A little less than six months after cutting its dividend for the first time since the Second World War Royal Dutch Shell (RDSB) has announced more major changes as it reacts to the Covid crisis revealing it will cut up to 9,000 jobs by 2022.
Shell said job cuts of 7,000-to-9,000 were expected, including around 1,500 people who had agreed to take a voluntary redundancy this year.
The company also narrowed its third-quarter production forecast for its upstream oil and gas business after it took a hit from hurricanes in the US Gulf of Mexico.
Production for the three months through September from the upstream busines was expected at between 2.15 million and 2.25 million barrels of oil equivalent per day, the company said.
That compared to guidance given at the time of the company’s second-quarter results of between 2.1 million and 2.4 million barrels.
The fresh guidance included a production impact of 60 to 70 thousand barrels per day from the hurricanes.
In the oil products business, Shell warned its refining margins in the third quarter were expected to be ‘significantly lower’ than in the second quarter.
The refinery utilisation rate was expected to be between 64% and 68%, lower than previous guidance of 68-76%.
COULD JOB CUTS UNDERMINE ENERGY TRANSITION EFFORTS?
AJ Bell investment director Russ Mould commented: ‘The big job cuts are understandable and are likely to receive a broadly positive response from the market. A more efficient, more streamlined operation could result in more profit which it can share with investors and potentially invest in reshaping the business.
‘However, while some roles might have been rendered irrelevant by the transition away from fossil fuels, Shell will lose good people.
‘This could undermine its recovery coming out of the pandemic and also hamper its attempts to head towards a greener future.
‘The big argument employed by the oil majors when questioned on why they should be involved in a move towards cleaner sources of energy is that they have lots of transferrable skills and experience which can be applied in areas like renewables.
‘The planned redundancies may get rid of some dead wood but some of that store of skills and experience seems very likely to be lost too.
‘This industry has track record of cutting jobs in previous cycles and then facing a skills shortage down the road.’