By “Jo Blow”, a Shell/Motiva Insider.
I was asked to provide commentary on the email below which is a Shell/Motiva leaked email provided to this site by another insider. This email is believed to be authentic and authored by the sender Tom Purves, Regional Vice President of Downstream Manufacturing for The Americas Gulf Coast Region. The email was sent to the General Manager of the Motiva Norco Refinery, some site and corporate business planning people, and several finance people.
The purpose of the email appears to outline key cost reduction and margin improvement opportunities along with associated dollar values as it relates to integrating the Shell Norco Chemical Facility with the Motiva Norco Refinery. These two sites are situated side by side along the Mississippi river just outside of New Orleans Louisiana. This will not be the first time in the history of these sites that they have operated as an integrated facility.
In the email Mr. Purves outlines his expectations for what is to be included in the business plan as it relates to integration of the sites. It is not surprising that staff reductions in the salaried ranks is recognized as a key cost reduction driver in integrating the sites. With the sites operating as an integrated facility, the other improvements mentioned in the email should be fairly easy to realize. This email seems to confirm the following quote from a recent blog posting by “Norco Scum”.
“Now Purves has demanded an additional $2 million in personnel cuts from each of SCC and Motiva at the site by the end of the year, beyond the SPI target. So, hang on, more to come.”
However painful of an exercise this is, the benefits for integrating the sites will actually deliver a strengthened position for the Norco Site within the downstream asset portfolio. Shell/Motiva must position itself in the short term to weather the current business environment, which is forecast to continue for the next few years. The cost reduction initiatives already initiated, and the yet to be implemented cost reduction initiatives will likely mean the difference between posting a profit or posting a loss for manufacturing.
In closing, I would like to offer a couple of my observations and opinions as it pertains to this email. At face value the email and its directed actions is exactly the sort of communication I would expect from Mr. Purves or any other Senior Executive with similar responsibilities. Tough as it will be from a personnel standpoint for those affected, it will benefit the many that will not be affected. To realize the savings in maintenance synergies, tankage utilization, and hydrocarbon margin improvement mentioned in the email, it will take the dedicated employee’s at Norco to identify and implement the nuts and bolts of these opportunities both during and after integration. When you put that in perspective, it becomes paramount to the integration plan’s success for Mr. Purves and his Team to properly manage employee engagement.
LEAKED EMAIL FROM TOM PURVES, SHELL/MOTIVA VP, Manufacturing Gulf Coast
From: Purves, Tom SOPUS-DMG-DMM
Sent: Saturday, August 29, 2009 1:04 PM
To: Ainsworth, Anne-Marie N MOTIVA-DMM/6; Bundick, Hermie L SCC-DMG/8; Howell, Art SDIUS-DFM/675; Co, Quennie L SDIUS-DFM/67; Marczak, Kristin M MOTIVA-DMM/647; Henning, Laurel F MOTIVA-DFC/13
Cc: Bolter, Anthony J SDIUS-DFM/7; Luijten, Marcel P MOTIVA-DVM/3; Pease, Robert W MOTIVA-DVM
Subject: Business Plan Premises for Norco Site Integration
I have now read through and digested all of the notes that have gone around among many of you while I was on vacation. Here is what I would like to build into the business plans for both Motiva Norco and Shell Norco regarding site consolidation.
Salaried Staffing Synergies – reduction of salaried staff and management between the two sides over and above what is already premised with the SPI 100 efforts that have been pursued independently thus far. I recognize that there have already been some limited departmental level consolidations. The premise number to be used in the plans will be $4mln per year split equally between Shell and Motiva. I expect the sites to translate this into specific reductions in people once the site is consolidated. I will need a preliminary estimate of how this is going to happen for discussion in the biz plan. You can bring that to the challenge sessions.
Maintenance Synergy – includes better contractor utiliztion through integrated planning and scheduling, single point control of contract resources, consistent prioritization and supervision and a significant improvement in the use of maintenance material. This is over and above what has already been achieved by the two sites independently. The premise number will be $8mln per year split equally between Shell and Motiva.
Tankage Utilization Improvements – includes reduced tankage rationalization and optimization of working capital including short term opportunities for segregations, additional storage or other movement opportunites to take advantage of the immediate marketplace. This is largely a margin capture item. The premise number will be $1mln per year split equally between Shell and Motiva.
Hydrocarbon Margin Capture Through Unit Operating Options – includes stream routings and unit operational options that create short term opportunities to capture value in the immediate marketplace. This is entirely a margin capture item. The premise number will be $10mln per year split equally between Shell and Motiva.
Thus the benefits we will build into the plan will reflect a $12mln savings for each site in 2010 over what we would have built for each site independently.
I have seen some notes that escalate the margin capture year on year. I am open to that possiblity but I don’t see how that is going to happen beyond the general growth in margins. To that end, if we want to escalate the $10mln in margin savings at 2010 premise margins to “margin of the year”, I could support that. I’d like Tony and Marcel to weigh in on the appropriateness of that approach.
Kristin, Quennie/Art – we will need a specific slide to descirbe this in both the Motiva presentation and the Global M material. Not sure how to translate this into the templates so I leave that to you.
If anybody has a concern or question, please raise it quickly. Thanks…
Vice President Manufacturing Gulf Coast
Houston One Shell Plaza Room 1236B
Office Telephone 713-241-6363
US & International Cell 713-301-5042