Shell Announces Regulatory Approval, Layoffs in BG Merger

Royal Dutch Shell has announced plans to eliminate nearly 3,000 jobs in order to cut costs after its takeover of 5,000-employee oil and gas firm BG Group.

The cuts are part of a restructuring effort to consolidate offices of the two firms and to reduce overhead by $3.5 billion. Overlap between the offices of the two exists in several countries, including Australia, Brazil and the U.K.

Some observers have been skeptical of Shell's $70 billion acquisition plan. It required multinational regulatory reviews – in Europe, Australia, Brazil and China – all of which are now completed. Shell announced that received its final pre-conditional approval, an Chinese anti-trust review, on December 14.

In addition to the regulatory hurdles, some viewed BG's price as too high in a tightening oil and gas market.

But in purchasing BG, Shell becomes the world's largest LNG firm and acquires oil and gas assets around the world. Shell has promised cost savings as part of its rationale for the acquisition, and the reduction in head count signals that the company plans to follow through.

“Shell expects the restructuring will be required to achieve the expected benefits of the recommended combination, including previously disclosed and reported-on pretax synergies of $3.5 billion,” Shell said in a statement.

Media suggest that the combined total number of employees of the two companies stood at nearly 100,000 people at the end of the 2014, and Shell has already reduced payroll by over 7,000 (including contractors). The additional layoffs will mean the reduction of their combined workforce by around 10%.

BG Group recently started commercial operation of its Train Two at the QCLNG facility in Queensland, Australia. With the addition of the second train, the facility is expected to come up to a total of eight million tons per annum of production LNG. It will reach full capacity in mid-2016, around the timeframe of the merger completion.