For BP, a path to zero emissions is taking shape. It’s going to cost them

How much does it cost for an oil company to transform from fossil fuels to clean energy? Start in the tens of billions, and keep going.

BP, the British energy giant, began to set out initial cost estimates on Monday, including the write-down of assets and the decision to not exploit some existing resources, as the company grapples with both the immediate hit of the coronavirus pandemic and its long-term commitment to reach “net zero” emissions by 2050—a goal of pushing emissions as low as possible and offsetting the rest.

The first round of write-downs and impairment charges are expected to equal between $13 billion and $17.5 billion, to be finalized when the company announces its second-quarter results in early August, BP said in a release. It also said it was revising its forecasts for the long-term price value of its products and undergoing a review of its exploration assets—in other words, whether it will drill for oil in its unexploited sites. That announcement comes on the heels of CEO Bernard Looney’s announcement earlier this month that the company will lay off nearly 10,000 employees by the end of the year, in order to preserve cash and as part of its transition to becoming a “low carbon” company.

On Monday at noon in London, BP shares were down 3.5%; it opened down 5%. The Brent crude price was down 2.28% at $38.15, as fears of a second wave of COVID-19 pandemics spooked investors.

The announcement marks the first set of concrete details on how the company plans to meet its “net zero” target, announced in mid-February, nearly immediately after Looney took over as CEO. The specifics of the plan were sparse at the time, and Looney committed to providing more details by September on exactly how one of the world’s largest oil and gas companies would completely transform its business.

Since then, the global COVID-19 pandemic has overturned even the sector’s status quo economics. Demand plunged as much of the world went into lockdown by April, eviscerating the need for transport fuels, in particular. The plunge briefly caused oil prices to hit negative territory and spurred a wave of cost cutting from Texas oilfields to Saudi Arabia. Even with energy demand recovering as economies have reopened, the International Energy Agency predicts that this year will mark a record drop in global oil demand.

That has only “reaffirmed” the company’s emerging strategy on how to hit net zero, Looney said in a release, after noting in an earlier announcement that the drop in oil prices had resulted in the company losing “millions of dollars, every day.”

The initial cost estimates could also be a sign of what’s to come for a slate of other European energy giants that have committed to hitting net zero targets in recent months. Those include Spain’s Repsol, France’s Total, and Royal Dutch Shell, the world’s largest publicly traded energy company, which committed to the goal in April.

It also underlines a growing rift between the strategies of the largest European companies and their American rivals, where no such commitments have been made on the same ambitious scale. Exxon Mobil, the largest publicly traded U.S. company, has said it is committed to meeting the Paris Agreement to limit rising temperatures this century, but has given few specifics on how it will do so. Instead, CEO Darren Woods has largely kept to a long-term forecast that the middle class will grow in emerging economies, increasing the demand for oil and gas for decades to come.