Interesting suggestion from Business Week…however, Shell might not be able to come up with the necessary finance, while BP might just be able to do so…. the question then becomes whether Total would be willing to act as a white knight to save Shell from BP’s clutches.
Hi, really great site.
Im currently doing a piece of work for my degree regarding the effectiveness of Shell’s communication functions, both Internal and External. I would be really gratefull if someone could provide me with any expert information or guidance on where to find any good literature.
Thanks.
Dear Fellow Pensioners (includes you too Paddy as we are all in the same boat!)- I have a couple of (final?)comments. To pick up on the “right on the nail” comments from fellow pensioner the real scandal in Shell EP has been the departure from the tried and tested practice of only having people at the top (leaders) who actually knew the nuts and bolts of the EP business. This started with the disastrous decision to appoint Cor (if you need geology go to Schlumberger) Herkstroter to the top job. He oversaw the destruction of a E&P organisation which was second to none, the envy of its peer group and a source of pride to all of us working in it. This massive error was compounded by importing huge numbers of US staff totally clueless as to the way the business worked in the many operating units of the world and were typified by an astonishing focus on their year end performance bonus requiring a declaration of success long before the “final result” was actually known. The modus operandi quickly became one of preaching from on high, intolerance of questioning (it’s my way or the highway) and a continual reference to a number of “management guru bibles” - US author only, please. (We were not to know then, but it was all terribly prescient of the US Iraq misadventure). Remember, Mission Accomplished - all Hype, Hypocrasy & Hyperbole with Honesty and Humility totally absent.
PE (petroleum engineering) became Powerpoint and Excel.The virtue and necessity of time consuming solid technical work became a luxury the company could not afford! Ten years on a massive effort has been expended to recover the situation - but of course in the meantime so much has been lost. That is the real scandal. I will never be an apologist for the truly dreadful Watts and his acolytes but in my more generous moments I honestly believe they did not fully understand what they were doing. I once asked him not to use the expression “economic reserves”; by definition reserves ARE economic and the look he gave me was one of “what on earth are you talking about?”. I will leave the matter there but continue to grieve for the company that lost its way.
Iain
Good analysis but a bit lopsided and I must react! Of course you are totally correct that the SEC was way behind modern technology and is now making some amends. But to conclude that Shell EP has been an industry pathfinder and somehow the whole world has erroneously dumped on Shell goes a bit too far. I know you very well and I am convinced that your words come from your heart and were not drafted by some Shell PR spindoctor. But you know that we started to lose the battle around the mid 90s on technology development. Until that time we were very good at inventing new technology, a bit less at implementing it quickly and globally and we dithered perhaps a bit longer than really needed. And our internal bureacracy could also be a bit improved at that time. And we were by far the biggest operator in the world and as such earning the money for many of our competitors. We outperformed many (most?) from the early 70s to the mid 90s. But after the mid 90s, all had to be changed in a major way and we lost basic business controls and created a new attitude in the workforce whereby short term views prevailed, promise was better than performance, open communication was a thing of the past and the ensuing cultural revolution led to many disasters. The breaking of SEC rules was just one of them and in my view a minor one but this point was magnified by everyone. It was fodder for the lawyers and easy to find a culprit that could be sacrificed. But there was something bigger going on behind the scenes, less obvious to the general public. We all know (and you certainly better than anyone) that companies like Schlumberger have a lot more know-how and technology development than we have. They ‘stole with pride’ our systems and enhanced them. And then they applied them too! With all the internal turmoil and american political correctnesss flying about, we lost focus and have forgotten how to find and develop new oil and gas in an economic manner. We lost the ability to consistently do giant projects well. Very few are on time and within budget, certainly not 50 % over and 50% under the objectives. You know that the personal greed has exploded and there is little coherence in the company anymore. We used to have the top people near the coalface, now we have a small group in the headoffice and many processes. But we have no real feel of the local conditions anymore.
