Shell slashes up to 9,000 jobs in shift towards low-carbon strategy

Oil and gas giant trims 10 per cent of workforce in ‘extremely tough process’

Royal Dutch Shell chief executive Ben van Beurden said losing staff during the restructure is "an extremely tough process". AFP

Royal Dutch Shell plans to cut up to 9,000 jobs, equivalent to more than 10 per cent of its workforce, as part of the oil and gas company’s “strategic” shift to become a net-zero emissions energy business.

The world’s largest fuel retailer, which had 83,000 employees at the end of last year, said the restructure will see between 7,000 and 9,000 jobs cut by the end of 2022, with 1,500 people already agreeing to voluntary redundancy this year.

“This is an extremely tough process,” said Shell’s chief executive Ben van Beurden in an interview published on the company’s website. “It is very painful to know that you will end up saying goodbye to quite a few good people. But we are doing this because we have to, because it is the right thing to do for the future of the company. We have to be a simpler, more streamlined, more competitive organisation that is more nimble and able to respond to customers.”

In August, the company unveiled a broader review of its business, as it looks to become net zero in all its operations, radically adapting its refineries, chemical sites, onshore and offshore production facilities and changing the type of products it sells.

“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,” Mr van Beurden said on Wednesday.

About 85 per cent of the company’s carbon footprint currently comes from customer emissions when they use its products, he said.

"Shell’s CEO believes that the company will end up with less than 10 refineries as it continues to become more environmentally friendly company. Due to the lower oil price, the company’s gross refining margins are massively squeezed," said Naeem Aslam, chief market strategist at Avatrade.

Shell stressed that the job cuts were part of its “strategically driven exercise” to reform, rather than as a direct result of the fallout from coronavirus. The company’s oil and gas production is expected to drop sharply in the third quarter to around 3.04 million barrels of oil equivalent per day because of lower output, the company said in an updated operation outlook. This deficit was caused by the effects of the Covid-19 outbreak and hurricanes that forced offshore platforms to shut down.

The virus has hit the entire energy sector, with Shell's rival BP also cutting about 10,000 jobs, equivalent to 15 per cent of its staff.

The virus has hit the entire energy sector, with Shell's rival BP also cutting about 10,000 jobs or 15 per cent of its staff, the energy major said in June.

Shell said it aims to generate annual savings of between $2bn to $2.5bn through the job cuts as well as other measures such as cutting back on refining capacity, a move that will help company to achieve the $3-$4 billion efficiency drive rolled out in March that will run until next year.

Shell first flagged that job cuts were in the pipeline after posting a unveiling a $18.1bn second-quarter net loss in July.

Mr van Beurden said the company is also examining other costs, such as travel and the use of contractors, and considering virtual working options to help trim its outlay.

“Covid-19 has shown we can work very effectively in ways we did not think we were ready for yet. But a large part of the cost saving for Shell will come from having fewer people,” he said.