The Full Transcript
Elizabeth Wason: Welcome to the Policy Leadership Series Podcast, from Resources for the Future. Leading global decisionmakers speak to RFF President and CEO Richard Newell about big environmental and energy policy issues. In this episode, Richard speaks to CEO of BP Bernard Looney. Mr. Looney took on the role of CEO about a year ago, but has spent most of his career at BP, starting out as a drilling engineer, and most recently leading BP's upstream business of global oil and gas exploration and production. Their conversation took place on March 11.
Richard G. Newell: Bernard, welcome. Thanks so much for joining us for this policy leadership series event.
Bernard Looney: Thank you very much for having me Richard. It's fantastic to be with you.
Richard G. Newell: I'd like to start, Bernard, with the story of your career and experiences at BP, you've spent your entire career at BP, three decades working in many different roles before becoming CEO. I know you started as a drilling engineer, working in places like the North Sea of Vietnam, in the Gulf of Mexico. How have those experiences ultimately led you to where you're at now, and how did your background in engineering influence your perspective and decisionmaking as the top leader of a global energy company?
Bernard Looney: Well, Richard, thanks for having me on. It's fantastic to be with you, and hello to everyone who's out there listening. Yeah. I grew up in the West of Ireland on a small farm actually and studied engineering in university in Dublin and as you said, joined BP, 30 years ago now and have been with them around the world. And one of the things that you get the opportunity to experience when you do that is the emphasis that people in different parts of the world place on energy.
And something that we take for granted, maybe in America and in the UK, is something that people desperately rely on and vie for in parts of the world. I've lived in Vietnam in the early nineties, for example, in Da Nang, of all places. So I think it does instill in you a sense of how fortunate we are in the West and how energy is the lifeblood to progress. But coming into the job, I think it was clear to me, Richard, that we had to change as a company, and we had to change for three reasons, none of which are a surprise to you or your viewers.
The first is that there is a carbon budget. It is finite, and it is running out. Second, society, and of course our employees are part of society, wants us to change, and quite frankly, they need us to change. They want different things from their energy, and to be successful, as we were talking about earlier in the long run, you simply can't go against the grain of what society wants. And thirdly, I believe it's an enormous business opportunity. The entire energy system of the world, I think, would be replumbed and rewired. That will take trillions of dollars of investment.
It's a complex problem. And in fact, we love complexity, and it plays to our strengths. So on the one hand, I guess we feel we have got to change because if you don't, you get left behind by society and by technology. On the other hand, Richard, we want to change, not just because it's the right thing to do, but it's also a massive business opportunity for us. I hope that gives you a sense of how we came at this.
Richard G. Newell: Yeah, absolutely. So, Bernard, let's dive in a little bit. I know that you started as CEO, had some major announcements, and maybe a week ago, a year ago, and many pivotal things have happened since then. That must have been a pivotal point for the company. And then of course, COVID-19 brought the global economy to a halt. These are unprecedented circumstances, they've demanded unprecedented and unanticipated shifts in employment, in strategies, shifts in how you think about who you are as a company and what your customers want. We will delve into some of the detailed strategies in a minute, but one year out, what is this process of reinvention looking like, and what priorities have you established as you build BP of today and into the future?
Bernard Looney: Well, I think if we look back on the year, and I live in London now, and as the British would say, it certainly has been an “interesting” year in the British sense of the word, but it's been an incredibly challenging year to say at the very minimum for so many people in so many parts of the world, but amongst all those challenges, and I'm sure you feel this as well, Richard, it does feel like there's been a real powerful momentum for change, positive change. And given the long history of the RFF and the many administrations that you have worked with, it'd be great to hear your perspective because there's a lot that we can learn, frankly, from you, as we said about our journey to become a net-zero company. But as we look at the year, a lot of people have said to me, if you knew what was about to happen, would you have stopped?
