BP Cuts Net Zero Budget to Prioritize Oil and Gas

LONDON — British energy conglomerate BP announced a significant shift in its strategic focus on Wednesday, opting to cut back on investments in green technology while increasing its commitment to oil and gas production. This move, aimed at enhancing BP’s underperforming share price, has raised eyebrows among climate action advocates.

The company, in a statement titled “Reset BP,” outlined its intention to reduce annual spending on businesses aimed at achieving net-zero carbon emissions from $5 billion to up to $2 billion. Conversely, BP plans to boost its investments in oil and gas production by about 20% to $10 billion annually.

Murray Auchincloss, the company’s CEO, emphasized the focus on high-return projects to promote growth, indicating that the firm will take a more targeted approach with renewable energies. “This represents a recalibrated BP, prioritizing long-term shareholder value enhancement,” he conveyed.

This strategic shift marks a departure from the previous plan, initiated five years earlier by former CEO Bernard Looney, which focused on reducing oil and gas outputs to pave the way for sustainable, net-zero enterprises.

Discussing the company’s change in tactic, Auchincloss explained to investors that BP’s commitment to the green energy shift was perhaps overly optimistic and ambitious. Emphasizing the enduring demand for oil and gas, he stated these resources will be integral for several more decades. Nonetheless, Auchincloss acknowledged that renewable energies continue to hold substantial potential and confirmed BP’s objective to achieve net-zero carbon emissions by 2050.

In his remarks, Auchincloss reiterated the need for global carbon emission reductions, highlighting the demand for low-carbon products and services to help nations, enterprises, and consumers meet their decarbonization goals.

The recent announcement appears designed to rekindle investor confidence amidst the faltering performance of BP’s stock price. Although the update aimed at uplifting investor sentiment, initial market reactions showed a 1.4% dip in BP’s share value during afternoon trading on Wednesday. Investors may be cashing out following recent stock rallies amid speculation over the company’s strategic realignment.

BP’s lagging stock performance compared to industry peers like Shell, ExxonMobil, and Chevron has fueled market talk about a potential relocation of its stock listing to the New York Stock Exchange or perhaps even becoming a takeover target.

Recently, Elliott Management, a notable U.S. hedge fund, acquired nearly 5% of BP’s shares, suggesting potential pressure to revert BP’s focus back to fossil fuels to enhance profitability.

Under Auchincloss’s leadership, BP has spun off its offshore wind enterprise into a joint venture and is seeking to sell its onshore wind operations while concurrently cutting costs amid challenging market conditions. Notably, BP has announced plans to trim over 5% of its workforce.

The company’s pivot away from green initiatives is drawing significant criticism from environmental groups who had previously been encouraged by BP’s commitment to sustainable energy.

Matilda Borgström, a campaigner at climate advocacy group 350.org, expressed disappointment, stating, “BP’s decision underscores why wealthy corporations, focused on immediate profits for shareholders, are unreliable stewards for addressing the climate crisis or leading the transition to renewable energy.” She further criticized the decision, suggesting that increased fossil fuel investment not only endangers climate goals but also poses a substantial risk to shareholder interests amidst the rapid growth of the renewables sector.