Arab Today, arab today shell finds fresh bg takeover savings plans upstream overhaul
Last Updated : GMT 05:15:54
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Shell finds fresh BG takeover savings, plans upstream overhaul

Arab Today, arab today

Arab Today, arab today Shell finds fresh BG takeover savings, plans upstream overhaul

Shell has lifted its estimate of pre-tax savings from its BG Group
London - AFP

Shell has identified another $1.0 billion (900 million euros) of savings from its BG Group takeover, it said Tuesday, and unveiled a new overhaul to combat a "prolonged downturn" in oil prices.

The energy giant has lifted its estimate of pre-tax savings from its BG Group mega-takeover by 40 percent to $3.5 billion by 2018, it said in a statement ahead of an investor day in London.

The Anglo-Dutch company had revealed last week that it dived into a $7.4-billion third-quarter net loss on falling energy prices and huge write-downs after scrapping costly projects in Alaska and Canada.

It has however insisted that its proposed £55-billion takeover of BG remains on track for completion in early 2016.

"Shell is becoming a company that is more focused on its core strengths, a company that is more resilient and competitive at all points in the oil price cycle and that has a more predictable project development pipeline. We'll grow to simplify," said chief executive Ben van Beurden in Tuesday's statement.

Shell said the new synergies arose from administrative, corporate and IT savings, as well as lower spending on marketing, procurement and shipping. It did not however specify any potential job losses.

About $1.5 billion of the $3.5-billion total was linked to slashed expenditure on exploration.

Shell added Tuesday that it would overhaul its upstream or exploration and production division, with effect from January 1, as it plans for a "prolonged downturn" in oil prices.

"Shell is announcing a new, simpler upstream organisation that reflects recent changes in the company’s portfolio," the company said.

As part of the overhaul, Shell will run its natural gas business as a stand-alone organization, in a move reflecting its enlarged scale and investment potential.
It will create a new upstream division that will comprise Shell's conventional oil and gas businesses.

Shell added that Marvin Odum, currently Upstream Americas Director, would become Director of a new Unconventional Resources organisation, spanning heavy oil and shales activities in the Americas.

That will also include "ongoing reviews of portfolio and investment opportunities in these longer term themes, and the winding down of Shell’s activities in offshore Alaska", it said.

Crude oil prices lost more than half their value between June 2014 and late January, due to a stubborn supply glut fuelled largely by robust output from US shale rock and weak world energy demand.

“Low oil prices are driving significant changes in our industry," added van Beurden on Tuesday.

"I am determined that Shell will be at the forefront of that, and emerge as a more focused and more competitive company as a result."

Low oil prices bite into profits for the energy sector, sparking investment cutbacks as they seek to lower operating costs.

The BG deal is aimed at helping Shell boost its flagging output thanks to BG's strong position in liquefied natural gas (LNG), a cleaner alternative to coal and nuclear energy.

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