Shell said on Wednesday that volumes of both Liquefied Natural Gas and crude production were down in the third quarter.
The oil major disclosed this in an update to the market, which also detailed plans to cut up to 9,000 jobs by the end of 2022 as it adjusts to the COVID-19 price collapse, according to S&P Global Platts.
Upstream production of oil and associated streams was significantly down in the quarter, in a range of 2.2 million to 2.3 million barrels of oil equivalent per day, from 2.6 million boe/d in Q3 2019.
LNG output was down in a range of 7.9 million to 8.3 million metric tonnes for the quarter, compared with nine million mt a year earlier.
In the update ahead of a full results statement on Oct. 29, Shell said its oil sales in July and August had reflected a 15-20 per cent discount to Brent pricing, similar to the second quarter, and its LNG business in the quarter had suffered a ‘significant impact’ from a lag effect in the oil-linked pricing of LNG.
It also highlighted refining weakness, with a utilisation level of just 64-68 per cent and margins “significantly lower” than in the second quarter 2020, and said it intended to reduce its refining footprint globally to less than 10 sites.
On its restructuring plans, Shell said, “Reduced organisational complexity, along with other measures, are expected to deliver sustainable annual cost savings of between $2.0bn to $2.5bn by 2022.
“This will partially contribute to the announced underlying operating cost reduction of $3bn to $4bn by the first quarter 2021.”
Worldwide job reductions of 7,000 to 9,000 are expected by the end of 2022, including 1,500 people who have agreed to take voluntary redundancy this year, Shell said.
It also said production levels in both the upstream business and the LNG business had been lower than in the second quarter, partly reflecting seasonal maintenance, but also the impact of hurricanes in the US Gulf of Mexico.
