BP Shifts Focus to Oil and Gas Investments Amid Renewable Energy Pullback

Investor Pressure and Market Trends Drive Strategic Energy Pivot / GettyImages

BP, a global energy giant, has announced a significant shift in its corporate strategy, moving away from aggressive renewable energy investment and refocusing on expanding its oil and gas production. This decision follows increasing pressure from investors frustrated by the company’s underwhelming financial performance compared to industry competitors like ExxonMobil and Shell. To realign its priorities, BP plans to increase its annual oil and gas production funding by approximately 20%, bringing total investment to around $10 billion. Simultaneously, its renewable energy investment will be drastically reduced from over $5 billion annually to a range of $1.5 billion to $2 billion per year.

This strategic pivot is part of a broader trend among major oil and gas companies, many of which are reassessing their energy transition commitments in response to shifting economic realities and political influences. One key factor in BP’s decision is the resurgence of fossil fuel profitability, spurred by rising oil prices and geopolitical disruptions, such as the ongoing effects of Russia’s invasion of Ukraine. Additionally, political factors such as U.S. President Donald Trump’s strong pro-drilling stance have influenced BP’s revised approach to balancing shareholder returns with long-term sustainability goals. BP’s CEO, Murray Auchincloss, acknowledged that the company’s previous renewable energy push was “overly ambitious” and needed recalibration. He emphasized that prioritizing shareholder value through oil and gas production growth is now the company’s main focus. Under this new strategy, BP aims to increase its daily oil and gas output to 2.3 million to 2.5 million barrels of oil equivalent by 2030, with several key projects scheduled to commence by 2027.

BP’s move comes amid financial challenges that have amplified investor concerns. In 2024, the company reported a net income of $8.9 billion, a sharp drop from $13.8 billion the previous year. This decline in profitability has fueled dissatisfaction among stakeholders, particularly activist investors such as Elliott Management, which holds a nearly $4 billion stake in the $70 billion company. These investors have been vocal advocates for reallocating capital to more lucrative oil and gas production investments. Auchincloss reinforced this view, stating that BP’s previous faith in rapid renewable energy expansion had been misplaced given the current demand landscape and return on investment. BP’s chairman, Helge Lund, echoed this sentiment, emphasizing that “cash flow growth” is now the company’s top priority. However, the market’s response to the announcement has been mixed initial enthusiasm led to a brief uptick in BP’s stock price, but shares soon dipped amid lingering concerns over the long-term sustainability of this fossil fuel-driven strategy.

Environmental groups and sustainability-focused investors have strongly criticized BP’s reduced commitment to renewable energy investment. Organizations such as Greenpeace UK argue that BP’s decision demonstrates the oil industry’s lack of reliability in combating climate change. Alexander Kirk of Global Witness accused BP of prioritizing short-term profits while ignoring the environmental consequences of expanding fossil fuel operations. In a public protest against BP’s strategy shift, Global Witness drove a lorry through central London displaying messages condemning the company’s actions. Further highlighting stakeholder division, a coalition of 48 investors recently urged BP’s leadership to allow a shareholder vote on any plans that scale back renewable energy commitments. Despite the backlash, BP maintains that its long-term goal of achieving net-zero emissions by 2050 remains intact. The company points to ongoing initiatives, such as offshore wind farms and carbon capture projects in the UK, as evidence of continued—albeit significantly reduced—investment in clean energy solutions.

This dramatic shift marks a reversal from BP’s previous renewable energy commitments. Under former CEO Bernard Looney, BP had pledged to cut its oil and gas output by 40% by 2030 and significantly expand its green energy portfolio. At the time, these goals positioned BP as a leader among traditional oil companies in the global energy transition. However, the financial returns from these initiatives have failed to meet investor expectations. Over the past five years, BP has delivered a total shareholder return of just 36%, significantly trailing Shell’s 82% and ExxonMobil’s 160%. This underperformance has fueled speculation that BP may become a takeover target or could consider shifting its primary stock listing to the U.S., where oil and gas companies generally receive higher valuations.

To address investor concerns, BP is implementing additional cost-cutting measures and structural changes. The company plans to streamline operations by eliminating 4,700 jobs and reviewing the potential sale of its Castrol lubricants business. It is also shifting towards “capital-light partnerships” in its wind and solar divisions, similar to its existing offshore wind joint venture with Jera. These adjustments are designed to increase financial efficiency while maintaining some level of engagement in the renewable energy sector.

However, industry experts remain divided on whether BP’s new strategy will prove beneficial in the long run. Sir Ian Cheshire, a seasoned business executive with experience at Kingfisher and Barclays, has expressed skepticism, arguing that BP’s move could be seen as shortsighted in hindsight. Speaking on BBC’s Today programme, he stressed that climate change remains a pressing issue and that the scientific consensus on global warming has not changed. The International Energy Agency (IEA) has also warned that new fossil fuel projects contradict global efforts to limit temperature rises to 1.5°C above pre-industrial levels. Critics argue that by reducing renewable energy investments, BP is deprioritizing climate change mitigation in favor of short-term financial gains.

BP’s pivot aligns with a broader slowdown in the global energy transition, as other oil majors, including Shell and Norway’s Equinor, have also scaled back their renewable energy strategies. The economic attractiveness of fossil fuels has surged in recent years, driven by rising prices and heightened energy security concerns. In line with this trend, BP has announced budget cuts in areas such as biogas, biofuels, and electric vehicle charging infrastructure while maintaining a limited presence in wind and solar through strategic partnerships. The company aims to achieve $4 billion to $5 billion in structural savings by 2027, with overall annual capital expenditure dropping to between $13 billion and $15 billion. Additionally, BP plans to generate an extra $2 billion in operating cash flow from its new oil and gas projects. To reassure investors, BP has pledged to distribute 30% to 40% of its operating cash flow as dividends and share buybacks.

The impact of BP’s decision extends beyond its own corporate strategy, influencing the future of sustainable energy investment and shaping global discussions on corporate responsibility in the fight against climate change. While BP acknowledges that peak oil demand is likely to occur within the next decade and that fossil fuel consumption is expected to decline significantly by 2050, its current trajectory prioritizes immediate financial performance over positioning itself for a carbon-neutral future. This ongoing tension between investor-driven profit motives and climate change mitigation efforts reflects a broader industry dilemma how to balance short-term returns with long-term environmental responsibilities. As BP continues down this path, its actions will not only affect its own fortunes but also set precedents for how other energy giants navigate the evolving global energy landscape.