You are here
LONDON -- Royal Dutch Shell plc is planning even deeper cuts to its oil refining and retail operations after downstream weakness caused a 75 percent fall in fourth-quarter profits to $1.18 billion, Reuters reported.
Shell Chief Executive Officer Peter Voser pledged $1 billion in cost cuts and 1,000 job reductions in 2010 -- mainly to come from the downstream unit -- and upped his target for refinery divestments. He also said the company will continue to shift the focus of its downstream business to Asia, where rising fuel demand could ensure better profits.
Lower oil and gas production, and a big loss in refining offset higher crude oil prices for Shell. Voser said its refining and marketing division is enduring the toughest times he has seen in his 25 years at the company, The Wall Street Journal reported.
"We are not assuming that there will be a quick recovery, and the outlook for 2010 is uncertain," Voser said. "We are taking steps to improve our performance."
Shell reduced costs by an additional $1 billion in the fourth quarter, bringing total 2009 cost reductions to $2 billion, he said. "For 2010, we are targeting a further underlying cost reduction of at least $1 billion, and a reduction of some 1,000 employees," he said.
Shell's oil and gas exploration and production division performed poorly, while its refining and marketing division's performance was "really bad," making a $427 million loss, ING analyst Jason Kenney said in a report by The Wall Street Journal. The overall profit was flattered by currency gains of just over $400 million, he said.
"There is a significant overhang of industry refining capacity, exacerbated by the economic downturn," said Voser. "That's why we have initiatives underway to refocus Shell's downstream footprint into fewer, more profitable markets." The future of 560,000 barrels a day of refining capacity is under review in 2010, Voser noted.
Shell CEO Predicts 'Challenging' 2010
Shell Chief Expected to Cut More Senior Jobs