London Daily

Focus on the big picture.
Monday, Jul 13, 2026

COP26: Away from summit, global demand for oil and gas means BP remains a 'cash machine'

COP26: Away from summit, global demand for oil and gas means BP remains a 'cash machine'

Britain's energy giants have set out ambitious targets to move towards renewables but they are not welcome at the Glasgow climate meeting - and are enjoying a sharp recovery in demand for their products.

It may strike some as deeply ironic that, while heads of state, scientists, charities and environmental activists rub shoulders at the COP26 summit, some of the biggest players involved in the transition to net zero are not in Glasgow.

While the likes of Turin Polytechnic, Bristol City Council, the Omega Institute for Holistic Studies and the US Presbyterian Church are all there, there is no room for some of the world's biggest oil and gas companies.

This is curious because, were the likes of Chevron and Exxon Mobil to set sufficiently bold targets for carbon reduction, it would have far more impact than the targets set out by many of the individual governments attending.

BP's chief executive Bernard Looney has set out ambitious net-zero plans


Most surprising of all is the omission of the UK's big two oil and gas producers, BP and Royal Dutch Shell, which have both set out ambitious plans to reduce their carbon footprint and transition away from oil and gas towards renewables.

Both have backed their promises with action.

Earlier this year, for example, Shell said it would dispose of its US shale assets, selling them in September to ConocoPhillips.

These moves have, it is fair to say, put both in hot water with elements of their shareholder base.

BP, for example, encountered much scepticism from investors when, just before the global pandemic, it announced plans to go net zero by 2050.

More recently, Shell has faced calls from an activist investor, the hedge fund Third Point, to break itself up, separating its cash-generative fossil fuel operations from its businesses investing in renewables and carbon reduction technologies.

Shell boss Ben van Beurden said the company was told it was not welcome at COP26


So it is odd indeed that the COP26 organisers found no room to include companies actually being criticised for having similar objectives to those of the summit itself.

The pair were apparently excluded because the Science Based Targets initiative, a third party supported by the UN and some non-profit organisations, judged that their emissions reduction targets were not credible.

Ben van Beurden, Shell's chief executive, explained last week: "We were told that we were not welcome, so we will not be there."

The organisers may also be judging that neither should be in Glasgow because they have made no secret of the fact that, while they are committed to reducing their carbon footprint, hydrocarbon production will remain a core part of their business for years to come.

That reflects that, in the absence of an enormous fall in the cost of transitioning away from them, the world will still be consuming oil and gas in significant quantities well into the middle of the century.

That demand for oil and gas continues to outweigh supply was borne out today by BP's latest financial results.

At a headline level, BP reported a loss of $2.5bn for the three months to the end of September, which was an accounting technicality reflecting the fact it must mark the price of contracts used to hedge the value of liquefied natural gas shipments to the price in the market while not actually doing the same for the value of its assets.

More importantly, on an underlying basis, replacement cost profit - the industry's preferred measurement - rose 18% to $3.32bn compared with the second quarter.

That was up from $86m in the same period last year and was significantly better than analysts had been expecting.

It is the third quarter in a row that BP's results have beaten expectations and mainly reflects stronger oil and gas prices.

Brent crude traded at an average of $73.51 per barrel during the three months, up from $68.97 from April to June and up from $42.94 in the three months to the end of September last year.

BP breaks even at a crude price of $40 a barrel.

No wonder, then, that Bernard Looney, the chief executive, described BP as resembling a "cash machine" when its core products are trading at these levels.

Operating cash flow during the quarter was just shy of $6bn.

And things on that front may yet get better.

Mr Looney said demand for oil was already back above the pre-pandemic level of 100 million barrels per day - and that is even before global aviation has recovered.

Analysts at the investment bank Bank of America today said they expect a price of $120 per barrel by June next year.

BP's cash is being deployed in a number of ways.

One is to reduce debt which, during the last 12 months, has fallen from $40.38bn to $31.97bn and which has now come down for six consecutive quarters.

Some will go on share buybacks: BP announced a further $1.25bn worth of these today although, with the dividend being held at the previous level, the shares, which are up by 39% since the start of the year, fell by more than 2%.

And, of course, it is going on investment.

BP's capital expenditure is expected to be between $14-$16bn next year.

Not all of that will be on renewables.

Mr Looney stressed today that investors should not assume that, just because BP is aiming to cut emissions, it would be making no new investments into hydrocarbon projects.

Oil demand is already back above 100 million barrels per day - even before global aviation recovers


Interestingly, Mr Looney - who said he was "not hearing" calls from investors to separate its hydrocarbons operations from its renewables operations - was at pains to scotch the suggestion that BP is only interested in building the latter.

He told analysts: "I see the characterisation in some media as BP moving from oil to renewables and that's not actually the case.

