BP will need to commit to significant investments in the renewable energy and LNG space in order to meet its 2030 target of 50GW in renewables capacity and 30MPTA in LNG, says GlobalData.
Capital available for investment activity will be challenged as market weakness dents cashflow from BP’s core hydrocarbons business, the data and analytics company continued.
Daniel Rogers, Oil and Gas Analyst at GlobalData, commented, “BP has proven its willingness to invest big outside its core business, but will continue to rely on hydrocarbons as the cash cow for future investments. The current market fundamentals reduce the profitability of BP’s core business, potentially shrinking its pool of capital available for future low-carbon acquisitions.”
LNG will continue to play a major role in BP’s low-carbon energy and electricity goals and is targeting significant growth in the sector. In its current equity LNG portfolio, BP is forecast to reach 16MTPA in capacity by 2025, while relying on merchant volumes for the rest of the targeted amount.
Rogers continued, “The delay of the Tortue LNG project was a major blow and further delays could hinder BP’s 2025 target from being achieved. Future developments in Mauritania and Senegal will be the cornerstone of the company’s growth opportunities, but will hinge on investment decisions going ahead in spite of a potentially oversupplied LNG market going into the late 2020s.”
BP currently holds 2.3GW of installed renewable power capacity, leading the way for the major international oil companies (IOCs) and its recent deal with Equinor secures entry into the offshore wind sector with a capacity addition of 2.2GW once complete. BP’s current project pipeline will increase its capacity by 6.5GW, but this is still short of its target of 20GW by 2025.
Rogers concluded, “As BP will leverage off its core hydrocarbons business to fund its investment strategy, weakened oil and gas prices will put pressure on the company’s capital availability necessary to meet its low-carbon energy ambitions.”
Mixed fortunes in LNG markets
Analysis by Rob Cockerill, Global Managing Editor
It’s interesting to read this take on BP’s LNG business as it pivots away from big oil in the long-term, and the commitments that it’s claimed it needs to make in what is a relatively uncertain LNG market right now.
It’s been a mixed year for LNG markets. On the one hand, it was hoped that 2020 would be a cornerstone year for LNG as one of many fuelling options available to help the maritime sector navigate the choppy waters of IMO 2020. It’s a move which has been a long time coming and had been expected to lean on the use of LNG as a shipping fuel.
At gasworld, we understand that a relatively healthy compliance with IMO 2020 has indeed provided a boost to the LNG sector.
Form an industrial gas equipment perspective, there have been other highlights throughout the year too, not least the news in June that the US Department of Transportation (US DOT) and the Pipeline and Hazardous Materials Safety Administration (PHMSA) would allow the use of cryogenic railcars to ship LNG from production plants to destinations across the US. This is expected to provide a lift to those in the small-scale LNG sector.
Yet for all of this positivity, there’s also no escaping what an equally tough year it has been for LNG markets at the hands of a Covid-19 (coronavirus) pandemic that has shaken economies and so rapidly cooled oil, gas and petrochemicals demand.
Continue reading this analysis here.