Shell to shed jobs in face of long cheap oil period

Royal Dutch Shell announced deep cuts to jobs and investment on Thursday as the global energy giant prepares for a prolonged period of low oil prices. Shell expects to eliminate 6,500 staff and contractor positions this year as it seeks to reduce operating costs by 10%, the Netherlands-based company said. The company also plans to reduce capital investment by $7 billion, or 20 per cent.

The cuts were announced as Shell reported that second-quarter net income fell 25 <g data-gr-id="17">per cent</g> to $3.99 billion. Brent crude, a benchmark for North Sea oil, averaged about $62 a barrel during the period, down from $110 in the second quarter of 2014. “Today’s oil price downturn could last for several years, and Shell’s planning assumptions reflect today’s market realities,” Chief Executive Ben van Beurden said. “The company has to be resilient in today’s oil price environment, even though we see the potential for a return to a $70-$90 oil price band in the medium term.”

Shell also said it had agreed to sell a 33 <g data-gr-id="19">per cent</g> stake in Japan’s Showa Shell Sekiyu for around $1.4 billion. Production of oil and natural gas fell 11 percent to the equivalent of 2.73 million barrels a day during the second quarter, partly due to the sale of assets in North America and security concerns in Nigeria. Shell plans to bolster earnings through the $70 billion acquisition of British Gas announced in April. The deal, which is scheduled to be completed in early 2016, will produce cost savings of about $2.5 billion a year by 2018, the company said on Thursday.