Oil and gas companies used to measure their success by how good they were at finding new reserves. The unforgiving rule by which they were judged was the “reserve replacement ratio”, a metric of how successful a company was at replacing the oil and gas it extracted with new supplies. Today, that view is being turned upside down. Bernard Looney, chief executive of BP, believes the future lies in producing less hydrocarbons, not more. He wants BP to cut its production of oil and gas by 40 per cent over the next decade. 

The ambition marks the profound shift gripping the energy industry. Big Oil has to reinvent itself if it wants to survive in a low-carbon world. BP said this week it believes the global demand for oil may peak within the next few years and that consumption may never recover from the pandemic. Such a bleak assessment from one of the world’s largest oil companies would have been unthinkable just a few years ago. 

The world was changing even before Covid-19. Climate change has moved to the forefront of the public’s consciousness. Pressure on the oil industry to adapt has come from all sides even as companies have yet to figure out how to generate revenues from lower-carbon businesses. Investors are more vocal, urging the likes of BP and Royal Dutch Shell to recognise the financial impact that global warming could have on their operations.