And I guess the honest answer is, we could've pressed pause and in a time of global disruption, I guess, people would have understood, I think, if we pushed pause. And I think it would have meant that we would have had an easier time of it, not that it would have been easy, but it would have been easier. But in hindsight, Richard, I'm so glad that we pressed on. Quite frankly, it's not just us that has pressed on—the world has pressed on. And look at how much progress there's been on climate, just in the last 12 months, whether it's despite the pandemic or because of the pandemic, but China has a new net-zero target, 2060, the European Union has the Green Deal, the UK here has plans for a green industrial revolution, and in America, the US has rejoined Paris in a carbon-free power sector by 2035.
And in reality, I guess what I'm saying is that over the past 12 months, the world's moved towards our position rather than moved away from us. We sit here today, and because we pressed on, I'm not just sitting here saying that we support those moves of those governments, but we're fully aligned with the moves that those countries have made. So we moved faster than I thought we would. We set a net-zero ambition, one of the first large energy companies to do that, by 2050 or sooner. We set a new purpose: we want to reimagine energy for people and our planet. We set a new strategy, we'll talk about it, to become an integrated energy company. We did some real, tangible things like getting into offshore wind for the first time in the United States and just recently in the UK.
The exciting thing is that it doesn't mean that we need to make a choice between the sense of responsibility, or a choice between doing the right thing and the bottom line of the business because, of course, we have to match both of those things. I'm increasingly confident, Richard, that the two are very much aligned. We can increase the value of the company through the strategy that we've chosen, and at the same time, investors and all our other stakeholders can be supporting a carbon-intensive company that is decarbonizing. I can't imagine a more positive thing to be supportive of. So that's a little bit of a look back on the last 12 months, if that's helpful.
Richard G. Newell: Yeah. It was interesting. We've been doing a survey of American climate sentiment for 20 years now in collaboration with Stanford University. We did it in the summer, and one of the major questions we had and were wondering ourselves, was whether or not attitudes had changed on the urgency of climate as an issue and the extent to which government should be taking action in response. What we've found is consistent with what you've said and what I think we've all experienced, which is, if anything, it increased people's attention, and the level of importance they place on this issue has not abated. And it's also been joined by many other issues related to societal equality and other things that have now also been touching on some of these major crisis areas. So you are very consistent with your experience.
Bernard Looney: I think there's something about science and the pandemic that applies to climate. There is no border to a pandemic; there is no border to climate. And the fact is that it's cheaper and more effective and more efficient to act early in prevention rather than act late. So there are so many similarities, and we don't want to solve the climate problem by bringing the world's economy to a halt. So we have to find a different way to do it. And that's what we're all focused on trying to do.
Richard G. Newell: So delving a little bit into BP's net-zero ambitions, they've made a lot of headlines, you've committed to a tenfold increase to about 5 billion a year in low carbon investments by 2030, and you're planning to fulfill this commitment through multiple technological avenues, including renewables, bioenergy, hydrogen, and carbon capture and storage. What ultimately led you, you said a little bit about this, but maybe give a little bit more detail, you and BP to such a substantial departure from BP's past strategy?
Bernard Looney: Well, look, I think a little bit of what I said earlier, Richard, I think there's a case of what customers want from energy is changing. Customers want energy, society wants energy that is affordable, they want it to be reliable and they want it to be clean or cleaner. That's what society wants from energy. And what we want to do is help give society what it wants. Now, that's actually quite a difficult problem to solve: clean, affordable, reliable. Renewables can give you clean and affordable, but they may not give you reliable. Hydrocarbons can give you reliable and affordable, but they may not give you clean. So how you solve this problem is actually very, very difficult. That's why it plays very well to our strengths and to the strategy that we've chosen, and the strategy that we've chosen is that we will become an integrated energy company whose purpose in life is to knit together different sources of energy to solve the problem that our customers want.
And when I say customers, I mean data centers, I mean hospitals, that's what they need: clean, reliable, affordable energy. We actually do this in America today for over 100 cities. BP does, we've got deals with Amazon, with Microsoft, but at the end of the day, this was about heading in a direction that gives our customers what they need, but also what they want. And today, people need hydrocarbons, but they don't always want them. We want to be a company that helps solve what is going to be quite a complex and difficult problem as you know, to solve as years roll on.
