BP is freezing base pay across the group this year, the latest in a series of steps by major oil companies to cut costs in response to sinking oil prices.
Over the past year, major oil firms have been selling assets to protect cash flows and shareholder dividends.
Many have accelerated cuts in capital and operating expenditures, including freezing some projects, as crude prices more than halved since June last year to less than US$50 per barrel.
Salaries in the oil sector are a major part of operating expenses. BP employed 83,900 people in 2013 and paid them about US$13.6 billion in benefits, including wages and pensions, according to the company’s Web site.
“The tougher external environment in 2015 means that our businesses and functions need to work ... to take a number of measures in response to the harsh trading environment,” chief executive Bob Dudley said in a message to staff on Monday.
“One of the measures we are taking across the group is a general freeze to base pay for 2015, with only a few exceptions for specific circumstances around the world,” Dudley added.
A BP spokesman would not comment directly on the internal message, but confirmed the step, saying: “We have told staff across BP that we intend to freeze base pay worldwide for 2015.”
“Together with our work to simplify and increase efficiency across BP, we see this as a prudent measure in response to the current challenging market environment in which BP is operating,” he said.
Last month, BP announced a US$1 billion program to cut thousands of jobs globally, including its UK North Sea operations.
The OPEC in November last year decided to maintain its output ceiling at 30 million barrels per day, deepening the global price drop which began in June last year.
Oil was then trading at more than US$100 a barrel, but yesterday international benchmark Brent crude for March delivery was fetching US$48.28 in Asian trade.
“It’s too low for everybody,” Khalid al-Falih, president of state-owned energy giant Saudi Aramco, yesterday told the Global Competitiveness Forum in Riyadh. “I think even consumers start to suffer in the long term.”
Saudi Aramco is the world’s largest oil company in terms of crude production and exports.
Al-Falih also said American shale oil production is important for the world’s long-term energy future and Saudi Aramco has marked an additional US$7 billion for its own shale projects.
Saudi Arabian Minister of Petroleum and Mineral Resources Ali al-Naimi has been quoted as saying it is unfair to expect the cartel to reduce output if non-members, who account for most of the world’s crude production, do not.
Al-Falih reiterated that policy, saying: “Saudi Arabia will not singlehandedly balance the market on a downturn.”
The company’s production has been steady over the past few years, while domestic demand rose and exports gradually declined, he said.
“So the reason for the imbalance in the market absolutely has nothing to do with Saudi Arabia,” al-Falih told the conference.
Al-Falih said “it will take time” for the current excess supply to be removed.
He declined to speculate on the price at which the market will ultimately settle.
“It will be the price that will balance supply and demand. I think we’re going to just wait for the forces of supply and demand,” he said.
Additional reporting by AFP
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