Elliott Pushes BP for Major Restructuring, Citing Strategy Failures

Elliott Investment Management, an activist investment firm, is reportedly pushing for significant organizational changes at BP, the British oil giant. The firm is advocating for the replacement of BP's head of strategy, Giulia Chierchia, and the separation of its upstream oil and gas exploration and production business from its downstream refining and sales operations. This move aims to enhance management accountability and dismantle the hybrid operating model implemented during the tenure of former CEO Bernard Looney.

Elliott currently holds a stake of slightly over 5% in BP, and its primary demands center around the direction of the company's strategic transformation. Chierchia, who joined BP from McKinsey in 2020, has been instrumental in leading Looney's energy transition plan. This plan involved significantly reducing fossil fuel production and investing heavily in renewable energy. However, this strategy has weakened BP's traditional business competitiveness, as evidenced by the prolonged shutdown of its Whiting refinery in the U.S. and a fatal safety incident at its biofuel plant in Brazil, both of which have impacted the profitability of its refining segment.

Current CEO Murray Auchincloss announced in February that BP would abandon Looney's aggressive transition strategy, focusing instead on debt reduction and cost control. However, Elliott believes that the delay in adjusting the business structure is a key reason why BP's stock performance has lagged behind that of Shell and ExxonMobil over the past five years.

BP currently operates under a hybrid management structure, with Gordon Birrell overseeing both upstream and refining operations, while Emma Delaney manages traditional downstream businesses such as retail fuel stations. Elliott proposes a complete separation of upstream and downstream operations to improve operational transparency and capital allocation efficiency, aligning with industry standards.

Prior to Looney's appointment in 2020, BP maintained a separate accounting structure for its upstream and downstream businesses. Current Chairman Helge Lund, who supported Looney's transition plan, faced nearly 25% opposition at the April shareholder meeting and was forced to commit to publishing a strategic assessment within six months.

Market analysts suggest that Elliott's involvement could accelerate BP's asset divestment process. If the plan to separate upstream and downstream operations is implemented, it could trigger a chain reaction: the upstream division would focus on maximizing oil and gas production, while the downstream division would concentrate on optimizing refining profits. Investments in renewable energy could become a secondary or peripheral business. The outcome of this struggle will set a new benchmark for traditional oil companies balancing shareholder returns with low-carbon transitions.