Royal Dutch Shell's pivot away from crude oil towards a low-carbon slate of fuels will cost Singapore 500 jobs and halve the processing capacity at Pulau Bukom in the next three years.
Shell Singapore said yesterday that the 1,300-strong Bukom workforce will be cut to 1,100 by the end of next year and in another two years, it will be downsized to 800.
The reduction in crude refining capacity - down to 250,000 barrels a day from the current 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 Royal Dutch Shell's announcement in September on some 9,000 job cuts worldwide.
In the short term, the payroll cuts will help shore up the supermajor's finances, which have been hit by the coronavirus-driven collapse in demand and prices of crude oil.
However, grim industry forecasts 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 - entails a smaller and smarter refining footprint and a pivot towards 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 the present 14. Bukom will be one of those six sites.
Ms Aw said the transition at Bukom, which includes digitalisation and automation of its operations, has been planned in consultation with all stakeholders, including the Government and 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 affected 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 queries from The Straits Times.
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 to cope with the impending changes," he said.
Shell is not the only oil major making big changes in a bid to withstand the unprecedented disruptions to the oil industry caused by Covid-19. Most of its peers have made big spending reductions.
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. The company announced a cut of 21,000 jobs 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 and biofuels like ethanol, and developing low-emissions power sources like solar energy.
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.
Ms Aw said Shell 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," she said.
"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."
Apart from possibly redeploying staff within the company, Shell Singapore will also work with external partners, such as the National Trades Union Congress' e2i Job Security Council, to support impacted employees in finding alternative employment.
Ms Aw said: "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."
Other parts of Shell's business in Singapore, such as the chemical plant in Jurong, will remain unaffected by the global restructuring.
In fact, Ms Aw said new job opportunities may emerge in time as Shell's transition to the low-carbon business picks up pace.