Oil supermajor Shell (NYSE:SHEL) is planning to reduce its oil and gas exploration and development staff by 20%, according to an exclusive report from Reuters, citing intentions to cut costs to what has long been a wildly profitable segment of the oil giant’s business.
The new cuts follow Shell’s earlier moves to reduce its workforce and costs in the renewable and low-carbon segments.
According to Reuters, citing unnamed company sources, Shell is restructuring its operations, targeting exploration, well development and subsurface units, with its UK and Dutch branches set to carry the heaviest burdens.
The workforce cuts are not set in stone, and must still be discussed with employee representatives.
Shell’s new CEO, Wael Sawan, is on a cost-saving drive to improve the company’s performance in comparison with its peers.
"Shell aims to create more value with less emissions by focusing on performance, discipline and simplification across the business. That includes delivering structural operating cost reductions of $2-3 billion by the end of 2025," Shell said in a statement carried by Reuters.
On August 1, Shell reported adjusted earnings of $6.3bn for the second quarter, beating analyst consensus. The company initiated a $3.5bn share buyback program, to be completed by the third quarter results.
The previous month, Shell pressed pause on the construction of its Rotterdam biofuels facility and announced it would divest from a Singapore refining plant. Those two movies, plus slower trading in its gas division, resulted in a ~$2-billion impairment.
Shell’s subsidiary Shell Nederland Raffinaderij announced in July that it would temporarily pause on-site construction work at its 820,000 tons-a-year biofuels facility at the Shell Energy and Chemicals Park Rotterdam in the Netherlands “to address project delivery and ensure future competitiveness given current market conditions,” the company said.
That move saw Shell walk back several of its climate commitments and pledges, which triggered the resignation of several high-profile executives in its renewables division.
By Charles Kennedy for Oilprice.com