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Monday, 17 December, 2001, 18:31 GMT
Shell to trim costs by $1bn
Shell service station
Petrol prices have come down in line with crude oil
Anglo-Dutch oil giant Royal Dutch/Shell is to cut costs by $1bn (710m) over the next two years, but has not plans to shed any jobs.

"We are continuing with our cost reduction programme as set out, but we are not planning any job cuts," a spokesman said.

Shell and its subsidiary companies laid off a total of 4,900 workers in 1998.

Shell added that it plans to sell a further $7bn's worth of subsidiary companies and assets unless they start generating higher profits within a "reasonable" timeframe.

Shoring up confidence

The company's announcement on Monday was designed to reassure investors amid signs that profits are coming under pressure.

Last month, Shell reported a 17% dip in profits to $2.45bn during the three months to September, hit by a decline in world oil prices.

If analysts take a longer term view, they "will see that Shell is a very, very resilient performer and this is perhaps just a blip on the chart," Professor John Stopford, a former non executive director of Shell, currently at the London Business School, told the BBC's World Business Report.

His view, however, is that Shell could cut a lot more fat from the company.

However, the company on Monday unnerved some analysts by raising the benchmark oil price it uses to calculate returns on possible investment projects from $14 to $16 a barrel.

Some investors are concerned that the assumption of higher average oil prices will encourage riskier investments.

"(The new benchmark) gives them slighly more scope to hit targets," said Bruce Evers, oil analyst at stockbrokers Investec.

The decision puts Shell's baseline oil price on a par with that of arch-rival BP, which lifted its benchmark to $16 in July this year.

The company added that it aims to increase investment by 5% a year starting in 2004, with the bulk of the extra spending earmarked for exploration projects.

The company's share price was trading 8p up on the day at 460p late on Monday in London.

 WATCH/LISTEN
 ON THIS STORY
Professor John Stopford, London Business School
"Shell is a very, very resilient performer"
Analysts' reaction
to Shells' cost cutting plan
See also:

23 Oct 01 | Business
Exxon's profits tumble
25 Oct 01 | Business
Profits fade for oil companies
07 May 01 | Business
Shell blow as US target is sold
03 May 01 | Business
Shell posts record profits
08 May 01 | Business
Oil firms: Excessive profits?
25 Jul 01 | Africa
Shell overtures to Ogonis
02 Aug 01 | Business
Shell profits continue to gush
04 Oct 01 | Business
Opec faces up to low oil prices
01 Nov 01 | Business
Weak oil prices injure Shell
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