BP to let go middle management as oil price fall bites
09 December 2014
Oil giant BP, which has lost out in a review petition, after the US Supreme Court declined to review a lower court decision relating to the compensation of claims ''for losses with no apparent connection to the Deepwater Horizon spill'' in the Gulf of Mexico, is now planning to lay off scores of middle management personnel in its bid to budget for the plummeting price of oil, The Independent reported.
The company, with an 84,000-strong workforce, would likely reveal plans to step up its two-year-old restructuring programme in a presentation to the banking and finance industry tomorrow, The Sunday Times reported.
The price of Brent crude had fallen by 35 per cent since the summer and was down to under $70 last week with a supply glut triggering plunging prices.
According to BP's finance director Brian Gilvary, the company was reducing the number of managers across all ''layers above operations''.
The first major casualty of the plunging oil price turned out to be the £492 million takeover bid for rival Petroceltic by Dragon Oil.
BP would also be expected to reveal its exploration and production strategy until 2020, but did not expect oil prices to impact long-term plans.
Some 15,000 of BP's employees were based in the UK, while the company employed about 84,000 people worldwide, www.thecourier.co.uk reported.
According to Gilvary who spoke to the Sunday Times, with the simplification plan headcounts would start coming down across all of the company's activities in upstream, downstream and in the corporate centres - essentially the layers above operations."
BP initiated an extensive divestment programme after the oil spill in 2010, selling off around £40 billion dollars (£25.6 billion) of the business.
Robert Wine, a spokesman for the company, said: "We have sold about a third of the business but we are still set up for being that bigger company that we used to be."
According to Wine, the job losses would be in the "head office and back office, not the front line operations".
Among the parts of the business likely to be trimmed are legal, procurement and HR.
Wine said the job cuts would make the business more efficient, but they had not been triggered by the fall in oil prices.
He said it certainly added more focus to the simplification that was going ahead but it certainly had not been triggered by that, adding that it is important to get the simplification right.
Wine said the company was not "setting a number" in terms of how many jobs would be lost. "It's not going to be just in the UK or just in the US or just anywhere," he said.
BP, which started a major restructuring operation after the Gulf of Mexico disaster, had said that it would be focusing on value over volume, which meant having high value portfolio both upstream and downstream, investing only where the company can apply the distinctive capabilities and technologies that it has built up over decades.
''We will actively manage our portfolio, divesting non-core assets while reinvesting in higher value activities and continuously optimising the portfolio to unlock value,'' the company had said.
Now that the Supreme Court has declined to review the lower court decisions relating to causation of the accident and correct the ''matching'' accounting rules fashioned in error by the claims programme, BP said it was concerned that the programme has made awards to claimants that suffered no injury from the spill - and that the lawyers for these claimants have unjustly profited as a result.
BP said it would continue to seek investigation of suspicious or implausible claims and to fight fraud where it is uncovered. ''In doing so, we hope to prevent further exploitation of our commitment to compensating all those legitimately harmed by the spill.''