.png)
BP, the global energy giant, has announced a dramatic pivot in its investment strategy. It will prioritize oil and gas expansion while drastically scaling back its commitment to renewables. This shift—described as a strategic "reset"—reflects mounting investor pressure for higher returns and a growing recognition that the global energy transition isn't progressing as swiftly as once anticipated.
“We found ourselves in a different place now, where nations are prioritizing affordability, assurance of flow, security of supply,” Murray Auchincloss, BP’s chief executive, told analysts on Wednesday. “The transition just is not being valued as much as it was five years ago.”
The company revealed plans to increase oil and gas investment by 20%, reaching approximately $10 billion annually. This move could lead to modest growth in fossil fuel production by 2030. Meanwhile, spending on renewables is set to plummet by roughly 70%, down to between $1.5 billion and $2 billion per year—marking a stark reversal from BP’s earlier commitments.
Adding to the shake-up, BP is launching a "strategic review" of its Castrol lubricants division. This move could ultimately lead to a sale. BP suggests that the proceeds would likely be funneled back to investors.
According to Kate Thomson, BP’s chief financial officer, the decision stems from reassessing the energy landscape.
What BP has realized, she said, is that rather than drastically shifting away from oil and gas, “demand for energy and all types of energy is definitely growing.”
That allows BP to focus on “the things that we are known for, the things that we are good at,” Ms. Thomson said.
With oil and gas delivering projected returns of over 15% in the coming years, BP sees more significant financial incentives in fossil fuels than its struggling renewable energy ventures. Offshore wind projects—especially those in the United States—have underperformed, exacerbating BP’s concerns about green energy profitability.
This strategic course correction follows the departure of former CEO Bernard Looney, who had championed BP’s aggressive push into clean energy. His 2019 vision to slash oil and gas production by 40% by 2030 was initially hailed as a bold industry-leading move. However, rising oil and gas prices—and a political climate more favorable to fossil fuels—have altered BP’s trajectory.
The transition slowdown isn’t unique to BP. Norwegian energy giant Equinor recently announced plans to halve its renewables investment, signaling a broader industry retreat from aggressive clean energy targets.
BP’s shift may also be linked to growing pressure from Elliott. This influential activist hedge fund has acquired a significant stake in the company. Elliott is reportedly pushing BP to streamline its portfolio by focusing on high-return projects and divesting less profitable assets.
Analysts cautiously welcomed BP’s approach, which had been largely expected. “We have disagreed with BP’s policy and strategy over recent years, thus we are pleased to see this reset and reversion to focusing on hydrocarbons,” analysts from Wells Fargo wrote.
“The new strategy appears more shareholder friendly, and over time should be more positive for the stock,” wrote Henry Tarr, an analyst at Berenberg, a financial firm.
However, not all investors are on board. A coalition of investment firms has formally questioned BP’s renewed emphasis on fossil fuel production, raising concerns about long-term sustainability and climate commitments.
The firms said that while they could understand “the short-term business case” for such a change, in the longer run, it would increase the risk that the company might wind up with “stranded or value destructive assets as the energy transition progresses.”
As BP redefines its energy strategy, the company finds itself at a crossroads—balancing shareholder expectations, evolving market conditions, and the uncertain pace of the global energy transition.
Comments