LONDON (Reuters) – Nothing escapes the winds of change now sweeping BP, not even the exploration team that for more than a century boosted its profits by discovering billions of barrels of oil.
Its geologists, engineers and scientists have been reduced to less than 100 from a high of more than 700 a few years ago, company sources told Reuters as part of a climate change-driven review launched last year. by CEO Bernard Looney.
“The winds have become very cold on 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, either transferred to help develop new low-carbon or laid-off activities, according to current and former employees.
The exodus is the company’s most blatant sign of its rapid shift to oil and gas, which will nevertheless be its main source of cash to fund the switch to renewable energy at least over the next decade.
BP declined to comment on the staff changes, which have not been publicly disclosed.
Reuters spoke to a dozen former and current BP employees who highlighted the massive challenges the company faces in its transition from fossil fuels to carbon neutrality.
Looney made his intentions clear both internally and externally by reducing BP’s production targets and becoming the first major oil CEO to promote this as a positive for investors looking for a long-term vision of an economy with less carbon.
BP is cutting about 10,000 jobs, about 15% of its workforce, under the restructuring of Looney, the most aggressive among European oil giants, including Royal Dutch Shell and Total.
A 50-year veteran oil engineer, who previously led the oil and gas exploration and production division, aims to reduce production by a million barrels a day, or 40%, over the next decade, all 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 drive to reinvent BP has done nothing to increase its shares, which reached its lowest level in 25 years by the end of 2020 and fell 44% a year, mainly due to doubts about whether it will be able to transform and get the benefits you want.
The change marks the end of an era for Moscow and Houston exploration teams at BP’s research headquarters in Sunbury, near London, with farewell meetings held at Zoom in recent months, they added.
“The atmosphere was brutal,” a former employee said at the time of last year’s layoffs.
For BP’s small exploration team, led by Ariel Flores, the former head of the North Sea, the focus has been on finding new resources near existing oil and gas fields in order to to offset declining 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 oil and production division.
Flores was not available for comment.
Data from Norwegian consultancy Rystad Energy show that BP acquired about 3,000 square kilometers of new exploration licenses in 2020, the lowest since at least 2015 and much less than Shell, which acquired about 11,000 square kilometers , or Total, which bought about 17,000 square miles.
Although global exploration activity slowed last year due to the COVID-19 pandemic, the fall in BP was primarily the result of the change in strategy, four company sources said.
(Graph: BP slow scan -)
(Chart: BP exploration spending -)
Oil and gas exploration has been the spearhead of the evolution of companies towards huge multinationals that delivered huge profits to shareholders over the decades.
BP began reducing its exploration spending under former CEO Bob Dudley in response to the falling oil price of 2014, with the goal of using the technology to unlock more oil and gas reserves.
Looney makes the exploration budget even lower, up to $ 350 million 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 also removed $ 20 billion last year from the value of its oil and gas assets after lowering its energy price prospects. Under these lower price assumptions, BP no longer considered it worthwhile to develop many of its oil and gas reserves.
(Chart: BP stock performance)
BEYOND PETRLELE
BP, which began as the Anglo-Persian Oil Company in 1908 and has since discovered massive fossil fuel resources in places such as 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 power technology, but the vast majority of investments failed.
Looney believes his plan will succeed with unprecedented government support for the energy transition and technological advances that make renewable energy more affordable than ever. He has hired Giulia Chierchia, a former McKinsey executive to oversee the development of BP’s strategy.
And a team of geologists and data analysts led by Houston-based Kirsty McCormack, who was previously part of the exploration unit, will now apply analytics used to study and map rock structures in search of fossil fuels for develop low-carbon technologies such as carbon capture, use and storage (CCUS) and geothermal energy, company sources reported.
The uptake of carbon dioxide emitted by highly polluting industries and its injection into depleted oil deposits is considered key in the energy transition helping to offset emissions.
Other oil veterans have also been reassigned, with Felipe Arbelaez, who previously led BP’s oil and gas operations in Latin America, now leading the renewable energy business, and Louise Jacobsen Plutt, an experienced oil engineer, now senior vice president. of Hydrogen CCUS.
BP also sought staff from Uber, Toyota and Silicon Valley to improve its understanding of electric vehicles, energy markets, renewable energy and expand its big data capabilities.
Franziska Bell, a former Toyota employee, is BP’s vice president of data and analytics, while Justin Lewis joined the company in July to run his high-tech company after working as a software engineer at Tesla.
The transformation has met with a mix of fear and concern among employees who wonder if the pace is sustainable and if it is enough for BP to compete in a rapidly changing energy world.
Some current and former senior employees warned that BP runs the risk of investing in new fields before fully understanding how they will adapt to a transformed company, while abandoning long-standing cash sources.
“There are so many internal changes that it will be a big task to grab the organization and get things started,” said a senior employee of the exploration division.
(Chart: Big Oil Expenditure -)
(This story was re-corrected to correct paragraph 11 by deleting foreign words)
Reports by Ron Bousso; Edited by Alexander Smith