Holdfast Training Services Trial Blog

I thought I’d spend a few moments putting pen to paper on the recent announcement by BP to cut 300 out of 3,500 jobs in the North Sea. (This note only refers to BP North Sea Global Operations Organisation.)

This was formally announced last Thursday in a Town Hall, i.e. get yourselves to the Gym for a centralised briefing (except this wasn’t three line whip). Whilst not directly influenced by this announcement I had a certain amount of interest, having been an observer during the recent military job cuts.

The Town Hall was delivered by the Regional President of the North Sea, Trevor Garlick, supported by the VP of HR, David Conway. In contrast to the military redundancy briefings it was not delivered from a script, however, it was clear that the brief had been prepared and was supported by a handful of slides. As can be expected the tone of the brief was also considerably different, in that it was softer and laboured on the fact that the decision to make the cuts was not linked to the cut in the price of oil but is a measure that had been under review and developed since Q4 2014.

So how did BP come to the number 300? The business driver is a simplification and efficiency agenda. In recent years BP has seen a 50% reduction in production, with an increase in costs of 37% and personnel by ~20%, all leading to a level of efficiency that is not competitive in the North Sea. Therefore in an effort to improve efficiency BP has scrutinised the activities in 2014, as it is the engineering, design, fabrication and execution of the activities that is costing the money, not the employee head count. With the activity set reduced the corresponding reduction in associated employee and contractor headcount was calculated. The 300 is split into 200 employees and 100 contractors, though the final numbers and split is still subject to consultation.

The execution of the redundancy programme itself does bare some similarities to the military redundancies. BP is openly inviting those that will take voluntary redundancy to come forward, through a process called expression of interest. It is not guaranteed that an individual will be selected, but it is hoped that it will reduce the number of compulsory redundancies. This process in open for a few more weeks and will close in February. After this point the VPs of each function will conduct a selection process and identify those individual that will be given voluntary redundancy and those that have been selected for compulsory redundancy. It is expected that the selection and announcements will be early in 2015 with those selected for redundancy leaving by end of Q2 2015.

One of the points laboured in the townhall was safety and how that will not be compromised during this process and this has led to certain trades being ‘ring fenced’. In simple terms all offshore worker have been excluded from the redundancy process as a cut in the offshore workforce was considered detrimental to safety. The impact of this is that half of the 3,500 is exempt from redundancy with the remaining pool approximately 1,750 strong. This relates to a 17% cut in the eligible workforce.

How does this affect me in the Project and Modification Team? At the moment I haven’t seen any direct impact in BP, though I expect that in the coming months the team will see some people leave as 80 of the 300 job cuts will occur in the Operations function, in which Projects and Mods sit. Some of this will be through redundancy though I expect some contractors will walk before being pushed as they look for other opportunities before the axe falls. Where these opportunities might be I don’t know, as many of the other operators and service companies are cutting jobs with considerably more gusto.

In terms of activities, I have seen little change in the desire to execute the work that I am responsible for as a significant amount of it is safety related and therefore tied to consent to operate. The remainder of projects have comparatively large operation efficiency impacts and so the business case that supports them remains valid, even with the depressed oil price.

Outwith BP I am starting to see some impact in the delivery of my projects. A number of senior Projects Engineers and discipline engineers in WGPSN have already made the jump and more are preparing to move on. The resultant churn as WGPSN attempts to balance resources will undoubtedly place pressure on the project schedules. In the coming months it will be important to spend more time with the Project Teams, which are unfortunately geographically remote, to keep the delivery on schedule / mitigate any impact that the churn has.

In closing this note I thought I would share Bob Dudley’s (BP CEO) comments at the World Economic Forum in Davos, Switzerland. He said: “We have got to plan on this (the oil price) being down for certainly a year, probably two and maybe three years.” Difficult times ahead for the oil industry and I expect that we will see more in the news.