BP has made a strategic decision to halt new offshore wind projects and implement a hiring freeze in its renewable energy division.
- The shift is driven by new CEO Auchincloss’s pragmatic approach to enhance profitability and immediate returns.
- Investor concerns over the profitability of BP’s renewable energy ventures have influenced this strategic refocus.
- BP remains committed to investing in biofuels and other low-carbon ventures that promise quicker returns.
- The decision has stirred controversy among climate activists advocating for BP’s transition to cleaner energy.
Auchincloss recently took over leadership and aims to reduce investments in large-scale, low-carbon projects like offshore wind, favouring ventures that promise immediate returns. He contrasts with his predecessor, Bernard Looney, who had begun shifting the company away from fossil fuels before resigning last autumn due to personal scandals.
The redirection to fossil fuels stems from investor concerns regarding the profitability of BP’s renewable energy ventures. This concern has escalated as oil and gas profits surged following the global economic recovery from the pandemic and geopolitical tensions triggered by Russia’s invasion of Ukraine.
Internal sources reveal that both Auchincloss and CFO Kate Thomson are prioritizing investments in existing oil and gas operations, particularly in the Gulf of Mexico and US onshore shale basins. These investments are expected to yield quicker returns compared to the long-term investments required for offshore wind projects.
Nevertheless, BP remains open to investing in biofuels and other low-carbon ventures that can offer faster returns. Recently, BP agreed to purchase a 50% stake in a Brazilian sugar and ethanol joint venture from grain trader Bunge for $1.4 billion (£1.1 billion).
Despite these strategic changes, BP is anticipated to execute some job cuts within its renewables sector, although specific targets for these cuts have not been disclosed. A company-wide hiring freeze has also been implemented, exempting essential frontline and safety personnel.
Since assuming his role, Auchincloss has emphasised a pragmatic approach, which includes a $2 billion cost-saving drive by the end of 2026 and a streamlined executive leadership team. BP’s statement to Reuters highlighted six priorities set by Auchincloss, designed to make BP a ‘simpler, more focused and higher value company.’ These priorities focus on enhancing efficiencies and advancing BP’s growth projects.
The company’s shares have underperformed in recent months, which has led to speculation about potential takeover bids and increased pressure on Auchincloss to balance the need for decarbonisation with the immediate demand for fossil fuels. In 2023, BP allocated $2.5 billion to renewables, hydrogen, electric car charging, and biofuels out of a total investment budget of $16 billion. However, BP remains the only major oil company with explicit targets to reduce its oil and gas production.
The decision to halt offshore wind projects is likely to provoke backlash from climate activists who have long campaigned for BP’s transition to clean energy. As the company navigates these complex dynamics, the actions of Auchincloss will be closely monitored by both investors and environmental advocates.
BP’s shift in focus under new leadership underscores the tension between profitability and environmental responsibility, closely watched by stakeholders across the spectrum.
