BP's second-quarter operating results took a backseat Tuesday, as all eyes were on oil spill details and the next steps for the new CEO. The decision to replace Tony Hayward with Bob Dudley as CEO on October 1 marks the beginning of a multiyear process to try to restore BP's reputation after damage from the Gulf of Mexico oil spill. The shift in leadership makes sense, as BP must now set a new strategy to instill a greater focus on safety and best practices. We believe it may take years for BP to prove to a sceptical public that change is at hand.
We'd like to see Dudley take aggressive steps over the coming weeks to set plans with measurable markers on how BP will reset its culture and safety review process. First, we'll look for BP to move forward with plans to secure sufficient liquidity via new bank lines or asset sales to cover near-term oil spill costs. BP now has undrawn committed borrowing facilities of $16 billion and raised its upstream asset sale plans to $30 billion from $10 billion over 18 months to help cover oil spill costs. The firm took a $32.2 billion charge during the second quarter for oil spill costs, leading to a quarterly loss of $17 billion. To boost financial flexibility, BP plans to reduce net debt at a later stage to $10 billion-$15 billion from the current $23 billion.
Next we'll look for progress on the oil spill clean-up for the rest of the year, including measures to restore Gulf waters and the shoreline. BP's $32.2 billion charge includes costs to date of $2.9 billion, the $20 billion escrow fund, and another $9.3 billion in estimated clean-up costs and grants based on expectations that most of the direct clean-up costs will occur by year-end. The firm plans to start its static kill August 2, with completion of a permanent kill via the relief well by mid-August.
Because our central concern remains the longer-term impact on BP's operations, we will look for steps from BP's leaders to secure and promote new projects and joint ventures across the globe to drive long-term growth. Oil and gas production during the second quarter of 3.9 million barrels of oil equivalent per day was 4% lower than year-ago levels because of more seasonal turnarounds that will continue into the third quarter. BP moved forward with projects in Azerbaijan and offshore Egypt. We'd like to see more new projects lined up over the coming months, demonstrating BP's ability to stay on a growth path after the spill. Assigning Hayward to a non-executive position at BP's Russian joint venture, TNK-BP, may help maintain growth plans for this crucial holding.
