Jobs cuts sweep through energy sector
30 Jul 2015
Royal Dutch Shell and Centrica have both revealed plans to cut thousands of jobs in response to challenging market conditions.
Centrica announced it would make 6,000 job cuts over the next five years, but this figure was topped by Shell, which plans to make 6,500 job cuts and a 20% reduction in capital spending this year.
The news came as Shell reported a 37% fall in its second-quarter profits and revealed strategic changes in preparation for a prolonged downturn in oil prices.
In its upstream operations, earnings were impacted by declines in oil and gas prices and decreased production volumes. However these were offset by improvements in refining margins and downstream performance.
“We have to be resilient in a world where oil prices remain low for some time, while keeping an eye on potential recovery. So we are taking a prudent approach, pulling on powerful financial levers to manage through the downturn,” said Ben van Beurden, chief executive of Shell.
The 20% reduction in capital investment means a number of new projects may now be postponed.
According to a recent Financial Times report, $200 billion (£128 billion) of industry spending on major oil and gas projects has been deferred since the collapse of the crude price.
Centrica, which owns British Gas, also reported challenging conditions, as its adjusted operating profits for the first half of 2015 fell by 3%.
Lower profits from its upstream gas and power businesses were partly offset by British Gas, which benefited from a fall in wholesale gas prices and colder-than-normal weather.
However slimmer profit margins are expected during the remaining half of the year, and the company said it planned to shift focus from its oil and gas production business to concentrate on energy supply and services.
“Our focus for long-term growth will be in five areas: energy supply; services; distributed energy and power; the connected home; and energy marketing and trading,” said Iain Conn, chief executive of Centrica.
Half of the announced job cuts will come from natural attrition and half from redundancies, with most of the latter occurring before the end of 2017.
“Taking account of additional headcount in the growth areas, the net reduction should be about 4,000 roles, before growth in the workforce necessary to deliver the roll-out of smart meters in the UK,” said Conn.
The full-year outlook remained largely unchanged but the company said it would “continue to plan on the basis of current low wholesale prices persisting for the rest of 2015”.
