Oil giant Shell said that the near 60% collapse in crude oil prices over the past six months is creating opportunities to reduce its own costs and also to take costs out of the supply chain – where there are ‘multi-million dollar potential savings’.
After Wall Street opened yesterday, Conoco and Occidental – respectivey the third and fourth largest US oil companies – also announced major cuts in exploration spending plans.
Conoco, which said last month that it would cut 2015 spending by 20% to $13.5 billion, now expects spending to be scaled back by a further 15% to $11.5 billion, while Occidental said it would slash its capital budget by 33% to $5.8 billion this year.
Last summer, Shell announced the lost of 250 jobs in Aberdeen, with BP also axing another 300 in Scotland’s oil capital last month,
In his annual update, Ben van Beurden, Shell Chief Executive, said: “Given today’s lower oil prices, investment levels are under severe pressure in the near term.
“We are deferring spending in many areas and driving costs down in the supply chain. This should result in reduction of potential capital investment for 2015-17 of over $15 billion.
“Organic capital investment in 2015 is expected to be lower than 2014 levels, and we have curtailed over $15 billion of potential spending over the next three years.
“We have options to further reduce spending, but we are not over-reacting to current low oil prices. We are taking a prudent approach here and are taking structured decisions to balance growth and returns.”
Shell reported profit excluding one-time items and inventory changes was $3.3 billion in the fourth quarter, up from $2.9 billion a year earlier. That missed the $4.1 billion average of 13 analyst estimates compiled by Bloomberg.