Mark Williamson: Shake-up at oil giant will impact many Scots

However, environmental campaigners would probably feel he has not gone anywhere near far enough while other company watchers may wonder if the costs of the changes Mr Looney has started making are set to be shared fairly by different groups of stakeholders.

The Irish executive took charge in February last year after Bod Dudley completed a 10-year term, much of which was spent helping BP deal with the disastrous fallout from the Gulf of Mexico oil spill in 2010 for which it was vilified around the world.

READ MORE: North Sea oil giant triples profits as coronavirus vaccines fuel recovery hopes

Mr Looney moved into the hot seat at a time when oil and gas giants found themselves under increasing pressure to justify their existences as the need to tackle climate change became increasingly urgent.

A veteran of BP’s North Sea business, Mr Looney made clear that he believed that oil and gas giants could be part of the solution to the problem instead of being seen as a cause of it.

Within days of taking charge, he announced his ambition for BP to become a net zero business by 2050 in terms of carbon emissions only to find the company needed to respond to an even more urgent issue than climate change in the form of the pandemic.

READ MORE: New BP boss says oil giant can be force for good as it aims for net zero

The lockdowns that were imposed around the world sent demand for oil and gas plunging with grim consequences for firms’ revenues. The price of the benchmark US West Texas Intermediate crude even turned negative briefly in April as storage facilities were overwhelmed leaving traders having to pay people to take oil off their hands.

In Tuesday’s results announcement Mr Looney made it clear that he felt BP had managed to respond to the challenges posed by the coronavirus while making progress on the reform front.

The company made $2.6 billion (£1.9bn) profit net of one-offs in the three months to March 31 on the measure followed by analysts compared with $0.8bn in the same period last year.

“This quarter demonstrates what we mean by performing while transforming,” declared Mr Looney. He added: “We’ve delivered disciplined strategic progress right across bp.”

The decision to use lower case for bp in pronouncements may reflect directors’ desire to underline the fact the company is changing.

By way of example, Mr Looney noted that BP had started to build a high-quality offshore wind business while making great progress with its electrification agenda. The latter will involve actions across the supply chain, ranging from the decarbonisation of oil and gas production operations to the development of electric vehicle charging networks.

BP started production from the giant Clair Ridge field West of Shetland in 2018 with partners Picture: BP

Mr Looney detailed plans for BP to become a big player in such markets in the strategy update that BP issued in August. This laid out in broad terms what the company expected to do to put it on track to deliver on the aspiration to become a net zero company.

BP aims to become an integrated energy company rather than an oil and gas-focused operation.

Its upstream oil and gas production is expected to reduce by 40 per cent over the next 10 years while Investment in low carbon energy is set to increase ten-fold over the same period, from around $500 million to around $5 billion a year. The company said it will focus on building scale in renewables and bioenergy and seeking early positions in hydrogen and carbon capture usage and storage.

In support of the claims made on Tuesday, Mr Looney can point to a range of steps the company has taken to deliver on the strategy.

These include forming an offshore wind venture in the US with Equinor. In February BP was appointed preferred bidder for licences covering two large areas of the Celtic Sea in the first offshore wind leasing round of its kind in a decade.

READ MORE: BP makes billion pound bet on windfarms as oil price hits year high

In March it announced plans to build a ‘blue’ hydrogen production facility on Teesside. This will involve producing hydrogen fuel from natural gas and pumping the associated carbon offshore for storage under the North Sea.

BP has formed partnerships with organisations ranging from Aberdeen City Council to the Australian airline Qantas to work on decarbonisation projects.

Environmental campaigners remain concerned, however, that under Mr Looney’s vision BP will remain a very significant oil and gas producer for years to come.

He has said the company can use the profits generated from oil and gas to invest in the development of renewables while keeping debts at reasonable levels and making the payouts to investors that they have come to expect.

The first quarter results showed how closely its trading fortunes remain tied to developments in oil and gas markets.

READ MORE: Plans to develop billion barrel oil field off Shetland set to be revived

The company’s oil production operations made $1.5bn profit after losing $0.2bn in the first quarter of 2020.

The results show that the new gas and low carbon energy division more than tripled profits to $3.4bn from $1bn. The details make clear that growth was driven by “exceptionally strong gas marketing and trading results”.

Mr Looney said the overall result reflected a strong business performance but also the “recovery in the price environment” seen in recent months.

The Brent crude price has risen from less than $40 per barrel in November to around $66/bbl following advances on the coronavirus vaccine front.

Members of the Opec Plus group of exporters have played a key role in supporting prices for months through curbs on production that they introduced last year.

READ MORE: Why are North Sea oil and gas assets suddenly in demand among overseas investors?

North Sea industry watchers will be pleased that BP has made clear that it expects to remain in the area for years. In February the company included the North Sea in a group of eight core oil and gas regions on which it expects to focus.

However, the growth in profits also reflects the impact of the cost-cutting drive that BP launched amid the downturn triggered by the coronavirus crisis. The drive appears likely to take a toll on jobs and the supply chain in the North Sea. In June BP said it expected to cut global workforce numbers by 10,000 (around 11 per cent) without saying how it would impact on the North Sea.

However, workforce numbers in the area have fallen to around 1,000 from 1,150 in June.

READ MORE: Can renewables jobs make up for Scottish oil industry decline?

Mr Looney could say shareholders in BP have had to take some of the strain associated with the company’s response to the pandemic and the energy transition.

In August the company halved its quarterly dividend to 5.25 cents per share. The cut was the first it had made since 2010.

The company has maintained the quarterly payout at 5.25 cents under Mr Looney’s plan for it to follow a “resilient” dividend policy.

But on Tuesday BP announced that it is generating enough cash to be ready to start making additional payouts to shareholders through buybacks.It expects to buy around $500m of shares in the second quarter to offset the impact of employee share awards.

Much bigger buybacks are likely to follow. The company said: “Subject to maintaining a strong investment grade credit rating, the board is committed to using 60% of surplus cash flow for buybacks.”

Some may feel that BP investors deserve a break. The company’s share price has fallen from 456.85p in February last year to 305p. The shareholder base includes pension funds that provide incomes for huge numbers of people.