Shell is shedding almost 500 North Sea jobs in Aberdeen and the north east of Scotland, as the industry continues to contract confirming grim predictions, despite oil prices rallying recently.

Shell’s announcement follows its near £40 billion takeover of the BG group, completed earlier this year.

The Anglo-Dutch giant is trying to merge its new purchase into its existing operation, but stresses the job losses are necessary to “ensure Shell is competitive in a ‘lower for longer’ oil price environment.”

Paul Goodfellow, Shell’s Vice President for UK & Ireland, addressed staff in Aberdeen and said afterwards:

“We’re continuing the improvement journey we’ve been on to create a competitive and sustainable business in the North Sea. Despite the improvements that we have made to our business, current market conditions remain challenging.

“Our integration with BG provides an opportunity to accelerate our performance in this ‘lower for longer’ environment. We need to reduce our cost base, improve production efficiency and have an organisation that best fits our combined portfolio and business plans.”

He said that as a result the company would reduce the organisation supporting its UK and Ireland upstream business (exploration and production) by around 475 people. Most would go this year, but underlined that following these changes, "Shell will still remain a key employer in the North East of Scotland with around 1,700 employees.

“The reductions we’re announcing today in Aberdeen are part of a global programme of job reductions in Shell. Last year, in response to the oil price downturn, we made the tough but necessary decision to remove 7,500 Shell staff and direct contractor roles and this has now been completed. Separately, as previously announced, a further 2,800 global staff reductions were initially identified as part of the BG integration, which is now well underway.

“These are tough times for our industry and we have to take further difficult decisions to ensure Shell remains competitive through the current, prolonged downturn. In 2016, the number of job reductions in response to low prices and as a result of the BG integration is expected to total at least 5,000 globally. This number includes the 2,800 integration-related roles previously announced.”