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Shell to shed 10,000 jobs, defers FID on Bonga South West Project

By on February 6, 2016

As dwindling oil prices take their toll on oil industry operations, Royal Dutch Shell has announced that it will cut its global staff strength by 10,000 in 2016.
It also announced in its fourth quarter of 2015 financial report that it would defer its final investment decision (FID) on the Bonga South-west deepwater project in Nigeria, saying that its operating costs and capital investments had been reduced by $12.5 billion with further reductions expected in 2016.

Shell’s Chief Executive Officer (CEO), Mr. Ben Van Beurden, made the announcement on the cost-cutting measures in a webcast presentation with analysts. A transcript of the presentation was released yesterday in Abuja.

“The completion of the BG transaction, which we are expecting in a matter of weeks, marks the start of a new chapter in Shell, rejuvenating the company, and improving shareholder returns.

“We are making substantial changes in the company, reorganising our upstream, and reducing costs and capital investment, as we refocus Shell, and respond to lower oil prices.

“As we have previously indicated, this will include a reduction of some 10,000 staff and direct contractor positions in 2015-16 across both companies,” said Van Beurden.

He went on to state: “In 2015, we significantly curtailed spending by reducing the number of new investment decisions and designing lower-cost development solutions.”

In 2016, he said Shell had exited the Bab sour gas project in Abu Dhabi, and was postponing final investment decisions on LNG Canada and the Bonga South-west in deepwater Nigeria.

“Operating costs and capital investment have been reduced by a total of $12.5 billion as compared to 2014, and we expect further reductions in 2016,” he added.

Van Beurden explained that as a result of Shell’s actions in 2015, the company retained a strong balance sheet position, with 14 per cent gearing.

According to him, “Shell will take further impactful decisions to manage through the oil price downturn, should conditions warrant that. Shell’s dividends for 2015 were $1.88 per share, and are expected to be at least $1.88 per share in 2016, as previously announced.”

It is estimated that the Bonga South-west project, located in Oil Prospecting Licence (OPL) 212 is worth $12 billion.

A Shell subsidiary in Nigeria – Shell Nigeria Exploration and Production Company (SNEPCo) – operates the field under a production sharing contract (PSC) on behalf of the Nigerian National Petroleum Corporation (NNPC). Other partners in the field include Esso, Nigeria Agip and Total.

Van Beurden also said: “Our integrated business mix is helping to support our results, in what is a challenging industry environment today. We are pulling on powerful financial levers to manage the company in the industry downturn.

“We are reducing costs and capital investment, as we refocus the company, and respond to lower oil prices. The completion of the BG transaction, which is expected to take place on the 15th of February, will mark the start of a new chapter in Shell to rejuvenate the company, and to aim to improve shareholder returns.

“Shell is becoming a company that is more focused on its core strengths, a company that is more resilient and competitive at all points in the oil price cycle and that has a more predictable development pipeline.”

Shell’s announcement on job cuts came just as the National Union of Petroleum and Natural Gas Workers (NUPENG) and Nigeria Labour Congress (NLC) held a meeting with the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, in a renewed effort to protect the jobs of their members in the country’s oil and gas sector.

The National President of NUPENG, Mr. Achese Igwe, spoke to journalists in Abuja on Thursday on the outcome of the meeting the unions had with Kachikwu.

According to him, the meeting discussed the possible sack of workers in the NNPC and the oil sector, as well as ongoing reforms in the industry.

He said: “We are going to resist any attempt (to sack workers) vehemently. We have advised oil service companies and multinationals that are outsourcing and contracting that this will lead to job losses for Nigerians. We will say no to them because that is not what this government is all about.

“The government today talks about job creation and not job losses. With the current economic challenge we are having in our country, we need not have job losses.”

When asked what concrete assurance the unions got from Kachikwu against job losses, Igwe said the minister gave his word that jobs would be protected.

“One of the concrete assurances he has given is that there will be no job losses, he has said there will be job security. He is also thinking of expanding the business of the NNPC to a profit-making organisation and to a world class oil and gas company like Petrobras, Petronas and the rest of them,” he explained.

According to him, “We have said clearly as a union that any attempt to cause job losses in the oil and gas sector especially at NNPC, we will definitely react, we will resist it accordingly and we will do it within the framework of what labour union is known for.”

Also, in a move to douse tension following plans by oil companies to lay off workers, the federal government yesterday pleaded with the companies operating in Nigeria to shelve such plans so as to avoid social upheaval and a national crisis in the country.

Minister of Labour and Employment, Senator Chris Ngige, at a joint labour-oil sector meeting, urged the oil companies to consider the national interest first before going on with plans on staff rationalisation that might be inimical to the national economy.

The minister stressed that the nation was already facing a lot of social security problems and could not afford for more to be created through job cuts.

“Oil majors in Nigeria must therefore bend backwards and see what they can plough back from their profits to keep Nigerian workers at their duty posts,” the minister said.

Speaking further, Ngige assured the oil majors that the present economic downturn would not last forever.

“Keep the existing jobs as nothing lasts forever. We have a downturn today but you can be sure it will not last forever.  If you are not creating new jobs, let us keep the ones we have. That is what this government is pleading and we must emphasise that is what we want,” he said.

He reminded them that the oil and gas sector remains the backbone of Nigeria’s economy, and as such any threat of industrial unrest in the sector should be nipped in the bud.

He revealed that he had received a plethora of petitions from the unions in the sector, in relation to industrial and employment relations such as casualisation of workers, redundancies, threats of retrenchment, and unfair labour practices, among others.

Speaking on behalf of the IOCs present – Agip, ExxonMobil, Chevron, Addax and Total – the director of human resources and medical, Chevron Nigeria Limited, Ihuoma Onyearughe, appreciated the federal government’s efforts at stabilising the economy and ensuring industrial harmony in the sector.

She appealed for understanding and collaboration on the part of the government in view of the current challenges facing the industry.

“The issue of laying people off is not a decision that comes lightly. I will not come here to tell you that people are being laid off or not. The situation in the oil sector is dire. We want to ask for more understanding in appreciation of the challenges we face.

“Nevertheless, we have heard the minister and we will take your message back to our various companies,” she said.

Onyearughe also pleaded with the minister to protect the oil majors from unnecessary harassment from the labour unions that usually close their eyes to unfair labour practices by “employment contractors” who do not remit workers’ pension and compensation funds, but harass and turn the heat on the oil companies.

The next meeting between the government and oil unions is scheduled for next week to resolve issues in the industry.

Also, the President of NLC, Mr. Ayuba Wabba, warned yesterday that any attempt by oil majors to sack workers under the excuse of falling oil prices would create a crisis.

Wabba told THISDAY in a telephone interview that notwithstanding the prevailing circumstances in the oil industry, it should not lead to the mass sack of oil workers.

“We know there is a challenge, but you don’t sack workers as a solution, you cannot just do that. They want to run away from paying gratuities, severance and other benefits. They must follow the process, the system must be stable, the crisis will be monumental.
We must give oil workers their rights, just as the oil companies also deserve their rights,” he said.

 

[ThisDay]