Shell cuts hundreds of contractors amid 'ruthless' shake-up by new CEO
Simon Hunt
Fri, 20 October 2023 at 6:21 pm GMT+8·3-min read
Shell is cutting hundreds of contractors from its workforce amid a major efficiency drive by the oil giant's new CEO as he targets bigger shareholder returns.
Scores of contracts have either been cut short or are not being renewed. The bulk of the contractors who face the axe sit in the firm's IT wing, of which permanent staff represent a minority of the workforce in a number of teams.
Company insiders also say work social events have been cut back, and contractors have been barred from several events, to which only permanent staff are now invited.
"The morale inside the IT teams feels low right now," one IT worker told the Standard.
Shell CEO Wael Sawan has vowed to aggressively target profitability and bigger dividends for shareholders since stepping into the role at the start of the year.
Addressing investors at a capital markets day in New York in June, Sawan outlined his plans for a $40 billion package of investment into oil and gas production as well as a reduction in operating costs of up to $3 billion by 2025 as part of a “ruthless focus on performance, discipline and simplification.”
“It is critical that the world avoids dismantling the current energy system faster than we are able to build the clean energy system of the future,” he said.
“Oil and gas will continue to play a crucial role in the energy system for a long time to come, with demand reducing gradually over time. Continued investment in oil and gas is critical.
“While the destination of a net zero emissions energy system remains clear, this will not be a linear journey as different places transition at different paces.”
Shell earlier this year appeared to row back on plans to cut oil production each year for the rest of the decade, promising instead to focus on “value-based decisions” over oil output rather than specific production targets.
Sawan’s predecessor, Ben van Beurden, who left the company’s board earlier this year, had previously set a goal of “an expected gradual reduction in oil production of around 1-2% each year, including divestments and natural decline”. But Shell denied it had abandoned its 2030 goal, insisting it had met the target early after it sold an oil and gas business in Texas.
The London-listed energy firm also attracted criticism from environmental groups last month after it emerged it had shelved a commitment to spend up to $100 million annually on carbon offsetting. The company said it remained committed to carbon offsetting, including from nature-based solutions.
Richard Hunter, head of markets at stock trading platform interactive investor, said: “The structural efficiencies announced are a small part of a big plan.
“Shell is continuing to target efficiencies and the reduction of net debt, while also being mindful of its duty to investors in terms of shareholder returns, such as dividends and share buybacks. The group is also aiming to invest up to $15 billion in renewable energies, even if the high-level targets have recently been trimmed.
“Efficiencies are of course central to companies who wish to streamline their businesses, especially in times of economic stress, such as the announcement from Rolls-Royce earlier this week that it would be cutting up to 2500 jobs.”
Shell’s strategy pivot comes amid a turbulent spell for the energy industry as Middle East tensions threaten to push up oil prices above $100 a barrel. On Wednesday, Iran called for OPEC members to impose an oil embargo on Israel in response to its actions in Gaza, while Israel last week shut an offshore gas field near Gaza, squeezing already-tight global supplies.
In a statement Shell said: “Contractors continue to provide important IT skills to Shell as valued people in our teams. It is usual for the numbers of contractors to go up and down in line with business need.
“In 2023, we have needed fewer contractors overall to support IT functions at Shell. A small proportion of these reductions have been in the UK.”
Simon Hunt
Fri, 20 October 2023 at 6:21 pm GMT+8·3-min read
Shell is cutting hundreds of contractors from its workforce amid a major efficiency drive by the oil giant's new CEO as he targets bigger shareholder returns.
Scores of contracts have either been cut short or are not being renewed. The bulk of the contractors who face the axe sit in the firm's IT wing, of which permanent staff represent a minority of the workforce in a number of teams.
Company insiders also say work social events have been cut back, and contractors have been barred from several events, to which only permanent staff are now invited.
"The morale inside the IT teams feels low right now," one IT worker told the Standard.
Shell CEO Wael Sawan has vowed to aggressively target profitability and bigger dividends for shareholders since stepping into the role at the start of the year.
Addressing investors at a capital markets day in New York in June, Sawan outlined his plans for a $40 billion package of investment into oil and gas production as well as a reduction in operating costs of up to $3 billion by 2025 as part of a “ruthless focus on performance, discipline and simplification.”
“It is critical that the world avoids dismantling the current energy system faster than we are able to build the clean energy system of the future,” he said.
“Oil and gas will continue to play a crucial role in the energy system for a long time to come, with demand reducing gradually over time. Continued investment in oil and gas is critical.
“While the destination of a net zero emissions energy system remains clear, this will not be a linear journey as different places transition at different paces.”
Shell earlier this year appeared to row back on plans to cut oil production each year for the rest of the decade, promising instead to focus on “value-based decisions” over oil output rather than specific production targets.
Sawan’s predecessor, Ben van Beurden, who left the company’s board earlier this year, had previously set a goal of “an expected gradual reduction in oil production of around 1-2% each year, including divestments and natural decline”. But Shell denied it had abandoned its 2030 goal, insisting it had met the target early after it sold an oil and gas business in Texas.
The London-listed energy firm also attracted criticism from environmental groups last month after it emerged it had shelved a commitment to spend up to $100 million annually on carbon offsetting. The company said it remained committed to carbon offsetting, including from nature-based solutions.
Richard Hunter, head of markets at stock trading platform interactive investor, said: “The structural efficiencies announced are a small part of a big plan.
“Shell is continuing to target efficiencies and the reduction of net debt, while also being mindful of its duty to investors in terms of shareholder returns, such as dividends and share buybacks. The group is also aiming to invest up to $15 billion in renewable energies, even if the high-level targets have recently been trimmed.
“Efficiencies are of course central to companies who wish to streamline their businesses, especially in times of economic stress, such as the announcement from Rolls-Royce earlier this week that it would be cutting up to 2500 jobs.”
Shell’s strategy pivot comes amid a turbulent spell for the energy industry as Middle East tensions threaten to push up oil prices above $100 a barrel. On Wednesday, Iran called for OPEC members to impose an oil embargo on Israel in response to its actions in Gaza, while Israel last week shut an offshore gas field near Gaza, squeezing already-tight global supplies.
In a statement Shell said: “Contractors continue to provide important IT skills to Shell as valued people in our teams. It is usual for the numbers of contractors to go up and down in line with business need.
“In 2023, we have needed fewer contractors overall to support IT functions at Shell. A small proportion of these reductions have been in the UK.”
