Royal Dutch Shell Plc will cut as many as 9,000 jobs as Covid-19 accelerates a companywide restructuring into low-carbon energy.

The move reflects the challenge facing Big Oil as the pandemic persists, with some in the industry believing the era of demand growth is already over. As the crisis hastens the shift to cleaner energy, oil majors are axing jobs, taking multibillion-dollar writedowns and even slashing once-sacrosanct dividends.

At Shell, job reductions of 7,000 to 9,000 are expected by the end of 2022, including around 1,500 people taking voluntary redundancy this year, the company said Wednesday. It currently has about 83,000 employees. Sustainable annual cost savings of $2 billion to $2.5 billion are predicted by that time.

“We have to be a simpler, more streamlined, more competitive organization,” Chief Executive Officer Ben van Beurden said in a statement. “In many places, we have too many layers in the company: too many levels between me, as the CEO, and the operators and technicians at our locations.”

Shell also warned of lower sales in the third quarter, saying oil-product volumes were around 4 million to 5 million barrels a day, down from 6.7 million a day a year earlier. Oil-product trading results will fall short of the historical average and will be “significantly lower” than in the second quarter.

That shows the oil-trading bonanza that saved Shell’s last set of results won’t be repeated. The company also expects refining margins to be much lower than in the second quarter. Its full third-quarter financials, scheduled for Oct. 29, will include impairment charges of $1 billion to $1.5 billion.

Shell’s B shares were trading 0.6% higher to 962.6 pence as of 9:10 a.m. in London.

Oil’s coronavirus-induced plunge has seen Shell’s peers also take drastic steps to shore up the balance sheet. BP Plc said in June it planned to cut 10,000 jobs, Chevron Corp. intends to trim 10% to 15% of its global workforce, while Exxon Mobil Corp. is reviewing staffing country by country.

“The transformation to a leaner and lower-carbon organization is the right one for Shell longer-term in our view,” Barclays analysts including Lydia Rainforth wrote in research note. “But with the macro environment still challenging, this may take some time to reflect in the share price.”

Shell began the process in May, when Van Beurden told staff in a memo that it was reshaping the company to make it leaner and more resilient and that there could be redundancies in the second half of the year, according to people with knowledge of the matter. The Anglo-Dutch major offered voluntary severance, scaled back recruitment and reviewed expatriate staff contracts.

“These incremental details should help investors who think Shell has been sitting on its hands in recent months,” RBC Capital analyst Biraj Borkhataria wrote in a note Wednesday. But he highlighted that investors will want more details on the major’s plans, expected in Shell’s strategy day on Feb. 11.

The reorganization is also designed to further Shell’s expanded green ambitions. The company said in April it planned to eliminate all net emissions from its own operations and the bulk of greenhouse gases from fuel it sells to its customers by 2050. The Anglo-Dutch firm also said that ultimately, it would only do business with emission-free companies. (Bloomberg)

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