BP announces North Sea job cuts

Written By Unknown on Kamis, 15 Januari 2015 | 19.21

15 January 2015 Last updated at 11:48

The oil company BP is to cut 200 jobs and 100 contractor roles following a review of its North Sea operations.

It is believed that most of the cuts will be onshore. The company expects a relatively small number of compulsory redundancies.

Staff at BP's North Sea headquarters in Aberdeen have been briefed about the plans.

BP currently employs 3,500 people in the North Sea, with a further 11,000 elsewhere in the UK.

The oil giant announced a major restructuring in December in response to the fall in the world oil price, which has halved in recent months.

BP said it needed to respond to "toughening market conditions". The company has been downsizing since the Deepwater Horizon oil spill in the Gulf of Mexico in 2010.

The recent oil price reduction "has simply made this even more imperative", it said.

Trevor Garlick, regional president for BP North Sea, said: "We are committed to the North Sea and see a long term future for our business here.

"However, given the well-documented challenges of operating in this maturing region and in toughening market conditions, we are taking specific steps to ensure our business remains competitive and robust, and we are aligning with the wider industry.

"Whilst our primary focus will be on improving efficiencies and on simplifying the way we work, an inevitable outcome of this will be an impact on headcount and we expect a reduction of around 200 staff and 100 contractor roles.

Continue reading the main story

"We have spoken to staff and will work with those affected over the coming months."

Last month, BP announced that plans to cut hundreds of jobs within its back-office departments - many of them based in the UK and US - would be accelerated. The restructuring is expected to cost £640m in the coming years.

The price of a barrel of oil dropped to a low of about $46 earlier this week from a peak of about $115 last summer. It currently stands at about $48.

Oil prices hit record highs above $147 a barrel in July 2008 - but as the global economic crisis began to bite, they plummeted to around $30 in December of the same year before rising sharply again.

BP is the latest in a string of North Sea operators to announce job losses, with Shell cutting 250 jobs last August, and Chevron losing 225 in July.

Some, including the Wood Group and Chevron, have announced salary freezes for staff and pay cuts for contractors.

Even before oil prices started to fall, the industry had said it needed to address high costs, which included the number of contractors on large, often six-figure salaries.

Robert Peston

BBC economics editor

BP's job announcement later today, including a few hundred job losses in Aberdeen, is being made because it does not expect the oil price to bounce any time soon.

The oil price has dropped around 60% since June, to $48 a barrel, and I understand that BP expects that it will stay in the range of $50 to $60 for two to three years.

Although no oil company has a crystal ball, this matters - especially since it has a big impact on its investment and staffing ambitions.

So plans that it had already initiated to reduce costs have taken on a new element, namely postponement of investments in new capacity that have not been started, and shelving of plans to extend the life of older fields where residual oil is more expensive to extract.

Read more from Robert

Mick Cash, general secretary of the Rail, Maritime and Transport (RMT) union, said BP's announcement was a "devastating blow" to workers and said he had been warned there is "much worse to come".

He added: "RMT believes that the industry is making offshore workers carry the can for their failure to plan for lean times such as these.

"Instead they have gone for a short-term slash-and-burn approach that will have long-term implications for the future of the entire industry and the security of the UK's energy supplies."

He said the unions would be pushing for a halt to the job cuts programme and an emergency package of measures to stave off the "destruction of both jobs and infrastructure" when they meet with industry body Oil annd Gas UK on Friday.

"We are also continuing to lobby politicians for incentives to allow exploration, maintenance, safety and engineering development works to take place during this emergency period for the industry." he added.

On Wednesday, the Scottish first minister said the falling price of oil posed a risk to jobs in the North Sea as she announced a task force was being set up to help the sector.

Nicola Sturgeon also made the offer of a funded guarantee to support apprenticeships in the industry.

BP and the North Sea
  • BP employs 3,500 staff in the North Sea out of a total of 15,000 across the UK and 84,000 across the world.
  • To date it has invested £35bn in the North Sea, and produced five billion barrels of oil and gas.
  • North Sea operations account for 5% of the company's global production.
  • It has 45 production fields, 33 platforms and 10 pipeline systems in the UK continental shelf.
  • BP estimates it is sitting on three billion barrels of oil equivalent reserves in the North Sea.
  • The Clair field, west of Shetland, is BP's flagship future development and the largest oilfield in Europe, containing an estimated eight billion barrels of oil.
  • The company also owns the Forties Pipeline System, described as the single most important piece of oil and gas infrastructure in the UK.