We want to be at the heart of providing the solution to that rather than quite frankly, describing how difficult it is. So it is about doing what our employees want; it is about doing what society wants from us. And ultimately, we cater to our shareholders who have two things on their mind. One is they want to make a strong return on their investment, and we believe that through this process, we will do that. And equally, increasingly, they want to put their money into an enterprise that is a force for good or is adding to the planet and not taking from the planet.
Richard G. Newell: Yeah. For those who haven't followed the detailed aspects of your commitment to net zero, when you say net zero, does that include just emissions from your operations or is it also from the combustion of the products you sell?
Bernard Looney: It is from the combustion of the oil and gas that we produce. And this is a very important point that you allude to. The vast majority of the emissions from oil and gas obviously come when the product is combusted. Now, it may not be combusted or it likely isn't combusted by us, but it is combusted somewhere in the world. And in fact, about 90 percent of emissions come from that. So what we said is that as BP, we do drill for hydrocarbons, we produce it, and it is what happens to that oil and gas when it is combusted, which in our case is about 415 million tons of carbon dioxide equivalent on an annual basis. It is that we wish to get to net zero by 2050, not just the emissions that are created as we go about our operations, so-called “Scope 1” emissions and “Scope 2” emissions.
So we do want to get into what happens when that oil and gas is combusted. And at the end of the day, we're going to drive our absolute emissions down. And that's what the world needs. The world doesn't need us to improve efficiencies or intensities, it doesn't need us to do that, but ultimately if we're going to hit one and a half degrees, absolute emissions come down and that's what we've set out to do in our strategy.
Richard G. Newell: Yeah, I can imagine, Bernard that you get skepticism and questions from multiple flanks as you take such a serious undertaking. What do you say to those who expressed skepticism of BP's plans, such as criticism, that it is marketing or it's greenwashing really, rather than a significant change in focus or ultimate intention?
Bernard Looney: It's a good question. I can assure you, it is not greenwashing, and here's why I would say that. We intend to go from two and a half gigawatts of renewable electricity to 50 gigawatts by 2030. This is a massive, massive increase, 20 fold. We intend to increase the amount of money that we spend on the transition tenfold over that time period. We intend to drive down the emissions from those combustive products by between 35 and 40 percent over the next decade. We intend to go from 7,000 charge points for electric vehicles to 70,000 charge points over the next decade. So this is not a window dressing. This is fundamental change. We've also said that we will bring our oil and gas production down by 40 percent over the next decade. This is very, very distinctive.
So I can assure you, we do get people who criticize us from quite frankly, Richard, multiple directions. Some people who say it's greenwashing, some peoples who say, you're not doing enough, some people are saying that you're not putting the shareholder first, that you're playing to the crowd, all sorts of criticism. I think the first thing in life is to rather than blame people for being critical is to put ourselves in their shoes. I think this is a very important lesson in life, at least it has been for me, because people aren't bad, people aren't being critical for no reason, they're being critical because they have a history and a set of experiences with a company like ours, which if I put myself in their shoes to understand for a moment, it at least gives me perspective of where they're coming from without immediately saying they're wrong and I'm right.
We are getting some good feedback, our employees love what we're doing, society I think in general is very pleased with what we're doing. I think investors liked the direction of travel. Each day, I think they understand the rationale and the proposition more, but understandably, they want to see results, they want to see execution and we're 100 percent focused on that. I have every confidence that we will increase value of this company over time. But of course there are critics, and the thing is, there's no point in life really, in talking to people all the time that agree with you.
So I think it is important to sit down and listen to people. “Listen,” being the important word, not to try and convince them that they're wrong. Listen, because my late mother who was very important to me, she told me that God gave me two ears and one mouth, and I should use them in that proportion. I hope it was advice in general and not just for me, but I think it's great advice. If only we did a bit more listening in the world, listening to understand, not to respond, I think the world would be much better off. That's what I try to do. Of course there comes a point where you do have to say, "Well, I have a different point of view," but sometimes you learn. I think that's the most powerful thing.
