BP has defended a decision to row back on its climate pledges.
The energy giant’s boss Bernard Looney made the dramatic U-turn in the firm’s results last week.
The world’s largest oil and gas companies are under increasing pressure over everything from their greenhouse gas emissions to the amount of tax they pay after the sector raked in massive profits last year.
Last Tuesday BP reported £23billion in profit for 2022, before stunning the industry by saying it will cut oil and gas production by just 25 per cent between 2019 and 2030.
This was well short of its more ambitious previous target of a 40 per cent reduction.
The energy supermajor also revealed it would reduce oil and gas production by less than previously forecast.
The decision marked an about-face for chief executive Looney, who had spent years boasting of BP’s green ambitions and increased focus on clean energy.
Analysts believe the oil and gas arm at BP has once again taken centre stage and is Looney’s major focus.
The 53-year-old Irishman has struggled to convince investors that the oil producer can run renewables projects profitably enough to compensate for lost earnings from the fossil fuel business.
But yesterday Anja-Isabel Dotzenrath, the head of the company’s low-carbon energy business, defended the targets and said BP remained fully committed to renewable energy – despite the lower returns at present.
She pointed to BP’s plans to pour tens of billions of pounds into its low-carbon arm by the end of the decade, while in its updated strategy BP predicted that projects focused on green hydrogen would deliver ‘double-digit’ returns alongside 6pc to 8 per cent for other renewables.
‘There is absolutely no link between confidence in returns from renewables and the production target on the oil and gas side,’ she told the Financial Times.
‘I have the support to deploy £25billion of investment to the end of the decade in my business, and I’ve seen what this company is capable of doing.
I am not aware of any other comparable company in our sector who does this and is as clear about it.’
But the comments are unlikely to convince many politicians and campaigners as the shift in strategy was announced as BP revealed billions of profits for 2022.
It and its major rivals have cashed in on soaring oil and gas prices sparked by Russia’s invasion of Ukraine.
Looney’s rhetoric also shifted in the wake of the results, saying BP needed to continue ‘near-term investment into today’s energy system – which depends on oil and gas – to meet today’s demands’.
The U-turn was widely seen as an embarrassment for BP, which unlike other oil giants leaned heavily into its green ambitions after Looney – who has spent his entire career at BP – took over as boss in 2020.
He had previously waxed lyrical about how the world needed a ‘rapid transition to net-zero’ and that BP could be ‘a force for good in the world’ by shifting its focus towards renewables.
The approach stood in stark contrast to many of its competitors which had made comments about shifting away from fossil fuels but had not made it the centrepiece of their strategy.
But the chief executive’s lofty goals appear to have been overtaken by cold hard cash as global oil firms raked in billions off the back of surging crude prices last year.
AJ Bell investment director Russ Mould said: ‘Some may be tempted to see BP’s policy shift as a U-turn.
‘Others will see it as a pragmatic – if very reluctant – acceptance of the grim realities of energy security and the globe’s ongoing need for, and reliance upon, hydrocarbons whether we like it or not.’
He added that while the company’s decision may be ‘unpalatable to some’, the question over funding the shift from fossil fuel to renewables remained ‘a challenge’ and there was ‘no such thing as a perfect outcome.’
International oil benchmark Brent crude hit an 11-year high of over $120 a barrel last June as the Russian invasion sparked fears of an energy supply crunch.
While prices have eased since then to around $86, they are still well above levels seen during the depths of the Covid-19 pandemic as well as before the virus took hold.
Aside from BP, Shell’s profits hit an all-time high of £33billion in 2022, while results from US energy giant’s Chevron and Exxon, Norway’s Equinor and French group TotalEnergies also broke records.
The bumper figures, as well as billions handed back to investors through dividends and share buybacks, have inflamed the debate about whether energy giants should be hit with larger windfall taxes to help fund support for households grappling with surging energy bills. BP shares fell 0.5 per cent, or 2.6p, to 557.4p.