Oil major plans further jobs cull

Oil giant Royal Dutch Shell is planning a fresh wave of job cuts under new chief executive Peter Voser’s group-wide overhaul, it has emerged.

Shell’s first tranche of cuts is set to draw to a close this week and it is expected to be followed soon by an announcement over a new set of job losses.

The firm rejected reports that between 500 and 600 of its global management are to go in the next phase of the restructuring.

A spokeswoman for the firm declined to comment on the numbers and it is believed Shell has yet to set targets for the upcoming cuts.

Shell’s new boss has already announced plans to merge two of the firm’s three “upstream” exploration subsidiaries, which employ 22,000 staff.

The company is also streamlining its corporate affairs division, which is headquartered in The Hague, where it employs 2,000 staff.

Most of the changes already in progress will affect divisions headquartered outside the UK. But a report in The Times suggested the new round of cuts could involve the UK business.

The group’s downstream arm – which covers non-exploration activities – is also headquartered out of the UK.

Shell has an upstream operation in Aberdeen, while it also has a London-based corporate affairs function in the UK.

A source close to the firm said: “We are finishing the current round and there is a new round starting after that.”

Copyright © 2009 The Press Association. All rights reserved.

SOURCE ARTICLE

Here’s the story. You are a Swiss accountant with a proven record of ruthlessness and synthetic business acumen. You are comfortable with numbers – that’s what you do – but you know little about the minutiae of the oil business. How can you be – you are not an “oil man” you are a “dollars man”. By guile, good fortune and the Peter Principle you find yourself at the helm of one of the world’s biggest oil and gas companies. You know that you will struggle with the difficult things – like creating an organisation that finds, develops, transports, refines and markets hydrocarbons. You know nothing at all about the oil and gas chain from exploration to consumption. You’ve never really worked in it – other than seeing spreadsheets which show you how much it costs. But you are now in charge. So what you do is retreat to the familiar world of numbers. That world where there is certainty – where something that costs “$100m” is only supportable if an adequate ROACE is assured. And where, even though future earnings are always, by definition, unpredictable you find a way of getting bogus certainty where there is none. By appointing more accountants and listening to them.

And then there is the term over which you plan to steer the business. Everyone knows that the genetics of the oil business are very long term. To find oil (which costs money) and to develop that oil (which costs more) is within the special competences of Shell – always has been. But to harvest the oil and the gas and to generate the income streams you have to be patient. But how can you be patient if you want to show how macho and “profit-focused” you are? Cut, cut, cut. It’s what I do. And immediately the bottom line benefits. Never mind that in five or ten years we won’t have any new discoveries. Never mind that in a decade or so the reserves cupboard will be bare. I’ll be on a seven figure pension by then like Mark and Phil and Jeroen before me. Ha!

By John Donovan

On 30 January we broke the news of Shell’s decision to make “tough choices” in reaction to the collapse in oil prices.  Shell confirmed to Reuters that the Shell internal emails from CEO Jeroen van der Veer and Executive Director Malcolm Brinded we published were authentic.  Quotes from the emails were featured in the Reuters article: Shell gets tough on costs as oil prices bite

Notability, the warning by Brinded of “touch choices” did not extend to him giving up his fat cat retention bonus.

In relation to Shell’s employee safety, Brinded admitted in his email, not meant for public consumption, that “Shell had a “dreadful start” to this year after 10 contractors and one third party were killed in three incidents”.

On 9 February, Reuters published a follow-up article reporting: “some employees posted comments on Shell protest website
royaldutchshellplc.com saying up to half the jobs at the Dubai operation could go.”

A few days later we published a Shell internal email sent on behalf of Chris Haynes, Shell Vice President Technical, EPT Projects demanding a ruthless review of third parties costs and plans to “trim” the work force. This was reported in the Reuters article: Shell to stall hires and get “ruthless” on contractors

On 26 May, we announced the major restructuring of Royal Dutch Shell being discussed at a conference of several hundred Shell executives in Berlin. The meeting became known as “The Funeral in Berlin”. Shell took several days before confirming the story, which by then had resulted in many news articles, including a front page lead story in the Financial Times acknowledging our role in breaking the story.

A Reuters article said: The Royaldutchshellplc.com website was the first to reveal news of the planned restructuring.

In June, The Wall Street Journal reported “Leaked Shell E-mail Reveals 62 Senior Executive Appointments”. This time the leaked email was from Peter Voser, the then incoming CEO of RDS Plc.

