BP records highest profit in eight years of $12.8bn

British energy company BP recorded a surge in profit to $12.8 billion in 2021 — the highest in eight years — after being boosted by rising crude and gas prices.

The strong recovery, which followed a large loss in 2020 of $5.7bn, came as the London-based oil and gas company said it plans to boost its spending on low-carbon and renewable energy.

"2021 shows BP doing what we said we would ― performing while transforming," chief executive Bernard Looney said.

BP's underlying replacement cost profit, the company's definition of net earnings, reached $4.1bn in the fourth quarter of last year, compared to the $3.32 billion in profit in the third quarter.

The quarterly results were supported by higher oil and gas prices and production which was partly offset by weaker oil trading results and the impact of higher energy costs on operations such as refining, the company said.

Natural gas and electricity prices around the world have rocketed since the middle of last year amid tight gas supplies and higher demand as economies rebounded from the pandemic, with benchmark European gas prices and Asian LNG prices hitting all-time highs in the fourth quarter.

Calls are now growing in Britain for a windfall tax on energy companies, with some MPs arguing that while households are grappling with much higher prices — with energy bills set to rise more than 50 per cent in April — the companies that extract the gas are reporting enormous profits.

Shell was in the firing line last week as it reported a hefty rise in profits on the same day as UK energy regulator Ofgem unveiled a near £700 rise in the energy price cap.

Supporters of the tax believe some of this money should be reclaimed to help struggling households cope with the increase, but Chancellor of the Exchequer Rishi Sunak has so far rejected the proposals.

"BP's results yet again demonstrate the case for a windfall tax," said Ed Miliband, shadow secretary of state for climate and net zero.

"The boss of BP described the energy price crisis as a cash machine for his company, and the people supplying the cash are the British people through rocketing energy bills.

"In these circumstances, it is only fair and right for oil and gas producers to make an additional contribution to helping the millions of families facing a true financial crisis."

BP boosted share buy-backs and followed Shell, Exxon Mobil and Chevron in pouring money back to investors after years of paltry returns.

BP will repurchase another $1.5 billion of shares using surplus 2021 cash flow before it announces first-quarter results later this year.

The results leave little doubt about the enormous gains BP has made since the start of the Covid-19 pandemic. It has paid off more than $8bn of net debt over the past year and also increased its dividend. The company also pledged to moderately increase investments, albeit from a historically low level.

Mr Looney said the company had "strengthened the balance sheet and grown returns".

"We're delivering distributions to shareholders with $4.15bn of buy-backs announced and the dividend increased, and we're investing for the future," he said.

While BP’s fortunes have completely reversed within the space of a year, thanks largely to a rapid recovery in the price of oil, Mark Crouch, analyst at social investment network eToro, does not expect this to last.

“However, conditions in the oil industry will not remain this good, with the price of oil expected to fall from more than $90 a barrel now to half that amount by 2050," Mr Crouch said.

“That’s why BP is pumping billions into low-carbon energy, with the aim of producing $9bn-$10bn of earnings from its ‘transition growth’ businesses by 2030.

“BP’s recent share price growth is down mainly to the recovery of the oil price. If it wants to maintain that buoyancy, it will have to follow through on its green pledges while remaining hugely profitable.”

BP's share price was up 1.54 per cent at 9am London time, helping the FTSE100 enjoy a positive start on Tuesday.

This year BP's capital expenditure will be between $14bn and $15bn, and remain around that range until 2025. Last year the figure was $12.8bn.

By then, BP plans to devote more than 40 per cent of its investments into energy-transition businesses. The company also said it could achieve net-zero emissions sooner than its 2050 target.

Green ambitions

Trees: 1,500 to be planted, replacing 300 felled ones, with veteran oaks protected
Lake: Brown's centrepiece to be cleaned of silt that makes it as shallow as 2.5cm
Biodiversity: Bat cave to be added and habitats designed for kingfishers and little grebes
Flood risk: Longer grass, deeper lake, restored ponds and absorbent paths all meant to siphon off water

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Place a sun reflector in your windshield when not driving
Park in shaded or covered areas
Add tint to windows
Wrap your car to change the exterior colour
Pick light interiors - choose colours such as beige and cream for seats and dashboard furniture
Avoid leather interiors as these absorb more heat

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

Going grey? A stylist's advice

If you’re going to go grey, a great style, well-cared for hair (in a sleek, classy style, like a bob), and a young spirit and attitude go a long way, says Maria Dowling, founder of the Maria Dowling Salon in Dubai.
It’s easier to go grey from a lighter colour, so you may want to do that first. And this is the time to try a shorter style, she advises. Then a stylist can introduce highlights, start lightening up the roots, and let it fade out. Once it’s entirely grey, a purple shampoo will prevent yellowing.
“Get professional help – there’s no other way to go around it,” she says. “And don’t just let it grow out because that looks really bad. Put effort into it: properly condition, straighten, get regular trims, make sure it’s glossy.”

UAE currency: the story behind the money in your pockets

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Ruwais timeline

1971 Abu Dhabi National Oil Company established

1980 Ruwais Housing Complex built, located 10 kilometres away from industrial plants

1982 120,000 bpd capacity Ruwais refinery complex officially inaugurated by the founder of the UAE Sheikh Zayed

1984 Second phase of Ruwais Housing Complex built. Today the 7,000-unit complex houses some 24,000 people.

1985 The refinery is expanded with the commissioning of a 27,000 b/d hydro cracker complex

2009 Plans announced to build $1.2 billion fertilizer plant in Ruwais, producing urea

2010 Adnoc awards $10bn contracts for expansion of Ruwais refinery, to double capacity from 415,000 bpd

2014 Ruwais 261-outlet shopping mall opens

2014 Production starts at newly expanded Ruwais refinery, providing jet fuel and diesel and allowing the UAE to be self-sufficient for petrol supplies

2014 Etihad Rail begins transportation of sulphur from Shah and Habshan to Ruwais for export

2017 Aldar Academies to operate Adnoc’s schools including in Ruwais from September. Eight schools operate in total within the housing complex.

2018 Adnoc announces plans to invest $3.1 billion on upgrading its Ruwais refinery

2018 NMC Healthcare selected to manage operations of Ruwais Hospital

2018 Adnoc announces new downstream strategy at event in Abu Dhabi on May 13

Source: The National

UPI facts

More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions

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