Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to
Just $1.99per week for the first 24weeks
Just $1.99per week for the first 24weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(}function setPanelState(o){dom.root.classList[o?"add":"remove"](,dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

The COVID-19 crisis and climate change are catching up with Big Oil. It is no longer business as usual. The era of stranded assets – oil left in the ground, a fantasy concept peddled by allegedly out-of-touch environmentalists only a few years ago – may have arrived.

As if to prove the point, BP, the former British Petroleum that is Europe’s second-biggest oil company, on Monday unveiled oil and natural gas write-downs of as much as US$17.5-billion after taxes, or US$21-billion pretax. The latter is equivalent to a quarter of BP’s market value on the London Stock Exchange.

The write-down marks what may be the start of a Bernard Looney-inspired revolution at BP. Mr. Looney, 49, is the Irish engineer and career BP insider who replaced Bob Dudley as chief executive in February and immediately swung into action.

Story continues below advertisement

Within days of taking the job, he announced a grand plan to make BP carbon-neutral (net-zero emissions) by 2050. As the coronavirus onslaught took on global dimensions, sending oil prices into the toilet, Mr. Looney culled 10,000 jobs. Then came the massive write-down and admission that the easy money era was pretty much over. In an internal webcast the week before the write-down news, Mr. Looney said: “The oil price has plunged well below the level we need to turn a profit. We are spending much, much more than we make.”

Anyone can understand that concept – best to avoid a slow-motion financial suicide. But low prices aren’t BP’s only problem. The other biggie is how to achieve net-zero emissions while maintaining profits and, crucially, the hefty dividend. BP’s dividend is worshipped by pensioners. It accounts for fully 7 per cent of the dividends paid by FTSE 100 companies. But with a yield of 10 per cent, the dividend seems unsustainable, and BP is wary of taking on new debt to finance the payments when the price of oil is so low.

The write-down was triggered by the begrudging acceptance of two related realities. The first was that oil prices are likely to stay lower for longer, the reverse of the “stronger for longer” mantra that ruled the thinking of oil and mining bosses until about the middle of the past decade. The second was that low prices and the global decarbonization effort mean that some oil reserves may never be pumped – the dreaded stranded asset scenario. To oil companies, oil left in the ground is like a parked passenger jet: Neither pays the rent.

BP reduced its long-term price assumption for Brent crude by 27 per cent, to US$55 a barrel (the price on Monday was about US$41, down by a third in the past year). The forecast for American gas was cut by 31 per cent. The impairment charges and exploration write-offs will cost the company between US$13-billion and US$17.5-billion in the second quarter.

In a statement, BP said it would have to adapt to a world where oil is neither needed nor wanted as much as it used to be, noting that “the aftermath of the pandemic will accelerate the pace of transition to a lower carbon economy and energy system, as countries seek to ‘build back better’ so that their economies will be more resilient in the future.”

So is BP launching a black-to-green transformation? Don’t count on it.

The company has a history of talking green and doing little to nothing about it. The net-zero pledge was easy. It came with almost no details or milestone commitments. BP will no doubt mill through three or four more executives before 2030, meaning Mr. Looney will not take the blame if the goal is missed.

Story continues below advertisement

While rivals Chevron and ExxonMobil have little interest in replicating BP’s pledge, it is hard to say yet that BP is at the forefront of the decarbonization revolution. Job No. 1 is keeping investors happy. Loading up on wind and solar farms, and leaving oil in the ground, may not be what they want.

Twenty years ago, under John Browne, the CEO who turned BP into a global energy competitor, the company launched a US$200-million public relations campaign to rebrand itself as Beyond Petroleum, complete with a starburst green and yellow logo that carried no hint of the core business. The implication was that BP, in time, would become a diversified energy company, with oil just one of its divisions.

The transformation went nowhere. BP realized it was better at drilling holes than operating wind and solar farms and got rid of them shortly after Beyond Petroleum was rolled out. It doubled down on its oil bet by investing heavily in U.S. shale oil and gas and the Alberta oil sands. BP’s Deepwater Horizon oil spill in 2010 in the Gulf of Mexico, one of the industry’s worst disasters, reminded the world that BP’s heart was black, not green.

BP might be greenwashing itself again by pledging to embrace a net-zero future, to the point that it is writing off huge chunks of value in its hydrocarbon business. If Mr. Looney wants to emerge as the man who transformed BP into a green-tinged, diversified energy company, he will have to follow up with some firm spending and milestone commitments to embrace beyond doubt that BP’s future is “Beyond Petroleum." If he doesn’t, BP will remain part of the climate problem, not the solution.

Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to If you want to write a letter to the editor, please forward to

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies