BP has sharply cut its investment in renewable energy and plans to increase annual oil and gas spending to $10 Bn, reported Al Jazeera.
Out of this, 70% will be invested in oil and 30% in gas, with the goal of launching at least ten major oil and gas projects by 2027 and another eight by 2030.
This shift in strategy, put forward by its Chief Executive Officer, Murray Auchincloss, marks the abandonment of BP’s 2020 plan to become a net zero energy company.
According to The Guardian, Auchincloss was progressively reducing hydrocarbon business until the combined effects of the Covid-19 pandemic, the war in Ukraine, the recession and changes in market and government attitudes impacted their energy system.
The decision has reportedly faced backlash from environmental campaigners.
Reasons Behind Shift
According to The Guardian, investors have pressurised BP to abandon its green ambitions after the company’s share price slumped by a quarter in the past two years, while the market value of rival oil companies climbed.
Auchincloss, BP’s former finance chief, admitted that the company’s confidence in the green energy transition had been “misplaced” and that the company had gone “too far, too fast” in recent years.
The company faced three major obstacles, as reported by The Guardian. First, a post-Covid bottleneck in global supply chains coupled with the recent increase in interest rates has made green energy investments more expensive. Second, due to recent surge in global oil and gas prices, production of fossil fuels has become more profitable. Third, the activist hedge fund Elliott Management has acquired a significant stake in BP, which could push it to make drastic changes to restore its lost value – including a potential breakup of the company and a boardroom cull.
BP is not alone in scaling back its clean energy objectives. British rival Shell and other oil majors have also reportedly retreated from their renewable energy goals.
