bp sets new course, plans 75% group capex allocation to upstream oil and gas
bp is changing gears with an overall capital expenditure budget reduction, but an increase in upstream oil and gas investments as it reallocates spending. The company will increase upstream spend to 75% of group capex (70% oil, 30% gas on average) as it simultaneously plans to become more selective with energy transition spending.
The news is part of the operator’s plan to ‘reset’ the business to improve performance, it said in a release Feb. 26.
“Today we have fundamentally reset bp’s strategy. We are reducing and reallocating capital expenditure to our highest-returning businesses to drive growth,” said Murray Auchincloss, chief executive officer.
“We will grow upstream investment and production to allow us to produce high margin energy for years to come. We will focus our downstream on markets where we have leading integrated positions. And we will be very selective in our investment in the transition, including through innovative capital-light platforms,” he continued.
Helge Lund, bp’s chair, said the board has worked with bp executives over the last 12 months as the company developed the new direction, “ensuring it reflects the significant changes we have seen in energy markets and our purpose of delivering energy to the world today and tomorrow.”
The company will reduce its total capital expenditure to $13-15 billion per year to 2027, $1-3 billion lower than in 2024. Capital expenditure for 2025 is targeted at $15 billion.
Upstream, downsteam
Of that, $10 billion per year will be allocated to the upstream oil and gas business with the aim of growing production to 2.3-2.5 MMboe/d in 2030. bp said it aims to strengthen its upstream portfolio through access to discovered resources and “reloading [the] exploration hopper." Ten new major projects are expected to start up by end-2027, and a further 8-10 by end-2030. Changes are expected to generate an additional $2 billion in operating cash flow in 2027.
Downstream, the company will focus on its core integrated positions with investment of about $3 billion by 2027 with an expected $2 billion in structural cost reductions across the downstream portfolio. The company expects an additional $3.5-4 billion in downstream operating cash flow by 2027.
‘Capital-light’ energy transition investment, potential sales
With the renewed focus on oil and gas, the company is reducing its energy transition investment to $1.5-2 billion per year, $5 billion lower than previous guidance.
The company said it will be “disciplined” in such investments, including biogas, biofuels, and EV charging, with “capital-light” partnerships in renewables with a focus on investment in hydrogen and carbon capture and storage (CCS).
To aid in improving the balance sheet, bp is targeting structural cost reductions of $4-5 billion by end-2027 and $20 billion in divestments by 2027, including potential proceeds from adding a partner to Lightsource bp and a strategic review of Castrol, it’s global lubricants business.
Earlier this month, BP Europa SE noted plans to seek potential buyers for Ruhr Oel GmbH – BP Gelsenkirchen and associated refinery assets with sales agreements targeted for 2025.
The company is targeting a net debt reduction to $14-18 billion by end-2027.
Mikaila Adams | Managing Editor - News
Mikaila Adams has 20 years of experience as an editor, most of which has been centered on the oil and gas industry. She enjoyed 12 years focused on the business/finance side of the industry as an editor for Oil & Gas Journal's sister publication, Oil & Gas Financial Journal (OGFJ). After OGFJ ceased publication in 2017, she joined Oil & Gas Journal and was named Managing Editor - News in 2019. She holds a degree from Texas Tech University.
