As Shell and British-Scottish Gas shed 12,000 energy jobs, crude price slump could see oil companies abandon N. Sea by 2025

Two major British energy companies – Shell and British Gas/ Centrica –  have today announced plans to shed more than 12,000 jobs combined.

Centrica – the listed company which owns the Scottish Gas and British Gas retail energy brands – is re-modelling its business with a view to increasing cash flow and profits for shareholders.

Its 6,000 job cuts will be primarily felt in the UK. It was not immediately known what impact this will have on Scotland and/or the Scottish Gas brand office in Edinburgh.

While Shell continues to grapple – along with the rest of the oil industry – with the fall-out from the slump in benchmark Brent crude oil prices, which has already cost Scotland 5,000 N. Sea job losses.

Shell Chief Executive  Ben van Beurden
Shell Chief Executive Ben van Beurden

Shell is aiming to cut more than 6,000 staff and contractor jobs worldwide – some of which may be in the North Sea.

The crude oil price slump – which has fallen by around 50% over the past 12 months – has forced N. Sea oil companies to slash investment and spending. Shell profits also slumped – falling 35% to £3.3 billion in the first half of this year.

When crude oil prices were at $110-barrel last year, the UK industry accepted that there are around 25 billion barrels of oil left in the N. Sea bucket.

But less than half of these stocks may be recovered if crude prices continue to stagnate at around $50-60-barrel.

This means that oil production could be abandoned in the North Sea by as early as 2025.

As exclusively reported earlier this week by Scottish Energy News, N. Sea trade unions expect more Shell job losses as a result of its move to cut costs by imposing new offshore shift rotas for workers. See full story here: http://goo.gl/zuHUum

Will Hedden, an oil dealer at London Capital Group, commented: “The capex and job cuts continue at the <Shell> oil giant, as $50 crude oil starts to dig its heels in, and with added bearishness on the prospect of a return to more favourable levels.

Ben van Beurden, Shell chief executive, said: “Shell’s integrated business and our performance drive are helping to mitigate the impact of low oil prices on our bottom line.

 “As our results today show, we’re successfully reducing our capital spending and operating costs, and delivering a competitive performance in today’s oil market downturn.

 “We have to be resilient in a world where oil prices remain low for some time, whilst keeping an eye on recovery. We’re taking a prudent approach, pulling on powerful financial levers to manage through this downturn, always making sure we have the capacity to pay attractive dividends for shareholders.

 “At the same time, we are making good progress with the recommended combination with BG, which should enhance our free cash flow, create an IOC leader in LNG and deep water innovation, and be a springboard to change Shell into a simpler and more profitable company.

 “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.”

Meanwhile, Centrica chief executive Iain Conn, said he wants to save £750 million in annual cost savings by 2020 and plans to dispose of up to £1 billion of oil and wind assets. Centrica will also cut back on North Sea exploration and production as well as power generation.

Despite losing 45,000 retail / household customers in the first half of this year – as consumers continue to flee from Britain’s ‘Big Six’ legacy utility providers – profits doubled at British Gas to £528 million.

A spokeswoman for Which? – a London-based consumer organisation – commented: “With British Gas profits high and wholesale prices low, customers will no doubt be wondering why cuts to their bills haven’t gone further, and haven’t included electricity.

“The Competition and Markets Authority recently confirmed that household bills would be lower if the energy market was truly competitive. Following the CMA’s blistering assessment of this sector, we expect big suppliers to pass on falling costs to their customers quickly and fairly.”

 

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