Shell Targets $2.0-2.5bn in Annual Cost Savings

Shell plans to make $2.0-2.5bn in annual cost savings by 2022 by streamlining its business, the Anglo-Dutch major  reported on September 30, in addition to the $3-4bn in cuts it announced earlier this year.

The measures will involve 7,000-9,000 of job cuts, which will include some 1,500 people that have agreed to take voluntary redundancy this year. Shell had 83,000 employees at the end of 2019.

"We have looked closely at how we are organised and we feel that, 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 CEO Ben van Beurden said in an internal interview published on the company's website. There are also many employees working in Shell's middle levels that have a relatively small number of people reporting to them, he said.

"In some cases there are good reasons for that, but as a principle we are looking to remove that complexity, and cost, so we can be the nimble, efficient and customer-focused company we need to be," van Beurden said. Shell will also seek to make savings on travel and the use of contractors, and look at other opportunities like virtual working.

The company is targeting cuts across its upstream, refining and integrated gas businesses. It plans to reduce the number of its refineries to less than 10 from 17, more closely integrating its remaining sites with its chemicals and trading division. Its integrated gas segment will expand in LNG markets and customer-led energy solutions, while lowering its carbon footprint.

Shell's reorganisation will help the major reach its goal of net-zero emissions by 2050, van Beurden said. The company is moving into the power sector and renewables, where margins can be relatively low.

Shell also warned that its third-quarter oil and gas production would fall sharply to between 2.97-3.11mn barrels of oil equivalent per day, owing to the continuing impact of the coronavirus pandemic and Gulf of Mexico hurricanes that led to offshore platforms shutting down.

The major also said it would book another impairment charge of $1.0-1.5bn in the third quarter. Its upstream business is expected to see a loss, as it did in the second quarter.