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Shell to cut up to 40% from oil and gas production to prepare for energy transition


Royal Dutch Shell is looking to slash up to 40 per cent off the cost of producing oil and gas in a major drive to save cash so it can overhaul its business and focus more on renewable energy and power markets, sources told Reuters.

Shell’s new cost-cutting review, known internally as Project Reshape and expected to be completed this year, will affect its three main divisions and any savings will come on top of a $4 billion target set in the wake of the COVID-19 crisis.

Reducing costs is vital for Shell’s plans to move into the power sector and renewables where margins are relatively low. Competition is also likely to intensify with utilities and rival oil firms including BP and Total all battling for market share as economies around the world go green.

“There will be differences, this is not just about structure but culture and about the type of company we want to be,” said a senior Shell source, who declined to be named.

Last year, Shell’s overall operating costs came to $38 billion and capital spending totalled $24 billion.

Shell is exploring ways to reduce spending on oil and gas production, its largest division known as upstream, by 30 per cent to 40 per cent through cuts in operating costs and capital spending on new projects, two sources involved with the review told Reuters.

The company’s integrated gas division, which runs Shell’s liquefied natural gas (LNG) operations as well as some gas production, is also looking at deep cuts, the sources said.

For downstream, the review is focusing on cutting costs from Shell’s network of 45,000 service stations – the world’s biggest – which is seen as one its “most high-value activities” and is expected to play a pivotal role in the transition, two more sources involved with the review told Reuters.

“We are undergoing a strategic review of the organization, which intends to ensure we are set up to thrive throughout the energy transition and be a simpler organization, which is also cost competitive. We are looking at a range of options and scenarios at this time, which are being carefully evaluated,” a spokeswoman for Shell said in a statement.

Shell’s restructuring drive mirrors moves in recent months by European rivals BP and Eni which both plan to reduce their focus on oil and gas in the coming decade and build new low-carbon businesses.

The review, which company sources say is the largest in Shell’s modern history, is expected to be completed by the end of 2020 when Shell wants to announce a major restructuring. It will hold an investor day in February 2021.

Speaking to analysts on July 30, Shell Chief Executive Ben van Beurden said Shell had launched a program to “redesign” the Anglo-Dutch company.

Low-carbon fuels

Teams in Shell’s three main divisions are also studying how to reshape the business by cutting thousands of jobs and removing management layers both to save money and create a nimbler company as it prepares to restructure, the sources said.

Shell, which had 83,000 employees at the end of 2019, carried out a major cost-cutting drive after its $54 billion acquisition of BG Group 2016, which has helped boost its cash generation significantly in recent years.

Shell’s operating costs, which include production, manufacturing, sales, distribution, administration and research and development expenses, fell by 15 per cent, or roughly $7 billion, between 2014 and 2017.

Shell cut its 2020 capital expenditure plans by $5 billion to $20 billion in the wake of the collapse in oil and gas prices due to the pandemic amid warnings it could have lasting effects on global energy demand.

Van Beurden said in July that Shell was on track to deliver $3 billion to $4 billion in cost savings by the end of March 2021, including through job cuts and suspending bonuses.

He said travel restrictions during the pandemic had accelerated the digitalisation of Shell while machine learning was being rolled out to minimize outages and shorten maintenance time at refineries, oil and gas platforms and LNG plants.

The review of refining operations also includes finding ways to sharply increase the production of low-carbon fuels such biofuels, chemicals and lubricants. That could be done by using low-carbon raw materials such as cooking oil, one source said.

Global News

5 Comments on "Shell to cut up to 40% from oil and gas production to prepare for energy transition"

  1. DT on Wed, 23rd Sep 2020 2:09 pm 

    Transitioning to cooking oil. Yea right. Anyone buying this bullshit?

  2. makati1 on Wed, 23rd Sep 2020 3:57 pm 

    DT, it is obviously a joke. Like burning trash to produce electric. Idiots can type bullshit articles all day but it does not make it true. The elite are pushing The Big Reset, but it is going to fail, after causing a lot of pain.

  3. wtcinsidejob on Wed, 23rd Sep 2020 6:29 pm 


    Till You KNOW 4 Simultaneous Days
    Rotate In Same 24 Hours Of Earth
    You Don’t Deserve To Live On Earth

    Americans are actually RETARDED from

    Religious Academia taught ONEism -upon

    an Earth of opposite poles, covered by Mama

    Hole and Papa Pole pulsating opposite burritoes.

    The ONEist educated with their flawed 1 eye

    perspective (opposite eyes overlay) Cyclops

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    as a fictitious unicorn same burrito transformation.


  4. makati1 on Wed, 23rd Sep 2020 6:41 pm 

    BTW: I have been warned by some here that China will invade the Philippines and take over if it is not “protected” by Amerika. Really? And I have been telling them that the Philippines is already Chinese.

    “The mayor made the remark before officials of 170 chapters of the Federation of Filipino-Chinese Chamber of Commerce and Industry (FFCCCII) as businesses in Manila continue to survive the severe impact of the pandemic.”

    ““The federation helped us a lot on this pandemic. I am grateful as mayor and as a Manilenyo, and we are grateful here in the City Government of Manila,” Domagoso said.”

    BTW: Current C19 deaths in the Philippines is about 4,000, with a population 1/3 that of the US, and 1/50th of the deaths of the US about 200,000.

  5. makati1 on Wed, 23rd Sep 2020 6:56 pm 

    Amerikans want to sell stuff to the Philippines.

    “Tasan Health and Medical TECH donated to President Rodrigo Roa Duterte, through Executive Secretary Salvador Medialdea and Senator Christopher Lawrence “Bong” Go, one million face masks that could be used in the country’s ongoing fight against the coronavirus disease (COVID-19).”

    The Chinese give it free.

    The Philippines is working with Russia to get a vaccine, Sputnik 5. Also with the Chinese. Not Amerikans. That is a good thing. I trust the Russians and Chinese a lot more than I trust Amerikan shit.

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