BP has announced a major shift in strategy, reducing renewable energy investments while increasing spending on oil and gas production. The move follows pressure from investors concerned about lagging profits and stock performance.
BP’s New Energy Strategy
The company will boost oil and gas investments by 20% to $10 billion (£7.9bn) annually, while slashing planned renewable energy funding by over $5 billion (£3.9bn). CEO Murray Auchincloss admitted BP moved “too far, too fast” away from fossil fuels, calling its faith in green energy “misplaced.”
BP will now be “very selective” in funding renewables, reducing investments to $1.5 billion to $2 billion per year.
Why Is BP Increasing Oil and Gas Production?
Rising oil prices and shareholder demands have pushed BP—and rivals Shell and Equinor—to scale back green energy goals. BP Chair Helge Lund emphasized that the shift is about “cash flow growth” and maximizing shareholder returns.
BP plans to increase oil production to 2.3-2.5 million barrels per day by 2030, with major projects launching by 2027.
Investor Pressure and Stock Performance
BP’s 2024 net income fell to $8.9 billion (£7.2bn) from $13.8 billion in 2023, fueling investor concerns. Activist group Elliott Management, which holds a £4 billion stake, has pushed for more fossil fuel investments.
BP also trails competitors in shareholder returns over five years:
- BP: 36%
- Shell: 82%
- ExxonMobil: 160%
This underperformance has led to speculation that BP could be a takeover target or move its stock market listing to the U.S., where oil firms command higher valuations.
Backlash from Environmental Groups
BP’s decision has sparked criticism from environmental organizations and some investors:
- Greenpeace UK: “Proof that fossil fuel companies won’t be part of climate solutions.”
- Global Witness: Accused BP of prioritizing short-term profits over climate responsibility.
A coalition of 48 investors has demanded a vote on BP’s renewable energy commitments.
Does BP Still Support Clean Energy?
Despite budget cuts, BP insists its net-zero ambitions remain. It will continue projects like:
- Three UK offshore wind farms
- Carbon capture initiatives
- EV charging and biofuels
However, BP is shifting to “capital-light partnerships” in renewables, placing its offshore wind business into a joint venture with Japan’s Jera and seeking a partner for solar energy.
The Future of BP’s Climate Commitments
BP originally aimed to cut oil and gas production by 40% by 2030, but in 2023, this was reduced to 25%.
As former Barclays executive Sir Ian Cheshire put it: “I wonder if this decision will look right in 10 years. The climate crisis hasn’t changed.”
Conclusion
BP’s shift back to oil and gas investments aligns with short-term financial goals, but raises questions about its long-term environmental commitments. Will this decision pay off—or backfire—in a world moving toward clean energy?
Source: bbc.co.uk, ChatGpt
