“Historic moment” as BP writes-off billions of reserves as stranded
When you have been writing about the oil industry for decades, it is easy to slip into hyperbolic language when significant events happen. But yesterday was one of these moments.
For years, climate activists have been warning Big Oil and their loyal investors that there would come a time when their most prized assets, their oil, would become their greatest liability, due to climate change. They came up with a term for the concept: stranded assets.
Seven years ago on this blog, I wrote
In April that year, Carbon Tracker issued a report that argued that at least two-thirds of fossil fuel reserves
At first, activists were dismissed out of hand. Oil majors and pundits said the world would always need more oil. And so companies carried on drilling. But slowly, the concept gained traction amongst influential climate scientists, investors, and bankers such as Mark Carney, the ex-Governor of the Bank of England.
In 2015, Carney
In October that year, BP conceded
I wrote at the time:
Later that year, the 2015 UN Climate Change conference was held in Paris where it was formally agreed that to have any chance of a livable future, we had to keep emissions “well below” 2 degrees Celsius. Ideally, we would “pursue efforts to” limit the temperature increase to 1.5 degrees.
It was the clearest signal yet that the writing was on the wall for the oil industry, which ignored the climate costs of its operations at its peril.
*But in the five years since that speech, BP has ignored its own warnings and those of scientists and investors and have carried on drilling.*
For example, Simon Howard
And this week, BP met the writing on the wall.
A double whammy of COVID-19 and climate change caught up with the company. In an unexpected move, BP slashed up to USD 17.5 billion off the value of its assets after lowering its longer term price assumptions in the wake of COVID-19. In the words of the *Financial Times*
*It is the biggest write-down the company has had to make since the Deepwater Horizon oil spill a decade ago.*
As the *Financial Times* clearly noted: “Its move on Monday marks the biggest recognition yet in the oil and gas industry that tens of billions of dollars worth of investments could be rendered uneconomic as the world pursues the Paris climate goals.”
Climate reality has finally caught up with BP’s corporate dreamland that it could carry on drilling forever. Bernard Looney
It was predictable that the company’s share-price would take a battering, with the oil giant’s share price falling over six percent in early trading yesterday.
Natasha Landell-Mills, head of stewardship at asset manager Sarasin & Partners, told the business paper of record: “This is a clear acceptance by BP that the past is no longer a guide to the future. Until your accounts are aligned with Paris, your capital spending will not be aligned.