At the new BP, wind is out and cost efficiency is in as CEO Murray Auchincloss plots a ‘hard reset’

A fourth-generation oilman from Canada, Auchincloss started working for his father in the industry as a teenager, learning the ins and outs of the oilfield. He then took the finance route at the University of Calgary and eventually joined Amoco in 1992 before it merged with BP. Now he’s initiated a hard “reset” at BP, cutting costs, scaling back on renewables and the energy transition, and doubling down on fossil fuels, especially in upstream oil and gas exploration and production in the U.S. And the Middle East—from the Kirkuk oilfield in Iraq to the Kaskida hub in the Gulf of Mexico.

In the meantime, BP is selling its U.S. Onshore wind portfolio, divesting a 50% stake in its Lightsource solar business, and selling much of its global offshore wind business through a new, fifty-fifty joint venture with Japanese utility JERA. BP also sold a $1 billion stake in the TANAP gas pipeline from the Caspian Sea to Apollo Global Management. A strategic review of its Castrol lubricants business is up next, as well as putting its retail fueling business in Austria up for sale.

Now, BP also is searching for a new board chair following the April 4 announcement that Helge Lund, who strongly supported BP’s push into energy transition businesses, will step down, most likely in 2026, according to the company.

As market analysts wonder whether BP can survive on its own, Auchincloss tells Coins2Day he is staying focused on one deceptively simple strategy: “Stick with what you’re good at.”

The following has been condensed and lightly edited for clarity.

With the reset going into place, how was it finding the right balance? On one side, you have people complaining you’re taking a U-turn away from the energy transition. On the other, Elliott Management and others are reportedly pushing for deeper change. So, why is this reset plan the appropriate way to go?

We had to think about how you can strongly grow cash flow and returns for shareholders at the same time you continue to build the strengths of the business. So, obviously, given world demand, and given the countries in which we operate, we needed to continue to grow oil and gas production. That’s sensible. We found a place we think is quite deliverable with investment. We’ve increased the investment by about $2 billion into upstream. That’s really a question of what does it take to grow that durably over time. We think we found the right balance.

On the downstream business and the transition businesses, it’s about making sure they can compete on their own. That’s why we’re setting return thresholds for bio gas, biofuels and EV that match what we do in the upstream, so it’s very returns focused. The parts of transition that have a hard time competing, you move to off balance sheet basically. You keep them because you need the electron flow.

If you think about what we really are, we’re an oil and gas company, we’re an integrated downstream position, we’re a big [energy] trading company. For that trading company to thrive and grow in the future, it needs those electrons that customers are demanding so much. You can buy some from other people, but you need your own as well. That’s how we found the balance. And, you know, support from shareholders has been very strong.

How is the investor tour going and where, if anywhere, are you still getting pushback? And, have you continued that tour stateside as well?

We’ve met 40% across the globe of our shareholders as of [March]. Time flies when you’re having fun. That’s pretty good hitting 40% in a couple of weeks’ time. I would anticipate we hit 60% of shareholders by June. The feedback is pretty unanimous. They’re supportive of the direction of the strategy. They think it makes sense, and their feedback on what they now expect is also pretty unanimous, which is just go and deliver. Just get out there and deliver. It’s good to have the strategy behind us, and now it’s just all about delivery, which is all about running our plants well, both in the upstream and the downstream. It’s all about continuing to trade well. It’s all about bringing the next major projects online and continuing to drive cost efficiency. We’re taking another 25% out of our cost base. All of that then gets to 20% growth in cash flow compound through the next three years. Investors just want us to deliver on them.

Could you briefly summarize how you would explain the mistakes of the past and getting to the reset today, if you’d even couch them as mistakes?

