Despite posting record profits, Shell has announced plans to lay off a significant portion of its workforce. Here’s why the oil giant is slashing thousands of jobs even as it shifts its focus to cost-cutting and gas production growth.
Oil Giant’s Massive Job Cuts Despite Record Profits
Despite raking in hundreds of billions in profits in 2022 and 2023, Shell has just dropped some incredibly bad news for thousands of employees.
18,000 Jobs on the Line
The oil and gas giant is set to lay off around 20% of its workforce – which means about 18000 jobs are on the chopping block.
A Cost-Cutting Crusade
So, what’s behind this drastic decision, and what does it mean for the future? CEO Wael Sawan is pulling the trigger on these layoffs as part of a sweeping cost-saving effort, with the company looking to save between $2-3 billion by the end of next year.
Global Axe
The job cuts will mainly hit Shell’s oil exploration and development teams in Houston, The Hague, and to a lesser extent, the UK. Thousands will face the axe, and it’s sparked concerns about the future of ongoing projects.
Gas Growth Amidst Job Cuts
But even though Shell is slashing jobs, they’re not hitting the brakes on gas production. They’re actually aiming to grow in this area – despite warnings from climate experts that new oil and gas projects could push global temperatures beyond the irreversible 2°C limit.
Namibian Oil Rush
Shell has been busy making headlines with new oil discoveries in Namibia, but the big question now is whether these new finds will get the attention they need with so many positions on the chopping block.
The Price of Cutting Costs
Exploration is crucial for finding new oil reserves and replenishing depleted ones, so losing a chunk of the team might slow things down – and also slow down Shell’s expansion plans.
Goodbye Europe
This shakeup is part of Shell’s broader strategy to shift its focus away from Europe – and especially the UK. The UK government’s recent decisions to hike their oil and gas windfall tax to a hefty 78% and cuts to new field development incentives have pushed Shell to reconsider its investments in the region.
Shell’s UK Setback
Shell’s recent struggles also include a setback with the UK’s largest untapped oil and gas field near Aberdeen, called Jackdaw.
UK Government’s U-Turn
Environmentalists challenged the oil field in court, arguing it was approved illegally, and the UK government – just this month – announced they “wouldn’t waste taxpayer money” on defending the oil field.
Rosebank Reversal
By not defending it, the government has essentially agreed that the previous approval of Rosebank was unlawful.
Lost Potential
Jackdaw was predicted to produce 40,000 barrels a day for at least twenty years, so the UK government’s move has just added another layer of frustration for Shell – who own the oil field and have had permission to drill since September 2023.
Beyond Layoffs
Shell’s plan to cut costs doesn’t just stop at job layoffs. They’re also working to reduce emissions and streamline operations, with the hope of reducing operating costs by up to $3 billion by the end of 2025.
Sawan’s Grand Plan
Sawan, who took over as CEO earlier this year, is on a mission to boost Shell’s profitability and close the valuation gap with its American rivals. Part of his plan includes expanding the liquefied natural gas sector and keeping oil production steady, all while cutting back on less profitable areas.
Renewable Retreat
Over recent months, Shell has pulled back from several renewable projects – including offshore wind and solar and has sold off various assets. The company also made headlines by scaling back its carbon reduction goals, a move that hasn’t been well received by environmentalists or even some of Shell’s own employees.
Profit Rollercoaster
The numbers tell a mixed story. Shell’s profits for 2023 were $28.2 billion, down from the record $39.9 billion in 2022 – but still incredibly high compared to years prior.
Q2 Slump
Earlier this year Shell reported that profits for their second quarter had fallen from $6 billion to $4.9 billion due to lower oil and gas prices.
Wall Street’s Verdict
After announcing these layoffs Shell’s stock did see a slight bump – up 0.6% by late afternoon – which indicates that investors are holding onto some optimism.
An Uncertain Future Ahead
It’s clear that the company is in a period of transformation, but what sort of company will come out the other side of this is anyone’s guess.
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