Thursday, October 22, 2020
News Shell Looking to Slash Oil, Gas Production Costs 40 Percent for Green...

Shell Looking to Slash Oil, Gas Production Costs 40 Percent for Green Transition

Report says Shell planning massive cost-cutting review

  • Report says Shell would focus on key production areas

  • Company also looking to decrease service station costs


A new report says that Shell is looking at taking a big bite out of the cost of producing oil and gas, a drive to save cash and help the company make the massive transition from fossil fuels to renewable resources.

The report comes from Reuters, speaking with what they referred to as “a senior Shell source.” “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,” the source said.

The cost-cutting review is called Project Reshape, and the goal is to slash up to 40 percent of the cost of producing oil and natural gas. That would be on top of a $4B savings target already set by Royal Dutch Shell over COVID-related revenue concerns, and the review is expected to be complete this year.

Shell has plans to move into power and renewables, which have margins much smaller than those oil and gas can offer. They’re likely to become more competitive as well, as other utilities and oil companies begin to make the transition.

Per the report, Shell is looking at focusing oil and gas production at a few key hubs including the Gulf of Mexico, Nigeria, and the North Sea. That could leave other markets, especially higher-cost options like Alberta’s oil sands, on the sidelines.

That’s on the production side, on the downstream or user side, the company is looking at cutting costs related to service stations, an area that could be critical as part of the green fuel transition. The review is said to be the largest in the company’s modern history.

“We are undergoing a strategic review of the organization, which intends to ensure we are set up to thrive throughout the energy transition and be a simpler organization, which is also cost competitive. We are looking at a range of options and scenarios at this time, which are being carefully evaluated,” a spokeswoman for Shell said in a statement.

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