LONDON (Reuters) – Nothing escapes the winds of change now sweeping BP, not even the exploration team that for more than a century has boosted its profits by discovering billions of barrels of oil.
Its geologists, engineers and scientists have been reduced to less than 100, from a peak of more than 700 years ago, company sources told Reuters, part of a climate change-driven reform launched last year by CEO Bernard Looney.
“The winds have been very cold in the exploration team since Looney’s arrival. This is happening incredibly fast, ”a senior team member told Reuters.
Hundreds have left the oil exploration team in recent months, transferred to help develop new low-carbon activities or laid off, current and former officials said.
The exodus is the strongest sign ever from within the company of its rapid shift from oil and gas, which, however, will be its main source of money to finance the move to renewable energy for at least the next decade.
BP declined to comment on personnel changes, which were not publicly disclosed.
Reuters spoke with a dozen former employees and current BP employees, who highlighted the enormous challenges the company faces in its transition from fossil fuels to carbon neutrality.
Looney made his intentions clear internally and externally by lowering BP’s production targets and becoming the first major oil CEO to promote this as a positive thing for investors looking for a long-term vision for a low carbon economy.
BP is cutting about 10,000 jobs, about 15% of its workforce, under the restructuring of Looney, the most aggressive of Europe’s oil giants, including Royal Dutch Shell and Total.
The 50-year-old veteran engineer who previously headed the oil and gas exploration and production division, plans to cut production by 1 million barrels a day, or 40%, over the next decade, while increasing renewable energy production by 20 times. .
Despite the changes, oil and gas will remain BP’s main source of revenue until at least 2030.
And Looney’s effort to reinvent BP did nothing to boost its shares, which reached their lowest level in 25 years in late 2020 and fell 44% in the year, mainly due to doubts whether it will be able to transform and obtain the profits it seeks.
The move marks the end of an era for exploration teams in Moscow and Houston at BP’s research headquarters in Sunbury, near London, with farewell meetings held at Zoom in recent months, they added.
“The atmosphere was brutal,” said a former employee during last year’s layoffs.
For BP’s reduced exploration team, led by Ariel Flores, the former head of the North Sea, the focus was restricted to the search for new resources near existing oil and gas fields in order to compensate for declines in production and minimize spending.
“We are in a harvest mode and what is not being said is that BP will be a much smaller company without exploration,” said a second source in BP’s production and oil division.
Flores was not available for comment.
Data from Norwegian consultancy Rystad Energy shows that BP acquired about 3,000 square kilometers of new exploration licenses in 2020, the smallest since at least 2015 and far less than Shell, which acquired about 11,000 square kilometers, or Total, who bought about 17,000 square kilometers.
Although global exploration activity declined last year due to the COVID-19 pandemic, the drop in BP was mainly a result of the change in strategy, said four company sources.
(Graph: BP’s slow exploration -)
(Graph: BP exploration expenses -)
The exploitation of oil and gas has been the spearhead of the evolution of companies in large multinationals that have provided huge profits to shareholders over the decades.
BP began to reduce its exploration spending under former CEO Bob Dudley in response to the fall in oil prices in 2014, with the goal of using the technology to unlock more oil and gas reserves.
Looney is reducing the exploration budget even further, to about $ 350 to $ 400 million a year. That’s about 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 out $ 20 billion of the value of its oil and gas assets after reducing its forecast for energy prices. With these lower-priced assumptions, BP no longer considered many of its oil and gas reserves worth developing.
(Graph: Performance of BP shares -)
BEYOND OIL
BP, which started out as Anglo-Persian Oil Company in 1908 and has since discovered massive fossil fuel resources in places like Iran, Iraq, Azerbaijan, the North Sea and the Gulf of Mexico, has tried to diversify into renewable energy before.
Under CEO John Browne, BP launched “Beyond Petroleum”, investing billions in wind farms and solar technology, but the vast majority of investments failed.
Looney believes that his plan will succeed with unprecedented government support for the energy transition and technological advances that make renewable energy more accessible than ever. He enlisted Giulia Chierchia, a former McKinsey executive to oversee the development of BP’s strategy.
And a team of geologists and data analysts led by Kirsty McCormack of Houston, who was previously at the exploration unit, will now apply analyzes used to study and map rock structures in search of fossil fuels to develop low-carbon technologies, such as capture carbon, use and storage (CCUS) and geothermal energy, company sources said.
Absorbing carbon dioxide emitted by highly polluting industries and injecting it into depleted oil reservoirs is seen as the key to the energy transition, helping to offset emissions.
Other oil veterans were also transferred, with Felipe Arbelaez, who previously headed BP’s oil and gas operations in Latin America, now leading its renewable energy business, and Louise Jacobsen Plutt, an experienced oil engineer, now deputy senior president of hydrogen CCUS.
BP has also hired employees from Uber, Toyota and Silicon Valley to increase their understanding of electric vehicles, energy markets, renewable energy and expand their big data capabilities.
Franziska Bell, a former Toyota employee, is vice president of data and analytics at BP, while Justin Lewis joined the company in July to lead his initial high-tech venture after working as a software engineer at Tesla.
The transformation was met with a mixture of admiration and concern among employees who are wondering whether the pace is sustainable and whether it is enough for BP to compete in a rapidly changing energy world.
Some former and current employees have warned that BP is at risk of investing in new fields before fully understanding how they will 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 get the organization up and running,” said a senior exploration division official.
(Graph: Big Oil spending -)
(This story has been refiled to correct paragraph 11 by removing strange words)
Ron Bousso reporting; Alexander Smith edition