BP returns to its roots

By Ron Bousso, Energy Columnist

Welcome back to the Power Up newsletter! This week was once again dominated by U.S. President Donald Trump, whose administration issued new U.S. sanctions on Iran's shadow oil tanker fleet and Venezuela. The market also awaits a key decision by OPEC and its allies led by Russia on their plan to begin unwinding output cuts.

On the gas side, the European Union unveiled an Affordable Energy Action Plan to lower electricity bills, help roll out clean energy sources and diversify suppliers. The plan includes a proposal to aggregate liquefied natural gas buying

But perhaps the most closely-watched event took place in London, where BP made a dramatic about-turn in BP's strategy, shifting firmly back into oil and gas and abandoning a failed foray into renewables. 

More on this below...

BP has returned to its oil and gas roots in a spectacular about-turn following its trailblazing attempt five years ago to become a renewables giant. The takeaway for Big Oil is that the energy transition is a marathon, not a sprint.

BP CEO Murray Auchincloss on Wednesday unveiled a long-awaited strategy reset, abandoning his predecessor Bernard Looney's eye-catching 2020 plan to "re-invent" the company.  

The 54-year-old Canadian now aims to increase oil and gas production by up to 2.5 million barrels of oil equivalent per day by 2030, from 2.36 million boed in 2024. He also cut spending on low-carbon energy, ditched a target to sharply grow renewables generation capacity and removed a goal of reducing overall emissions by 2030.

That's quite a shift for a company that had been a poster child for Big Oil's efforts to decarbonise rapidly. BP invested billions globally in large offshore wind, solar, hydrogen and low carbon projects. But inflation, technical problems and soaring energy prices undermined the plans. 

As a result, BP had to book billions of dollars in impairments, debt rose and its stock underperformed. It has spun off its offshore wind business and plans to sell half of its solar business while mothballing hydrogen projects.

The British company's share price remained roughly flat over the last five years, while Exxon Mobil's and Chevron's rose by 102% and 55%, respectively. 

The growing financial distress and loss of corporate direction have raised speculation that BP will be bought by a rival. Activist shareholder Elliott Management has meanwhile acquired a large stake, adding to the pressure for a radical revision of strategy.

Graphics are provided by Reuters. 

But this reversal – which means investing billions in new oil and gas projects at a time of high commodity prices and elevated service costs – is not without risks.

Demand for oil is nearing a plateau, while renewables remain the fastest-growing source of energy. The International Energy Agency forecasts renewable energy capacity to nearly triple between 2023 and 2030 to nearly 11 million gigawatts.

And some companies have shown that it is possible to forge a more sustainable, moderate transition path. French energy giant TotalEnergies has invested steadily since 2020 in oil, gas and renewables, growing a significant power generation business that is already generating profits.

While BP and its rivals may be able to temporarily walk back from their green goals, they will not be able to sidestep the energy transition for long. Investors will expect these companies to offer viable long-term strategies, because while BP is facing an existential crisis, the energy transition is not.

The annual International Energy Week conference was held in London this week, and the one recurring theme among executives, oil traders and analysts has been... uncertainty. Speculation over U.S. President Donald Trump's plan to impose ⁠tariffs on Canada and Mexico next week, the possibility of all-out trade wars and questions over the impact of a possible ⁠settlement of the war in Ukraine on Russian oil and gas exports are creating jitters among energy traders. For now, markets are taking a cautious stance, but already the latest round of sanctions on Iran and the termination of Chevron's licence to operate in Venezuela have pushed oil prices up in recent days.

Global demand for liquefied natural gas is estimated to rise by around 60% by 2040, driven largely by economic growth in Asia, AI impact and efforts to cut emissions in heavy industries and transportation, Shell said in an annual report.

The Canadian government would have to play a significant role in any project to build new oil pipelines in Canada to overcome regulatory, financial and political hurdles and activist opposition, writes Amanda Stephenson. With U.S. President Donald Trump threatening tariffs on Canadian oil exports, several Canadian politicians have called for new pipelines to coastal export terminals to reduce dependency on the U.S. market.

India has the second-largest clean power capacity development pipeline globally after China, with nearly 56,000 megawatts of new renewables, hydro and nuclear capacity under construction. However, the country is also building 30,000 MW of new coal-fired capacity, which will preserve coal's status as India's primary power source even after the construction boom, writes Reuters Energy Transition columnist Gavin Maguire.

And Reuters columnist Clyde Russell ⁠takes a look at Asia's crude oil imports, which have been off to a weak start in 2025, as top importer China continues to buy less and new sanctions put the brakes on cargoes from the continent's top supplier Russia.

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