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RealTimeTraders.com, Inc: Royal Dutch Shell Intends Job Cuts, IT-job Outsourcing Under Cost-cutting Initiatives

Wednesday Jan 2, 3:26AM EST  

(RTTNews) – Anglo-Dutch oil giant Royal Dutch Shell Plc (RDS-B, RDS-A, RYDAF.PK, RDSA.L) is finalizing details of its cost cutting initiatives, with an aim to surpass the threatening effects of sky-high oil prices to its profit, the Wall street Journal reported on Wednesday.

The company plans to outsource about 3,000 information-technology jobs as part of the initiatives. The company also plans few finance job cuts, reshaping expatriate packages and restructuring Nigeria ventures to reduce costs.

As per earlier reports, a Shell spokesman confirmed the company is aiming for cost savings of GBP 250 million a year.

According to WSJ, high oil prices, which once played an important role in earnings growth at oil majors, are now ‘hurting refining margins, or the profit refiners make by processing crude oil into fuels, by driving industrywide cost inflation and encouraging governments to seek better terms for their contracts at the expense of majors.’

This reflected in profit declines for most oil majors in their third quarter, even though crude oil price peaked at $100 a barrel.

Even though Shell looked like an exception with a 16% rise in headline third-quarter net earnings, its profit excluding inventories and one-time items fell 13%.

According to a Shell newsletter obtained by Royaldutchshellplc.com, Shell intends to transfer “close to 3,000 positions” from its IT staff to outsourcing companies. The document noted that IT staff will receive a letter in early January with the details.

“We can confirm we’re in discussions to outsource a substantial part of our IT infrastructure services to three suppliers. We are in the middle of commercial conversations and expect contracts to be signed in 2008, at which point we will share more details,” WSJ reported, citing a Shell spokesman.

The company also plans to reduce positions in its finance and human-resources departments, the report said. However, the spokesman noted that there is no plan to reduce staff numbers in a top-down, prescriptive way.

Meanwhile, WSJ noted that Shell is adding engineers and other specialists.

On December 31, Daily Mail reported that Shell is likely to outsource some 3,200 positions to external providers as it is slashing its IT budget. The report also noted Shell’s plans for cuts in financial jobs as it reduces cross-border overlaps and shunts workers into a handful of major centers.

In addition, Shell is facing pressures from the government of Nigeria, its largest oil-production area outside the European North Sea and the U.S., to change the terms of its contracts. The company also suffers from local insurgent attacks. The new organization is due to be effective in April, WSJ said.

RDS-A closed Monday’s regular trading at $84.20, down $0.65 or 0.77%, on a 560 thousand share volume, while RDS-B lost $1.34 or 1.59% and settled at $83.00. Meanwhile, RYDAF.PK closed at $41.50, up $0.05 or 0.12%.

RDSA.L is currently trading on LSE at 2,111.00 pence, down 16.00 pence or 0.75%, on a volume of 930 thousand shares.

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