Royal Dutch Shell announced that it would focus its operations on Nigeria, Gulf of Mexico, The North Sea and a few others as it looks to reduce oil and gas production costs by 40%.
This was announced by Reuters in an exclusive report Monday after speaking with sources. Shell sources also reveal it would direct the saved costs into more renewable energy investments. The new project would be called Project Reshape, and would be implemented in all three divisions of the company with the aim of saving $4 billion due to the effect of the pandemic on the industry.
Nairametrics reported in July that Shell warned in its second-quarter 2020 outlook that it could write down between $15 billion – $22 billion in post impairment charges for Q2, due to the heavy effect of the pandemic in their business. Shell had earlier this year, shocked investors by cutting dividend by 2 thirds for the first time since World War 2.
A source told Reuters that the new reshape of the company would not only shake up the structure but also the culture and “type of company we want to be”, as the company fancies investments into the power and renewable sector with historical low margins, and also competition from other oil companies seeking to go green.
Shell is seeking to cut 40% of operating costs in its upstream oil and gas to make the new vision possible and focus on just key assets in Nigeria, Gulf of Mexico and others.
In the Downstream sector, Shell also plans on cutting costs in its fuel stations business with about 45,000 in service. A spokeswoman from the company announced that a cost competitive total strategic view of the organization is in place, “which intends to ensure we are set up to thrive throughout the energy transition and be a simpler organization.”
CEO, Van Beurden said Shell would deliver $billion in its cost savings drive by Marche 2021, which includes suspended bonuses and job cuts. Shell also plans to reduce it refineries from 17 to 10 and announced plans of selling 3.