BP says it will continue “focused investment” in hydrogen as it slashes annual energy transition spending by at least 70% as part of a strategy “reset” that refocuses on fossil fuels.
In a statement, the UK-based oil supermajor said it will reduce capital expenditure (capex) in its “transition businesses” by $5bn a year, down to $1.5bn-2bn — a 70%-plus reduction — with average annual investments of less than $800m in “low carbon energy”.
The company seems to include hydrogen in its “low carbon energy” bucket, explaining that it wants to be “capital-light” in this sector, focusing on “top-tier offshore wind and solar platforms” and “limited further projects in hydrogen and carbon capture”.
This is described elsewhere in the statement as “focused investment in hydrogen/CCS”.
“BP is now focusing its sustainability aims on those most relevant to the long-term success of its businesses and to its net-zero ambition,” the company stated, which still officially includes net-zero emissions from all of its products by 2050.
BP is said to have already shelved its planned $600m green hydrogen and renewables fuels project in Kwinana, Western Australia, even though it had been shortlisted for government funding, However, it did take a final investment decision in December on its 100MW Lingen green hydrogen project in Germany.
The oil giant is also planning to build a 1.2GW blue hydrogen project in northeast England, which would incorporate carbon capture and storage.
CEO Murray Auchincloss told investors in London today: “In 2020 we made some bold strategic changes, accelerating into the energy transition while progressively reducing our hydrocarbon business.
“We then saw Covid, the war in Ukraine, a recession and the shift in attitudes of markets and governments have a fundamental impact on the energy system.
“Pressure on budgets meant that lower cost energy won out in most nations, and the pace of transition and decarbonization, while important, was not as fast as envisioned, and energy demand continued to rise.
“Our optimism for a fast [energy] transition was misplaced, and we went too far, too fast.”
In the market statement, Auchincloss explained: “Today we have fundamentally reset BP’s strategy. We are reducing and reallocating capital expenditure to our highest-returning businesses to drive growth, and relentlessly pursuing performance improvements and cost efficiency. This is all in service of sustainably growing cash flow and returns.”
