2024-12-11 08:45:00
Shortly after Shell, another British hydrocarbon giant will “significantly” reduce its investments in renewable energy. Eager to rebuild cash flow and boost profitability after a sharp decline in profits in the first half of 2024, British Petroleum (BP) is shelving its carbon neutrality plan, unveiled in 2020, to respond to economic pressures such as delay in visibility. compared to American competitors on the oil market and, above all, to shareholder dividends.
In February 2020, BP unveiled a plan considered ambitious that aims for carbon neutrality by 2050 or earlier. There was talk 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 investment in low-carbon activities, while promising to maintain its financial performance during this transformation.
The green transition sacrificed on the altar of profitability
The oil giant reiterated its commitments at the beginning of the current year, announcing the results of the 2023 financial year. 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, later declared his intention to carry forward the plan established by his predecessor, Bernard Looney, as well as the company’s desire to transition from “an international oil company to an integrated energy company”.
This result is explained above all by BP’s exit from the Russian oil giant Rosneft after the invasion of Ukraine, since the profit net of extraordinary components, i.e. ordinary operating activities, halved 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 decline in net profit, with a decline of 79%, to $2.1 billion. Revenue also fell 8% to $98 billion.
The findings sparked discontent among investors and shareholders, who put pressure on BP. The plan launched by Bernad Looney “did not obtain the support of shareholders”, explains an analyst. The current CEO is “looking for ways to increase shareholder returns” with projects with high returns on investment, which is not the case with offshore wind energy, he continues.
The British hydrocarbon giant announced on Monday its decision to “significantly” reduce its investments in renewable energy to boost its profitability. This decision was announced on the occasion of the creation of a joint venture with the Japanese energy company Jera, which is merging its offshore wind assets with BP.
Avant BP, Shell, ExxonMobil and TotalEnergies
A change in strategy that involves reducing BP’s direct investments in renewable energy, particularly wind power. The expected amount was around $10 billion, but has now risen to just $3.25 billion. This backtracking had been under scrutiny for months since BP had already announced in February 2023 the reduction of its targets.
The reduction in oil and gas 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. Its 2024 annual results, due to be released next February, will be equally scrutinized by investors, who expect a further decline in BP’s green transition commitments.
The British giant is not the only one to slow down its climate goals, neither in the United Kingdom nor elsewhere. In March 2024, its competitor Shell reconsidered its climate strategy by revising its emissions reduction targets downwards. The group now aims to reduce the net carbon intensity of its energy products sold by 15-20% by 2030 compared to 2016, compared to a previous target of 20%. Shell also abandoned its 45% reduction target by 2035, citing uncertainty over the pace of the energy transition. At the same time, the company has sold renewable energy assets and abandoned some offshore wind, biofuels and hydrogen projects.
At the end of October TotalEnergies announced an increase in oil and gas production through 2020. In the United States, ExxonMobil expects oil demand to remain almost unchanged from current levels in 2050.
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