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Shell Reportedly To Slash Oil and Gas Production Costs To Focus More On Renewables

An anonymous reader quotes a report from CBC.ca: Royal Dutch Shell is looking to slash up to 40 percent 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, sources told Reuters. Shell’s 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 $4 billion US target set in the wake of the COVID-19 crisis. 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 company’s integrated gas division, which runs Shell’s liquefied natural gas (LNG) operations as well as some gas production, is also looking at deep cuts, the sources said. For downstream, the review is focusing on cutting costs from Shell’s network of 45,000 service stations — the world’s biggest which is seen as one its “most high-value activities” and is expected to play a pivotal role in the transition, two more sources involved with the review told Reuters.

The review, which company sources say is the largest in Shell’s modern history, is expected to be completed by the end of 2020 when Shell wants to announce a major restructuring. It will hold an investor day in February 2021. Teams in Shell’s three main divisions are also studying how to reshape the business by cutting thousands of jobs and removing management layers both to save money and create a nimbler company as it prepares to restructure, the sources said. Besides cutting costs at its downstream retail business, Shell is pressing ahead with plans to reduce the number of its oil refineries to 10 from 17 last year. It has already agreed to sell three. The review of refining operations also includes finding ways to sharply increase the production of low-carbon fuels such as biofuels, chemicals and lubricants. That could be done by using low-carbon raw materials such as cooking oil, one source said. “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,” said a senior Shell source, who declined to be named.

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