BP slashes renewables investment and boosts fossil fuel production | Money News

Oil and gas giant BP has again slashed its renewable energy investment and announced more funding for greater fossil fuel production.

In a further row back of climate targets the company has said renewable energy investment will fall by $5bn (£3.95bn) a year to just $1bn to $2bn (£790m to £1.58bn). Less than half that investment will go to low-carbon energy.

Funding for further oil and gas extraction will grow to $10bn (£7.9bn) annually as the business shifts focus back to its original mission of extracting fossil fuels. The majority (70%) of the funding will go to oil with the remaining 30% funding gas projects.

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New “major” oil and gas projects are to start by the end of 2027 with eight to 10 more to begin by the end of 2030.

The company also said it will have “selective” investment in biogas, biofuels and electric vehicle (EV) charging and “capital-light partnerships” in renewables like wind and solar.

Under the tenure of old chief executive Bernard Looney, BP had dropped its 2020 goal of cutting production, revising it down in 2023 from 40% to 25%. The aim of dropping its oil and gas output by 2030 has been axed.

The International Energy Agency has said no new fossil fuel project is compatible with the globally accepted goal of limiting warming to 1.5C.

But BP now aims to grow production to 2.3 million to 2.5 million barrels of oil a day in 2030.

Why is this happening?

“Today we have fundamentally reset BP’s strategy,” chief executive Murray Auchincloss said.

“This is all in service of sustainably growing cash flow and returns.”

BP went “too far too fast”, Mr Auchincloss said, due to “misplaced” optimism on the pace of energy transition and decarbonisation which was not as fast as he envisioned.

This latest scaleback comes as BP faces pressure from activist investor Elliott Management, which reportedly took a 5% share of the company.

Elliott is renowned for forcing changes in companies to increase the share price and was reportedly pushing for a sale of BP’s renewable arm.

BP’s share price had dipped below the all-time high in February 2023 and company profits have come off the record level in 2022.

Dividends and company performance have been lower at BP than at its energy-producing peers.

The current CEO Mr Auchincloss announced plans in January to cut BP’s workforce by 5% – reducing the headcount by 4,700 – as he sought to achieve $2bn (£1.62bn) of cost savings.

It comes as the world breached the key 1.5-degree threshold in the 12 months from June 2023 to May 2024.

Countries including the UK signed up to the Paris Agreement to limit global warming to the 1.5 target.

There’s been a sector-wide retreat from green investment, however, as US President Donald Trump pledged to “drill baby drill”.