Reports indicate that Royal Dutch Shell will eliminate over 400 employment positions. The job cuts, which will be in the Netherlands, will be in the departments dealing in energy technology and projects. Part of the reason for the downsizing measure includes the low oil prices which have necessitated a shift in the business model. For the last two decades Royal Dutch Shell has been focusing on mega projects.
According to a statement that was issued in response to queries from journalists, the plan by the second biggest oil firm in the world by market value to cut jobs will be carried out in this year’s last quarter and the first half of next year. Currently Royal Dutch Shell employs approximately 92,000 people around the globe.
Move to low-cost countries
A spokesperson of the oil major also revealed that employees would be consulted before determining how many job positions would be eliminated. As part of the restructuring some research roles which are based in the Netherlands will be moved to Bangalore, India. This is expected to reduce costs. And instead of concentrating on mega projects, the oil giant plans to shift to simple or medium complex projects.
Besides reducing the employee headcount Shell also plans to cut costs via outsourcing some of the responsibilities. This will cut down on the number of employees especially expensive expatriates. The layers of management will also be reduced in the technology and project operations of the oil major.
“The industry as a whole has become less efficient over the last 1-2 decades, whilst automotive, aerospace, solar and wind, for example, have become more efficient,” a document that was seen by Reuters said.
Low oil prices
The oil industry as a whole has been downsizing and so far Shell has already cut about 12,500 jobs due to the low oil prices. Capital investment budgets have also been a victim of the low oil prices as a result of projects that were previously profitable becoming uneconomic.
Though there was a rebound in the earnings of companies in the second quarter, analysts are of the view that the low operating costs and strong production in shale oil fields in the United States will hamper the chances of the prices of oil improving significantly in the near future. Currently a barrel of Brent crude is hovering around the $50 mark which is about half the price of what it was trading at over the period of the last six years.