Oil giant Shell’s profits slide by 70% to £1.4bn

Jul 31 2009 by Iain Laing, The Journal

OIL giant Royal Dutch Shell has seen a 70% slide in profits to £1.4bn in the period between April and June.

The Anglo-Dutch firm revealed better than forecast achieved profits of £22bn last year, but, in line with BP on Tuesday, it said the weaker global economy had impacted its performance in the second quarter.

New chief executive Peter Voser said: “Energy demand is weak. There is excess capacity in the market and industry costs remain high.”

He warned that “substantial” staff reductions were likely this year.

Shell has already reduced the number of senior management positions by more than 100, or 20%, and plans to merge two of the firm’s three “upstream” exploration subsidiaries, which employ 22,000 staff.

The company did not provide further details on the plans, but said it had reduced costs by £426.8m in the first half of the year. Mr Voser said: “Looking beyond 2009, Shell needs to become a more efficient company, with faster decision-making, sharper implementation of strategy and more focus on costs and value.”

His comments echo those of BP counterpart Tony Hayward, who said this week the company’s target for a reduction of £1.21bn in costs in 2009 had already been exceeded, with a further £607m saving expected over the rest of the year.

Mr Voser also shared the BP chief executive’s view that there was unlikely to be a sudden pick-up in demand.

He added: “Conditions are likely to remain challenging for some time, and we are not banking on a quick recovery. Shell is adapting to this new situation, and we must do more. We are sharpening our focus on delivery and affordability.”