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Shell CEO says reorganization to mean job cuts

CALGARY, Alberta (Reuters) - A planned reorganization of Royal Dutch Shell Plc's RDSa.L worldwide exploration and production operations will mean job cuts, its chief executive said Friday, but he declined to say how many.

Shell, Europe’s largest oil company by market value, aims to boost the efficiency of its oil and gas production business as it tries to meet energy needs for the next decade or more, CEO Peter Voser said.

But Voser offered no details of the coming revamp while on a visit to Canada, where his company is one of the largest producers and processors of crude from the vast oil sands of northern Alberta.

“I will not talk about actual numbers of staff, (the) number of reductions, because quite clearly this is not about staff number reductions,” he told reporters after a presentation at a business conference at the Spruce Meadows equestrian facility on the outskirts of Calgary.

“This is about (creating) an efficient company which will, in a very focused way commercially and externally, drive the company into a very competitive position developing the major projects we have ... We will have less staff but we will discuss that internally.”

In May, Shell said it would restructure its exploration division and divide it into two units, one focused on the Americas and another on the rest of the world.

One website, citing internal sources, has reported that Shell plans to chop 15 percent of its upstream unit’s staff, but the company has declined to comment.

This is not the only change for Shell under Voser.

The company has put refineries at Hurbarg and Heide in Germany, and at Stanlow in Britain, up for sale. It is also studying whether to sell or close its Montreal refinery, or convert it into a terminal. A decision on that is expected this month.

Those actions are at various stages, and Voser declined to comment on the outcomes.

“In general terms, it’s quite clear that Shell has a strategy to move toward bigger refineries, which are more complex, and hence have more economy of scale, which allows you during downturns of refinery margins to manage refineries in a better way,” he said.

FEARS INDUSTRY SPENDING CUTS

Voser also warned that lower investment in oil projects since prices collapsed in 2008 threatens a renewed bout of price hikes.

“You need to invest throughout the cycle,” he said. “Otherwise we will actually generate the next price hike in four or five years. I think we are in a very dangerous place at these reduced investments that by 2013, ‘14, ‘15, when demand comes back, we may face a supply problem.”

But he said the cost of developing new supplies must drop further if the industry is to ramp up output to meet demand.

“It’s quite clear costs have doubled since 2004 in the oil industry,” he said. “It has somewhat come down, but not as much as one would hope.”

Meanwhile, he said the oil industry and the Canadian government must do more to promote the importance of Alberta’s oil sands and the efforts industry is making to reduce the environmental impact of oil sands development.

Oil sands development has been the target of a major campaign by environmental groups, which warn of damage to air, water, land and local communities.

“I have to say industry, and I’m criticizing now to a certain extent, the Canadian government have not done enough to actually make the case and how we also have improved,” he said.

The country’s governments have, however, shown leadership in their support for technology to reduce emissions such as carbon capture and storage, he said.

Shell has Alberta government backing for a planned carbon capture project at its Scotford oil sands upgrader near Edmonton.

Reporting by Jeffrey Jones; additional reporting by Scott Haggett; editing by Peter Galloway

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