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Shell to cut 9,000 jobs in restructuring, plans to grow chemicals business

September 30/2020

MOSCOW (MRC) -- Shell says it will cut up to 9,000 jobs worldwide as part of a major restructuring that will enable cost savings of USD2.0–2.5 billion per year by 2022, while outlining plans to grow its chemicals business and further integrate it with a more streamlined downstream refining business, said Chemweek.

Shell’s CEO Ben van Beurden outlined the restructuring today as part of the company’s ongoing response to the challenge of dealing with the impact of COVID-19 and the slump in oil demand, as well as its longer-term stated goal of achieving net-zero carbon emissions by 2050. Shell says it will reduce its refining footprint to less than 10 sites, keeping those that have “flexibility to adapt and further integrate with the growing chemicals and trading businesses."

The refining business “will be 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. We will keep sites in key locations which have the flexibility to adapt,” says van Beurden. “It is also worth noting that, if we want to be a large player in biofuels, a lot of the biofuel capability will be built within our refining infrastructure. We will end up with fewer than 10 refineries, compared to 55 around 15 years ago, but they will be set up to serve the changing needs of society,” he says. No details were given on which assets it will keep.

Shell’s traditional oil and gas business will be more focused, according to van Beurden, with its upstream segment to be run “to ensure a strong flow of cash to Shell… so we have the financial strength to invest further in our lower-carbon products.” The company intends to focus on continued growth of its integrated gas and liquefied natural gas (LNG) business, he says. Shell’s 2050 carbon-neutral goal means it has to be “net zero in all our operations, which means major changes at refineries, chemicals sites, on-shore and offshore production facilities,” he says. The company will still have some oil and gas in the mix of energy it sells by 2050, but it will be predominantly low-carbon electricity, low-carbon biofuels, hydrogen, and other solutions, he adds.

The restructuring is aimed at reducing organizational complexity, with the annual cost savings of up to $2.5 billion by 2022 to partially contribute to previously announced underlying operating cost reductions of USD3.0–4.0 billion by the first quarter of 2021, according to Shell.

The expected job cuts will range between 7,000 and 9,000, including around 1,500 employees through voluntary redundancy by the end of 2022, van Beurden says. The cuts were “the right thing to do for the future of the company” as it strives to become a net-zero emissions energy business, he says. “We have had to act quickly and decisively and make some very tough financial decisions to ensure we remained resilient, including cutting the dividend,” says van Beurden. “But as hard as they were, they were entirely the appropriate choices to make."

Shell employs 83,000 people worldwide, and reported a 46% decline in first-quarter net income year on year (YOY) to USD2.9 billion, while second-quarter net income dropped 82% YOY to $638 million. Third-quarter earnings are expected to be “at the lower end of the USD800–875 million range,” it says.

In an updated chemicals outlook for the third quarter to that issued with its second-quarter results in July, Shell says chemicals manufacturing plant utilization is expected to be 79–83%, with sales volumes of 3.7–4.0 million metric tons. Compared with second quarter 2020, adjusted earnings for its chemicals business are expected to be negatively impacted by around USD100 million due to “increased activity, provisions, and phasing of maintenance activities,” it says. Group post-tax impairment charges of USD1.0–1.5 billion are expected for the third quarter, it adds. In June, BP said it would cut 10,000 jobs as it moved into cleaner energy.

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

According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.

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.
Author:Anna Larionova
Tags:petroleum products, crude oil, PP, PE, neftegaz, petrochemistry, Shell.
Category:General News
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