BP profits fall as oil prices fall

image source, Good pictures

Energy giant BP posted a sharp drop in profits last year after oil prices plunged.

Profits are expected to reach $13.8bn (£11bn) in 2023, up from $27.7bn in the previous year.

After Russia's invasion of Ukraine, energy companies reported huge profits while oil and gas prices soared.

Although household energy bills have decreased from 2022, they are still at high levels.

The results are the first BP has published since the company announced Murray Auchinclose as its new chief executive.

The drop in BP's profits echoes results from rival Shell, which last week posted a profit of $28.2bn, up from $39.9bn in 2022.

Despite the decline, BP's profits are still – except for last year – the highest seen since 2012.

The company plans to return $1.75bn to investors in the first three months of the year through share buybacks. It also said it had committed to withdrawing $3.5bn in the first half of 2024.

BP said this year “baseline production from oil production and operations will be higher”, but production from gas and low-carbon energy will be lower.

Last year, BP came under fire from environmental groups after it scaled back plans to reduce the amount of oil and gas it produces by 2030.

Global Witness, a campaign group reacting to the latest results, said BP was on the wrong track.

“Shareholders need to protect their long-term positions. That means demanding a faster clean energy transition for companies like BP. These reckless shareholder payouts are doing the opposite,” said Jonathan Noronha-Gant from the group.

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However, last week an investor group – Bluebell Capital Partners – called on BP to scrap targets for lower oil and gas production altogether, calling them “irrational”.

Energy prices started to rise when the Covid lockdowns ended, but peaked in March 2022 when Russia launched an attack on Ukraine. There were fears of a disruption in energy supplies and many countries, including the UK, imposed embargoes banning all imports of oil and oil products from Russia.

The price of Brent crude reached $128 a barrel soon after the invasion, but is now below $80.

A price hike in 2022 has led all energy companies to take higher profits. In response, the UK government introduced a windfall tax Energy Profits Tax (EPL)“Extraordinary” revenues from companies in UK operations to fund a scheme to subsidize gas and electricity bills.

BP said its North Sea business paid $1.5bn (£1.2bn) in UK tax in 2023, of which $720m was paid to EPL. The previous year, it paid $2.2bn in taxes for its North Sea operations, including $700m from EPL.

There have been fears that oil prices could rise as a result of attacks on shipping in the Red Sea by Houthi rebels, but so far they have been little changed.

The attacks led several companies, including BP, to divert ships from the route through the Suez Canal. It is the fastest sea route between Asia and Europe and is particularly important for the transportation of oil and liquefied natural gas.

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