Calgary-based Suncor Energy Inc. plans to cut 1,000 people from its workforce by mid-October through layoffs, retirements or discontinuation of contract positions that resulted from its merger with Petro-Canada Corp., the company said Thursday. Combined, the two producers employed a total of 13,000 people before their merger was announced last March (see NGI, March 30).

Royal Dutch Shell plc apparently also is preparing for staff reductions. According to NGI sources, the company told staff last week that restructuring will lead to double-digit job reductions (see related story).

Most of the layoffs at Suncor are in corporate headquarters in finance, human resources and information technology departments. Other cuts are being made in the conventional natural gas division, a spokesman told NGI. Those affected "have either been offered new jobs in the organization, confirmed in their existing jobs, or if they're leaving the organization, most of them know already," a Suncor spokesman said.

When the merger was unveiled, the Calgary-based companies predicted the combination would yield annual savings of C$300 million in operating expenses and C$1 billion in capital expenditures. The merger was completed Aug. 1, and CEO Rick George said the combined company is on track to meet or exceed those expectations.

"One month after close, we are already seeing significant savings through integration of our product marketing logistics and economies of scale in our supply chain," said George. "Unfortunately, bringing two large businesses together has also meant that some of the efficiencies are necessarily through workforce reductions. It's been difficult, but we've said from the start that this would be the case and worked hard to keep employees informed and to move quickly to build the new organization."

Alberta's oilpatch already was suffering from low gas prices. Premier Ed Stelmach on Thursday said he regretted the job losses, but he said the merger will prove beneficial to the province.

"The jobs lost are significant, and it's of great concern to us in government," Stelmach said. However, he said the merger would "make for a much stronger company, one that will attract investment to Alberta. It will attract investment to the oilsands, not only to the extraction side but also to the value-added, and we will get those jobs back, plus many more."

Suncor has been reviewing its portfolio of potential growth projects to determine the best opportunities and optimal timing of projects to be developed based on expected rates of return, near-term cash flow potential and business risk, George said. Suncor and its UK subsidiary also are proposing that responsibility for managing the company's international and offshore business be moved to Calgary from London. The proposal and resulting staffing decisions are subject to a consultation period of up to 90 days as required by UK law.

"With our new organization largely in place and our review of investment opportunities well under way, we expect to be in a position to begin translating strategy into action later this year," said George. "In the mid- to longer-term, that will mean more investment in Canada's economy than either Petro-Canada or Suncor could have accomplished individually. We expect the benefits of this merger to become increasingly clear to our shareholders, business partners and Canadians."

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