BP’s new boss has set out plans to reinstate the company structure the fossil fuel supermajor ditched six years ago as part of its failed attempt to reorganise the business to pursue a green agenda.
Meg O’Neill told staff that the 117-year-old company would return to a “simpler, stronger” two-business arrangement including an upstream oil and gas production unit and a downstream business focused on refining and distributing fuels and retail activities.
“In service of becoming a simpler, stronger, more valuable BP, we intend to build an organisation with a clear upstream and downstream,” O’Neill said.
The planned overhaul is the latest step in dismantling the legacy of former chief executive Bernard Looney who in 2020 restructured BP to include a gas and low-carbon energy division as part of a wide-ranging mission to “reimagine” BP as a green energy company.
The green agenda raised concerns among BP’s investor base, and made the company a target of activist investor Elliott Management, which called for BP to return its focus to fossil fuels and simplify its structure.
After O’Neill’s surprise appointment late last year, she took up her post in April as BP’s fifth chief executive since 2020 promising a “clear direction and consistency” as the company navigates “an environment of significant complexity” due to the Middle East conflict.
The war has created one of the biggest energy supply crises in history but BP expects to post “exceptional” earnings from its oil trading desk, reaping a windfall from choppy energy markets triggered by the US-Israeli war on Iran.
Energy traders are navigating significant market volatility after Tehran’s effective closure of the strait of Hormuz shipping route.
BP said on Tuesday that its refining margins had strengthened and that the “oil trading result is expected to be exceptional” in the first quarter of its financial year.
Last week, its UK rival Shell said it anticipated “significantly higher” oil trading profits for the quarter.
Analysts have been upgrading their profit forecasts, with the US bank Citi raising its estimate for BP by 20% to $2.6bn adjusted net income in the January to March quarter.
Brent crude has risen sharply from about $61 a barrel in January, and hit $119.50 several weeks ago after the effective closure of the strait. The global oil benchmark rose above $100 a barrel again on Monday and dipped 1% to $98.28 a barrel on Tuesday.
Brent averaged about $78 a barrel during the January-to-March quarter, compared with $63 in the fourth quarter and $75 a barrel during the same period last year, according to Reuters.
Analysts at JP Morgan Chase expect oil prices to stay above $100 a barrel in the second quarter, while Goldman Sachs last week reduced its forecast to an average price of $90 from $99 a barrel.
BP’s update came as the International Energy Agency cut its forecasts for global oil demand this year. In its latest oil market report, it warned that supply and demand would both be reduced by the conflict in the Middle East.
Oil demand is now forecast to fall by 80,000 barrels a day this year, whereas last month the IEA forecast demand would rise by 640,000. This would be the first annual decline since the 2020 Covid pandemic.
The group also said global oil supply plummeted by more than 10m barrels of oil a day in March, to 97m. It said continued attacks on energy infrastructure in the Middle East and restrictions to tanker movements through the strait had led to the largest disruption in history.
BP expects overall oil and gas production to be broadly flat in the first three months of the year. Refining margins rose to $16.9 a barrel in the first quarter from $15.2 a barrel in the previous three months, which is expected to lift earnings from refined products by $100m to $200m.
O’Neill will face shareholders at the annual meeting on 23 April and BP is due to report first-quarter results on 28 April.
