BP has announced it is to reduce its spending on renewables by $5bn per year, including growing top tier offshore wind and solar platforms in a “capital light way”.
The move forms part of the oil and gas giant’s “fundamental reset strategy” which will see total capex in transition businesses now set at US$1.5–2bn per year, with average annual spend of less than $0.8bn in low carbon energy.
There will also be limited limited further projects in hydrogen and carbon capture.
The turnaround is reportedly coming amid investor concerns over earnings, with BP’s shares underperforming its rivals in recent years.
The company had planned to have 50GW of renewable generating capacity by 2030 and was building a diversified renewable portfolio.
Chief executive Murray Auchincloss said: “Today we have fundamentally reset BP’s strategy.
“We are reducing and reallocating capital expenditure to our 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.”
However, the move could have several legal and regulatory implications.
Vicki Chilton, partner in the energy & infrastructure team at law firm Birketts, said: “The company may face increased scrutiny from environmental groups and governments concerned about its environmental impact.
“This scrutiny could lead to potential legal challenges and regulatory pressures aimed at ensuring BP meets its climate commitments.
“Additionally, BP’s reversal on its energy transition commitments might attract regulatory attention, especially if it conflicts with national and international climate goals.
“The UK government and regulatory bodies like Ofgem are dedicated to achieving renewable energy targets, and any significant deviation by major players like BP could prompt regulatory responses to ensure progress towards these goals.
“Overall, while BP’s decision is driven by investor pressure and financial considerations, it is likely to face legal and regulatory challenges as it navigates the complex landscape of energy transition and climate commitments.”