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Shell to undertake major cost re-allocation to prepare for energy transition

21/09/2020
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Shell has been reported to be undertaking a major cost re-allocation program known internally as “Project Reshape” in order to overhaul its oil and gas development arm and invest more into the renewable energy and power markets. 



Like many majors, Shell are looking to pivot their core business model away from an oil and gas focus. The review will end with a major company restructuring, which is expected by the end of 2020.

It’s thought that the company is looking to save 40% of its upstream oil and gas production costs through cuts in operating and capital spending on new projects. Ongoing projects will be focused on key hubs in the Gulf of Mexico, Nigeria and the North Sea. 

“We had a great model but is it right for the future? There will be differences, this is not just about structure but culture and about the type of company we want to be,” a senior Shell source (who declined to be named) told Reuters. 

It’s thought that the company is looking to save 40% of its upstream oil and gas production costs through cuts in operating and capital spending on new projects. Ongoing projects will be focused on key hubs in the Gulf of Mexico, Nigeria and the North Sea. 

It’s also expected to try and cut costs from downstream areas, including its network of 45,000 service stations.

Shell have already agreed to sell three of its 17 oil refineries, and is expected to seek to reduce its total to just 10. 

“We are undergoing a strategic review of the organization, which intends to ensure we are set up to thrive throughout the energy transition and be a simpler organization, which is also cost-competitive. We are looking at a range of options and scenarios at this time, which are being carefully evaluated,” a spokeswoman for Shell announced in a statement.

An investor day is expected in February 2021, at which point it will become clearer what the results of this review are and how Shell are positioning themselves for the future.

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Shell to undertake major cost re-allocation to prepare for energy transition - Time to read 2 min
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