BP is reportedly refocusing toward oil and gas. Current CEO Murray Auchincloss will allegedly update BP’s strategy in February 2025 to remove the target of reducing its oil and gas production by 25 percent by 2030.
In its 2023 update, BP said it plans to retain some upstream assets from which it was previously planning to divest and will increase capital investment in oil and gas by at least $1 billion annually. BP’s capital investment in “low carbon” increased from $0.6 billion to $1.3 billion from 2020–23: a significant jump, but far short of the previous goal of $3–4 billion by 2025. It also divested its onshore U.S. wind business in September.
Additionally, BP has re-energized its exploration activity. In August, the company signed a Memorandum of Understanding with the Iraqi government to investigate redeveloping and exploring the Kirkuk oil and gas fields. It also announced a final investment decision to use 20K technology to develop the Kaskida deepwater oil fields in the Gulf of Mexico and took 10-percent equity in the LNG facility in Abu Dhabi. Finally, BP entered Namibia, obtaining a 42.5-percent stake from Rhino Resources in Namibia in Block 2914A.
BP’s strategic shift is the latest example of a European major reverting back to its core business. The top five leading European international oil companies – Shell, TotalEnergies, BP, Equinor and ENI – have turned back toward oil and gas to varying degrees, moving away from earlier energy transition targets.
Strategic Shifts
When Wael Sawan took Shell’s helm in January 2023, he focused on financial performance. This differs from the approach of his predecessor, Ben Van Beurden, who heavily prioritized sustainability and fossil fuel divestment.
Van Beurden pledged to reduce oil production by 1–2 percent annually, divest $4 billion per year, including upstream assets, achieve net zero by 2050 across scopes 1, 2, and 3 emissions and increase efforts toward CCUS, nature-based solutions and EV-charging stations.
In comparison, Sawan’s new strategy emphasized:
- Maintaining oil production at 1.4 million barrels per day with minimum upstream divestments
- Growing LNG sales by 25–30 percent by 2030, including liquefaction capacity and purchased volumes, to maintain its position as the top IOC for LNG trading
- Aiming to be net zero across scopes 1 and 2 only
- Reducing operating costs by $2–3 billion per year until 2025
Sawan reiterated the company’s previous position of no exploration in new countries after 2025, but Shell did not commit to any specific targets around nature-based solutions and reduced its target EV-charge points from 2.5 million to about 200,000 by 2030.
What’s in a Name?
Majors that had rebranded around Europe’s energy transition are now walking back their renewable-focused strategies. TotalEnergies, Europe’s second-largest IOC, changed its name from Total in 2021, hoping to become a “world-class player in leading the energy transition.” This followed rebranding by DONG, now Orsted, and Statoil, now Equinor.
In September, TotalEnergies’ CEO Patrick Pouyanné said that the French major plans to grow oil and gas production by 3 percent annually. Additionally, Pouyanné aims to grow the company’s LNG business by 50 percent before 2030. TotalEnergies will invest 70 percent of its capital in its oil and gas business to achieve these targets.
Norway-based Equinor is another company that changed its name a few years back. Equinor recently said it would grow oil and gas production by 5 percent annually from 2023–26 and manage gradual decline to roughly 2.0 million barrels of oil equivalent per day by 2030, mainly due to long-term decline in the Norwegian Continental Shelf. It intends to grow in 10 countries, especially Brazil, to boost international production by 15 percent from 2024–30.
Equinor is also exiting renewable projects it deems not commercially viable, while building a portfolio of wind and solar projects in Brazil, Poland, the United Kingdom and the United States. Last month, Equinor made a “counter-cyclic” investment, paying $2.5 billion to acquire a 10-percent share in wind-centric Orsted. Despite sharp drops in Orsted share prices between Q1 2021 and Q3 2023, Equinor views Orsted as an investment opportunity.
Looking for ROIs
Despite breakthrough offshore oil and gas discoveries in Egypt, Ivory Coast and Mexico, ENI’s share price is down 1.5 percent over the past five years (see sidebar). This might have stemmed from its renewable investments. In 2021 and 2022, ENI planned to spin off its renewable business via an IPO. Instead, it dedicated several subsidiaries to addressing downstream and customer-facing lines of business, as well as renewable energy.
In its 2024 strategic update, ENI announced plans to increase its oil and gas production by 3–4 percent annually. It also intends to devote 40 percent of its capital expenditure from 2023–27 to growing its gas and LNG business, almost twice as much as its investment in upstream oil. This strategy may help share prices recover.
So, what could be fueling these shifts toward oil and gas after years of deep investment in renewables?
First, European majors’ share prices have underperformed compared to American majors. The average share price change for the top five European IOCs since 2019 is 14.5 percent, versus 59.7 percent for American majors. TotalEnergies and Equinor shares have performed better than their European peers, partly because of their relatively less aggressive energy transition targets. American companies have stuck with oil and gas, committing to low-carbon efforts to a much lesser degree. The war in Ukraine also amplified the need for energy security.
In the long run, all European majors are still committed to achieving net zero by 2050, at least for scope 1 and 2 emissions. For now, though, they seem to have returned to oil and especially gas as the world continues to find the right balance and pace for the energy transition.