BP Weighs Brazil Biofuel Exit as Egypt Gas Ramps Up and Analysts Turn Bullish

BP is exploring a sale of its Brazilian biofuels business as it targets USD 20 billion in divestments by 2027, while expanding gas output in Egypt.

BP is exploring a sale of its Brazilian biofuels business, according to Bloomberg, with the British energy major weighing strategic options for its sugarcane and ethanol operations — including a full exit. Talks are said to be at an early stage, and no binding decision on the unit's future has been reached.

A disposal would amount to a swift reversal. Only two years ago, BP bought out partner Bunge's remaining half of the Brazilian joint venture for USD 1.4 billion including debt. Internally, the business is no longer viewed as central to the group's direction. Management is instead targeting USD 20 billion in divestments by 2027 to shore up the balance sheet.

Capital Discipline Reshapes the Portfolio

The logic behind the overhaul is a clear reordering of priorities: freed-up funds are to flow first into the traditional oil and gas business and into segments with more dependable returns. With crude prices elevated on world markets, the conventional upstream unit is generating particularly attractive cash inflows. BP is thus shedding capital-intensive peripheral activities and tying investment more strictly to near-term profitability.

The South American plans slot neatly into that cost-cutting drive. Last year BP agreed to sell 65 percent of its lubricants brand Castrol to investor Stonepeak, and followed that in the summer with the disposal of its Gelsenkirchen refinery. The company is also tapping the brakes on renewables: according to media reports, it is withdrawing via a joint venture from the German North Sea wind projects Oceanbeat East and West, which have a planned combined capacity of four gigawatts.

Fayoum-4 Feeds Gas into the Grid

While the portfolio shrinks in some regions, BP is pushing ahead with exploration and production in North Africa. Executives met Egyptian oil minister Karim Badawy today to discuss the implementation of a USD 700 million drilling program. The campaign covers four confirmed wells and has been running since last spring. One milestone has already been reached: the Fayoum-4 well in the West Nile Delta is feeding roughly 80 million cubic feet of natural gas per day into the grid, according to the ministry. The facility entered regular operation two years earlier than originally scheduled.

BP operates the concession with an 82.75 percent stake, while Harbour Energy holds the remainder. Once work at Fayoum-4 wraps up, the rig is to move to the Grab exploration prospect. Two deepwater exploration wells for the Arcius joint venture, in which BP holds a 51 percent majority, will follow. For the 2026/27 financial year, the group has reaffirmed investment commitments of USD 1.5 billion for domestic gas exploration.

Political Hurdles and Market Reaction

The production expansion is unfolding against a complicated political backdrop. New obstacles have recently emerged regarding the sale of BP's Egyptian assets about a month ago, which have since gained 5.9 percent. National security interests and doubts about the buyer's deepwater technical capabilities were cited as the reasons. BP plays a key role for the country: according to Reuters, the group accounts for roughly 60 percent of total Egyptian natural gas production.

No concrete details on possible valuations or a sales timeline for the Brazilian business have been made public. In London, the tighter capital discipline is drawing praise. Morgan Stanley rates the stock "Overweight" and raised its price target to 598 pence, pointing to the prospect of strong free cash flow in the years ahead. JPMorgan also lifted its target and now sees fair value at 675 pence.

Investors are rewarding the focus on debt reduction and earnings power. In today's pre-market trading the shares stand at EUR 6.56, a gain of 34 percent since the start of the year.