Shell Chairman Mark Moody-Stuart said yesterday the companyplans to sell 40% of it chemicals business and take a relatedfourth quarter $4.5 billion after-tax charge. He described it as”clearing out the cupboard.” It is the first part of a radicalrestructuring of the company that is designed to achieve $2.5billion in annual cost savings by 2001 and to create greaterefficiency during an extended period of low crude prices andincreasing competition because of consolidation among its peers.

“I am absolutely clear that our group’s reputation withinvestors is on the line,” he said. Shell plans to reduce itsproduct businesses to 13 from 21. It plans to sell 50% of Montell,a Dutch petrochemical company. Areas of high cost oil productionand refineries also are being addressed for restructuring.

The announcement follows a report last week that Shell would beestablishing a much greater degree of executive accountability atall levels with executive structures replacing the businesscommittee system to ensure decisions are reached “more rapidly,more effectively.”

“We have had to make tough choices,” Moody-Stuart said. “Butalthough we have made some very big cuts, with an $11 billionglobal spending program we still have plenty of room forgrowth….and remain ahead of the competition.”

Moody-Stuart said Shell expects little help from the businessenvironment with the price of Brent crude over the next five yearsforecast to be an average of $14/bbl. Global economic growth isassumed to be a maximum of 2% while chemical margins will decline,at least initially.

Shell has in the past weeks announced job losses totaling 4,000on a global work force of 105,000. The changes announced yesterdaywill result in further reductions, but no figures were provided.

Moody-Stuart confirmed the company has looked at “mergerpossibilities and will continue to look at such possibilities, andif the right opportunity arises we will act. But we are largeenough to be the leading company on our own without any merger.”Last week, it was rumored Shell and Chevron would announce amerger, but the two companies would not comment on the reports.

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