1,000 Shell workers to go after huge profits fall

Published on Thursday 4 February 2010 20:24

ROYAL Dutch Shell, Europe's largest oil company, said it would lay off another 1,000 staff this year after revealing profits at the end of 2009 fell by three quarters.

The cuts are part of a plan to save $1 billion (634 million) in 2010, and will focus on Shell's downstream business, which has been hit by a huge oversupply in refining capacity.

Yesterday Shell, which is headquartered in the Netherlands but listed in London, said that profits in the final three months of 2009 had dropped 75 per cent to $1.18bn. During the period its oil and gas production fell 2.4 per cent to 3.3 million barrels of oil equivalent per day.

While the price of oil at the end of 2009 was higher than a year earlier, Shell is highly exposed to oil refining, where margins have collapsed in recent months as demand drops.

On Tuesday Tony Hayward, the chief executive of rival company BP, estimated that in the Atlantic Basin alone there were 3 million barrels a day of unneeded capacity. In response, Shell said it would cut 15 per cent of its worldwide refining capacity – 560,000 barrels a day – and cut 1,000 staff from that part of the business.

In a statement Shell said that downstream businesses, which also includes retail fuel sales, were facing "some tough times", making a restructure necessary.

"There is a significant overhang of industry refining capacity, exacerbated by the economic downturn. That's why we have initiatives under way to refocus Shell's downstream footprint into fewer, more profitable markets with growth potential, through disposals and selective growth investment."

In 2009 Shell shed more than 5,000 jobs and cut costs by more than $2bn.

BP has also been carrying out a wide-ranging cost-cutting programme. Hhowever, unlike Shell, its fourth-quarter profits were sharply higher than in 2008.

Yesterday's profit figures from Shell were below market expectations, sending the group's "B" shares down 43.5p, or 2.5 per cent, to 1,666p.