Why is bp Reviewing its Shift from Oil & Gas to Renewables?
Murray Auchincloss, CEO of bp, has announced that the company will conduct a full review of its oil and gas portfolio, alongside a further cost reduction initiative aimed at boosting shareholder returns.
“So far this year we’ve brought five new oil and gas major projects onstream, sanctioned four more and made ten exploration discoveries, including the significant discovery in Bumerangue block in Brazil,” says Murray in bp’s second quarter and first half 2025 results.
Is oil and gas making a return?
The review follows bp’s announcement of its largest oil and gas discovery in 25 years, a major deepwater find off the coast of Brazil, in the Bumerangue block of the Santos Basin.
The field, covering an area of more than 300km², could become a new production hub and add a significant boost to bp’s upstream ambitions.
The find adds to a series of recent discoveries in the Gulf of Mexico and Egypt.
These discoveries come after bp's energy transition strategy appeared to stall.
In early 2025, the company cut planned investments in renewables while diverting billions of dollars back into traditional oil and gas ventures.
The pivot brings uncertainty against the International Energy Agency’s (IEA) data for the 2030 net zero targets.
The IEA predicts that global renewable capacity is expected to grow by 2.7 times by 2030, surpassing countries’ current ambitions by nearly 25%, but it still falls short of tripling.
Profitability under pressure
In its second-quarter 2025 results, bp posted an underlying replacement cost profit of US$2.4bn, a 15% drop year-on-year but still ahead of analyst expectations.
Operational performance remained strong, with upstream plant reliability and refining availability both exceeding 96%.
Cash flow from operations rose to US$6.3bn, helping reduce net debt to US$26bn.
Despite the dip in profit, bp’s financials were buoyed by divestments, including its exit from onshore wind in the US and mobility assets in the Netherlands.
Structural cost reductions of US$1.7bn have already been achieved since 2023 and the company has launched a US$750m share buyback for Q2.
Still, capital expenditure in oil and gas for the first half of 2025 reached US$3.4bn, more than double what was spent on gas and low-carbon energy combined.
Complexities in energy supply chains
According to Maersk, renewable supply chains are inherently more complex due to the infrastructural, regulatory and geographical demands required to build, distribute and maintain clean energy sources like wind, solar, hydro and geothermal.
While solar power is the most mature and scalable, with China dominating photovoltaic (PV) production and logistics, its reliance on special cargo and sensitivity to time and location adds strain.
Wind power presents even greater challenges, as it depends heavily on large-scale, out-of-gauge logistics, where errors can cost companies millions.
However, Maersk says renewable supply chains, when well-integrated with logistics partners early on, can help build a decentralised, resilient energy grid for the future.
McKinsey & Company also highlights the importance of renewables for reaching net zero goals, estimating that solar and wind capacity (excluding China) will triple by 2030.
However, the firm also warns that supply chains remain vulnerable to raw material price shocks, policy volatility and talent shortages.
While renewables can revolutionise and even regionalise energy logistics, they require early strategic planning, long-term supplier partnerships and innovation in sourcing to avoid disruptions and deliver on their climate promise.
Investor priorities vs climate commitments
Once seen as a leader among oil majors in embracing decarbonisation, bp’s current trajectory may reflect a shift in priorities.
The company has reiterated its commitment to long-term shareholder value and strong returns but it remains unclear how this aligns with its 2050 net zero pledge.
Murray’s pledge to embed continuous business improvement and capital discipline could signal a turn in bp’s strategy.
