BP halts offshore wind projects

Offshore wind projects may not generate profit for years - Andy Buchanan/AFP via Getty Images

BP has put all new offshore wind projects on pause as the oil company’s new chief executive seeks to focus more heavily on fossil fuels.

Murray Auchincloss, who became permanent head of the business at the start of the year, has also frozen hiring in the offshore wind division.

The move, which was first reported by Reuters, follows investor discontent over the company’s switch to green energy.

However, it is likely to trigger a backlash from climate campaigners who have waged a years-long campaign to push BP into clean energy.

Mr Auchincloss is seeking to slow down investments in big budget, low-carbon projects, particularly in offshore wind, that are not expected to generate cash for years.

It suggests he is reversing the policies of Bernard Looney, his disgraced predecessor, who tried to move away from fossil fuels before quitting over inappropriate relationships last autumn.

The shift to greener energy has weighed on BP’s shares as returns from renewables shrank, while profits from oil and gas soared. The global recovery from the pandemic and then Russia’s invasion of Ukraine both drove prices to new highs.

Mr Auchincloss and chief financial officer Kate Thomson have prioritised investing in and even acquiring new oil and gas assets, particularly in the Gulf of Mexico and US onshore shale basins, where BP already has large operations, company sources briefed on the matter said.

BP will still consider investing in biofuels and some low-carbon businesses that can generate returns in the short term.

This week, BP agreed to buy grain trader Bunge’s 50pc stake in Brazilian sugar and ethanol joint venture for $1.4bn (£1.1bn).

It is also expected to make some job cuts in renewables, although no specific targets have been given, sources told Reuters. They added that BP has imposed a company-wide hiring freeze, with only a few exceptions such as frontline and safety personnel.

Mr Auchincloss has promised a pragmatic approach since taking over in January, four months after Looney resigned.

He announced a $2bn cost-saving drive by the end of 2026 relative to 2023. The 53-year-old also cut his executive leadership team from 11 to 10 members.

BP said in a statement to Reuters that Mr Auchincloss introduced six priorities “to deliver as a simpler, more focused and higher value company”.

The priorities include delivering “the next wave of efficiencies and BP’s growth projects”.

It said: “The actions we are taking are part of delivering this – and of course are all in service of our aim of growing the value of BP.”

Shares in BP have underperformed rivals in recent months, raising speculation that it could be a takeover target.

That has piled pressure on Mr Auchincloss as he seeks to reassure investors who are juggling the need to decarbonise the global economy with rising near-term demand for fossil fuels.

BP spent $2.5bn on renewables, hydrogen, electric car charging and biofuels in 2023, out of a total investment budget of $16bn.

BP is the only major oil company with targets to reduce its production of oil and gas. Shell last year shifted its strategy to focus on high-return business, scaling back investments in many renewables and low-carbon energy businesses.

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