BP is spinning off its offshore windfarm business into a joint venture with a Japanese rival.
The deal comes as the energy giant’s boss Murray Auchincloss dials down the focus on renewable energy to move back towards its traditional focus on oil and gas.
BP has previously said that it ‘aims to be a world leader in offshore wind’ and is developing sites in the UK, US, Germany, South Korea and Japan.
But investors have been concerned about low profit margins in the sector amid supply chain issues and growing competition.
And Auchincloss has been under pressure as the share price underperforms rivals. It is down by 16.6 per cent this year while Shell has fallen by only 1.9 per cent.
BP shares rose 4.3 per cent, or 16.1p, to 393.85p yesterday.
Oil man: BP boss Murray Auchincloss is dialing down the company’s focus on renewable energy to move back towards its traditional focus on fossil fuels
The joint venture with Jera, called Jera Nex BP, will include assets and projects in development with a combined potential to generate 13GW of power, a spokesman for the firms said.
BP will contribute up to £2.5billion and Jera – Japan’s largest power generation company – £2billion for investments up to the end of 2030, though the companies pointed out that the sums may be lower.
Analysts at investment bank RBC noted that BP had previously planned to spend £7.8billion on renewables over the 2022-2030 period with offshore wind likely to have been the biggest part.
Even assuming £1.6billion has already been spent, the latest announcement ‘represents a significant reduction in spending in this area out to 2030’.
Offshore wind was a key part of former boss Bernard Looney’s strategy to reduce BP’s greenhouse gas emissions by rapidly building up renewables capacity and slowing investments in oil.
But that has been rolled back since he quit over a sex scandal last year.
In October, BP abandoned plans to cut fossil fuel output by 2030.
Auchincloss has said that he will focus on the most profitable operations.
He said yesterday that the joint venture would create one of the world’s top five wind developers.
He added: ‘This will be a very strong vehicle to grow into an electrifying world, while maintaining a capital-light model for our shareholders.’
The offshore windfarm sector has been hammered by surging development costs, supply chain issues and higher inflation in recent years.
RBC’s analysts said yesterday’s announcement ‘provides further evidence of evolving strategies [on energy transition], particularly in the offshore wind sector given recent industry headwinds and a much-changed interest rate environment’.
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