BP’s efficiency overhaul to involve heavy cuts of North Sea workforce

Oct 25, 2007 02:00 AM

by Steve Hawkes

BP sent a shudder through the UK’s oil and gas industry by unveiling plans to cut 10 % of its North Sea workforce.
About 350 jobs will go over the next six months in Aberdeen as part of the second round of cuts announced by the energy giant since Tony Hayward, the new chief executive, outlined a radical restructuring earlier.

Nearly 1,000 exploration and production staff in Chicago, Illinois, were told they would have to move to Houston, Texas, as Mr Hayward looks to slash costs and rejuvenate BP’s operations worldwide. The group’s third-quarter results revealed a 27 % fall in underlying profits after refinery shut-downs in the United States and delays to the start of production at two oil-fields in the Gulf of Mexico.
The job cuts in Britain will fall among office-based staff and contractors at BP’s control centre in Dyce, Aberdeen, where the Queen officially opened the Forties pipeline in 1975. This brought the first ever oil onshore from a North Sea discovery.

Andy Inglis, chief executive of BP’s Exploration and Production business, said that the cuts were “an important step in delivering BP’s agenda for simplifying how the company is run and ensuring resources are focused on front-line delivery”. He added that the move was essential to “secure our continuing presence in the North Sea”, given rising costs and declining production.
Trade union leaders said that the move was “devastating” and called on BP to set up a workers forum to help the affected staff to find new employment.

Graham Tran, regional officer at Unite, said: “We all knew the restructuring was coming, the new chief executive had already said as much when he talked about how BP was being mismanaged.
“But no one thought it would be of the scale of 350. It’s shocked us and people throughout the industry.”

BP employs a total of 2,100 onshore staff in its North Sea business and 97,000 worldwide. Nearly 10 % of its total global production still comes from fields off the east coast of Scotland, but output has fallen from 550,000 barrels of oil and gas day to 330,000 barrels in the past three years.
Industry figures have long argued that the financial pressures on oil and gas companies active in the North Sea are growing. Operating costs are up 45 % in the past two years and Oil and Gas UK, the industry’s trade association, is locked in talks with the Treasury over the tax burden falling on offshore operators.

As well as a 50 % corporation tax, oil and gas companies pay an even higher 75 % tax rate on fields that were developed before 1993.
A spokesman for Oil & Gas UK said that further talks with the Treasury were expected: “BP’s announcement is indicative of the current situation in the North Sea, where rapidly rising costs and declining production are reducing the competitiveness of the basin.”

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