We won’t invest in green energy for the sake of it, says BP boss

BP boss Bernard Looney's comments come after BP scaled back some of its green targets earlier this year. Photo / Bloomberg, Getty Images

The boss of BP has warned that the oil giant will not invest in green energy schemes unless they are profitable enough, as rising costs make a string of offshore wind farms unviable.

On Tuesday (Wednesday NZT), the blue-chip company became the latest producer to reveal a drop in profits, with oil and gas prices down from the highs they reached following the outbreak of the Ukraine war.

In the wake of the crisis, Bernard Looney, BP’s chief executive, said investment was needed in both fossil fuels and renewable power to boost global energy security.

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.

BP scaled back its green targets earlier this year after making record profits of $US27.7bn or £21.7bn (NZ$45.2bn) in 2022 off the back of soaring oil and gas prices.

Looney’s comments on Tuesday came as the company said second-quarter profits had sunk to £2bn ($NZ4.17b), down from £6.65bn (NZ$13b) a year earlier.

The company insists it is not scaling back its green ambitions, having pledged to invest an extra £6.26bn in its “transition” businesses and another £6.26bn in its oil and gas divisions by the end of the decade.

Speaking on Tuesday, Looney said: “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, 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, 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.”

Looney’s remarks come as a string of wind farm projects around the world, including some in Britain, are facing serious financial difficulties.

Swedish energy giant Vattenfall last month confirmed it had halted development of the 1.4 gigawatt Boreas project, off the coast of Norfolk, after a 40 per cent increase in costs made it unviable.

Developers behind other projects have also indicated their schemes could be at risk as well, with final investment decisions still to be taken.

Meanwhile, 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.

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.”

It comes as UK PM Rishi Sunak on Monday announced new oil and gas projects in the North Sea, in a bid to boost Britain’s energy security.

His push angered climate activists, who are campaigning for an end to all new licensing in the UK.

But the Prime Minister, who has suggested some of Britain’s net zero pledges could be watered down if they threaten consumers with huge costs, said the move would “increase domestic gas production and reduce our reliance on hostile foreign states”.