IN THE NEWS / Royal Dutch-Shell Poised To Cut Jobs, Assets By $6.6B
Monday 14 December 1998
Herald News Services
The Royal Dutch-Shell Group will unveil today a sweeping cost-cutting program that will reduce the value of its assets by billions.
Analysts predict the company plans to dispose of about $6.6 billion US in assets in the next three years and that it will announce a reduction in capital spending for next year from $16.5 billion to $11.6 billion US.
Other possible actions by the Anglo-Dutch oil giant include a profit warning, an announcement of plans to sell parts of the business and further plans to cut staff levels beyond the 6,000 job cuts announced in recent months.
The company would not comment Sunday but said it planned to issue a statement this afternoon. It took tentative steps last week toward changing the consensus management style of the century-old company, appointing chief executives to run each of its four core businesses.
Mark Moody-Stuart, chairman of Shell's committee of managing directors who expects a rough ride from analysts at today's presentation, is believed to have given ultimatums to senior management at a conference last week, telling them that poor performing businesses would be fixed or would leave the group.
Like other oil groups, Shell has been hit by a double whammy of 12-year lows in the price of oil and falling demand in crisis-hit Asia.
Its international energy operations include majority control of Shell Canada Ltd., the Calgary-based oil company that employs thousands of Canadians in oil and gas production, its three gasoline refineries and retailing at its network of close to 2,100 stations across the country.
A Calgary oil industry analyst said Sunday any cost-cutting or job losses at Royal Dutch-Shell would likely spell trouble for employees at its Calgary-based Canadian subsidiary
"They're part of the same family so it's got to affect them," said Ian Doig, of Doig's Digest, an industry publication.
Doig says what was once believed to have been a temporary, six-month drop in the price of oil looks to be more permanent.
"I think people are starting to realize this is going to be a long issue." said Doig.
Shell may have to sell assets or merge with another oil giant to remain competitive in world markets, at the cost of jobs, he added.
While many blame the Asian economic downturn for reducing the demand for oil worldwide, Doig said the supply has increased due to success in finding new reserves and new drilling technology to extract oil cheaper.
"Our publication has said from the beginning (that) the supply side was a darker cloud than demand," he said.
Wilf Gobert, an energy analyst with Peters & Co., said Shell Canada ''may not be affected at all'' by asset writedowns of its European parent. He said cost-cutting could hurt such joint future initiatives as the Sable Island natural gas project of which Shell holds a 31.3-per-cent stake. The company is involved in a $3.4-billion Alberta tar sands development project.
There have been rumours that Shell might opt to follow the lead of rivals British Petroleum and Exxon and address its problems via a takeover of Chevron. But analysts believe the company has decided to put its own house in order rather than take on new assets. Both Shell and Chevron have declined to comment on the takeover talk.
"Shell has been somewhat behind its rivals in cutting costs," said Jim Wood-Smith, head of research at stockbrokers Greig Middleton. "It has a famously bureaucratic management structure.
"This means there is plenty of room for efficiencies and job cuts are inevitable."
The Royal Dutch-Shell group has already announced the likely closure of its 92,000-barrels-a-day Shell Haven refinery in Britain.
One analyst said Shell would be looking to sell parts of its chemical and coal divisions, while there may be further European refinery cuts to come.
Industry experts have said 15 per cent of the production capacity in Europe's refineries needs to be cut to bring stability to the market.
Some Shell watchers warned the announcement may not include much detail. They said the company may choose to tell employees of its plans before it tells analysts. |
