Shell will cut 7,000 to 9,000 jobs as part of a large-scale business transformation aimed at making the company sustainable. The oil major wants to grow its chemicals and biofuels production while also looking at the development of new, low-carbon products.
The job cuts are necessary to help Shell become more streamlined and nimble as the company is transforming, the oil major states in a release. The layoffs are expected to result in annual cost savings of USD 2 to 2.5 billion.
The exercise will be completed by the end of 2022 and will result in redundancies in the range of 7000 to 9000 positions. This includes around 1500 people who have already agreed to take voluntary redundancy this year but excludes any who may leave Shell because of divestments.
Net-zero by 2050
Shell has set out on a mission to become net-zero by 2050 in order to remain an important player in the future energy supply chain. As Shell CEO Ben van Beurden puts it: ‘If society wants to get to net-zero emissions and we really want to be an integral part of that society, then we need to get to net-zero as well.’
That means that instead of trying to produce oil and gas products with the lowest possible emissions, Shell has decided to rethink its product portfolio and find new, more sustainable energy carriers. An example of this is hydrogen, for which Shell is building its first production plant in the port of Rotterdam.
What the product mix will look like exactly by that time is still uncertain. ‘We will have some oil and gas in the mix of energy we sell by 2050, but it will be predominantly low-carbon electricity, low-carbon biofuels, it will be hydrogen and it will be all sorts of other solutions too,’ Van Beurden says.
Shell is currently part of a venture that produces sugarcane ethanol. It is taking part in offshore wind bids. It is developing solar power projects. And there’s hydrogen. But for Shell to become sustainable, the most important thing is to scale down its oil and gas production.
Oil and gas production
Shell says it will do so, but at the same time, the company will rely heavily on its oil and gas-related income to finance its transformation. ‘In practical terms that means our traditional business will be more focused,’ says Van Beurden. ‘That means Upstream – the business that extracts the oil and gas from the earth – will be run to ensure a strong flow of cash to Shell. We will continue to invest, but it will not be about how many barrels or cubic feet Upstream produces, but how much it adds to the bottom line. The projects we invest in will be highly valuable. Upstream will be critical to Shell as we change – we need it to be very successful so we have the financial strength to invest further in our lower-carbon products.’
The refining business will become smaller but smarter. ‘We will keep only what is strategically essential to us and integrate those refineries with our chemicals business, which we plan to grow,’ says Van Beurden. The refineries that Shell will keep will play an important role in biofuels production. The company expects to end up with fewer than 10 refineries, compared to 55 around 15 years ago.
Integrated Gas will have a bigger focus on unlocking markets and focusing on the customers’ specific needs. To develop some of the new products, Shell is looking to collaborate with its customers more directly and intensively. ‘We have to work much harder with others to make the change happen: developing new types of biofuels and making them commercially viable, for example, or developing hydrogen for heavy-duty road transport in areas where nothing exists yet, not even the business model. In some cases, we will have to bring the customers with us as we develop the products, so we can actually sell the products to them,’ Van Beurden says.
The CEO adds that ‘the new, reshaped Shell’ will be set up to do just that, with a strong focus on helping customers decarbonise in sectors like aviation, shipping and heavy-duty road transport.
This article first appeared on Project Cargo Journal, which is another publication of SWZ|Maritime’s publishing partner Promedia.