BBC Business Correspondent Greg Wood: Oil companies are cutting costs and merging in order to maintain profits

The company has launched a huge cost saving drive as it struggles to boost its performance in the face of plummeting oil prices.

The radical restructuring will cost $4.5bn to implement. The charge will cover the writing-down of assets, reorganisation and redundancy provisions.

Mark Moody-Stewart: There will be jobcuts all around the world, not just in Britain.

Shell hopes the initiative will save $2.5bn a year by 2001. Chairman Mark Moody-Stuart told BBCRadio 4's Today program job cuts would be spread around its global operations but refused to discuss numbers.

Oil analysts believe job losses could be 20,000 - a fifth of Shell's global workforce - including 3,000 already announced this year.

Fergus MacLeod, oil analyst at BT Alex Brown said the latest job cuts could top 17,000 including 6,500 from the chemicals business and a further 10,500 in other divisions.

Shell has been linked with US rival Chevron

Mr Stuart told a meeting of analysts that the company planned to sell 40% of its chemicals business. Shell is also likely to shake overhaul its troubled refinery business.

Shares in Shell had fallen a further 2 pence to 348.5p by 1055 GMT on Tuesday, after a 3.75p decline on Monday.

Global slump

Shell, like all other major oil companies, has been dealt a severe blow by the 12-year low in oil prices and falling demand in Asia.

Mr Moody-Stuart predicted that the oil industry was in for a torrid time over the next 12 months, with oil prices remaining around $10 a barrel.

The prospect of low prices has forced the group to slash costs.

Jim Wood-Smith, head of research at stockbrokers Greig Middleton, said: "Shell has been somewhat behind its rivals in cutting costs. It has a famously bureaucratic management structure. This means there is plenty of room for efficiencies and job cuts are inevitable."

The group has already announced the likely closure of its 92,000 barrels a day Shell Haven refinery in the UK as well as production cuts and sell-offs to a number of European sites.

Last week Shell published the details of a major restructuring of its top management, appointing Paul Skinner and Phil Watts as chief executives at its key Oil Products and Exploration & Production divisions respectively, replacing committees of executives.

Merger talk

The painful period for the oil industry has prompted industry leaders to join forces to shelter from the financial storm.

Exxon and British Petroleum recently announced mergers with Mobil and Amoco respectively. Last week there was speculation that Shell was considering a takeover of oil company Chevron.

Mr Moody-Stuart hinted that Shell could seek a merger, but indicated the group would have to put in own business in order before it teamed up with a rival.

"We have have a great deal of work to do in our own shop. We have looked at merger possibilities and will continue to look at such possibilities, and if the right opportunity arises we will act," he said.

"But we are large enough to be the leading company on our own without any merger," he added.