Shell to cut up to 9,000 jobs in effort to shave $2.5bn in costs

Royal Dutch Shell plans to cut up to 9,000 jobs as the pandemic accelerates a restructuring at the oil and gas producer while it shifts to an era of cleaner fuels.

Ben van Beurden, chief executive, said on Wednesday that making Shell, which had 83,000 employees at the end of last year, a simpler organisation was expected to reduce annual costs by as much as $2.5bn by 2022.

“A large part of the cost saving for Shell will come from having fewer people,” Mr van Beurden said in a statement. Mr van Beurden, who has led Shell since 2014, said the company would cut 7,000 to 9,000 jobs by the end of 2022.

“We have looked closely at how we are organised and we feel that, in many places, we have too many layers in the company: too many levels between me, as the CEO, and the operators and technicians at our locations,” he said.

As the pandemic depresses crude prices, Shell’s review of its operations this year is designed to make the group more financially resilient and set it up for a shift towards lower-carbon energy businesses.

In April, the company announced a plan to become a net zero emissions company by 2050.

The job cuts include 1,500 people who have taken voluntary redundancy. Rival UK energy major BP announced 10,000 job cuts in June as part of an overhaul under new chief executive Bernard Looney.

Oil companies are coming under increasing pressure from environmental activists and some investors to wind down their exploration and production businesses as part of an effort to tackle climate change.

However, like peers such as Total of France and BP, Shell needs the cash generated from its dirtier, legacy oil division for investments in lower-margin cleaner energy businesses.

As part of the restructuring, Mr van Beurden said the group’s traditional hydrocarbon business would become more “focused”. “We will continue to invest, but it will not be about how many barrels of oil, or cubic feet of gas . . . but how much it adds to the bottom line,” he added.

The company also warned that with 80 per cent of its long-term liquefied natural gas contracts linked to the oil price, it expected a “significant impact” on margins in the third quarter.

Bumper trading profits in the second quarter helped Shell escape a loss. The company added on Thursday that trading profits would be “significantly lower” in the third quarter.

After announcing impairment charges of $16.8bn prompted by a lower outlook for oil prices over the long term, Shell said it would write down a further $1bn to $1.5bn in the third quarter.

Shell’s share price, which has more than halved in the past year, rose 1.2 per cent in early London trading on Wednesday.

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