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Leaked email from Shell Projects & Technology Executive Matthias Bichsel

Matthias Bichsel, Royal Dutch Shell Plc Director of Projects & Technology

We have today published a leaked email dated 1 Sept 2009 sent on behalf of Matthias Bichsel, Royal Dutch Shell Plc Director of Projects & Technology. He is also a member of the RDS Plc Executive Committee, which has nine members, including CEO Peter Voser (like Mr Bichsel, a Swiss national). We have added bold text to highlight certain words and passages. The email was signed off with a representation of a handwritten signature “Matthias”.

For good measure, we have supplied links to nearly 300 pages of confidential documents relating to Mr Bichsel and the reserves fraud. They include his sworn testimony and his complete CV, far more informative than the brief version published on shell.com

If any members of the news media use any information from the leaked email, we would appreciate a mention of this website as the place where it is on open display for Shell stakeholders and rival oil companies to study.

—–Original Message—–
From:   Bosschieter, Thora TMF SIEP-EPT   On Behalf Of Bichsel, Matthias F SIEP-EPT
Sent:   01 September 2009 16:00
To:
Subject:        Projects and Technology: the way ahead

The distribution list of this e-mail is based on your current work location – it is not a reflection of the ongoing design work. If you are aware of someone who should get this but has not received it, please feel free to forward, and inform Susmit Banerjee.

This email is accompanied by a short video message from Matthias Bichsel. Please click here to view:
https://a112.sharing.shell.com/sites/bernadette_cunnane/Player.aspx?mediaId=5

Colleagues,

The Projects & Technology Business (P&T) Leadership Team is committed to ensuring open and honest communications with staff throughout the Transition Phase. We continue making every effort to share information as soon, and as fully, as possible.

Transition Phase communications content necessarily started out at a high level. Now, with good progress with our design of the new organisation, more information is becoming available.  EVP’s, VP’s and I are getting ready to engage with you.

As we move through the Transition 2009 journey, it is important that everyone is in the same place in knowledge and understanding. With that in mind, I think it would be helpful for me to set out and contextualize the key factors of our journey.

The email is long. This is because it contains detailed information to enable you to use it as a discussion tool with colleagues and work teams. I encourage you to read it most carefully and think about what it means for you, and how you will bring it to life.

The Case For Change

Shell unquestionably is a strong company. We have much of which we should be rightly proud. Under Jeroen van der Veer’s leadership we now have a sound strategy to expand our heartlands and increase focus on technology, on operational excellence, on large capital projects and on people. Our brand and reputation has grown over the past 5 years. But time and circumstances continually change and move on, demanding constant adaptation to meet the challenges to remain a strong company.

In his Berlin speech Peter Voser set out the seriousness of the situation facing the oil industry.  The global recession and struggle to develop increasingly more difficult and costly energy sources are facing our IOC counterparts, NOCs and other energy industry players alike.

Every company is under great pressure to reduce costs. But Shell in particular is hampered by a high cost structure. Comparing 2004 and the second quarter 2009, the oil price (the prime driver of revenue) is the same, but our costs have doubled. A competitive cost structure is critical for sustained growth and the ability to outperform the competition. And, let’s not forget, our competitors are not standing still.

The challenge for Shell is not just to position us to weather the immediate storm of the global recession. We now have an opportunity to do everything that is necessary to change so that we emerge a fitter, stronger company that can outperform the competition and create value to shareholders and stakeholders.

The debate around this is closed, the case for change is non-negotiable; we are now moving at a fast pace to create and implement that action.

The Way Ahead

Shell remains committed to creating superior shareholder value as an integrated oil and gas company. More Upstream, Profitable Downstream remains our strategic focus.

The creation of the P&T Business forms a key component to achieve our strategic goals.
We know the root cause for Shell’s high cost base. These include organizational complexity, an internally focused, consensus driven culture and insufficient focus on execution. The fundamental organisation change invoked in 2009 is designed to address these root causes.

As part of this, the P&T Leadership quite deliberately established key Business priorities aimed at tackling up front and head on P&T’s biggest challenges for delivering business success:

Goal Zero – This is rightly a top priority for the whole company, but P&T is directly responsible for project construction where the safety exposure risk is particularly high. We are also responsible for project design and technology development & implementation, which present key opportunities for driving down risk exposure and safety incidents in construction and operation.