Richard G. Newell: Yeah, very good advice. Bernard, I want to touch back a little bit on the severe disruption to the global economy that was caused by COVID-19 as I think you alluded to earlier, very substantially reduced energy consumption, global demand in 2020 fell 6 percent overall, and at the peak was much greater than that. This all comes at a time when markets had already been flushed with oil. I think you've said, but if I have anything further, you want to add that one could have imagined this could have disrupted your plans, it sounds like you've proceeded a pace. And if I heard you right, even though at the times, there may have been questions in retrospect, it was the right thing to do. But if you have anything to add in terms of whether you've had adjustments in your strategy due to COVID, and also one year into the pandemic, how much of this do you think is transitory, and how much do you think is permanent in terms of what the energy impacts will be?
Bernard Looney: I think time will tell on what the long-term implications of the pandemic will be. If I take our own company, and let's talk about work for a moment, we will go into a hybrid strategy where instead of people coming to an office environment to work, people will work from home around two days a week and spend about three days a week in the office. So that is a change that will be a real change inside of our company. It gives people more flexibility, I hope it reduces commuting and time lost on commuting, and it gives people more time in their home environment. So there will be changes like that. I've no doubt that business travel will change, but I think we shouldn't be naive, particularly when we see some of the numbers and what's happening in China, in Asia, in India, where numbers are back at already exceeding levels that we saw before the pandemic.
So there is an insatiable desire for energy in the world, particularly in emerging economies, they have every right to expect that and want that. Our job obviously is to help those countries meet their energy needs, things that we take for granted that they dream of, our job is to help them get that and do it in a way which doesn't damage the environment. That's what we're trying to do. Does the pandemic change our strategy? It didn't. If anything, it caused us to double down on what we're doing. We stuck with it, we are a year further down the road, we're now in the wind business and the offshore business in the United States, which I'm delighted with off shore New York, we just entered in the Irish Sea here in the United Kingdom, we're building partnerships with Quantas where the electric vehicle charger to Didi and China.
Didi is the world's largest mobility provider. They have 600 million users on their platform. They have 30 million rides a day. They own, I think a million electric vehicles, the biggest owner of EVs in the world, and they've chosen BP to be their partner to build out their charging network in China. So these are all just small examples, our biggest examples, I guess, of the things that we've managed to get done. Look, I've always said, Richard, when you come to a problem in life—and whether it's in your personal life or in work or wherever—there's usually an easy route and there's usually a tougher route.
And my experience is that the tough route is usually the right route. And while it was harder in many ways to stick with what we planned and laid out last year, I have deep inner confidence that in the long run, we'll be delighted that we did it. The tough things in life are usually the right things to do. And that's just a piece of reality that for me, I've certainly experienced.
Richard G. Newell: Yeah, the tough road is tough and it also requires a lot of continuous care and attention and planning along the way.
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Richard G. Newell: I want to turn a little bit to policy and discuss carbon pricing and other policies just for a minute. Many oil and gas companies are not taking the same types of actions on climate that BP is. Some are, but many are not. Some have continued to work against policies to reduce emissions of methane and CO₂. So what led BP to come out so forcefully for a price on carbon, it may even seem to run counter to your own historical growth strategy, and to what extent do you think BP's actions might lead the way for other companies to take a similar changes and commitments?
Bernard Looney: Well, I think there's a lot of great companies out there, and it's not for me, Richard, to tell anyone what to do. So I'll leave them to their own choices, so to speak. But for us, we have long been a supporter of a pricing carbon actually over the last 20 years ever since John Brown did his speech on climate change at Stanford university in the late nineties, where he acknowledged that climate change and human activity were interlinked.
And at the time derided by many in our industry for saying such a thing, but he was right. And I think that was in 1997 or 1998. Ever since then, we've been a strong proponent of a price on carbon. We actually had our own internal carbon trading scheme for a while. Look, I'm not an economist, I'm an engineer. Not smart enough to be an economist, but I do get the basic principle, which is if something isn't priced, if this concept of an externality, how can we expect people to make the right choices? Because the cost isn't there to be seen, and therefore the cost isn't in the decisionmaking. So, we've long been a supporter of a pricing carbon. In many ways, it gets easier as we transition the company, because as we put a price on carbon, as many countries and states now are doing, and cities actually around the world, not waiting for some global solution, as that happens while yes, it increases the cost of our core product, it incentivizes people around the products that we are developing.
