By Mark Williamson

BP has unveiled plans for multi-billion dollar spending cuts amid the crude price plunge but said that for the next three months none of its employees will be laid off as a result of coronavirus-related cost cutting.

The company has become the latest oil and gas heavyweight to confirm that it will seek to make big savings on running costs while slashing investment in new assets to offset the impact of the oil price fall.

Brent crude has fallen by around 50 per cent this month in response to concern about the impact of the coronavirus on demand and the start of a price war between Saudi Arabia and Russia.

It sold for $24.87 per barrel yesterday afternoon compared with $52/bbl at the start of the month.

North Sea industry leaders fear the fallout from the slump will take a heavy toll on the area with firms that operate oil and gas fields likely to retrench.

BP made big cuts in its North Sea operations amid the downturn triggered by the crude price plunge from 2014 to early 2016 but remains a significant player in the area.

The company’s chief executive Bernard Looney said yesterday that BP was in great shape but would act quickly and decisively to further strengthen its financial frame in response to the currently volatile and extremely challenging market conditions.

“This may be the most brutal environment for oil and gas businesses in decades,” he said.

The company expects to achieve around $2.5 billion of cash savings on operating costs annually by the end of 2021, compared with 2019. Mr Looney highlighted the potential to harness digital technology and increased integration across the group to make savings.

BP plans to cut spending on new assets this year by 25%, to $12bn, down $4bn on its previous estimate.

It expects to cut the valuation of its global portfolio by $1bn, in a move that will weigh on first quarter profits.

The company gave no indication of how the cuts would impact on its operations in different countries.

BP noted it has been reducing manning levels to reduce the risk of the coronavirus spreading.

But Mr Looney said: “Job security is a big worry at this time, so we have taken the decision that for the next three months no BP employees will be laid off as a result of virus-related cost cutting.”

He paid tribute to people around the world who are helping in the effort to tackle the coronavirus threat and said BP was trying to play its part.

“At BP we are mobilising in our own way across the BP world, taking action with three clear objectives: protecting our people; supporting the communities where we live and work; and strengthening our finances,” noted Mr Looney.

The protective moves for employees include changing shift patterns to make social distancing easier and reducing non-essential activity.

Measures to support communities include allowing emergency service vehicles in the UK to refuel for free at BP’s retail stations.

Mr Looney said BP remains committed to growing sustainable free cash flow and distributions to shareholders over the long term.

He cautioned: “There is uncertainty around how long current depressed commodity pricing and weakness in product demand will continue.”

The recent challenging market conditions are expected to impact on BP’s first quarter results.

BP expects the results of its downstream operation to be impacted by a significant and growing decline in demand for fuels, jet fuel and lubricants following moves by countries to address the coronavirus threat.

Royal Dutch Shell, which is also a big player in the North Sea, said on Tuesday that it planned to cut the valuation of its global asset portfolio by up to $800m after changing its oil price forecast. Last week Shell said it planned to cut global operating costs by $3-4 billion annually over the next 12 months while reducing capital spending on new assets by $5bn.

EnQuest decided not to restart production from two North Sea fields following the oil price fall. It aims to cut costs by $150m.

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