With oil prices hovering around $30 a barrel, the world’s largest oil and gas firms have tightened their belts, slashed their investments and laid off workers across the globe over the past 18 months. BP has joined competitors such as ExxonMobil and Shell in the energy sector’s struggles as once-promising investments such as offshore oil exploration and the harvesting of the Canadian tar sands are, for now, no longer profitable.
Already hampered by the massive costs incurred by the 2010 Deepwater Horizon disaster in the Gulf of Mexico, BP has been further broadsided by the declining cost of crude oil. The results have been a total loss of $6.5 billion during FY2015 -- $2.2 billion last quarter alone -- with the company expecting to fire 7,000 workers by the end of 2017, or 8.2 percent of its global workforce. On Monday, BP announced an executive shake-up as the company seeks to boost its upstream business and become even more efficient as global oil prices show no sign of an uptick.
The lingering cost from the Gulf of Mexico spill almost six years ago is one reason why the global oil giant continues to rack up losses. Last quarter the company wrote off charges of approximately $443 million related to the Deepwater Horizon aftermath, which it says added to the total of $55.5 billion the company lost due to that explosion and oil leak.
While the company says it has continued to show “strong operational performance” and has implemented cost reductions across the company, its upstream business has continued to suffer and was responsible for the lion’s share of its quarterly financial losses.
BP has canceled approximately $10 billion in future projects since the fall of 2013, and it plans to nix an additional $3 billion to $6 billion in initiatives over the course of this year.
Despite the mounting losses -- and dramatic long- and short-term fall in its stock price -- BP continues to exude confidence about its business operations. The company has touted its new upstream opportunities in Egypt and the Gulf of Mexico, and claims it is still keen on investing in Russia despite that country’s own struggles with low oil prices. More projects in Australia, Angola and Algeria have launched or are on target to start this year, and on the clean-energy side, BP is partnering on a jet biofuel project in Norway.
But, as with the case of many companies within its sector, BP is looking lost and rudderless in the aftermath of the COP21 talks. Last year its shareholders demanded increased reporting of its climate change risks, and the company’s promises of pursuing more sustainable forms of energy ring hollow as it's clear the company has long been sabotaging climate research while garnering millions in tax breaks from governments.
Meanwhile the clean-energy sector shows no sign of slowing down despite rock-bottom oil prices. The conventional wisdom had long held that cheap oil means a death knell for renewables, but that rule no longer applies.
As a result, BP and its allies are in for one long roller-coaster ride, one that looks to be spiraling down.
Image credit: Flickr/Deepwater Horizon Response
Leon Kaye has written for TriplePundit since 2010, and became its Executive Editor in 2018. He is also the Director of Social Media and Engagement for 3BL Media. His previous work can be found at The Guardian, Sustainable Brands and CleanTechnica. Kaye is based in Fresno, CA, from where he happily explores California’s stellar Central Coast and the national parks in the Sierra Nevadas. He's lived in South Korea, the United Arab Emirates and Uruguay, and has traveled to over 70 countries. He's an alum of the University of Maryland, Baltimore County and the University of Southern California.