Shell revealed its plans to cut spending below $30 billion through 2020 by selling 10 percent of its assets, increasing savings to $4.5 billion. As a result of leaving ten countries in the process, 12,500 jobs will be lost. They did not specify which countries would be hit.
In addition to keeping annual cost down, they cut the 2016 capex for a third time to $29 billion, originally $35 billion. The world’s second largest firm in the industry hopes these new measures will boost profits in shares not living up to expectations since the BG announcement two years ago. They said these sales could lead to a return on capital by 2020, assuming a slight increase in oil prices between now and then.
Shell approved investing in a new cracker and polyethylene plant in the U.S, one of many investment decisions to be made this year during recovery from the recent instability in oil prices. With their smaller rivals as a model, they promise the trim will bring more efficiency, citing the source for cost cutting to be significant overlaps in operations in highly meaningful areas.
CEO Ben Van Beurden says they plan to focus short-term growth on deepwater projects in Brazil and the Gulf of Mexico, in addition to chemical projects in the U.S. and China. Long term is said to target shale production, renewable energies, hydrogen, solar and wind in North America and Argentina. Ben continues, “Our strategy should lead to a simpler company, with fundamentally advantaged positions, and fundamentally lower capital intensity. Today, we are setting out a transformation of Shell.”
Article written by HEI contributor Marcela Abarca.