In a significant shift in strategy, BP has announced a scaling back of its renewable energy ambitions at its capital markets day on 26 February.
The UK-based oil and gas giant will now aim for 50GW of renewable generation capacity by 2030, abandoning its previous goal of a 20-fold increase from current levels.
The move signals a refocusing on BP’s core fossil fuel business, a decision driven by investor concerns over earnings and the company’s recent underperformance compared to competitors like Shell, Exxon, and Chevron.
BP CEO Murray Auchincloss addressed these concerns, outlining a plan to prioritise returns and cost discipline.
Under Auchincloss’s predecessor, Bernard Looney, BP had committed to a 40 per cent reduction in oil and gas output by 2030 while aggressively expanding its renewable energy portfolio.
However, the reduction target was lowered to 25 per cent in 2023, and the company’s current renewable generation capacity stands at 8.2GW.
Since taking the helm, Auchincloss has initiated cost-cutting measures, including a planned 5 per cent reduction in staff, and has slowed down investments in renewable energy projects.
BP also failed to reach its 2024 earnings before interest, taxes, depreciation, and amortisation (EBITDA) target of US$40.9 billion and will now target an annual percentage growth instead of a fixed dollar amount.
The company reported capital spending for 2024 at US$16.24 billion.
BP‘s new strategy also includes plans to divest assets and reduce investments in other low-carbon initiatives to lower debt and improve returns.
This decision aligns with a broader trend in the energy sector, where companies are increasingly refocusing on oil and gas due to improved profitability amidst rising fossil fuel prices.
The strategy shift also comes amid mounting pressure from Elliott Investment Management, which has acquired a nearly 5 per cent stake in BP.
Elliott has been advocating for a comprehensive overhaul of the company, emphasising tighter cost discipline and a reduction in green energy spending.
The investment firm has a track record of pushing for significant changes at companies like Honeywell and Southwest Airlines.
Sources indicate that Elliott is urging BP to consider selling assets such as wind and solar farms, as well as exploring the potential divestment of its Castrol lubricants and service station businesses to unlock value and boost share buybacks.
