HOUSTON – Royal Dutch Shell says it’s planning to cut billions in spending and operating costs in 2016, girding itself for a prolonged downturn as the collapse of crude prices in recent weeks underscores the possibility that the oil bust could last for several years.
The Anglo-Dutch oil major expects its investment budget next year to come in 30 percent lower than in 2014, at $33 billion. That figure combines the projected spending of Shell and BG Group, the British gas producer it expects to purchase next year.
Shell also said Tuesday its operating costs will likely come down by $3 billion next year, as it expects to cut 2,800 jobs once it completes its $53 billion merger with BG Group. Its costs next year are expected to come in 15 percent lower than in 2014.
“Our industry has entered what could be a prolonged downturn,” Shell Chairman Chad Holliday said in a written statement.
Holliday said the combination with BG Group, announced in April, will strengthen Shell’s financials during the downturn. Shell expects to sell $30 billion in assets over the next two years and put more financial muscle behind deep-water and liquefied natural gas projects – two businesses that BG Group has built up in recent years.
In 2015, Shell said, it cut its own capital spending budget by $8 billion, or 20 percent, and slashed operating costs by $4 billion, about 10 percent. The company also scrapped major oil projects in Canada and Alaska and has already cut 7,500 jobs earlier this year.