Royal Dutch Shell Plc has announced that it will slash 9,000 jobs globally, as part of the firm’s cost-cutting measures to alleviate the effects of the crude oil crush and overhaul its business to embrace clean energy.
The Anglo-Dutch oil giant employed 83,000 workers last year across five continents. The firm says that about $2.5 billion annually will be saved from the plan to lay off 9,000 staff by the end of the year.
The number represents 11% of its total workforce which has already been cut by 1,500 people who took voluntary redundancy this year.
Shell also plans to invest in a low-carbon energy future as it battles the fall in crude oil prices due to the coronavirus pandemic which slashed oil demand.
Chief Executive Officer Ben van Beurden in a statement said, “We have to be a simpler, more streamlined, more competitive organization.
“In many places, we have too many layers in the company: too many levels between me, as the CEO, and the operators and technicians at our locations.”
Shell’s embrace of clean energy will see the company reduce its number of plants to seven from the current 15. Already, refining margins have dropped considerably in the third quarter from the previous quarter, and oil-product sales slammed to 4.5 million barrels a day from 6.7 million a day in 2019.
Much of the job cuts will affect positions in the top three layers of the company and include its subsidiary in Africa’s largest oil producer, Nigeria.
The company also expects to make more savings from trends adopted during the coronavirus pandemic including virtual working, limited travel and conferences, and decreased reliance on contractors.
Shell’s Q3 oil-product sales are set to fall short of the historical average, lower than the second quarter. The results will include impairment charges of between $1 billion to $1.5 billion. They are scheduled for October 29.
The announcement of the unprecedented job cuts caused Shell’s B shares to trade down 1.7% at 940.2 pence on Thursday evening.
It is not the only player in the oil market making such moves. British Petroleum (BP) announced in June that it would cut 10,000 jobs while American firm Chevron Corp. intends to trim 10% to 15% of its global workforce. Exxon Mobil Corp has also announced that it is reviewing staffing country by country.
Shell has ambitions to reorganize itself as a major player in a new future that the firm, and many analysts predict, will be less reliant on fossil fuels. Europe’s largest oil producer announced in April that it plans to eliminate all net emissions from its own operations and the bulk of greenhouse gasses from the fuel it sells to its customers by 2050.
Shell also declared that it would solely do business with companies that have zero net emissions.