MA: I look back to the [Amoco] merger [in 1998] is the way that I like to think of these things. I was a youngster when the merger happened. Since then, I’ve had the chance to reflect deeply on the things that we’ve not done as well as we could in the past. Process safety is the absolute No. 1 thing that keeps us moving forward. In our refineries and in our oil and gas facilities, it is something that just sticks tightly as the No. 1 thing to make sure that you learn from the past. The second thing is we had waves in the 2010s where we chased too much stuff. And 2020 to 2023, we chased too much stuff as well. In the 2010s, it was the upstream, pursuing too many projects across the sector, and we became wickedly capital inefficient as we did that. In the 2020 frame, we just chased too much. We should have narrowed that. That’s obviously what I’ve done now. I think the last thing I’d say is stick with what you’re good at and continue to grow that as you build new businesses. So, stick with the upstream, continue to grow it, because that’s what nations want, and grow adjacent businesses at the same time. That’s something you can see me refocusing on now.

On the transition business, could you go through the plans of selling U.S. Onshore wind, the stake in Lightsource and the new JERA offshore wind joint venture?

On the renewable side, solar is a very profitable business. The way that we run it is the develop-and-flip model through our subsidiary Lightsource. They get the land and the permitting, they secure the panels, they secure the financing, and they bundle that, and they flip it to a customer. That’s their model. They’ve been doing that since 2016. We’re active in 14 countries around the world. The partners (the founders and managers) had to move out of the business. They just couldn’t afford the expansion moving forward, and they wanted to go do something else. So we bought it back in. We’re now marketing it, and we’ll bring in a big, big partner to this 50-50. What’s key to me is we take it off balance sheet. That will then allow it to grow at a much faster rate. So right now, it’s doing 3 gigawatts (GW) a year of development. It’s got capacity at 5 [GW]. If you bring in a big partner, most of the ones we’re talking to want 6 to 8 GW a year out of this. For shareholders, there’s no capital. That’s a good thing. For us, we’ll get a steady stream of income and then a steady flow of electrons into the trading business. So that’s how we think about the solar side.

Offshore wind, obviously, the U.S. Market is quite difficult. But, in places like Europe and the Far East where they don’t have the blessing of natural resources the U.S. Has, the way they get security of supply is through offshore wind. So, we’ll continue to work in those nations. We brought a great partner in with JERA, the largest utility in Asia—huge, huge markets across southeast Asia to complement our markets inside Europe. We’re a pretty good construction company. You bring the two together, and it makes it a very capital-light model. We’ve got a few capital contributions to make, but then we won’t be injecting capital once we’ve done those contributions. It gives us the chance to grow further. Over time, it’ll give us a dividend stream again, and flow of electrons into these markets where they don’t have their own domestic sources of natural gas or oil, like continental Europe and like Asia. It’s a very exciting model to be able to take that off balance sheet so the shareholders don’t worry about capital being deployed into that.

There are obviously criticisms from the environmental side. Can you discuss the decision to not move out of renewables—you’re scaling back?

We remain committed to transition, and the reason we remain committed to transition is because we have so many customers and governments that need that help. That’s what it’s about. As far as the scale of our transition, we have pulled back the capital that we spend, but we’ve created structures where there will be continued capacity to grow. As you look around the businesses at what we’ve created, we’ve got a top-five solar developer globally, a top-five wind developer globally. We’re No. 1 in biogas in the United States through our Archaea [Energy] acquisition. We’re No. 2 in Brazilian biofuels. We’re anywhere from No. 1 to four in fast-charging markets where we directly deploy our capital. And there’s another one in India where, again, it’s an off balance sheet structure. We have actually started construction on two carbon sequestration programs. We’re not just talking about it; we’re not doing PowerPoints. We’re actually constructing in Indonesia and the UK, with government support to start the carbon sequestration, which we think is so important for the future. So, we’re actually doing stuff, is my answer, and we’re constructing things. And there are very few companies that are doing what we’re doing to try to promote the transition. The criticism that comes is we have less of our own direct capital. I’m fine with that criticism, given the activity we’re doing. We’re just using smart restructuring to do it.

Regarding divestments and strategic reviews, Castrol is the clear potential sale. Can you touch on that, and then what might else be to come?

We announced a $20 billion divestment package over the next three years. It’s a higher rate than we’ve done in past. It will continue to be made up of tail assets in the upstream where they get late life and somebody else can add more value than ourselves. It will continue with decapitalizing pipelines across the world. We continue to high-grade our downstream business, letting go of a German refinery and concentrating our retail positions around the globe. We have about 6,000 operated retail positions, and we’re saying that, over the next three years, we’ll take that 10% lower to really focus on the core markets and corridors that we want. Lightsource BP will bring in a partner, as I talked about.

