BP silent on climate as low oil prices hit profits

BP slashes spending but declines to follow Shell’s example in backing a shareholder campaign on climate risk disclosure

Deepsea oil drilling is one of BP's priorities for investment (Pic: BP)

Deepsea oil drilling is one of BP’s priorities for investment (Pic: BP)

By Megan Darby

BP kept quiet on climate change as it announced falling profits on Tuesday.

The company slashed its spending plans for 2015 to US$20 billion, 20% lower than previous projections, in response to low oil prices.

It did not follow Shell’s move last week to back a shareholder resolution on climate risk. Similar resolutions filed with both companies demanded they consider how their business plans fit with international goals to curb greenhouse gas emissions.

Shareholders will vote on the proposals at BP’s annual general meeting in April.

More than 150 investors including the £150 billion Local Authority Pension Fund Forum are behind the call to analyse the impact of climate action on fossil fuel demand.

Supported by ShareAction and ClientEarth, they challenge the companies to “stress-test” their investment plans against a target agreed by governments to limit global temperature rise to 2C above pre-industrial levels.

A third of oil and half of known gas reserves need to stay in the ground to meet that target, according to a recent UCL study.

The most expensive fossil fuel exploration projects are at risk of being “stranded” by falling demand, it warned.

BP’s portfolio “compares favourably with other oil and gas majors” on resilience to this risk, the resolution states.

But analysts at the Carbon Tracker Initiative last August named three BP projects among the 20 largest high cost undeveloped fields in the industry.

One of these, BP’s “Sunrise” project in Canada’s tar sands, entered production in December 2014.

All needed an oil price of more than US$95 a barrel to make a profit. In recent months, the price has dropped below US$50.

Future prices rose on Tuesday, as BP’s plans to cut spending on new production followed similar announcements by Shell and Chevron.

At the results announcement, group chief executive Bob Dudley made clear BP is not counting on higher prices in the next few years.

“We have now entered a new and challenging phase of low oil prices through the near and medium term,” said Dudley.

“Our focus must now be on resetting BP: managing and rebalancing our capital programme and cost base for the new reality of lower prices.”

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