BP has reported a dramatic 20% decrease in year-on-year profits during the last three months of 2014, and an annual fall of 10%. Now, as damage limitation exercises begin, many of the tens of thousands of British BP staff working across the globe have been left wondering how this will affect them.
So far, BP has said it will reduce spending on exploration and capital expenditure to counteract the fall in the price of oil (a fall of 50% in six months). But even before today’s announcement – in which BP effectively reported a quarterly loss of $969 million due to the need to devalue assets and operations in light of the weaker oil price – there were doubts about being able to maintain current staffing levels, and the benefits they receive.
Pension Cuts?
The BP final salary pension scheme has been in operation for 65 years, but concerns have been voiced about exactly how well the pension fund is performing, particularly in light of the fact that a large percentage of the attributed portfolio is invested in rival oil companies, who have also struggled in the face of the lack of demand for crude. In fact, simultaneously, many of the most prominent pension funds across the global hold significant amounts of BP shares, the knock-on effect of continued poor performance could be catastrophic for millions.
While it is no time for immediate panic, murmurings of discontent and concern amongst BP staff were visible across online forums after the departure of Sally Bridgeland, former Chief Executive Officer of BP Pension Trustees Limited, who left in April 2014 to pursue a “portfolio career.” No other information was given by BP, but staff were quick to point out that the fund seemed to be performing well under her guardianship, and were surprised the announcement came so suddenly.
The Knock-on Effect
Whether or not the knock-on effect of the various troubles BP – and the wider oil industry – faces up to will impact on pension fund performance is up for debate. But in 2009 BP closed schemes to new employees, citing the increased life expectancy of male oil workers, and concerned pension members are being urged to seek independent advice to allow an in-depth review of current and prospective pension performance.
BP has been subject to numerous examples of misfortune since it made its way into Libyan oil reserves ahead of some of the biggest US-based oil companies, not least the huge $13.8bn fine from US authorities relating to the Blue Horizon oil rig disaster of 2010 – a disaster which also involved a US company which allegedly “lost” an important document pertinent to BP’s defence during the court case. The US company were find $200,000. Oil prices are set to remain at the same level for at least the next three years, according to analysts, so cut-backs are sure to eventually be far-reaching, and it’s an unfortunate bi-product that staff are among the first to suffer.
