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Shell to axe another 1,000 jobs and close last UK refinery home

Oil firm will sell 15% of refinery operations and slow down tar sands projects as fourth-quarter profits fall by 75%

Terry Macalister
Thursday 4 February 2010 12.21 GMT

Tankers arrive and depart from Shell’s Stanlow refinery, which the firm is to shut down. Photograph: Don McPhee

Shell is to sell off 15% of its refinery capacity in Europe and the Americas and cut a further 1,000 jobs after reporting a 75% collapse in final-quarter profits and a slump in annual results.

Peter Voser, the chief executive, said four previous years of increased profits had allowed the company to “to eat too much and get fat”.

Shell, which had previously unveiled plans to axe 5,000 jobs worldwide, said it was looking at $3bn (£1.89bn) worth of divestments and was slowing down investment in higher-cost oil production, such as the tar sands of Canada.

As the share price fell 2% to £16.76, Voser denied there was a fire sale going on. “We are not selling for the sake of selling. We are selling for the sake of value. If the value is not right we will not sell,” he explained, after reporting that fourth-quarter earnings fell by 75% to $1.2bn, compared with a 33% increase at arch-rival BP which has replaced it as Europe’s largest oil group by stock market value.

Shell’s last remaining UK refinery, Stanlow in Cheshire, which produces a sixth of the country’s petrol, is one of the facilities being disposed of as Shell shifts its focus in this “downstream” part of the business to China and Asia.

Shell also aims to sell refining plants in Montreal, Canada and Heide and Harburg in Germany as it cuts 560,000 barrels a day of capacity in the light of a $1.8bn loss from downstream operations over the last three months.

“There is a significant overhang of industry refining capacity, exacerbated by the economic downturn. That’s why we have initiatives in place to refocus Shell’s downstream footprint to fewer, more profitable markets with potential growth,” it said.

But the Anglo-Dutch group said it had no intention of following the lead of Norway’s Statoil, which earlier this week announced plans to sell off its entire petrol forecourt operations.

Shell, which unveiled a 69% fall in 2009 full-year earnings to $9.8bn, has started to dispose of some “upstream” exploration and production assets in troubled Nigeria and has scaled back planned expansion in the controversial tar sands of Canada.

Voser said this was a move triggered by lower oil prices and higher costs and left the door open to expansion at some future date. He downplayed the influence of environmental campaigners – and some of Shell’s own shareholders – opposed to the carbon-heavy operations, boasting the firm had made “remarkable” progress on reducing its carbon footprint.

The company yesterday reported a 5% increase in the final-quarter dividend but said there would be no increase in the next three-monthly payout, which would be held steady at $0.42 per share.

Analysts at Evolution Securities said this was unwelcome but not “a major surprise” as the company had hinted heavily in the third-quarter results that this would be a risk. They said: “The [oil] group continues to make progress on cost savings, $1bn in 2009 to be repeated in 2010, and the growth projects remain on track. At this point in time though we see no reason to rush into the Shell shares and stick with our preference for BP.”


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