Oil major BP to write off billions of dollars as coronavirus slashes crude demand

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BP Plc will make billions of dollars of write-offs and impairments after reducing its price assumptions, anticipating that the coronavirus pandemic will have a long-term impact on energy demand.

The oil major is also reviewing plans to develop some of its exploration prospects, it said Monday in a statement. These actions will lead to non-cash impairment charges and write-offs in the second quarter, estimated to be in a range of $13 billion to $17.5 billion post-tax.

“With the COVID-19 pandemic having continued during the second quarter of 2020, BP now sees the prospect of the pandemic having an enduring impact on the global economy, with the potential for weaker demand for energy for a sustained period,” the company said. “The aftermath of the pandemic will accelerate the pace of transition to a lower carbon economy.”

In February, BP outlined its ambitions to become a “net-zero” company by 2050. The company acknowledged that production will decline in the long term, and said whatever is pumped in 2050 “will have to be de-carbonized.” Peers including Royal Dutch Shell Plc, Total SA and Equinor ASA have also set out agendas for what’s becoming an existential challenge for the oil industry.

BP’s revised investment appraisal long-term price assumptions are now an average of around $55 a barrel for Brent crude and $2.90 per million British thermal units for Henry Hub gas, from 2021-2050, the statement shows.

“These lower long-term price assumptions are considered by BP to be broadly in line with a range of transition paths consistent with the Paris climate goals,” it said. “However, they do not correspond to any specific Paris-consistent scenario.”

BP is scheduled to publish its second-quarter results on August 4.

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