Royal Dutch Shell, also known as Shell, announced its plans to lay off up to 9,000 employees or more than 10% of its workforce around the world.
Trouble in the gas and oil industry
The oil and gas giant, which has around 83,000 employees around the world, said that the reorganization would lead to annual savings of up to £2billion by 2022.
The company said that the job cuts are part of a major cost-cutting program after the business was hit by the decrease in demand for oil and a subsequent dive in prices.
Last month, Shell launched a review of its business aimed at deeply cutting costs as it prepares to restructure its operations as part of a shift to low-carbon energy, according to CNBC.
The Anglo-Dutch company said that it expected to cut 7,000 to 9,000 jobs by the end of 2022, including 1,500 staff who have agreed to take voluntary redundancy this year.
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In an operations update, the company also said its oil and gas production was set to drop fast in the third quarter to around 3,050 barrels of oil equivalent per day.
Shell said that this was due to lower output as a result of the COVID-19 crisis and hurricanes in the Gulf of Mexico that forced offshore platforms to shut down.
In 2019, the total cost of operations throughout Shell was about £30billion, and company CEO Ben van Beurden wants to save £3.1billion by the end of March 2021, according to Fortune.
Mr. van Beurden said that they have to act fast and decisively, and they have to make some tough financial decisions to ensure that they remained resilient, including cutting the dividend.
Mr. van Beurden also said that Shell is looking at a raft of other areas where it can cut costs, such as travel, its use of contractors, and virtual working.
The CEO said that the coronavirus pandemic had shown the company that it can adapt to working in new ways but stressed that a massive part of the cost-saving for Shell would come from having fewer people.
Shell is said to be considering focusing its oil and gas production on a few key hubs, such as the Gulf of Mexico, Nigeria, and the North Sea, and trimming costs at its 45,000-strong network of petrol stations, according to BBC.
In a statement, Shell said that reduced organizational complexity, along with other measures, are expected to deliver sustainable annual cost savings of between $2billion (£1.6billion) to $2.5billion (£2billion) by 2022.
The measures will partially contribute to the announced underlying operating cost reduction of three billion dollars to four billion dollars by the first quarter of 2021.
Energy companies have come under increasing pressure from investors and governments to help the world move away from fossil fuels.
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 numerous industries.
The oil prices plunged from around $66 at the start of the year to as low as $19 and are still only back at around $39 now.
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