Shell hits £2.3bn savings with process standardisation

Royal Dutch Shell has made $3.5 billion (£2.3bn) savings through an accelerated business overhaul, driven by process standardisation, operational simplification and job cuts.

The oil company, which could lose out after US President Barack Obama stopped drilling in the Gulf of Mexico following the huge BP oil spill, also plans to make further savings by offloading up to $8 billion of assets in the next two years.

Shell chief executive Peter Voser today highlighted the importance of deep sea drilling to future oil supplies, insisting at a results presentation that “personal and process safety” were “ring-fenced” from any cost cuts.

BP, one of Shell’s main rivals, has been criticised by some observers and technicians for cost cutting in the years leading up to the accident, though it has not yet been established whether efforts to save money played a part in the accident.

Voser said that his company’s cost savings exceeded original plans by 15 percent, and were “some six months ahead of schedule”. The news comes as Shell reported half year profits had nearly doubled to $4.5 billion (£2.9 billion).

Following 7,000 job cuts, mostly from “non-technical areas”, and a reorganisation of the company’s operations into three clear sections, Shell had “closed a chapter” on radical changes, he said. The focus was now on “continuous improvement”.


BP casts doubt on main safety system

Shell is driving a massive process standardisation programme. It is also using Lean development to speed up technology rollouts. The company expects that in some cases this will cut years from development and testing. It is also using more off-the-shelf products.

Shell is additionally moving to shared service centres in “low cost” countries, mainly for finance and basic IT processes. Its six centres now employ 8,000 people, with up to another thousand expected by the end of the year.

In 2008 the company signed £2 billion worth of outsourcing deals with EDS, T-Systems and AT&T. Additionally it has an application support deal running with IBM, Logica, Wipro and Accenture. Last year it reportedly cut the pay of IT contractors by 12 percent.

Shell is mainly Microsoft Windows-based, but also runs Linux in exploration and production, and some Unix systems.

Its key applications are hosted out of Amsterdam, and it runs both SAP and Oracle software. It has four petabytes of storage.

Copyright © 2010 IDG Communications, Inc.

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