BP, the energy giant, said on Wednesday that it would increase spending on oil and gas while sharply paring back investments on various forms of clean energy.
The move, described as a “reset,” appears to be a response to a combination of investor pressure for higher returns and a realization that the so-called energy transition to cleaner fuels is not moving as fast as once expected.
“We found ourselves in a different place now, where nations are prioritizing affordability, assurance of flow, security of supply,” Murray Auchincloss, BP’s chief executive, told analysts on Wednesday. “The transition just is not being valued as much as it was five years ago.”
BP said it would increase oil and gas investment 20 percent, to around $10 billion per year, helping output to potentially grow modestly by 2030. At the same time, the company intends to cut spending on renewables to between $1.5 billion and $2 billion per year, a roughly 70 percent reduction from previous plans.
BP also said it would conduct what it called a “strategic review” of its Castrol lubricants business, possibly leading to a sale that could raise cash to be returned to investors.
In an interview, Kate Thomson, BP’s chief financial officer, said the moves were the result of a reappraisal of the environment for energy companies.
What BP has realized, she said, is that rather than drastically shifting away from oil and gas, “demand for energy and all types of energy is definitely growing.”
That allows BP to focus on “the things that we are known for, the things that we are good at,” Ms. Thomson said.
For a company like BP with a long legacy of fossil-fuel production and distribution, oil and gas now looks more attractive than renewables, with the company anticipating financial returns of more than 15 percent over the next few years on its investments in exploration and drilling.
Mr. Auchincloss was put in charge of BP about a year ago, succeeding Bernard Looney, who was ousted over a failure to disclose personal relationships with other employees.
Five years ago, Mr. Looney announced major changes at the company that included a plan to cut oil and gas production about 40 percent by 2030. Those targets were applauded at the time as industry-leading by some analysts and investors.
In the meantime, though, oil and natural gas prices have risen. And some areas of green energy in which BP invested, notably offshore wind, have fared poorly, especially in the United States.
The Trump administration, which favors fossil fuels, has also altered the investment calculus for energy companies.
Many companies and analysts have said the pace of the energy transition has slowed. Equinor, the Norwegian energy giant, recently said it planned to halve its investment in renewables.
While Mr. Auchincloss, a veteran oil executive, has been gradually changing course, he may have been spurred on somewhat by Elliott, an activist hedge fund, that has taken a sizable stake in BP.
Elliott wants BP to focus on its most profitable projects, while selling off other businesses to bolster the company’s finances, according to a person with knowledge of the fund’s thinking.
Analysts cautiously welcomed BP’s approach, which had been largely expected. “We have disagreed with BP’s policy and strategy over recent years, thus we are pleased to see this reset and reversion to focusing on hydrocarbons,” analysts from Wells Fargo wrote.
“The new strategy appears more shareholder friendly, and over time should be more positive for the stock,” wrote Henry Tarr, an analyst at Berenberg, a financial firm.
Not all investors will be pleased with BP’s new direction. In a recent letter to BP, a group of investment management firms questioned a shift to a greater emphasis on fossil fuel production.
The firms said that while they could understand “the short term business case” for such a change, in the longer run it would increase the risk that the company might wind up with “stranded or value destructive assets as the energy transition progresses.”
Ms. Thomson said that, based on her conversations, she was confident that shareholders would be supportive of BP’s shift. “It’s quite tricky to have everyone satisfied completely with the direction you are taking,” she said.
BP’s share price fell 1.4 percent in trading in London.
