THE boss of BP warned yesterday that it will not invest in green energy schemes unless they are profitable enough, as rising costs make a string of offshore wind farms unviable.
CEO Bernard Looney said investment was needed in both fossil fuels and renewable power to boost global energy security.
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But he also warned that green energy schemes had to pay their own way, as oil companies face pressure from investors to focus on fossil-fuel production rather than less profitable wind and solar farms.
It comes as a string of offshore wind farms face being delayed or shelved, as rising costs wreck the business cases for investing in them.
Mr Looney’s comments came after BP reported a big dip in profits for Q2 of this year.
Lower oil and gas prices and smaller refining margins were among issues which hit the company’s bottom line. Underlying replacement-cost profits for the quarter were £2.03billion, as against £3.90billion for the previous quarter.
BP already scaled back its green targets earlier this year.
But the company insists it is not scaling back its green ambitions, having pledged to invest an extra $8billion (£6.26billion) in its “transition” businesses and another $8billion in its oil and gas divisions by the end of the decade.
Mr Looney said yesterday: “We are investing in today’s energy system, and – not or – we are investing in accelerating the energy transition.
“We’re not making a choice between one or the other, we believe the world needs both.”
In February, the company slowed its retreat from oil and gas production, relaxing its targets for cutting carbon emissions up to 2030.
Asked whether BP should further reduce its green commitments, Mr Looney said: “We grew oil and gas production in the first half of this year.
“We’ll actually grow production through the middle of the decade and it will be relatively flat through the end of the decade… that’s where we provide the security that the world needs, at the same time providing the cash flows that we need for our business.”
At the same time, Mr Looney warned inflation had “clearly impacted offshore wind projects”.
But he said: “What I can tell you categorically is that our returns threshold is sacrosanct – we will not develop projects that don’t meet our returns threshold.”
He said the company would only invest in offshore wind where it could directly benefit from the power generated, adding: “We don’t want to generate electrons just for electrons’ sake.”
Mr Looney’s remarks come as a string of wind farm projects around the world, including some in Britain, are facing serious financial difficulties.
Meanwhile, Mr Looney said BP was holding crunch talks about a proposed wind farm it is seeking to build off the east coast of the US, where it is seeking to renegotiate a power-selling agreement due to rising costs.
Challenge
He told the Telegraph: “The challenge has arisen in the United States and in the UK, where there are projects that have experienced cost rises where there have been pre-existing contracts signed on the revenue side, and then there’s a mismatch between the cost assumptions and the revenue assumptions.
“And that’s where the real crunch is coming in….that’s what the industry is trying to resolve. Clearly, the world needs offshore wind to be successful.”
In May, it was reported that plans were moving ahead for a major wind project in the North Sea off Aberdeen.
BP and German energy company EnBW have a ScotWind lease option for the Morven development.
The fixed-bottom project will have a total generating capacity of around 2.9 GW – sufficient to power more than three million homes.
BP said last year that the success of the Morven bid was expected to unlock a number of investments as part of its integrated energy company approach, leveraging its existing North Sea infrastructure, skills and relationships and EnBW’s experience in offshore wind.
Green hydrogen
Along with the offshore wind development, these investments include significant expansion of electric vehicle charging infrastructure in Scotland and green hydrogen production.
These represent up to £10billion of investment in support of offshore wind and Scotland’s energy transition.
BP and EnBW have now taken premises in Edinburgh which will become a base for Morven.
The partners are also bringing a remote operating control centre to Aberdeen for their joint UK wind projects, of which there are three in development.
These developments are Morgan and Mona in the Irish Sea, and Morven.
