The short answer is: Zero. If anything, the company has the opposite problem of not having enough oil assets. This is the result of a misguided move into renewable energy where the company misjudged the speed of the energy transition and paid a substantial price for this well-intended but fundamentally flawed diversification strategy. Here’s the story.
In 2020 under its new CEO Bernard Looney, the company announced a strategy to be net zero by 2050 through 2030 targets of cutting oil and gas production by 40%, growing its low-carbon energy investments to $5 billion per year, increasing its renewable generating capacity from 21.5GW in 2019 to 50GW, and reducing oil and gas production from 2.6 million barrels of oil per day (mmboed) to 1.5 million by 2030.
Since then the company has dramatically underperformed its Western oil and gas major peers. The company’s share price has been flat in the last five years, going from $31.29 on February 28, 2020, to $33.12 on February 27, 2025, for a market cap of $88.08 billion. In contrast, during that same period of time, ExxonMobil’s shares have risen from $51.44 to $110.15 for a market cap of $484.12 billion; Shell’s have risen from $44.03 to $67.27 for a market cap of $203.59 billion. In light of BP’s poor performance the activist hedge fund Elliott Management saw opportunity and over the past few weeks has acquired nearly five percent of the company’s shares. Although rather tight-lipped as activist hedge funds are want to be, they appeared to be pushing for more investment in oil and gas, less investment in renewables, cutting costs, and scaling back on its net-zero emissions ambitions.
BP’s New Strategy
There was great anticipation about the company’s shareholder meeting on February 26, 2025 since the company was facing what The Telegraph declared was an “existential crisis” since “The British energy giant faces humiliation as the oil industry’s biggest loser on net zero.” In a press release about the meeting BP CEO Murray Auchincloss is quoted as saying “Today we have fundamentally reset bp’s strategy. We are reducing and reallocating capital expenditure to our highest-returning businesses to drive growth, and relentlessly pursuing performance improvements and cost efficiency.” The company announced:
- An increase in oil and gas investments to ~$10 billion per year
- 10 new major projects to start by 2027 and another 8-10 by 2030
- Growing its production capacity to 2.3-2.5 mmboed by 2030 (BP lost substantial production when on February 27, 2022 it sold its 19.75% holding in the Russian national oil company Rosneft following Russia’s invasion of Ukraine.)
- Reshaping its downstream portfolio to grow revenues, operating profit, and cash flow
- Selective investments of $1.5-2.0 billion per year in “transition businesses” like biogas, biofuels and EV charging, more than $5 billion per year lower than previous guidance
Relatively little is said about sustainability although the company notes “bp is now focusing its sustainability aims on those most relevant to the long-term success of its businesses and to its net zero ambition.” There is no mention of a net-zero by 2050 target. As Lindsey Stewart, director of stewardship research at Morningstar told Responsible Investor, “having already cut back its energy transition targets in 2023, BP’s subsequent underperformance compared with peers has created pressure for BP management to focus on sustainability of a financial rather than ecological nature.”
Reactions to BP’s New Strategy
However, Auchincloss’s new strategy was not enough to appease Elliott who felt it lacked a sense of urgency, and the proposed changes weren’t extensive enough. There are various options for Elliott to pursue such as a five percent trimming of the work force, a further reduction in investments in renewable energy, sales of assets like its Castro lubricants business worth potentially $10 billion, and even being sold to a rival, such as Shell.
The Charybdis to Elliot’s Scylla were those who opposed the new strategy as one giving up on being green. Prior to the meeting RI reported that a group of nearly 50 BP shareholders had expressed their displeasure with the company’s proposed new strategy. None of them were a top 10 shareholder.
After the meeting RI quoted Diandra Soobiah, director of responsible investment and ESG integration at Nest saying ,“BP’s belief that increasing oil and gas production will drive long-term shareholder value is misguided—there are clear risks of these high-cost projects failing to deliver promised returns as the energy transition accelerates and demand for oil and gas falls.” It is a fair point to raise of whether the cost of these projects will be economically viable under a range of oil prices, a commodity whose price fluctuates a great deal. Over the past five years it has ranged from around $20 per barrel of crude oil to $120. Over the past four years the range has been $60 to $120 and today is at around $71. Whether demand will fall is another question.
Echoing her concerns, The Guardian quoted Matilda Borgström, a campaigner at the climate action group 350.org (“Join our global movement to stop fossil fuels and build a future powered by the energy of the sun, the wind and the people everywhere!”) saying, “This move by oil giant BP clearly demonstrates why super-rich corporations and individuals, chasing short-term profit for themselves and shareholders, cannot be trusted with fixing the climate crisis or leading the transition to renewable energy we so badly need.” There are two assumptions in this statement. The first is that it is the job of oil and gas companies is to “fix the climate crisis” (it’s not) and the second is that they can take the lead in developing renewable energy (they can’t).
