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The chief executive of BP has admitted the company “went too far, too fast” in its shift to net zero, adding a decision to cut spending on oil and gas was “misplaced”.
As part of an update to investors, Murray Auchincloss said the company’s net zero strategy had been overtaken by events including the coronavirus pandemic, the Ukraine war and changes in government policies.
He said: “In 2020 we made some bold strategic changes, accelerating into the energy transition while progressively reducing our hydrocarbon business. We then saw Covid, the war in Ukraine, a recession, and the shift in attitudes of markets and governments had a fundamental impact on the energy system.
“Pressure on budgets meant that lower cost energy won out in most nations, and the pace of transition and decarbonisation, while important, was not as fast as envisioned, and energy demand continues to rise.
“Our optimism for a fast transition was misplaced, and we went too far, too fast.”
His comments came as BP said it would increase its oil and gas investment to $10bn (£7.9bn) a year as part of a net zero “reset” that involves the company slashing spending on renewables.
BP said it would slash renewables investment to between $1.5bn and $2bn a year, which is $5bn lower than was previously earmarked.
It also cast off commitments to reduce oil and gas production and vowed to increase investment in fossil fuels to $10bn per year until at least 2027, representing a 20pc increase.
At least 10 major projects are due to come online by that year, BP said, in addition to another eight by 2030.
The strategy about-turn was announced after pressure from activist investor Elliott Management to sell off green energy assets and focus on more profitable fossil fuels.
Previously the company had pledged to reduce output to 2m barrels of oil per day, but on Wednesday said it would target up to 2.5m barrels per day this decade – with an option to go higher by 2035.
It is also plotting asset sales worth $20bn by 2027.
Helge Lund, BP’s chairman, added: “Over the past 12 months, we have worked closely with Murray and his team as they have developed the new direction, ensuring it reflects the significant changes we have seen in energy markets and our purpose of delivering energy to the world today and tomorrow.
“This new direction places free cash flow growth, returns and value at its heart.”
Shares in BP fell by as much as 2.2pc following the update.
Shift driven by rivals’ stronger share performances
BP’s retreat from green energy investment marks a dramatic shift from the strategy announced under former boss Bernard Looney in 2020. He was ousted in 2023 after failing to disclose personal relationships with colleagues.