Oil giant Shell to push for more cost saving
07 June 2016
Oil giant Shell is targeting yet more cost savings to pay off debt and protect its dividend in the lower oil prices regime.
According to the Anglo Dutch giant, capital spending would be in the region of $25-$30 billion a year to 2020. For 2016 it would be $29 billion, down from a forecast ''trending toward'' $30 billion, which was itself down from an earlier projection of $33 billion.
According to the company, the spending could go even lower if oil prices sank below their current levels, but crucially would not increase if oil surged.
Crude has stabilised at around $50 a barrel, after hitting a 12-year low of $28 a barrel in January and was trading at over $100 two years ago.
Shell also expected to save more money than earlier thought from its multi-billion takeover of Reading-based BG Group.
It had considered cost savings of $4.5 billion from its £40-billion merger with liquid natural gas (LNG) specialist BG earlier this year, up from $3.5 billion.
Asset sales would be expected at $30 billion for 2016-18, with up to 10 per cent of Shell's oil and gas production earmarked for disposal.
The company planned to quit five to 10 countries as part of this retrenchment, with $6 billion-8 billion in asset sales realised this year alone.
Though some investors had doubted the wisdom of buying BG as oil prices plunged after the announcement, Shell had argued BG gave it a leading position in deepwater production and liquefied natural gas (LNG), which allowed gas to be shipped around the world in tankers.
Ben van Beurden, Shell's chief executive, said, ''The BG deal is an opportunity to accelerate the reshaping of Shell. Integration is gathering pace, and today we expect to deliver more synergies, and at a faster rate,'' The Guardian reported in its online edition.