BP is to sell or close three big refineries in Europe and the US, affecting up to 1,425 staff. The rationalisation, which will result in a one-off charge of $1.1bn in the fourth quarter, is the first important move by John Browne, chief executive, since he took up the post last year.
Mr Browne said: ''We believe that the refining business has undergone a fundamental change in the last few years and that only the most efficient companies can expect to make a decent return on the business."
He said BP had no plans to pull out of refining but would retain only those plants that were among the top 25 per cent most efficient in a given region.
The changes, which Mr Browne said would not affect the dividend, were largely welcomed in the City. The three plants earmarked for disposal have been loss-making for some time although BP said that the refining business as a whole was at break-even in 1995. Some analysts estimate that the move will save up to pounds 100m a year.
One analyst added: "This is a very strong signal that BP will not tolerate underperforming assets, and that for an oil company is fairly revolutionary. Mr Browne does not see refineries, he sees dollar bills."
BP's shares fell by 13.5p to 520.5p but there was a view that this could be caused by worries over the oil price and general gloomy sentiment on the sector.
Mr Browne said that the decision was taken against a background of overcapacity in the industry and a record squeeze on refining margins. He blamed the situation partly on mushrooming investment in new capacity since the Gulf War and the "incessant creep of capacity brought on by technology improvements" at existing refineries.
The disposals include the closure of the Pernis unit at Rotterdam, a joint venture with Texaco which employs around 350 people and in which BP holds a 65 per cent stake.
Plants to be sold or closed are Lima, Ohio, which employs 455, and Lavera in the South of France, which has a staff of 620. The move leaves BP with 11 principal refineries world-wide and cuts its capacity from two million to 1.4 million barrels per day - compared with the 1.8 million needed by the marketing arm.
But Mr Browne said: ''The products are relatively freely available and there are a lot of people out there who are simply in the business of refining."Reuse content