And then, Castrol, it’s [reviewing] strategic options. Either way, we’ve started conversations already. We’re quite open on Castrol. It’s a less integrated business. It’s had a great run over the past eight quarters with income going up quarter on quarter. We see a nice runway through the end of the decade as well, and starting to build adjacent businesses in data center cooling and consumer products. It’s a fabulous brand globally. If it’s going to grow in these other adjacencies, it’s going to need a lot of capital. So, we think it’s sensible to explore with partners what they may want to do in this space. I think others will value this quite highly.

Oil and gas analysts are wondering if BPX (U.S. Onshore oil and gas) could be spun off or sold, although you seem to not have that in mind.

With BPX, I don’t think about it. It’s such an important part of our business that we don’t want to lose control of it. They do the most fracking, well drilling, etc, inside the portfolio. They are a center of expertise on unconventional. They help us access in Oman, in Abu Dhabi, Libya, etc. They help us do frac designs in Oman. They do frac designs offshore in the Gulf of America for Kaskida, Tiber, etc. They’ve got a huge concentration of knowledge that helps the rest of the business. If you spun it out, they couldn’t do that for you, so you’d have to recreate it. That’s tremendously inefficient for the business.

Bigger picture, and amidst rumors, is there anything you’d want to say to shut down speculation from the standpoint of whether BP could be sold, or end up in a mega merger with Shell?

I can’t really say anything other than we’re focused on our own business, our strategy and driving it forward. Obviously, the media likes to speculate about this. Investment bankers like to speculate about this. But, we’re just focused on our own business right now. We’re happy to have launched the strategy, and we’re going to drive forward and grow cash flow, and that’ll make us strong and independent.

Obviously, you have a lot of experience here going back to Amoco more from the financing and dealmaking side of things. I wanted to get your thoughts on, being finance-driven and making those tough decisions, if you feel like you’re the right person at the right time?

I’m fourth-generation oil and gas. My dad was a geologist. As I moved into my teens, he was running a company and brought me into the company. I was working in gas plants. I was working on rigs. I was picking logs and drilling targets at [age] 14. How strange is that in life? I had a pretty thorough induction into the sector from a family perspective. So I’m probably more technically astute than you might otherwise think with a finance degree.

Not just dollars and cents.

I’m not an engineer, I’m not an expert, but I know enough to be dangerous. At the point in time we’re at right now, what we really need to focus on is concentrating the portfolio and then hardcore delivery. I think having the performance edge of a finance person is exceptionally important, being rigorous to make sure that we’re making the right investment cases is incredibly important right now. I had the opportunity to train as chief of staff under [former CEO] Bob Dudley for four years. Understanding how to interact with governments and help move relationships forward has been very, very important, both from the deal side that I’ve done and then that great opportunity I had with Bob. That’s what’s really needed in the world right now. So, I think this is the right moment for a person like me, and I’m delighted to have the job.

Do you feel like, because of your background, the CEO transition has gone smoothly, even given the abrupt timing?

From Bernard (predecessor CEO Bernard Looney) to myself? It’s OK. I mean, I knew mostly what we were doing—95% I was familiar with. Of course, the CEO job carries on relationships and interactions the CFO doesn’t see with host governments. That’s really the big thing that the CFO doesn’t necessarily see. But, given the fact that I did that with Bob, I could relatively easily step into that role. I think I had a great business background with what BP was doing. I was infinitely familiar with the portfolio. I could very easily parse my way over a six, nine, 12-month period, what investments we should stop, what we should focus on. And, then, start to do the transactions that have laid the framework for what we’ve done, like the offshore wind transaction that we did. So, it’s pretty smooth, and the only thing I really had to pick up was government relationships, and that’s gone well.

Switching gears to the upstream side, as we talked about you’re going up about $2 billion. I know some of the projects are already spelled out, but I wanted to get your take on where you see more of the growth coming?

