bp’s annual underlying profit slipped from $13.8bn in 2023 to $8.9bn last year, prompting a ‘strategy reset’.
Underlying profit for the fourth quarter totalled $1.2bn, compared with $2.3bn for the previous quarter, which the energy major attributed to weaker realised refining margins, higher impact from turnaround activity and seasonally lower customer volumes as well as ‘fuels margins and higher other businesses and corporate underlying charge’.
CEO Murray Auchincloss said it ‘laid the foundations’ for growth last year.
“We have been reshaping our portfolio – sanctioning new major projects, and focusing our low-carbon investment – and we have made strong progress in reducing costs.”
“Building on the actions taken in the last 12 months, we now plan to fundamentally reset our strategy and drive further improvements in performance, all in service of growing cash flow and returns.”
Last year its production and manufacturing expense and distribution and administration costs totalled around $43bn, up $10bn in the last six years, although $8bn was attributable to ‘variable costs’ driven by higher transport and shipping costs. The company said it delivered structural cost reductions of around $800m, claiming it ‘more than offset the impacts of inflation and energy costs’.
In the fourth quarter, gas and low carbon energy underlying profit was $200m higher than the previous quarter, but gas marketing and trading was ‘average’.
With blocs such as Europe eager to press on with renewables development to meet Net Zero and decarbonisation targets, and the new US administration advocating fossil fuel development, bp’s new strategic direction isn’t immediately clear. The company embarked on a high-profile renewables push in 2020 before putting the brakes on. Coinciding with the results, it has emerged hedge fund Elliott Management has taken an undisclosed stake.
Liquefied natural gas (LNG) is sure to remain a key focus. In January, bp began flowing gas from wells at the GTA Phase1 LNG project to its floating production storage and offloading (FPSO) vessel for the next stage of commissioning.
GTA, offshore Mauritania and Senegal, is one of the deepest offshore developments in Africa, with gas resources in water depths of up to 2,850m. Once fully commissioned, GTA Phase 1 is expected to produce around 2.3 million tonnes of LNG per year.
In December, bp established a new gas joint venture, Arcius Energy, with ADNOC’s international investment company XRG.
Read more: bp and ADNOC launch Arcius Energy regional gas platform
Speaking at the opening day of India Energy Week in New Delhi, William Lin, Executive Vice-President Gas and Low-Carbon Energy at bp, said it targets two to three sustainable aviation fuel (SAF) projects this decade.
“SAF plays to our strengths, we’ve been supplying conventional jet fuel and have deep relationships over many decades,” he said. “Those channels of distribution are there.”
“We have the ability to produce SAF at or near refineries, so putting that together is a natural evolution. In terms of regulatory or legislative help, all types of transitioning business need support, and mandates are ways that as an industry we can benefit.”
He added that converting ethanol to SAF is a huge market, particularly in India where aviation is growing rapidly.
But Lin sounded a note of caution when it comes to investment. “We all want to transition, but it has to be economically viable – we have shareholders and have to manage returns,” he said. “Hydrogen will happen, and low-carbon fuels, it’s just a matter of time and transition.”
Commenting on the new pro-fossil-fuel US government policies, Lin said, “It’s early days, I know people are jumping on ‘drill, baby, drill’, but we have to live through different jurisdictions and governments, we have to weather through any administration. But based on history, I know Trump wants to cut on permitting times and those are positive things to look forward to.”
Yesterday, Oil and Natural Gas Corporation Limited (ONGC) and bp agreed to explore opportunities for collaboration and partnership across the energy industry in India and internationally.
