LONDON -- Offering new evidence of how low fuel prices are hurting refiners, British oil company BP announced plans on Tuesday to lay off 5% or about 4,000 of its global exploration and production (E&P) workforce in the face of a continued slump in oil prices, reported Reuters.
London-based BP markets more than 15 billion gallons of gasoline every year to U.S. consumers through more than 11,000 BP- and ARCO-branded retail outlets.
The company said it aims to reduce its global upstream headcount to about 20,000 from about 24,000 as it undergoes a $3.5-billion restructuring program. BP said its total headcount--including downstream--was approximately 80,000 at the end of 2015.
With crude oil prices at 12-year lows of around $32 a barrel, the world’s biggest oil and gas producers are set to continue aggressively slashing spending this year as they face their longest period of investment cuts in decades.
“We want to simplify (our) structure and reduce costs without compromising safety. Globally, we expect the headcount in upstream to be below 20,000 by the end of the year,” a company spokesperson told the news agency.
BP’s announcement comes after many of its rivals announced similar levels of job cuts in response to oil prices that have fallen by more than two-thirds since mid-2014, said a Wall Street Journal report. U.S. oil was trading just above $31 on Tuesday, brought lower by a Chinese slump in energy demand, a continued world-wide crude glut and a strengthening American dollar.
In the U.S., Chevron said last year it could cut between 6,000 and 7,000 jobs. France’s Total last year said it would cut 2,000 jobs by 2017. Norway’s Statoil said it would eliminate up to 1,500 permanent jobs and 525 other jobs this year in a $1.7-billion cost-cutting program. The company had previously cut 1,340 permanent jobs and 995 external consultants since the end of 2013. Royal Dutch Shell said in July it would eliminate 6,500 jobs, and could make further cuts.
Unlike its competitors, BP has been planning a major staff reduction unrelated to the oil price for more than two years, said the Journal.
BP, which must also pay $20 billion in fines to resolve the 2010 Gulf of Mexico oil spill, announced in October plans for a third round of spending cuts and said it would limit capital spending, or capex, to $17 billion to $19 billion a year through to 2017, said Reuters.
The company, which has already sold more than $50 billion of assets in recent years in order to cover the spill costs, said it expected an additional $3 billion to $5 billion of divestments in 2016.
The oil spill from a BP rig off the U.S. coast nearly ruined the company, CEO Bob Dudley said, calling it “a near-death experience” for the company. According to an OilPrice.com report, he told the BBC that it shook the company “to its core” and led to a complete change in its organizational structure.
“It was a forced focusing down of what we do,” Dudley said. “It was ‘this is what we need to do to survive’.”
Since last summer, Dudley has been cautioning that he expects oil prices to stay “lower for longer.” Now he believes he has determined how much longer those prices may decline, and when they may start rising again.
“A low point could be in the first quarter [of 2016],” he told the BBC. “But 2016’s third and fourth quarters could witness a more natural balance between supply and demand, after which stock levels could start to wear off.”
But Dudley stressed that doesn’t mean a rebound by the end of this year.
“Prices are going to stay lower for longer,” he said. “I think we are in this for a couple of years. For sure, there is a boom-and-bust cycle here.”
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