BP scales back on climate ambitions as it records record $23bn profits

BP's profits more than doubled to $27.7bn (£23bn) in 2022, compared with $12.8bn the year before.

It comes hot on the heels of Shell announcing record annual profits doubled in a year to $39.9bn (£32.2bn) afer energy prices surged in the wake of Russia's invasion of Ukraine. The gains of Europe's largest oil and gas compan doubled from a year earlier and were the highest in its 115-year history, outstripping the previous record of $31bn in 2008.

In the wake of Shell's profits, the Labour party asked for Britain’s energy profits levy to be revamped to capture more of the exceptional earnings made by oil and gas firms.

Three years ago BP chief executive Bernard Looney launched a commitment to cut oil and gas production by 40 per cent to cut the group’s emissions and move to lower-carbon forms of energy.

But now the energy giant changed its plans to cut production, indicating that oil and gas output in 2030 was now expected to be only 25% lower.

The new wave of energy giant profits have led to more calls for better support for struggling consumers in the cost of living crisis and for firms to pay more tax as many households struggle with rising bills.

Energy prices rose sharply in March last year after Russia invaded Ukraine, sparking concerns about global supplies.

The price of Brent crude oil reached nearly $128 a barrel, but has since fallen back to about $80. Gas prices also rose but have come down from their highs.

It has led to huge profits for energy companies, but also led to a rise in energy bills for households and businesses.

Rishi Sunak introduced the tax when he was chancellor, describing it as a 25% Energy Profits Levy.

The levy applies to profits made from extracting UK oil and gas, but not from other activities such as refining oil and selling petrol and diesel on forecourts. Mr Hunt said it would raise £40bn over six years.

Oil and gas firms also pay 30% corporation tax on their profits as well as a supplementary 10% rate. Along with the new windfall tax, that takes their total tax rate to 75%.

In the Autumn Statement, Chancellor Jeremy Hunt announced this would increase to 35% from January 2023, and stay in place until March 2028. It had previously been scheduled to finish at the end of 2025.

Friends of the Earth Scotland said energy companies were "not serious about climate action or transitioning away from oil and gas" adding that the evidence shows they are spending just a tiny fraction of their profits into truly green projects.

It registered concern that BP is actually scaling down its investments into green energy and "plan to be drilling for more oil and gas for decades to come".

Friends of the Earth Scotland’s oil and gas campaigner Freya Aitchison said the Scottish government should chart a "clear path away from oil and gas and towards an energy system that is built on clean, reliable renewables".

She added: "Ministers must listen to the science which tells us that to meet climate targets in a fair way, fossil fuel extraction needs to be phased out in the next decade.”

Ed Miliband, Labour’s shadow climate change and net zero secretary, said: “It’s yet another day of enormous profits at an energy giant, the windfalls of war, coming directly out of the pockets of the British people.

“What is so outrageous is that as fossil fuel companies rake in these enormous sums, Rishi Sunak still refuses to bring in a proper windfall tax that would make them pay their fair share.”

Paul Nowak, the general secretary of the TUC, said hard-pressed families were being treated like “cash machines” and would “rightly feel furious”.

Calling for higher windfall taxes on oil and gas companies, he added: “As millions struggle to heat their homes and put food on the table, BP are laughing all the way to the bank.

“Ministers are letting big oil and gas companies pocket billions in excess profits. But they are refusing to give nurses, teachers and other key workers a decent pay rise.

SNP energy spokesman Alan Brown MP said the UK government must scrap its "downright offensive" plan to raise the energy bill price cap yet again in April - and guarantee households will continue to receive the £400 Energy Bill Support Scheme payments.

“It’s ludicrous that ordinary families are paying through the teeth while major companies are making record profits. Instead of increasing people’s bills, the Tories should be reducing them."

Following the record profits, Mr Looney said BP would spend $8bn more on its “transition” businesses — biofuels, convenience, charging, renewables and hydrogen — between now and 2030 than previously planned.

However, the group said it would also increase its oil and gas investments by the same amount, targeting “short-cycle fast-payback opportunities with lower additional operational emissions”.

“It’s clearer than ever after the past three years that the world wants and needs energy that is secure and affordable as well as lower-carbon,” he said.

BP said it had incurred total taxes of $15bn worldwide – its highest annual total.

In the North Sea, which it said accounts for less than 10% of global profits, it will pay $2.2bn (£1.82m) in tax for 2022, including $700m (£581.3m) because of UK windfall taxes, known as the energy profits levy.

In November, it said it expected to pay $800m in windfall tax on its North Sea operations.

Last year, BP's chief executive dismissed rising calls for a windfall tax on fossil fuel companies to help UK households weather the record surge in global gas prices after his company at that time made its biggest profits in eight years.

BP’s profits for the final quarter of last year leapt 35-fold as gas prices across global markets reached new all-time highs, and the international oil price reached a seven-year record towards the end of the year. Its chief executive, Bernard Looney, had said that BP becomes a “cash machine” at those prices.