July 2 (Bloomberg) -- BP Plc, Europe’s second-largest oil company, plans to cut pay for North Sea contract staff, risking strike action later this year.

BP wants to reduce the cost of offshore platform workers employed through contractors and plans to end discretionary payments including overtime built-in to the day rate and automatic night shift payments. The changes cut pay as much as 20 percent for 800 people, union leaders say.

“We think it’s moving to a fairer, more transparent system,” Richard Grant, a BP spokesman in Aberdeen, Scotland, said in a phone interview today. “The North Sea has always been a relatively high-cost area in global terms. Staff should get paid for the hours they work.”

While oil prices have increased 89 percent from last December’s low to about $68 a barrel today on London’s ICE Europe Exchange, U.K. day-ahead gas prices have plunged 69 percent, dragging down the average price for a barrel of oil equivalent, he said. About 45 percent of BP’s North Sea production is natural gas. North Sea costs doubled in the four years though 2008, according to BP.

“You can’t just change someone’s contract of employment unilaterally,” Jake Molloy, the regional organizer of the OILC branch of the Nation Union of Rail, Maritime and Transport Workers said over the phone. Any walkout would “obviously” impact BP’s production, he added.

Malloy said the move by BP “sounds the death knell” for the Offshore Contractors’ Association. The OCA has traditionally negotiated with North Sea workers on behalf of the oil services companies, such as John Wood Group Plc, that they employ. Oil services companies supply BP and other producers with some of their platform staff.

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Unions are considering legal or strike action, he said.

The OCA and union representatives are consulting on the pay changes due to be implemented in October. Malloy said the consultation was “a sham” and the decision to cut pay had already been taken.

“What we’re seeing is companies trimming back on enhancements that were added when the market was over-heated,” OCA Chief Executive Bill Murray said in an e-mailed statement.

BP said it will honor any decision the OCA reaches.

To contact the reporter on this story: Ben Farey in London at bfarey@bloomberg.net

Last Updated: July 2, 2009 06:44 EDT