Shell plans up to 9,000 job cuts with virus driving reductions | Economy News

Royal Dutch Shell Plc will cut up to 9,000 jobs while Covid-19 accelerates a company-wide restructuring into low-carbon energy.

The move reflects the challenge Big Oil faces in the face of the ongoing pandemic. Some in the industry believe that the era of demand growth is over. As the crisis accelerates the shift to cleaner energy, oil companies are cutting their jobs, taking billions of dollars in write-offs, and even lowering the once sacrosanct dividends.

At Shell, 7,000 to 9,000 job cuts are expected by the end of 2022, including around 1,500 people who will be made voluntary layoffs this year, the company said on Wednesday. It currently has around 83,000 employees. By then, sustainable annual cost savings of $ 2 billion to $ 2.5 billion are projected.

“We have to be a simpler, leaner and more competitive organization,” said CEO Ben van Beurden in a statement. “In many places we have too many shifts in the company: too many levels between me as CEO and the operators and technicians at our locations.”

Shell also warned of lower sales in the third quarter, saying oil product volumes were between 4.7 and 5 million barrels per day, up from 6.7 million per day last year. Trading results for oil products will be below the historical average and “significantly lower” than in the second quarter.

This shows that the oil trade bonanza that saved Shell’s latest results will not be repeated. The company also expects refining margins to be well below those of the second quarter. Full third quarter financials, slated for October 29, will include impairment charges of $ 1 billion to $ 1.5 billion.

Shell’s B shares were trading 0.6% higher to 962.6 pence as of 9:10 a.m. in London.

With the oil slump caused by the coronavirus, Shell colleagues have also taken drastic steps to shore up the balance sheet. BP Plc announced in June that 10,000 jobs would be cut. Chevron Corp. intends to cut 10% to 15% of its global workforce while Exxon Mobil Corp. Review staffing levels from country to country.

“The move to a leaner and lower-carbon organization is, in our view, the right one for Shell in the longer term,” wrote Barclays analysts, including Lydia Rainforth, in a research note. “With the macro environment still challenging, it may take some time for the stock price to reflect.”

Shell started the process in May when Van Beurden issued a memo to employees telling them that the company was being reshaped to make it leaner and more resilient and that there could be layoffs in the second half of the year, according to experts. The Anglo-Dutch major offered a voluntary severance payment, reduced recruitment and reviewed contracts for expatriate employees.

“These incremental details should help investors who believe Shell has been sitting on its hands for the past few months,” wrote Biraj Borkhataria, an analyst at RBC Capital, in a note on Wednesday. However, he stressed that investors will want more details on the major’s plans, which are expected on Shell Strategy Day on Feb.11.

The restructuring is also intended to fuel Shell’s expanded green ambitions. The company said in April it plans to eliminate all net emissions from its operations and most of the greenhouse gases from fuel it sells to its customers by 2050. The Anglo-Dutch company also said it would only end up doing business in emissions. free companies.