Royal Dutch Shell Group said on Tuesday that it has commenced plans to exit oil and gas operations in 10 countries as part of a strategy to raise its cost savings profile to $4.5 billion and narrow its focus to the most profitable businesses such as liquefied natural gas.
The conglomerate also seeks to embark on this shake up to pay down debt following its $54 billion acquisition of BG Group. Shell also plans to sell $30 billion worth of assets around the world by around 2018 and quit operations in 5 to 10 countries to reduce its balance sheet gearing which soared to 26 percent following the BG deal.
Royal Dutch Shell Group’s Chief Executive Officer, Ben van Beurden, who spoke on Tuesday in London as the Group looks to seal the $54 billion acquisition of BG Group, did not name the countries to be affected by the company’s exit plans. Mr. Van Beurden said costs-cutting, and acquisition of BG Group, would make Shell the world’s second biggest multinational oil company behind Exxon Mobil Corporation.
“For the first 90 years of Shell’s existence, we were the industry leader in total shareholder return. But we lost the lead in the 1990s. I am determined to get us back to that number one position.
“Our strategy should lead to a simpler company, with fundamentally advantaged positions, and fundamentally lower capital intensity.”
The company, which has already unfolded plans to divest from Gabon, said the cost saving strategy would also include savings from 12,500 job cuts in 2015 and sale of 10 per cent of its production as part of a $30 billion asset sale plan by 2018.
Shell is currently active in about 70 countries around the world, including Nigeria where it remains the leading producer of hydrocarbons. Shell plans to focus attention on its operations in just 13 countries, including Brazil, Australia and the United States.
Over the last few months, industry watchers have observed a systematic sale of Shell assets in Nigeria, last year, Royal Dutch Shell Group subsidiary, Shell Petroleum Development Company of Nigeria Limited, re-assigned its interest in oil mining lease (OML) 29 and the Nembe Creek Trunk Line (OML29 and NCTL) and related facilities in the Eastern Niger Delta to a Nigerian indigenous oil firm, Aiteo Eastern E&P Company Limited for $1.7 billion.
In 2014, the company also sold 45 per cent of its stake in OML 18 to a consortium that included Canadian company, Mart Resources Inc. as part of attempts to reduce its presence in Nigeria, which is currently facing a spate of attacks from armed Niger Delta militant groups.
Part of its long-term operational strategy includes plans to grow its shale oil and gas production and green energy as it switches to cleaner fuel alternatives in renewable energies – hydrogen, solar and wind, and raising deep-water production to some 900,000 barrels of oil equivalent per day in 2020.