BP's Strategic Shift: Slashing Net Zero Spending to Focus on Oil and Gas

BP, the energy giant, has announced a significant shift in its strategy, aiming to increase spending on oil and gas while sharply reducing investments in various forms of clean energy. This move comes as a response to investor pressure for higher returns and a realization that the energy transition to cleaner fuels is not paying off as expected. The company's new CEO, Murray Auchincloss, has stated that this "reset" is aimed at sustainably growing cash flow and returns.



BP's decision to increase oil and gas investment to around $10 billion per year, while cutting spending on renewables to between $1.5 billion and $2 billion per year, represents a $5 billion-per-year drop from previous plans. This change in strategy has raised concerns among environmental groups and some shareholders, who argue that it goes against the company's previous net-zero ambitions and increases the risk of climate impacts.

One of the key factors driving BP's decision is the rising oil and natural gas prices, which have made these traditional energy sources more profitable. Additionally, some areas of green energy in which BP invested, notably offshore wind, have fared poorly, especially in the United States. The Trump administration's policies, which favor fossil fuels, have also altered the investment and operating environment for energy companies.

BP's underperformance against its peers, such as Shell, ExxonMobil, and Chevron, has fueled speculation that the company may consider relisting its shares in New York or becoming a takeover target. The influential U.S. hedge fund Elliott Management recently took a nearly 5% stake in BP, and it is believed that they have sought to push BP back towards fossil fuels to boost profit.

BP's change of strategy is facing sharp criticism from environmental campaigners, who had previously warmed to the company's insistence that the future was green. Matilda Borgström, U.K. campaigner at climate action group, 350.org, stated that "this move by oil giant BP clearly demonstrates why super-rich corporations and individuals, chasing short-term profit for themselves and shareholders, cannot be trusted with fixing the climate crisis or leading the transition to renewable energy we so badly need."

BP's revised strategy has had mixed implications for its share price and overall market performance. Initially, the announcement of the strategy change led to a rally in BP's share price, with the stock gaining around 10% in the days leading up to the update. However, on the day of the announcement, BP's share price fell by 0.8% despite the heavily-trailed update, indicating that investors may have been expecting more positive news.

In conclusion, BP's strategic shift towards increasing oil and gas investment and reducing spending on renewables has raised concerns about the company's commitment to its net-zero ambitions. While some investors may welcome this change as a means to boost profits and share price, others remain concerned about the company's impact on the environment. The mixed market performance and varying investor perceptions suggest that the long-term implications of this strategic change are yet to be fully understood.