After just a few months in the job, Shell CEO Ben van Beurden reveals what it’s like to head up one of the world’s biggest companies. He shared his vision of the changing energy landscape and explained how Shell is preparing for the future when he spoke to Shell’s Rob van’t Wel and Charlotte Brookes at the start of June 2014.
You became CEO at the beginning of 2014. What have your first impressions been?
Ben van Beurden : First of all I am very happy to have taken the job. Many things that I believed to be true have been reinforced: Shell has an incredibly strong reputation, we are seen as innovative thinkers and preferred partners. As I visit our projects, it’s fantastic to see how we bring technology to life and the truly remarkable breadth of what we do. Our people are really committed. But at the same time a few things are not so pleasing. It is frustrating that, despite all the good things we do, we are not “moving the needle”. Our investors are yet to be convinced: we have not always allocated our capital spending well. We need to reflect more deeply on how we control our performance. I will be devoting a lot of effort to better focusing the capabilities and commitment of our people on the bottom line.
You took over as CEO at a time of international turmoil with events in Ukraine and Russia, as well as continuing uncertainty in the Middle East. How does the energy landscape look to you today and into the future?
Ben van Beurden : There are many things happening. North America has seen a revolution in shale gas and tight oil. There is volatile economic sentiment around the world. To perform well in this environment we need a two-fold approach: first we must keep a fundamental, long-term view. We shouldn’t change our strategy, but instead look ahead through the turmoil and cycles. Shell has the financial strength to do that and the capacity to understand that the long-term view for our industry is positive. Energy is fundamental to our lives and we will need all the sources we can get. We are in a growth industry. But we also need to understand what’s happening in the short-term and build resilience in our own portfolio, so we are able to cope with multiple scenarios. I don’t see that the turmoil will stop – it will likely intensify. There are growing tensions in global systems, with added pressure on energy, water and food. Tremendous resourcefulness is required to deal with the challenges.
Shell experienced a poor year for results in 2013 with the volatile security situation in Nigeria, tight refining margins, as well as low gas prices in North America. But our performance seems to have bounced back in the first quarter of 2014. Is that “job done”? If not, how will you keep up the drive to improve performance?
Ben van Beurden : I’m very pleased with the recent results: it takes some of the pressure off and removes doubts that we were essentially on the wrong track. We saw highlights, such as our performance in our integrated gas activities. But our problem areas remain: a very low return on our oil products business, while our tight and shale oil and gas business is not performing as it should. There is a discrepancy between the capability of our people and the bottom-line results. So we can’t go back to “business as usual”. To ensure change, the most important lever I have on my desk is communication. But it can’t all come from me. Each person in the company must be clear on his or her own role and how they can have an impact: whether an engineer on the Mars B project in the Gulf of Mexico or someone marketing products in Malaysia. We are looking at our businesses in terms of smaller performance units where value is created. In other words, while integrated gas might be doing well, it doesn’t mean that those working in the North Sea should become complacent. This way of viewing the businesses will allow us to track performance better.
We also need to ensure that we have the right projects. In 2014 we plan to spend around $35 billion on capital investment, excluding acquisitions; very few companies do the same. People deep in the business must understand how activities will contribute to the bottom line and share this detailed information so we can make the right choices. In terms of how we run our operations, our priority is, as always, safety. I believe we can do better, and that personal intervention is vital. I will also be focused on the performance of our assets and ensuring there are no leaks. We have made a lot of progress but I still feel we lack a fully proactive culture when it comes to safety and the environment.
Given some shareholder dissatisfaction with return on investment, is it possible that in future Shell might only focus on upstream or downstream activities?
