Nobody could ever accuse Shell boss Peter Voser of being scared to make big decisions: after slashing 5,000 jobs within weeks of his appointment as CEO last year, he announced today that he's going to lose another 2,000 - and flog up to $3bn of Shell's assets - in the next couple of years. Voser admitted today that Shell 'had become too complicated and slower to respond than we'd like', so the cuts were necessary to make it more competitive. It'll undoubtedly mean a lot of short-term pain - investors will just have to hope it results in long-term gain...
For a while now, Shell has been regarded as the most sluggish of the big oil companies; a sprawling operation whose costs had got a little out of control. So former FD Voser was clearly brought in with a mandate to hack away at the cost base, and he hasn't shied away from that. This latest round of cuts - which he says will deliver savings of $1bn this year alone - will see Shell reduce its refining capacity by 15% and withdraw from about a third of its petrol stations (they're currently spread across 90 countries, an approach Voser described as 'too scattered' today). All in all, this could mean $1bn-$3bn worth of 'non-core' asset sales, and the loss of 2,000 jobs worldwide by the end of 2011.
But Voser's not just a slash and burn merchant. After seven years of declining production, he also said today that Shell should be pumping 3.5m barrels of the black stuff out of the ground every day by 2012 - 11% more than it did last year. He also said it was assessing over 35 new projects, 'especially in North America and Australia', which should underpin production growth for the next decade. So both the upstream and the downstream divisions should look a bit healthier in a couple of years. 'We are sharpening up,' was how Voser put it.
Shell hasn’t been helped over the last year or so by the fall in industrial production, which has reduced demand for its downstream products, or the fall in natural gas prices. But as the oil price heads up again, as it surely will, Shell’s finances will look a lot healthier (even if it doesn’t go any higher than $60/ barrel, apparently). For Voser, that was the big advantage of taking over when he did: times were tough, but the only way was up...
In today's bulletin:
EU embarrasses Government by slamming deficit plan
Slasher Voser continues his shake-up of sluggish Shell
Debenhams sales up after returning to first Principles
Public sector has 22% of workers - but 37% of employment appeals
MT talks to GGR's Gill Riley