Energy producer BP takes $17.5 billion hit as demand slides

LONDON: Energy company BP is writing off as much as $17.5 billion from its oil and gas assets and will review its plans to develop oil wells as the COVID-19 pandemic accelerates its goal of decreasing its reliance on fossil fuels.

Chief Executive Bernard Looney said the pandemic is forcing the company to face the long-term impact on the economy, together with the likelihood of weaker demand for a longer period of time. The company pledged in February to become a net-zero company by 2050, but the pandemic has forced them to re-consider their assumptions once more.

“We are also reviewing our development plans,” Looney said. “All that will result in a significant charge in our upcoming results, but I am confident that these difficult decisions – rooted in our net zero ambition and reaffirmed by the pandemic – will better enable us to compete through the energy transition.”

BP said the actions would to non-cash impairment charges and write-offs in the second quarter, estimated to be between $13 billion to $17.5 billion post-tax.

Supply of oil and gas was particularly high when the outbreak began, creating a perfect storm for the industry. With storage facilities filling up, the U.S. price of oil went below zero in April for the first time ever.