BP announced in February that it was doing a U-turn on plans to broaden its portfolio to include a range of renewable energy projects, and to instead focus on its primary oil and gas business. This was unexpected, as many oil majors have invested heavily in diversifying their energy mix in recent years, with rising pressure to decarbonise to support a global green transition. Five months on, BP has appointed a new chair to oversee the shift back to fossil fuels.
BP’s CEO, Murray Auchincloss, announced plans for a “fundamental reset” in February, which involved scrapping a target to increase renewable generation 20-fold by 2030, from 2019 levels, and instead redirecting the company’s focus to fossil fuels. BP had around 8.2 GW of renewable generation capacity at this point. Auchincloss also announced plans to divest assets and cut other low-carbon investments to reduce debt and boost returns. This formed part of a strategy shift announced by the company due to investor concerns over earnings. BP’s shares have long been underperforming, compared to those of several of its competitors, which led it to discard its target to reduce oil and gas output by the end of the decade.
The rise in global oil and gas prices in the post-pandemic era boosted profits for several oil majors. Meanwhile, BP has lagged behind following its shift to focus on renewables. Shareholders put huge pressure on the company’s former CEO, Bernard Looney, to make the business more profitable, until he was eventually replaced by Auchincloss in September 2023.
In March, Auchincloss defended BP’s shift back to fossil fuels, suggesting that the move was made largely to appease investors. “From the many conversations I have been having, our new direction is resonating with shareholders… Most of the questions to me are about how quickly we can deliver,” Auchincloss wrote in an article in The Times.
BP now intends to increase its oil and gas production to between 2.3 million and 2.5 million barrels of oil equivalent per day by 2030, as well as increase spending by around 20 percent, to $10 billion a year. Previously, the British firm had planned to reduce output by around a quarter from 2019 levels, to 2 million bpd. “Our optimism in 2020 for a fast energy transition was misplaced and we went too far, too fast in our plans,” Auchincloss wrote.
Just a few months after the announcement, in July, BP said it had appointed a new chair to oversee its transition back to fossil fuels. Albert Manifold, the former head of the building material company CRH, will replace Helge Lund as chair of the oil major in October. Lund had long supported BP’s green transition and announced he would be stepping down in April. Amanda Blanc, the senior independent director at BP, said Manifold had “transformed and refocused CRH into a global leader” and commended “his impressive track record of shareholder value creation”.
Meanwhile, Manifold said it was “an honour to be appointed chair of one of the world’s great energy companies, and to have the opportunity to help the company reach its full potential.” BP also hired Simon Henry, a former Shell executive, on its board, as well as oil and gas veteran Dave Hager, signalling a significant shake-up.
In mid-July, BP agreed to sell its onshore wind business in the U.S. to the New York-based LS Power. This includes the sale of its share in 10 windfarms, which produce enough energy to power over 500,000 homes. The agreement’s terms were not disclosed, but the combined value of the windfarms, nine of which are operated by BP, is thought to be under $2 billion. The decision came as part of the company’s plan to offload $20 billion in assets. Auchincloss aims to complete between $3 billion and $4 billion of divestments in 2025, having already agreed deals with a total value of $1.5 billion.
BP claimed, "we are no longer the best owners” for advancing its U.S. wind business. It also likely comes in response to a crackdown on wind energy under President Donald Trump’s administration. William Lin, the head of BP’s gas and low-carbon energy business, said, “We have been clear that while low-carbon energy has a role to play in a simpler, more focused BP, we will continue to rationalise and optimise our portfolio to generate value. The onshore US wind business has great assets and fantastic people, but we have concluded we are no longer the best owners to take it forward.”
British oil major BP has rapidly backtracked on its progress towards developing a more diversified energy portfolio, including renewable energy projects. The firm now plans to pursue higher oil and gas output to increase its profit margins. It is not the only oil major to have stalled in terms of green progress, as many fossil fuel companies have increased their output as oil and gas prices have risen in recent years.
By Felicity Bradstock for Oilprice.com
