bp to ramp up oil and gas investment to $10 billion per year through 2027
bp has announced plans to ramp up its oil and gas investment to $10 billion per year through 2027 as part of a “fundamental strategic reset.”
That number represents an increase of 20% over bp’s previous guidance on its fossil fuel development plans.
The British oil major announced its plans in an investor day presentation at its Capital Markets Update on Feb. 26 in London.
The British oil major also said that it planned to lower its annual capital expenditure to sit within a range of $13 and $15 billion over the same time horizon, while targeting $20 billion in divestments by the end of 2027.
The company also announced that investment in transition businesses would be “significantly lower” over the coming years. The firm said spending is now likely to come in at $1.5 billion to $2 billion per year — a roughly 70% reduction from previous plans, and more than $5 billion per year below the previous guidance.
For a company like bp with a long legacy of fossil-fuel production and distribution, oil and gas now looks more attractive than renewables, say analysts. bp says that it anticipates financial returns of more than 15% over the next few years on its E&P investments.
“Today we have fundamentally reset bp’s strategy,” said bp CEO Murray Auchincloss. “We are reducing and reallocating capital expenditure to our highest-returning businesses to drive growth, and relentlessly pursuing performance improvements and cost efficiency. This is all in service of sustainably growing cash flow and returns.”
Analysts had described bp’s investor day as a pivotal moment for the firm, particularly after it emerged that activist investor Elliot Management had built a stake in the oil major. Elliott wants bp to focus on its most profitable projects, while selling off other businesses to bolster the company’s finances.
At the investor event, bp said that it would conduct what it called a “strategic review” of its Castrol lubricants business, possibly leading to a sale that could raise cash to be returned to investors.
bp’s Auchnicloss, who took the helm on a permanent basis in January last year, is reportedly under significant pressure to reassure investors that the company is on the right track to improve in its financial performance.
The London-listed firm has lagged its industry rivals in recent years, as investors have continued to question the firm’s strategic direction.
Reuters on Monday reported that bp was poised to abandon its target to increase renewable generation 20-fold by 2030, citing two unnamed sources close to the matter.
Five years ago, bp became one of the first energy giants to announce plans to cut emissions to net zero “by 2050 or sooner.” As part of this push, bp pledged to slash emissions by up to 40% by 2030 and to ramp up investment in renewables projects.
The company scaled back this emissions target to 20% to 30% in February 2023, saying at the time that it needed to keep investing in oil and gas to meet global demand.
“We found ourselves in a different place now, where nations are prioritizing affordability, assurance of flow, security of supply,” Auchincloss told analysts at the Capital Markets Update. “The transition just is not being valued as much as it was five years ago.”
