Thursday, June 30, 2016

Ignore Climate Change at Your Peril, Lord Browne Warns Oil Groups

Former BP chief executive Lord Browne is urging traditional energy businesses to embrace change (Credit: Click to Enlarge.
Oil companies could go bankrupt if they do not address the risks created by climate change and invest more in renewable energy, Lord Browne has warned.

The former chief executive of BP said the big oil and gas groups could go the way of Peabody Energy, the world’s biggest private sector coal producer, which filed for bankruptcy protection in April.

Peabody is the largest of several US coal producers to have gone bankrupt after a slump in demand as western countries switch to cleaner fuels to cut their carbon dioxide emissions.

Lord Browne told the Financial Times: “If society is saying it is time to change our energy mix, I do think the big players should be involved in the change.

“If they are not involved in that change in a productive way, they will be made to do so.”

He added: “Traditional energy businesses should reflect carefully on the bankruptcy of Peabody coal.  Great companies do go into difficult times when they have a product that people don’t want.”

Lord Browne made a name for himself as BP chief executive between 1995 and 2007 by pioneering its shift towards renewable energy and rebranding the company as “Beyond Petroleum”.

Under that strategy, BP invested heavily in solar and wind power.

But when Lord Browne left, BP reversed much of that strategy, focusing instead on its core oil and gas business.

In 2011, the company exited its solar business, despite strong sales of panels, saying it could not make any money out of this operation.

Despite pressure to develop renewables, many energy majors see more money in traditional markets

Lord Browne said he had been disappointed at the reversal, adding:  “I am sorry that BP got out of the renewables business.”

He also accused large energy groups of being seduced by a high oil price into focusing their operations on fossil fuels.

“With oil at $100 it is tempting to say, ‘Oil is where the future is and nothing can compete with it’,” he said.

“It turns out that was not true, partly because the cost base went up so much that it meant returns in oil and gas were not what they were expected to be.  Meanwhile returns in renewables were not bad.”

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