BP insists it is not slowing green transition to cash in on high oil prices

The boss of BP’s US business has insisted that the company is sticking with its promised transition away from fossil fuels even though it plans an aggressive oil output increase in the country and is slowing down its planned production cuts elsewhere.

BP announced a scaling back of its climate goals last month as it unveiled record annual profits in 2022 after oil prices surged following Russia’s invasion of Ukraine.

The company’s target to slash oil output by 40 per cent by 2030 — a strategy announced amid a historic oil price crash in 2020 — was reduced to 25 per cent.

The move prompted dismay among some climate campaigners but sent share prices sharply higher as investors welcomed what some thought was a renewed focus on higher margin fossil fuels.

Dave Lawler, chair of BP America, said notions that the company was shifting tack again were mistaken.

“The strategy has not changed at all,” Lawler told the Financial Times in Denver. “There are different opinions on what it means or doesn’t mean, but it has not changed.”

Lawler’s comments come as European supermajors such as BP and Shell try to build profitable clean-energy businesses while also facing political pressure to pump more oil to cool prices.

The BP executive was among Big Oil bosses excoriated in Congress last year by Democratic politicians who accused the companies of war profiteering amid a run-up in US petrol prices after Russia’s invasion of Ukraine.

BP and Shell are also trying to close a valuation gap with ExxonMobil and Chevron, US rivals that have remained focused on oil and ruled out the kind of investments in renewable energy made by European supermajors.

As well as paring back its plan to cut oil output, BP also said capital investments to 2030 could increase by up to $16bn more than previously planned, representing up to $8bn more in both oil and gas and in its energy transition businesses. The changes mean that BP’s emissions will fall more slowly than planned by 2030.

The US will be a crucial growth engine, especially in oil and gas, with targets for offshore Gulf of Mexico output to rise by almost 50 per cent to 400,000 barrels a day by the “mid-2020s” and onshore shale to increase by 30 to 40 per cent, to as much as 450,000 b/d by 2025.

The oil production growth targets are among the most aggressive in the industry.

But Lawler played down the impact, saying that the company would not be distracted from its energy transition plans.

“What we’re going to do is invest additional dollars here, so it will come up some, and we will hold on to some assets globally longer than expected, but then those will be sold,” he said.

“It’s just an adjustment for where the world is right now,” Lawler added, referring to the energy crisis sparked by the war in Ukraine.

But climate campaigners are disappointed by what they consider to be a significant shift in the company’s strategy. Mark van Baal, head of Follow This, an activist shareholder that has taken small stakes in Big Oil, said BP had “backtracked” on its emissions plan and could no longer claim to be aligned with the Paris climate deal.

Equity analysts have, however, welcomed what JPMorgan described as a “pivot”. The company’s “strategic shift to lean harder into the hydrocarbon business” was aligned with the bank’s own assumptions about rising oil prices, its analysts wrote. Analysts at Cowen also welcomed BP’s “course correction”.

The UK supermajor’s plan to raise shale production will also be welcomed by the White House, which has repeatedly urged drillers to increase supply in recent months.

BP says it is also reducing the carbon impact of its US shale operations by electrifying its fracking activities and eliminating flaring, and has backed federal rules to crack down on methane pollution in the sector.

Lawler said he was “really excited” about the Biden administration’s Inflation Reduction Act, which includes billions of dollars of tax credits for clean energy.

BP recently spent $4.1bn buying renewable natural gas producer Archaea Energy, and its US business includes offshore wind and solar projects. Lawler said BP was also now exploring green hydrogen prospects and planned to use the fuel to “begin decarbonising” its two US refineries.

Shareholders would need patience, however, as they waited “several years” for such investments to pay off, Lawler acknowledged.

“We’re not going to deviate from our strategy,” Lawler said. “We’re not a renewables company. We’re not an oil and gas company. It’s an integrated company that will provide energy for the transition.”