BP Pulls Out of Australia Hydrogen Project Amid Oil Pivot

BP plc BP announced on Thursday that it will exit the Australian Renewable Energy Hub (“AREH”), one of the world’s largest planned green hydrogen projects, according to a Reuters report. The company informed its joint venture partners — InterContinental Energy and CWP Global — that it will relinquish its role as both its operator and equity holder. BP currently owns a 63.57% stake in the project.

The decision underscores BP's broader strategic pivot back to its core oil and gas operations. Initially estimated to cost around $36 billion, the AREH project was a central part of BP’s low-carbon ambitions. It aimed to develop up to 26 gigawatts of solar and wind capacity to generate 1.6 million metric tons of green hydrogen annually.

BP Retreats From Renewables After Investor Pushback

BP joined the AREH initiative during a phase when the company was aggressively expanding into renewables and low-carbon energy, signaling a shift away from fossil fuels. However, after underwhelming stock performance and mounting investor pressure, the energy major has slashed its planned spending on renewables and is now rechanneling funds in traditional oil and gas ventures.

This strategic reversal is part of a broader trend among energy companies re-evaluating the commercial viability of large-scale green hydrogen projects.

What This Means for AREH and the Hydrogen Sector

BP’s withdrawal raises questions about the future of AREH, which was envisioned as a flagship development in global green hydrogen production. With its exit, the remaining partners will need to reassess the financial and operational framework of the project to move forward without BP’s substantial capital and leadership.

As the energy transition continues to evolve, BP’s latest move signals a more cautious approach toward unproven renewables, particularly those involving green hydrogen, while doubling down on oil and gas operations in the near term.

BP’s Zacks Rank & Key Picks

BP currently carries a Zack Rank #3 (Hold).

Investors interested in the energy sector may look at some better-ranked stocks like Antero Midstream Corporation AM, Eni S.p.A. E and Enbridge Inc. ENB, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Antero Midstream generates stable cash flow by providing midstream services under long-term contracts with Antero Resources. The company prioritizes debt reduction by effectively utilizing free cash flow after dividends. Antero Midstream’s higher dividend yield compared to its sub-industry peers reflects its commitment to generating shareholder returns.

AM’s earnings beat estimates in one of the trailing four quarters, met once and missed in the other two, delivering an average negative surprise of 5.50%.

Eni’s strategic growth in upstream production, focused portfolio optimization and expansion into renewables highlight its resilience amid changing macroeconomic conditions. Successful ramp-up of exploration projects and efficient asset management reinforce its long-term potential and enhance its position in the global energy market.

E’s earnings missed estimates in three of the trailing four quarters and beat once, delivering an average negative surprise of 11.43%.

Enbridge is a major energy company that owns the longest and most complex oil and gas pipeline system in North America, transporting about 20% of the natural gas used in the United States. The business earns steady fees through long-term contracts, protecting it against big oil price swings or changes in shipment. 

ENB’s earnings beat estimates in two of the trailing four quarters, met once and missed in the other, delivering an average surprise of 0.28%.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research