The British giant BP has announced a radical turn in its corporate strategy: from the green commitment to fossil fuels again.
Short. A year after being appointed CEO of BP, Murray Auchincloss has dismantled the plan to reduce the production of hydrocarbons that had driven his predecessor, Bernard Looney.
Auchincloss described his new strategy as a “fundamental restart” in the company’s plans: to cut the investment in renewable energy to increase the production of oil and natural gas.
A turn in the middle of the investment pressure. The latest BP results did not excite their investors. During the fourth quarter, the net profit of the group fell to 1.2 billion dollars, less than half as in the same period of the previous year.
With a collection of dividends of just eight cents per share, Elliott Investment Management, which accumulates a participation of almost 5,000 million dollars in BP, has intensified the pressure on the group to improve the return of its shareholders. Given this scenario, BP has decided not to get away from fossil fuels, but to enhance its production.
When your neighbor’s beards see cut … Shell, Exxonmobil and Totalenergies, three of the main BP competitors, have been improving results thanks to their commitment to the production of hydrocarbons, whose demand continues to increase slightly despite the energy transition.
As the divergence in the performance of both strategies became more noticeable, BP shareholders, especially Elliott, have been demanding drastic improvements in the structure and strategy of the company.
How this affects renewables. It is not encouraging news. BP plans to increase its investment in hydrocarbons to about 10,000 million dollars annually until 2027, with the aim of producing between 2.3 and 2.5 million barrels of natural oil and gas for 2030.
To be able to do this while returning capital to shareholders, BP will substantially reduce spending on less profitable projects, such as renewable energies. The group will adjust its investments in these areas with a very selective approach, prioritizing transition projects that require a lower disbursement. Its Offshore wind division will become independent from the group.
Even so… BP claims to continue committed to its goal of achieving carbon neutrality by 2050, a legal objective established by the United Kingdom government, which was one of the first to formalize and support with legislation the commitment to reduce net greenhouse gases emissions to zero.
BP’s change of strategy can help her be more profitable in the near future, but only a transition that will clearly be inevitable if climatic policies are maintained or become more aggressive. With the improvements in efficiency and safety of nuclear energy, advances in electrification and increasingly cheaper renewables, excuses are over to continue betting on fossil fuels.
Image | BP
In WorldOfSoftware | European oil companies readjust their strategy: they leave aside the green transition before market pressures
