BP Walks Back Green Targets Amid Market Realities

By Irina Slav - Oct 26, 2024

BP has reversed its commitment to cut oil and gas production by 40% by 2030.

The energy transition remains challenged by economic realities, prompting BP and other major oil companies to scale down transition plans.

BP's pivot, along with similar moves from other oil majors, highlights the industry’s continued reliance on hydrocarbon.


In February 2020, then-brand-new chief executive Bernard Looney told the world that one of the oldest and biggest oil companies in the world was going to become a net-zero company by 2050. To achieve this, it would slash its oil and gas production by 40% by 2030.

Four years and one major crisis later, BP is abandoning not only the original production cut target of 40%, but also a revised, lower target of 25%. BP, in other words, is returning to its roots. And commodity investors who are not paying attention should be—and so are transition investors.

“This will certainly be a challenge, but also a tremendous opportunity. It is clear to me, and to our stakeholders, that for BP to play our part and serve our purpose, we have to change. And we want to change – this is the right thing for the world and for BP,” Bernard Looney said back in 2020 when he announced the company’s new course.

There was much enthusiasm in the climate activist world when that statement was made. Activists were not satisfied but did concede that it was a step in the right direction. Investors took the news differently—BP’s shares dropped precipitously immediately following the announcement of the newly charted course before rebounding later in the year.

Then came the pandemic, decimating demand for energy and leading to a price slump that BP at the time seemed to believe the industry wasn’t going to recover from, because, it said in one of its latest world energy outlook editions, global oil demand had peaked back in 2019 and it was never going to go back to those levels. BP still believed it was on the right track with its net-zero plans and a 40% cut in oil and gas production by 2030. And then it was 2022.

Oil demand had been on the rebound ever since the lockdowns began to be phased out. When China joined the party of ending lockdowns, the demand rebound really took off. The war in Ukraine took that momentum and added to it supply security fears for a price rally that had not been seen in years.

The rally resulted in energy companies becoming the best performers in the stock market, overtaking Big Tech, and in record profits, which in turn led to fatter dividend payouts and massive stock repurchases. It also led to a reconsideration of some of Big Oil’s transition plans. In BP’s case, the latest stark reminder that the world still runs on hydrocarbons prompted the company’s senior leadership to abandon plans to cut its oil and gas production by even 25% by 2030.

All these developments also made investors think again—about energy transitions and the security of energy supply. It made investors think so much that pro-transition outlets are sounding an alarm about oil companies being unserious about the transition and, worse, unclear about the direction of their business, which should make investors cautious.

“A decarbonizing economy threatens the fossil fuel industry’s core business model, and the sector does not seem to be offering a cohesive and consistent plan for navigating this changing world,” the Institute for Energy Economics and Financial Analysis said in a recent report. The report zeroed in on the latest BP news about the U-turn on oil and gas production cuts, suggesting that BP basically had no idea what it wanted to do with its future, and this should make investors nervous about the whole oil and gas industry.


That criticism certainly has a lot of merit in the context of a business world that is firmly on the way to a cleaner, greener energy future because the economics of such a future make sense. The actual business world in which BP and all other companies are operating, however, is different from that vision.

In it, the economics of the energy transition, as envisioned by its advocates and proponents, do not always make sense—which is why BP and other companies are abandoning their initial ambitious targets made, one might say, in the heat of the moment, following years of activist pressure that was warmly embraced by politicians in decision-making positions.

However, once these companies realized their transition efforts were not paying off, they pivoted. One might call it a lack of a “cohesive and consistent plan.” On the other hand, one might call it flexibility in the face of a reality that has proven different than hoped for. In addition to the news about BP abandoning its production cut target for 2030, the company was also reported to be considering reducing its exposure to offshore wind at a time when fellow supermajor Shell was also dialing back its transition ambitions and another fellow supermajor, TotalEnergies, just announced a $10.5-billion oil and gas development in Suriname.

The energy industry then appears to have a pretty clear view of the future. Hydrocarbons remain the energy source most widely used on the planet. Their alternatives do not seem to be living up to the hype. Therefore, Big Oil is shrinking its transition ambitions in favor of the business that has been proven to be profitable—for the companies and their investors. Sometimes, it really is as simple as that.'

By Irina Slav for Oilprice.com