BP to Cut Renewable Investments and Focus on Oil and Gas

BP is expected to announce a significant reduction in its renewable energy investments, shifting its focus toward expanding oil and gas production.

The energy giant is set to outline its new strategy following pressure from investors frustrated by its lower profits and share price compared to competitors. Both Shell and Norwegian firm Equinor have already scaled back their green energy investments. Meanwhile, former U.S. President Donald Trump’s pro-fossil fuel stance has further encouraged a shift away from low-carbon projects.

The move has sparked concerns among environmental groups and some shareholders who fear an increase in fossil fuel production.

A Shift Away from Previous Climate Commitments

Five years ago, BP set ambitious goals to reduce oil and gas production by 40% by 2030, while significantly increasing its renewable energy investments. However, in 2023, the company revised its oil and gas reduction target to 25%, and now it is expected to abandon it entirely.

Additionally, BP is set to cut its renewable energy investments by more than half, a shift described by CEO Murray Auchincloss as a “fundamental reset”.

In 2024, BP reported a net income of $8.9 billion (£7.2 billion), down from $13.8 billion the previous year. Auchincloss is facing pressure from activist investors, including Elliott Management, which recently took a £4 billion stake in BP to push for greater oil and gas investment.

Underperformance Compared to Rivals

Since former CEO Bernard Looney unveiled BP’s energy transition strategy in 2020, the company has delivered total shareholder returns of 36% over five years. In contrast, competitors Shell and ExxonMobil have seen returns of 82% and 160%, respectively.

BP’s underwhelming financial performance has led to speculation that it could become a takeover target or consider moving its stock market listing to the U.S., where oil and gas companies generally command higher valuations.

Investor and Environmental Concerns

Not all shareholders support BP’s strategic shift. Last week, a group of 48 investors urged BP to allow a vote on any plans to abandon its renewable energy commitments.

A spokesperson for Royal London Asset Management, one of the signatories, stated:

“As long-term shareholders, we recognize BP’s past efforts toward energy transition but remain concerned about its continued investment in fossil fuel expansion.”

Meanwhile, Greenpeace UK warned that BP could face strong opposition from both environmental activists and its own shareholders if it fully commits to fossil fuels.

Charlie Kronick, Senior Climate Adviser at Greenpeace UK, commented:

“Government policies will need to prioritize renewable power, and as extreme weather puts pressure on insurance models, policymakers will look to fossil fuel profits to fund recovery efforts. BP may want to reconsider this U-turn.”

A Pivotal Moment for BP

Analyst Russ Mould of AJ Bell described the move as one of the most significant shifts in BP’s strategy in years.

“Other energy companies have been clearer about their intentions than BP,” he said. “They need to show investors that they are actively addressing their underperformance, not just letting things drift.”

BP has already moved its offshore wind business into a joint venture with Japanese company Jera and is seeking a partner for its solar energy division. The renewed focus on oil and gas could also lead to the sale of non-core assets.

Over 20 years ago, former BP CEO Lord John Browne suggested that BP could stand for “Beyond Petroleum”, signaling a shift away from fossil fuels. Today’s strategy shift, however, could be seen as “Back to Petroleum”—a decision welcomed by some investors and opposed by others.