"Yes, we are building a renewables business.

"But we've always said, we're not building a renewables business just for renewables.

"We're building a renewables business to be part of an integrated energy value chain that goes all the way from the production of energy into, in some cases, people's cars in terms of electrons, or into hydrogen, or into whatever it is that you wish to do with it.

"It's a focusing of oil. It's a doubling of convenience, including EV [electric vehicle] charging, $5bn to $10bn. And it's an investment in renewables."

If that sounds complicated, that is because it is.

The transition away from fossil fuels is not as black and white as some perhaps think.

Newsletter

Related Articles

0:00
0:00
Close
World Cup Visitors Turn American Big-Box Stores Into Souvenir Stops
Netflix Weighs Always-On Channels, Bundles and Short-Form Video
Passenger Is Pulled Partly Outside Ryanair Jet After Window Fails Mid-Flight
Innovation-led growth strategy
Public service reform pressure
Defence and industrial security
Labour leadership transition and economic reset
Northern England Pushes for Greater Influence in Britain’s Future Economic Model
UK Technology Strategy Focuses on Life Sciences, Digital Innovation and Research Investment
Britain and United States Maintain Focus on Pharmaceuticals Cooperation and Industrial Growth
UK Public Services Face Continued Pressure as Government Promises Visible Improvements
Regional Economic Power Becomes Key Theme in Britain’s Next Political Phase
Britain Expands Support for Small Businesses as Firms Seek Better Access to Finance
UK Economy Remains Central Political Challenge as Cost of Living and Growth Concerns Persist
National Health Service Introduces New Workplace Reviews to Improve Conditions for Healthcare Staff
UK Life Sciences Sector Secures More Than Three Billion Pounds in Investment to Support Innovation
Britain Strengthens Defence Strategy as Security Concerns Reshape Military and Industrial Policy
Andy Burnham Promises Stronger UK Defence Industry and Expanded Domestic Production
UK Government Faces Difficult Spending Choices as Labour Leadership Transition Approaches
Rachel Reeves Warns Andy Burnham of Immediate Economic Challenges After Expected Leadership Change
Andy Burnham Prepares to Lead UK Government With Plans for Regional Power Shift and Economic Reset
Government Creates Emergency Support Scheme for Financially Struggling Universities
United Kingdom Replaces Traditional Farm Subsidies With Payments Linked to Environmental Performance
National Grid Reports First Week of Electricity Generation Without Fossil Fuels
United Kingdom Financial Regulator Introduces Tougher Capital Rules for Cryptocurrency Exchanges
Belfast Harbour Expands Operations to Attract Investment Through United Kingdom and European Union Market Access
Scottish Government Threatens Legal Challenge Over Westminster Cuts to North Sea Transition Funding
United Kingdom Accelerates Trans-Pennine High-Speed Rail Project Linking Northern Cities
United Kingdom Secures Ten Billion Pound Investment for Cambridge Quantum Computing Campus
Port Talbot Steelworks Wins Support for Green Hydrogen Transition and Protection of Industrial Jobs
United Kingdom Sends Royal Navy Carrier Strike Group to Indo-Pacific as Regional Security Focus Expands
National Health Service Expands Artificial Intelligence Diagnostics Across England to Reduce Screening Backlogs
United Kingdom Launches Fifty Billion Pound Infrastructure Fund to Accelerate Housing and Construction
UK Medical Chiefs Update Health Guidance to Promote Everyday Physical Activity
Office of Communications Keeps Wikipedia Under Review Under UK Online Safety Rules
UK Defence Ministry Expands Deep-Strike Capability Through Precision Missile Programme
Russell Group Universities Warn Funding Cuts Could Damage NHS Workforce Training
UK Parliament Calls for National Emergency Broadcast as Heatwave Conditions Intensify
UK and Netherlands Strengthen Naval Cooperation With New Amphibious Defence Partnership
UK Defence Ministry Joins International Missile Programme With One Hundred and Ninety Million Pound Investment
Bank of England Warns Middle East Conflict and AI Risks Could Pressure UK Economy
UK Government Introduces New Rules to Limit Foreign Influence in Political Donations
UK and France Prepare Naval Mission to Protect Shipping Through Strait of Hormuz
United States Pressures UK to Increase Defence Spending at NATO Summit
Bank of England Warns Artificial Intelligence Investment Boom Could Create Financial Stability Risks
Bank of England Begins Direct Oversight of Critical Technology Providers Supporting UK Finance
Andy Burnham Set to Become UK Prime Minister After Labour Leadership Race Clears Path to Downing Street
Scottish Fishing Industry Calls for Emergency Support Amid Rising Costs
UK Supports Stronger European Response to Russian Actions in Ukraine
Devon and Cornwall Police Release Suspect in Ann Widdecombe Murder Investigation
×