The restructuring continues and deepens with the news that 10,000 Shell employees may be culled. Under the circumstances, it seems reasonable to forecast that a growing number of disgruntled former Shell employees will join those already using our Shell Blog to make their feelings known about being “culled” at a time when it is difficult to find new jobs.

The fat cats at the top of Shell will of course profit from the savage cuts, boosting their already obscene remuneration packages, including pensions pots worth several millions of pounds.

CITY A.M.

Monday, 27th July 2009

ENERGY
OIL giant Royal Dutch Shell is set to announce a set of job cuts this week, as new chief executive Peter Voser continues his wave of intense restructuring at the company. But reports that the number of job losses would be as high as 600 were yesterday dismissed. Voser is expected to give details of his restructuring plans at the company’s interim results on Thursday. Earlier this year, Voser kicked off his leadership with a bang, when he axed almost half of the executive directors on the group’s board. This led to the most senior woman executive, Linda Cook, leaving.

The Times

Shell, which recently became the world’s biggest company by market capitalisation, has been hit by falling output in the Nigerian delta, where rebels have attacked its facilities. The company could announce a cull of up to 600 senior management roles globally.

Analyst consensus forecasts show that BP is expected to make $2.78bn (£1.69bn) in adjusted operating profit, edging ahead of Shell’s estimated $2.4bn profit.

Both companies are under pressure from falling demand for oil, but Shell is more exposed to the slumping price of natural gas. Richard Griffiths, an analyst at Evolution Securities, said: “Everyone knows it is going to be grim reading, so we will be looking at the outlook. Rising oil prices combined with a declining cost base means earnings momentum should start to turn in a postive direction.”

Despite lower profits, analysts said that safe dividends are not under threat.

TELEGRAPH ARTICLE

OTTAWA — GLOBAL ENERGY REPORTER,

Earlier this month, Royal Dutch Shell PLC announced it is conducting a strategic review of some of its global refining operations, including its 130,000-barrel-a-day refinery in Montreal. Options for the 75-year-old plant include continuing its operation, selling it or closing it and transforming the property into a terminal to receive imported petroleum products.

A year ago Shell abandoned plans to build a refinery near Sarnia, Ont., to handle production from Alberta’s oil sands.

Shell and its partner, Saudi Refining, have also delayed by nearly two years the expansion of their jointly-owned plant in Texas. Other U.S. companies, including Valero Energy Corp., Marathon Oil Co. and ConocoPhillips Co., have also recently announced plans to delay or suspend expansion or upgrading of refineries.

The investment pullback has prompted complaints in U.S. Congress that the oil industry is deliberately restraining capacity to maintain high prices.

COMPLETE ARTICLE

The Sunday Times

UK oil giants’ profits plunge $10bn

Danny Fortson

THE world’s biggest oil and gas companies are suffering the most precipitous fall in profits in the history of the industry, it will be revealed this week.

Several of the sector’s top players – including BP, Royal Dutch Shell and BG Group – will announce quarterly earnings this week, revealing the extent of the damage wrought by a combination of recession, the falling value of gas and an oil price that remains far below the record levels it reached a year ago. Oil has fallen from $147 a barrel to $68.

Concerns are rising that if the situation does not improve quickly the industry could be forced into drastic restructuring, with some compelled to sell major assets, exit countries or even entire regions, and slash dividends.

One industry source said: “If things continue like this, it won’t be a question of selling a few old assets in the North Sea to help fund their capital programmes. It will be a question of getting out of the North Sea entirely.”

The oil industry relies on cash flow to fund the hundreds of billions it spends every year to find new sources around the world. The recovery of the oil price from the lows it hit this year has been more than offset by weaker demand and falling gas prices.

When it reveals its performance for the three months to June on Thursday, Shell is expected to report profits of about $2.4 billion (£1.5 billion), down more than two-thirds compared with last year. The earnings call will be the first chaired by Peter Voser, who took over as chief executive this month. Investors will be keen for further details of his sweeping cost-cutting plans, expected to include thousands of redundancies.

BP is expected to announce earnings of $2.8 billion, also down about two-thirds from a year ago but marginally up on the $2.4 billion it made in the first quarter. Goldman Sachs expects BG’s profits to have halved to $758m for the quarter. Together BG, BP and Shell will have seen profits drop $10.5 billion relative to a year ago.

TIMES ARTICLE

Some believe that both BP and Shell could be interested in cutting short the process of finding new reserves by announcing takeovers of existing companies.