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British energy giants set to axe costs in a bid to cope with falling gas and oil prices

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Screen Shot 2015-07-27 at 08.40.27BG could reveal a 75 per cent fall in profit to £200million


The falling price of oil and gas continues to take its toll on energy firms as British Gas-owner Centrica, BP and Royal Dutch Shell are set to reveal increased cost cutting to cope.

The weak oil price has led to £130billion worth of oil and gas projects to be shelved globally, according to consultancy Wood Mackenzie.

In the UK this week Centrica chief executive Iain Conn is expected to reveal the details of a comprehensive strategic review that has been under way since he joined in January.

Alongside drastic cost cutting he is expected to show its British Gas business has made a huge profit – a 50 per cent rise on the previous year to £390million. This surge will spark outrage at the cost of household bills from the energy firm that supplies 11million homes in Britain after it issued customers with just a 5 per cent reduction.

Overall Centrica is expected to reveal half-year pre-tax profits for the group up just 1 per cent to £898million.

Conn, a former BP executive, is predicted to reveal plans to save another £400million by 2017 on top of the £100million cost cutting announced in February.

Analysts at Jefferies expect the savings to include a sell-off or scaling back of its North Sea assets. This is a U-turn on the strategy of predecessor Sam Laidlaw who invested in its production operations. It could also mean job cuts of up to 2,000 roles.

Tomorrow BP will update on its cost cutting, having announced billions of pounds of savings and sell-offs in the wake of its Gulf of Mexico oil spill in 2010 and the continued weak oil price.

Analysts expect it to confirm a final £6.5billion hit associated with its settlement over the Deepwater Horizon spill. At its second quarter results it is expected to show profit down around 50pc to £1.1bn compared to last year.

Last week ratings agency Standard & Poor’s said the settlement of the Deepwater Horizon blowout should mean it will meet its credit ratio and raised its outlook to stable from negative.

Royal Dutch Shell and BG Group, which Shell is in the process of buying in a £47billion deal, will also post half-year results on Thursday and Friday respectively.

Shell has already hinted of further cost savings to the £640million already announced.

But BG could reveal a 75 per cent fall in profit to £200million.

The oil industry globally has been forced to cut back on investment and slash jobs since a rise in US shale production and the continued oil exports from cartel OPEC have pushed the price from more than $110 a barrel a year ago to around $55.

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