Shell, in a bold move to cut costs, plans to reduce its workforce by 20 per cent in its oil and gas exploration units, marking a direct impact on its core upstream business.
This decision is part of a broader cost-cutting initiative led by Chief Executive Wael Sawan, who has been steering the company towards greater efficiency since taking over last year.
The layoffs will affect employees involved in Shell’s exploration strategy and the development of its oil and gas resources, including geologists, geophysicists, and well designers.
According to a source familiar with the plans, the cuts will primarily come from technical departments as part of a consolidation effort across different arms of Shell. These discussions are still ongoing with employees, and the final details have yet to be confirmed. This strategy aligns with Sawan’s commitment to streamline operations and reduce costs by up to $3 billion by the end of 2025.
In 2023, Shell’s operating expenses stood at $40 billion. So far, Sawan has achieved $1.7 billion in cost savings by merging management roles, cutting jobs in renewable energy, and adopting more technology to replace back-office functions.
Shell has consistently maintained that exploration is essential for finding new, profitable oil and gas fields, especially as existing resources are depleted. However, the planned cuts raise questions about the future of Shell’s exploration activities.
Irene Himona, an analyst at Bernstein, noted that it’s unclear whether the job reductions are due to overstaffing or if they signal a shift in Shell’s exploration strategy. Himona pointed out that Shell’s upstream production costs are higher than those of its competitors, suggesting that the company is under pressure to improve operational efficiency.
Despite the internal changes, Shell’s financial performance has been strong, with its share price rising more than 8 per cent this year, outperforming many of its rivals. Investors seem to favour Sawan’s focus on maintaining steady returns and enhancing operational efficiency, viewing these strategic cuts as a step towards a more profitable and resilient Shell.
Shell’s decision to reduce its workforce could have broader implications, particularly in Nigeria, where the company has a significant presence in the oil and gas sector. Any shifts in Shell’s exploration and production strategy may impact local operations, job markets, and partnerships.
As one of Nigeria’s leading international oil companies, Shell’s moves are closely watched, and these cuts could signal a period of adjustment for Nigeria’s oil and gas industry. Local stakeholders will be keen to see how these global strategies translate into changes on the ground.
