Shell-BG Deal Adds to North Sea Job Concern After Oil Collapse

File photo: Shutterstock/cyberdog
File photo: Shutterstock/cyberdog

By Donal Griffin

(Bloomberg) — Royal Dutch Shell Plc says its proposed $70 billion takeover of BG Group Plc will boost dividends and share buybacks for investors. North Sea workers in fear of their jobs after a collapse in oil prices will hope they’re as lucky.

Shell, employing about 2,400 across the North Sea, targets $2.5 billion of pretax “synergies” a year across the globe from the deal, including staff cuts.

“There are no guarantees in life,” said Chief Executive Officer Ben Van Beurden, asked if the deal would lead to cuts in the U.K. “Irrespective of what happens, we will have to look at how we make the North Sea a strong and healthy province again.”

Even before the latest plans, The Hague-based company said March 26 that about 250 positions would go in Aberdeen, the Scottish city at the center of the U.K. oil and gas industry.

“We expect synergies globally, which would include job reductions and office consolidation,” Kayla Macke, a Shell spokeswoman, said Wednesday in an e-mailed reply to questions. Details will be provided later, she said.

The U.K. North Sea already faces its greatest threat since output began in the 1970s with thousands of jobs lost after oil prices fell by half last year amid depleting resources and rising costs. Ian Wood, author of a state-backed review of the industry, predicted 15,000 job losses by the end of the summer in an interview with Bloomberg in February.

Region’s Woes

That prospect has pushed the region’s woes up the political agenda before a general election scheduled for May 7. U.K. Chancellor of the Exchequer George Osborne, attacked by Scottish nationalists for raising industry taxes in 2011, used his last annual budget before the vote to reverse the increase.

A BG acquisition would be the most significant response yet to the collapse in prices and may set in motion a series of mergers as producers seek to get more output at lower cost.

“When you get a merger of two sizable companies, once the dust settles, often the new company looks at what they can do differently,” said Willie Wallace, a regional officer in Aberdeen for the Unite trade union, which has thousands of members across the North Sea. “There’s always a worry that could lead to further job losses down the line.”

About 10,000 North Sea employees and contractors have already lost their jobs since the price of oil began to fall last year, Unite said in a statement last month.

Shell’s proposed deal would be the biggest in the oil and gas industry in at least a decade. Van Beurden is targeting at least $30 billion in asset sales and a share buyback of $25 billion from 2017 to 2020 to win over shareholders.

Reducing staff won’t be the driving force for the deal, William Hares, a Bloomberg Intelligence analyst, said by e-mail.

“Looking at the overall deal, job cuts won’t be a deciding factor in whether or not this combination makes sense,” Hares said. “But given complementary asset portfolios in the North Sea, job cuts are possible.”

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