Shell Extends Job Cuts on Division Basis: Scaling Back Hydrogen for a Leaner Organization

By Moon Harper

Dec 21, 2023 11:39 PM EST

Shell has started laying off employees beyond the initially announced 15% reductions in its low-carbon division in October as part of the profit-driving plan.

Job Cutting on a Division-by-Division Basis

Jobs are being cut on a division-by-division basis as part of a profit-boosting plan, where impacted employees are given choices such as redundancy packages or the opportunity to apply for other positions within the company, as mentioned in Bloomberg's report without any details on the number of jobs affected.

Unnecessary "Structural Costs"

In June, The company shared a plan with investors to cut "structural costs" by up to $3 billion by the end of 2025. Shell aims to improve its portfolio, enhance efficiencies, and create a leaner organization to achieve reductions, as stated by a Shell spokesperson. Although no specific targets are set, Shell will consistently assess and adjust activities to maximize value.

"Achieving those reductions will require portfolio high grading, new efficiencies and a leaner overall organization," Shell said. "While no formal targets exist, we will continuously look to right-size the activities that deliver the most value."

Wael Sawan, appointed Shell's CEO earlier this year, ruthlessly enhances the company's performance by selling assets and cutting low-return investments to narrow the valuation gap with U.S. competitors Exxon Mobil Corp and Chevron Corp. By the end of 2022, Shell had around 93,000 employees globally on a full-time and part-time basis, which is more than double Chevron's workforce, despite having a 34% higher market value.

15% Workforce Reduction to Scale Back Hydrogen

Shell plans to reduce its workforce in the low-carbon solutions division by at least 15% and scale back its hydrogen business. The staff cuts and organizational changes follow the commitment to overhaul Shell's strategy, emphasizing higher-margin projects, maintaining steady oil output, and growing natural gas production. Shell will cut 200 jobs and is reviewing an additional 130 positions as part of an initiative to reduce the headcount by 2024, which currently has around 1,300 employees, and merge the remaining roles into other areas of the company, which employs more than 90,000 employees.

"We are transforming our Low Carbon Solutions (LCS) business to enhance its focus on our main low-carbon business areas such as transport and industry," the company added.

Future Impact on Big Oil Executives

Despite reaping record profits in 2022 due to global disruptions from Russia's invasion of Ukraine, Big Oil executives are cautious about the future. Concerns about the uncertain future of fossil fuel consumption and pressure from investors for dividends and stock buybacks are leading Western oil companies to exercise greater discipline in their spending.

Chevron, which agreed to acquire Hess Corp in October, has told its staff to improve performance in 2024 following shortcomings in critical metrics. Exxon has cut its workforce by 17% since 2019 and recently outlined a plan to save $6 billion in structural costs by 2027.