Royal Dutch Shell Plc will slash oil-processing capacity at its largest refinery, resulting in hundreds of job losses over the next three years.
Shell last month singled out the Pulau Bukom manufacturing complex in Singapore as one of six key refining and chemical hubs that would remain core to its business amid a companywide reorganization. Yet the site won’t escape the overhaul, with plans announced Tuesday to cut capacity there by half.
The Anglo-Dutch major, which set out bolder climate goals in April, has said it sees oil-product consumption falling as the world transitions to a cleaner energy mix. The impact of the Covid-19 pandemic has only served to accelerate that shift, with refining capacity far outstripping demand for fuels.
“A refining industry that was intended to accommodate a certain level of global demand must now contend with what is expected to be a significantly lower amount of it,” Rob Smith, a director at IHS Markit, said this week. “What was expected to be a long, slow adjustment has become an abrupt shock.”
Shell will progressively make changes in the configuration of the Pulau Bukom refinery over the next three years, a company spokesperson said. Downsizing the 500,000-barrel-a-day plant will mean reducing staff to about 800 by the end of 2023 from 1,300 now, the spokesperson said.
Oil refiners around the world are increasingly feeling the pressure from Chinese and Middle Eastern refineries, which have grown in size and sophistication. Those refiners benefit from a captive local market, and in many cases -- particularly in China -- access to subsidies. IHS Markit expects more than 8 million barrels a day of refining capacity to be completed over the next decade, with some 5 million barrels already under construction or likely to be accelerated.
Many European energy companies are embarking on a transformation to become cleaner and greener, with fewer oil assets by the middle of the century. At Shell, the changes will bring as many as 9,000 job losses by the end of 2022 -- with cost savings of as much as US$2.5 billion ($3.37 billion).
Shell plans to eliminate all net emissions from its own operations and the bulk of greenhouse gases from fuel it sells to customers by 2050. The company has started shutting refining capacity in the U.S. and will either sell or close energy and chemical plants that aren’t the right type or in the right location, Chief Financial Officer Jessica Uhl said last month.
