BP's announcement of record profits masks major flaws in the company's long term investment strategy, according to analysts at Greenpeace and PLATFORM.

Strong growth recorded in the first half of 2008 was undermined by a collapse in profits during the final quarter, indicating a vulnerability to oil price fluctuations which will continue while BP remains wedded to an “oil at any cost” strategy.

Analysts from both groups criticised the company for its investment decisions which they claim have failed to take a new political, environmental and regulatory climate into account.

In March 2008 BP finalised its $5.8bn investment in the Sunrise tar sands project in Alberta, Canada. Since then the future of the tar sands industry has been thrown into question as oil prices fell below the breakeven point of most tar sands projects, and a new era of clean energy legislation has been proposed by the Obama administration.

Reacting to the news, Greenpeace chief climate advisor Charlie Kronick said:

"These results prove that BP's investment decisions are going in the wrong direction. The Canadian tar sands project is a clear threat to investors, while the alternative energy division has been left to wither on the vine despite the urgency of climate change."

Whilst James Marriott, Partner of PLATFORM said:

"The company is wedded to a 20th century business model which is simply not flexible enough to cope with the twin challenges of global climate change and increasingly remote oil reserves. Shareholder returns are bound to fall as the political, environmental and regulatory climate changes dramatically over the next few years."

Last week the head of the Sunrise field, Catherine Hughes, resigned her post amid rumours of a delay in the project, and BP's annual results confirm that production has been put back until 2013. Since October 2008, dozens of tar sands projects have been put on hold, including three major projects proposed by BP’s main rival Shell.

Rumours of the Sunrise project being scrapped remain unconfirmed, but as a high cost SAGD (1) investment it appears unlikely that it will go ahead as originally planned. BP spent $250 million on the project during the 2008 financial year, and is committed to a total spend of over $2.5 billion over 4-5 years.

CEO Tony Hayward told investors at Davos that "The price needed today to stimulate investment into that [oil sand] resource is of the order of $60 to $80 a barrel." Oil currently languishes at $40 per barrel and this price remains highly volatile.

The results also reveal the disastrous performance of BP’s Alternative Energy division, which lost $633m over the past year. Greenpeace points out that despite axing staff and pulling investment from the division, BP has continued to spend heavily on a worldwide advertising campaign which gives the false impression that alternative energy represents a core part of the company’s business. (2)

In fact, the company diverted 93% of its 2008 capital expenditure towards oil and gas extraction, compared with just 1.3% on solar energy, 2.6% on wind and a similar amount on biofuels (3). The head of BP’s alternative energy decision recently admitted that “limits on capital spending in the existing portfolio” had been imposed on clean energy projects. (4)

For more information please contact the Greenpeace press office on 0207 865 8255

Or PLATFORM on 0207 403 3738

Footnotes

(1) SAGD is Steam Assisted Gravity Drainage, a highly energy intensive and therefore expensive method of extracting bitumen from the deeper deposits in Alberta’s tar sands belt. It involves injecting steam into the reservoir to heat the bitumen so it can be pumped to the surface.

(2) One of BP's more notable adverts claims the company works with "the earth, the sun and everything in between." Another states that "the best way out of the energy mix is an energy fix." See "BP wins coveted emerald paintbrush award" for more details.

(3)http://www.bp.com/liveassets/bp_internet/globalbp/STAGING/global_assets/downloads/I/IC_bp_strategy_presentation_2008_slides.pdf

(4) http://www.guardian.co.uk/business/2009/jan/20/bp-oil-green-energy

ENDS

A misjudged push for 'green' fuels could instead damage the climate and trash rainforests, according to the UK's largest environmental and development groups today.

Biofuels - which are similar to petrol but less environmentally damaging because they are made from crops and wastes - could play an important role in tackling global warming. But, say bosses from the RSPB, WWF, Greenpeace, Oxfam and Friends of the Earth, the government's dash for biofuels is ill thought out, lacks appropriate safeguards and could be creating more problems than it solves.

The government proposal - known as the Renewable Transport Fuel Obligation (RTFO) - could, in its present form, see businesses producing biofuels by destroying rainforests and wetlands, not only threatening endangered habitats and species but also releasing far more carbon into the atmosphere than could ever hope to be saved by replacing fossil fuels.

The groups are demanding the obligation is tightened up so that biofuel producers must meet minimum greenhouse gas and sustainability standards, with environmental audits of the whole life-cycle of the fuels, from growing the crop to transporting it to the pump.

Dr Douglas Parr, Chief Scientist at Greenpeace, said: "In its current form, this proposal is monumentally complacent. It could see biofuel production wrecking the climate rather than help it. The Government must sort out this botched plan or risk losing the value that biofuels can offer."

Phil Bloomer, Oxfam's Director of Campaigns & Policy, said "Biofuels could offer a way out of poverty for poor farmers and agricultural workers around the world. However, under this proposal they may do more harm than good, as deforestation is associated with land-grabbing, human rights abuses and deepening poverty. The government must take the lead in designing policies which ensure that biofuels do not come at the expense of vulnerable people's livelihoods."

Mark Avery, Director of Conservation at the RSPB, said "This proposal threatens to accelerate the destruction of some of the world's most precious habitats and wildlife. Without environmental standards, biofuels will be little more than a green con."

Adam Harrison, Food and Agriculture officer at WWF said: "The government's policy on biofuels is in danger of doing more harm than good. Without tough minimum standards, we risk escalating deforestation and even increasing our CO2 emissions."

Ed Matthew of Friends of the Earth, said: "It doesn't seem possible that the government could design a system for developing the biofuel industry that could actually make climate change worse but they seem to be managing it. Biofuels can be an important part of the solution to climate change but without rapid action from government to toughen up the standards the opportunity, and we may only have one, will be lost."

The group's full statement is:

The current political and business enthusiasm for renewable biofuels is understandable. This emerging industry could play an important role in tackling climate change. However, without appropriate safeguards, this flagship policy could have disastrous unintended consequences - actually increasing carbon emissions, intensifying deforestation and causing extensive negative social impacts.

We are concerned that Government's plans to promote biofuels through the Renewable Transport Fuel Obligation (RTFO), lack these precautions.

Greenhouse gas emissions savings from different biofuels vary widely and some can even result in an overall increase. The RTFO as proposed fails to distinguish between the biofuels that can contribute most to tackling climate change.

In addition, without strong, mandatory standards in place the RTFO will attract biofuels produced at the expense of forests, peat lands and natural grasslands in places such as Brazil and Indonesia. As well as being hugely important habitats, their destruction will add huge volumes of carbon dioxide into the atmosphere. Making biodiesel from soy planted on cleared rainforest takes 200 years before it could be considered carbon neutral.

The expansion of tropical crops such as palm oil is also linked to the loss of indigenous peoples land rights, human rights abuse and the destruction of local communities' natural resources.

To gain our support, the RTFO must:

• Ensure that biofuels meet strict externally audited, widely accepted and mandatory sustainability and greenhouse gas balance standards, including at least a 50 per cent saving on greenhouse gases compared to fossil fuels, taking a whole life-cycle approach
• Take account of the greenhouse gases caused by land-use change and forest clearance to grow biofuels so that where high carbon land-uses are lost, no saving is claimed.

Although additional measures may become necessary, with these safeguards in place, biofuels are much more likely to contribute to a reduction in emissions from the transport sector without damaging the environment.

ENDS

For more information, contact:
Greenpeace press office on 020 7865 8255
Oxfam press office on 01865 472498
RSPB press office on 01767 681577
WWF press office on 01483 412388
Friends of the Earth press office on 020 7566 1649