As Shell transitions to clean energy, workers face uncertain future
As Royal Dutch Shell announced last week that its oil production had seen its best days, the surprise admission came with unwelcome news for its workers.
The Hague-based oil giant, which has some 8,000 workers in the Houston area, said it won’t raise salaries for most of its employees this year, according to people with knowledge of the matter. Instead Shell looks to save cash as it begins a transition from a producer of mostly oil and gas to one focused on greener forms of energy. Traders will receive annual bonuses, while others won’t receive any.
In a note to staff, CEO Ben van Beurden said that while the company had previously told employees to have low expectations for salary increases, most wouldn’t get a pay raise this year.
Shell on Thursday said its oil production peaked in 2019 and laid out a plan to transform its fossil fuels business into a clean energy provider to meet a goal of net-zero emissions by 2050. It said it will invest as much as $6 billion a year in renewable energy projects while selling off its stakes in oil exploration and production projects to the tune of $4 billion a year over 10 years.
“We must give our customers the products and services they want and need — products that have the lowest environmental impact,” van Beurden said in a statement. “At the same time, we will use our established strengths to build on our competitive portfolio as we make the transition to be a net-zero emissions business in step with society.”
In addition to previously announced job cuts totaling 9,000 over the next two years, a second round of voluntary reductions is also underway, van Beurden said this month.
He reiterated that there would be no bonus payments for anyone in the company, the people said. In July, Chief Financial Officer Jessica Uhl told analysts that halted bonus payouts would save the company about $1 billion.
Shell’s traders, however, will receive bonuses, which are not tied to payout budgets associated with the company’s performance, said people with knowledge of the matter who asked not to be identified because the information is not public.
The company’s trading unit, among the biggest in the world, had its best performance on record in the second quarter of last year. Van Beurden’s note did not mention bonuses for traders, which can often be hefty.
A Shell spokesperson declined to comment.
The Anglo-Dutch oil giant reported disappointing end-of-year earnings as the effect of the coronavirus pandemic continued to hammer fuel sales and refining margins. The pressure to turn greener has pushed companies toward clean energy projects, which typically have lower returns than oil. That is forcing them to keep a tight rein on expenditure.
Still, Shell will continue to reward shareholders.
In a statement outlining its energy transition path on Thursday, the company reiterated its commitment to raise the dividend by about 4 percent each year. It will also start share buybacks once net debt falls to $65 billion.