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.

PROMOTED VIDEO
News
Ian Thorpe had Rio 2016 in his sights
people
Arts and Entertainment
Original Netflix series such as Orange Is The New Black are to benefit from a 'substantial' increase in investment
TVHoax announcement had caused outrage
Life and Style
Swimsuit, £245, by Agent Provocateur
fashion

Diving in at the deep end is no excuse for shirking the style stakes

News
One Direction star Harry Styles who says he has no plans to follow his pal Cara Delevingne down the catwalk.
peopleManagement confirms rumours singer is going it alone are false
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Voices
Mrs Brown's Boy: D'Movie has been a huge commercial success
voicesWhen it comes to national stereotyping, the Irish know it can pay to play up to outsiders' expectations, says DJ Taylor
Arts and Entertainment
Curtain calls: Madani Younis
theatreMadani Younis wants the neighbourhood to follow his work as closely as his audiences do
Arts and Entertainment
'Deep Breath' is Peter Capaldi's first full-length adventure as the twelfth Doctor
TVFirst episode of new series has ended up on the internet
Life and Style
Douglas McMaster says the food industry is ‘traumatised’
food + drinkSilo in Brighton will have just six staple dishes on the menu every day, including one meat option, one fish, one vegan, and one 'wild card'
Sport
Mario Balotelli, Divock Origi, Loic Remy, Wilfried Bony and Karim Benzema
transfersBony, Benzema and the other transfer targets
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

Information Security Manager (ISO 27001, Accreditation, ITIL)

£70000 per annum: Harrington Starr: Information Security Manager (ISO 27001, A...

Biztalk - outstanding opportunity

£75000 - £85000 per annum + ex bens: Deerfoot IT Resources Limited: Biztalk Te...

Trade Desk Specialist (FIX, Linux, Windows, Network Security)

£60000 per annum: Harrington Starr: Trade Desk Specialist (FIX, Linux, Windows...

Service Desk Analyst (Windows, Active Directory, ITIL, Reuter)

£35000 per annum: Harrington Starr: Service Desk Analyst (Windows, Active Dire...

Day In a Page

Iraq crisis: How Saudi Arabia helped Isis take over the north of the country

How Saudi Arabia helped Isis take over northern Iraq

A speech by an ex-MI6 boss hints at a plan going back over a decade. In some areas, being Shia is akin to being a Jew in Nazi Germany, says Patrick Cockburn
The evolution of Andy Serkis: First Gollum, then King Kong - now the actor is swinging through the trees in Dawn of the Planet of the Apes

The evolution of Andy Serkis

First Gollum, then King Kong - now the actor is swinging through the trees in Dawn of the Planet of the Apes
You thought 'Benefits Street' was controversial: Follow-up documentary 'Immigrant Street' has got locals worried

You thought 'Benefits Street' was controversial...

Follow-up documentary 'Immigrant Street' has got locals worried
Refugee children from Central America let down by Washington's high ideals

Refugee children let down by Washington's high ideals

Democrats and Republicans refuse to set aside their differences to cope with the influx of desperate Central Americas, says Rupert Cornwell
Children's books are too white, says Laureate

Children's books are too white, says Laureate

Malorie Blackman appeals for a better ethnic mix of authors and characters and the illustrator Quentin Blake comes to the rescue
Blackest is the new black: Scientists have developed a material so dark that you can't see it...

Blackest is the new black

Scientists have developed a material so dark that you can't see it...
Matthew Barzun: America's diplomatic dude

Matthew Barzun: America's diplomatic dude

The US Ambassador to London holds 'jeans and beer' gigs at his official residence – it's all part of the job, he tells Chris Green
Meet the Quantified Selfers: From heart rates to happiness, there is little this fast-growing, self-tracking community won't monitor

Meet the 'Quantified Selfers'

From heart rates to happiness, there is little this fast-growing, self-tracking community won't monitor
Madani Younis: Five-star reviews are just the opening act for British theatre's first non-white artistic director

Five-star reviews are just the opening act for British theatre's first non-white artistic director

Madani Younis wants the neighbourhood to follow his work as closely as his audiences do
Mrs Brown and her boys: are they having a laugh?

Mrs Brown and her boys: are they having a laugh?

When it comes to national stereotyping, the Irish – among others – know it can pay to play up to outsiders' expectations, says DJ Taylor
Gavin Maxwell's bitter legacy: Was the otter man the wildlife champion he appeared to be?

Otter man Gavin Maxwell's bitter legacy

The aristocrat's eccentric devotion to his pets inspired a generation. But our greatest living nature writer believes his legacy has been quite toxic
Joanna Rowsell: The World Champion cyclist on breaking her collarbone, shattering her teeth - and dealing with alopecia

Joanna Rowsell: 'I wear my wig to look normal'

The World Champion cyclist on breaking her collarbone, shattering her teeth - and dealing with alopecia
Bill Granger recipes: Our chef gives raw ingredients a lift with his quick marinades

Bill Granger's quick and delicious marinades

Our chef's marinades are great for weekend barbecuing, but are also a delicious way of injecting flavour into, and breaking the monotony of, weekday meals
Germany vs Argentina World Cup 2014 preview: Why Brazilians don't love their neighbours Argentina any more

Anyone but Argentina – why Brazilians don’t love their neighbours any more

The hosts will be supporting Germany in today's World Cup final, reports Alex Bellos
The Open 2014: Time again to ask that major question - can Lee Westwood win at last?

The Open 2014

Time again to ask that major question - can Lee Westwood win at last?