Murray Auchincloss: Sure. I guess maybe I’ll tackle both of those. On the East Coast venture with Equinor, over time what we’ve decided is that integrated delivery models are much more important for us than a PPA-like model. Empire really is a PPA model. So it was time to divorce ourselves that Equinor carry forward with that, they want to do that. And for ourselves, we’ll step away from that one. In exchange, we got some land that we can monetize as well as Beacon. Beacon’s 2.5 gigawatts. It stands the transfer integration. So we’re #1 gas trader in the United States, #2 or 3 in power. We see the capacity to absorb that into that book and create some interesting value. We’ll take our time to do this. We’re not in any rush. The U.S. really needs to build out.
And of course, we’ll bring in partners, et cetera, over time. So that’s how we’re thinking about that. As far as decision-making quality, I think back in 2020, we were taking this as a first step into the basin, recognizing that we were paying a premium to learn. We learned and we move on from that is, I think, the best way for me to describe it moving forward. Economics in low carbon incentives, et cetera. I think we just need to remember that incentives exist everywhere inside the energy space across the United States and across most countries in the world. There is an equal incentive in oil and gas, called the intangible drilling credit, as there is RINs, as there is on the IRA. So the U.S. is a place that incentivizes energy provision across the wide range of it arrangement.
Sometimes we get a little bit forgetful. And we think it’s only new energies that have those incentives. That is not true. As far as the new energies themselves, I think, Carol, with the Archaea model, we feel very good without the incentives to drive forward well above our returns thresholds if those incentives moved away. But to be honest, those incentives have been in place since the early 1970s. They come and gone in different guises but biogas and biofuels, in particular, have had all kinds of incentives, if not at the federal level, then at the state level, as different constituencies want to transition. Hydrogen in particular right now will be a place we have to watch. What happens, new regulations came out from the IRS that we’re providing comments on.
We’ll just see — have to — we’ll have to see how that progresses, and what the nation decides to do. They have the choice to continue to accelerate or they have the choice to decelerate that particular space. And we’ll just have to pragmatically react to how the United States decides to move these things forward. But we have lots of opportunities inside Europe, lots of opportunities inside Australia, so we can always pivot to what the best returns are inside the portfolio. Hope that helps with those questions. Why don’t we go back online now, Ryan, please?
Unidentified Analyst: Maybe a couple for me. On the refining side of the business, products results were quite weak this quarter. You’ve had a lot of moving pieces in the portfolio in recent years. And even though margins were weaker in the fourth quarter than they’ve been of late. They were still particularly seasonally relatively solid and above mid-cycle in most places, and you posted a loss in the business. So as we think about the earnings power of your refining business, can you help us understand on the quarter, maybe some of the moving pieces, whether one-off or specific trends that might have been headwinds? Was it a trading issue a matter of specific hit? Or how should we think about what was or was not maybe kind of repeatable on this fourth quarter?
And then the second question on Lightsource bp, you referenced mid-teens returns over the last 5 years, which is very impressive. We don’t have a lot of visibility on that. However, maybe we’ll get more going forward. But as you look over the next 5 years, could you maybe talk about some things that have or have not changed in the environment, particularly if you think about the build and farm down business? Are there — are margins compressing on that side or not? How do you think about margins over the next 5 based on trends in that business versus the last 5?
Murray Auchincloss: Super. Thanks, Ryan. Kate, do you want to take refineries. I’ll take Lightsource?
Katherine Thomson: Sure. Thanks, Ryan. Good morning. Thank you for the question. In the refining portfolio, we did signal a significant level of turnaround activity and maintenance in the fourth quarter. And it was a very heavy quarter, as I said, I think in my prepared remarks. We had a full site turnaround at Castellon. We also had unit-level towers at 2 other refineries. So if you look at what’s going on, I think credit to the team are — availability is really high. So we’re at 96.1% for the quarter. Our utilization as a consequence of the level of activity in those refinery turnarounds was down to around 84%. That’s really what’s driving it, coupled with the slight drop in margins that you recognize. But yes, it’s around the level of activity that we are putting through those refineries to upgrade and make sure that they are maintained and solid as opposed to what’s going on in the refinery margin environment.
Murray Auchincloss: Yes. I think if you adjusted for those, Kate, they’d be quite comfortable profitable, in line with expectation. As far as Lightsource bp and trends, so as I talked about over the past few years, that’s what the return cycle has been. As interest rates have risen in 2023, it’s been quite difficult to get prices and interest rates to match in a development flip model. In Australia, Lightsource was able to move transactions forward. In Europe, they were able to move transactions forward, so there wasn’t a disparity between price and discount rate, but the United States was a challenge. And it was a challenge on pricing to get price high enough to match the discount rates. So they slowed down the program in the United States.
That will be something that picks back up, as we see interest rates drop through ’24 and ’25. You guys will be able to guess interest rate trends better than I will, but we all read the same stuff in the media, I am sure. So I think that’s one particular trend. We do see lots of capacity for solar. There are more and more countries that are starting to develop solar. So I don’t feel supply chain bottlenecks happening, and demand just continues to skyrocket. And I think especially the trend that is interesting is GenAI. And I think the more and more that corporations, individuals use GenAI, we’ll see more and more demand for power. And I think we’re going to need every little bit of renewables and natural gas we possibly can to help power of the world systems given that expansive demand inside GenAI.
So I hope that gives a super high level overview, Ryan, for the question. Anybody back in the room? Irene. Sorry, I can see you behind the podium, Irene.
Irene Himona: Irene Himona, Societe Generale. Murray, you highlighted how moving from origination to execution is going to be key to delivering operational excellence. I’m curious as to how you do that in practice. So what levers do you have to drive a sort of cultural or working cultural change day to day? My second question, you highlighted throughout the presentation that amazing volatility we’ve obviously had in the last 3 or 4 years. If we do find ourselves in a world of 60, how — I understand we will still get 80% of surplus cash is buyback. How should I think of the flexibility of the $16 billion of CapEx which you announced today in that scenario?
Murray Auchincloss: Yes. Great. Thanks, Irene. Culture. I suppose it’s what — it’s where we as leaders inside the team place our emphasis. Do we place the emphasis and the encouragement for new stuff? Or do we encourage people to get on with sanction and move forward? So there’s something about, as a leadership team, we need to shift our focus to the execution side. And then equally importantly, how do we align third-party contractors on that basis? How do we make sure the supply chains are robust and how do we gain confidence and then what we’re doing will be as efficient as it possibly can be. So I don’t think it’s a material challenge to start constructing. The material challenge will be to turn off the old stuff and all the other things.
That’s the material challenge that we have that each and every one of us, as leaders, is constantly focusing on. I’m looking at Leigh-Ann, who runs our digital. Everybody wants to spend lots of money on digital and do their favorite programs. The key is in really, really getting control in it and focusing it down to only the big things that matter. So I don’t know, maybe not every company is like us, but that’s always our challenges turning off the old stuff. On $60 world, we actually have quite a bit of flexibility inside — you changed your oil and gas drilling plants, and we’ve got quite a bit of flexibility across the portfolio to swing CapEx down materially, if we needed to. Kate, I don’t know, would you like to add anything to that one?
Katherine Thomson: No, I think that’s absolutely right, Murray. I think where we started 2023, we’re at 16 to 18. And as we went through, we tightened that write-down and by the time we got to 3Q, we were saying around 16. And I think for me, the most important thing is creating the right level of focus. As you’d expect, at this stage, we’ve probably got a fair bit of CapEx committed for 2024. And as Murray said, we’ve got a lot more flexibility with regard to ’25. And I was hold BPX as my big optionality within that frame to move things up and down if we need to make fast reactions. But what I would say is that the strength of the balance sheet, the resilience we’ve created as a consequence of that means that we don’t have to make sharp reactions and we can take our time, but we have flexibility.
Murray Auchincloss: Thanks, Irene. Let’s go to online again. Bertrand, please.
