By Sam Fleming
Last updated at 10:30 PM on 30th July 2009
Royal Dutch Shell will axe thousands more jobs as it grapples with the deepest downturn in oil demand for almost three decades.
The oil giant’s new chief executive Peter Voser struck a resoundingly grim tone as he unveiled a 70 per cent crash in secondquarter profits to Ł1.4billion.
He will hack capital spending by 10 per cent and push through ‘substantial’ cuts to the firm’s 102,000-strong workforce.
Gloomy outlook: Shell has seen its profits plunge and plans more redundancies
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 Ł1.9billion. US rival Exxon said yesterday its profits tumbled 66 per cent to Ł2.4billion.
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.’