UK’s bp to Invest Billions in Its O&G Business

Confirming a significant shift in its strategy, the UK’s oil major bp on Wednesday said that it will be cutting its renewable energy investments and increase oil and gas production to by 2.3–2.5 mmboed in 2030 by pumping $10 billion per year.

This strategy will see bp grow its upstream oil and gas business, focus its downstream business, and invest with increasing discipline into the transition.

It will also build on bp’s distinct strengths and competitive advantages as an integrated energy company – with a world-class portfolio with top tier oil and gas businesses in attractive basins and leading integrated positions and brands across value chains, all underpinned by trading, technology, and partnerships.

The move is part of the efforts of bp CEO Murray Auchincloss to reduce and reallocate capital expenditure, significantly bring down costs and drive improved performance to grow cash flow and returns besides supporting a stronger balance sheet and resilient distributions.

The company will reduce the energy transition investments between $1.5 billion and –$2 billion a year, over $5 billion per annum lower than previous guidance. There will be selective investment in biogas, biofuels and EV charging, capital-light partnerships in renewables and focused investment in hydrogen/CCS, BP said.

The company also said it was It will be reducing annual capex from $13 billion to $15 billion to 2027 targeting significantly higher structural cost reductions of $4 billion to $5 billion by 2027 and was also reviewing its lubricants business, Castrol, and targeting $20 billion in divestments by 2027.

Resetting Strategy                     

Auchincloss said that they have fundamentally reset bp’s strategy by reducing and reallocating capital expenditure to the company’s 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.

“We will grow upstream investment and production to allow us to produce high margin energy for years to come. We will focus our downstream on markets where we have leading integrated positions. And we will be very selective in our investment in the transition, including through innovative capital-light platforms. This is a reset bp, with an unwavering focus on growing long-term shareholder value,” he added.

Helge Lund, bp’s chair, said that they believe this is an important strategic reset and was confident that the strategy, together with rigorous performance management, will deliver improved performance and sustainable value for bp’s shareholders.

“Over the past 12 months, we have worked closely with Murray and his team as they have developed the new direction, ensuring it reflects the significant changes we have seen in energy markets and our purpose of delivering energy to the world today and tomorrow. This new direction places free cash flow growth, returns and value at its heart,” Lund added.

The company also said that the share buybacks are expected to be announced at time of quarterly results, subject to board approval, bp expects the share buyback for Q1 of 2025 to be $750 million to $1 billion.