Top Quartile Project & Wells Delivery – These are the primary metrics of operational performance upon which major resource holders and future partners judge us. They are the key determinants of our commercial success and ensuring continued access to resource and business opportunities.

Competitive Costs for PT and Shell – The drive is to both tackle internal costs as well as to provide the Upstream and Downstream businesses access to cost-competitive materials, supplies and services through leveraging our scale and size through contracting and procurement and supply chain management. Driving down our own P&T costs will not only make the company directly more profitable, reducing project and technology costs will create extra margins and make Shell an attractive partner to major resource holders and customers.

Value Adding Solutions and Services – All P&T staff must develop a bottom-line mindset focused on directly tracking the value-add of everything we do, internally and externally. Activities and projects that don’t do this, we will eliminate. Focus will be on higher-end activities where Shell can add differentiated value – more commoditised services can be bought from elsewhere.

Technology Driven Competitive Advantage – We shall continue to strive to develop and apply our own technology (and in combination with the technology of others such as service companies and suppliers) towards achieving and maintaining competitive advantage. Technology is not just about widgets and gizmos, it is also very much about building technical capability and leveraging this across Shell’s businesses.  Equally, where we do not have cost-competitive technology we shall seek to utilise the most cost-efficient technology available through effective use our CP organisation.

Fast, Lean and Responsive Organisation – All of us recognise that our decision-making process can be more efficient (the 2009 Shell People Survey confirms this again). Internal complexity inevitably leads to lower staff utilisation, higher costs and thus higher tariffs and further loss of competitiveness. Increased efficiency, fewer interfaces, less complexity and thus cost focus forms a compelling part of our business case. Ultimately, this will become part of our ways of working and culture, but I see it as a focus area over the next few months.

P&T Organisation Design

I want everyone to understand from the outset that the P&T Business will be a single, unified organisation, not a “federation”.  Accordingly, I have designed P&T with deliberately built-in interdependency at all levels of the organisation. The successful delivery of everyone’s business targets will be dependent in some way upon the collaboration and contribution of others. This will help us to avoid working in silos. It links everyone directly to achieving our business objectives.

To illustrate this, let’s look at the technology focused part first: Innovation/R&D and the Upstream and Downstream Solutions units and Technical IT. All four must fully understand the needs of the business, its assets and operations, as well as have the eye on the external world. Best practice from other technology industries has shown that the strategic, revolutionary technology development must be managed differently from applied ‘R&D’/problem solving and service provision. Hence I have split those activities. However, Gerald Schotman, Ed Daniels, Chris Finlayson and Bart Hartgring are working closely together and will create technologies that impact the bottom-line of our assets and ensure we equip the Upstream and Downstream business with technical capability. Each element of the value chain will be interlinked but follow its own logical business driversagainst clear KPIs and TQ performance criteria, appropriate to UI/UA & DS business needs.

In the projects space, we have brought together common skills and disciplines under one umbrella, the Projects and Engineering Services unit under Chris Haynes. This, for the first time in the history of Shell, allows us to truly come forward with one set of standards, with one set of engineering processes, with one set of terminology that will help us to create one Shell engineering community. The Upstream and Downstream projects units (Jaap Huijskes and Phil Holland) will draw heavily on the knowledge and skills of Chris Haynes’ unit, while providing single point accountability for the execution activities of Shell’s downstream and major upstream projects together with Peter Sharpe’s Wells unit. Stijn van Els’ CP unit and Kieron McFadyen’s S&E unit will provide corner stone support for the projects folks to ensure that we deliver the most cost-effective projects as well as their safe and environmentally sound execution.

Of course the Functions – HR (Jack Tabak), Finance (Wouter de Vries) and Legal (Brad Nielson) will support all of the P&T organisation and its activities and also provide the glue between the units.

Principal Design Benefits
·       A flatter organisation with fewer layers and generally larger spans of control will drive more accountability, reduce interfaces and promote faster decisions, increasing responsiveness to the demands of the business.

·       Creates immediate cost reductions through leadership de-layering, reducing support functions and merging duplicating expertise, thereby building in higher staff efficiency and utilisation.

·       Fewer people will make strategic choices and work out strategies and plans. More people will implement, with improving performance as their guide and goal.

