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Shell launches major cost-cutting drive to prepare for energy transition

September 22/2020

MOSCOW (MRC) -- Royal Dutch Shell is looking to slash up to 40% 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, reported Reuters.

Shells 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 USD4 billion target set in the wake of the COVID-19 crisis. Reducing costs is vital for Shells 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.

We had a great model but is it right for the future? 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, Shells overall operating costs came to USD38 billion and capital spending totalled USD24 billion.

The companys integrated gas division, which runs Shells 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 Shells network of 45,000 service stations - the worlds 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.

Besides cutting costs at its downstream retail business, Shell is pressing ahead with plans to reduce the number of its oil refineries to 10 from 17 last year. It has already agreed to sell three.

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.

As MRC wrote previously, Shell has recently announced that it will replace the ethylene steam cracker furnaces at its Moerdijk petrochemicals complex, The Netherlands, in a move that will reduce its greenhouse gas emissions.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's overall PE production totalled 1,712,400 tonnes in the first seven months of 2020, up by 58% year on year. Linear low density polyethylene (LLDPE) accounted for the greatest increase in the output. At the same time, overall PP production in Russia increased in January-July 2020 by 24% year on year to 1,063,700 tonne. ZapSibNeftekhim accounted for the main increase in the output.

Royal Dutch Shell plc is an Anglo-Dutch multinational oil and gas company headquartered in The Hague, Netherlands and with its registered office in London, United Kingdom. It is the biggest company in the world in terms of revenue and one of the six oil and gas "supermajors". Shell is vertically integrated and is active in every area of the oil and gas industry, including exploration and production, refining, distribution and marketing, petrochemicals, power generation and trading.


mrcplast.com
Author:Margaret Volkova
Tags:Europe, PP, PE, LLDPE, crude and gaz condensate, propylene, ethylene, gas processing, petrochemistry, BP Plc, Shell, Total Petrochemicals, Netherlands, Russia, USA.
Category:General News
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