Exclusive-BP lowers oil output target in strategy reset, Reuters sources say

By Ron Bousso

LONDON (Reuters) – BP ( NYSE: ) has abandoned a target to cut oil and gas production by 2030 as CEO Murray Auchincloss scales back the company’s energy transition strategy to win back investor confidence, three sources said who know this subject.

When presented in 2020, BP’s strategy was the most ambitious in the sector, pledging to cut production by 40% while rapidly increasing renewables by 2030. BP lowered the target last February to a reduction of 25%, which would leave 2 million to produce. barrels per day at the end of the decade as investors focused on short-term returns rather than the energy transition.

The London-listed company is now eyeing several new investments in the Middle East and Gulf of Mexico to boost its oil and gas production, the sources said.

Auchincloss took over in January but has struggled to stem the slide in BP’s share price, which has underperformed rivals this year as investors question the company’s ability to generate profits under its current strategy.

The 54-year-old Canadian, formerly BP’s finance chief, has sought to distance himself from the approach of his predecessor Bernard Looney, who was sacked for lying about relationships with colleagues, vowing instead to focus on profits and invest in the most profitable businesses. , primarily in oil and gas.

The company continues to aim for net zero emissions by 2050.

“As Murray said earlier in the year … the direction is the same – but we will deliver as a simpler, more focused and higher-value company,” a BP spokesman said.

Auchincloss will present its updated strategy, including scrapping the 2030 production target, at an investor day in February, although in practice BP has already abandoned it, the sources said. It is unclear whether BP will provide new production guidance.

Rival Shell ( LON: ) has also scaled back its energy transition strategy since CEO Wael Sawan took over in January, selling power and renewables and abandoning projects including offshore wind, biofuels and hydrogen.

The change for both companies comes as a result of renewed focus on European energy security following the price shock triggered by Russia’s invasion of Ukraine in early 2022.

BP has invested billions in new low-carbon businesses and drastically reduced its oil and gas exploration team from 2020.

But supply chain issues and steep increases in costs and interest rates have put further pressure on the profitability of many renewables businesses.

A company source said that while rivals have invested in oil and gas, BP has neglected exploration for several years.

BACK TO THE MIDDLE EAST

BP is currently in talks to invest in three new projects in Iraq, including one in the Majnoon field, the sources said. BP owns a 50% stake in a joint venture that operates the giant Rumaila oil field in the south of the country, where it has been operating for a century.

In August, BP signed an agreement with the Iraqi government to develop and explore the Kirkuk oil field in the north of the country, which will also include building power plants and solar capacity. Unlike historical contracts that offered slim margins to foreign companies, the new deals are expected to include a more generous profit-sharing model, sources told Reuters.

BP is also considering investing in the redevelopment of Kuwait fields, the sources added.

In the Gulf of Mexico, BP announced that it will proceed with the development of Kaskida, a large and complex reservoir, and the company also plans to give the green light to the development of the Tibru field.

It will also weigh acquiring assets in the prolific Permian shale basin to expand its existing U.S. onshore business, which has expanded reserves by more than 2 billion barrels since acquiring the business in 2019, the sources said.

Auchincloss, which announced in May a $2 billion cost cut by the end of 2026, has in recent months halted investment in new offshore wind and biofuel projects and reduced the number of low-carbon hydrogen projects to 10 from the 30th.

However, BP acquired the remaining 50% of its solar joint venture Lightsource BP, as well as a 50% stake in its Brazilian biofuels business. Bunge (NYSE: ).