·       Enables greater focus and more weight to be given to one of the key Shell business levers – top quartile execution of major projects, including well engineering.

·       Promotes clearer choices from the total technical portfolio with faster, more impactful deployment of proprietary technology.

·       Provides emerging technology focus better fitting external drivers and Shell imperatives, with fit-for-purpose, cost-effective technical services for Shell assets on demand.

·       Pulls together Group-wide expertise and leadership in key technology and technical functions (e.g. petroleum engineering) removing interfaces and clarifying accountabilities, enabling leadership and staff to spend more time applying value-adding core skills rather than on internal management.

·       Bringing together expertise in critical functional areas (Safety & Environment, Technical IT and C&P) facilitates externally comparable excellence and reduces costs by removing duplication, enforcing standardisation, and focusing on actual delivery to the business and projects.

Leadership focus

Working in the P&T Business will be different and must be different. Driving P&T to achieving top quartile performance across the range will require a step change in our leadership culture, both during Transition and as part of ongoing business.

Towards this end we have identified three Leadership focus areas: Speed; External World and Performance Management.

Speed – The pace at which we undertake our business has to be increased across the piece. We have designed our organisation with this directly in mind. A flatter structure with less layers and clearer interfaces should speed up decision-making and responsiveness to business needs. But only if matched with greater focus on delivery rather than discussion. P&T leaders are expected to role model and use performance management to encourage and reward a bias towards action and achievements of goals.

External world – It is very easy in a company the size of Shell to get caught up in internal business. It is only by looking externally that we can correctly measure and improve our performance towards being a top quartile company. All P&T staff are expected to look externally at our customers and partners and ask themselves “what can I do to better meet their needs?”, to look at their counterparts in our leading competitors and say “how am I doing against them, what must I do to match or beat them?”.

Performance Management – Quite simply this means establishing top quartile performance benchmarks, determining where we are relative to those benchmarks, and setting out a roadmap to deliver and maintain top quartile performance; and accepting nothing less. We will have a structured performance management approach, with clear goals, performance indicators and milestones. At all levels in the organisation we will appraise performance quarterly.

Culture

P&T will comprise staff coming from a range of differing cultures. Accordingly, I know that some of you will be asking yourselves what the culture will be within P&T. Let me be absolutely clear that I am not seeking to create a P&T culture per se, we shall establish the same new performance culture based on the same Shell Business Values as every other Shell Business.

UI / UA and DS Businesses are working on the same four culture priorities. In fact we are all very familiar with them since they have not changed over the years:

ESSA (Eliminate, Simplify, Standardise and Automate)

Leadership, Accountability and Teamwork
Diversity & Inclusiveness
Honesty, Integrity and Respect for people

We all know what behaviours we must undertake to deliver them. However, towards ensuring this, I expect everyone in P&T to explicitly work these into our KPIs in our team business plans and personal GPA deliverables for 2010.

So what’s different this time?

I recently read again the Shell MF Professionalism document – “A Key Success Factor”. Some of you will remember this from the mid 1980s. I also went back to the mid nineties when Shell had a go at its structure and when EP was overhauled.

Reading these documents I was struck by the similarities between the circumstances we faced then and the proposed responses.

“… enhance technical proficiency, to reduce costs and to deliver services faster”

“… contribute within and between disciplines, communicate across traditional barriers”

“… develop more effective ways of serving customers”

These are truisms that were valid then as they are now. Does this, however, mean that the previous changes were in vain?

Compared to 15 years ago, I think that there are several differences, but also certain elements that have not changed – and where we must continue to put effort in.

First, the extent of increased competition and the changes in our industry were certainly underestimated in the mid nineties and earlier. The emergence of the NOCs, the internationalisation of regional players were not foreseen, while certain other predictions, such as the “asset-less oil company” or the “atomisation of big oil” did not materialise. Also, I think the role of technology to stay ahead of the game and to create competitive advantage was underestimated by industry, which led to some ill-fated attempts of outsourcing of core strengths.

