BP Reduces Jobs at $3.8 Billion Oil Refinery Expansion, Contractor Says

BP Plc is trimming jobs at a $3.8 billion expansion of the largest refinery in the U.S. Midwest, according to a construction firm involved in the project.

Pipefitters, laborers and other construction workers are being dismissed from the project at BP’s Whiting, Indiana, plant about 20 miles (32 kilometers) southeast of downtown Chicago, said Tim Cuson, vice president of Superior Construction Co., a contractor on the expansion. He said as many as six construction and engineering companies have been affected.

The expansion, which is BP’s costliest ongoing refining project worldwide, entered its “peak construction phase” this year, employing 3,500 people, said Scott Dean, a BP spokesman. Employment fluctuates as each phase is finished, he said.

The spending plan hasn’t been affected by costs related to the Gulf of Mexico oil spill and the expansion is on track to finish by its 2012 deadline, he said.

“They were spending a lot of money on this project early in the year but now they’re cutting back,” said Superior’s Cuson, whose Gary, Indiana-based company accounts for 10 percent of the outside workforce on the refinery-expansion job.

Cuson said he didn’t know how many layoffs had been ordered or how long they may persist. He declined to say how many workers from his company were sent home.

BP’s bill to fight the spill off the Louisiana coast, sop up the crude and compensate Gulf Coast residents has topped $1.6 billion since the April 20 blast aboard a rig that killed 11 workers.

BP has lost almost half its market value in the eight weeks since the blast triggered a leak almost a mile beneath the sea surface that has been gushing oil ever since. The London-based company’s liabilities may reach $37 billion, Credit Suisse Group AG has said.

Yields, Dividends

Investors are demanding higher yields to hold BP debt, an indication that concern is mounting that the company won’t be able to pay what it owes.

The company may also be forced to suspend its $10 billion dividend to satisfy President Barack Obama’s demand for an escrow account to compensate victims, analysts said. Bloomberg forecasts show that BP is unlikely to pay a cash dividend in the second and third quarters. The company has tentatively agreed to place $20 billion in escrow, a person familiar with the talks said today.

BP Chairman Carl-Henric Svanberg and Chief Executive Officer Tony Hayward met with Obama today in Washington to discuss the leak, which is spewing enough crude to fill a supertanker every 33 days.

Drilling Moratorium

The explosion and spill prompted the Interior Department, which oversees oil production in federal waters, to impose a six-month ban on exploratory drilling. The moratorium idled 33 rigs leased by companies such as Exxon Mobil Corp., Chevron Corp. and Anadarko Petroleum Corp.

BP is upgrading its 119-year-old refinery on the southern shore of Lake Michigan to process more heavy crude from Canada’s oil sands, according to the company’s website. The expansion will enable the plant to boost daily gasoline production by 1.7 million gallons, which at current retail prices would be worth $1.68 billion a year.

“You’re going to hear about people from specialist firms coming and going, and it’s related to different phases of the project,” Dean said in a telephone interview. “The project continues to move forward.”

BP acquired the Indiana refinery as part of its $61.7 billion purchase of Amoco Corp. in 1998. The project, which is scheduled to last through 2012, involves construction of a new coker, distillation unit and sulfur-removal equipment.

The plant can process 405,000 barrels of crude a day, according to a public company filing.

To contact the reporter on this story: Joe Carroll in Washington at jcarroll8@bloomberg.net.

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