Back in 2020, British oil giant BP was positioning itself to be a leader in the energy transition, touting plans to eliminate carbon emissions and usher in a new era of green energy.
Five years and a new CEO later, the company is singing a different tune. Last week it was reported that BP was tossing a plan to increase renewable energy generation by 2030, and would be refocusing on oil and gas production. The move came amid investor concerns over stock prices.
Kevin Crowley, senior U.S. oil reporter for Bloomberg, spoke with Texas Standard about why this marks a major turning point in Big Oil’s green energy strategy. Listen to the interview above or read the transcript below.
This transcript has been edited lightly for clarity:
Texas Standard: You and your colleague, Will Mathis, wrote specifically about how oil giant BP’s ditching its plan to move away from fossil fuels and what that means for the industry. But first, tell us about what you describe as “turmoil” at BP. What’s going on there?
Kevin Crowley: Well, BP has had a really shocking decline in the share price, really, over the past 2 or 3, 3 to 5 years. It’s really underperformed it’s major rivals. And it’s chiefly due to this heavy investment in green energy and a pullback from oil and gas.
And now the decision has really come home to roost. There’s an activist investor, Elliott Investment Management. One of the most aggressive activists on Wall Street has come into the stock and they’re really forcing the company to change its ways and deliver more cash to shareholders.
This was a company that obviously had a very hard decade after the spill in the Gulf of Mexico. But the green pivot also caused it to cut its dividend, cut its buybacks. And now Elliott is really forcing change.
I see. So basically activist shareholders are pushing BP in this direction. But I’m curious – you mentioned that this seems to mark the end of Big Oil’s green moment.
Is this not more about just BP? Or is this something bigger than the company’s own troubles with their shareholders?
Well, about five years ago, there was really a fork in the road for the five major oil companies. I’m talking about Exxon, Chevron, BP, Shell and TotalEnergies. They had enjoyed a fairly difficult decade. The costs on many of these megaprojects had run out of control. Climate change was becoming a much, much bigger issue.
And so they decided to kind of tackle this crisis in sort of two different ways. BP and Shell decided to reduce their oil and gas investments. And we saw that oil and gas production going down through the rest of the decade while they would grow, especially in power, because they thought they wanted to be on the forefront of the electrification trend that was going to take over the economy.
The Americans did a different approach – sort of doubled down on oil and gas; grow oil and gas production quite strongly and then invest very specifically in certain adjacent low-carbon technologies that are subsidized by government, like hydrogen and and carbon capture.
Five years later, the jury is now in and we’ve seen the Europeans really pivot back towards the American model. So there’s now a convergence, really, around the core business of oil and gas still being the core business of these companies.
So we don’t expect them to convert from being international oil companies into international energy companies anymore. They’re going to be oil from here on out.
So not even an all-of-the-above approach. More of a “we’re going to stick with fossil fuels because that’s where the money’s being made.”
They still invest. They’re still investing around the edges for sure. But they’re not going to kill the golden goose.
Oil and gas has always been the big cash-generator. And this was the big problem at BP. They decided to run down their oil and gas production by 40% by 2030 whilst they were investing in power and these new energies.
The problem was, was that by running down the oil and gas, they also cut off their cash flow, which which is bad for investors, it’s bad for dividend, it’s bad for buybacks. And ultimately they weren’t able to fund those big investments in renewables.
What does this mean for renewables, long-term?
They’ll still grow. It just means other players will be the people doing the funding, really. We can’t rely on Big Oil to convert, now, to Big Energy.
So I think, you know, we’re still going to see growth in solar and wind. But it will be a different business model. It will be specialists growing this rather than oil companies shifting away from fossil fuels.
