BP’s Shifting Strategy: A Tale of Two Visions

A Historic Pledge: Bernard Looney’s Vision for a Sustainable Future

Five years ago, Bernard Looney, then-CEO of BP, made a bold announcement that stunned the oil and gas industry. Standing beneath the slogan "reimagine," Looney declared that BP would transform into a very different kind of energy company. This was no small shift for a corporation that had started as the Anglo-Persian Oil Company in 1909. Looney’s vision included reducing oil and gas production, investing heavily in renewable energy, and even leaving some fossil fuel assets untouched. His ultimate goal was to make BP net-zero by 2050, aligning with global efforts to combat climate change. This ambitious plan was not just about environmental altruism; it also reflected a strategic bet on the growing demand for cleaner energy sources and the potential profits they could generate.

The rocky road to a greener future

Despite the optimism surrounding Looney’s announcement, challenges emerged. The COVID-19 pandemic, which began just as Looney unveiled his strategy, initially seemed to support his vision. With global travel grinding to a halt and energy demand plummeting, the shift toward renewables appeared timely. However, questions lingered about BP’s ability to maintain its dividend payments, which are crucial for attracting investors. Over time, it became clear that the transition was not as smooth as hoped. The Russian invasion of Ukraine in 2022 sent energy prices soaring, bringing a windfall for oil and gas companies but casting doubt on the profitability of renewable investments. BP’s profits reached $13.8 billion, but its performance paled in comparison to competitors like Shell. The company’s share price struggled, and its debt grew as it borrowed to fund renewable projects, while its rivalsEnjoyed the benefits of higher oil prices.

A Shift in Leadership and Strategy: Murray Auchincloss Takes the Helm

By 2023, the tide had turned. Bernard Looney was ousted, reportedly due to concerns over his charismatic leadership style and undisclosed relationships with employees. His successor, Murray Auchincloss, inherited a company facing significant headwinds. Under pressure from activist investors like Elliott Management, which had acquired a 5% stake in BP, Auchincloss reassessed Looney’s strategy. In a stark reversal, he announced that BP would pivot back to its core oil and gas business. The new CEO acknowledged that the optimistic timeline for transitioning to renewable energy had been unrealistic, given the disruptions caused by COVID, the war in Ukraine, and shifting market attitudes.

Back to Basics: BP’s Return to Petroleum

Auchincloss’s strategy was clear: BP would increase oil production, bringing it nearly back to 2019 levels, and focus its capital investments on extraction, with 75% allocated to upstream operations and less than 5% dedicated to renewables. The CEO argued that oil and gas would remain in strong demand until at least 2035, and his priority was to maximize shareholder value. The new slogan, "Growing shareholder value," reflected this shift in focus. For Auchincloss, the decision was pragmatic: doubling down on what BP does best while the world continues to rely on fossil fuels.

Divided Opinions and Uncertain Futures

Not everyone was convinced by Auchincloss’s new direction. A group of 48 UK investors called for a vote on the strategy, and the UK Sustainable Investment and Finance Association criticized the move as a step backward. They warned that BP risked being left with "stranded assets" as the world inevitably transitions to low-carbon energy. These concerns were amplified by a report from the UK Climate Change Committee, which predicted that electric vehicles would dominate by the 2040s, rendering petrol stations obsolete. Critics argue that BP’s retreat from renewables could harm its long-term viability and leave it lagging behind in the global energy transition.

The Road Ahead: Balancing Profits and Sustainability

As BP navigates this pivotal moment, the debate over its strategy highlights the broader challenges facing the energy industry. Can companies like BP balance short-term shareholder demands with the need to address climate change? The answer remains unclear. While Auchincloss bets on oil and gas as the safe choice for now, the growing urgency of the climate crisis and technological advancements in renewables suggest that the transition to cleaner energy is inevitable. Whether BP can adapt and thrive in this evolving landscape remains to be seen. For now, the company is placing its bets on the past, hoping that its familiarity with fossil fuels will carry it through an uncertain future.