Royal Dutch Shell yesterday announced plans to shed a further 1,000 jobs and sell six refineries as the oil company fights to stem widening losses from its global refining operation.
The announcement came as Shell unveiled a 69 per cent plunge in annual profits to $9.8 billion (£6.2 billion), from $31.4 billion, prompting Peter Voser, the chief executive, to deliver a gloomy verdict on the industry’s prospects.
“For my outlook for 2010, I would not call it a rosy one,” he said, as Shell revealed that it had suffered a loss of $1.7 billion in its downstream business, which includes its network of 35 refineries around the world, in the final three months of 2009.
Mr Voser, who is in the midst of a restructuring drive in Shell, said that the disposal of the refineries, which include the Stanlow plant, in Cheshire, and sites in New Zealand, Germany, Sweden and El Salvador, would trim Shell’s refining capacity by about 15 per cent or the ability to process 560,000 barrels of crude per day into petrol, diesel and other oil products.
The group’s refineries have total daily capacity of 3.3 million barrels, but it is struggling amid a collapse in profit margins. They hit a 15-year low of $1.49 per barrel in December, down from $5.19 a year ago.
For the full year, Shell said, profits from its downstream arm were down by 95 per cent at $258 million.
Mr Voser said that the worldwide recession has dramatically cut fuel demand, while industry overcapacity — particularly in North America and Europe — had undermined the economics of processing crude into petrol and other oil products. He said that the disposals, likely to raise several billion dollars, could take more than a year.
Gordon Gray, oil and gas analyst for Collins Stewart, said that the decision made sense, given the poor margins and the fact that there was no real sign that they would get better.
Mr Voser also pledged to press ahead with the global restructuring programme launched when he was appointed chief executive last July. He said that Shell had made 5,000 job cuts during the second half of last year — more than 800 a month — but said that he intended to remove a further $1 billion from the group’s costs this year, in part by cutting a further 1,000 jobs.
“This is all about simplification,” he said, adding that most of the cuts so far had been in “management and non-technical functions”.
Shell said that it would keep its dividend for the first quarter of 2010 frozen at 42 cents per share, as in the previous fourth quarter. This is up from the 40 cents of a year earlier.
Shares in the Anglo-Dutch oil giant slipped by 2.5 per cent to £16.66 after the results, which were slightly weaker than expected.
The steep fall in annual profits from a record $31.3 billion in 2008 was also driven by the weaker oil prices, which averaged $56 per barrel in 2009, compared with $90 the year before, as well as even steeper falls in the price of gas.
Shell revealed that, unlike its top rival, BP, oil production had fallen last year by about 3 per cent.
The company also said that it had sold 6 per cent less fuel last year than in 2008, with volume totalling 6.156 million barrels. Petrochemical sales fell by an even sharper 10 per cent.
“For my outlook for 2010, I would not call it a rosy one,” he said, as Shell revealed that it had suffered a loss of $1.7 billion in its downstream business, which includes its network of 35 refineries around the world, in the final three months of 2009.
Mr Voser, who is in the midst of a restructuring drive in Shell, said that the disposal of the refineries, which include the Stanlow plant, in Cheshire, and sites in New Zealand, Germany, Sweden and El Salvador, would trim Shell’s refining capacity by about 15 per cent or the ability to process 560,000 barrels of crude per day into petrol, diesel and other oil products.
The group’s refineries have total daily capacity of 3.3 million barrels, but it is struggling amid a collapse in profit margins. They hit a 15-year low of $1.49 per barrel in December, down from $5.19 a year ago.
For the full year, Shell said, profits from its downstream arm were down by 95 per cent at $258 million.
Mr Voser said that the worldwide recession has dramatically cut fuel demand, while industry overcapacity — particularly in North America and Europe — had undermined the economics of processing crude into petrol and other oil products. He said that the disposals, likely to raise several billion dollars, could take more than a year.
Gordon Gray, oil and gas analyst for Collins Stewart, said that the decision made sense, given the poor margins and the fact that there was no real sign that they would get better.
Mr Voser also pledged to press ahead with the global restructuring programme launched when he was appointed chief executive last July. He said that Shell had made 5,000 job cuts during the second half of last year — more than 800 a month — but said that he intended to remove a further $1 billion from the group’s costs this year, in part by cutting a further 1,000 jobs.
“This is all about simplification,” he said, adding that most of the cuts so far had been in “management and non-technical functions”.
Shell said that it would keep its dividend for the first quarter of 2010 frozen at 42 cents per share, as in the previous fourth quarter. This is up from the 40 cents of a year earlier.
Shares in the Anglo-Dutch oil giant slipped by 2.5 per cent to £16.66 after the results, which were slightly weaker than expected.
The steep fall in annual profits from a record $31.3 billion in 2008 was also driven by the weaker oil prices, which averaged $56 per barrel in 2009, compared with $90 the year before, as well as even steeper falls in the price of gas.
Shell revealed that, unlike its top rival, BP, oil production had fallen last year by about 3 per cent.
The company also said that it had sold 6 per cent less fuel last year than in 2008, with volume totalling 6.156 million barrels. Petrochemical sales fell by an even sharper 10 per cent.
Source: The Times
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