BP cut the pay of Lord John Browne last year, piling more humiliation on its departing chief executive who was criticised by US officials as the company struggled with oil spills, safety lapses and allegations that it manipulated prices.

The huge energy company said in its annual report that Browne's total pay package - including £2m worth of shares under a long-term incentive scheme - was £4.57m for 2006, down 28% on the amount he received in 2005.

Browne - whose salary, bonus and non-cash payments amounted to £2.5m in 2006, against £3.3m in 2005 - is to step down on July 31.

The annual report reveals that on his departure date Browne will gain a year's salary in the form of a lump sum of £1.57m. He will also receive a testimonial payment worth another year's wages, and bonus worth £2m. There is also an extra £90,000 in "fringe benefits" that include a car and driver, the report said.

After 40 years with the oil company, Browne, 58, will also enjoy a lucrative pension worth more than £1m a year. This includes share options that could net up to £3m based on previous awards and share performance.

Despite record results at BP last year, Browne's bonus was cut by nearly half to £900,000 from £1.75m the previous year.

The value of the shares awarded to Browne under long-term share incentive schemes also fell, to £2m from £3.1m for 2005. Under the 2006-2008 share scheme, BP's chief could also be awarded up to another 1,761,249 shares, the report said. This was down from the 2,006,767 maximum number of shares which he was entitled to under the plan reported in last year's annual review.

This is the second consecutive year that Browne's salary and bonus has been reduced, following problems in 2005, including an explosion at BP's Texas City refinery which killed 15 workers. In 2006, US regulators partly blamed that accident on cost-cutting, casting a shadow over BP's and Browne's reputations.

US officials also started an investigation of BP last year for alleged manipulation of the propane market, and the company suffered a series of problems at its Alaskan operations following pipeline leaks.

These problems, and some delays on the start-up of key projects, overshadowed BP's strong results in 2006 and eroded the "management premium" that BP's shares had previously enjoyed over rivals such as Royal Dutch Shell.

BP said in January Browne would step down in July, 17 months earlier than planned, to be replaced by exploration and production chief Tony Hayward.

The early departure was intended to avoid a period of drift during a long handover period, and the announcement followed a disagreement last year between Browne and chairman Peter Sutherland over whether the chief executive should retire at 60, in line with established BP practice.

Hayward saw his bonus fall from £460,000 to £250,000 last year, although his salary did jump from £485,000 to £750,000 when he was appointed as the new chief executive.

Overall bonus payouts to BP's board of directors fell from £3.6m to £2.1m in 2006.

A company spokesman said bonus payments hinged on a number of factors including operational and safety performance, as well as the share price.

BP's safety record was centre stage again yesterday when the Reuters news agency put out a report based on an interview with a senior US official.

The official said BP's failure to maintain pipelines properly at its Prudhoe Bay field was a major factor behind Alaska's worst-ever onshore crude spill last year. Investigators are awaiting the final results of laboratory analysis on the corroded pipeline.