Aug 5, 2020

BP strengthens its net-zero strategy

Fossil fuels
Net Zero
Dan Weatherley
3 min
The oil giant aims to reduce its fossil fuel portfolio through its beefed-up net-zero and sustainability strategy...

The oil giant aims to reduce its fossil fuel portfolio whilst riding the wave of the global energy transition.

Centered in the United Kingdom, BP is the fourth-largest oil and gas company by revenue in the world, and rather than trying to strengthen its involvement with fossil fuels, BP has instead announced its commitment to the environment and its plans to become an ‘integrated energy company’. 

It aims to become ‘a very different kind of energy company’ through the concept of sustainability.

The company is set to invest in clean energy and technology whilst reducing its oil and gas production by around 40 per cent following record losses during Q2 2020, primarily as a result of the COVID-19 pandemic.

The ultimate goal of the company’s plan and strategy is to become a net-zero company by 2050. Its competitor Royal Dutch Shell, which is part-based in the UK, has already announced plans to become net-zero by 2050 or before, with a long-term sustainable ambition.

As part of the strategy, BP is set to immediately increase its spending on various types of ‘low carbon investments’ including clean electricity, carbon capture technology, and renewable energy sources such as hydrogen. In addition, the company has said it will increase its focus on bioenergy and storage and mobility. 

Currently, BP invests in the above energy trends and technologies up to a value of around $500mn. The company has revealed that it will increase its investment by ten-fold, reaching $5bn annually to help tackle climate change.

The company has also announced that it’s driving away from upstream oil and has production, and aims to reduce emissions from the practice by just over a third by the end of the current decade.

The company’s Chief Executive, Bernard Looney, said the strategy provided a "comprehensive and coherent" approach to the delivery of the ambition which was first revealed by BP at the beginning of the pandemic, back in February this year.

Looney also echoed his views on the next decade and how it is "critical for the world in the fight against climate change".

"In the years ahead, BP is going to significantly scale-up our low-carbon energy business and transform our mobility and convenience offers," Looney said. 

"We will focus, and reduce our oil, gas and refining portfolio. And, as we drive down emissions on our route to net zero, we are committed to continuing to deliver long-term value for our stakeholders.”

Andrew Grant, Head of Oil & Gas at Carbon Tracker, said the firm had "radically changed the game". "In the arms race of emissions announcements, most oil and gas peers have conveniently ignored the global need to produce and use less oil and gas," he said. "BP's production cut of 40 per cent by 2030 makes them unquestionably the industry leader."

The strategy comes just a day after the Australia subsidiary of Shell announced its acquisition of project carbon offsetting specialist, Select Carbon.

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Jun 21, 2021

Magellan, Enterprise and ICE unveil new futures contract

Dominic Ellis
4 min
The Midland WTI American Gulf Coast contract is being launched in response to market interest for a Houston-based index

Magellan Midstream Partners, Enterprise Products Partners and Intercontinental Exchange (ICE) are establishing a new futures contract for the physical delivery of crude oil in the Houston area.

The Midland WTI American Gulf Coast contract is being launched in response to market interest for a Houston-based index with greater scale, flow assurance and price transparency. It will use the capabilities and global reach of ICE’s trading platform and is due to be launched by ICE by early 2022, subject to regulatory approval. 

The quality specifications of the new futures contract will be consistent with a West Texas Intermediate crude oil originating from the Permian Basin with common delivery options at either the Magellan East Houston terminal or the Enterprise Crude Houston terminal. In support of this new futures contract, Magellan and Enterprise anticipate discontinuing their existing provisions for delivery services under the current futures contracts deliverable at each terminal once the new contract receives regulatory approval and is finalised. 

“Magellan is pleased to join forces with Enterprise and ICE to offer this leading-edge joint futures contract,” said Aaron Milford, Magellan’s chief operating officer. “The new contract improves the transparency, flexibility and marketability of Midland WTI crude oil for Gulf Coast and export customers while maintaining industry-recognized quality and consistency.”

Harold Hamm, Chairman of the Board of Continental Resources and Founding Member of the American Gulf Coast Select Best Practices Task Force Association said on April 20 last year, when the Cushing, Oklahoma WTI contract traded down to -$38, it was a wake-up call to the oil industry that the storage constraints and landlocked location of the Cushing contract could no longer be ignored.

"I started the American Gulf Coast Select Best Practices Task Force to develop specifications for a new US light sweet crude oil price benchmark in the American Gulf Coast, and to advocate for its implementation and adoption as the main pricing point for the US oil markets," he said.

"We think a futures contract in the most interconnected market center in the country, with a widely accepted quality spec, which settles with guaranteed delivery of crude oil is an important new alternative for the industry. The task force has worked tirelessly to create a marker with transparency and liquidity that is waterborne for this modern era. The Midland WTI American Gulf Coast futures contract ... is a huge step forward for the industry and goes a long way to accomplishing the mission on which the task force has been working.”

Brent Secrest, Executive Vice President and Chief Commercial Officer of Enterprise’s general partner, said: “We are excited about this new crude oil futures contract, which features the combined strength of two extensive and complementary networks of midstream assets with a world-class trading platform to provide customers with greater supply reliability, flexibility and price transparency. 

As the market hub for Permian Basin production, Houston represents the most logical choice for a new futures contract. Between Magellan and Enterprise, we offer access to virtually all of the export capacity in the Houston region, redundant connectivity to all area refineries, a robust Gulf Coast storage position and interconnects to all of the relevant supply pipelines, including those owned by third parties.”

Jeff Barbuto, Global Head of Oil Markets at ICE, said combining efforts with Magellan and Enterprise to establish a benchmark for pricing Midland quality WTI on the Gulf Coast allows it to offer the industry a futures contract with over four million bpd of supply capacity from Midland into Houston, access to both domestic and foreign demand, and nearly 60 million barrels of storage capacity in the Magellan and Enterprise systems. 

"Traded on the same global platform as ICE Brent, Murban and Platts Dubai Crude Oil futures contracts, the new Midland WTI American Gulf Coast contract can also offer significant capital efficiencies to the industry and provide industry-leading quality that buyers have grown accustomed to in the Houston market," he said.

According to EIA forecastsglobal consumption of petroleum and liquid fuels will average 97.7 million bpd for all of 2021, a 5.4 million bpd increase from 2020. US crude oil production averaged 11.2 million bpd in March, up 1.4 million on February. 

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