The Scottish government has called for the supplementary charge on the oil and gas industry introduced by the UK government in 2011 to be scrapped.

That position is backed by Oil and Gas UK, which has argued that further tax cuts would help the sector deal with falling oil prices.

Scotland's energy minister, Fergus Ewing, told BBC Radio Scotland that the crisis in the North Sea posed the most serious threat to Scottish jobs in living memory.

Mr Ewing added: "I would call upon my colleagues in the UK government, with whom I hope I work in a constructive way, that we must all work together now, put the politics aside, don't re-run the referendum and let's get that tax deal implemented now because it will save jobs."

'Future health'

UK Energy Secretary Ed Davey - who will meet industry leaders in Aberdeen later - has acknowledged that tax issues may need to be examined.

Mr Davey told BBC Radio 4's Today programme that there must be no "panicked" response to short-term price fluctuations and insisted the government was "determined to do everything we can" to save jobs.

He added: "The oil and gas industry - in terms of corporate sectors - pays more tax than any other and therefore it's very important that we think about that both in terms of jobs and in terms of the overall tax take and the future health of the sector.

"We need to make sure that to secure our gas and oil needs in the decades ahead that we're planning with the sector on tax as well as regulation."

Douglas Fraser

BBC Scotland business and economy editor

This is an industry where suppliers and individual freelance contracts benefit from rapid price inflation in the boom times, but suffer sharp cost cuts in the bad times.

That's why Wood Group, among others, simply lopped 10% off its contractor payments last month.

Of course, that feeds through to the spending power of those workers, who could be found living and spending big money across Scotland and beyond. They're important to some remote communities as much as the oil and gas heartlands of Aberdeen city and shire.

What, then, of this broader economic impact?

There's a lot of analysis coming in these days. Wood Mackenzie, the energy analyst and consultancy based in Edinburgh, has been rather busy.

Read more from Douglas

Data released on Thursday showed that the number of oil wells drilled in the UK sector of the North Sea fell to the lowest level in 15 years last year, which analysts said underlined the basin's struggle with high exploration costs that have contributed to a decline in output.

Oil and gas explorers drilled just 40 exploration and appraisal wells in the UK Continental Shelf (UKCS) in 2014, 47% lower than the average yearly drills over the past 10 years, according to the data from Deloitte's Petroleum Services Group.

Many large oil companies have cut investments in the North Sea as they see more profitable new fields in emerging areas such as south-east Asia and Brazil.

North Sea producer Premier Oil said on Wednesday it was not committing to new exploration work beyond a portfolio of eight key projects, none of which is in the UK.

But Total has confirmed that gas and condensate production has started at its West Franklin Phase 2 project in the Central Graben area, some 150 miles (240km) east of Aberdeen.

It will develop reserves equivalent to 85 million barrels of oil. The project includes the drilling of three new production wells and the installation of two new platforms.

And US-based asset management firm the Carlyle Group has announced plans for £660m of investments in the UK oil and gas sector.

Its intention to commit the equity capital in the North Sea is one of a series of transatlantic trade announcements marking a visit by Prime Minister David Cameron to US President Barack Obama.

Bank of England governor Mark Carney told a House of Commons committee on Wednesday that plunging oil prices represented a "negative shock" to the Scottish economy, which is heavily reliant on North Sea reserves.

But Mr Carney said he believed the fall - which has fed through to ultra-low inflation which it is hoped will boost consumer spending - was an overall positive development for the UK.

Energy analysts Wood Mackenzie have warned that if the oil price slipped below the $40 mark, operators could consider closing down wells.

Wood Mackenzie told Scottish Energy News that with prices at $50 a barrel, oil production would cost more than its value in 17 countries, including both the UK and the US.

Are you a BP employee or contractor? You can email haveyoursay@bbc.co.uk with your comments. Please leave a telephone number if you are willing to be contacted by a BBC journalist.

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