Royal Dutch Shell plans 2,800 job cuts after BG deal

 

The tie-up between Shell and BG deal is due to be completed early next year.

However, an institutional investor has told the BBC that the deal does not make "financial sense" at current oil price levels.

David Cumming, head of equities at Standard Life Investments, told the BBC it was "very difficult to make the deal work" with oil below $40 a barrel, saying oil prices needed to be $60-$70 a barrel.

Extra measures

Shell announced in April that it had agreed to buy BG, in a deal that valued the oil and gas exploration firm at about £47bn.

In its latest statement, Shell said that the planned job losses were part of "operational and administrative restructuring".

"Further detailed work will be undertaken on the details of the proposed restructuring as part of ongoing integration planning," Shell said.

The final regulatory barrier to the Shell-BG tie-up was cleared on Monday after it was approved by China.

It has already been approved by regulators in Australia, Brazil and the European Union.

Shell chief executive Ben van Beurden said the companies would now "seek approval from both sets of shareholders as we move towards deal completion in early 2016".

'Under pressure'

Last week, the price of oil fell to seven-year lows, with both Brent crude and US crude now below $40 a barrel.

Speaking before Shell announced the plans for job cuts, Mr Cumming told the BBC's Today programme that - given the low oil price - possible options included Shell walking away from the deal, Shell changing the terms of the deal, or shareholders rejecting the deal.

"Shareholders could vote the deal down, and the break fee is pretty low, so I think Shell will come under pressure over the next few months to say how the deal is going to work," Mr Cumming added.

Standard Life is among the top 20 investors in both companies. Mr Cumming declined to say how he would vote on the deal.