Oil giant, Shell, yesterday declared plans to sack additional 5,000 staff, raising the number of staff to be laid-off in Nigeria and other countries of operations by the company and another oil major, Chevron, to 23, 500.
These have heightened panic and generated confusion among some staff of the companies who are now considering industrial action. Shell’s vice president for the United Kingdom (UK) and Ireland, Paul Goodfellow, who announced the plan to lay off 5,000 more staff before the end of 2016, said that 2,200 more jobs would be cut in the first phase of the new disengagement, as the world’s second biggest oil companies continue to adjust to the slump in oil prices.
This takes the tally of sack by Shell to 15,000 between 2015 and 2016, as the oil firm continues to adjust to the slump in prices. Chevron, on its own, will round up the number of sacked workers to 8,500 before December while other companies such as ExxonMobil, Total have also sacked about 4,000 workers secretly in their global operations.
Mobil Producing Nigeria (MPN), Unlimited, operator of the Nigerian National Petroleum Corporation MPN/NNPC Joint Venture in Akwa Ibom laid-off about 150 contract staff and 40 drivers from its employ, while Total fired 100 in its Nigerian operations.
“These are tough times for our industry,” Goodfellow said in a statement. “We have to take further difficult decisions to ensure Shell remains competitive through the current, prolonged downturn.” At least 5,000 jobs will be cut this year, Shell said in an e-mailed statement.
These reductions are in response to oil prices staying “lower for longer,” and as a result of the acquisition of BG Group Plc. earlier this year, said Goodfellow. Shell and BG employed about 94,600 people at the end of 2015.
The industry is cutting deeper despite oil’s 80 per cent recovery since last January. Prices remain about half the level of two years ago and companies’ earnings have been pummelled, debt has increased and credit ratings have been cut.
To help protect their balance sheets, companies have deferred or cancelled billions of dollars of projects, renegotiated contracts with suppliers and eliminated thousands of jobs. Shell had, before Goodfellow’s announcement, revealed its plans to sack 10,000 staff and slash direct contractor positions in the company’s unedited full year 2015 results earlier obtained by New Telegraph.
The oil giant also got the approval by shareholders at a January 27 meeting in The Hague, Netherlands, of a cost cutting strategy by $3 billion in 2016. Chevron would, in the process that began in 2015, complete the sacking of 8,500 staff in its services globally by the end of 2016.
The United States oil company revealed that it would lay off 7,000 staff before 2016 ends in addition to the 1,500 it announced early in 2015, according to a 2015 last quarter report published by the New York Times.
Stating that it expected its costs to fall again in 2016, by a further $3 billion, Shell, which slashed $4 billion investments in 2015, said that its drive to improve competitive performance was delivering at the bottom line.
“That is on top of 10,000 already cut! Meanwhile CEO gets £1.4 million salary, £3.5 million bonus and £441,000 pension! #Strike needed,” a staff of Shell/ BG, Richard Godon said in a tweet. Another staff, Anthony S. John, added: “A plague spreading across businesses hitting the lower paid: cut positions, lower wages and bonuses, increase world load and hours.” Shell’s adjusted net income fell 58 per cent to $1.6 billion in the first quarter following the collapse in prices.
The company bought BG Group for $54 billion this year to get access to oil and natural gas reserves from Australia to Brazil. The purchase has increased its debt to $70 billion and driven up its ratio of net debt to capital to above 26 per cent.
“Operating costs have reduced by $4 billion or around 10 per cent in 2015, and the company expects Shell’s costs to fall again in 2016 by a further $3 billion. Synergies from the BG combination will be in addition to that.
“Together, these actions will include a reduction of some 10,000 staff and direct contractor positions in 2015-16 across both companies, as streamlining and integration of the two companies continue,” the Shell report stated.
Chief Executive Officer of the Royal Dutch Shell, Ben van Beurden, who confirmed the new business strategy, expressed satisfaction with “the momentum in the company to reduce costs and to improve competitiveness.” Beurden noted that bold, strategic moves shape the industry.
“A substantial number of staff in the operations of Shell and Chevron in Nigeria will be swept by this gale of sack,” an industry source once told this newspaper, adding that Shell and Chevron were “courageous enough to announce the number of staff to be affected, but the truth is that all the international oil companies (IOCs) are toeing the line of downsizing and they have all begun this with the termination of contracts with some of their contract staff.”
The two multi-nationals did not give a breakdown of how many staff in their Nigerian operations would be affected, Chevron, however, said on its website that Nigeria was “an important part of Chevron’s business globally,” while Shell, which is also the biggest oil firm in Nigeria in terms of assets and production, “produces substantial volume of its global output from Nigeria.”
Shell, according to the unedited report published on January 20, is taking impactful steps to refocus and reduce capital spending.
