“We anticipate a significant reduction in operated activity and headcount, and we are informing employees and contractors,” BP said in an e-mailed response to questions. The cutbacks follow the sale of the Polvo field last year, the conclusion of a drilling campaign and as the company prepares to wait two or three years to beginning drilling in blocks acquired last year, according to the statement.
The reductions, including dismissals and relocations, will represent at least half the workforce in Brazil, according to two people with knowledge of the plans, who asked not to be identified because details haven’t been made public. BP declined to elaborate on the number of cutbacks.
BP entered exploration and production in Brazil with the March 2010 acquisition of 10 concessions from Devon Energy Corp., with a target of producing at least 100,000 barrels a day by the end of the decade. The London-based producer subsequently bought stakes in offshore blocks operated by Petroleo Brasileiro SA (PETR4) in the so-called Equatorial Margin in northern Brazil. In May, it acquired more stakes in the region in an auction and still plans to do seismic studies.
BP’s only operating asset in Brazil was a 60 percent stake in the Polvo offshore field, which it sold in May to HRT Participacoes em Petroleo SA for $135 million. The company now has stakes in 19 concessions and is awaiting for regulatory approval for five more.
BP said it remains committed to Brazil and attributed the operational gap to the “lumpy” nature of the business.
BP’s decision to sell the Polvo field and scale back in Brazil comes at a time the world’s largest oil companies are focusing staff and capital on large projects to become more efficient, said Bob Fryklund, vice president of energy consulting firm IHS CERA.
“The majors are going through major portfolio realignment to reinvigorate the rate of return on capital deployed,” Fryklund said by telephone. “If you’re a super-major it’s all about scale. You want profitable, but you also want scale. It needs to move the needle.”
To contact the reporters on this story: Rodrigo Orihuela in Rio de Janeiro at email@example.com; Nidaa Bakhsh in London at firstname.lastname@example.org; Peter Millard in Rio de Janeiro at email@example.com