OIL MAJOR Royal Dutch Shell is to “take a good look” at its North Sea assets after the planned acquisition of BG Group, chief executive Ben van Beurden said today as he confirmed thousands of job cuts.
The firm said it was having to take action amid a slump in oil prices and that it was “planning for a prolonged downturn”.
It is slashing costs for 2015 by 10 per cent, or $4 billion (£2.6bn), while investment is being pared by a fifth, or $7bn, with further cost-cutting ahead.
Shell said it was looking to dispose of some $30bn of assets in the two years following the expected completion of the £47bn BG deal early next year.
Although the group would not provide specific details on which assets it would target, the mature North Sea basin with its relatively high-cost base is likely to come under close scrutiny.
Van Beurden said: “We will take a very good look at the North Sea and make sure that out of two strong portfolios will crystallise the strongest possible core.
“We have a very significant position in the North Sea that ranges from very mature assets to assets that are still under construction. BG has a very significant position as well.”
Shell said it plans to cut 6,500 jobs this year, although the majority have already been announced, including the loss of 500 in the UK plus others in Norway, the US and Nigeria. The global workforce today stands at about 94,000.
The group disclosed the figures as it published second-quarter results showing a 35 per cent fall in earnings to $3.36bn. It said profits in its “upstream” production and exploration division were weighed down by “the significant decline in oil and gas prices and decreased production volumes” partly offset by lower costs.
Earnings from the division fell by 80 per cent to $774 million.
The price of a barrel of Brent crude has slumped by more than half from nearly $116 in June last year.
It has recovered a little from a low of $45 in January but the continuing prospect of a glut of supply in world markets – especially after a thawing in relations between the US and sanctions-hit Iran – has kept this in check.
Brent crude reached nearly $70 in May but has since fallen again to around $53.
But Shell stressed that its downstream results were strong as it took steps to improve financial performance and higher profit margins from its refining business.
The downstream business also includes the selling of fuels and other products for home, transport and industrial use.
Profits from this division were up 116 per cent to $2.75bn in the quarter.