BP has made its largest oil and gas discovery of the past 25 years off the coast of Brazil as it continues to shift its focus away from renewables and back to fossil fuels.
The Santos basin oil and gas discovery, which is located in deep waters, is the company’s 10th oil discovery of the year and could be its largest since its discovery at the Shah Deniz gasfield in Azerbaijan in 1999.
BP is carrying out further tests on the Santos discovery, made beneath about 2,400 metres of water and 250 miles (400km) off the Brazilian coast, to gauge the potential of the oil and gas basin. It is likely to play a significant role in the company’s plan to increase its oil and gas production to between 2.3m to 2.5m barrels of oil equivalent a day.
The company said on Monday it had also started a new oil extension project in the Gulf of Mexico that should add an extra 20,000 barrels a day to its production. The Argos project would be the first in a series of new projects in the Gulf between now and the end of the decade.
BP has returned its focus to fossil fuels in recent years after abandoning its failed plan to cut its hydrocarbon production, which had favoured expanding in low-carbon energy alternatives, such as offshore wind.
Gordon Birrell, the head of BP’s oil and gas production business, said the discovery was “another success in what has been an exceptional year so far” which had underscored the company’s “commitment to growing our upstream” oil and gas production.
He added that Brazil was an important country for BP, which will explore the potential of establishing “a material and advantaged production hub in the country”.
The Santos basin, which is in coastal waters off Rio de Janeiro and São Paulo, is BP’s second discovery in Brazil this year. The group has also announced oil and gas discoveries in Trinidad, Egypt, the Gulf of Mexico, Libya, Namibia and Angola, in a marked retreat from its former green agenda.
The company’s plan to become a “net zero” energy company has faced a string of unforeseen hurdles since it was put in motion in early 2020.
The Covid-19 pandemic triggered one of its worst financial results – a $5.7bn loss for 2020 – since it reported a $4.9bn loss for 2010 following the Deepwater Horizon oil spill. In 2022, it was forced to take a $25bn hit after offloading its stake in the Russian oil company Rosneft after the Kremlin’s invasion of Ukraine.
While the company invested heavily in the offshore wind industry, which has suffered increasing costs in recent years, its rivals were able to exploit the surge in fossil fuel prices after the Russian invasion by pumping more oil and gas.
BP, which announces its half-year results on Tuesday, said last month that it would sell its share in 10 US onshore windfarms to the New York-headquartered LS Power. On Monday it launched its 50:50 offshore wind joint venture with the Japanese wind company Jera worth up to £4.5bn, which it plans to use to gain some access to zero-carbon wind energy developments while focusing on fossil fuels.
Amid BP’s floundering net zero strategy, its former chief executive Bernard Looney was sacked from the company for failing to disclose to the board his relationships with his staff.
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BP’s flagging share price has raised concerns that it could become prey for a larger rival intent on a takeover. Shell has been forced to deny its reported interest in buying BP.
BP has also emerged as a target for the New York hedge fund Elliott Management. The activist investor amassed a 5% stake in the company and has been agitating for a strategy overhaul of the company, including sweeping changes to the board.
Last month BP appointed a successor to its embattled chair, Helge Lund. Albert Manifold, the former boss of the building material company CRH, will join the BP board on 1 September as a non-executive director and as chair-elect, before taking over on 1 October.
The announcement of BP’s important oil discovery took place a day after the Opec oil group and its allies said they would again boost output.
The Opec+ group agreed on Sunday to raise production by 547,000 barrels a day for September, the latest in a series of accelerated increases to regain market share. The move means Opec+ has now fully reversed its largest tranche of output cuts, made as oil demand slumped after the Covid-19 pandemic.
The oil price was down 2% on Monday, with Brent at just over $68 a barrel.
