BP has confirmed a significant shift in strategy that will see its cut its renewable energy investments and instead focus on increasing oil and gas production.

It will increase annual oil and gas investment to $10 billion, returning the focus to fossil fuels, as part of CEO Murray Auchincloss’ efforts to boost returns and improve financial performance.

Investment in the transition businesses will be cut to $1.5–2bn a year, over $5bn lower than previous guidance.

There will be selective investment in biogas, biofuels and EV charging, capital-light partnerships in renewables and focused investment in hydrogen/CCS.

The company also said it was reviewing its lubricants business, Castrol, and targeting $20 billion in divestments by 2027.

Mr Auchincloss said: “We will grow upstream investment and production to allow us to produce high margin energy for years to come.

“We will focus our downstream on markets where we have leading integrated positions. And we will be very selective in our investment in the transition, including through innovative capital-light platforms. This is a reset bp, with an unwavering focus on growing long-term shareholder value.”

The announcement, which was being made to investors, comes amid growing pressure from investors dismayed by weak profits and a sluggish share price that lags behind its rivals.

Since 2020 shareholders have received total returns including dividends of 36% over the last five years. In contrast, shareholders in rivals Shell and Exxon have seen returns of 82% and 160% respectively.

BP has announced a major step towards a return to fossil fuels by signing a deal with the government of Iraq to work on the redevelopment of four large oil and gasfields in Kirkuk in the north of the country. It could see BP spend $25 billion over the lifetime of the project.

Mr Auchincloss is unwinding the strategy set under his predecessor Bernard Looney to increase its focus on renewable energy and scale back in oil and gas.

Shell and Norwegian company Equinor have already scaled back their plans to invest in green energy, encouraged by US President Donald Trump’s “drill, baby, drill” comments.

Activist group Elliot Management is a particular source of influence in BP’s change of direction after taking a near £4 billion stake in the £70 billion company to push for more investment in oil and gas.

BP’s under performance has prompted speculation that it may be a takeover target or may consider moving its main stock market listing to the US where oil and gas companies command higher valuations.

The environmental group Greenpeace UK has warned BP could expect “pushback and challenge at every turn – not just from green campaigners but from its own shareholders”.

AJ Bell analyst Russ Mould said this was one of the most significant moments for BP in the last four or five years.

“Other energy companies have been clearer about their intentions thus far than BP,” he said.

See also

Rushing energy transition ‘will damage supply chain’