BP’s oil exploration team sidelined in climate revolution

LONDON (Reuters) – Nothing escapes the winds of change now sweeping BP, not even the exploration team that, for more than a century, fueled profits by discovering billions of barrels of oil.

Its geologists, engineers and scientists have been reduced to less than 100, from more than 700 a few years ago, company sources told Reuters, as part of a climate change-related overhaul triggered the year last by CEO Bernard Looney.

“The winds have gotten very cold on the exploration team since Looney’s arrival. It’s happening incredibly fast, ”a senior member of the team told Reuters.

Hundreds of people have left the oil exploration team in recent months, either transferred to help develop new low-carbon businesses or made redundant, current and former employees said.

The exodus is the most glaring sign yet from within the company of its rapid move away from oil and gas, which will nonetheless be its main source of cash to finance the switch to renewables for at least the next. decade.

BP declined to comment on the staff changes, which were not made public.

Reuters spoke to a dozen former and current BP employees, who highlighted the enormous challenges the company faces in its transition from fossil fuels to carbon neutrality.

Looney has made his intentions clear internally and externally by lowering BP’s production targets and becoming the first CEO in the petroleum industry to promote this as a benefit to investors looking for a long-term vision. end of a low carbon economy.

BP is cutting some 10,000 jobs, or about 15% of its workforce, as part of the restructuring of Looney, the most aggressive of European oil giants, including Royal Dutch Shell and Total.

The 50-year-old veteran petroleum engineer who previously headed the oil and gas exploration and production division, aims to reduce production by 1 million barrels per day, or 40%, over the next decade, while still multiplying by 20 the production of renewable energy.

Despite the changes, oil and gas will remain BP’s main source of revenue until at least 2030.

And Looney’s willingness to reinvent BP did nothing to increase its stocks, which hit their lowest level in 25 years at the end of 2020 and fell 44% in the year, mostly due to doubts about to its ability to transform itself and achieve the benefits it aims.

The change marks the end of an era for exploration teams from Moscow and Houston at BP’s research headquarters in Sunbury, near London, with farewell meetings held on Zoom in recent months, they added.

“The atmosphere was brutal,” said a former employee during the layoffs last year.

For BP’s small exploration team, led by Ariel Flores, the former boss of the North Sea, the focus has been on finding new resources near existing oil and gas fields in order to to compensate for production cuts and to minimize expenses.

“We are in harvest mode and what is not said is that BP is going to be a much smaller company with no exploration,” said a second source from BP’s oil and production division.

Flores was not available for comment.

Data from Norwegian consultancy Rystad Energy shows that BP acquired around 3,000 square kilometers of new exploration licenses in 2020, its lowest since at least 2015 and far less than from Shell, which acquired around 11,000 square kilometers, or Total, which purchased some 17,000 square kilometers.

Although global exploration activity slowed last year due to the COVID-19 pandemic, the drop at BP was mainly the result of the change in strategy, four company sources said.

(Graphic: slow exploration of BP -)

(Graph: BP exploration expenses -)

Oil and gas exploration has spearheaded the evolution of companies into huge multinational corporations that have generated huge profits for shareholders over the decades.

BP began cutting exploration spending under former CEO Bob Dudley in response to the 2014 drop in oil prices, with the goal of using technology to unlock more oil and gas reserves.

Looney further cuts the exploration budget, to around $ 350 million to $ 400 million per year. This is roughly half of what BP spent in 2019 and a fraction of the $ 4.6 billion spent on exploration in 2010.

BP also wiped $ 20 billion from the value of its oil and gas assets last year after slashing its energy price outlook. With these lower price assumptions, BP no longer considered that many of its oil and gas reserves were worth developing.

(Chart: BP share performance -)

BEYOND OIL

BP, which started out as the Anglo-Persian Oil Company in 1908 and has since discovered huge fossil fuel resources in places such as Iran, Iraq, Azerbaijan, the North Sea and the Gulf of Mexico has already attempted to diversify into renewable energies.

Under CEO leadership, John Browne BP started “Beyond Petroleum,” investing billions in wind farms and solar power technology, but the vast majority of investments failed.

Looney believes his plan will succeed thanks to unprecedented government support for the energy transition and technological advancements that are making renewables more affordable than ever. He hired Giulia Chierchia, a former McKinsey executive, to oversee the development of BP’s strategy.

And a team of geologists and data calculators led by Houston-based Kirsty McCormack, who was previously in the exploration unit, will now apply the analyzes used to study and map rock structures in search of fossil fuels to develop low carbon technologies such as carbon capture. , utilization and storage (CCUS) and geothermal energy, according to company sources.

The absorption of carbon dioxide emitted by highly polluting industries and its injection into exhausted oil reservoirs is considered a key element of the energy transition by helping to offset emissions.

Other oil veterans have also been reassigned, with Felipe Arbelaez, who previously led BP’s oil and gas operations in Latin America, now leading its renewable energies business, and Louise Jacobsen Plutt, an experienced petroleum engineer, now senior vice president of hydrogen CCUS.

BP has also poached staff from Uber, Toyota and Silicon Valley to improve its understanding of electric vehicles, energy markets, renewables, and expand its capabilities in big data.

Former Toyota employee Franziska Bell is vice president of data and analytics at BP while Justin Lewis joined the company in July to lead his high-tech start-up after working as a software engineer at Tesla.

The transformation has been met with a mixture of respect and concern among employees who wonder if the pace is sustainable and if it is enough for BP to be competitive in a rapidly changing energy world.

Some current and former senior employees have warned that BP risks rushing into investments in new areas before they fully understand how they would fit into a transformed company, while abandoning long-standing sources of cash.

“There are so many internal changes that it will be a big job to take over the organization and get things done,” said a senior employee in the exploration division.

(Graphic: Big Oil spending -)

(This story has been passed on to correct paragraph 11 by removing unnecessary words)