BP has reported what it calls “significant progress” on its new fossil fuel-focused strategy, even as its profits for the past quarter nearly halved and debt levels rose sharply. The shift comes as the energy giant pivots away from its earlier, more ambitious green energy commitments, responding to investor pressure and volatile market conditions.
A Strategic Reset: Back to Oil and Gas
Earlier this year, BP’s chief executive, Murray Auchincloss, announced a “fundamental reset” of the company’s direction. The new strategy prioritises growing upstream oil and gas production, focusing downstream operations, and investing selectively in energy transition projects. Auchincloss stated, “We have already made significant progress. So far this year we have started up three major projects, made six exploration discoveries and have progressed our divestment programme – all while delivering strong operational performance, with over 95% upstream plant reliability supporting the best operating efficiency on record, and over 96% refining availability”.
This marks a clear departure from BP’s previous climate ambitions. Five years ago, BP aimed to cut oil and gas production by 40% by 2030 and ramp up renewables investment. However, in 2023, the company scaled back that target to a 25% reduction, and now appears to be abandoning even that goal in favour of stabilising and growing fossil fuel output.
Financial Performance: Profits Down, Debt Up
Despite operational successes, BP’s financials reflect the challenges facing the sector. The company’s preferred profit measure-underlying replacement cost profit-fell by 49% to $1.38 billion (£1.03 billion) in the last quarter. This was attributed mainly to weaker oil prices and global economic uncertainty, with debt swelling to $27 billion (£20.1 billion).
Nevertheless, BP has continued to reward shareholders, increasing its dividend and announcing further share buybacks. The company plans at least $14 billion in buybacks through 2025, returning 80% of surplus cash flow to investors.
Investor Pressure and the Retreat from Renewables
The strategic pivot comes after sustained pressure from investors who have been dissatisfied with BP’s share performance compared to rivals. Many stakeholders have urged the company to focus on its core oil and gas business, especially after the Russia-Ukraine war highlighted the profitability and perceived security of fossil fuels. Auchincloss himself acknowledged that BP may have gone “too far, too fast” in its green transition efforts.
BP has thus slashed its renewables ambitions, dropping its target to increase renewable generation twentyfold by 2030 and reducing capital allocated to green projects. In 2023, for every dollar BP invested in low-carbon energy, it spent over $11 on oil and gas, and distributed more than $10 to shareholders.
Environmental Concerns and Future Outlook
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Environmental groups have criticised BP’s new direction, accusing the company of prioritising profits over climate goals. BP’s own reporting shows that in 2023, 91% of its emissions were from so-called “scope 3” sources-those generated by customers burning its fuels-while its revised targets for emissions reduction now fall significantly short of what’s needed for net zero alignment.
Despite the retreat from renewables, BP still maintains some green projects, such as a major green hydrogen plant in Spain, but these are now the exception rather than the rule.
BP’s recent results and strategic reset underscore a decisive shift back towards fossil fuels, driven by investor demands and market realities. While the company boasts operational achievements and promises shareholder returns, its reduced climate ambitions and rising debt highlight the ongoing tension between profitability and the energy transition.