Changes made then were necessary for two reasons: to compete in a new world as we saw it emerging, and to become lean and fit to outperform the competition. Changes today are necessary for two reasons: to compete in another new world as we see it emerging and to again become lean and fit. The former is something that will happen yet again; while we will make some correct calls of what the future will be, we will inevitably miss some others. The latter – being lean and fit, however, is something where we must get better at: creating an environment in Shell where waste is continuously taken out, where cost reduction is an organisational and cultural imperative and where top quartile performance is part of our DNA. As leaders and as individual contributors we must work harder and smarter at creating this organisational capability of regenerating ourselves on an ongoing basis.

I believe that the changes we are making to the Company and within the P&T Business fully recognizes and addresses these issues. However, I must stress that the change we are undergoing must be more than just a restructuring of our organisation, it must include change that compels teams, departments and business units to continually improve their efficiency and effectiveness.

Equally important is the nurturing of a Learning Organisation culture by identifying and establishing the right behaviours. That means individuals and teams are actively seeking out lessons learned and best practice at the earliest stages as an integral part of the process.

A key issue will be to change our behaviours from “I have been given a task and I will now prove that I can come up with my own solution” to “…I will first check whether someone has already solved such a challenge and I will use his/her solution rather than re-inventing it.” In our performance management processes we will be looking to reward those that do this best.

To close

I am pleased with the speed with which the new organisation is being designed and taking shape. We will continue at this high speed to minimise the period of uncertainty for all staff as well as to show that we can deliver the business benefits.

Not all current staff will remain in Shell. This will be difficult, both for those leaving as well as for those staying. We will use the People Principles and criteria as we have adopted for Transition 2009 and have used in earlier resourcing EC-2 rounds. My aim is to ensure a fair and equitable process. I have full confidence that we can deliver this.

As indicated, the next step is now further engagement with all of you, through town halls and in smaller groups. I trust that you all can take time to attend those sessions and get the clarity that you need.

Best regards,

(Representation of handwritten signature “Matthias”)

EMAIL ENDS

Transcript of Videotaped Deposition of MATTHIAS BICHSEL, then Executive Vice President Technical, Shell Exploration and Production B.V.: taken in New York, New York October 31, 2006

Exhibit 49 (200 pages) Bichsel Deposition

Exhibit 50 below is of particular interest. In addition to the Deposition of Bichsel, it also contains his CV, confidential email correspondence and PERSON OVERVIEW documents for Bishsel and other senior Shell Executives, as follows: –

Brian Ward, Director, Technical and Operational Excellence: RBD Europe and Africa; Shell International Exploration and Production: Extract: “Brian needs to take care against slipping back in his natural Shell “operations management” role thereby diluting his all-round abilities as “role model EP leader”.

Zaharuddin (Din) Megat, Regional Business Director, Central and South Asia and Russia, Shell International Exploration and Production:

Extract: “Din’s portfolio was reduced on April 1, 2002 to better align scope and capabilities.”

Extract: “Din does not always choose his words carefully when communicating with staff which has resulted in misunderstandings, anger and frustration for several of them this past year. He needs to work on his ability to build effective working relationships with, and more effectively motivate, those reporting to him.”

Tim Warren, former Chairman Shell Australia: Extract: “Tim’s long hours are a legend at Shell. Given our current struggles with work-life balance, he would be well served to lead by example in managing his own work hours and ensuring those he leads focus on the most critical strategic initiatives/issues.”

John Darley, Director Shell Technology Exploration and Production; SIEP

Bob Sprague, Regional Business Director Shell International Exploration and Production: Extract: “He is direct in his communications with others, sometimes uncomfortably so when stating his concerns or objections (particularly through e-mail!). He displays… intolerance for decisions/ recommendations where staff work has not been thorough or the thinking well organised. His lack of natural engagement skills and absence of pro-active behaviour towards changing performance or business climates can “downgrade” his overall excellence in-depth expertise and perspectives.”

Bichsel Matthias, Exploration Director, Shell International Exploration and Production

Lorin Brass, Director, Business Development Support, Shell International Exploration and Production: Extract: “Lorin needs to work at more forceful, persuasive presentation of his position.”

Dominique Gardy, Chief Financial Officer, Shell International Exploration and Production Company: Extract: “…Dominique at times has appeared to be spread a bit thin and needed to consider more effective delegation, time management and perhaps more effective use of resources.”

Carol Dubnicki, HR Director, Exploration and Production, Shell International Exploration and Production.

Exhibit 50 (75 pages)

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