BP’s new renewables chief has slashed its ‘hopper’ of early-stage green energy project prospects after “running a very tight rule” over their potential to deliver acceptable returns, said the oil supermajor’s chief executive.
Anja-Isabel Dotzenrath, who started work in March, has “already kicked back some proposals, which we think is a very positive thing”, said BP chief Bernard Looney when asked by financial analysts why the hopper figure – covering projects under initial evaluation – had dropped to 12GW by the end of the first quarter from 17GW at the end of 2021.
“We’ve chosen not to do things. Anja is running a very tight rule over things… she is doing exactly what we want her to do. We want to lean in and accelerate [in renewables and the energy transition] but only if we can make the returns we have promised,” Looney said, adding that he expected the hopper to rise and fall over time.
The hiring of Dotzenrath – formerly CEO at German power giant RWE Renewables – as BP’s new executive vice president for gas & low carbon energy was seen as a coup for the UK-based oil & gas giant when it was announced last year.
BP is pursuing a goal to advance 50GW net of renewables projects by 2030, one of the most ambitious targets globally as part of an energy transition strategy dominated by offshore wind, solar and hydrogen.
Although the hopper fell, the company’s roster of more advanced pipeline projects and those developed to final investment decisions was, at 29.2GW, 1.8GW higher in Q1 than at the end of 2021, reflecting BP’s success in the ScotWind leasing round.
Looney’s comments on the hopper came as he was questioned over the impact on its business of rising supply chain costs in offshore wind, which the BP CEO admitted was currently “a challenging marketplace in a number of dimensions, including for suppliers in that sector”.
BP is sticking to its policy of only pursing projects that can deliver returns in its 8-10% target range, said Looney, referencing the company’s unsuccessful bid in the New York Bight US offshore wind leasing auction which he said “I hope you will take as a sign of discipline”.
We want to grow in offshore wind but not at any cost.
“We want to grow [in offshore wind] but don’t want to grow it at any cost. We will look at future rounds in Holland, Norway, Japan. They’re all very different and we’ll do it case by case.”
Looney also claimed BP could be better placed than others to eke out cost advantages in a tough supply chain thanks to the vast global buying power of its total operations.
“We can hedge steel prices. We’re a massive consumer of steel in our upstream [hydrocarbons] business. Things an IEC [integrated energy company] can do that others may struggle to do.”
Windfall tax calls
Looney spoke to analysts as BP faced a storm of controversy in its home UK market over booming profits as it reaped the rewards of high energy prices.
The company’s underlying first quarter profits more than doubled to $6.2bn adding to political pressure for a windfall tax on BP and fellow UK supermajor Shell to help hard-pressed energy consumers. Campaign group Greenpeace said UK fossil players had seen profits rise to “stratospheric levels” through “absolutely no effort whatsoever” on the back of geopolitical turmoil.
“There’s a simple thing [UK Prime Minister] Boris Johnson can do to break the impasse, and that’s bring in a windfall tax on oil giants’ bloated profits and use the money to help struggling households,” Greenpeace said.
In a statement designed to underline that it’s “backing Britain” BP said it plans to invest up to £18bn ($22.5bn) in the UK energy system by 2030, a figure that includes both hydrocarbon and low-carbon ventures.
However, Looney told analysts it was sticking to its existing overall capital expenditure plans and would not be drawn on how and where it might accelerate its low- or zero-carbon activities.
BP and its fellow oil giants seem to have Johnson on-side, with the UK leader saying today that he doesn’t want to imperil energy investments through a windfall tax.