BP is offloading its United States shale gas business as it looks to cut costs and react more quickly in a "hyper-competitive" market.
The FTSE 100 giant admitted it was likely to shed an unspecified number of staff and contractors in the shake-up of its onshore oil and gas business in the US, which includes conventional as well as shale reserves.
BP said the influx of small, nimble, independent operators that have piled into the US shale gas industry in recent years had greatly increased competition, dragging down prices and unleashing a wave of innovation as companies come up with new ways to squeeze oil and gas from the rocks.
The oil and gas are typically produced using the controversial practice of hydraulic fracturing – or fracking – which releases the hydrocarbon by blasting a mixture of water, sand and chemicals into the rock.
The new business will operate separately from BP, although it will continue to be owned by the company and will not have a separate listing. It is likely to publish separate accounts from 2015 and is expected to retain its senior management team, which is presently headed by Tim Harrington.
"Our overriding goal is to build a stronger, more competitive and sustainable business that we expect will be a key component of BP's portfolio for years to come," BP Upstream's chief executive, Lamar McKay, said.
A BP spokesman added: "The new business is designed to adapt to the rapidly changing and hyper-competitive energy landscape in the region. This move is expected to unlock significant value associated with BP's extensive resource position in the US."
The new business will see BP's onshore oil and gas exploration and production business move from its Westlake campus in Houston, Texas, to a new location in the city.
The group's oil and gas businesses in Alaska and the Gulf of Mexico will not be affected by the restructuring, nor will its refining operation.
"These changes are chiefly intended to improve competitiveness through greater speed of innovation, faster decision making and shorter cycle times from access through to production, together with more efficient cost management," the spokesman said.
A BP spokesman said being a smaller, independent group would allow the new company to make crucial decisions – such as which technologies to focus on and which licences to bid chase – more quickly, by eliminating "several layers of the decision-making process".
Furthermore, it will enable the group to cut costs in a market that is characterised by falling prices.
BP said the restructuring was not related to a US court decision on Monday night that is likely to result in it paying billions of pounds more in compensation claims for the Gulf of Mexico oil spill than it has budgeted for.
The 5th Circuit Appeals Court in New Orleans voted 2-1 for the claims to continue and also said an injunction preventing payments should be lifted. The ruling is problematic for BP because it allows businesses to recover money from BP even if they cannot trace their economic losses to the disaster.Reuse content