When BP’s chief executive, Bernard Looney, said he would cut the oil giant’s dividend in half earlier this month, he might have expected a backlash from the pension funds that rely on the £1.6bn quarterly payout. In the event, it caused little more than a ripple of interest. Nor was much attention paid to BP’s record $17.7bn (£13.5bn) loss, incurred over just three months and which compared with a profit of $1.8bn in the same period a year earlier.
Instead, the headlines were dominated by one of the most dramatic strategy shifts ever announced by a FTSE 100 company. BP, Looney said, would become a “very different energy company” as it increased tenfold its investment in low-carbon energy, while reducing oil and gas output by a billion barrels a day. much of the legacy oil business will be sold in the next five years and replaced by renewable energy generation.
The reshaping of one of the stalwarts of corporate Britain demonstrates how rapidly the tectonic plates of business are shifting in the age of the coronavirus.
Across all industries, long-term trends that analysts had expected to play out over years, or even decades, have been crunched into a few months.
In boardrooms. shopping centres, offices and industrial parks there is a sense of the old being swept away, to be replaced by a new economy operating on different rules – but no one is yet quite sure what they are.
Looney’s bombshell announcement was part of a wider trend that has seen disastrous results push Big Oil to bring forward decisions that might have been delayed for years. BP is cutting 10,000 jobs, while rival Shell has also slashed its dividend.
The pandemic is only part of the trouble: oil prices briefly turned negative earlier this year on falling demand and trade tensions, There is evidence that concerns over climate change are being addressed – BP sold its petrochemicals business for $5bn in June – although some scepticism remains about how serious the oil companies are. “All of the words in the world don’t help; at the end of the day, as critics have said of us, its the money that counts,” said Looney.
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