British energy giant BP steps back from clean energy, announcing $10B drilling investments

British energy giant BP announced on Wednesday that it will invest $10 billion per year in natural gas and oil while reducing clean energy investments.

The strategy overhaul comes after a difficult trading year for BP, which is under pressure from investors to boost its share price as countries look to slash emissions.

“We are reducing and reallocating capital expenditure to our highest-returning businesses to drive growth,” chief executive Murray Auchincloss said in a statement ahead of a presentation to investors in London.

“This is a reset BP, with an unwavering focus on growing long-term shareholder value,” he added. To the dismay of environmentalists, the group will cut cleaner energy investment by more than $5 billion annually, while retiring targets on cutting emissions.

BP on Wednesday claimed it had reduced emissions by more than expected. Its carbon-cutting targets, announced in 2020, had stood out at the time as one of the most ambitious in the industry.

Potential sale of Castrol subsidiary

The group will grow oil and gas production up to 2.5 million barrels a day in 2030, in a major pivot away from previous plans to cut the output of fossil fuels.

BP plans to also offload assets worth a total of $20 billion by 2027, including from the potential sale of its Castrol lubricants division. The much-anticipated update comes after BP suffered a 97% slump in net profit last year.

Its profit after tax tumbled to $381 million from $15.2 billion in 2023 in the face of higher costs as well as weaker oil and gas prices. Total revenue dropped 9% to $195 billion.

Auchincloss had already emphasized oil and gas to boost profits, scaling back on the group’s key climate targets since taking the helm at the start of 2024. The energy group has embarked on a plan to find $2 billion in cost savings and recently axed 4,700 staff jobs or around five percent of its workforce.

Oil giants to shift natural gas, leaving clean energy targets

British rival Shell and other oil giants have also cut back on clean energy objectives.

On the eve of BP’s update, TotalEnergies chief executive Patrick Pouyanne said that while oil and gas would continue to be produced, “you need to produce it differently with much lower emissions”.

The head of the French giant was speaking Tuesday at International Energy Week, an annual gathering in London of major players from across the sector.

Shell the same day forecasted global demand for liquefied natural gas (LNG) to rise by about 60% by 2040.

“This demand would be largely driven by economic growth in Asia, emissions reductions in heavy industry and transport as well as the impact of artificial intelligence,” it added.

Gas is being touted by energy companies as cleaner than other fossil fuels as countries around the world strive to reduce their emissions and slow global warming.