SINGAPORE - Royal Dutch Shell's pivot away from crude oil towards a low-carbon slate of fuels will cost Singapore 500 jobs and half of the processing capacity on Pulau Bukom in the next three years.
Shell Singapore said on Tuesday (Nov 10) that the 1,300-strong Bukom workforce will be cut to 1,100 by the end of 2021, and downsized further to 800 in another two years.
The reduction in crude refining capacity - to 250,000 barrels a day from the current level of 500,000 - will be achieved at a faster pace, probably in the next year or two, Ms Aw Kah Peng, chairman of Shell Companies in Singapore, told The Straits Times.
The restructuring at the 59-year-old Bukom site - the company's Asia-Pacific hub for integrated fuels and petrochemicals and home to Singapore's first refinery - follows parent Royal Dutch Shell's announcement in September to cut as many as 9,000 positions worldwide.
The payroll cuts will help shore up the supermajor's finances, which were hit by the coronavirus-driven collapse in crude oil prices and demand.
However, grim forecasts by some industry players that oil consumption may never return to levels seen before the pandemic have also prompted Shell to accelerate its plans to become a net-zero emissions energy business by 2050 or sooner.
The plan - announced in 2017 and updated more recently - entails a smaller and smarter oil-refining footprint and a switch to serving businesses and sectors that are also net-zero emissions.
The company will consolidate its global refining portfolio into six energy and chemicals parks by 2025, down from 14 at present. Bukom will be one of those six sites.
Ms Aw said the transition at Bukom, which includes digitalisation and automation of its operations as well, has been planned in consultation with all the stakeholders including the Government and the trade union.
Mr Munirman Abdul Manaf, general secretary of Singapore Shell Employees' Union, said the union has been working closely with the management to explore ways to help its members.
"We are appreciative that the management consulted the union early, and there has been open and transparent communication between the union and the management," he said in response to ST queries.
He said that while the union's priority is to protect jobs and ensure that the process is fair, the transformation at Bukom will impact some of its members.
"We will spare no effort in helping our members with job placement and cope with the impending changes," he said.
Ms Aw said the company realises that this is difficult news and is informing its staff well ahead of time, with no change taking place until at least a year from now.
"The impacted employees will get a retrenchment package that is above that which is provided for by the tripartite guidelines. This includes a comprehensive set of support initiatives, for example, extended in-patient medical coverage for up to a year following retrenchment, professional outplacement services, and a learning subsidy, where applicable," she said.
Apart from looking at possible redeployment opportunities within the company, Shell Singapore will also work with external partners, such as NTUC's e2i Job Security Council, to support impacted employees on finding alternative employment.
"These are never easy decisions, but the change is a necessary one to ensure that Bukom remains competitive and that Shell in Singapore stays resilient in the energy transition," she said.
Other parts of Shell's business in Singapore - such as the chemical plant in Jurong - will remain unaffected by the restructuring.
In fact, Ms Aw said that new job opportunities may emerge in time as Shell's transition into low carbon businesses picks up pace.
Shell isn't the only oil major making big changes to withstand the unprecedented oil-industry disruption caused by Covid-19. Most of its peers have made big cost reductions as well.
Exxon Mobil recently announced it will slash its global workforce by 14,000. BP will cut 10,000 jobs worldwide and Chevron 6,000. Even oilfield services companies like Schlumberger have joined the fray, with 21,000 layoffs globally.
Shell was the first oil major to pledge a refocus of its business away from crude refining to making cleaner fuels like liquefied natural gas (LNG), hydrogen and biofuels like ethanol, and to developing renewable energy sources like solar. But the crash in oil demand this year - estimated at around 10 per cent - has seen most supermajors contemplating a move away from fossil fuels.
BP became the first of these companies to call the end of the era of relentless growth in oil demand. In a report released earlier this year, BP said that even its most bullish scenario sees demand to be no better than "broadly flat" for the next two decades.