Many oil workers in Nigeria may struggle to retain their jobs in a low oil price environment as Royal Dutch Shell announced on Wednesday it has plans to cut 7,000 to 9,000 jobs worldwide.
Shell, which employs more than 4,500 Nigerians directly and another 20,000 indirectly through the network of companies that provide supplies and services, said “reduced organisational complexity” is to save between $2 billion – $2.5 billion by 2022 on an annual basis.
Shell’s CEO Ben van Beurden described it as an “extremely tough process” but said “reducing cost is essential”.
He referred to bringing technical support staff for its global assets “all into one place”, and there being “too many people in the middle” of the organisation in terms of management “layers”.
Read Also: Pressure mounts on Akwa Ibom government over oil-producing area development commission
“In some cases there are good reasons for that, but as a principle we are looking to remove that complexity, and cost, so we can be the nimble, efficient and customer-focused company we need to be,” Van Beurden said.
The move comes five months after it cut its dividend for the first time since World War II.
Battered by the travails of the coronavirus pandemic and a fall in oil prices, managing costs has emerged the biggest issue in Nigeria’s oil and gas sector as many producers are drilling at costs higher than the price of oil in the international market.
Oil majors have been rocked by the dual shock of Covid and the oil price crash. In July, Shell announced an $18 billion loss in the second quarter of the year due to the impact on its business.
The job cut figure has been released in an update ahead of its third-quarter results.
In its update, Shell said it expected adjusted earnings losses for its Integrated Gas and Upstream segments, while the Oil Products and Chemicals divisions will be $200-400m and $100m worse off, respectively, compared to Q2.
Post-tax impairment charges of $1.0 billion to $1.5 billion are also expected for the third quarter, Shell said.
Following news earlier this year that BP planned to cut 10,000 jobs, Rystad Energy predicted all oil majors would be seeking to cut roughly 15 percent of their workforces in response to the current crisis.
