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Shell to axe 6,500 jobs as oil price slump continues

The oil giant Royal Dutch Shell has announced plans to cut 6,500 jobs as part of cost cutting plans to counter falling oil prices.

Capital expenditure will be reduced by $3 billion, a further reduction since the group’s last update in April. This will bring the total capital expenditure to around $30 billion for 2015. This represents a reduction of 20 per cent from 2014 levels, and 35 per cent compared to 2013.

In spite of the cuts, the group has vowed that it will continue with its expensive and controversial exploration programme in Artic Alaska, saying it was a “long-term play” that could not be influenced by current energy prices.[1] However, other energy projects will be stalled, one example being the longstanding concession in Abu Dhabi, where Shell and BP refused to pay multibillion-dollar signing-on fees for a new deal.

Analysts at Barclays have said:

“To us it is clear that the management is proactively resetting the business to deal with a lower oil price.”

According to the BBC, the price of oil is currently about $53 a barrel, sharply down from about $110 a barrel a year ago.

Several other oil majors are making similarly dramatic cuts to spending. Data from Rystad Energy shows that Exxon has cut its capex by 16 per cent this year, while Total and Chevron have both brought spending down by 14 per cent[2].

[1] Terry Macalister, Shell cuts 6,500 jobs as oil price slump continues, www.theguardian.com
[2] Caitlin Morrison, The great oil reset: Shell to axe 6,500 jobs as black gold price set to stay low, www.cityam.com