BP is set to slash its renewable energy investments to focus on increasing oil and gas production, according to new reports.
As part of the what CEO Murray Auchincloss is calling a “fundamental reset”, BP have signed a deal worth $25bn (£19.8bn) with the government of Iraq to work on multiple oil and gasfields in the country.
Competitors like Shell and Norwegian company Equinor have already cut back their own green energy investment plans, as US President Donald Trump’s “drill baby drill” ethos has placed a renewed focus on fossil fuel and a move away from low carbon projects.
The multinational energy giant will outline its strategy on Wednesday following pressure from investors unhappy that its profits and share price have been lower than its rivals.
BP’s share price has risen by just 0.88 per cent over the last five years, excluding dividends payments, though has climbed from a low point of under 200 pence per share in late 2020 back up to above 430 pence today. Even so, comparisons with the likes of Shell - up 48 per cent over five years excluding dividends - are unfavourable, leading to activist pressure of late.
Despite share price concerns, BP remains the sixth-biggest listed company on the London Stock Exchange by market capitalisation. As of 12:30pm GMT on Wednesday, shares were down a further 0.8 per cent for the day.
The Times report that the Iraq deal will see BP develop four major gas and oilfields in the north, in Kirkuk, with up to 20 billion barrels equivalent of oil and gas being in the region. The initial arrangement is reportedly to cover around three billion barrels, supporting Iraq’s domestic gas needs with the potential for further exploration.
Last month, BP announced almost 5,000 jobs would be cut as part of a company-wide cost-cutting drive, which aimed to save up to $2bn (£1.6bn).
BP’s decision will come after they set some of the most ambitious targets among large oil companies to cut their oil and gas production by 40 per cent by 2030 in order to invest in green energy. But in 2023, the company lowered this reduction target to 25 per cent.
It is now expected to abandon these targets altogether while confirming cuts to renewable energy investments by over half.
James Alexander, CEO of the UK Sustainable Investment and Finance Association (UKSIF), criticised BP’s turnaround as being “misaligned” with climate goals.
“Today’s announcement from BP should sound alarm bells for investors and UK policymakers alike. Expansion of BP's oil and gas extraction activities is misaligned with long term global energy projections and at odds with the decarbonisation trajectory needed to limit global warming to 1.5C degrees,” Mr Alexander said.
“This shift must raise serious questions over whether decisions are being made in the interests of the long-term viability of the company and whether it exposes investors to growing risks from stranded oil and gas assets.”
The company’s net income fell to $8.9bn (£7.2bn) last year, down from $13.8bn in 2023.
BP is under pressure to perform, especially as influential group Elliott Management has built a stake of nearly five per cent to push for investment in oil and gas.
Since 2020, when the ambitious energy targets were set in stone, BP has underperformed with shareholders receiving total returns including dividends of 36 per cent over the last five years. Meanwhile, shareholders of Shell and ExxonMobil saw returns of 82 per cent and 160 per cent respectively.
Already, shareholders and environmental groups have shared their concerns over increasing production of fossil fuels.
Greenpeace UK warned that BP could expect further “pushback and challenge at every turn if it doubles down on fossil fuels - not just from green campaigners but from its own shareholders”.
Last week, a group of 48 investors called on BP to allow them a vote on any potential plans distancing themselves from the renewable energy commitments they had made.
A spokesperson for one of the signatories, Royal London Asset Management, said: "As long-term shareholders, we recognise BP's past efforts toward energy transition but remain concerned about the company's continued investment in fossil fuel expansion."
Within days of returning to office, President Trump signed a number of executive orders to encourage oil and gas industries.
He declared an “energy emergency” under the National Emergencies Act to prioritise fossil fuel production and energy distribution and exited the Paris Agreement, a commitment made by world leaders in 2015 to curb global warming.
A report from green advocacy group Climate Power found that big oil spent $445 million to influence Trump and Congress throughout the last election cycle.
