BP will announce on Wednesday that hundreds of jobs will be lost at offices in London, Sunbury and Aberdeen as part of huge global staff cuts resulting from plunging oil prices and the Gulf of Mexico spill.
Bob Dudley, the chief executive, will tell a meeting of City investors, that major financial savings will be made as support staff in areas such as procurement, legal and communications are scaled back.
There are 84,000 working for BP worldwide, of which 15,000 are in the UK, but the almost 40% fall in the price of crude this year is causing a rethink on exploration and production projects.
Many back-office jobs are not needed now because BP has 50% fewer offshore fields, 50% fewer pipelines and 30% fewer wells after selling off more than $40bn worth of assets to pay for the cost of the Deepwater Horizon accident.
BP declined to comment on Sunday evening but its chief financial officer, Brian Gilvary, told the Sunday Times that “headcounts are coming down across all our activities in upstream, downstream and in the corporate centres”.
Sources said the BP headquarters at St James Square, the offices at Sunbury in Berkshire – where 5,000 staff are located – and the exploration base at Aberdeen would all be hit.
Rivals such as Shell, Chevron and Statoil have already announced significant job losses as the industry retrenches in the face of lower oil prices and shareholder demands for lower capital expending and higher dividends.
Dudley warned 18 months ago that BP would be undertaking a review of all its exploration and production activities saying that in March 2014 60 different projects for simplifying and streamlining the business were being looked at.
The results of those projects will be revealed at the investor day when BP will outline how it plans to lower its overheads and concentrate on “value not volume” across its operations. The pressure on Dudley has increased due to the new oil price environment and BP’s vulnerability to geopolitical risk caused by western sanctions against Russia due to its 20% shareholding in the largely state-owned Rosneft. Some analysts question whether a cash-strapped regime led by Vladimir Putin could seize BP assets in Rosneft causing further pain to the British-based group.
The dramatic crude price squeeze that started in June due to lower than expected demand growth plus high US shale output and has accelerated since Opec declined to cut its production at a key meeting in Vienna 10 days ago.
The oil industry is now in a frenzy about how much further oil prices could fall with the Chicago Mercantile Exchange reporting that it has a surge of investors betting US crude – now $65 per barrel – could fall eventually as low as $40.
Among the expectations are that there will be a major boom in mergers and acquisitions: the shares of BP rose sharply last week on speculation of a takeover by Shell.
The companies are refusing to comment but one of the factors counting against such a transactions is that BP is still in the middle of legal action against the US Department of Justice over issues arising out of the Deepwater Horizon accident of 2010.
By Terry Macalister