BP to Increase Oil Output, New Chief Says

Murray Auchincloss signaled that he would take a more profit-oriented approach than his predecessor, who started a big push into renewables.

 

[ABS News Service/07.02.2024]

BP’s new chief executive, Murray Auchincloss, promised a flexible approach to the shift away from fossil fuels as the oil giant reported a $3 billion profit in its latest quarter on Tuesday (06.02.2024).

Mr. Auchincloss said in an interview after BP reported earnings that the company was pursuing what he called a “demand strategy.” BP’s shares rose nearly 5 percent in trading in London, where the company is based.

BP has a plan to become what Mr. Auchincloss called an integrated energy company. But in the meantime, “we see growing demand for energy right now across the globe,” he said. “It is not slowing down.”

BP is “going to invest in today’s energy system, to help make sure that prices don’t get out of control,” Mr. Auchincloss said. “So that’s investing into oil and gas,” he added, while also putting money into alternative energy sources like biofuels and hydrogen.

Mr. Auchincloss was confirmed as chief executive of BP in January. The former chief financial officer had been serving in an interim capacity after the departure of his predecessor, Bernard Looney, over his failure to fully disclose personal relationships at the company.

In a presentation to financial analysts on Tuesday, Mr. Auchincloss seemed to suggest a more profit-oriented approach than the one pursued by Mr. Looney, who after becoming chief executive in 2020 began perhaps the most ambitious shift into renewable technologies among the major oil companies.

But Mr. Looney shifted his focus back toward oil and natural gas production early last year, after Russia’s invasion of Ukraine helped drive oil and gas prices higher.

The leaders of oil companies, especially in Europe, face a difficult balancing act between demonstrating to customers and governments that they are serious about lowering emissions and appealing to investors, who insist on profitability and returns above all.

“The first thing investors want is to make sure they get performance,” said Giuseppe Bivona, the chief investment officer of Bluebell Capital Partners, a hedge fund that has criticized BP over plans to reduce its oil and gas business while investing in areas like offshore wind power. The fund managers have said that BP lacks the expertise to succeed in the wind industry.

Indeed, BP said that last year it wrote off $1.1 billion in investments in offshore wind projects along the East Coast of the United States, which involved a joint venture with Norway’s Equinor. Mr. Auchincloss acknowledged that BP had paid a “premium” to enter a business that has proved difficult, with projects encountering delays and higher costs.

In the meantime, the company’s mainstay oil and gas production rose 2.6 percent last year. Supplies of liquefied natural gas — a chilled, compressed fuel transported by ships — rose by more than 20 percent.

Mr. Auchincloss said that oil output would continue to rise 2 percent to 3 percent a year through 2027 because of production increases in Abu Dhabi, Angola, the United States and elsewhere. He that there were projects on the drawing board that could prolong the output growth in later years if necessary. “We have some big decisions ahead of ourselves,” he said.

BP said that, on average, the prices it received for oil and gas were about 20 percent lower in 2023 than in 2022, partly accounting for a drop in annual profit, from $27 billion in 2022 to $13.8 billion last year, which still ranked as one of its best years in a decade.

In cleaner energies, BP is now betting on businesses that are closer to the company’s existing strengths in distributing fuel and servicing automobiles. For instance, the company’s production of so-called biofuels that are made from plants and substances like cooking oil were up 18 percent. The company’s portfolio of electric vehicle charging points rose by 35 percent.