BP changes course by increasing fossil fuel investments while cutting back on renewable energy

BP announced on Wednesday that it would increase its annual oil and natural gas investment by $10 billion. This will return the focus to fossil-fuels as part of Murray Auchincloss’ efforts to improve financial performance and boost returns.

The oil giant has slashed its planned annual investment into transition businesses by over $5 billion compared to the previous forecast. It now expects to invest between $1.5 and $2 billion annually.

"We will increase upstream production and investment to enable us to continue producing high-margin energy for many years. We will concentrate our downstream efforts on markets in which we hold leading integrated positions," Auchincloss stated in a press release.

BP's predecessor Bernard Looney pledged to reduce oil and gas production by 40% in 2020, while rapidly increasing renewables by 2030. BP lowered its reduction target in 2023 to 25%.

BP aims to increase production in 2030 to 2.3 to 2.5 million barrels equivalent to oil per day.

In the energy sector, companies have shifted to a more conservative position to reduce carbon emissions. They have also shifted to a focus on oil and gas because the returns are easier now that fossil fuels have recovered from their COVID-19 lows. "We will invest in the transition with great care, using innovative capital-light platforms. "This is a reset BP with an unwavering commitment to growing shareholder value over the long term," Auchincloss said.

BP is making strategic changes to regain investor trust after it underperformed its peers. Meanwhile, activist investor Elliott Investment Management has increased their stake in the company. This added pressure on BP to make radical changes.

(Reporting by Arunima Kumar in Bengaluru; Editing by Sriraj Kalluvila and Emelia Sithole-Matarise) Arunima Kumar in Bengaluru, Sriraj Kalluvila, and Emelia Sithole Matarise edited the report.

(source: Reuters)