BP to save $200m as green energy cost cutting kicks in

A BP drive to boost shareholder value is set to yield an initial $200m in cost savings across renewables and hydrogen, the oil major's latest quarterly earnings report showed, although initial investments on German offshore wind power projects were behind an uptick in overall capital expenditure.

BP’s third quarter income of $2.27bn was just ahead of analysts forecasts, although it was 30% lower than the same quarter of 2023, due mainly to lower trading and refining margins in the oil sector.

Despite the dip in profits, CEO Murray Auchincloss said BP has been making strides in “driving focus into the business, simplifying how we work to deliver efficiencies, all in pursuit of growing cashflow and value”.

Divestments have been key to this — as have share buy-backs — and BP highlighted its recent decision to sell its US onshore wind business, along with the sale of four mature oil fields in Trinidad & Tobago, as key steps.

“These actions generate value today, reduce operating costs and enable future capital to be allocated to projects with higher returns.” Auchincloss said of the divestments.

In addition to the US onshore wind divestment, BP has announced a decision to streamline its investments in low carbon hydrogen by narrowing the number of new projects, and selecting only the most profitable ones.

“Starting with portfolio focus, we are already starting to realise cash cost savings from the actions we have taken. For example, across renewables and hydrogen, we expect to benefit from around $200m reduction in annual cash costs, as a result of focusing our portfolio,” said CFO Kate Thomson.

These savings form part of a bigger picture of cost reductions that include the sale of some oil and gas assets, supply chain efficiencies, digital transformation – with a focus on AI – and scaling back of new biofuels projects, BP stated.

The company said it is targeting $2bn in “sustainable cost reductions” by 2026.

The portfolio streamlining did not spell a headlong retreat from renewable energy assets, however.

BP said overall capital expenditure in the quarter increased by around $900m to $4.5bn, “largely driven by the scheduled initial payment for our two offshore wind projects in Germany”.

BP has retained the Beacon Wind offshore wind project on its portfolio, pointing to a potential 2.5GW in the US, although commercial plans for this project are on hold.

The company’s renewable energy pipeline still stands at 46.8GW, although analysts say final investment decisions for much of this are seen as a relatively distant prospect.

BP also completed the acquisition of solar PV unit Lightsource BP in the quarter, putting it in charge of what it described as a "62GW development pipeline in 19 global markets".