Shell will cut between 7,000 and 9,000 jobs by the end of 2022, it confirmed today. The figure includes around 1,500 people who have agreed to take voluntary redundancy this year.

The energy giant said "reduced organisational complexity", along with other measures, are expected to deliver sustainable annual cost savings of between $2 and $2.5 billion within two years.

Ben van Beurden, CEO of Royal Dutch Shell, said: "We have to be a simpler, more streamlined, more competitive organisation that is more nimble and able to respond to customers."

He added the company faces a "big mission" with the energy transition to a low-carbon future, whether that's developing new types of biofuels and making them commercially viable, for example, or developing hydrogen for heavy-duty road transport in areas where nothing exists yet. Educating its customers will be key as about 85% of its carbon footprint comes from customers’ emissions when they use Shell products. 

While Shell has made in-roads with renewable energy, van Beurden acknowledged "it all needs to accelerate".

He said Upstream will be critical to it has financial strength to invest in low carbon, refining will be refocused so its "smaller but smarter" and integrated gas will focus more on unlocking markets and focusing on customers' needs. Sector updates are as follows:

Integrated Gas

• Production is expected to be between 820 and 860 thousand barrels of oil equivalent per day
• LNG liquefaction volumes are expected to be between 7.9 and 8.3 million tonnes
• Trading and optimisation results are expected to be below average
• A one-off tax charge is expected to have a negative impact on Adjusted Earnings in the range of $100 to $200 million, no cash impact is expected in the third quarter
• Approximately 80 percent of term sales of LNG in 2020 have been oil price linked with a price-lag of up to 6 months. Consequently, lower realised prices due to this price-lag are expected to have a significant impact on LNG margins in Q3
• CFFO can be impacted by margining resulting from movements in the forward commodity curves up until the last day of the quarter. Margining inflows are expected to be in line with Q2 2020

Upstream

• Production is expected to be between 2,150-2,250 thousand barrels of oil equivalent per day, which includes a production impact of 60 to 70 thousand barrels of oil equivalent per day from hurricanes in the US Gulf of Mexico
• Realised liquids prices in the first two months of this quarter reflected a 15 to 20 percent discount to Brent, similar to the discount in the second quarter 2020. Realised gas prices are trending in line with Henry Hub
• Depreciation is expected to be at a similar level as in the second quarter 2020
• Similar to the second quarter 2020, while Adjusted Earnings are expected to show a loss, CFFO is not expected to reflect equivalent cash tax effects due to the build-up of deferred tax positions in a number of countries

Oil Products

• Refinery utilisation is expected to be between 64-68 percent
• Realised gross Refining margins are expected to be significantly lower compared with Q2 2020
• Sales volumes are expected to be between 4,000 and 5,000 thousand barrels per day
• Trading and optimisation results are expected to be lower than the historical average and significantly lower compared with Q2 2020
• Marketing margins are expected to be significantly higher compared with Q2 2020
• Compared with Q2 2020, Adjusted Earnings are expected to be negatively impacted by $200 to $400 million due to higher volume driven activity, phasing of maintenance activities and provisions.
• A one-off deferred tax benefit is expected to have a positive impact on Adjusted Earnings of around $100 million, no cash impact is expected in the third quarter.
• Working capital movements are typically impacted by movements between the quarter opening and closing price of crude along with changes in inventory volume. Inventory volumes are expected to be lower compared with the end of Q2 2020, impacting working capital positively.

Chemicals

• Chemicals manufacturing plant utilisation is expected to be between 79-83 percent
• Chemicals sales volumes are expected to between 3,700 and 4,000 thousand tonnes
• Compared with Q2 2020, Adjusted Earnings are expected to be negatively impacted by around $100 million due to increased activity, provisions and phasing of maintenance activities