Shell Slashing 9,000 Jobs to Cut Costs

Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--Oil major Royal Dutch Shell plc (NYSE:RDS.A) (The Hague, The Netherlands) has announced plans to cut up to 9,000 jobs--more than 10%--of its global workforce over the next two years in an attempt to cut costs.

The cuts form part of the oil and gas giant's goal to move into renewable energy, energy trading, biofuels and hydrogen while greatly reducing emissions from its traditional activities like production, refining and chemicals processing.

"We do not have an exact figure because the details are still being worked out, and we have never had a target to reduce a particular number of jobs," commented Shell Chief Executive Officer Ben van Beurden. "But we can say that, because of the efficiencies we expect to gain, we will reduce between 7,000 and 9,000 jobs by the end of 2022. This includes around 1,500 people who have already agreed to take voluntary redundancy this year, but excludes any who may leave Shell because of divestments. Along with the other measures we will take, we should achieve a sustainable annual cost saving of between $2 billion and $2.5 billion."

At the end of 2019, Shell's workforce stood at 83,000 employees. In August, Industrial Info reported that Shell led a number of leading oil and gas companies in reporting record, combined second quarter financial losses of $28 billion, mainly due to the impact of COVID-19. For additional information, see August 10, 2020, article - Big Oil Reports Record Losses of $28 Billion.

Shell plans to revamp its Upstream business--which discovers and extracts oil and gas--to fund the transfer to lower-carbon products, with van Beurden claiming, "We have to change the type of products that we sell."

He explained: "That means Upstream--the part of Shell that deals with exploring for and producing oil and gas--will be run to ensure a strong flow of cash to Shell. We will continue to invest, but it will not be about how many barrels of oil, or cubic feet of gas, Upstream produces, but how much it adds to the bottom line. The projects we invest in will be highly valuable. Upstream will be critical to Shell as we change -- we need it to be very successful, so we have the financial strength to invest further in our lower-carbon products."

There is expected to be a large knock-on effect to the company's refining and chemicals operations. Van burden said: "Refining is another business that we will refocus. It will be smaller but smarter. We will keep only what is strategically essential to us and integrate those refineries with our chemicals business, which we plan to grow. We will keep sites in key locations which have the flexibility to adapt. It is also worth noting that, if we want to be a large player in biofuels, a lot of the biofuel capability will be built within our refining infrastructure. We will end up with fewer than 10 refineries, compared to 55 around 15 years ago, but they will be set up to serve the changing needs of society."

Shell also expects integrated gas to have "a bigger focus on unlocking markets and focusing on the customers' specific needs."

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