Shell to sack 6,500; cut spending to cope with lower oil prices

Vanguard reports; London – Royal Dutch Shell (RDSa.L) says it will axe 6,500 jobs this year and step up spending cuts, to deal with an extended period of lower oil prices.

Besides, the company announced on Thursday in London the sale of a 33 per cent stake in the Showa Shell refinery in Japan to Idemitsu, for about $1.4 billion.

The Anglo-Dutch company also said it was planning more asset disposals, bringing total asset sales between 2014 and 2018 to $50 billion.

“We have to be resilient in a world where oil prices remain low for some time, whilst keeping an eye on recovery,’’ Chief Executive Officer Ben van Beurden said.

Shell said it anticipated 6,500 staff and direct contractor reductions in 2015 from a total of nearly 100,000 employees.

Lower oil prices have contributed to a 37 per cent drop in the oil and gas group’s second-quarter profits.

And the group said it would reduce 2015 capital investment for the second time this year to $30 billion by 20 per cent from a year ago.

Big oil companies have cut 2015 spending by 10 to 15 per cent from 2014, to cope with a halving of oil prices over the past year to below $55 a barrel LCOc1.

Rivals BP (BP.L) and Total (TOTF.PA) announced further cuts this week.

Shell said its operating costs were expected to fall by $4 billion, or around 10 per cent, in 2015 as part of a broad efficiency drive to boost its balance sheet.

It also expects $30 billion of asset sales between 2016 and 2018, on top of a total of $20 billion in disposals for 2014 and 2015 combined.

Shell, however, have planned to return to the line of profit by pushing ahead with its proposed $70 billion acquisition of BG Group (BG.L).

Shell hopes to complete its BG deal by early 2016 and is still awaiting key regulatory approvals from the European Union, China and Australia.

But Brazil, the United States and South Korea have formally cleared it.

The deal is expected to generate pre-tax benefits of around $2.5 billion per year, starting 2018.

The tie-up will turn Shell into the world’s leading liquefied natural gas company and one of the largest deep-water oil producers, with a focus on Brazil.

Shell maintained its quarterly dividend at 47 cents per share and is committed to rewarding shareholders with at least the same pay-out in 2016. (Reuters/NAN)