Shell to shed further 2,800 jobs after BG takeover

Cuts will affect 3% of global workforce as Anglo-Dutch oil giant seeks to cut costs to cope with oil price slump and rationalise operations after £40bn deal

Royal Dutch Shell plans to cut about 2,800 jobs after its takeover of BG Group is completed early next year.

Shell said the cuts, quantified for the first time since the $60bn (£40bn) deal was announced in April, would affect about 3% of the combined company’s permanent workforce. It did not reveal which countries or businesses would be affected.

The group said: “Shell proposes that office consolidation will be undertaken where practical in certain locations around the world. With regards to office footprint rationalisation in the UK, Shell will, following deal completion, undertake a comprehensive review during the course of 2016.”

The post-takeover job losses will come on top of 7,500 announced by Shell for its own business as it seeks to cut costs after a slump in oil prices.

The Anglo-Dutch company announced the cuts after China’s competition authority consented to the BG takeover, after it completed the required regulatory approvals. Shell approval from Brazil, the EU and Australia.

Some Shell shareholders have become increasingly doubtful about the BG deal, which was agreed on the assumption oil prices would recover to $90 a barrel by 2020. The price of oil has slumped from $115 a barrel in summer 2014 to less than $40, with some analysts predicting it could fall further.

Shell said it aimed to press on with the deal by seeking approval from both sets of shareholders, but Standard Life, one of the biggest investors in the UK stock market, said the deal could not work with oil prices so low.

David Cumming, head of equities at Standard Life Investments, said: “The deal doesn’t make financial sense at the current oil price. You have to be pretty bullish on the oil price to make this deal work.”

Shell could walk away from the deal or renegotiate terms or shareholders could vote against it, he told BBC Radio 4’s Today programme. He declined to say how Standard Life, which owns about 0.24% of Shell and is not among the top 20 shareholders, would vote.

Cumming said the £750m Shell would have to pay BG to abandon the deal is “pretty low” and that Shell would therefore come under pressure from shareholders to explain how the deal will work.

Shell left expected cost and revenue gains from the BG takeover unchanged at $3.5bn. The company doubled its estimate for cost cuts to $2bn last month as it sought to reassure investors that the BG takeover remained a good deal.

Shell’s chief executive, Ben van Beurden, said: “I am delighted we now have all the pre-conditional approvals needed to move to the next important phase. This is a strategic deal that will make Shell a more profitable and resilient company in a world where oil and gas prices could remain lower for some time. We will now seek approval from both sets of shareholders as we move towards deal completion in early 2016.”

Shell’s shares fell 1% to £14.45 on Monday morning, their lowest price since the peak of the financial crisis in October 2008. BG shares rose 0.8% to 933p.

Contributor

Sean Farrell

The GuardianTramp

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