Royal Dutch Shell has publicly announced it will slash 5,000 jobs by year end—including “hundreds” in Houston—as part of a sweeping reorganization new CEO Peter Voser said is needed to make the company more competitive.
But under a separate program, the European oil giant has been quietly transferring additional office jobs from Houston and elsewhere to India and the Philippines to reduce costs, according to internal Shell documents obtained by the Chronicle and a person familiar with the plan.
The “migration” programs affect employees in finance and other support functions, which are being consolidated in what the oil company calls “shared service centers” in low-cost countries to fit the new company structure.
They are “part of a Shell-wide effort to streamline processes and improve efficiency” and “will enable us to deliver consistently world-class service at a competitive cost,” according to a Shell Powerpoint presentation for a portion of the company’s finance division.
It’s unclear how many of Shell’s 13,000 employees in the Houston area will be affected by the migration plans. Partly, that’s because company officials are still deciding which jobs will stay or go abroad, and are rolling out the plans in phases that run into next year. But at least a few divisions in Houston are preparing to be downsized dramatically.
“People are very concerned about their future,” said a Shell finance employee, who requested anonymity for fear of losing his job.
He said about a quarter of the jobs on his team will be relocated to India in coming months and that more will follow under a final phase next year.
The salaries for the foreign jobs are a small fraction of those for similar U.S. jobs and have fewer benefits, making it impractical for many American employees to make the move, the finance employee said.
Shell officials would not comment directly on the internal company documents, nor discuss potential job losses from migration programs. But they said shared service centers in Manila are part of a broader effort to make the company more efficient and competitive.
Major oil companies including Shell, ConocoPhillips and BP have been cutting jobs, capital spending budgets and other costs in response to the global economic downturn that has sapped demand for petroleum products like gasoline and diesel fuel.
And it’s nothing new for multinational companies to move U.S. jobs to lower-wage countries to save on labor costs.
But Shell’s migration programs could have broader implications for Houston. They suggest that yet another category of well-paying jobs in the oil and gas industry is leaving the city, perhaps forever, as energy companies try to get leaner to compete.
“We talk about Houston being the energy capital of the world, but it’s lost some of that edge, especially in the manufacturing sector,” said Barton Smith, director of the University of Houston’s Institute for Regional Forecasting. “But it remains the technological center of energy and it remains, to a large extent, the financial center.”
The exit of energy finance jobs from the city would be discouraging, especially as a shortage of engineering talent has already forced the oil industry to recruit overseas, said Amy Jaffe, a senior fellow in energy studies at Rice University’s Baker Institute.
But at the same time, Shell could add other jobs to the region over time as the company develops major projects in North and South America, she said.
In fact, the region should be a “disproportionately growing part of Shell” in coming years with new projects in deep waters of the Gulf of Mexico and Brazil, the Canadian oil sands and natural gas fields in the U.S. and Canada, said Marvin Odum, president of the company’s U.S. division, in a recent interview with the Chronicle.
For now, however, the company is still finding its footing amid uncertainty on many fronts.
Shell, which is based in The Hague, with U.S. headquarters in Houston, has been involved in a major downsizing since Voser replaced Jeroen van der Veer as CEO in July.
By year end, the company plans to cut 5,000 employees, or 10 percent of its global workforce, under a reorganization he calls Transition 2009.
The process — which merged the company’s three upstream businesses into two, expanded its downstream group and added a new projects and technology division — trimmed management ranks by 20 percent and has forced 15,000 Shell employees to re-apply for a smaller pool of jobs.
Shell officials said that reorganization will wrap up by the end of this month.
The company has been moving on a separate track with its migration programs.
The company recently told employees within its finance division that some of their jobs are being relocated from Houston and Calgary, Alberta, to “finance operations centers” in Manila and Chennai, India.
Spokesman Bill Tanner said foreign shared service centers are key to improving the finance unit’s competitiveness. “Currently, our finance operations are too complex and too costly and this is preventing the finance function from fully contributing value to the business,” he said.