BP has officially abandoned its 2030 target to significantly cut oil and gas production, marking a notable shift under CEO Murray Auchincloss. This move, according to three sources familiar with the matter, comes as BP refocuses on its core strengths in oil and gas to regain investor confidence after facing criticism over its energy transition strategy.
Back in 2020, BP unveiled one of the most ambitious plans in the energy sector, pledging to reduce its oil and gas output by 40% by the end of the decade while ramping up investment in renewable energy. However, in February 2022, that goal was scaled back to a 25% reduction, reflecting a shift in investor priorities, which increasingly favored immediate returns over long-term investments in the energy transition. Now, it seems BP is pulling back even further, opting to boost production through new investments in key regions like the Middle East and the Gulf of Mexico.
Auchincloss, who took over as CEO in January, has been trying to stem BP’s lagging share performance, which has underperformed compared to its peers this year. Investors are questioning whether BP can maintain profitability under its current strategy, and Auchincloss appears to be taking decisive steps to address those concerns by prioritizing oil and gas investments. The 54-year-old Canadian, who previously served as BP’s chief financial officer, is keen to set himself apart from his predecessor, Bernard Looney. Looney, who had focused heavily on renewables, was ousted amid a scandal involving inappropriate relationships with colleagues.
2050 IS THE NEW 2030
Auchincloss has reiterated that while BP remains committed to achieving net-zero emissions by 2050, the company’s approach will be “simpler, more focused, and higher value.” This streamlined strategy includes abandoning the 2030 production target, though it’s expected that Auchincloss will officially outline these changes at an investor day scheduled for February.
This strategic pivot is not unique to BP. Shell, another major player in the energy sector, has also scaled back its transition plans since its new CEO, Wael Sawan, took over earlier this year. Like BP, Shell has moved to reduce its investments in renewables, including selling off parts of its power and renewable businesses, and scaling down projects in offshore wind, biofuels, and hydrogen.
The shift at both companies comes against the backdrop of heightened concerns over energy security in Europe, especially in the wake of Russia’s invasion of Ukraine. The war caused energy prices to spike, leading European governments and companies to rethink their energy strategies and emphasize short-term security over long-term sustainability.
Despite investing billions in low-carbon technologies and reducing its oil and gas exploration team since 2020, BP has struggled to make its renewables ventures as profitable as hoped. Supply chain disruptions, rising costs, and higher interest rates have all eaten into the returns on these projects. A company insider noted that while rivals continued to invest in oil and gas exploration, BP neglected this area for several years, focusing instead on green energy projects.
BP BACK IN THE MIDDLE EAST
Now, BP appears to be recalibrating, particularly with new projects in the Middle East. The company is reportedly in talks to invest in three projects in Iraq, including the Majnoon field. BP already holds a significant stake in the giant Rumaila oilfield and has been operating in the region for over a century. In addition, BP signed an agreement with Iraq’s government in August to explore the Kirkuk oilfield, which also includes plans for power plants and solar energy capacity.
Notably, these new deals in Iraq are expected to include more favorable profit-sharing agreements, a shift from the razor-thin margins that characterized previous contracts with foreign companies. This move is seen as a bid to make such investments more appealing and profitable for international oil companies.
Beyond the Middle East, BP is also eyeing opportunities in the Gulf of Mexico, where it plans to move forward with the development of the Kaskida and Tiber fields—two large and complex oil reservoirs. In addition, the company is considering expanding its U.S. onshore business by acquiring assets in the Permian shale basin, a prolific region where BP’s existing reserves have grown significantly since its 2019 acquisition of a major stake in the area.
PUMPING THE BRAKES ON RENEWABLES
While Auchincloss is pulling back from certain renewable energy projects—pausing investments in offshore wind and reducing the number of low-carbon hydrogen initiatives—BP remains involved in some clean energy ventures. The company recently acquired full ownership of its solar power joint venture, Lightsource BP, and took a 50% stake in the Brazilian biofuel business, Bunge.
In May, Auchincloss announced a $2 billion cost-saving initiative, to be achieved by 2026, as part of his broader efforts to streamline the company and focus on more immediate returns. These recent moves signal a return to BP’s roots in oil and gas, as Auchincloss seeks to balance profitability with the energy transition, all while navigating a challenging landscape of rising costs and shifting investor priorities.
With BP scaling back its green ambitions and doubling down on oil and gas, Auchincloss has made it clear that his primary focus is on securing near-term returns and steering the company back to profitability, while still keeping one eye on the long-term goal of achieving net-zero emissions by 2050.
