BP cuts carbon neutrality targets to boost profitability

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Shortly after Shell, another British oil giant will “significantly” reduce its investments in renewable energy. Keen to replenish cash and boost profitability after a sharp drop in profits in the first half of 2024, British Petroleum (BP) is shelving its carbon neutrality plan, presented in 2020, to respond to economic pressures such as its lag behind its American competitors in the oil market and, above all, shareholder dividends. 

In February 2020, BP unveiled a plan deemed ambitious, aiming for carbon neutrality by 2050 or earlier. It was a question of a 50% reduction in the carbon intensity of products sold, carbon neutrality for all BP operations, and a 50% reduction in methane emissions. The company also mentioned increased investments in low-emission activities, while promising to maintain its financial performance throughout this transformation. 

Green transition sacrificed on the altar of profitability 

The oil giant reiterated its commitments at the beginning of the current year, when announcing its 2023 financial results. It recorded a positive net result of 15.2 billion dollars after a 2022 marked by a net loss of 2.5 billion. Its CEO, Murray Auchincloss, declared his intention to continue the plan established by his predecessor, Bernard Looney, as well as the company's desire to move from an “international oil company to an integrated energy company”.

This result was mainly explained by BP's exit from the Russian oil giant Rosneft after the invasion of Ukraine, since profit excluding exceptional items, i.e. ordinary operating activity, fell by half to 13.8 billion dollars. BP then said it was suffering from “declining refining margins and declining oil sales performance.” 

The situation was confirmed in July 2024 with the announcement of quarterly results, which showed a sharp drop in net profit, with a fall of 79% to $2.1 billion. Turnover also fell by 8%, reaching $98 billion. 

The results have sparked discontent among investors and shareholders, who are putting pressure on BP. The plan launched under Bernad Looney “has not won the support of shareholders,” explains an analyst. The current CEO “is therefore looking for ways to increase shareholder returns” with projects with high returns on investment, which is not the case for wind power in sea, he continues. 

On Monday, the British oil giant announced its decision to “significantly” reduce its investments in renewable energy to boost its profitability. This decision was announced precisely during the creation of a joint venture with the Japanese energy company Jera, which is merging its offshore wind activities with BP.  

Before BP, Shell, ExxonMobil and TotalEnergies   

A change in strategy that involves a reduction in BP's direct investments in renewable energies, particularly wind power. These were planned at around $10 billion but have now fallen to only $3.25 billion. This backpedaling had been under scrutiny for months since BP had already announced in February 2023 the reduction of its objectives.  

The reduction in its gas and oil production will ultimately be around 25% in 2023 (compared to 2019) and not 40%. Which was still considered “irrational” by some shareholders, such as the Bluebell fund. The 2024 annual results, which will be published next February, will be just as closely scrutinized by investors, who expect a further decline in BP's commitments to the green transition.  

The British giant is not alone in slowing down its climate targets, either in the UK or elsewhere. In March 2024, its rival Shell reconsidered its climate strategy by revising downwards its emissions reduction targets. The group is now aiming for a 15 to 20% reduction in the net carbon intensity of its energy products sold by 2030 compared to 2016, compared to a previous target of 20%. Shell also abandoned its target of a 45% reduction by 2035, citing uncertainty over the pace of the energy transition. At the same time, the company has sold its renewable energy activities and abandoned some offshore wind, biofuel and hydrogen projects.  

At the end of October, TotalEnergies announced an increase in its oil and gas production until 2020. In the United States, ExxonMobil is counting on virtually unchanged oil demand in 2050 compared to current levels.

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