BP’s evolving energy transition strategy faces renewed scrutiny after the company warned of an additional $1 billion impairment charge for the second quarter, largely linked to its gas and low carbon energy businesses.
The latest write down reflects broader challenges facing integrated energy companies as weaker returns from several low carbon investments contrast with stronger earnings from conventional oil and gas operations amid continued geopolitical uncertainty.
In its second quarter trading update, BP said production from its gas and low carbon energy segment is expected to average between 750,000 and 770,000 barrels of oil equivalent per day, down from 798,000 barrels of oil equivalent per day in the first quarter. The company also expects net debt to decline to between $22 billion and $23 billion by the end of the second quarter, compared with $25.3 billion at the end of the previous quarter. Full quarterly results are scheduled for August 4.
The impairment is the latest indication that BP is reassessing the commercial prospects of several businesses that were once positioned as core elements of its energy transition strategy. During the past five years, the company invested heavily in renewable power, hydrogen, bioenergy, electric vehicle charging, and carbon capture as part of its ambition to diversify beyond hydrocarbons.
Bioenergy was among the company’s largest strategic bets. In 2022, BP acquired renewable natural gas producer Archaea Energy for approximately $4.1 billion, identifying bioenergy as one of five major transition growth businesses expected to drive expansion through the decade. Since then, however, declining natural gas prices and weaker market valuations have reduced expected returns across parts of the sector, contributing to a more cautious investment approach.
The shift became more pronounced in early 2025 when BP announced it would reduce annual spending on transition businesses by about 70 percent to approximately $2 billion per year. The decision reflected growing pressure from investors seeking stronger financial performance after renewable and low carbon investments generated lower returns than originally anticipated.
Hydrogen has become one of the clearest examples of this strategic recalibration. BP has withdrawn from several flagship hydrogen developments, including the H2Teesside and HyGreen projects in the United Kingdom, while also exiting a planned renewable energy and green hydrogen hub in Australia’s Pilbara region. In May, the company further reduced its exposure to carbon capture and storage by selling stakes in two CCS projects.
These decisions mirror broader trends across the energy industry. High interest rates, rising project costs, uncertain hydrogen demand, and delayed regulatory support have slowed investment decisions for many large scale clean energy developments. While governments continue to promote hydrogen as a long term decarbonization solution for heavy industry and transport, commercial deployment has progressed more slowly than many developers anticipated.
At the same time, elevated oil and gas prices, supported in part by geopolitical tensions in the Middle East and persistent supply uncertainty, have strengthened the relative profitability of upstream operations. For integrated energy companies, this has reinforced the financial case for prioritizing conventional assets capable of generating higher near term returns and supporting shareholder distributions.
BP has not abandoned all of its low carbon businesses. In Spain, the company continues to advance its partnership with Iberdrola, where a 25 MW green hydrogen facility at BP’s refinery could be expanded after the Spanish government approved the reallocation of €211 million, equivalent to approximately $239.5 million, in public funding. The project illustrates how government support remains a critical factor in improving the economics of green hydrogen investments, particularly during the industry’s early commercialization phase.
