BP, one of the world’s largest energy companies, is making a major change to its business strategy. The company plans to reduce investments in renewable energy and put more focus on oil and gas. This decision comes as BP faces pressure from investors unhappy with its profits and stock prices.
Investor Demands Force BP’s New Strategy
BP’s decision to cut back on renewable energy investments is largely driven by investors who want higher returns. Over the years, BP’s profits and stock prices have been lower than its competitors like Shell and Equinor. Meanwhile, other companies, like Shell, have also been reducing their green energy projects and focusing more on fossil fuels.
BP had made big promises five years ago. The company vowed to cut its oil and gas production by 40% by 2030. It also pledged to invest more in renewable energy. But in 2023, BP changed its goal. Instead of cutting production by 40%, the company now plans to reduce it by 25%. Now, BP plans to cut its renewable energy investments by more than half. CEO Murray Auchincloss called this change a “fundamental reset.”
BP’s Financial Struggles
BP’s financial performance has been weaker than expected. In 2024, BP reported a drop in net income from $13.8 billion in 2023 to $8.9 billion. This sharp decline has left many investors unhappy. One activist group, Elliott Management, bought a nearly £4 billion stake in BP and is pushing the company to focus more on oil and gas.
Over the past few years, BP shareholders have received a 36% return, including dividends. But this is low compared to its competitors. Shell shareholders saw a return of 82%, while Exxon’s shareholders saw 160%. This has led to speculation that BP could be a target for a takeover, or it could move its stock market listing to the United States. There, oil and gas companies tend to have higher market valuations.
Not All Investors Agree with BP’s New Plan
While some investors support BP’s shift back to fossil fuels, others do not. A group of 48 investors recently urged BP to hold a vote before making any drastic changes. Royal London Asset Management, one of BP’s long-term investors, expressed concern about the direction the company is heading. They recognize BP’s efforts in renewable energy, but they worry about BP’s growing reliance on fossil fuels.
Environmental groups are also critical of BP’s new direction. Greenpeace UK warned that BP may face backlash if it increases investments in oil and gas. Senior climate adviser Charlie Kronick warned that governments around the world are moving toward renewable energy. He added that extreme weather events could cause insurance companies to change their models. As a result, governments may start targeting fossil fuel profits to fund recovery from natural disasters.
BP’s Big Move: Back to Petroleum?
Analysts say that BP’s move back to fossil fuels is one of the biggest changes the company has made in years. Russ Mould, an analyst, pointed out that BP’s competitors have been clearer about their future plans. BP now needs to prove that its strategy will improve the company’s performance and share prices.
BP has already made changes in its renewable energy business. The company placed its offshore wind business into a joint venture with a Japanese company, Jera. BP is also looking for a partner for its solar business. Some insiders believe BP might sell off more non-core assets to focus on its main oil and gas operations.
More than 20 years ago, former CEO Lord John Browne led BP through a transition away from oil and gas. BP became known as “Beyond Petroleum,” a name that reflected its push into renewable energy. Now, critics say BP’s new focus should be called “Back to Petroleum.”
The Future of BP
BP’s decision to focus more on oil and gas is raising many questions about its future. Some investors are excited about the potential for better returns. Others worry that the company’s decision could harm its long-term growth and reputation.
As BP adjusts its strategy, the company will need to show it can balance the need for profits with the growing demand for clean energy. Governments, environmental groups, and investors are all watching closely to see how BP’s strategy plays out in the coming years.
For more updates on BP’s energy strategy and its impact on the market, visit Euro News 24.