Shell oil transformation: please don't call me an oil giant...

On September 21, Reuters reported that Shell is conducting a company-wide cost reduction assessment that may reduce oil and gas production costs by up to 40%, thereby saving cash and devoting more energy to renewable energy and Electricity Market.

This new cost reduction plan is called "Project Remodeling" within Shell, and the evaluation is expected to be completed by the end of the year.

According to reports, the assessment will affect the three major sectors of Shell's upstream, downstream and LNG, and the reduction will exceed the US$4 billion target set at the beginning of the new crown crisis. A source said that this is the largest evaluation of Shell in decades.

There are indications that the oil and gas business of this European oil giant may really change.

Shell wants to "design" Shell again

The sudden industry shock in 2020 has really pushed the oil giants and made the pace of corporate transformation even greater.

In March of this year, in response to the market environment under the cloud of the epidemic, Shell decided to cut operating costs by US$4 billion in 2020 and cut capital expenditure from 25 billion to 20 billion US dollars.

And this severe financial austerity measure is just a "foreplay" for Shell to seek transformation.

In a speech to analysts on July 30, Shell CEO Ben van Beurden said that Shell has launched a plan to "redesign" the company to promote the company into a simpler and more efficient organization.

Today, Shell's exploration of plans to cut operating costs and capital expenditures for new projects for upstream, downstream and LNG has confirmed Van Burden's statement.

Sources said that Shell is looking for ways to focus its oil and gas production on several core areas such as the Gulf of Mexico, Nigeria and the North Sea, and cut its largest upstream sector oil and gas production spending by 30% to 40%.

For downstream businesses, the focus of Shell's review is to reduce the cost of its global network of 45,000 gas stations.

In addition to the retail business, Shell will also review its refining business and try to significantly increase the production of low-carbon fuels such as biofuels, chemicals and lubricants. At the same time, Shell has agreed to sell three of its refineries and reduce the number of its refineries, which is expected to be reduced from 17 last year to 10 in the future.

Surprisingly, even Shell’s natural gas business, which Shell has always valued, has been included in the assessment. Currently, Shell's integrated natural gas division is considering a substantial reduction in natural gas production.

The source also revealed that the teams of these three main departments of Shell will study how to reshape the business structure by cutting thousands of positions and cutting management to save money.

The entire review is expected to be completed by the end of 2020, when Shell may announce a major restructuring plan.

Reshaping the international giants

It is not the first to prepare for a major strategic reorganization this year.

On June 4 this year, the board of directors of the Italian oil giant Eni Group approved the company's new business transformation and the creation of two new business groups-Natural Resources and Energy Evolution.

The natural resources department will focus on the upstream oil and gas business and continue to enhance the value of the Eni Group's upstream oil and gas business portfolio; and the energy development department will focus on the growing renewable energy and biomethane power generation, and also cover the group's refining, chemical business and retail business Wait.

Claudio Descalzi, CEO of Eni Group, said that this new business structure reflects Eni Group's determination in the energy transition, and the company hopes to become a major participant in the energy transition.

Of course, when it comes to strategic transformation, bp is indispensable.

On August 5th, bp announced a new ten-year strategy. The company will reshape its business from an international oil company focused on producing resources to a comprehensive energy company focused on providing solutions.

According to the strategic plan, bp plans to invest about 5 billion U.S. dollars in low-carbon fields every year within 10 years, which is 10 times the current annual low-carbon investment amount, focusing on technologies such as renewable energy, bio-energy, hydrogen energy, and carbon capture, utilization, and storage. Research.

Conversely, bp will not seek to conduct exploration in countries where it has not carried out upstream activities in the future. In the next 10 years, the company's daily oil and gas production plan will be reduced by at least 1 million barrels of oil equivalent, which is equivalent to a reduction of 40% from 2019 levels. .

Between this increase and decrease, bp will achieve a "big change in blood" and its business will shift to low-carbon power and energy, convenient retail and mobile travel, and highly competitive oil and gas business.

There are signs that after the dramatic changes in the industry environment this year, the search for energy transition seems to have become a new trend.

On this energy transition road, there are many “radicals” such as Shell, Total, and Statoil that aim to achieve net zero emissions, and there are also “slowers” such as Gazprom and Saudi Aramco who intend to reduce their carbon footprint.