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740 senior Shell managers asked to reapply for 600 jobs

The Times

July 31, 2009

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.


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