Shell to cut up to 10pc of workforce by 2022: Update

Market: Crude oil, Natural gas
30/09/20

Adds details from internal document

Shell expects to cut up to 9,000 jobs by the end of 2022, more than 10pc of its workforce, as part of a structural reorganisation to shift towards a low-carbon future.

"We have to be a simpler, more streamlined, more competitive organisation that is more nimble and able to respond to customers," chief executive Ben van Beurden said. "We have too many layers in the company: too many levels between me, as the CEO, and the operators and technicians at our locations."

The firm will look to cut between 7,000-9,000 jobs over the next two years. Shell will reduce the number of jobs in the top three layers of the company by nearly a fifth, van Beurden told employees in an internal document seen by Argus.

The total job cuts include around 1,500 people who have already agreed to take voluntary redundancy this year, but they exclude those who leave Shell because of divestments. Shell had a workforce of 83,000 at the end of last year. It said the redundancy programme, combined with other measures, should save $2bn-2.5bn/yr by 2022.

Earlier this year Shell cut its dividend for the first time since the 1940s, partly in preparation for the energy transition shift, saving it $10bn this year and reducing the need for urgent redundancies. But the firm said today that it plans to make its traditional business more focused as part of a low-carbon future. It has already announced plans to become a net-zero emissions energy business by 2050 or sooner.

"We will continue to invest, but it will not be about how many barrels of oil, or cubic feet of gas, [the] Upstream [business] produces, but how much it adds to the bottom line," van Beurden said. "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."

Shell is seeking to sell five refineries to reduce its fleet to fewer than 10, and plans to grow its integrated gas business. The new "reshaped Shell" will be set up with a strong focus on helping customers decarbonise in sectors such as aviation, shipping and road transport, van Beurden said. "We have to change the type of products that we sell."

Shell plans to establish a "sectors and decarbonisation" business in its downstream segment, according to the internal document. And it plans to integrate a number of departments under one structure. For example, IT, digital and data capabilities will move into the projects and technology organisation.

Shell's decision to reduce its workforce follows in the footsteps of competitor BP, which announced in June it would cut 14pc of its global workforce — around 10,000 jobs — as a result of the oil downturn brought on by Covid-19 and citing the energy transition. Shell plans to complete a detailed design of the company by early January 2021, and for the reshaped firm to become fully operational by 1 July next year.

By Rowena Edwards

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