Anglo-Dutch supermajor Shell is planning to cut between 7000 and 9000 jobs — 8.5% to 11% of its global workforce — as it looks to streamline its business to thrive in the energy transition.
Shell said in a trading update on Wednesday ahead of interim results due next month that it is planning for “reduced organisational complexity” to help deliver annual cost savings of between $2 billion and $2.5 billion by 2022.
Shell employs about 83,000 people worldwide.
The reduction in headcount will include about 1500 people who have agreed to take voluntary redundancy this year.
Shell and its peers, including BP, have been grappling with how to maintain profitability amid falling oil demand as a result of the Covid-19 pandemic while also delivering on society's needs to reduce carbon emissions to limit global warming.
Chief executive Ben van Beurden said in an article published on the company’s website that it will be “painful to know that you will end up saying goodbye to quite a few good people”.
But he added: “We have to be a simpler, more streamlined, more competitive organisation that is more nimble and able to respond to customers.
“To be more nimble, we have to remove a certain amount of organisational complexity. In addition, we have to make sure we are making the best of the core capabilities we need to succeed.”
In April, the 113-year-old oil and gas company unveiled plans to become carbon neutral by 2050 and in June said it was embarking on a programme to reshape its business.
Revealing more details about the new strategy, which is expected to be fully announced in February next year, Van Beurden said Shell's upstream oil and gas business will remain critical to ensuring strong cash flows but will be “more focused” in future.
“We will continue to invest, but it will not be about how many barrels of oil, or cubic feet of gas, upstream produces, but how much it adds to the bottom line.
"The projects we invest in will be highly valuable.
"Upstream will be critical to Shell as we change – we need it to be very successful, so we have the financial strength to invest further in our lower-carbon products,” he said.
Shell is also planning to have a smaller refining business, eventually ending up with fewer than 10 refineries, compared to about 15 at present and 55 about 15 years ago.
But Van Beurden said the future means “dramatic change for Shell”.
“We have to be net zero in all our operations, which means major changes at refineries, chemicals sites, on-shore and offshore production facilities. But it also means that we have to change the type of products that we sell.
“We will have some oil and gas in the mix of energy we sell by 2050, but it will be predominantly low-carbon electricity, low-carbon biofuels, it will be hydrogen and it will be all sorts of other solutions too.”
Shell said in the update that overall production in the third quarter is expected to come in at between 2.97 million barrels of oil equivalent per day and 3.11 million boepd, consisting of between 820,000 and 860,000 boepd from the integrated gas division and between 2.15 million and 2.25 million boepd in the upstream division.
In May Shell cut its dividend for the first time since the 1940s to preserve cash and defend its balance sheet amid falling demand due to the coronavirus pandemic.