“Our optimism for a fast transition was misplaced, and we went too far, too fast.”
BP’s shift towards green energy came just before Russia’s invasion of Ukraine in 2022 drove oil and gas prices higher and sent European countries scrambling to find alternative supplies.
Critics said it meant the company was not as well-positioned as its rivals to capitalise on the sudden surge in demand.
More recently, United States President Donald Trump’s pledge to “drill, baby, drill” has boosted oil companies in America by clearing the way for more extraction.
Auchincloss’ comments came as BP said it would increase its oil and gas investment to $10 billion ($17.56b) a year as part of a net zero “reset” that involves the company slashing spending on renewables.
BP said it would cut renewables investment to between $1.5b and $2b a year, which is $5b lower than was previously earmarked.
It also cast off commitments to reduce oil and gas production and vowed to increase investment in fossil fuels to $10b per year until at least 2027, representing a 20% increase.
At least 10 major projects are due to come online by that year, BP said, in addition to another eight by 2030.
The strategy about-turn was announced after pressure from activist investor Elliott Management to sell off green energy assets and focus on more profitable fossil fuels.
Previously the company had pledged to reduce output to 2 million barrels of oil per day, but on Wednesday local time said it would target up to 2.5m barrels per day this decade, with an option to go higher by 2035.
It is also plotting asset sales worth $20b by 2027.
Helge Lund, BP’s chairman, added: “Over the past 12 months, we have worked closely with Murray and his team as they have developed the new direction, ensuring it reflects the significant changes we have seen in energy markets and our purpose of delivering energy to the world today and tomorrow.
“This new direction places free cash flow growth, returns and value at its heart.”
Shares in BP fell by as much as 2.2% following the update.
Shift driven by rivals’ stronger share performances
BP’s retreat from green energy investment marks a dramatic shift from the strategy announced under former boss Bernard Looney in 2020. He was ousted in 2023 after failing to disclose personal relationships with colleagues.
Looney had previously claimed the company would be “re-imagined” as a green power provider, adding: “BP has been an international oil company for over a century. Now we are pivoting to become an integrated energy company.”
But that change in direction, which included historic commitments to cut BP’s oil production this decade, has gradually been unwound since then – culminating in Wednesday’s “reset”.
One of the main drivers for BP’s reversal has been the bigger profits and stronger share performances of its rivals, such as Shell, Exxon Mobil, and Chevron, which have made more modest climate commitments.
Analysts have also complained about a lack of clarity over BP’s strategy under Auchincloss, who initially tried to argue that Looney’s strategy would remain in place.
More recently, the arrival of Elliott Management – the Wall Street hedge fund – on the company’s shareholder register has also piled further pressure on executives.
Elliott has reportedly argued that the company’s shares are under-performing partly because it has wasted too much money on renewables.
It is pushing for a sell-off of BP’s remaining green energy assets.
- The Telegraph
