Resilience - now and in the future

BP is working to help make sure our business is sustainable - commercially, environmentally and in a lower-carbon future

We believe having a balanced portfolio with flexibility and a dynamic investment strategy -  supported by preparation for potential climate impacts to our facilities - gives us the resilience to meet today’s challenges as well as set us up for the future. 

A balanced portfolio with flexibility

BP strives for a balanced portfolio in terms of its resources, geography and businesses. This helps us manage changing circumstances, both expected and unforeseen. 

The diversity of our portfolio - upstream, downstream and renewables - helps us to provide energy to support economic development and to contribute to a lower-carbon future. Natural gas accounts for around half of our Upstream portfolio and our biofuels production has grown year-on-year.

We also think it’s important to have geographical diversity of operations. This gives us access to a variety of resources and markets, and provides robustness to geopolitical events.

And, by having upstream and downstream businesses and well-established trading capabilities, we have a cushion to oil price volatility as downward pressures in one part of the group can create opportunities in another.

Flexibility in portfolio choices

We renew our portfolio to meet demand for our products. We have flexibility in investment decisions as our current portfolio matures and external circumstances change.

UN conference on climate change - COP21

BP welcomes the direction provided by the Paris Agreement for countries to determine their contributions to holding temperature rise well below 2°C. 

Although developed countries are still expected to lead, the agreement applies to all participating countries. It commits all countries to submit climate pledges, regularly report on progress and declare new and more ambitious contributions every five years, following reviews of collective progress.

We are pleased the agreement creates the possibility for carbon pricing to help deliver global goals and national contributions. We will continue to work in our own right, and collaboratively with other companies in the Oil and Gas Climate Initiative to evolve our businesses towards, and help deliver, the aims of the agreement. We continue to work with all relevant stakeholders to play our part.
We will continue to work in our own right and collaboratively with other companies in the Oil and Gas Climate Initiative to evolve our businesses towards, and help deliver, the aims of the agreement.

Dynamic investment strategy

BP’s proved reserves are produced, and historically replaced, over a 13-year timeframe on average. This means we have time to adapt our investment strategy to changes in policy, market or technology conditions.

Greenhouse gas policy

We assess how potential carbon policy could affect our businesses now and in the future. This is particularly important as we expect, by 2020, around two thirds of BP’s direct emissions will be in countries subject to carbon policy.

To help us anticipate greater regulatory requirements for greenhouse gas (GHG) emissions, we factor a carbon cost into our own investment decisions and engineering designs for large new projects and those for which emissions costs would be a material part of the project. In industrialized countries this is $40 per tonne of carbon dioxide (CO₂) equivalent. We also stress test at a higher carbon price.

We consider this carbon cost, along with other factors, when assessing the economic value of the investment. To date, the internal carbon price has not resulted in a no-investment decision. The real benefit is that it, along with energy efficiency considerations, has encouraged projects to be set up in a way that will have lower GHG emissions.

Supply and demand

We make regional and global assessments of energy supply and demand in our Energy Outlook and we undertake detailed analysis of the transport sector.

Our Energy Outlook takes the long-term view, considering a wide variety of factors. That means that we try to look past the near-term volatility in oil prices and identify the structural trends, such as sustainable technological advancements enabling faster growth in shale gas, tight oil and some renewables.

While our Energy Outlook presents what we think is likely to happen, we recognize that there are many uncertainties. One key uncertainty is climate change policy, so we developed an alternative ‘faster transition’ scenario. It’s based on a carbon price of $100 per tonne in the OECD and other leading economies, with at least $50 per tonne elsewhere; tougher CO₂ standards for vehicles; and 80% of estimated potential energy efficiency gains for industry and buildings in place by 2035. In this scenario, oil and gas would still account for more than 50% of total energy consumption, with renewables at 15%.

We update our Energy Outlook on an annual basis to be able to inform our strategy. We also consider external assessments such as those by the International Energy Association and the International Transport Forum.

Fluctuating oil prices

We test our investments against a range of oil and gas prices to check their profitability over the long term. We take into account current price levels and our long-term outlook.

We view the lower oil prices seen in late 2014 through early 2016 as a return to price volatility. That said, we have been reviewing our strategy against this environment as we expect prices to remain lower for longer.

Importantly, in light of the current environment, the break-even price of many of our investments goes down as industry suppliers reduce their costs to meet with market conditions.

Cost of supplying oil and gas

The extraction of oil and gas varies in cost according to a number of factors, but most significantly the nature of the asset class or resource. For example, it is generally cheaper to extract conventional onshore oil and gas than oil sands or deepwater resources. Technology advancements and government incentives are other key contributors. 

Through our Technology Outlook, launched in 2015, we have forecast the cost of supplying oil and gas to 2050 - taking into consideration expected technological improvements. We have also considered the impact of a carbon price at $80 per tonne. We use this as a lens to review the future attractiveness of our various oil and gas resources.

Governments can impact investment into various resources, depending on which types they incentivize through taxes and subsidies.

Evolving technology

We undertake periodic and thorough reviews of potential innovation out to 2050 and collaborate with external technology-focused bodies. Our Technology Outlook examines what technology can do in terms of access to primary energy resources and how it might change the power and transport sectors, especially in the context of reducing carbon emissions.

We recognize that some emerging technologies could lead to rapid improvements in the performance of energy storage devices like batteries, solar conversion and the use of hydrogen as a fuel. We monitor these developments and invest in start-up companies to understand and participate in these potentially disruptive technologies.

Oil resources in 2050: availability and costs

Looking ahead to 2050, technology innovation will enable access to oil and gas resources more cost effectively and in greater volumes.

A theoretical carbon price of $80 per tonne can shift the relative attractiveness of the different oil resource types.

Climate change adaptation

We use specialized climate models developed with Imperial College and Princeton to help us predict possible climate impacts relevant to our operations, as well as to better understand how extreme weather events might impact our business in the future. 

We seek to address potential climate change impacts - such as sea-level rise, higher temperatures, extreme weather events and greater precipitation - on our new projects from the start, in the design phase. We have guidance for existing operations and projects on how to assess potential climate change risks and impacts - to enable mitigation steps to be incorporated into project planning, design and operations.

For example, we decided to place some of the new South Caucasus pipeline deeper underground to avoid potential washouts due to flooding. And, in Iraq, where we are redeveloping an existing oilfield, we are selecting new equipment to better withstand extended periods of high temperatures.


The information on this page forms part of the information reviewed and reported on by Ernst & Young as part of BP's 2015 sustainability reporting. View the full assurance statement.

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