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SHELL TO SLASH COSTS WITH GIANT JOBS CULL

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SHELL TO SLASH COSTS WITH GIANT JOBS CULL

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RESTRUCTURE: Peter Voser is going to restructure the company

Thursday May 28,2009

By Andrew Johnson

Royal Dutch Shell unveiled one of the most radical restructurings in its 119-year history yesterday in a move placing thousands of jobs at risk.

Incoming chief executive Peter Voser is aiming to slash costs, cut project overruns and speed up decision making through the overhaul announced yesterday following the departure of gas and power chief Linda Cook.

While the company disappointed the City by setting no targets for how much money will be saved, analysts said the annual figure would be in the high “£100millions, if not low £1billions in the next two years or so”.

The company said up to 24,000 jobs will be affected by the changes, which see three upstream (or production) arms merged into two, which will then be refocused geographically.

The groups’s refining and marketing businesses will also be rationalised. There will be a completely new division, called projects and technology, which will design and manage all new projects, as well as research and development. Headquarter operations will also be restructured.

There has been speculation that up to 30 per cent of senior management could go in the cull.

In an e-mail to staff, Voser said: “Organisationally, we are too complex and our culture is still too consensus-oriented. Our costs are simply still too high.” He added: “The industry, and Shell, faces considerable challenges and high costs, volatile energy prices and competition for new projects.”

The biggest aspect of the restructuring is the merger of the gas and power and oil sands divisions with exploration and production. This will become two divisions, one focused on the Americas and the other on the rest of the world.

Up to 22,000 people will be affected from this move, while the remaining 2,000 mostly affected will be based in the centralised corporate affairs divisions. The bulk of the cuts are expected to fall outside the UK.

Investors deplored the lack of concrete targets and the shares dipped 15p to 1648p. ING oil analyst Jason Kenny said Shell was a late mover in terms of cutting costs compared to rivals such as Exxon and BP.

Shell is under fire from investors, who voted down the group’s pay report last week for giving executives bonuses after they had missed targets.

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