President Trump’s “drill, baby, drill” policies, Europe’s de-industrialization due to its “net-zero” climate policies, high energy prices, and investor dissatisfaction have resulted in foreign oil and gas companies changing their priorities. BP has announced it will cut its renewable energy investments and instead focus on increasing oil and gas production to increase cash flow. It plans to expand its production to between 2.3 million and 2.5 million barrels of oil per day by 2030, about 60% higher than the figure in its net-zero plan from five years ago, with hopes of “major” oil and gas projects starting by the end of 2027. BP intends to increase its investments in oil and gas by about 20% to $10 billion a year through 2027, while decreasing previously planned funding for renewable energy by more than $5 billion. It says it will be “very selective” in investing in businesses working on the energy transition and renewables, with funding reduced to between $1.5 billion and $2 billion annually.
BP’s chief executive will scrap a target to increase renewable generation 20-fold to 50 gigawatts by 2030, returning the focus to fossil fuels. The company has 8.2 gigawatts of renewable generation capacity, and in 2019, its net wind generation capacity reached 926 megawatts. The company will also divest assets and cut other low-carbon investments to reduce debt and increase returns. BP had pledged in 2020 to cut oil and gas output by 40% while rapidly growing renewables by 2030. It had lowered the oil and gas reduction target to 25% in 2023.
BP intends to sell about $20 billion of assets by the end of 2027, possibly including its Castrol lubricants business, its network of service stations, and the solar power developer Lightsource BP, helping to bring net debt down to $14 billion to $18 billion, compared with almost $23 billion at the end of last year. Its goal is to increase cash flow by more than 20% a year to 2027. Last June, BP announced it was scaling back plans for developing new sustainable aviation fuel (SAF) and renewable diesel biofuels projects at its existing sites. It also paused planning for two potential projects while continuing to assess three. SAF is being pushed by governments but rejected by airlines, as it can cost as much as 5 times as much as regular jet fuel.
Other European Oil and Gas Company Plans
Oil and gas companies have changed their strategy as profits from oil and gas have increased due to increasing prices that followed low prices during the Covid lockdowns. Shell and Norwegian based Equinor have also scaled back plans to invest in renewable energy. In the summer of 2023, Shell announced its new strategy to continue investing in oil and gas production and selectively invest capital in renewable energy. Due to weak market conditions, it paused on-site construction work at an 820,000 tons-a-year biofuels plant at the Shell Energy and Chemicals Park Rotterdam in the Netherlands. It took a $780-million impairment charge for the second quarter of 2024. Shell has also sold its retail home energy businesses in the UK and Germany. While it still reaffirmed its ambitions to be a net-zero energy business by 2050, Shell eased its carbon intensity target for 2030 as it has shifted away from green power sales to retail customers.
Equinor will nearly halve its investments in renewable energy and low carbon technologies to around $5 billion in total after project financing for 2025-2027. The Norwegian major, which dropped ‘oil’ from its previous name (Statoil) and rebranded to Equinor seven years ago when it was intending to pursue more investments in renewables, acknowledged that market conditions in the renewable energy sector have changed and the energy transition is going forward with an uncertain and uneven pace, largely due to inflation, interest rates, supply chain issues, and regulatory uncertainty. Equinor has also lowered its capacity target for renewables to 10 to 12 gigawatts by 2030, down from a previous target of 12 to 16 gigawatts, and is introducing a range for its net carbon intensity reductions. Instead, it will increase its oil and gas production between 2024 and 2027 by more than 10%. For years, Equinor’s renewables division has posted losses. Equinor has a 10% stake in Ørsted, the world’s biggest offshore wind farm developer, making it Ørsted’s second-largest shareholder after the Danish government.
France’s TotalEnergies is the outlier in the group, as it has continued to focus on growing renewable energy capacity and power generation through acquisitions and joint ventures globally.
Conclusion
BP has reset its operating strategy to increase investment in its upstream business, raise oil and gas production, and reduce spending on low-carbon energy technologies. BP’s boss said: “Our optimism for a fast [energy] transition was misplaced, and we went too far, too fast.” BP is not the only major European oil and gas company that has scaled back renewable investments amid poor returns and mounting losses and increased investment in oil and gas, as Shell and Equinor have done. European energy companies operate at a disadvantage to their peers in other parts of the world since their governments are so wedded to the politics of “net-zero” and pleasing the demands of the United Nations and the Paris Accords. President Trump’s withdrawal from the Paris Accord and his promise to make America energy dominant by encouraging the development of the nation’s massive resource wealth may be having a positive effect on others around the globe who have grown tired of being told people must live in diminished circumstances with inferior sources of energy.
