Royal Dutch Shell has posted its second quarter unaudited results, which reveal a 70 per cent decrease in profits compared to the same quarter in 2008.
On a current cost of supplies (CC) basis, the petrochemical giant reported earnings of $2.3bn (£1.4bn) against $7.9bn (£4.8bn) in June 2008.
Peter Voser, chief executive of Royal Dutch Shell, said the results can be blamed on the weak global economy.
‘It’s a difficult environment both in upstream and downstream,’ he said, referring to the search and recovery for oil and refining. ‘Energy demand is weak. There is excess capacity in the market, and industry costs remain high. Conditions are likely to remain challenging for some time and we are not banking on a quick recovery.’
Voser said Shell is trying to adapt to this new situation and the company is currently in the middle of a programme to build one million barrels of oil equivalent per day of additional upstream capacity, with selective downstream investment. He said new production start-ups in the first half of 2009 - at Sakhalin II in
Voser said Shell has also begun a number of initiatives to reduce costs.
‘Through a combination of self-help, reduced supply-chain costs and lower discretionary spending, we have reduced operating costs by $0.7bn [£0.4bn] in the first half 2009, compared to the first half 2008,’ he added.
‘This reduction excludes the impact of exchange rate movements and non-cash pension costs. We expect to reduce 2010 organic capital spending by more than 10 per cent compared to 2009 levels, to around $28bn [£17bn].’
Shell has also reduced senior management positions by 20 per cent through a new restructuring programme. The new management structure includes 600 management positions, but further staff reductions have not been ruled out.
‘We are taking steps to improve our performance, to bridge the company and our shareholders into a period of significant growth in the coming years,’ said Voser.