BP is expected to announce a major shift in its strategy, significantly reducing investments in renewable energy while prioritising oil and gas production.
The energy giant is set to outline its new direction later today, following mounting pressure from investors frustrated by the company’s lower profits and share price compared to industry rivals.
Shell and Norway’s Equinor have already scaled back their commitments to green energy, while US President Donald Trump’s pro-fossil fuel stance, including his “drill baby drill” rhetoric, has encouraged a renewed focus on traditional energy sources.
Some investors and environmental groups have raised concerns over BP’s anticipated expansion of fossil fuel production.
Abandoning Past Climate Targets
Five years ago, BP set ambitious goals among major oil companies, aiming to cut oil and gas production by 40% by 2030 while substantially increasing investments in renewables.
However, by 2023, the company had already revised this target down to a 25% reduction. Now, BP is expected to eliminate the goal altogether while slashing renewable energy investments by more than half. CEO Murray Auchincloss has described the move as a “fundamental reset” of the company’s strategy.
Financial and Shareholder Pressure
BP reported a net income of $8.9 billion (£7.2 billion) in 2024, a decline from $13.8 billion the previous year.
Auchincloss is facing pressure from certain shareholders, including activist investor group Elliott Management, which recently acquired a nearly £4 billion stake in BP. The group has been pushing for increased investment in oil and gas to boost profitability.
Since 2020, when former CEO Bernard Looney introduced BP’s energy transition strategy, total shareholder returns, including dividends, have amounted to 36% over five years. In contrast, competitors Shell and Exxon have delivered returns of 82% and 160%, respectively.
BP’s underperformance has fuelled speculation about a possible takeover or even a move to shift its primary stock market listing to the US, where oil and gas companies tend to receive higher valuations.
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Divided Shareholder Opinions
Not all investors are in favour of BP’s strategic pivot.
Last week, a coalition of 48 shareholders urged the company to hold a vote on any plans to scale back its renewable energy commitments.
A spokesperson for one of the signatories, Royal London Asset Management, acknowledged BP’s past efforts toward transitioning to cleaner energy but expressed concern over the company’s increasing investments in fossil fuel expansion.
Environmental advocacy group Greenpeace UK also warned BP could face significant backlash if it intensifies its focus on fossil fuels not just from climate activists but from its own investors.
Senior climate adviser Charlie Kronick cautioned that governments may begin prioritising renewable energy policies and could look to tax fossil fuel profits to fund climate disaster recovery efforts. “BP may want to reconsider this U-turn before it’s too late,” he said.
Strategic Realignment and Business Sales
Market analyst Russ Mould of AJ Bell described BP’s shift as one of the company’s most pivotal moments in recent years.
“Compared to its competitors, BP has been less clear about its long-term direction,” he noted. “With underwhelming operational and share price performance, the company now needs to show investors that it has a concrete plan to turn things around.”
As part of its strategy overhaul, BP has already entered a joint venture with Japan’s Jera for its offshore wind business and is seeking a partner for its solar energy operations.
The renewed focus on oil and gas may also lead to the sale of other non-core assets, as insiders suggest BP is looking to streamline its portfolio.
A Return to Fossil Fuels
More than two decades ago, then-CEO Lord John Browne positioned BP as moving “Beyond Petroleum,” signalling the company’s initial steps toward diversifying away from oil and gas.
Now, with its latest shift, some may argue BP is heading “Back to Petroleum,” a move welcomed by certain investors but met with strong opposition from others.
Both BP and Elliott Management have declined to comment on the developments.
