A rather unsubtle change is afoot at the world’s two leading British energy majors – BP (LON: BP) and Shell (LON: SHEL). Having pledged and burnt millions on renewable energy forays under their former bosses, both are now turning to traditional oil and gas plays to earn back more than few millions under current ones.
Both U.K.-listed FTSE 100 rivals have backtracked on some of their climate targets this year, putting more emphasis on oil and gas to boost profits whilst at the same time reaffirming their commitments to a low-to-zero carbon emissions horizon within the next three decades.
Both posted relatively lackluster results last week warning of lower takings from oil trading and lower refining margins. While Shell’s quarterly financials weren’t particularly trailblazing, BP saw its three-monthly profits slump to near 4-year-lows.
In their first public engagement since both sets of quarterly results were published, BP CEO Murray Auchincloss and Shell CEO Wael Sawan appeared together on a panel at ADIPEC in Abu Dhabi – a major energy conference and exhibition that concluded on Friday – to flag their commitment to the energy transition but one that’s heavily tempered with a return to basics.
Back To Basics?
Sawan shared Shell’s approach to the energy transition in so many words noting: “We fundamentally believe that the world needs much more energy, and specifically more diversified forms of energy.
“As a company, we must be very clear about where we can invest our capital. Decarbonizing our existing assets is the first step, and the next step in this process is changing our operations.”
Read what you will into it but actions speak louder than words. Since taking office in 2023, Sawan has given clear signals to investors that intelligent corporate thinking on the energy transition demands careful investments in a wider renewables landscape, and not running roughshod over the company’s primary offerings – oil and liquefied natural gas, with the latter being a market in which it has a leading position.
In line with this thinking, in June 2023, he ditched Shell’s pledge to progressively cut oil production every year to 2030 and sold its European home retail power business with the full support of its board. Both were once promoted by Sawan’s predecessor Ben van Beurden as key energy transition moves.
For his part BP boss Auchincloss – who is equally busy tempering his company’s costly renewables plays – noted that the world will need considerable amount of new investment in oil and gas in order to maintain supplies, notwithstanding a possible settling of demand in the coming years.
Delving into specifics, Auchincloss said he was particularly excited about BP’s latest foray in the Gulf of Mexico’s Paleogene play. In July, the company gave the go-ahead for its Kaskida offshore project which would be its sixth hub in the Gulf of Mexico.
First oil from Kaskida is expected in 2029. And Auchincloss added that he is looking to diversify the portfolio further. “That’s why we’re headed back to our roots here in the Middle East,” he said, in a nod to his event hosts in Abu Dhabi.
Reading between the lines from both companies, hydrocarbon revenues may not be king but a crucial necessity to keep ticking financially as well as having shareholders onside. This is unlikely to change anytime soon.