BP’s record $7.6 billion profit renews calls for windfall tax

BP today followed its hydrocarbon ‘sister’ Shell last week in posting record profits, renewing calls from politicians for a reluctant Chancellor to impose a windfall tax to benefit consumers who will soon face slumps skyrocketing energy bills.

The oil giant posted profits for calendar year 2021 of $7.6 billion, a third of it in the last quarter of last year, as the price of gas quadrupled on global exchanges.

Last year, Covid and lockdowns imposed record losses of $20.3 billion on the oil leviathe. By division, oil and gas production went on a dizzying roller coaster ride last year to a profit of $10.5 billion, reversing 2020 losses of $14.6 billion. Profits attributable to Rosneft, BP’s Russian joint venture, were positive at $2.25 billion, compared to $0.15 billion in 2020.

Liberal Democrat leader Sir Ed Davey repeated on BBC radio this morning that it was a matter of fairness for North Sea operators to pay a higher share of tax.

With investors keen to boost renewables, he said a one-off levy would have a negligible effect on deterring clean energy investment.

A mainstay of millions of investment portfolios, from retail savers to pension and insurance companies, BP today announced it will further enrich its shareholders. Funded with 60% of its “excess” cash flow earned in 2021, it will repurchase an additional $1.5 billion of stock, under a program triggered by the reduction of the company’s net debt to 35 billion dollars last year. The program will complete a total of $4.15 billion in announced share buybacks.

By late morning, the LSE had marked BP shares up 0.5%, valuing the giant at $80.32 billion.

Under chief executive Bernard Looney, the global company has been seeking to wean itself off hydrocarbons since 2020, investing in programs such as the production of blue hydrogen at Teesside.

“2021 shows BP doing what we said we would do – performing while transforming,” Looney told investors this morning.

“We have strengthened the balance sheet and increased returns. We pay distributions to shareholders…and we invest for the future.

“We have made great strides in our transformation into an integrated energy company: concentrating and leveraging our hydrocarbons business, expanding convenience and mobility, and disciplinedly building a low-carbon energy business,” he wrote. CEO.

The greening of BP

Carbon neutrality by 2050 for all Oil Extractor operations, products and their uses is the company’s overarching goal. Intermediate goals are also advanced, Looney announces today in an accompanying progress report:

  • By 2030, emissions from direct operations will now be halved, compared to a previous target of 35%
  • By 2050 or earlier, BP now aims to eliminate emissions throughout the life cycle of the energy products it sells. Previously, it aimed for a 50% reduction in their emissions intensity only.
  • In addition, the target’s mandate will expand to include physically traded energy products. For 2030, BP is aiming for a 15% to 20% reduction in their lifetime carbon intensity.

In low-carbon energy, BP says its development pipeline has grown since 2019 from 6 GW to 24.5 GW. Offshore wind, including the recent success of the ScotWind rental cycle, accounts for 5.2 GW.

With “disciplined” annual renewable energy capital expenditure expected to reach $6 billion, BP is targeting EBITDA of up to $3 billion by 2030.

CEO Bernard Looney said: “We are accelerating the greening of BP. Our confidence is growing in the opportunities offered by the energy transition. This allows us to elevate our low carbon ambitions, and we now aim to be net zero in operations, production and sales by 2050 or sooner – unique among our peers. In a world heading towards net zero, we are in a better position to succeed if we are also heading towards net zero. We believe our ambition is both good for business and supports society’s drive to achieve the Paris goals.

But observers point out that, by the end of the decade, the company will still be spending the same or more each year on legacy hydrocarbons. And today’s statements do not distinguish between “green” low-carbon hydrogen, electrolyzed from water with renewable energy from the sun or wind, and its “blue” variant. dirtier, chemically “washed” or steam-reformed from oil or gas.

“BP considers both renewable energies and hydrogen as growth engines of the transition”, specifies the cabinet. It claims to be on track to develop 20GW of clean generation capacity by 2025, with 50GW planned for 2030. BP remains confident of securing leveraged returns of 8-10% for its clean low carbon.

BP’s portfolio of hydrogen businesses serving what it calls “preferred markets” can potentially produce between 0.7 and 1.3 million tonnes per year. More financial value should be created by integrating syngas with renewables and CCS.

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