If you think about where the two growth parts of our portfolio are, it’s the Amoco heritage here in the United States. It’s growing substantially in BPX, starting to grow the Gulf of America (Gulf of Mexico) as well, especially in the Paleogene [formation]. The other growth avenue is back to our BP roots, which is the Middle East, where we’ve expanded in Oman and Abu Dhabi. We have big deals in Iraq. We’re looking at Kuwait. We’re looking at Libya. That’s the BP heritage of strong relationships from the 1920s, all the nations. Those are the two big growth avenues that we see moving forward. The rest of the portfolio is relatively stable with eight, nine countries that we operate in, but those are the two big growth avenues we see. They’re low cost of supply, they’re very high quality, and they’re durable for decades and decades.

If you want to go BP legacy first, the Iraq news might be the most recent.

In the Middle East, we’ve been in Oman since 2013. We’ve taken an unconventional field where we took our expertise from the Lower 48 and brought it to Oman. That’s built up a fabulous business that’s grown production from 1 Bcf (billion cubic feet of natural gas) per day to 1.5 B (Bcf per day), with the ability to expand beyond that. In Abu Dhabi, we’ve been there for 100 years. We’ve worked out new agreements to do another wave of LNG with them, called Ruwais. We’ve expanded and increased the role inside the onshore fields of Abu Dhabi, as well the conventional fields. And we’re in discussions with Abu Dhabi about unconventional as well, again, using the expertise of our Lower 48 business.

Iraq is very exciting. We’ve been there since 2008 in Rumaila. We took that field from 850,000 barrels [of crude oil] a day up to a 1.5 million per day of production. The government has appreciated the work we’ve done there, and now they’ve asked us to take on Kirkuk. It’s very exciting. Five domes right near the surface. We discovered them in 1929. We’ve obviously been out of them for a few decades. Now, we’re going to go back into them. It’s 3 billion barrels in the five domes, plus there’s saturated rock below it, plus there’s saturated rock everywhere in the nearby exploration territory. The overall territory we think has 20 billion barrels of oil yet to produce. We’ve got very competitive terms with the Iraqis, and we look at that as another great growth avenue for our business.

In Libya, we’ve kicked off exploration wells onshore, and we’ll move offshore in exploration as well. The Libyans have launched another license round, and we’ll think about participating in that based on the quality of the acreage that’s been brought about. In Kuwait, we manage Burgan, which is one of the world’s great [oil] fields. It produces 1.5 million b/d, and we’re in conversations about expanding in Kuwait as well. Each of those countries has huge resources, low costs of supply, and tremendous legacy from the past 100 years that nations want to continue to ask us to help them.

America?

Sure, onshore or offshore first?

Let’s go offshore, Gulf of America. We obviously have five hubs out there now that are producing that we operate, and we have three non-operated hubs that Shell operates. That’s a great business. It produces around 330,000 to 350,000 barrels per day through the decade. Very excitingly, we’re expanding in the Paleogene now. We discovered these back in 2006 [to 2009], and we took a pause post-Macondo (2010 Deepwater Horizon disaster). The industry has developed the technology to develop these high-pressure [and high-temperature] fields, 20K (20,000 psi) fields. We’re back now. The technology is developed by others, and it’s time to start developing these resources ourselves. We have 10 billion barrels in place across the discoveries we’ve already made. We launched Kaskida in the middle of last year. That will be 80,000 barrels a day coming on around 2029. We’re hopeful to move towards final investment decision on Tiber-Guadalupe [projects] shortly in the probably middle of the year, and that will be another 80,000-barrel-a-day boat alongside that. We have two big appraisal wells going in east and west of Kaskida, and an exploration well to the west that looks very, very prospective. It could take the resource from 10 billion to 15 billion barrels. It’s a very exciting new hub for America and a strong chance to grow our business in the Gulf of America through the next few decades.

In the Lower 48, we acquired BHP (onshore U.S. Oil and gas assets) back in 2018 and that’s been a fabulous business. We’ve been well ahead on synergies, well ahead on capital productivity, and the team is leading in efficiency. Getting the most value for money is the way that we like to think about that. The Permian [Basin] is growing. We’ll finish off the last central gathering station in middle of this year, and then we expect to fill that up. Across the Haynesville, Hawkville, Eagle Ford (southern and eastern Texas and northern Louisiana fields), we hold 30 Tcf (trillion cubic feet) of natural gas. These are the very best gas basins in the United States.

