BP to Cut Renewable Investments While Increasing Gas and Oil Production.

BP, the energy company, is preparing to announce a major change in its investment strategy. Instead of continuing to put money into renewable energy sources, it looks set to significantly reduce its investments in this area and focus more on increasing oil and gas production. This decision comes after investors expressed dissatisfaction with BP’s profitability and share price, which have not performed as well as those of its competitors.

Other companies in the energy sector, like Shell and Equinor from Norway, have also started to scale back their green energy plans. The influence of US former President Donald Trump, who encouraged increased fossil fuel production, has further shifted investments away from environmentally friendly projects.

Some BP shareholders and environmental organizations are worried that increasing fossil fuel production could harm efforts to tackle climate change. Five years ago, BP had ambitious goals to reduce its oil and gas output by 40% by 2030 and invest more in renewables. However, this year, the company revised that target down to a 25% reduction and now seems likely to abandon those plans entirely. CEO Murray Auchincloss described this shift as a “fundamental reset” and indicated that BP would cut renewable energy investments by more than half.

Pressure is mounting on Auchincloss from influential shareholders, including the activist investment group Elliott Management, which recently acquired a stake of almost £4 billion in BP. In contrast, BP’s net income dropped to $8.9 billion in 2024, a decrease from the previous year’s $13.8 billion. Shareholders in BP have seen their returns total 36% over the past five years, compared to much higher profits enjoyed by competitors Shell and Exxon, who have seen returns of 82% and 160%, respectively.

The underperformance of BP has raised speculation about the company possibly being a target for takeover or relocating its main stock market listing to the US, where oil and gas firms tend to have higher valuations. However, not all investors support such a drastic change in direction. Recently, a group of 48 investors urged BP to let them vote on any plans that would reduce its commitment to renewable energy.

Environmental group Greenpeace UK has cautioned that BP could face significant opposition, not just from climate advocates but also from its own investors if the company chooses to focus heavily on fossil fuels again. Climate advisor Charlie Kronick warned that government policies may increasingly prioritize renewable energy and that BP should reconsider its approach.

Sir Ian Cheshire, a seasoned executive, expressed skepticism about whether this course of action would be viewed positively in the future, noting that the demand for renewable energy transition remains strong and the climate crisis is still a pressing issue. AJ Bell analyst Russ Mould pointed out that BP needs to be clear about its intentions and actions, especially in light of its recent struggles and its rivals’ stronger performance.

BP is beginning to restructure by entering a joint venture for its offshore wind business and is seeking partners for its solar initiatives. The re-emphasis on oil and gas could possibly lead to divesting other non-essential businesses. More than two decades ago, former CEO Lord John Browne famously suggested that BP could stand for “Beyond Petroleum” as the company began to transition away from fossil fuels. Now, the latest shift in strategy might be seen as a retreat back to its oil and gas roots, pleasing some shareholders while disappointing others.