Up to 500 jobs are to go in London and 200 in Aberdeen, amounting to almost a quarter of the 4,000 strong production workforce.

More jobs could be at risk in the oil industry

Low oil prices are making further exploration and development of North Sea oil fields less economic, and the company says that more cuts are on the way.

"There will be other job losses around the world, as yet undefined," a company spokesman confirmed.

When the two companies announced a merger, they said that around 6,000 jobs would be eliminated due to efficiency savings. But the increasingly competitive conditions in the oil industry have led many analysts to speculate that the ultimate number of job losses may reach 20,000 out of the combined company total of 100,000 employees.

In a letter to employees, BP Amoco said "this is a difficult period for everyone..1999 will be a year of consolidation."

The price of oil has fallen to a twenty year low of $10 a barrel, far below the $15-$20 a barrel of the previous decade.

Other companies to cut

Texaco, the fourth largest US oil company, said on Friday it would cut back capital spending by 11% and accelerate its programme of job cuts, eliminating 2,000 workers from its 19,000 strong workforce.

And Phillips Petroleum laid off 1,400 workers yesterday in an attempt to cut costs.

Almost all the big oil companies have now announced major cutbacks. Royal Dutch Shell shed 3,000 jobs in November, while the merger of Exxon and Mobil to form the world's biggest oil company, is expected to lead to an even bigger consolidation.

"There is a silver lining to these cuts," ABN AMRO's Eugene Nowak said. "Oil production will drop more sharply than previously thought, which will help prices."

Shares in BP Amoco rose slightly to 921.5p on Friday.