Bluebell says BP should reduce investments in bioenergy, hydrogen and renewables between 2023 and 2030 by $28bn, or about 60% © Lightsource BP

Activist investor Bluebell Capital Partners has called on BP to ditch its commitment to cut oil and gas output as well as other keys parts of its strategy to transform the company into a clean energy provider.

Bluebell, a London-based hedge fund that previously took on Danone and Glencore, wrote to BP chair Helge Lund in October shortly after acquiring a small stake in the London-listed energy major.

In the letter, seen by the Financial Times, Bluebell said BP’s pledge to reduce oil and gas production by 25 per cent by 2030 compared with 2019 levels meant it was destroying shareholder value by moving away from hydrocarbons faster than society.

“This irrational strategy has, quite understandably, depressed the value of BP’s share price,” it said.

BP’s commitment to shrink the size of its oil and gas business remains the only hard target to cut output in the sector.

Launched by former chief executive Bernard Looney in 2020, the strategy was welcomed by environmentalists but has failed to fully convince investors. BP has trailed behind its rivals Shell, TotalEnergies, ExxonMobil and Chevron in terms of total returns to shareholders over the past four years.

Looney initially committed to a 40 per cent reduction in output by 2030 but pared that back to a 25 per cent cut last year in what BP described as a response to the disruption in western energy markets precipitated by Russia’s war in Ukraine.

Looney was forced to resign from BP in September in a scandal centred on his failure to disclose past relationships with company colleagues.

In the October letter, Bluebell said its investment predated Looney’s departure and that it would have called for his resignation had the Irish executive not left.

The hedge fund also challenged the pace and extent of investment in BP’s transition businesses — biofuels, convenience, charging, renewables and hydrogen.

BP should reduce investments in bioenergy, hydrogen and renewables between 2023 and 2030 by $28bn, or approximately 60 per cent, said Bluebell. Most of the reduction could be achieved by stopping all investment in renewables, a sector where BP “has no right to win” against specialist incumbents, the hedge fund added.

Renewable power projects generally have a lower return on investment than oil and gas, posing a challenge for companies such as BP, which tend to have higher borrowing costs than pure-play green energy providers.

BP told the FT that it welcomed “constructive engagement” with its investors and that “we have met with most of our major shareholders recently and continue to receive support for our strategy”.

Chief executive Murray Auchincloss, who was confirmed in the role this month, has said he is committed to the plan.

While BP will reduce the amount of oil and gas it produces between now and 2030 to help cut emissions, it has said it can still increase earnings from that business by focusing on its most profitable projects.

At the same time, BP has said it needs to invest in clean energy technologies such as biofuels and renewable power to build future revenue streams for the company as oil and gas demand eventually declines.

Bluebell, run by Giuseppe Bivona and Marco Taricco, has not disclosed the size of its investment in BP, which has a market capitalisation of $100bn. The fund manages about $150mn of assets and tends to hold 12-13 investments at a time.

Despite Bluebell’s relatively small positions, the fund was instrumental in the removal in 2021 of the chief executive of French consumer goods company Danone. That year it also called on commodity group Glencore to spin off its polluting thermal coal business and make other changes.

Glencore in November announced plans to expand its coal division through the acquisition of coal assets from Canada’s Teck Resources but pledged to spin off the combined business within 24 months of the deal closing.

Bluebell said this month that it had sold its stake in Glencore.

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Letters in response to this article:
Renewables vs oil and gas — the investment case / From Eric Knight, Chief Executive, Knight Vinke, Zurich, Switzerland

BP’s net zero plan — what could be more rational / From Professor Anirban Mukhopadhyay, Professor of Marketing, Bayes Business School, London EC1, UK

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