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Several thousand more jobs will be slashed – Shell CEO Voser

Spruce Meadows hosts oil royalty at annual forum

By Dina O’meara, Calgary Herald

September 11, 2009 8:40 AM

The future of Shell Canada could be laid out today as the new leader of Europe’s largest oil company brings forward his vision of the changing fortunes of global energy markets to industry leaders in Calgary.

Peter Voser, who officially took the helm of Royal Dutch Shell in July, will be discussing the impact of volatile changes in oil and gas markets during the past year at the 19th annual Spruce Meadows Round Table forum.

“We need to become more nimble,” Voser said in a recent interview. “That means reducing complexity. . . . We’ve also announced changes to our structure, changes aimed at simplifying the organization and clarifying accountability.”

Royal Dutch Shell watched second-quarter profits drop 67 per cent to $3.82 billion US, joining its supermajor peers ExxonMobil Corp. and BP PLC as oil prices slid from highs of $147 US per barrel a year prior.

In May, Shell said it would restructure its core exploration and production division into an international unit and one focused on the Americas. According to company insiders, the division–which includes Shell Canada operations–could be reduced by up to 15 per cent.

In July, the corporation said it may sell or close its 76-year-old refinery in Montreal as the industry struggled with weak profit margins.

“We need to streamline our processes and eliminate activities that don’t generate value,” Voser said. “At Shell, we are still struggling with elimination and simplification.”

The new oil environment and drop in global demand forced industry to focus on high netback, low-cost assets, resulting in many of Canada’s oilsands projects being put on ice and related upgrading projects cancelled outright.

However, at least one analyst doesn’t see too much bloodshed happening in Shell’s Canadian operations, which include oilsands mining and in situ projects, several refineries, including the Scotford refinery outside of Edmonton, and a number of natural gas processing facilities.

“Canada is an important part of Shell’s long-term strategy,” said analyst Brian Youngberg, with Edward Jones in St. Louis, Mo. “It’s an area they are going to continue to focus on for years to come.”

Shell owns 60 per cent of the Athabasca Oil Sands Project with Chevron Canada Ltd.( 20 per cent) and Marathon Oil Sands LP(20 per cent). It also operates five natural gas processing plants and two in situ oilsands projects. Shell Canada is a partner in the Sable Island offshore natural gas project and the stalled $16-billion Mackenzie Valley natural gas pipeline.

Voser already has instituted cuts across the integrated oil and gas corporation’s multinational operations, letting go of 150 top executives from a roster of 750, and has warned several thousand more positions will be slashed from lower positions.

In addition, Shell said it would cut its capital expenditures in 2010 to $28 billion, from an expected $31 billion in the current year.

Shell, like many other super majors, became bloated over the past decade and taking on new leadership is one way to address how the fat will be trimmed, Youngberg said.

A self-described “calm” leader, Voser foresees the recession having a lasting effect, but takes a longer-term position that incorporates projects already in construction.

The Round Table, held in conjunction with the Spruce Meadows Masters tournament, was created to provide opportunities to discuss strategic perspectives to global decision-makers on topical subjects. More than 150 senior national and international industry leaders will be attending the global forum.

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