Shell Begins Nigeria Ops Cost-Cutting Program to Offset Costs

LONDON Jun 11, 2007 (Dow Jones Newswires)

Royal Dutch Shell (RDSB.LN) said Sunday it has started implementing a number of cost cuts to its operations in Nigeria, which are likely to include job cuts, to combat rising costs and falling oil revenues caused by production outages.

A Shell spokesman in the Netherlands said the changes were underway and follow an internal announcement May 30 in which the company told its roughly 4,500 Nigerian employees that it would implement a "series of measures" to cut cost and boost productivity.

The changes amount "an austerity program for three years," the company said in the announcement, which wasn't made public but was made available to Dow Jones Newswires.

"The measures will demand significant step change in performance at personal and organizational levels as well as focus on how to reduce costs," the company said at the time.

The announcement didn't indicate what cost savings Shell hoped to strip out of its Nigerian operations. Shell is the biggest western oil company in Nigeria, Africa's largest oil producer, through its 30% stake in a government-run venture known as the Shell Petroleum Development Co.

The spokesman declined to comment on what exact measures the cost-cutting program entailed, but a Nigerian news report Sunday said several hundred job cuts were planned. The spokesman declined to confirm or deny the contents of that report.

"We don't comment on the details of these plans," the spokesman said.

Shell has borne the brunt of attacks by militants on oil installations in Nigeria during the past 18 months which have cost it and the Nigerian government hundreds of millions of dollars in oil revenues. Around 475,000 barrels a day of oil operated by Shell, through the Shell Petroleum Development Co. has been shut in Nigeria since February 2006.

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