BP, Rosneft Form Carbon Pact

BP and Russia's Rosneft have signed an agreement on collaborating in carbon management and sustainability activities, the companies said on February 4, joining forces to meet their environmental goals.

The UK major is looking to pivot away from oil and gas and towards renewables and other low-carbon activities, announcing last year it would scale back its hydrocarbon production by 40% by 2030, while boosting its renewable power capacity to 50 GW. But it has ruled out divesting its 19.75% stake in Rosneft, despite the fact the Russian oil giant's own climate targets are far less ambitious.

BP is targeting a 35-40% cut in direct and indirect emissions by 2030 and wants to become carbon neutral in 2050, whereas Rosneft is aiming to reduce the intensity of direct and indirect emissions from production by only 30% by 2035, and is yet to announce a net-zero pledge.

The pair have agreed to co-operate in identifying and developing low-carbon solutions and programmes. Projects under evaluation include renewables, carbon capture, utilisation and storage and hydrogen production. They will also join together to develop industry methodologies and standards for carbon management, including methane reduction initiatives and energy efficiency applications.

"We've been partners with Rosneft for many years now and we learn a great deal from each other," BP CEO Bernard Looney said. "That's important, and I believe that this agreement can be an important catalyst for progress."

While their climate ambitions may be more modest than those of other European producers, Russian oil firms too are paying closer attention to their environmental credentials, in response to pressure from investors and customers. But Rosneft trails behind the country's other main producers in this area. The company's environmental, social and governance (ESG) rating by US financial firm MSCI is only BB, while Gazprom and Lukoil have BBB scores and Novatek scores an A. Rosneft is at a disadvantage because it produces a lot of high-sulphur Urals oil and operates many of Russia's oldest oil assets.

While BP is scaling back its oil and gas activities, Rosneft is embarking on a massive Arctic development, known as Vostok Oil, which it estimates could one day produce over 2mn barrels/day of oil and 50mn metric tons/year of LNG. The company is considering using wind turbines to power some of Vostok Oil's facilities, industry sources have told NGW, taking advantage of the cold, windy conditions in Russia's far north.