Borgstrom continues to say that, “Pumping money into more oil and gas increases the risk of climate impacts for us all, flies in the face of legal climate targets and, with the renewables sector growing exponentially, is a big risk to the shareholders that BP is so keen to please.” The underlying argument here is the “stranded assets” one made by many, including investors and NGOs, who say they are simply looking out for shareholders’ interests. The premise is that the demand for oil and gas will fall so much that these companies will have spent tens of billions of dollars to find oil and gas and that there will much reduced demand for it since the price of renewables will have become so much cheaper. Net Zero Investor opines that, “Critics warn that the oil major’s doubling down on fossil fuel expansion risks stranded assets and long-term financial fallout.” Mark Campanale, founder of the Carbon Tracker Initiative has suggested that $1 trillion in oil and gas assets risk being stranded if “a pledge to keep 1.5 degrees” is fulfilled.
Global Oil Production and Projections to 2050
The question then becomes how likely this is to happen. According to the U.S. Energy Information Administration (EIA), today the world produces about 102 mmboed. BP’s daily production of oil is around one million barrels per day—one percent of the world’s total. By comparison, ExxonMobil produces around 3.8 million and Saudi Aramco around 12.8 million. BP’s ambition is to get to 2.5 million barrels per day by 2030. Is this foolhardy and the additional 1.5 million will end up being stranded assets? Or even the one million it is producing today?
In its “International Energy Outlook 2023” presenting seven scenarios for 2050, the EIA’s Reference Case projects the world’s oil production to be around 120 million barrels per day. The OPEC World Outlook projects the same at 120.1 million. ExxonMobil anticipates 100 million and Saudi Aramco at least that. BP’s Current Trajectory puts it 75 million. From this perspective the risk of BP having stranded assets is close to zero unless its cost of production becomes much greater than its rivals and they can absorb this small market share.
A greater concern for the company is if it has enough oil reserves to get to 2050. BP has 3.7 billion in oil reserves, down from around 10 billion in 2021 which was down from 19.75 billion in 2018 when it was producing 3.7 million barrels per day. At two million barrels per day the company has enough for five years of production. But it will continue to explore for more oil—exactly what the critics of oil companies don’t want them to do—and will no doubt find enough to keep it going for years to come. At today’s production levels the world has around 50 years in proven oil reserves.
In terms of the bigger picture, all of these scenarios suggest that the risk of $1 trillion in stranded assets for the industry as a whole is also low to zero. However, there are scenarios from the International Energy Agency (IEA) where some assets might be stranded. I say “might be” because this assumes that oil companies will continue to drill for oil even if it becomes clear that demand is declining rapidly. The IEA projects 55 mmboed in the Announced Pledges Scenario (APS) and 24 mmboed in the Net Zero Emissions(NZE); Saudi Aramco could supply one-half of this. Both of these scenarios strain credulity.
The APS is based on national announcements, “regardless of whether these announcements have been anchored in legislation or in updated Nationally Determined Contributions,” and assumes they are met in full and on time. This unbridled optimism flies in the face of the world’s energy dynamics today.
The NZE is “ is a normative scenario that shows a pathway for the global energy sector to achieve net zero CO2 emissions by 2050.” This is a fanciful scenario of what the IEA hopes can be rather than what is likely to be. The logic is similar to Campanale’s for the $1 trillion in stranded assets since it is based on staying below 1.5°C, a target that is no longer a realistic one and we should just accept that. It is also based on a heroic set of assumptions including “fair and effective global co-operation” and that all countries will get to net-zero with the advanced economics getting there before 2050.
There is also a certain irony in this scenario. Achieving it depends on having 15 percent of energy coming from nuclear when most of the EIA’s scenarios put it at around four percent, with the maximum of five percent. It also depends on carbon capture storage and utilization (CCUS) having a dominant role in the remaining production of fossil fuels. I have written about how those focused on reducing the use of fossil fuels are doing so while maintaining a strong aversion to both nuclear and CCUS.
Conclusion
Oil and gas companies have to make substantial long-term investments in conditions of great uncertainty regarding energy demand, the extent to which their energy hungry customers are transitioning away from fossil fuels, fluctuating oil prices, the capacity and cost of renewable energy, and energy policies at the national and global level. All evidence suggests that 100 million barrels of oil per day is the right number for oil and gas company executive teams and their board to be using in planning their capital commitments. Many forces outside of their control will determine if this number goes up or down.
