National Post (Latest Edition)

Shell to cut up to 9,000 jobs as virus accelerate­s overhaul

Shift to ‘ leaner, lower-carbon organizati­on’

- LAURA HURST

Royal Dutch Shell Plc will cut as many as 9,000 jobs as crude’s crash forces billions of dollars in cost savings and the oil and gas giant overhauls its business to embrace clean energy.

The move reflects the challenge facing Big Oil as the virus pandemic persists, with some in the industry believing the era of demand growth is already over. As the crisis hastens the shift to low- carbon energy, oil majors are axing jobs, taking multi-billiondol­lar writedowns and slashing once- sacrosanct dividends.

At Shell, 7,000 to 9,000 job losses are expected by the end of 2022 — as much as 11 per cent of the workforce. The total includes around 1,500 people taking voluntary redundancy this year, the company said Wednesday. It predicts sustainabl­e annual cost savings of US$ 2 billion to US$ 2.5 billion by that time.

“We have to be a simpler, more streamline­d, more competitiv­e organizati­on,” chief executive Ben van Beurden said in a statement. “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.”

Shell plans to “refocus” its refining business, eventually reducing its number of plants to fewer than 10, from the 15 it’s involved in today. Refining margins have been much lower this quarter than last quarter, and oil- product sales have shrunk to around 4 million to 5 million barrels a day from 6.7 million a year earlier, according to the statement.

While the Anglo- Dutch major didn’t provide a full breakdown of the job losses, a spokespers­on said that positions in the top three layers of the company would be reduced by one-fifth.

A spokespers­on for Shell Canada said details are still being worked out, adding “we have never had a target to reduce a particular number of jobs.”

Third-quarter oil-product trading results will fall short of the historical average and will be “significan­tly lower” than in the second quarter, the company said. That shows the trading bonanza that saved Shell’s last set of results won’t be repeated. Its full third-quarter financials, scheduled for Oct. 29, will include impairment charges of US$1 billion to US$1.5 billion.

Shell’s B shares traded down 1.7 per cent as of close in London.

“The transforma­tion to a leaner and lower- carbon organizati­on is the right one for Shell longer- term,” Barclays Plc analyst Lydia Rainforth wrote in a research note. “But with the macro environmen­t still challengin­g, this may take some time to reflect in the share price.”

Oil’s coronaviru­s- induced plunge has seen Shell’s peers also take drastic steps to shore up the balance sheet. BP Plc said in June it planned to cut 10,000 jobs, Chevron Corp. intends to trim 10 per cent to 15 per cent of its global workforce, while Exxon Mobil Corp. is reviewing staffing country by country.

Shell began the process in May, when Van Beurden told staff in a memo that it was reshaping the company to make it slimmer and more resilient and that there could be redundanci­es in the second half of the year, according to people with knowledge of the matter. The Anglo- Dutch major offered voluntary severance, scaled back recruitmen­t and reviewed expatriate staff contracts.

“These incrementa­l details should help investors who think Shell has been sitting on its hands in recent months,” RBC Capital analyst Biraj Borkhatari­a wrote in a note. But he said shareholde­rs will want more details on the company’s plans.

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