A note from bp’s CEO, Murray Auchincloss, on delivering business value

From international oil company to integrated energy company, the destination is unchanged. So says Murray Auchincloss, bp’s new chief executive officer. Here, Murray sets out bp’s near-term priorities and explains how the IOC to IEC strategy enables bp to grow in value.

We’re confident in our IOC to IEC strategy

The destination stays the same – from international oil company to integrated energy company, IOC to IEC. We’re confident in our strategy, and plan to deliver it as a simpler, more focused, higher-value company.

We invest in today’s energy system while building out tomorrow’s

This is a great company with great people. We’ve got a history of being involved in and building integrated value chains for delivering energy. That experience and capability, and our track record, give us a lot of confidence in what we’re doing, and over the past four years, we’ve learned a lot and adapted along the way. 

That’s made us stronger, more confident in the growth we have coming, and more convinced about the value we can create. I think there are only a few companies in the world that can do this at scale, and bp is one of them.

Building, growing and integrating our value chains

More than 100 years ago, we started our first value chain – oil fields, attached to refineries, with products sold in service stations and airports. Now, we’re introducing biofuels, such as biodiesel and sustainable aviation fuel.

And we’re looking at how we can use lower carbon hydrogen and electricity for power to reduce carbon emissions at our plants.

More than 60 years ago, we started to create a second value chain, linking natural gas fields with industries and homes, and now, increasingly, to plants that turn the gas into liquefied natural gas, or LNG.

And we’re introducing biogas into the value chain, and working on a major technology project in the UK to produce lower carbon power from natural gas by capturing and storing the carbon emissions.

Over the past four years, we’ve been accelerating action aimed at creating a third value chain. One that can use solar and wind to produce lower carbon hydrogen to provide to our plants and customers, and electricity to power our EV charging points.

All of this, we believe, supports getting us to where we plan to be as a company, delivering higher margins with lower emissions.

As an IEC, we can do even more to grow the value of bp

Across all the value chains, we have a choice about how much we produce ourselves or purchase from other producers. The magic is getting the mix right to optimize returns and trading options.

We see tremendous opportunity to grow and sustain value from our oil and gas business out to 2030 and into the next decade, and we expect to achieve comparable levels of returns from our transition growth engines.

In bioenergy, and from our EV charging and convenience portfolio, we expect returns of more than 15%. Over the past five years, Lightsource bp has generated returns in the mid-teens from solar. In offshore wind, the whole sector is experiencing cost and supply chain challenges, but we continue to expect double-digit returns from our projects once you factor in the options of selling stakes, bringing in partners and integrating the power into our own businesses.

And the more we interlink these value chains, the more we can grow returns and the value of bp. By how much? For the past four years, our traders have contributed, on average, around a 4% uplift to our returns (return on average capital employed, ROACE).

We think that’s beyond what a ‘pure player’ focused on one product or value chain can achieve.

We will be pragmatic and relentlessly returns-focused

Most important is to ensure absolute discipline in investing our scarce capital, in oil and gas and our transition businesses. Yes, we want to help scale lower carbon energy value chains and position ourselves to profit from them. But we must remain flexible, adjusting in line with changing demands and societal needs – as we have done previously.

We’re a stronger company because of our disciplined management of the balance sheet over the past several years, including disciplined allocation of investment capital. That’s at the core of a financial frame focused on optimizing returns and growing distributions for shareholders.

We plan to get simpler to create value

For bp, the past four years have largely been about origination. Everywhere you look across the business we have tons of options – in oil and gas, solar, bioenergy, hydrogen, offshore wind, EV charging.

The big focus now is getting our organization, the engineers and the commercial people moving from origination to execution. Focusing means forcing the pace on decisions, stopping lower-value activity and reallocating our people to the right place to speed up delivery times on projects to increase value. To me, it's all about focus, challenging ourselves to simplify everywhere we can.

Take our oil and gas business as an example. Over the past few years, we have centralized projects and operations and created agile squads that move to priority work. We have a ‘design one, build many’ mindset, and we have continued to lead on digitization and technology.

This is delivering results, creating value and lowering emissions. Our underlying oil and gas production grew by 2.6% last year and we expect to grow earnings (EBITDA) to 2025, then keep them at that level through to 2030, with the capacity to sustain earnings at this level well into the next decade.

At the same time, we’ve got targets and aims on emissions. We’ll have an update in March on what we’ve achieved in 2023, but I can share that we have hit an incredible milestone by deploying our methane measurement approach across our largest operated upstream oil and gas assets.

Engineering, science and technology will be at the heart of the company

I see tremendous opportunities for technology – both digital and physical – to improve how we work, simplifying, driving efficiency and lowering our costs.

I see huge opportunity here using our industry-leading digitization and technology expertise and global capability centres. For example, we want to put AI capabilities into the hands of our global workforce. We have been working with artificial intelligence for five years and now have about 100 live projects across our businesses.

We know exactly what we need to do

We are focused on delivering our 2025 targets, and we are confident for two reasons. First, we have strong momentum behind our strategy. We spend a lot of time with our shareholders, listening and talking about our strategy, and what we hear from them is support for our direction and our progress in delivering it.

And second, our businesses are clear on what they plan to do in the next two years – from starting up six major oil and gas projects and adding to our LNG supply, and from building 15 to 20 new renewable gas plants a year to growing our EV charging.

We know exactly what we need to do to grow the value of bp.