Murray Auchincloss CEO of BPspeaking at the 2024 CERAWeek by S&P Global.
British oil giant BP continued efforts to adjust its business plans to make itself more competitive with peer companies Monday, announcing it will abandon a goal of reducing its equity oil production by 2030. Originally set in 2020 at a 40% reduction by former CEO Bernard Looney, current BP management led by CEO Murray Auchincloss had reduced the goal in January to a 25% target.
Reuters quotes a company spokesperson as saying Monday the company’s overall goal of reaching net zero carbon emissions by 2050 remains unchanged despite the elimination of this near-term target. “As Murray said at the start of year… the direction is the same – but we are going to deliver as a simpler, more focused, and higher value company,” the spokesperson said.
The elimination of the targeted production cuts follows a series of moves invoked by Auchincloss earlier in 2024 designed to dedicate a larger percentage of the company’s capital allocation on its core oil and gas business ventures. In July, Auchincloss imposed a hiring freeze and pause in new investments in the company’s wind energy business unit, reversing Looney’s strategy of aggressively investing in both onshore and offshore wind projects as a key part of the plan to replace lost revenues from cuts in oil production and to meet the company’s net zero goals.
Auchincloss followed that step with an even more aggressive move in September, announcing plans to completely divest BP’s suite of US onshore wind projects. BP currently owns 10 onshore wind operations through its subsidiary BP Wind Energy. At the same time, Auchincloss detailed plans to acquire full ownership of Lightsource BP, a solar-focused joint venture in which it owns 50%. The plan there would be add some wind development to the Lightsource BP portfolio.
In making these and other moves designed to make itself more competitive through a refocus on its core oil and gas business, BP aligns itself with similar strategic moves made over the last two years by US majors ExxonMobil and Chevron, as well as fellow British major Shell. It all follows a move to prioritize energy security over ESG goals, a general industry theme that emerged early in 2023.
To no one’s real surprise, reaction to BP’s latest move from the anti-fossil fuel activist community was swift and aggressive. The Guardian quotes Greenpeace UK senior climate campaigner Philip Evans as saying, “This is yet further proof that we cannot leave the future of our planet in the hands of fossil fuel bosses. It’s clear that BP CEO Murray Auchincloss is hell-bent on prioritising company profits and shareholder wealth above all else as extreme floods and wildfires rack up billions of dollars in damages, destroying homes and lives all over the world. Oil companies cannot be trusted to curtail their further destruction of the planet.”
James Alexander, CEO of the UK Sustainable Investment and Finance Association, was less bombastic, accusing oil majors like BP of failing to “invest enough” in intermittent energy sources preferred by fossil fuel opponents. Alexander didn’t define exactly what would, in his view, amount to “enough” in such less profitable investments by BP or its industry peers, but he did add that, “The transition will not wait for them. The gap they have left is already being filled by renewables companies.”
Well, yes. Exactly so. After all, BP, ExxonMobil, Chevron, Shell and all the other major oil companies are exactly that: Oil companies. They have always been oil companies, and the core competencies of their corporate cultures are [smartly] focused on maximizing profits from their oil-related core business.
The conceit of this government policy-forced transition and the ESG mentality that pervades it has to this point been that these oil companies would simply be able to somehow transform themselves into renewable energy companies, as if by magic. Often lost in that discussion, though, is the fact that these are all corporations, and corporations exist for one reason: To maximize profits to be returned to their investors.
It is important to not lose sight of the fact that, for management at these corporations, a focus on maximizing profits and returns to investors is not just a goal, it is a fiduciary duty under the law.
Auchincloss and his current management team at BP have determined that the best way to fulfill that duty is to increase focus on what has always been the company’s core business since its founding as British Petroleum in 1908. The only wonder here is that anyone would be surprised by any of this.
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