Shell confirms shake-up; vague on job cuts

Updated: A big restructure of Royal Dutch Shell by its incoming chief executive Peter Voser has been confirmed and it is set to affect 24,000 jobs, although the company will not say exactly how many of those jobs will be cut. As expected, the gas and power unit is being merged with exploration and production into a broader upstream business; oil sands, which had been separate, will also be included. The new upstream business will be divided into two units: one covering the Americas and one for the rest of the world.

A total of 22,000 people work in upstream, and Shell has indicated there will be job losses from among this group as the three groups become two upstream units.

Also affected are 2,000 people in The Hague in support functions such as administration, corporate affairs and IT. Many of those jobs will either be cut or “redistributed” to specific parts of the business.

Here is the company statement, with links left intact:

Shell’s Upstream activities are currently managed in three separate organizations – Exploration & Production, Gas & Power, and Oil Sands. Upstream will now consist of two businesses: Upstream Americas covering North and South America, and Upstream International covering the rest of the world. Marvin Odum, currently Shell’s Executive Vice President for EP Americas, will become Director for Upstream Americas.  Malcolm Brinded, currently Shell’s Executive Director Exploration & Production, will become Executive Director of Upstream International.

There will also be changes in Downstream. In addition to the Refining, Marketing and Chemicals businesses, the Downstream portfolio will be expanded to include Trading and Alternative Energy activities in Shell, excluding Wind, which will be part of Upstream. Downstream will continue to be led by Mark Williams as Director.

A new business – Projects & Technology – will combine all of Shell’s major project delivery, technical services and technology capability covering both upstream and downstream. It will also oversee Shell’s safety and environment performance. Matthias Bichsel, who is currently Shell’s Executive Vice President for Exploration & Production Technology, will be the Director of this business.

Corporate functions will be refocused, with activities reallocated directly into the businesses, or consolidated into the portfolios of the Chief Financial Officer, Simon Henry, and the Human Resources Director (to be re-titled Chief Human Resources & Corporate Officer), Hugh Mitchell. Beat Hess continues as General Council, and completes the re-shaped Executive Committee.

Voser has been long expected to make a dramatic change to the company structure, as he is a finance man and does not have attachments to any particular part of the business.

Oil prices have no doubt played a part in the decision, as the company expects its gearing to rise from 7 per cent to the low 20s this year.  The move is somewhat similar to the restructuring carried out by Tony Hayward when he was appointed chief executive at BP in 2007. Hayward restructured the business into three main units: exploration and production – including upstream for both oil and gas; refining and market (all downstream sales); and alternative energy.

Related stories:
Shell shake-up widely rumoured; EP and GP tipped to merge
(FT Energy Source, 26/05/09)
Shake-up in pipeline as Shell eyes costs (FT 19/11/08)
Interview: BP’s Tony Hayward on restructuring (FT, 12/10/07)

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