Aberdeen oil jobs at risk as BP reviews operations

The Herald Scotland

2 days ago

'The North Sea: We have a proud history and we're proud of the team producing for more than 60 years now, and it's been a tremendous piece of business for us,' the head of BP's oil and gas production unit Gordon Birrell enthused.
He added: 'I would say the North Sea performance this year in terms of safety, production, costs has been tremendous. They really have stepped up … so kudos to the team up there.'
Mr Birrell was speaking in a presentation to analysts fronted by BP chief executive Murray Auchincloss, who is leading a campaign to help the company retain its independence amid investor dissatisfaction with its performance.
As BP's share price has trailed behind rivals such as Shell and US giants ExxonMobil and Chevron, some sector watchers think the firm could be vulnerable to a takeover bid.
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Mr Auchincloss decided to refocus BP on the oil and gas business after succeeding Bernard Looney, who championed a drive to turn the company into a renewables powerhouse.
As the company posted $2 billion (£1.5bn) second quarter profits last week, Mr Auchincloss said he had agreed with chairman designate Albert Manifold that BP should conduct a thorough review of its portfolio of businesses to ensure it maximizes shareholder value.
The decision to launch the review will cause concern among sector-watchers in Scotland amid fears that firms will slash investment in the North Sea in response to a series of tax hikes in recent years.
Chancellor Rachel Reeves sparked outrage when she increased the rate of the windfall tax in her first Budget in October.
The move gave added impetus to a shakeup in the area which has seen giants combining their North Sea businesses in a bid to reduce costs. The consolidation process will have worrying implications for jobs.
Israeli-owned Ithaca Energy announced plans for lay offs in March months after it merged with the bulk of the North Sea portfolio amassed by Eni of Italy.
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Shell and Norwegian giant Equinor are in the process of combining their North Sea operations.
Asked why BP had not made a similar move, Mr Birrell told analysts: 'The reason we haven't jumped into a joint venture is we believe we've got the best portfolio up there and that's been our view for quite a while.'
His comments underline BP leaders' belief in the long-term potential of the company's North Sea assets and may help to dispel fears that the company is cooling on the area.
The North Sea portfolio includes stakes in the giant Clair oil field West of Shetland and four big developments off Aberdeenshire.
Mr Birrell has noted the potential to achieve a significant increase in production off Shetland where BP has been considering plans for a third phase of development of the Clair field.
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In the results presentation, BP noted that the Murlach oil field development in the North Sea is one of 10 major upstream projects that it expects to start up by the end of 2027.
The list includes projects in the Americas, West Africa and Egypt.
Murlach will be linked to the ETAP production platform 140 miles east of Aberdeen.
However, Mr Birrell signalled that BP's enthusiasm for the North Sea may wane if Ms Reeves does not offer some concessions to the industry in the Budget she will announce later this year.
'We're also monitoring any potential changes to the fiscal situation in the North Sea which we expect to get some clarity on at some point this year,' he noted, adding: 'Once we've got clarity on the fiscal situation we'll then make decisions.'
North Sea industry leaders have warned that the increase in the windfall tax that was announced in October will lead to big cuts in investment in the area.
They have focused their campaigning efforts on a call for the Government to bring forward the expected end date for the windfall tax to 2026 from 2030.
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The case for change has been boosted by the fall in the crude price in recent weeks amid concern about the outlook for global demand.
Brent crude is selling for around $66 per barrel compared with $80/bbl in June. It fetched more than $120/bbl in 2022 when the windfall tax was introduced by the former Conservative Government.
The OPEC oil exporters organisation has caused complications by agreeing to a significant increase in members' total production quotas.
However, Ms Reeves has limited room for manoeuvre given her need to boost tax revenues to fund the Government's spending plans.
The case for oil and gas tax cuts may have been undermined by ExxonMobil boss Darren Woods in comments reported by the FT this month.
Mr Woods told reporters that ExxonMobil wanted to increase oil and gas production saying: 'Frankly if you look at the price environment we're in it's very attractive. So I think if you can't make money and generate good returns … you probably have a bigger, more fundamental issue.'
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Against that backdrop the Chancellor may not feel she needs to give much ground.
It seems unlikely that BP would resort to a dramatic move such as a complete exit from the North Sea if hopes for significant tax changes are disappointed.
If the company decided to sell off some North Sea assets bargain hunters might have the upper hand.
However, BP is unlikely to commit to large scale developments such as an extension of the Clair field so long as its tax concerns are not addressed.
BP provided a reminder last week that the outlook for jobs at the firm and in the wider sector will remain bleak regardless of what Ms Reeves does. The company said it planned to shed 6,200 jobs globally, including 4,700 under an existing programme of cuts, without specifying where.
Mr Auchincloss highlighted the potential for AI to help the firm boost the efficiency of its exploration and production operations.
News that the redundancy programme could result in a 15% cut in the number of office jobs at BP will spark alarm in Aberdeen. The company remains a major employer in the granite city despite axing hundreds of North Sea jobs during the downturns the industry has weathered in recent years.