BP in oil exploration team cuts as climate change-driven reorganisation continues
Oil major BP has drastically cut its fossil fuel exploration team in an attempt to keep up with the fast-moving revolution focused around renewables and climate change.
BP’s team of geologists, engineers, and scientists have been cut to less than 100 from a peak of more than 700 a few years ago, according to company sources cited by Reuters.
This is all part of a climate change-driven overhaul started last year by the company’s CEO Bernard Looney. Hundreds have left the oil exploration team in recent months, either transferred to help develop new low-carbon activities or laid off, current and former employees said.
The ‘cleanup’ of fossil fuel staff in the company is the strongest sign of BP rapidly moving towards renewables, regardless of oil and gas still being its main source of finances and, in turn, enabling the switch.
According to the media outlet, BP did not comment on the staffing changes, which have not been publicly disclosed yet. Nevertheless, company sources told Reuters that exploration teams from Moscow and Houston were dismantled as well as BP’s research headquarters in Sunbury near London.
Looney lowered BP’s production targets and became the first oil major CEO to promote this as a positive to investors seeking a long-term vision for a lower-carbon economy. He announced BP would to cut output by 1 million barrels per day, or 40 per cent over the next decade while growing renewable energy output 20 fold.
Furthermore, BP is cutting some 10,000 jobs, around 15 per cent of its workforce under restructuring imposed by Looney. This is the most aggressive restructuring amongst oil giants including Shell and Total.
At the moment, all this is reflecting BP shares in a bad way. Stocks hit their lowest level in 25 years late in 2020 and dropped 44 per cent in the year, mostly over doubts about whether it will be able to transform and make the profits it aims for.
For BP’s reduced exploration team led by Ariel Flores, the former North Sea boss, the focus has narrowed to searching for new resources near existing oil and gas fields to offset production declines and minimise spending.
Data from Rystad Energy suggests that BP acquired around 3,000 square kilometres of new exploration licenses in 2020, its lowest since at least 2015. Other oil majors like Shell and Total acquired much more – 11,000 and 17,000 square kilometres, respectively. Company sources cited by Reuters claim that, although global exploration activity slowed last year due to the COVID-19 pandemic, the drop at BP was mainly a result of the change in strategy.
It is worth noting that BP began reducing its spending on exploration under former CEO Bob Dudley in response to the 2014 oil price crash, aiming to use technology to unlock more oil and gas reserves. Looney is pushing this to another level with an even lower budget of around $350 to $400 million per year – around half of what BP spent in 2019 and a fraction of the $4.6 billion spent on exploration in 2010.
BP last year also wiped $20 billion from the value of its oil and gas assets after slashing its outlook for energy prices. At those lower price assumptions, BP no longer considered many of its oil and gas reserves worth developing.
Another noteworthy indicator of BP attempting to go all-out with the transition to a more renewable portfolio is poaching of staff from Uber, Toyota, and Silicon Valley to boost the company’s understanding of electric vehicles, power markets, renewables, and expanding its capabilities in big data.
On the other hand, Shell has faced problems with people departing from the company because they believed the oil major was not doing more regarding its energy transition plans and not doing it fast enough.