Posts from ‘July, 2009’

This self-explanatory email correspondence is published simultaneously with the article: “Former Shell Group Auditor says Shell is a hoodlum organisation”

EMAIL RESPONSE FROM MICHIEL BRANDJES ON BEHALF OF JORMA OLLILA

Dear Mr Campbell,

Thank you for your email of 20th July to Mr Olilla. As I indicated to you in my email of 5 September, 2008, as this matter has been referred to the Grampian Police and the Procurator Fiscal, it would be wholly inappropriate for us to engage in any direct communication with you in relation to it. We are, of course, happy to cooperate fully with the relevant authorities in any investigation.

Best Regards,

Michiel Brandjes 
Company Secretary and General Counsel Corporate 
Royal Dutch Shell plc

The Times

Shell axes thousands of white-collar jobs

Robin Pagnamenta and David Robertson

Royal Dutch Shell accelerated its cost-cutting campaign yesterday, warning of further substantial job reductions as the oil giant feels the effects of the biggest slump in global demand for crude since 1980.

As Shell announced a 70 per cent fall in profits to $2.3 billion (£1.4 billion) during the second quarter, Peter Voser, the new chief executive, confirmed that 20 per cent of its senior management, about 140 people, had already been axed since his appointment on July 1.

But he signalled there would be thousands more job losses as a reorganisation, dubbed Transition 2009, intensified. This, he added, would be complete by the end of the year.

Mr Voser said: “We simply have too many people doing business with each other and not with the outside world. We are stripping away layers and overlaps that are of no value and putting more focus on frontline activities … This really means fewer people thinking about strategy and more people implementing.”

Shell said 740 senior managers had been asked to reapply for 600 jobs in the new organisation. Mr Voser explained that asking staff to reapply had been “an interesting exercise because we could really select those we are keen on”. The departures include country and regional bosses at vice-president level.

The reorganisation is now set to cascade down through the company with “several thousand” middle managers being asked to reapply for jobs in a structure set by the newly established leadership cadre.

In total, analysts expect Shell to shave as much as 10 per cent off its 102,000-strong global workforce, including 8,500 staff in the UK, this year. The bulk of the losses, they say, will be in white-collar roles.

Gordon Gray, energy analyst at Collins Stewart, said he expected this would lead to a cost saving of $2 billion a year for Shell.

The company also said it had achieved $700 million in cost savings in the first half of the year compared with the same period in 2008.

Shell, which reported a 5 per cent fall in oil production yesterday, largely because of security problems in Nigeria, added that it was slashing its capital spending programme by 10 per cent next year to $28 billion.

Mr Voser said the industry was grappling with a combination of low crude prices, weak demand, excess capacity and high industry costs, and that Shell hoped to achieve reduced prices from contractors and suppliers of equipment and materials, such as steel, rigs and concrete.

He also said Shell was considering selling assets, including 8 per cent of its global refining capacity and petrol stations in Greece and elsewhere.

Mr Voser offered a bleak assessment of the company’s activities in Nigeria, where Shell’s production has more than halved since 2005 to 140,000 barrels per day, because of rebel attacks and large-scale theft of crude.

He added that Nigeria was going through a “very uncertain period”.

The chief executive was also pessimistic about the prospects for global recovery, stating that oil was in its deepest demand slump since 1980, even as the industry was set to lift production by 10 per cent this year.

“There is ample supply and not enough demand — quite a turnaround from a year ago,” he said.

“We simply don’t know when the global economy will recover and we have to plan on the basis that this downturn could last quite some time.”

Despite the gloomy outlook, Shell offered some positive news, saying it had made six important discoveries of oil and gas this year, which should contribute at least 700 million barrels of new reserves.

Mr Voser said the changes he was implementing this and next year would position Shell for a period of strong growth. In 2011 and 2012, several key projects, including the Pearl gas project in Qatar and the expansion of a production facility at Sakhalin in eastern Russia, will proceed.

TIMES ARTICLE

DAILY MAIL

That follows reductions of 17,000 people between 2003 and 2008 and a cull of a fifth of the firm’s top managers this year.

‘We simply don’t know when the global economy will recover, and we have to plan on the basis that this downturn could last quite some time,’ said Voser.

World oil demand will fall by over 2million barrels-a-day this year, the sharpest fall since 1980, says Shell.

Coming at a time when supplies are rising by an annual 10 per cent, this is proving a toxic combination for oil titans.

This time last year, firms were riding high on the back of oil prices that peaked at $147 a barrel.

But the global recession pushed prices below $40 early in 2009.

Since then, prices have recovered to the mid-$60s, but BP this week played down the chances of a further rally in the short term.

BP’s second-quarter profits fell 57 per cent to £1.9billion. US rival Exxon said yesterday its profits tumbled 66 per cent to £2.4billion.

Unlike BP, which pegged its dividend this week, Shell managed to deliver a 5 per cent uplift to 42 cents a share (25.5p). ‘A’ shares in Anglo-Dutch Shell rose 12p to 1,600p.

But finance chief Simon Henry said the firm could freeze the payout at that level as it responds to low inflation and the grim backdrop.

Shell’s woes in Nigeria helped push oil and gas output down by over 5 per cent in the quarter.

Voser sounded particularly downbeat on the African country, where Shell has been plagued by rebel attacks in the Delta region.

Asked whether he could withdraw altogether, Voser said: ‘This is an environment where we will have to be very careful how we are operating our assets going forward, but I think that is as far as I want to go at this stage.’

DAILY MAIL SOURCE ARTICLE

PETER VOSER: “We are stripping away layers and overlaps that are of no value,” he said as he announced half-year results yesterday before going on to accuse staff at the organisation of talking too much amongst themselves and not enough to the outside world.

Mr Voser has already overseen the introduction of a new restructuring programme in June, due to be completed by the end of the year, which includes a reduction of 20pc, or roughly 100 jobs, in senior management positions. The Shell boss said the programme was only the “beginning” of changes at the Anglo-Dutch company and that “substantial further staff reductions are likely”.

DAILY TELEGRAPH: The traditionally reliable dividend of Royal Dutch Shell may be frozen this year after the oil giant revealed an aggressive cost-cutting drive amid slumping profits.

If investors remain unimpressed, it is perhaps because they have heard this before. Shell management has touted its “strategic cost leadership” since the 1990s but failed to deliver a permanently leaner business. At a forward earnings multiple of eight times, the stock trades at roughly a 10% discount to its peers. It has missed out on the 13% rally in the European sector this year, falling 9%. Mr. Voser will have to show much more for his restructuring efforts before that discount narrows.

All the senior managers at Royal Dutch Shell have been made to re-apply for their positions and 150 of them have lost their jobs, the company revealed on Friday as it warned of substantial further job cuts spreading across the group.

The 750 executives in what is called the EC-2 level, two steps down from the top executive committee, have been cut to 600 in the shake-up launched by Peter Voser, the new chief executive who took over at the beginning of the month.

Link to complete article (subscription)