Oil AGMs presage awkward investor decoupling

LONDON, April 28 (Reuters Breakingviews) - BP (BP.L), once seen as "best in class" for its ambitious green goals, kicked off the industry's AGM season by trying to defend both its energy transition commitments and its pledge to remain "a predominantly oil and gas company". Bernard Looney, the chief executive of the British oil major, stressed that his group has gone above and beyond, with its spending on renewables, hydrogen and other clean power surging from just 3% of capital spending to 30% in the last three years. Chair Helge Lund defended a sudden reversal in February to now cut less oil and gas production by 2030. Some shareholders, including the UK's biggest pension funds, had questioned why the decision wasn't held to a resolution and called for voting him down.

The fact that Lund was re-elected by 90% of the shareholders while a climate resolution advocating for more aggressive emission targets was shot down could give cover to BP's European peers like Shell (SHEL.L) and TotalEnergies (TTEF.PA). Big Oil had more than doubled its profits in 2022 as energy prices spiked after Western sanctions on Russian energy. Central banks' push to hike interest rates to tame inflation has made more questionable what used to be an acceptable return of 4% to 5% on solar and wind assets.

While those disruptions may reverse, BP has shown how oil companies are changing in the longer term to focus more on hydrocarbons like LNG, and is shifting its attention to lower-hanging fruits like EV charging in Asia. The risk is that such a middle ground will fail to please investors in both camps. Pension investors like the Universities Superannuation Scheme, for example, are strengthening their climate investment policies and targeting board members to drive change. Meanwhile, hedge funds and asset managers like BlackRock (BLK.N) face awkward conversations with their own teams dedicated to climate solutions investments. The traditional oil investor base may soon start to question why companies aren't doing much more in oil and gas, if that's what drives profitability and market performance. The oil world's own awkward decoupling is happening fast.

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(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

CONTEXT NEWS

Shareholders at BP's annual general meeting on April 27 approved the re-appointment of BP Chairman Helge Lund by a majority of 90.43% after several investors, including five of the UK's largest pension schemes, called on shareholders to oppose it to protest BP's energy transition strategy.

BP had in February pared back its industry-leading commitment to cut its oil and gas output by 40% by 2030, compared with 2019 levels, and is now targeting a 25% decline.

A shareholder resolution calling on BP to set tougher carbon emission reduction targets won the support of 16.75% of votes at the energy company, according to preliminary results. The resolution filed by activist group Follow This called on BP to commit to absolute carbon emissions cuts by 2030 in line with the Paris climate deal.