Ben van Beurden : Splitting the company in this way is not on the cards. Integration continues to offer advantages, and now we integrate in a new way. A hundred years ago the only way to dispose of oil was to put it into your own refineries, and the only way to get rid of products was to do your own marketing. This has changed. Now we’ve moved into technology integrations: for example, at our Pearl gas-to-liquids plant in Qatar it’s hard to differentiate where the upstream technology ends and the downstream technology starts. I see it as the “modern integration”. The same is true in the oil sands and right across our natural gas business. There is a lot of value in an integrated approach that’s not always visible to the outside world but puts us ahead of our competitors.
Shell has faced particular challenges in Alaska and won’t be resuming exploration activities this year. What are our plans for the future there?
Ben van Beurden : There are three things that need to happen for us to resume exploration activities. First of all we need to be certain that we can carry our activities there exceptionally well – technically and environmentally. If we’re not convinced, we won’t do it. Then we need the full support of the US Government, in order to receive all the permits. Thirdly, considering the time and effort it will take to achieve the two aspects I have just described, we will only commit to doing this if there are no further legal roadblocks. Given the uncertainty around the second and third elements, I can’t put any timeline on our plans.
As we mentioned, the security situation in Nigeria has remained volatile in the past year and Shell has sold some of its interests in the country. What is our long-term plan?
Ben van Beurden : Nigeria is a very important country for us, but our focus is on reducing our exposure in some parts of the country. This does not mean we’re exiting; rather that we’re making sensible choices. We have a very strong deep-water business that we’d like to grow. We have a very strong liquefied natural gas (LNG) business – and some onshore gas – which we also want to develop. We need to be part of the domestic gas business, given the footprint of our operations, and we are helping to serve the country’s energy needs. Our problems lie with onshore oil – and what does Shell really have to bring here? There might be other companies with the right technology who can also work well with local communities. Overall, however, we will be continuing to invest in our Nigeria operations.
While new projects are starting up, others are coming to the end of their life. The industry-wide issue of decommissioning large platforms, for example in the North Sea, is a complex one. How is Shell handling the challenges faced?
Ben van Beurden : It’s a growing challenge for our industry. A lot of stock is reaching the end of its technical life. We’ve reserved a great deal of money to deal with this, and the amount is increasing. We have been doing a lot of work across our businesses and with partners, as well as competitors, to understand how we can best deal with these structures. There will no doubt be a lot of public attention on this issue. We must continue engaging with the right people as we work to address the technical challenges. The NGOs and media will be taking a keen interest, of course.
While fossil fuels will still be needed to meet the bulk of energy demand for the coming decades, is there a role for companies such as ours in developing renewables? And if we continue to focus on oil and gas, how are we doing it responsibly?
Ben van Beurden : We are in renewables: we are the biggest supplier of biofuels and produce ethanol from Brazilian sugar cane. We aim to grow our biofuels business, to make it more resilient.
When it comes to solar and wind, we’ve tried to be successful but it did not work for a company with our particular skills and expertise. We have not given up, however. Our future energies team, which reports directly to me, is looking at a range of renewable energy sources. We ask the question: how can we work commercially in these areas? We are actively investigating our role with partners: it could include logistics, trading or distribution.
At the same time we have a responsibility in the conventional energy system, by improving the energy efficiency of our operations and helping customers to be more energy-efficient. We are also finding ways to bring more cleaner-burning natural gas to market. For example, we moved ahead with the first floating liquefied natural gas project, Prelude FLNG, and we are helping develop the LNG marine market in Europe.
You have worked for Shell for over 30 years. What would you say to anyone considering whether to join the company now?
Ben van Beurden : When I joined Shell in 1983 people wondered why I wanted to work in a “sunset industry”. It was seen as low-tech, predictable and with no need for innovation. They were totally wrong. The energy industry is an incredibly dynamic place. Innovation on a vast scale has been vital, and I see no reason why it should become less important in the future. In fact, there will be an even stronger need for innovation. There will be an energy transformation, against a backdrop of volatility. The need for creativity and solutions to complex technical challenges has never been greater, and the industry has never been more exciting.
This interview was originally published on Shell.com in June 2014.