Former BP chief executive Lord Browne is urging traditional energy businesses to embrace change
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.
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.”
BP said: “BP has invested more than $ 8bn in alternative energy during the past decade and currently has the largest operated renewables business among our oil and gas peers.
“In addition to renewables, around half of BP’s current upstream portfolio is natural gas and we are increasing that proportion over time. Natural gas produces about half as much CO2 as coal.”
BP’s changing stance on renewable energy reflects the mixed approach oil companies have taken to climate change.
Several European energy groups last year signed up to a pledge to combat climate change in the run-up to a UN summit on the issue. None of their US counterparts joined the initiative.
Relatively few groups have, however, made significant changes in the type of projects in which they invest.