On February 26, BP announced that it is shifting its strategy to cut renewable energy investments and focus on increasing oil and gas production. The energy giant made the announcement on Wednesday, following pressure from some investors unhappy its profits and share price have been lower than its rivals.
In 2020, BP set some of the most ambitious targets among large oil firms to cut production of oil and gas by 40% by 2030, while significantly ramping up investment in renewables. In the five years since then, shareholders have received total returns including dividends of 36%. This compares with shareholders in rivals Shell and Exxon receiving returns of 82% and 160% respectively.
In greater detail, BP’s new strategy means that it will:
- Increase its investments in oil and gas by about 20% to $10 billion – or £7.9 billion – annually
- Decrease previously planned funding for renewables by more than $5 billion (£3.9 billion)
- Be "very selective" in investing in businesses working on the energy transition to renewables going forward – according to BP's Chief Executive Murray Auchincloss – with funding reduced to between $1.5 billion and $2 billion per year
Auchincloss commented that the energy giant had previously gone "too far, too fast" in the transition away from fossil fuels, and that its faith in green energy was "misplaced". He said the refocusing on oil and gas was part of a strategy "reset" by the organization to focus on boosting returns for shareholders.
BP is one of several firms in the energy industry to pivot back towards on oil and gas production, which has seen an increase in profits as prices have risen following lows seen during the Covid-19 pandemic. Rivals Shell and Equinor have also scaled back plans to invest in green energy, against a backdrop of increased investment in fossil fuels following US President Donald Trump's "drill, baby, drill" comments.
BP said it plans to increase its production to between 2.3 million and 2.5 million barrels of oil per day by 2030, with hopes of "major" oil and gas projects starting by the end of 2027. Shares in the company climbed before Tuesday's announcement but fell shortly after.