We continue to see gas demand growing like crazy through the decade, both from LNG export that we see, already started or under construction. And with gen AI (generative artificial intelligence), we’re seeing continuing material increases in demand across the decade as well. The U.S. Is going to need an awful lot more natural gas to supply all these things, and we’re very well positioned in the three best sub basins with the highest quality rock. We’ll lean into that as we move through the rest of the decade. We plan to grow in the U.S. From 650,000 barrels a day to 1 million a day by the end of the decade.

You’re pretty bullish on AI and the data center buildup. Obviously, it’s happening, but there’s a lot of debate of whether the demand projections are overstated or not.

Well, we track these things very closely through our trading organization. It’s obviously key for us to understand that. We’ve identified $2 trillion worth of investments that have already been decided upon. It’s $50 billion a center if you listen to the CEOs of Microsoft, etc. So, you can kind of calculate this. We’re pretty clear that there’s not much more coal. It’s very difficult to get marginal wind or solar to backfill these things. So, it really has to go back to natural gas to provide the energy for these. Nuclear [expansion], in a five-year window, is very hard to imagine. That’s what makes us very bullish about the natural gas environment. We haven’t seen this type of build out around the rest of the world. The rest of the world seems to be 12 to 18 months behind the U.S. I imagine, as the rest of the world catches up, you’ll see further demand for energy in those geographies as well.

Natural gas prices are up more recently, but a key thing there is getting more stability in the pricing. Do you see that beginning to occur?

I’m not sure I’d ever believe in stability of natural gas price in the United States. I was CFO for the Lower 48 business back in 2005 to 2007, and I think we hit $15 (per million Btu) or something like that (after record-breaking storm season of hurricanes Katrina, Rita and Wilma). I’m not sure North American gas will be stable. I think it’s quite volatile given the nature of those markets. For us, the way we manage that risk is through hedging. If we hit $4 Henry Hub (U.S. Natural gas benchmark) over an 18-month period, the returns in the gas basins equal to Permian at $65 WTI (West Texas Intermediate—U.S. Oil benchmark). So, we look for $4, and then we’ll do durable hedges. If you can put in place an 18-month hedge, then that pretty much guarantees the returns you’re looking for. So, we have an approach that takes hedges to manage price risk. We’re also in conversations with data centers about long-term supply at fixed prices. Obviously, we have the capacity of being one of the world’s largest LNG traders. So, we have multiple ways to manage the price risk. But I don’t think the volatility in natural gas pricing will disappear anytime soon, up or down.

How are things going with your Palantir tech and AI partnership, and its role in incremental efficiency gains helping free cash flow and everything else you’ve highlighted?

We’ve been working with Palantir for 13 years now. We brought them into the upstream to help us start to think how we could digitize back in 2014. So, we’ve been at that for 10 years. They’re a fabulous company that has a really nice chemistry with us. They’ve got the data scientists who can easily fit in with our engineers, watch what they do, and help them think how they can improve their jobs. If you fast forward through those 10 years, what’s come about is Palantir has helped us digitize all of our subsurface globally. They helped us digitize every single well we have. The same for the platforms, the same for the export lines, the same for well design history, the same for project design. They’ve helped us digitize every little bit of it from the wellbore to the export point. It enables the engineers to be able to visualize this stuff, see the history of 50 years of drilling, see the history of maintenance, understand where things have gone wrong, and become predictive.

Gen AI is now a real thing and Palantir AI is a real thing. What it’s enabling us to do is previously we could access about 2% of the data. Now, we’ll be able to access all of it. It will allow predictive maintenance, faster planning, you name it. An example I give is well design. Where normally it’s 10 to 20 people to go back and look through the history of wells, understand the trajectories, how they’ve performed over the years, and how to decide on what the next well to drill is. It would take 10 to 20 people six months to give three options on wells for managers to decide on. Now we’re down to a couple of days with hundreds of options through the gen AI. I see tremendous upside with this mass absorption of data Palantir can help us with.