Supermajor BP has announced plans to reduce its workforce by the end of the year in response to current market conditions, with senior management expected to take most of the hit as the company moves to simplify its structure.

BP said on Monday that its global workforce will be cut by 10,000 from a current total of 70,000, with the majority of those affected expected to leave this year.

In March, BP introduced a three-month redundancy freeze to ease some of the immediate worry for people, however, the moratorium on job cuts concluded this week.

Jobs to go

“This is a global number, we do not yet have broken-down details of how this will impact specific regions or businesses. The roles affected will be office-based, not front-line operational roles,” the company said in a statement.

The changes are expected to significantly impact senior levels as BP introduced its flatter structure — meaning that, under the cuts, the company’s group leadership positions will be reduced by one third.

BP has also reviewed its pay and bonus structures and said its junior and mid-graded staff will receive their annual pay rises from October after these had been deferred from April. However, senior staff will now receive no pay rise in 2020.

'Don't count on bonuses'

“Annual cash bonuses are part of regular remuneration for around half of BP’s workforce globally. While final decisions will be taken early next year, we have said it is very unlikely that anyone will receive an annual cash bonus for 2020,” the company said.

“It was always part of the plan to make BP a leaner, faster-moving and lower-carbon company. That is how we will deliver on our net-zero ambition. And that is how we will seize opportunities throughout the energy transition,” chief executive Bernard Looney said.

“Then the Covid-19 pandemic took hold. You are already aware that, beyond the clear human tragedy, there has been widespread economic fallout, along with consequences for our industry and our company.

'I am talking millions of dollars, every day'

“The oil price has plunged well below the level we need to turn a profit. We are spending much, much more than we make – I am talking millions of dollars, every day. And as a result, our net debt rose by $6 billion in the first quarter,” Looney said.

The job losses come as BP continues to work to bring down capital expenditure by 25% this year — which is a reduction of around $3 billion.

According to the company, it currently costs around $22 billion a year to run BP — of which around $8 billion is people costs.

“We are driving down those operating costs by $2.5 billion in 2021 — and we will likely have to go even further,” the company said.

Commenting on news of the job cuts, Deirdre Michie, chief executive of industry body Oil & Gas UK, said: "This shows the very real and personal impact of the coronavirus pandemic on jobs and livelihoods while companies are stepping up to deliver the net-zero agenda.

'Serious risk to UK'

"There is a serious risk the UK loses the skills it needs not only to meet existing energy demands from domestic resources, but also to meet the UK’s climate ambitions.

“It underlines the need to continue working with governments to deliver an inclusive, fair, and sustainable transition to a lower carbon future. This is the best way to protect jobs, create new business opportunities and ensure energy regions from the north east of Scotland to the east of England are not left in the dark."

Professor David Elmes, who leads the Global Energy Research Network at Warwick Business School said: “The job losses at BP are 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.

“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,” Elmes said.