Shell to make large cuts in its oil exploration division: sources

Shell will cut its oil and natural gas exploration and production workforce by 20%, according to company sources. CEO Wael Sawan is extending his cost-saving efforts to this highly profitable division following the deep cuts made in renewables and low carbon businesses.

Sources said that the restructuring of the exploration, wells development, and subsurface units would result in hundreds of job losses around the globe, with the greatest impact in offices in Houston, The Hague, and Britain.

Sources added that consultations will be held with the employee representative bodies to determine the exact 20% reduction.

Shell's upstream division, which includes exploration and well-development units, contributed more than a third of its $28,25 billion in adjusted earnings for 2023.

Exploration is essential for oil and gas firms to replenish depleting resources and discover new sources that can be highly lucrative if developed. Shell has made some significant discoveries in Namibia in the last few years, which it is currently studying to determine if they can be developed.

Shell's spokesperson refused to comment on the figures.

Shell aims to generate more value while emitting less carbon dioxide by focusing on performance and discipline across the entire business. Shell stated in a press release that it would reduce structural operating costs by $2-3 billion dollars by the end 2025.

Shell shares rose 0.6% to 1555 GMT.

Sawan, who assumed office in January 2023 has pledged to improve Shell’s performance in order to boost its profitability and narrow the wide gap in its share valuation in comparison with larger U.S. competitors.

Shell's strategy includes a plan to increase its liquefied gas division, maintain oil production, and concentrate on its most profitable business.

Shell has reduced its offshore wind, solar, and hydrogen operations, and sold some retail power businesses, refineries, and oil and gas production in Nigeria, in recent months.

Shell has lowered its carbon reduction targets for 2030 and scrapped the 2035 target, citing strong expectations of gas demand, and uncertainty regarding energy transition.

Shell shares are up over 8% this year. They have outperformed their European rivals, including Chevron. Investor confidence has been boosted by improved cashflows and better performance from the company's main assets.

(source: Reuters)