JOHANNESBURG - Global oil giant BP has become one of the biggest casualties of the coronavirus pandemic after the worldwide slowdown in oil production hit its production lines, telling its employees yesterday that it had begun a process to reduce its workforce by 14percent - amounting to 10000 employees - to cut costs.
BP chief executive Bernard Looney said the group planned to reduce its head count in order to achieve a leaner, faster-moving and lower-carbon company, but Covid-19 and the oil price slump have forced it to fast-track the decision in order to reduce its losses.
Looney said the decision would not affect petrol attendants.
He said the group spent much more than it made on a daily basis since the outbreak of the pandemic and its net debt rose by $6billion (R100.73bn) in the first quarter.
Looney said BP was working on cutting its capital expenditure by 25percent this year - which was a reduction of about $3bn.
“We will now begin a process that will see close to 10000 people leaving BP - most by the end of this year,” he said.
“The majority of people affected will be in office-based jobs. We are protecting the frontline of the company and, as always, prioritising safe and reliable operations. It currently costs around $22bn a year to run the company - of which around $8bn is people’s costs.”
The London-headquartered company, which employs 70000 people worldwide, including South Africa, said the move would mostly affect staff in office-based jobs and those holding senior roles, with the top 400 positions expected to be cut by one-third.
The group said senior management would not receive pay increases this year, while junior and mid-ranking staff would receive them only from October.
It said it had committed to a three-month freeze on job cuts, starting in early March, when the pandemic peaked. Promotions were also frozen, but will resume in July “in a measured way”, Looney said.
Cash bonuses for the year were “very unlikely”, he said, without clarifying whether that extended to BP’s trading division. Staff would be able to apply for voluntary redundancy from June 15.
The coronavirus has been a major shock for the oil industry, due to the significant fall in demand, as many people worked from home due to Covid-19 lockdowns.
To cushion the impact of the oil price volatility, Sasol, South Africa’s petrochemicals company, scaled up its hedging programme. Sasol, which announced pay cuts for its executives, also announced plans to sell non-core assets and said a rights issue was possibly on the cards.
Oil price volatility hit a peak in April, when the West Texas Intermediate (WTI) fell below zero a barrel for the first time in history. The price of Brent crude oil collapsed to below $20 a barrel for the first time in 18 years after the WTI price plunge.
However, prices have recovered, as Covid-19 lockdown restrictions have been eased locally and globally.