Energy giant BP is under pressure.
Back in January, I noted that energy giant BP had come under pressure, to quote one shareholder, Bluebell Capital Partners, to scrap its “irrational” net-zero commitments. Bluebell claimed that this strategy had left shareholders £40 billion poorer.
On June 27, Reuters reported that, according to sources at the company, BP was pausing “offshore wind projects” as the company placed a renewed emphasis on oil and gas “amid investor discontent over its energy transition strategy.” The discontent, clearly, was that the company was decarbonizing too much, not too little. The pause was apparently part of a decision “to slow down investments in big budget, low-carbon projects, particularly in offshore wind, that are not expected to generate cash for years.”
The company was reportedly prioritizing “investing in and even acquiring new oil and gas assets, particularly in the Gulf of Mexico and in the U.S. onshore shale basins.”
Reuters also notes that BP is the only major oil company to have oil and gas output-reduction targets, although these have been softened.
Bluebell, meanwhile, is not easing up, calling for BP to do away with certain CO2 targets, increase oil and gas production targets, and invest more in oil and gas and less in renewables. Bluebell would also like to see a $16 billion increase in cash returned to shareholders between 2023-30 “to be sure it is better deployed elsewhere, also in support of the energy transition.”
That last is an important point. There is no particular reason for oil and gas companies to be investing in renewables. They should carry on doing what they know how to do best, for as long as there is demand for oil and gas, rather than engage in capital-destructive diversification into businesses they do not properly understand. Oil and gas may, in the opinion of some, be a dying business (no time soon, I reckon, but that’s just me), but there is no reason that a dying business cannot be profitable for years.
And if some BP shareholders are enthused by renewables, returning money to them allows them to invest in that sector through companies that are better equipped to be in that business area.
This is also worth noting:
Bluebell also expresses concern and disbelief that the newly appointed Senior Independent Director Amanda Blanc (also CEO of Aviva plc), refused to meet with a dissenting shareholder, in clear breach of BP’s stated responsibilities of the Senior Independent Director role. This sends a concerning message about Amanda Blanc’s (potential lack of) independence and the Board’s failure to exercise proper oversight.
It would seem so.
Blanc has proved an effective manager of Aviva, one of the U.K.’s leading insurance, wealth, and retirement businesses. She was in the news about six months ago with this story, reported in the Daily Telegraph:
Amanda Blanc, the chief executive of Aviva, has said all senior white male recruits must get final sign-off from her as part of a diversity drive to stamp out sexism in the financial services industry.
Hmm. . . .
More relevant for BP is that in April 2022, Blanc was appointed co-chair of the U.K.’s Transition Plan Taskforce, another creation of the former Conservative government, during — what a surprise — the time Boris Johnson was prime minister. The idea behind the task force was:
to develop the gold standard for UK firms’ climate transition plans. The new regime being developed by the Taskforce will require UK financial institutions and listed companies to develop and publish rigorous and robust transition plans that detail how they will adapt and decarbonise as the UK moves towards a net-zero economy by 2050.
Blanc clearly endorsed the reckless “race” to net zero being promoted by all parts of the British political establishment:
Everyone in the UK will be touched by the climate crisis, so all of us depend on shifting the economy to net zero as soon as possible. Preventing the worst impacts of climate change will take all businesses developing ambitious, consistent transition plans to get us to a low carbon future. I’m delighted to be co-chairing this crucial work alongside the Economic Secretary and hope that the UK will set the gold standard, for everyone’s benefit.
Under the circumstances, if it’s true that she wouldn’t meet Bluebell, it’s not surprising. Such a meeting might have been a touch awkward. Nevertheless. . . .
Bluebell is calling for both Blanc and chairman Helge Lund to be removed from the board.