Job cut looms as Shell, BG seal world’ biggest $52bn LNG deal

Job cut looms as Shell, BG seal world’ biggest $52bn LNG deal

By Our Reporter  on January 29, 2016   Business
By Adewale Sanyaolu with Agency reports
As the hydrocarbon industry goes through its worst downturn in decade, BG Group (BG.L) shareholders, yesterday approved its acquisition by Royal Dutch Shell in a $52 deal, sending shivers down the spine of Shell workers in Nigeria and beyond and raising fears of possible job losses in months ahead.
Under the deal seen as the world’s largest LNG acquisition BG will now merge with Shell on February 15, bringing an end to nearly two decades of the company’s operation, having been carved out of British Gas.
With the merger, Shell will start a complex integration process that will include thousands of job cuts, tens of billions of dollars in asset sales and the harmonisation of the companies’ trading and production operations as they overlap in many parts of the world.
Shell has promised to find $3.5 billion from cost savings and overlaps by 2018, from various areas including its corporate, administrative and IT operations.
BG was created in 1997 when British Gas split into two separate companies. In 2000, another change saw the creation of BG Group, focused on international oil and gas production.
At a meeting in London, 99.53 percent of BG shareholders voted in favour of the merger, a day after 83 percent of Shell’s shareholders approved the deal first announced on April 8, last year. On the other hand, Shell shareholders are putting their faith in its CEO, Ben van Beurden’s, decision to focus the Anglo-Dutch company’s operations in LNG and deep water oil production over the coming decades.
Low oil prices will remain a challenge for the combined company in the short term, however, as crude has fallen 75 percent over the past 18 months to around $30 a barrel.
While the oil price is expected to stage a gradual recovery, Shell has said the combined group needs crude to be above $60 a barrel to break even.

“I very strongly believe in what Shell is trying to do long term.The idea that they try to specialize in their strengths being deepwater and LNG is absolutely the right thing to do,” BG Chairman, Andrew Gould told said.
Meanwhile, BG Chief Executive Officer, Helge Lund, who joined BG weeks before the merger was announced, is set to step down with Shell’s executive, Huibert Vigeveno, who headed the integration planning in recent months, becoming the transitional Chief Executive Officer(CEO).
Lund, who previously led Norway’s Statoil through a period of spectacular growth, has yet to indicate his plans.