'Oil Price at $55 by 2050'... bp Casts Shadow Over Petroleum Industry

Long-term forecast sharply lowered from $70... $21 trillion worth of asset write-downs
Expansion of renewable energy investment share

[Asia Economy Reporter Naju-seok] British major energy company British Petroleum (BP) has significantly lowered its long-term oil price forecast. This suggests that the sharp decline in energy demand triggered by the novel coronavirus infection (COVID-19) is not a temporary phenomenon but will continue in the long term.

[Image source=AP Yonhap News]

On the 15th (local time), BP lowered its forecast for the international oil price of Brent crude from 2021 to 2050 to $55 per barrel, down 27% from the forecast announced at the end of last year. BP lowered its oil price forecast because it expects crude oil demand to continuously decline in the future. Governments around the world are shifting their energy policies to reduce the share of carbon energy and increase reliance on renewable energy due to concerns about supply chains and climate change, leading BP to judge that demand for crude oil and other fossil fuels is likely to decrease.

Bernard Looney, CEO of BP, said, "The economic shock caused by COVID-19 is expected to be prolonged," adding, "BP has revised its price forecast to better respond to this shock and to contribute to a more sustainable world." He continued, "We will review existing investment plans," and said, "I am confident that these difficult decisions will ultimately enhance BP's competitiveness through energy transition."

Along with lowering its oil price forecast, BP announced it will write down assets worth between $13 billion and up to $17.5 billion (approximately 21.16 trillion KRW) in the second quarter of this year. The scale of the write-down will be disclosed when the second-quarter earnings are announced on August 4.

[Image source=Reuters Yonhap News]

BP plans to accelerate its transition to an eco-friendly energy company. CEO Looney announced in February a plan to increase investments in low-carbon and renewable energy to achieve net-zero carbon emissions by 2050. With this revision of the oil price forecast, BP is expected to further increase investments in the renewable energy sector.

Bloomberg News commented on BP's announcement, saying, "This is a reassessment of BP's future role as well as the value of its assets," and described it as "a bold declaration that BP will not pursue new oilfield developments." As expectations for returns on investments in fossil fuels such as oil and natural gas decline, this move lays the groundwork for more active investments in renewable energy.

The Wall Street Journal (WSJ) reported that BP will cut its dividend in the second quarter through this announcement. Although this write-down decision does not reduce BP's cash payment capacity, it increases the debt-to-capital ratio.

This content was produced with the assistance of AI translation services.