New research: BP’s fossil fuel spending beyond the boundaries of Paris

New research shows that BP’s capital allocation towards new oil and gas projects is not consistent with the goals of the Paris Agreement despite a binding 2019 commitment to shareholders.

BP: Capex beyond Paris, released today by the Australasian Centre for Corporate Responsibility (ACCR), shows that:

• none of the oil and gas projects BP took a final investment decision (FID) on in 2023 were aligned with the International Energy Agency’s (IEA) Net Zero Emissions (NZE) pathways for oil and gas.
• none of BP’s major unapproved oil and gas projects scheduled for FID before 2030 align with the IEA’s NZE, and the portfolio does not have a cost advantage.

In 2019, 99% of BP’s shareholders – and management – supported a binding special resolution which commits BP to annually review and disclose “the consistency of each new material capex investment”^[1] with the goals of the Paris Agreement. However, ACCR’s research finds that BP’s capital allocation and expenditure far exceeds a Paris-consistent framework.

The research comes ahead of BP’s Investor Day in February, where it is widely speculated the company will announce it is abandoning its target to reduce oil and gas production, following the initial weakening of this target in 2022. If the target is dropped, ACCR forecasts BP will produce 84% more oil and gas in 2030 than it targeted in 2020.

Commenting on the research, Nick Mazan, UK Company Strategy Lead, ACCR, said:

“Oil and gas markets are in a state of structural decline. The onus is on BP to demonstrate how any new investment in fossil fuels is in the interests of long-term shareholders, and aligned with the goals of the Paris Agreement. In our view, this is what the 2019 resolution requires, and what shareholders are entitled to expect.

“BP claims its capex is aligned with the goals of the Paris Agreement. However, if all oil and gas companies applied the same price-based framework as BP, they would sanction enough projects to exhaust the remaining carbon budget for a Paris-aligned world five times over.

“This should be cause for major investor concern. While BP committed in 2019 to disclose how each new material capex investment was Paris-aligned, it has assessed less than half of its greenfield oil and gas capex since 2019, and only provided very select detail to investors.

“BP’s claims of a disciplined approach to capex also require further testing. Our research found that the prices used in its capex framework are well above the average break-even for all unsanctioned oil and gas projects.

“Decarbonisation is essential to BP’s energy transition resilience, and as the company walks back from its target to reduce hydrocarbon production, capital allocation becomes even more critical to keeping the company on track.”