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Shell cuts drilling costs in Russian JVs due to crisis — Shell Russia’s chairman

At the same time, cost optimization had a different effect on each Shell business, he said

MOSCOW, June 29. /TASS/. Shell cut global capital expenditures in 2020 due to the crisis by 20%, and cost optimization also affected operations in Russia, Country Chair Russia at Shell Cederic Cremers said in an interview with TASS.

"It has also impacted our activities in Russia, absolutely. When I talked about our operating expenditure, this is something we were driving through across all our activities and all places. For example, we have had to reduce drilling expenditure in our joint ventures in Russia. Also, we had to change the pace and aspirations of some of our new ventures unfortunately as a result of the current external environment," he said.

Cremers added, "We had to adjust our expenditure, indeed. In our operating expenditures, we are expecting to spend about $3-4 bln less than we did in 2019, in the next twelve months. It also applies to some difficult decisions for people. For example, we have also decided that nobody in our global company will be getting performance bonuses over this financial year 2020. On top of that, we are reducing our capital expenditure from $25 bln to $20 bln this year, that is about 20% reduction".

At the same time, cost optimization had a different effect on each Shell business, Cremers noted. "Our upstream business is contributing about 45% of that reduction in expenditure; our downstream business - 30%, and our integrated gas including LNG and new energies business are contributing only 25% of this saving. Therefore, whilst all of them are reducing, we do see that the relative impact is different and is also related to the long-term shift in our industry," he said.

Shell owns 27.5% in the first Russian LNG project, Sakhalin 2, which it manages in partnership with Gazprom (50% plus one share), as well as Japanese Mitsui (12.5%) and Mitsubishi (10%) .