BP is moving away from its oil output target

Oil giant BP has retreated further from its target to cut oil output. Where does that leave the sector’s net-zero credentials?

BP Gas Station In London
(Image credit: NurPhoto / Contributor)

BP CEO Murray Auchincloss says the group has stopped bidding on new offshore wind projects in order to simplify operations and reduce costs, says Emma Powell in The Times

At the same time, BP will spend more on new oil and gas assets, particularly in the Gulf of Mexico and the US Permian basin, where it already has a large presence. The moves hint at a further retreat from the “pivot towards greener forms of energy” embarked upon by former CEO Bernard Looney, especially since the energy-transition strategy has caused “disquiet” among investors and drawn criticism from activist investor Bluebell Capital

That BP will be “scaling down its renewable energy ambitions” is no surprise, says Gaurav Sharma in Forbes. Its attempt to build an offshore wind portfolio has “often seen the company overbid for renewable energy assets over and above even established players in the industry” – assets that are “not expected to generate revenue for years”. The strategy was also “out of sync” with shareholders’ desire for “a focus on [the] core oil and gas business along with a slightly tempered approach to the energy transition”.

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Is BP still the green leader? 

Even after the latest “tweak”, the company is “still streets ahead of most of its rivals in terms of its transition strategy”, especially since it is “the only major to have a formal target to reduce oil and gas output”, says Nils Pratley in The Guardian. Still, last year Looney reduced this target from 40% by 2030, compared with 2019’s output, to 25%, and few would “be surprised if BP’s renewables ambitions were scaled back again” in the next few years. 

BP’s strategy now seems very far from Looney’s declaration that there is “no turning back” on green investment. Rival major Shell has also “tempered expectations over the pace of change”, says Tom Wilson in the Financial Times. And the US giants are becoming “bolder than ever” in their commitment to oil and gas, with ExxonMobil even filing a lawsuit against an activist shareholder “that has been pressuring the company to set more ambitious transition goals”. 

Overall, this suggests that Big Oil “is unlikely to lead from the front, opting instead to build the capability to enter new markets for lower-carbon energy products as demand evolves”. Ironically, the US energy companies may prove more environmentally friendly than either BP and Shell, says Stefan Andreasson in The Conversation

While BP and Shell have respectively spent 8%-12% and 12%-15% of capital expenditure (capex) on renewables in recent years, ExxonMobil has earmarked 17% of capex from 2022-2027 for green projects, “including carbon capture, lithium mining, hydrogen and biofuels”. 

What’s more, BP and Shell’s efforts are “arguably a poorer fit for the majors’ core skill set” than ExxonMobil’s move to become a leading lithium producer for EV batteries, “which fits its drilling specialism”. The core difference is that the US has developed much more “helpful” incentives for such behaviour. 


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Dr Matthew Partridge

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

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