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Job Cuts Expected at Shell

3,200 employees on the line as oil company eyes IT outsourcing

HOUSTON -- Shell Oil Co. and its parent company's previously stated goal of cutting $500 million from its budget could mean as many as 3,200 job cuts beginning next week. Royal Dutch Shell is expected to outsource the bulk of its information technology division in 2008, according to a report in The Financial Times.

An e-mail from Goh Swee Chen, vice president of IT infrastructure, was leaked by a Shell employee on December 19, outlining details of the outsourcing deal. The e-mail said three outsourcing companies had been selectedEDS, AT&T and [image-nocss] T-systemswith contracts expected to be signed in March, according to the newspaper.

Swee Chen told staff: "I acknowledge that there will still be uncertainty as we are working through the finalization of contracts, open resourcing and transition preparations. I encourage you to keep an open mind and take the time to learn more about the suppliers as employers and as business partners.''

While unable to confirm the job cuts or how they might affect employees in the United States, a member of Shell Oil Co.'s media relations team told CSP Daily News, Shell has been working on simplifying the organization and generating efficiencies since at least 2005. We have said, at various times during 2007 that as a result of our actions, we see potential cost savings and operating synergies from around the businesses of around $0.5 billion each year pre-tax. Various cost initiatives and synergies programs are in progress.

She offered two examples of how those cuts are being made, including a mention of the IT outsourcing project:

(1) We are reducing the number of staff in selected finance functions, and expanding the use of shared services centers where costs are lower. We have already six of these shared service centers.

(2) Our IT Infrastructure Sourcing Program (ISP) was launched in December 2006 to review the feasibility of outsourcing a substantial part of Shell's global IT Infrastructure services to a limited number of key suppliers. We are in the middle of commercial discussions and expect contracts to be signed in 2008, at which point we will share more details.

It is understood that about 3,200 IT jobs are to be outsourced and about 10% of these jobs are UK-based positions, according to The Financial Times. They include contractors and staff on Shell's pay-roll.

If the outsourcing deal goes ahead as planned, it would be one of the largest ever. Shell employs about 108,000 people worldwide.

Jeroen Van der Veer, Shell CEO, said this month the group had to cut costs to make up for the fact that the cost of getting oil out of the ground had risen 65% in two years.

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