BP plc remains committed to moving the company “beyond petroleum” despite a decision to downsize its alternative energy unit, company officials said this week.

Just two years after opening, BP’s Alternative Energy offices in London were shuttered last month and around 80 of the division’s employees were moved to the main corporate offices. The move followed the unexpected retirement of Vivienne Cox, the division’s managing director and BP’s senior female official, who said she wanted to spend more time with family.

“There is no change in strategy and no change to the business,” a spokesman told NGI.

Company officials cited the recession as one reason to trim the Alternative Energy budget to between $500 million and $1 billion this year from $1.4 billion in 2008. Budget cuts were made across all of BP’s businesses, the spokesman noted.

CEO Tony Hayward actually launched a companywide cost-cutting initiative when he took over in 2007, well ahead of the current recession (see Daily GPI, Oct. 12, 2007). At that time BP was to be defined by two business segments: Exploration and Production, and Refining and Marketing. Alternative Energy, launched in 2007 as a separate division, was to handle BP’s low-carbon business and future growth options outside oil and gas, Hayward said then.

BP plans to continue to invest millions every year in alternative energy, the spokesman said. BP invests more in renewable energy than many of its rivals, he noted, and remains “on track” to grow its commanding presence in the U.S. wind business by 2015. Between 2005 and 2015 BP plans to invest around $8 billion in alternative energy sources.

“We are going through a major restructuring and bringing the alternative energy business headquarters into the head office seems a good idea to me,” Hayward told reporters in London last week. “It saves money and brings it closer to home…you could almost see it as a reinforcement” of BP’s commitment to the renewable energy business.

Katrina Landis, formerly COO of the Alternative Energy business, was tapped to take over.

Most of BP’s North American renewable business spending is directed at wind projects. However, the company also funds solar power projects, biofuels, hydrogen power and carbon capture and storage. Some of the investments are higher priority than others, the spokesman admitted.

In early June BP issued its annual Statistical Review of Energy, which examines world energy trends (see Daily GPI, June 11). “Although renewable energy continues to play only a small role in the world’s energy mix, the share is rising rapidly in some countries, and there are the beginnings of a material impact,” Hayward said.

However, Hayward was not as optimistic about the prospects for solar energy in May when he spoke at a conference in California (see Daily GPI, May 18). Of the alternative fuels that BP has invested in, solar power is “the most challenged” because it’s not competitive with traditional sources of power on a cost basis, Hayward said.

In early 2008 Hayward said BP would fund the alternatives business — as long as it benefited shareholders. Alternative energy had been a pet project for Hayward’s predecessor, John Browne, who said BP needed to move “beyond petroleum,” a term that the company has used in advertising campaigns.

However, Browne also was criticized for spreading the company’s resources too thin. Hayward has attempted to refocus the company back on petroleum.

Since Hayward took the helm BP has tossed plans to enter the UK wind industry and now concentrates all of its efforts in the United States, where there are tax breaks and easier access to land. BP also has closed some solar power manufacturing plants in the United States and Spain.

“We intend to grow this business predominantly for its equity value,” Hayward said when speaking of BP’s Alternative Energy business last year (see Daily GPI, Feb. 28, 2008). “As we go forward we will be looking at how best we can realize that growing value for our shareholders.”

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