Shell announced plans to cut up to 9,000 jobs, or over 10% of its workforce, as part of a major overhaul to shift the oil and gas giant to low-carbon energy.
Shell, which had 83,000 employees at the end of 2019, said that the reorganization will lead to annual savings of $2 billion to $2.5 billion by 2022.
Last month it launched a broad review of its business aimed at cutting costs as it prepares to restructure its operations as part of the shift to low-carbon energy. Shell said it expected to cut 7,000 to 9,000 jobs by the end of 2022, including some 1,500 people who have agreed to take voluntary redundancy this year.
Rival BP this year announced plans to cut around 10,000 jobs as part of CEO Bernard Looney’s plans to rapidly expand its renewables business and reduce oil and gas production. Reducing costs is vital for Shell’s plans to move into the power sector and renewables where margins are relatively low.
Competition is also likely to intensify with utilities and rival oil firms including BP and Total all battling for market share as economies around the world go green.
In an operations update, Shell also said its oil and gas production was set to drop sharply in the third quarter to around 3,050 barrels of oil equivalent per day due to lower output as a result of the coronavirus pandemic and hurricanes that forced offshore platforms to shut down.
Shell, the world’s largest fuel retailer, saw a recovery in fuel sales in the third quarter from lows hit in the previous quarter as some countries gradually emerged from lockdown measures.
In the second quarter, Shell narrowly avoided its first quarterly loss in recent history, helped by a booming trading business. It however announced nearly $16.8 billion in impairment charges after sharply lowering its outlook for oil and gas prices in the wake of the pandemic.
Shell said it will take another impairment charge of $1 to $1.5 billion in the third quarter.