Royal Dutch Shell is looking to slash up to 40% off the cost of producing oil and gas in a major drive to save cash so it can overhaul its business and focus more on renewable energy and power markets.
Shells new cost-cutting review, known internally as Project Reshape and expected to be completed this year, will affect its three main divisions and any savings will come on top of a USD 4bn target set in the wake of the COVID-19 crisis.
Reducing costs is vital for Shells plans to move into the power sector and renewables where margins are relatively low. Competition is also likely to intensify with utilities and rival oil firms including BP and Total all battling for market share as economies around the world go green.
Last year, Shells overall operating costs came to USD 38bn and capital spending totalled USD 24bn.
Shell is exploring ways to reduce spending on oil and gas production, its largest division known as upstream, by 30% to 40% through cuts in operating costs and capital spending on new projects, two sources involved with the review said.
Shell now wants to focus its oil and gas production on a few key hubs, including the Gulf of Mexico, Nigeria, and the North Sea, the sources said.
The companys integrated gas division, which runs Shells liquefied natural gas (LNG) operations as well as some gas production, is also looking at deep cuts, the sources said.
