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BP: streamlining plans will cost company £638m over next year

Oil giant BP has warned that plans to streamline its business will cost it one billion US dollars (£638 million) over the next year.

The restructuring bill will reflect the need to downsize its operations following 43 billion US dollars (£27.5 billion) worth of divestments since the Gulf of Mexico disaster in 2010.

The company warned at the weekend that the rate of job losses across the UK and abroad will increase, with the focus likely to be on head office and back office roles rather than front-line operations.

Some 15,000 of BP's employees are based in the UK, while the company employs about 84,000 people worldwide.

The move to simplify the business comes with the price of oil at around 65 US dollars a barrel, some 40% below its level earlier this year.

Chief executive Bob Dudley said: "We are clearly a more focused business now and, without diverting our attention from safety and reliability, our goal is to make BP even stronger and more competitive.

"The simplification work we have already done is serving us well as we face the tougher external environment. We continue to seek opportunities to eliminate duplication and stop unnecessary activity that is not fully aligned with the group's strategy."

BP said the restructuring costs will be taken over the next five quarters, including the current quarter, and that further details of the programme are expected to be given on a quarterly basis.

At a strategy presentation for its upstream oil and gas business, BP said it still expects to see growth from its conventional and deepwater assets as well as an increasing contribution from gas.

It added: "We also have a quality pipeline of opportunities that we believe are capable of extending underlying growth well beyond 2020. Our focus throughout will remain firmly on safe operations, execution efficiency and greater plant reliability."

BP said not all its businesses were equally exposed to the oil price, with about one third of its upstream projects operated under production sharing contracts. It is also investing in gas projects which are typically less sensitive to oil price movements.

The company approves projects at 80 US dollars a barrel but it also tests each at 60 US dollars a barrel "to understand the resilience of the portfolio at a range of prices".

It added: "When oil prices fall, there is typically deflation in the industry as a whole. Together with its already greater focus on streamlining activity, this would be expected to further help BP align its cost base with its smaller footprint and reduced activity levels."

The Herold Scotland
Published on:
December 10, 2014
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