Oil giant BP has announced plans for a major strategic overhaul following a sharp decline in profits, a move expected to include scaling back its renewable energy ambitions and increasing oil and gas production.
The company reported a net income of $8.9 billion (£7.2 billion) for 2024, a significant drop from $13.8 billion in the previous year. BP attributed the decline to lower oil and gas prices as well as reduced profits from its refining operations.
Shift Away from Renewables
BP had previously committed to generating 50GW of renewable energy capacity by 2030, but that target is expected to be abandoned when the company unveils its revised strategy on February 26.
The company has already been retreating from its renewable energy commitments. In December, it transferred the bulk of its offshore wind assets into a joint venture with Japanese company Jera, effectively separating them from its core fossil fuel business. BP also froze new wind projects in June 2023 and is now expected to cut its $10 billion renewables investment plan by up to half.
Investor Pressure and Growing Criticism
BP’s shift towards fossil fuels comes as activist hedge fund Elliott Management has acquired a stake in the company, pushing for greater investment in oil and gas. Analysts suggest Elliott’s influence may lead to board changes.
Russ Mould, an analyst at AJ Bell, noted that BP’s profit slump had strengthened Elliott’s case. “A clear and credible plan is desperately needed if BP is going to remain the master of its own destiny,” he said.
However, the decision to pivot back to oil and gas has drawn criticism from environmental groups, who argue that BP and other fossil fuel companies are worsening the climate crisis.
Global Witness, a human rights campaign group, pointed out that BP invested nearly £9 billion in oil and gas last year, compared with only £1.3 billion on renewables and low-carbon energy.
“As the world battles extreme weather disasters supercharged by fossil fuels, it is wrong that polluters such as BP can double down on the oil and gas that is driving climate breakdown,” said Lela Stanley, the group’s head of fossil fuels investigations.
Industry-Wide Trend Towards Fossil Fuels
BP’s move reflects a broader trend in the oil and gas industry, with several major energy firms scaling back their renewable energy investments due to concerns over profitability.
Last week, Norwegian energy giant Equinor announced plans to halve its investment in renewable energy over the next two years, citing rising costs and a slower-than-expected transition to low-carbon energy. Shell has also stepped back from new offshore wind investments, following similar concerns.
Former BP strategy head Nick Butler defended the shift, stating that big oil firms would invest in renewables “when they can see a clear profit.”
Political Uncertainty and Climate Implications
The debate over fossil fuel investment is also playing out on the political stage. Former U.S. President Donald Trump, who has repeatedly expressed support for fossil fuels, recently renewed his pledge to withdraw the U.S. from the Paris climate agreement if re-elected. He has also vowed to ramp up oil and gas exploration, telling supporters the U.S. will “drill, baby, drill.”
In response, environmental activists are pushing for stronger regulations on fossil fuel companies. Elena Polisano of Greenpeace said growing pressure on governments could lead to higher taxation on oil and gas profits, with funds directed towards climate disaster recovery efforts, as seen in Vermont and New York.
“Oil majors like BP are fuelling the climate crisis,” she said. “So it’s only fair to make polluters pay.”
As BP prepares to unveil its new strategy, the company faces increasing scrutiny over whether its pursuit of profit-driven fossil fuel expansion aligns with global efforts to combat climate change.
