3,000 jobs face axe in $5bn BP-Mobil deal

Up to 3,000 jobs will go at BP and Mobil in one of the most radical overhauls of the European downstream oil industry announced yesterday. The $5bn (pounds 3.2bn) merger of the two groups' fuels and lubricants businesses in 43 countries will create a business with sales of more than $2bn and the strength to challenge the clout of Shell and Exxon in an increasingly competitive marketplace.

It fuelled speculation among City analysts over further rationalisation in the industry. One questioned whether US operators such as Chevron and Texaco, which have a relatively small position in Europe, might pull out altogether.

The venture will include refineries, pipelines, tankage and terminals as well as a network of 9,000 petrol stations across Europe. It pools almost all the BP and Mobil oil operations apart from the act of pumping it out of the ground. More than 2,000 of the petrol stations are in the UK, making this the biggest network ahead of Esso and Shell. Britain is also home to BP's Grangemouth refinery in Fife and to Mobil's Coryton refinery in Essex.

By joining forces, BP and Mobil will boast a 12 per cent share of the fuels market and will become the leader in lubricants with an 18 per cent market share. The company will shoot to the top of the league in some key European countries including France where individually they might languish in fifth or sixth place. BP shares rose 101/2p,to close at 5391/2p.

Joint ventures will be formed in each of the countries concerned including all EU states, Switzerland, Turkey, Cyprus, all of Eastern Europe and Russia West of the Urals. Of the $5bn of assets to be poured into the venture, $3.4bn will come from BP and $1.6bn from Mobil.

John Browne, BP's chief executive, said: ''This is a project that could only have been undertaken by BP and Mobil. The European downstream operations of our two companies are uniquely complementary. Bringing them together will produce efficiences through sharing costs, elimination duplication and and achieving major economies of scale." He said that the marriage, which puts them in the "top tier" of European refining and marketing, will result in joint annual pre-tax savings of $400m to $500m within three years.

Lou Noto, chairman and chief executive of Mobil, said: ''This is a venture which was not invented in the boardroom but at the working level. John and I agree that we will not nit-pick. We will not be reduced to silly games between the partners and we will not let egos get in the way." Mr Noto added that he believes the savings could go beyond those envisaged at present and stressed that the alliance should be viewed "as a platform for growth".

Sir David Simon, BP chairman, denied that there would be any problem combining the different company styles.

It is not yet clear where exactly the job losses will fall but they are expected to be among the combined non-service station workforce of 17,500. BP has a total world-wide workforce of 56,000 and Mobil 50,000.

BP will operate and have a 70 per cent interest in the fuels partnership which will run activities ranging from refining and manufacturing to petrol station forecourts, all of which will be branded in BP green and carry the joint venture mark, to include Mobil's logo. Mobil will operate and take a 51 per cent interest in the lubricants arm.

The far-reaching nature of the partnership underlines the downstream problems in the oil industry which show no signs of receding. The over- capacity and squeeze on margins in refining are legend and all the oil majors have warned that the problem will continue as new plants continue to be built in regions such as the Far East.

As recently as last month BP said it would sell or close three big refineries in Europe and the US. John Browne, chief executive, said then that BP would retain only those plants that were among the top 25 per cent most efficient in a given region.

Mobil closed a refinery in January last year and Shell recently suggested that it may be forced to cut its European capacity by up to one third. The move by BP and Mobil is likely to increase pressure on Shell, which is perceived as being too slow in taking firm action to resolve the capacity problem.

Both BP and Mobil pointed out that they have already taken the action they believe is needed to balance their refining portfolio. Mr Noto said: ''Let me say clearly that this partnership is not based on despair or desperation. It is based on opportunity. Both companies have taken significant strides to be more profitable. But the fact is we are not satisfied."

There has been little respite for the oil majors on the forecourt, with petrol price wars raging throughout the UK. The battle is expected to spread to the rest of Europe where the hypermarkets are already entrenched and taking substantial market share from traditional outlets. In mid-January Shell and Esso shook the retail market by cutting prices, underlining the growing backlash by the big oil companies against cut-throat pricing at the supermarket - now accounting for about one quarter of the market in the UK.

Analysts welcome the headline savings figure but they will be seeking answers on the effect of the alliance on longer term profitability. With the precarious state of the downstream markets and uncertainty over how far and deep the industry's rationalisation may go, the view is that this could be anybody's guess.

The big players in Europe

Country BP/Mobil Shell Exxon

UK 2,108 2,068 2,109

Western Germany 1,396 1,611 1,524

Eastern Germany 65 117 103

France 1,059 1,401 1,183

Belgium 190 440 374

Netherlands 673 755 340

Portugal 329 262 27

Spain 493 214 0

Austria 513 483 308

Turkey 805 640 0

Source:Wood McKenzie, 1994

Note: Figures do not include stations of Aral, in which Mobil holds a stake.

News
people
Arts and Entertainment
Game Of Thrones
Uh-oh, winter is coming. Ouch, my eyes! Ygritte’s a goner. Lysa’s a goner. Tywin’s a goner. Look, a dragon
tvSpoiler warning: The British actor says viewers have 'not seen the last' of his character
Arts and Entertainment
'New Tricks' star Dennis Waterman is departing from the show after he completes filming on two more episodes
tvOnly remaining original cast-member to leave long-running series
Sport
The Etihad Stadium, home of Manchester City
premier leaguePlus all the build-up to Man City vs Chelsea and Everton vs Palace
PROMOTED VIDEO
News
Polly Borgen at the Tribeca Film Festival in 2012
peopleThe Emmy award-winner starred in Cape Fear, the Sopranos and Desperate House Wives
News
people'I hated him during those times'
News
Britain's shadow chancellor Ed Balls (L) challenges reporter Rob Merrick for the ball during the Labour Party versus the media soccer match,
peopleReporter left bleeding after tackle from shadow Chancellor in annual political football match
News
Rumer was diagnosed with bipolarity, attention deficit hyperactivity disorder and post-traumatic stress disorder: 'I was convinced it was a misdiagnosis'
peopleHer debut album caused her post-traumatic stress - how will she cope as she releases her third record?
Arts and Entertainment
Lauryn Hill performing at the O2 Brixton Academy last night
musicSinger was more than 90 minutes late
Arts and Entertainment
tvReview: 'Time Heist' sees a darker side to Peter Capaldi's Doctor
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Senior BA - Motor and Home Insurance

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Market Risk & Control Manager

Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Head of Audit

To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

Day In a Page

Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam