Shell to slash workforce by 10%

Source: By Carlos Anchondo, E&E News reporter • Posted: Thursday, October 1, 2020

Royal Dutch Shell PLC announced plans yesterday to shrink its workforce by roughly 10% as it ramps up efforts to become a net-zero carbon emissions business by midcentury.

The Netherlands-based oil and gas major said it expects to lay off as many as 9,000 workers globally by the end of 2022 — part of a plan that the company says will save it up to $2.5 billion annually.

Oil companies worldwide have faced financial headwinds this year amid low energy prices and a bleak outlook for oil demand due to the coronavirus crisis.

Shell CEO Ben van Beurden said although the job cuts will be “very painful,” a smaller workforce will enable the company to be “the nimble, efficient and customer-focused company we need to be.”

“If you work your way through all of this, you do come across many opportunities to just do things more simply, and that brings cost savings too,” van Beurden said in an interview published yesterday on Shell’s website.

“Reducing cost is essential,” he said. “We have to be competitive.”

A Shell spokesperson declined to identify specific areas where the job cuts might be made and referred E&E News to van Beurden’s interview.

The layoffs announced in Shell’s third-quarter update echo a similar move by BP PLC this summer.

In June, the British oil major said it will eliminate about 10,000 people from its workforce (Greenwire, June 8).

BP CEO Bernard Looney said at the time that the “tough” decisions would help the company be nimbler.

Shell’s van Beurden said a leaner workforce is part of the firm’s “evolution” on the road to a lower-carbon future.

He said the company’s upstream business will remain “critical” to ensuring Shell has the financial resources needed to increasingly invest in lower-carbon products.

Michelle Michot Foss, a fellow in energy and minerals with Rice University’s Baker Institute, said job cuts are happening because companies are getting “slammed” by current market conditions and European majors are wrapping those cuts into “energy transition language because that’s the pressure that they’re under.”

“What everyone is trying to do right now is balance political pressure, public pressure, all of those kinds of things, with improving their portfolios so they are actually acquiring assets that make sense to be able to continue to put oil and gas volumes into the market as they’re needed,” Michot Foss said.

Yet companies cannot take billions of dollars in impairments without also trimming jobs, she said.

Shell wrote down the value of its assets by as much as $22 billion in June, according to its second-quarter update, due to a falloff in oil demand from coronavirus-related lockdowns and travel restrictions (Energywire, July 1).

Ehud Ronn, a finance professor and co-director of the Energy Management and Innovation Center at the University of Texas, Austin, said if benchmark oil prices are in the low $50 range in 2030, drillers will continue to be financially squeezed.

“At these prices out to the next ten years, there are fewer profitable exploration and production possibilities, so they are scaling back their investments, and reducing the workforce that will not be engaged in these exploration and production activities,” Ronn said in an email.

Shell’s announcement came one day after Ohio-based Marathon Petroleum Corp. filed with the Securities and Exchange Commission that it’s planning to cut roughly 2,000 employees as part of a “workforce reduction plan.”

“In total, these reductions and the open positions MPC has elected not to fill, represent approximately 12% of MPC’s workforce, excluding employees at its Speedway operations,” the filing said, dated Tuesday.

Marathon spokesperson Jamal Kheiry said in an email yesterday that the company was evaluating “how roles throughout our company will support the future-focused activities we have prioritized” but declined to comment further.

Reporter Mike Lee contributed.