BP is working to make sure our business is sustainable - commercially, environmentally and in a lower carbon future
The global energy landscape is changing. The energy mix is shifting, driven by technological improvements and environmental concerns. Fast-growing emerging markets are overtaking traditional centres of demand.
The energy transition underway poses a significant challenge - how to meet the world’s growing demand for energy while also reducing carbon emissions. That creates important choices and opportunities for BP and our industry.
We are evolving our strategy - allowing us to be competitive in a time when prices, policy, technology and customer preferences are changing. Our strategy anticipates a range of scenarios to give us flexibility in our approach, rather than pursuing a single view of the future. We believe having a balanced portfolio and a dynamic investment strategy give us the resilience to meet the challenge.
BP strategy - our priorities
Our strategic priorities help us to deliver heat, light and mobility solutions for a changing world
Shift to gas and advantaged oil
We are investing in new large-scale gas projects and focusing on quality oil projects in core basins - such as those in Abu Dhabi, Azerbaijan and the Gulf of Mexico - while moving away from projects that don’t fit our strategy, like the Great Australian Bight.
Market-led growth in the downstream
We are developing and producing fuels and lubricants to make the cars of today and tomorrow more efficient, thus reducing greenhouse gas emissions. This includes new lubricants that incorporate plant-based or recycled oils. And, we are establishing retail services to support electric vehicles.
Venturing and low carbon across multiple fronts
We are optimizing and growing our biofuels and wind businesses and investing in new low carbon business models to meet changing consumer and policy expectations. We will also develop partnerships and invest in start-up companies to access innovation and accelerate technology development.
Modernizing the whole group
We are modernizing and transforming our operational performance. We are developing creative business models when working with partners, such as collaborating with automakers to improve fuel efficiency and reduce emissions.
The changing world of energy
The energy world is changing at a pace not seen in decades. BP is ready for the opportunities and challenges this brings.
Energy mix is shifting
New technologies and consumer preferences for low carbon energy are leading to changes in the fuel mix, resulting in a gradual decarbonization.
Renewables are the fastest-growing energy source. They are expected to increase at around 7% a year and account for 40% of the growth in power generation over the next two decades. Renewables currently contribute around 3% of total global energy demand, and we estimate that, as a result of rapid improvements in their competitiveness, they will contribute around 10% by 2035.
Over the same period, we think oil and natural gas are likely to continue to play a significant part in meeting demand for energy. They currently account for around 56% of total energy consumption. By 2035, we think oil will have around a 29% share, with annual growth slowing down over this period. Meanwhile we believe the share of gas will go up slightly to 25% of global energy, placing it ahead of coal and not far behind oil.
BP is gearing up to meet this shifting demand by increasing its gas and renewables activities. We don’t expect our oil and gas portfolio to be ‘stranded’ in the future. This is because we produce and replace our proved reserves over a 15-year time frame on average - which gives us the flexibility to shift our investment strategy.
Growing demand for energy
Affordable energy is essential for economic prosperity. Energy provides heat and light for homes, fuel for transportation and power for industry. And, everyday objects - from plastics to fabrics - are derived from oil.
We expect world demand for energy to increase by around 30% between 2015 and 2035 - largely driven by rising incomes in emerging economies. The extent of this increase is being curbed by gains in energy efficiency, as there is greater attention around the world on using energy more sustainably.
Advances in technology
Emerging technologies - such as improved batteries, solar conversion, electricity storage and autonomous vehicles - are accelerating the energy transition. For example, the base case scenario in our Energy Outlook suggests that the use of electric vehicles will grow almost one hundred-fold by 2035. That means that about 6% of the cars on the road would be electric, with a reduction in total oil demand of around one million barrels a day. However, a faster mobility revolution - including car sharing, ride pooling, autonomous vehicles and electric cars - could reduce oil demand by several times that amount.
Our Technology Outlook shows how technology can play a major role in meeting the energy challenge by widening energy resource choices, transforming the power sector, improving transport efficiency and helping to address climate concerns out to 2050.
We prioritize certain new technologies for in-depth analysis - based on their fit with our strategy and how soon and likely we think they are to break through technological and commercial barriers.
Emerging greenhouse gas policy and regulation
Governments are putting in place taxes, carbon trading schemes and other measures to limit greenhouse gas (GHG) emissions. We expect around two-thirds of BP’s direct emissions will be in countries subject to carbon policy by 2020.
To help anticipate greater regulatory requirements for 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 currently $40 per tonne of CO2 equivalent, and we also stress test at a carbon price of $80 per tonne.
Our carbon cost, along with energy efficiency considerations, encourages projects to be set up in a way that will have lower GHG emissions.
Lower oil price environment
Oil prices have been substantially lower since 2014, primarily due to oversupply. The market is gradually readjusting, as both demand and supply respond to lower prices. However, the high level of oil inventories suggests this adjustment is likely to take some time.
In line with our refreshed strategy, 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.
A changing energy mix
Energy consumption (billion tonnes of oil equivalent)a
a The sum of the fuel shares may not equal 100% due to rounding.