The strategy overhaul comes after a difficult trading year for BP, which is under pressure from investors to boost its share price as countries look to slash emissions.
"Our optimism for a fast transition was misplaced, and we went too far, too fast," chief executive Murray Auchincloss told investors at a presentation in London on Wednesday.
To the dismay of environmentalists, the group will cut cleaner energy investment by more than $5 billion annually, while retiring key targets on cutting carbon emissions.
BP on Wednesday said it had reduced emissions by more than expected. Its carbon-cutting target, announced in 2020, had stood out at the time as one of the most ambitious in the industry.
"We are reducing and reallocating capital expenditure to our highest-returning businesses to drive growth," Auchincloss said in a statement ahead of the investor day.
"This is a reset BP, with an unwavering focus on growing long-term shareholder value," he added.
BP's shares were down 1.7 percent in afternoon trading in London.
- Clean energy reset -
BP will increase oil and gas investment to around $10 billion per year, making up two-thirds of capital expenditure, it added Wednesday.
The group will grow oil and gas production up to 2.5 million barrels a day in 2030, in a major pivot away from previous plans to cut output of fossil fuels.
"This is positive proof that fossil fuel companies can't or won't be part of climate crisis solutions," senior climate adviser for Greenpeace UK, Charlie Kronick, said in reaction.
"This conversation is over."
BP plans to also offload assets worth a total of $20 billion by 2027, including from the potential sale of its Castrol lubricants division.
The much-anticipated update comes after BP suffered a 97-percent slump in net profit last year.
Its profit after tax tumbled to $381 million from $15.2 billion in 2023 in the face of higher costs as well as weaker oil and gas prices.
Total revenue dropped nine percent to $195 billion.
The energy group is looking to find up to $5 billion in cost savings by the end of 2027 and has recently axed 4,700 staff jobs, or around five percent of its workforce.
"The problem for BP is that it flip flopped away from net zero and back to oil and gas too late," said Kathleen Brooks, research director at trading group XTB, adding that the market reaction to the strategy has been muted.
Ahead of the investor day, it was widely reported that US activist investor Elliott Investment Management has built a significant stake in BP.
The fund is known for forcing through corporate changes within groups it invests in, signalling further upheaval ahead for BP, analysts said.
- Rival oil majors -
British rival Shell and other oil majors have also cut back on clean energy objectives.
On the eve of BP's update, TotalEnergies chief executive Patrick Pouyanne said that while oil and gas would continue to be produced, "you need to produce it differently with much lower emissions".
The head of the French giant was speaking Tuesday at International Energy Week, an annual gathering in London of major players from across the sector.
Shell the same day forecast global demand for liquefied natural gas to rise by about 60 percent by 2040.
It forecast that this would be "largely driven by economic growth in Asia, emissions reductions in heavy industry and transport as well as the impact of artificial intelligence".
Gas is being touted by energy companies as cleaner than other fossil fuels as countries around the world strive to reduce their emissions and slow global warming.
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