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Shell’s bonus for City as drilling for savings yields extra $1 billion

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RUSSELL LYNCH: 7 June 2016

Royal Dutch Shell boss Ben van Beurden delivered a $1 billion (£688 million) present to the City today as he pumped up more savings from the oil major’s $54 billion mega-merger with rival BG Group.

The shares rose almost 3%, or 48p, to 1749p as the cost-cutting drive, which has stepped up a gear since the deal completed in January, now promises $4.5 billion in savings by 2018. 

That compares with the $3.5 billion previously estimated.

The latest savings will not involve further job cuts on top of the extra 2200 announced two weeks ago by the firm, which took the total number of jobs shed through the merger to at least 12,500. 

These reductions include 475 jobs at its North Sea business in Aberdeen. 

Shell also took an axe to capital spending as the company looks to whether an oil price hovering around $50 a barrel, less than half the level of two years ago.

The blue-chip now intends to spend just $29 billion this year, more than a third below the $35 billion spent by the two companies separately in 2014. 

Spending will range between  $25 billion and $30 billion until the end of the decade, depending on how much the oil price recovers.

The company expects to make “significant progress” this year on selling off some $30 billion in projects by 2018, accounting for up to 10% of Shell’s oil and gas production and exits from up to  10 countries. 

The company, however, remains committed to a strong UK presence, with around 1700 jobs in Aberdeen after the latest round of cuts, out of a global total of around 95,000.

Van Beurden said he was “setting out a transformation of Shell”, which would lead to a “simpler company”. 

“Integration is gathering pace, and today we expect to deliver more synergies, and at a faster rate,” he added.

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