So an example would be here in the United Kingdom, where we are supportive and have been vocal in our support of an acceleration of the ban on internal combustion engines. Now, why would we do that you might say? Isn't that what our company does? Well, yes, on the one hand, we sell a lot of fuel and gasoline as you would call it here in the UK, so it will impact that business. But at the same time, we own pulse and pulse is the largest charging EV charging network in the UK. And just as it hurts our fuel business, it will help our charging business. And therefore it's not just a threat, it's actually an opportunity. And that's what the transition does. It means that things like a price on carbon, which are absolutely right, actually helps our company now that we're part of this transition.
But pricing carbon is very clear. It can be effective: emissions can go down while the economy grows. It can be efficient, giving companies obviously that incentive to invest in the transition. And it can be fair: something that the pandemic has really brought to light is fairness in society. Those who emit the most, pay the most, and governments can choose how to use the revenues. It's not a silver bullet, but it is a big part of the toolkit. We've been involved, Richard, in several policy advocacy campaigns in the US. I think it's RGGI [the Regional Greenhouse Gas Initiative] on the East Coast, which is around a cap-and-trade program for power. I think TCI, the Transportation and Climate Initiative is an evolution of that that's now focused on transport.
And in Washington State, on the other side, where I am definitely advocating for an economy wide cap-and-invest bill. So lots going on, lots more to do, and it's really important for us. One of the first things I did when I took the job was get on the phone with our people inside the company and say, “we must advocate for policies that enable the transition, that enable net zero.” And all I would say is that it's a big company, and it takes time for that message, longer than you'd like sometimes, to get out there. So, if people see us doing things that are inconsistent with what I just said, it's probably not deliberate. It's probably something that for whatever reason has slipped through the cracks, let us know immediately, bring it to our attention so that we can address it because there's usually more to it than meets the eye.
Richard G. Newell: Thanks for that. I sometimes think it's not always appreciated that corporate commitments like yours, as important as they are, can only ultimately work within an overall ecosystem, an overall societal plan that's also driving the demand for energy in the same direction that you're seeking to drive the supply for energy. And so this interplay between society wide policies and strategies and corporate commitments like yourselves is incredibly important to have that aligned.
Bernard Looney: Absolutely. We obviously do not act in a vacuum, we do not do what we do in the absence of either a policy or societal wants and preferences. So this must come together as a system. I think you're seeing that in the US today, and we're certainly seeing it in Europe over the past several years, so much to be optimistic about I think.
Richard G. Newell: So we've touched a little bit on technologies that BP is investing in and there's obviously incredible growth in a new advanced energy technologies. At RFF we've had for a few years now an advanced energy technologies project. What that's doing is quantifying the potential societal benefit of technologies like carbon capture from gas plants, advanced nuclear reactors, geothermal power, and direct air capture and energy storage. And I know at BP you're also thinking about a wide set of energy technologies. So given all of these emerging technologies, which ones really excite you and how are you making decisions about which technologies to invest in and how fast?
Bernard Looney: Well, I think in the matter of electricity, a lot of the technology really does exist, and it's a question about continuing to drive scale and driving the cost curve. The world is electrifying, renewables are going to be a clear winner, and for us, we're one of the largest solar developers in Europe. I think the largest in the world is called Light Source BP. It's a 50/ 50 joint venture, we're in that. Offshore wind is a huge area. I think it's the fastest growing source of renewable electricity in the world. We want to bring a lot of the skills that we've honed over 112 years in oil and gas that are actually directly applicable to this. These are multi-billion-dollar, multi-year projects. We brought on, I think, 29 major projects across the world over the last five or six years. So, project management skills, we can apply there.
We have a large trading house, a very large trading organization that can bring this together for customers, and it can hedge pricing for them so that they can have predictable pricing and risk management for their businesses. Renewable electricity, I think, is an area that we will play, but it's not just there. The world's going to need more than that to solve some of the problems that lie ahead of us. Heat and industrial pr
