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BP to cut back on green shift amid booming demand for fossil fuels

Bernard Looney, chief executive officer of BP Plc, gestures while speaking during a news conference in London, U.K., on Wednesday, Feb. 12, 2020. BP Plc's new boss set out the boldest climate plan of any major oil company, pledging to eliminate almost all of the carbon emissions from its operations and the fuel it sells to customers. Photographer: Hollie Adams/Bloomberg - Hollie Adams/Bloomberg

The boss of BP wants to “dial back” its push into clean energy after US oil giants posted record profits on the back of booming demand for fossil fuels.

Bernard Looney, chief executive of BP, is said to be concerned about the returns from its investments in renewables such as wind and solar, which have been at the heart of his plans to recast the business as a green champion.

Mr Looney now wants to narrow the company’s focus and persuade shareholders that it is committed to maximising profits, according to the Wall Street Journal, as concerns about energy security prompt renewed political support for oil and gas projects.

As recently as a year ago, Mr Looney said BP was “accelerating” its green investments. BP is one of the world’s largest oil and gas producers, pumping out more than one million barrels of oil equivalent per day in 2021.

However, investors and analysts note the backdrop has changed since Russia’s invasion of Ukraine, which has disrupted supplies of oil and gas, pushing up prices and contributing to a cost–of-living crisis.

One BP investor said shareholders were carefully watching the performance of renewable investments.

They said: “Societally, people are now more focused on the question of energy security – we've got to be mindful that as we run up the new system of renewables, you can't run down the old system too aggressively; it’s a transition, it’s not a step change.”

Biraj Borkhataria, head of European energy research at RBC, said it would be better for a company to change tack now rather than spend too much and realise the returns were not high enough.

He added: “The environment, the assumptions that went into everyone’s net zero analysis in 2020 is clearly not valid today.

“It was based on a peaceful, globally cooperative world – that’s no longer valid.”

This week US giant Exxon Mobil posted a record $56bn (£45bn) annual profit after oil and gas prices soared following Russia's invasion of Ukraine.

Joe Biden has accused big oil companies of “war profiteering”, with the White House attacking the industry for funnelling their takings towards shareholders rather than using them to ramp up production.

The US President's comments underscore the change in tone from many western governments in the past year, with supply concerns and rocketing oil and gas prices prompting more caution about the speed of the green transition.

Many including the UK have signed up to achieving “net zero” carbon emissions by 2050 but more recently have found themselves urging oil companies to develop new projects to ease short-term demand pressures and bring down prices.

The huge profits made by the industry have also prompted windfall taxes – but in the UK ministers designed the tax so that companies would receive relief if they invested in new oil and gas developments.

Even a partial reversal on BP’s push into renewable energy would mark a significant change in tone from Mr Looney.

Within one week of starting the job in 2020, Mr Looney set out plans to reinvent BP as one of the world’s biggest providers of green energy and for it to reach net zero carbon emissions by 2050.

At the time he said he would not chase renewable energy capacity for the sake of it but only if it offered decent returns.

The company’s plan to shift away from oil and gas involves five areas: biofuels, forecourt shops, electric car charging, renewables such as wind and solar, and hydrogen. According to the Wall Street Journal, Mr Looney has suggested BP will continue to focus on developing climate-friendly hydrogen, biogas and electric-vehicle partnerships and charging networks.

The company said in February last year, just before Russia’s invasion of Ukraine, that it wanted to generate earnings of $9 billion to $10 billion from these businesses by 2050.

It has said it expects its oil and gas production to fall by 40 percent by 2030 as it shifts focus.

Anglo-Dutch giant Shell is expected to unveil record profits when it publishes its full-year financial results on Thursday. BP is due to publish its results on Tuesday.

BP declined to comment.