BP slashes green energy spending and turns back towards fossil fuels
The move follows pressure from some investors to boost profits at the firm, but has also angered environmental groups.
BP is making a drastic pullback from renewables in favour of more oil and gas, claiming that it went “too far, too fast” on green energy.
Chief executive Murray Auchincloss said that while BP is still aiming to hit net zero carbon emissions by 2050, it will slash its annual renewables spending by nearly three-quarters.
The move follows pressure from some investors to boost profits at the firm, but has also angered environmental groups and contradicts guidance by global energy bodies designed to help limit climate change.
BP said it will raise its investments in oil and gas by about 20% to 10 billion US dollars (£7.9 billion), but slash renewables spending by more than 5 billion dollars (£3.9 billion).
It follows in the steps of other oil firms including Shell and Equinor, who have also retreated from green investments.
And US President Donald Trump’s promise to “drill, baby, drill” has encouraged the energy giants to focus more on fossil fuels.
Mr Auchincloss said that as well as more oil and gas spending, BP will be “very selective” in its green energy projects, adding: “This is a reset BP, with an unwavering focus on growing long-term shareholder value.”
Despite turning a record profit in 2022, BP has come under increasing pressure from some investors over its share price, which has lagged behind rival Shell.
The influential US hedge fund Elliott Management took a nearly £4 billion stake in the company recently, just under 5% of its shares, in a move understood to have been aimed at pushing BP back towards fossil fuels to boost profit.
Back in 2020, BP announced some of the most ambitious goals among fossil fuels companies to cut oil and gas production by 40% by 2030 and invest heavily in renewables.
But Mr Auchincloss told investors on Wednesday: “Our optimism for a fast (energy) transition was misplaced, and we went too far, too fast.”
BP made about £7.2 billion in profit last year.
That figure is down a third compared to the year before, after oil and gas prices fell from the highs seen in the wake of Russia’s invasion of Ukraine.
According to the International Energy Agency, no new fossil fuel projects are compatible with limiting global warming to 1.5C compared to pre-industrial levels, a goal adopted by most of the international community.
However, BP has said it wants to increase its production to between 2.3 million and 2.5 million barrels of oil per day by 2030.
And it said it hopes “major” oil and gas projects will start by the end of 2027, with a target of eight to 10 kicking off by the end of the decade.
The decrease in renewables will cover biogas, biofuels and electric vehicle charging projects, while BP will go after “capital-light partnerships” in other green energy such as wind and solar.
Mr Auchincloss has already spun off BP’s offshore wind business in a joint venture while he is looking to offload its onshore wind arm.
Charlie Kronick, senior climate adviser for Greenpeace UK, said it shows oil and gas firms “can’t or won’t be part of climate crisis solutions. This conversation is over.”
He added: “Responding to the climate crisis can’t be driven by the whims of investors or the markets.”
BP’s update comes after the planet exceeded the 1.5C global warming threshold in the year to May 2024.
The company also said it would look to cut its overall costs by up to five billion dollars by the end of 2027.
It recently announced it would cut more than 5% of its workforce, with moves to axe 4,700 jobs across its global workforce and 3,000 contractor roles.
BP shares were down 2.4% after the announcement.
Alexander Kirk, of campaign group Global Witness added that BP is “focusing on short-term profits to shareholders while energy prices are high, with the rest of the world picking up the tab from its climate-wrecking products.”
