The Anglo-Dutch company said Wednesday that it would cut between 7,000 and 9,000 positions by the end of 2022, potentially affecting more than 10% of its workforce. The total includes 1,500 people who have volunteered to leave the company this year.
The job losses are part of an overhaul aimed at cutting costs and simplifying the company’s structure as it moves into low-carbon energy. Shell (RDSA) expects the overhaul to deliver annual cost savings of up to $2.5 billion by 2022.
“We have to be a simpler, more streamlined, more competitive organization that is more nimble and able to respond to customers,” CEO Ben van Beurden said in a statement. “Make no mistake: this is an extremely tough process. It is very painful to know that you will end up saying goodbye to quite a few good people,” he added.
The huge slump in demand for oil and gas caused by the coronavirus pandemic is pushing some of Europe’s biggest energy companies to speed up a shift to cleaner fuels. In June, Shell wrote down the value of its assets by as much as $22 billion and slashed its oil price forecasts.
Shell has committed to achieving net zero carbon emissions from its own operations by 2050. Van Beurden said Wednesday that the company would still produce some oil and gas by that date, but it would “predominantly” sell low-carbon electricity, low-carbon biofuels and hydrogen.
“We have to be net zero in all our operations, which means major changes at refineries, chemicals sites, on-shore and offshore production facilities. But it also means that we have to change the type of products that we sell,” van Beurden added.
In the future, the company will use its oil exploration and production business to generate cash that can be invested in lower-carbon products. The division will no longer focus on how many barrels of oil or cubic feet of gas it produces.
Shell will also shrink its refining business. “We will keep only what is strategically essential to us and integrate those refineries with our chemicals business, which we plan to grow,” said van Beurden.
Some analysts think global demand for oil may never return to its 2019 record high, expecting instead that the pandemic will permanently reshape the way people live and travel — and that consumers will push companies and governments to address the climate crisis with more urgency.
European energy companies have been much more aggressive than US rivals such as Exxon Mobil (XOM) in the shift to cleaner energy. BP (BP) announced in June that it would cut 10,000 jobs, or 15% of its workforce, as part of its own overhaul.