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Shell set to make Huge cuts as it looks towards Renewable Energy

September 22, 2020

Shell

Shell plans to make widespread cuts at its oil and gas production business to free up capital it can invest in renewable energy.

The oil major is looking into ways it can cut costs in the division, known as its upstream arm, by as much as 40 percent. This would include cutting the day-to-day costs of operations, as well as reining in spending on new projects.

And it would be on top of the £3.1billion that boss Ben van Beurden wants to save by the end of next March by laying off staff and suspending bonuses, but the company has not yet said how many staff it is looking to let go from its 83,000- strong workforce.

In 2019, the total cost of operations throughout the company was about £30billion – but it does not disclose how much of this is from the upstream business. Shell is said to be considering focusing its oil and gas production on a few key hubs, such as Nigeria, the Gulf of Mexico, and the North Sea, and trimming costs at its 45,000 petrol stations.

The restructuring is geared not only to help it survive the Covid crisis – which has reduced demand for oil – but to prepare it for the green ‘energy transition’.

Energy firms have come under pressure from investors and governments to help the world move away from fossil fuels. Rival BP has laid out plans to invest in renewable technology and reach the key ‘net zero’ carbon emissions target by 2050 under Bernard Looney, who took over in February.

Some analysts believe demand for fuel will never recover back to 2019 levels after plummeting during the pandemic – which grounded planes, took cars off the road, and disrupted industry.

A Shell source recently said: “We had a great model but is it right for the future? There will be differences – this is not just about structure but culture. “

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