UK/IRELAND

Australia safe from Shell's global purge

NONE of the 6500 jobs that Royal Dutch Shell will purge this year will come from its Australian o...

Australia safe from Shell's global purge

Shell will be reshaped once the BG Group takeover is complete, but for now is focusing on sharpening the knives, declaring last week it would axe 6500 jobs this year as part of a $US4 billion ($5.49 billion) reduction in operating costs for 2015.

And more is on the way, with Shell declaring in its latest quarterly that further reductions in operating costs would come next year, despite the pro-forma capital investment for the combined Shell and BG entity next year expected to be about $35 billion.

"The job figures are an aggregate or total of jobs already cut around the world due to divestments and various cuts to contractor numbers," a Shell spokesperson told Energy News.

"Australia is a growth centre for Shell due to Prelude among other things so remains unaffected."

For now, Shell is cutting capital investments by $7 billion for 2015, a 20% reduction.

Shell CEO Ben Van Beurden said Shell continued to review both the ongoing projects under construction, and the medium term investment options, to balance returns, affordability and medium-term growth potential.

He said Shell was making "good progress" with the recommended combination with British rival BG, which should enhance Shell's free cash flow, create an IOC [international oil company] leader in LNG and deep water innovation, and be a springboard to change Shell into a simpler and more profitable company".

"We will re-shape the company once this transaction is complete," he added.

"This will include reduced exploration spend, a fresh look at capital allocation in longer term plays, and asset sales spanning upstream and downstream.

"This should concentrate our portfolio into fewer, higher value positions, where we can apply our know-how with better economy of scale. In essence, we ‘grow to simplify'.

"The result should be a simpler, more profitable, resilient and competitive Shell, able to deliver better returns to shareholders

"These are challenging times for the industry, and we are responding with urgency and determination, but also with a great sense of excitement for the future."

Van Beurden said the deal was on track to wrap up by early next year as planned, having received approvals from Brazil's Council for Economic Defence, South Korea's Fair Trade Commission and the US' Federal Trade Commission.

Pre-conditional filings have also been submitted covering Australia, China and the European Union, and a joint team has been set up with BG to plan for the two companies' integration once the transaction has closed, and to "retain the top talent" from both firms.

"Synergies from the transaction should be at least $2.5 billion per year from 2018," van Beurden said.

"By combining Shell's current complementary positions with BG's LNG and deep water assets, Shell can add significant value - beyond the announced synergies - by applying its technology and know-how at greater scale, at a lower cost, concentrating on areas of existing competitive advantage, and through better optimization of the combined portfolio.

"The free cash flow expansion expected from BG's Australia and Brazil growth is a natural fit with Shell's 2017+ free cash flow growth potential.

:This in turn enhances Shell's continued intention to pay a dividend of $1.88/share for 2015 and at least $1.88/share for 2016, and reflects confidence in future financial capacity."

He said Shell expected oil prices to stay low for "some time", but was also keeping an eye on recovery.

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