BP has announced a major shift in its energy strategy, scaling back investments in renewable energy while increasing spending on oil and gas production. The move comes in response to investor pressure over the company’s lagging profits and share price compared to its rivals.
The energy giant revealed on Wednesday that it will boost investments in oil and gas by 20%, bringing annual spending to $10 billion (£7.9 billion). At the same time, funding for renewables will be slashed by more than $5 billion (£3.9 billion), signaling a significant retreat from its previous green energy commitments.
BP’s Leadership Cites Profitability Concerns
BP’s Chief Executive, Murray Auchincloss, defended the decision, saying the company had gone “too far, too fast” in its transition away from fossil fuels. He admitted BP’s faith in green energy had been “misplaced” and that future investments in renewables would be limited to $1.5 billion to $2 billion per year.
“This is a strategic reset,” Auchincloss said, emphasizing a renewed focus on shareholder returns. BP’s Chairman, Helge Lund, echoed the sentiment, stating that the company’s priority would now be on “cash flow growth.”
Despite a brief surge in BP’s stock price ahead of the announcement, shares fell shortly afterward.
Industry Trends and Political Influence
BP is not alone in scaling back renewable investments. Competitors Shell and Equinor have also slowed their transition to green energy. The shift aligns with political factors as well, with former U.S. President Donald Trump’s “drill, baby, drill” rhetoric encouraging further investment in fossil fuels.
BP plans to increase its oil and gas production to between 2.3 million and 2.5 million barrels per day by 2030, with major projects expected to launch by 2027.
Backlash from Environmental Groups and Investors
While some investors, such as activist hedge fund Elliott Management, have pushed for greater investment in fossil fuels, others remain critical of BP’s reversal.
A group of 48 investors recently called for a shareholder vote on any decision to scale back renewable commitments. Environmental groups have also condemned BP’s shift in focus. Greenpeace UK described the move as proof that “fossil fuel companies can’t or won’t be part of climate crisis solutions.”
Alexander Kirk from Global Witness accused BP of prioritizing short-term profits over environmental responsibility. “BP cannot be trusted to deliver the clean energy transition,” he said, noting that the company is benefiting from high energy prices while ignoring the long-term climate impact of its products.
In protest, Global Witness drove a lorry around central London displaying messages criticizing BP’s decision.
BP Defends Its Green Commitments
BP’s Senior Vice President for Europe and the UK, Louise Kingham, pushed back against criticism, insisting that the company’s overall ambition to reach net-zero emissions had not changed.
“None of the changes announced will alter BP’s commitments to UK green energy projects, including wind farms and carbon capture initiatives,” she said.
However, BP’s renewable energy efforts will now rely more on “capital-light partnerships.” The company has already placed its offshore wind business into a joint venture with Japanese firm Jera and is seeking a partner for its solar division.
A Shift from Ambitious Green Goals
Five years ago, BP set some of the boldest climate targets among major oil firms, vowing to cut fossil fuel production by 40% by 2030. In 2023, that goal was lowered to 25%, and with this latest announcement, the company has further distanced itself from aggressive climate commitments.
Since BP first laid out its renewable energy strategy in 2019, its shareholders have seen total returns of 36%. In contrast, rival firms Shell and ExxonMobil have delivered returns of 82% and 160%, respectively.
BP’s underperformance has fueled speculation that it could become a takeover target or consider shifting its stock market listing to the U.S., where oil and gas companies generally receive higher valuations.
As BP recalibrates its strategy, the battle between fossil fuel profits and renewable energy commitments continues to shape the future of the global energy industry.
