The Courier & Advertiser (Angus and Dundee)

Re-shaping means more pain for oil giant Shell

Move to curb investment and drive efficiency

- Graham huband

The chief executive of Shell has moved to future-proof the oil giant after revealing a major “re-shaping” of its global operations.

The business will dramatical­ly scaledown its investment over the next four years, pull out of up to 10 countries and look for more cost savings as it looks to simplify its operations amid what it fears will be a long-term lower oil price environmen­t.

The group said it intended slashing spending by 35% to between £17.3 billion and £20.8bn in the period to 2020 – a 35% reduction on its capital expenditur­e in 2014 before the oil price crisis hit.

The company is also planning £3.1bn of efficiency savings following completion of its £35bn mega-merger with BG. That figure has increased from an initial target of £2.4bn.

More than 10,000 job losses across the business have previously been announced and that figure will now likely rise.

Chief executive Ben van Beurden said the “transforma­tion of Shell” would deliver a “simpler company, with fundamenta­lly advantaged positions and fundamenta­lly lower capital intensity.”

The firm will increase the speed of non-core asset sales with up to 10% of its global oil and gas production portfolio – a package with an estimated total value of around £20bn – to be sold off by 2018.

Despite the major structural changes, Mr van Beurden said he still saw growth opportunit­ies for Shell.

“We expect to see robust demand for oil and gas for decades to come, in a global energy system in a long-term transition to lower carbon fuels,” he said.

“As well as low oil prices today, we are seeing higher levels of price volatility, due to geopolitic­al change, the speed of informatio­n flows, and the pace of innovation in our sector.

“By capping our capital spending in the period to 2020, investing in compelling projects, driving down costs and selling non-core positions, we can reshape Shell into a more focused and more resilient company, with better returns and growing free cash flow per share.”

Following its restructur­e, Shell said it will be in a better position financiall­y at a prevailing oil price of $60 per barrel than it was between 2013 and 2015 when the average price was $90.

A barrel of crude is now trading at around $50, a significan­t improvemen­t on the low of $28 that was seen earlier this year.

Mr van Beurden said the tie-up with BG would drive the business forward.

 ??  ?? Shell chief executive officer Ben van Beurden.
Shell chief executive officer Ben van Beurden.

Newspapers in English

Newspapers from United Kingdom