BP Cuts 10,000 Jobs to Shore up Reserves (Update)

(Adds comment from Warwich Business School)

UK major BP is to lose "close to 10,000" of its staff, mostly this year, CEO Bernard Looney said in a letter to staff June 8, as part of its move to stem losses of millions of dollars each day. "The oil price has plunged well below the level we need to turn a profit," he said. "We are spending much, much more than we make."

BP racked up $6bn of debt in the first quarter; and is selling assets – including reportedly a stake in its Oman tight gas project – and cutting costs to compensate.

The company brought in a three month delay on redundancies in March, which is now over. Looney said that staffing costs represented about $8bn of the company's $22bn annual running costs and the aim was to save $2.5bn by 2021, with more expected. The company also wants to cut capital expenditure by a quarter, or $3bn this year.

The brunt of the cuts will be felt by management: around a third of group leaders are to leave. Those in that category who stay cannot expect a payrise until next April although lower positions will be paid more, but six months later than usual: in October. And bonuses are very unlikely, he said.

After starting work as the CEO and before the Covid-19 virus struck, Looney announced earlier this year that the company would brief the market on its new, net-zero carbon plan, over three afternoons (UK time) September 14-16. The BP Energy Outlook will be presented by Spencer Dale on the first of those afternoons, "providing key insights into future energy trends as well as context for bp's new strategy," it said.

Job cuts 'symptomatic': academic

David Elmes, a professor at Warwick Business School, commented that the job losses at BP were symptomatic of the wider challenges facing the industry. "Coronavirus has reduced oil demand and the price per barrel has plummeted, but that has happened in a wider context of short-term and long-term decline. Some industry forecasts had acknowledged a flattening off in long-term demand last year, before the pandemic began." he said

"All firms in the sector will all be looking at how they can cut costs, shift their activities to the lowest cost field, trim investment, and thinking hard about what dividend they can pay. BP and the other European-based international companies have already said they will become less focused on oil and gas over time. If this situation continues, there will be intense discussions about what can they do to move faster."

Italian Eni earlier this month announced a restructuring plan whereby its oil and gas bueinss would be separated from its "energy evolution" business.