Over the past five years, BP has attempted to make a bold move to transform itself from a traditional oil giant into a company focused on low-carbon energy. Now, the British company is shifting gears again, aiming to revive its status as a major player in oil and gas. The goal? To match the growth of its competitors, lift its stock price, and reassure investors about its future profitability.
BP isn’t alone in this change of heart. Shell and Norway’s Equinor are also stepping back from some of their ambitious energy transition goals laid out earlier in the decade.
Two key factors are driving this reversal. First, the energy shock sparked by Russia’s invasion of Ukraine reshaped the global energy market, making fossil fuels more critical. Second, many renewable projects—especially offshore wind—have seen profits dwindle, largely due to rising costs, supply chain challenges, and technical setbacks.
BP’s CEO, Murray Auchincloss, is now planning to invest billions in new oil and gas projects in regions like the U.S. Gulf Coast and the Middle East. The idea is to boost performance and returns, something investors have been demanding.
At the same time, BP is dialing back its investments in low-carbon ventures. It’s paused work on 18 early-stage hydrogen projects and is looking to sell off wind and solar assets. In fact, the company recently downsized its hydrogen team in London by more than half. While BP declined to comment on these cuts, the shift in focus is clear.
Meanwhile, Shell’s CEO, Wael Sawan, is pushing to close the valuation gap with U.S. rivals ExxonMobil and Chevron. Shell has scaled back its green initiatives, including floating wind and hydrogen projects, and pulled out of power markets in Europe and China. The company has also sold off some refineries and softened its carbon reduction targets for 2030. Shell is even trying to sell Select Carbon, an Australian company specializing in carbon offset projects, reflecting its pullback from the renewables sector.
Yet, this pivot back to oil is raising questions inside these companies. At a recent online town hall, BP employees peppered CEO Auchincloss with questions about whether the company has enough talent and experience left to go back to expanding oil and gas operations, after downsizing its upstream team since 2020. Some employees are worried about a potential skills gap.
Equinor, for its part, has also reconsidered its low-carbon approach. The company is focusing on more developed offshore wind projects and scrapping some early-stage ones as it adapts to market conditions. Equinor said it aims to strengthen its competitiveness to be ready when the industry rebounds.
However, none of these companies are abandoning renewables altogether. Instead, they’re honing in on areas that seem more likely to turn a profit sooner, like biofuels. BP, Shell, and Equinor are still involved in offshore wind projects that are already underway and say they could make further investments if the returns are right. They’re also working on hydrogen initiatives aimed primarily at reducing emissions from their refining processes.
BP’s Auchincloss summarized it well when he said, “We need to expect the same level of returns from our transition growth businesses as we do from our traditional ones if we’re going to invest significantly.”
Interestingly, TotalEnergies of France stands out as the exception among European oil majors. It continues to pour money into low-carbon projects, outpacing Shell and BP in renewables capacity by a considerable margin.
This shift in energy strategy by BP, Shell, and Equinor comes at a time when the world is falling short of meeting the U.N.-backed goal of limiting global warming to 1.5 degrees Celsius, a threshold deemed necessary to prevent catastrophic climate impacts. With more spending funneled into fossil fuels, it seems likely that many emission reduction targets will be missed or revised downward.
At the same time, the outlook for fossil fuels is becoming increasingly murky. The International Energy Agency recently forecasted that global oil demand will peak by the end of the decade, driven by the rise of electric vehicles. Despite the renewed focus on oil, many investors remain wary of the European giants’ ability to sustain their profits, especially compared to their U.S. counterparts.
“To make transition plans stick, companies need the right incentives for management, a clear mandate from shareholders, and a focus on demonstrating value,” said Rohan Bowater, an analyst at Accela Research. “BP, for instance, is still caught in the middle—struggling to balance low-carbon investments with the expectations of shareholders.”
