Shell plans to meet the challenge of low oil prices by cutting costs and shedding assets but believes it will save more than expected from its acquisition of BG Group, the company said.
In a mid-term strategy announcement Shell CEO Ben van Beurden announced plans to cap capital spending in the period to 2020, drive down costs and sell non-core assets in order to “reshape Shell into a more focused and more resilient company”.
“As well as low oil prices today, we are seeing higher levels of price volatility, due to geopolitical change, the speed of information flows, and the pace of innovation in our sector,” he said.
The company is planning $30bn of asset sales between 2016 and 2018. Shell recently added that it planned to shed a further 2,200 jobs in the UK.
The company expects to save $1bn (£690m) more than it initially expected from its £35bn takeover of BG Group. This would bring savings from the merger to $4.5bn by 2018.
“The BG deal is an opportunity to accelerate the re-shaping of Shell. Integration is gathering pace, and today we expect to deliver more synergies, and at a faster rate,” said van Beurden.
The company expects growth in liquefied natural gas (LNG), particularly in Australia to be a “cash engine”.
It considers assets in Brazil and the Gulf of Mexico to “represent the best real estate in global deep water” oil production and believes Shell’s deep-water production could double by 2020.
The recent announcement of redundancies brings the total it has announced over the last two years to 12,500 global job losses, though the company says due to ongoing recruitment it will end up with less than 5,000 fewer staff overall.
Meanwhile, industry trade body Oil & Gas UK said jobs supported by the UK’s offshore oil and gas industry will have fallen by the end of 2016 by an estimated 120,000 since their peak in 2014, because of low oil prices.
This figure includes jobs in the supply chain as well as those directly employed by oil and gas companies.
Deirdre Michie, chief executive of Oil & Gas UK, said: “The industry has been spending more than it is earning since the oil price slump towards the end of 2014.
“To survive, the industry has had no choice but to improve its performance. It is looking to find efficiencies to restore competitiveness, to attract investment and stimulate activity in the North Sea.”