BP Boosts Oil and Gas Spending as Energy Giant Pivots From Low-Carbon Focus

BP, the British energy giant, has announced a significant shift in its strategic focus, moving away from its previous low-carbon energy strategy and increasing investment in oil and gas. The company aims to boost its annual oil and gas investment to around $10 billion, while cutting spending on renewable energy to between $1.5 billion and $2 billion per year. This marks a substantial reduction of over $5 billion compared to the previous forecast.

The move comes as BP seeks to regain investor confidence after its shares underperformed those of its rivals in recent years. The company has come under pressure from activist investor Elliott Investment Management, which has built a stake in the company and demanded changes in strategy or board reshuffles. BP's new strategy is expected to address these concerns and improve shareholder returns.

BP's new strategy involves increasing oil and gas production, with a target of 2.3-2.5 million barrels of oil equivalent per day (boed) in 2030. The company plans to start up 10 new major projects by the end of 2027 and a further 8-10 projects by the end of 2030. This increased production is expected to drive growth and improve returns for shareholders.

In addition to increasing oil and gas investment, BP is also planning to cut annual capital expenditure to between $13 billion and $15 billion through 2027. The company aims to reduce costs and net debt, with a target of $4 billion-$5 billion of structural cost reductions by the end of 2027. BP is also targeting $20 billion in new divestments to be announced by the end of 2027, including a strategic review of its Castrol lubricants business.



BP's new strategy is expected to have a positive impact on its long-term financial performance and shareholder value. The increased investment in oil and gas is likely to drive growth and improve returns, while the reduced spending on renewable energy and lower capital expenditure should improve the company's balance sheet and reduce debt. The company also plans to raise its dividend by at least 4% per share annually and expects first-quarter share buybacks of $750 million to $1 billion.

However, the shift in strategy may have potential geopolitical risks and benefits. Increased investment in oil and gas could exacerbate the world's dependence on fossil fuels, hindering efforts to combat climate change and meet the Paris Agreement targets. This could lead to geopolitical tensions with countries and blocs that prioritize renewable energy and sustainability. On the other hand, increased oil and gas production could improve energy security for BP's customers and allies, reducing their dependence on other suppliers and strengthening the company's geopolitical influence.

In conclusion, BP's pivot away from its low-carbon strategy and back towards oil and gas is likely to have both short-term and long-term effects on its competitive position in the energy sector. The company's increased investment in oil and gas is expected to drive growth and improve returns, while the reduced spending on renewable energy and lower capital expenditure should improve the company's balance sheet and reduce debt. However, the shift in strategy may also have potential geopolitical risks and benefits, depending on the locations and nature of BP's new oil and gas projects.