But having said all this, you are right again that the SEC now themselves should be doing some major ‘mea culpa’ for not overseeing the real criminals in the finance world. Our beloved leader of the past, the borne again christian Philippus Watts, would have made a great investment banker. And he will still occupy a seat next to the likes of bishop Mugabe in his afterlife. And it will be hot there! He was like the present bankers who sold crap and did not even want to know what was in the boxes they sold. It all tumbled when someone opened a box and saw it was empty. In Shell that someone was v.d.Vijver or perhaps Coopman. And like in the finance world it was the messengers that got sacrificed!
Apologies for the long reply, but some very bad things happened (and are happening still, just check with your dutch colleagues who are retired and how their pensionfund has been doing) and these things should not be swepped under the carpet.
And I wish you and all the readers here a very healthy and prosperous 2009 and hope the Donovans continue with this fantastic forum of REAL open discussion. But I still fear Shell, so I shall remain anonymous!
The reserves issue was a scandal not because there was confusion about the categorisation of hydrocarbon reserves. It was a scandal because at the very top of Shell there were lies, cover ups, disingenuous public statements, obfuscation and deceit. The revelations about all this led to further disclosures about the management style of Phil Watts and others in the command chain. Those of us who worked for Shell in the Watts era were not surprised at what emerged – we knew him and some of his cohorts for what they were. It was a scandal alright!
Dear Guest - I have no problem with your comment; infact I agree with it. The SEC “uniform set of rules” to which you refer will now reflect the technologies and techniques of the 21st Century instead of those of the early part of the second half of the 20th. All EP companies will estimate and report accordingly - to the ultimate benefit of the investor community. As I wrote in my previous posting this notable advance is a direct result from the trials and tribulations of Shell and the so-called great reserves scandal. I use the term “so-called” because if all the volumes recategorised had vanished like the money of those investing with the unsupervised, unregulated Madoff, the word scandal would be justified. However the volumes have not vanished inspite of the tsunami of bogus indignation which washed over the company and the many affected employees.
I wish all who contribute and read the contributions on this site a very Happy and spite-free New Year
Have to generally agree what Iain has said, some of which I have voiced earlier. I never realized that the SEC rules for reserves calculation were just for company to company comparison. If true then what a idiotic group the SEC are and the reason why companies such as Shell got nailed with the reserves scandle in 2004.
Iain, with both Brent and WTI both under $40 the SEC rules still won’t allow too many barrels of shale oil or tar sands to be booked. And at the risk of repeating what has been said many times: the SEC rules do not pretend to give an accurate estimate of technically/economically viable reserves, but only a clear set of rules to allow the reserves figures of one company to be compared with another. Annual reports don’t give an exhaustive financial analysis either, but use a uniform set of rules (GAAP) to ensure a degree of consistency between companies. That doesn’t mean the numbers are “right” - just consistent. As a PE I would also almost certainly differ from the SEC figures in making technically sound estimates. But the SEC does not pretend to produce technically sould estimates, just consistent, comparable numbers, prepared according to a uniform set of rules.
So - the SEC have now adopted new “rules” on reporting of hydrocarbon reserves and in doing so recognising the advances in technology used by the Shell petroleum engineering community to which I belonged for many years. In other words we had the confidence based on modern technology and our professionalism to call the volume “proved”. It is no surprise that the vast majority of the volumes were were obliged to “recategorise” is back in the proved category and would not have moved under the revised SEC “rules”. What a shame for all of us (especially the pensioner community) that the SEC had not spent more time overseeing the genuinely corrupt & greedy financial community instead of beating up the “corrupt & greedy” Shell EP business. At least Shell’s misery has led to reserve rule revisions which will benefit all those wishing to invest in EP companies. Infact, I can state that Shell has been proved to be an industry pathfinder (again) inspite of all the opprobrium heaped upon it.
Strange that only 3-4 years ago OPEC were stating they had a preference for a stable oil price around US$30 / bbl. Now the greedy Arabs, left wing Venezuela, corrupt Nigerians and Russian Governments want prices >US$50 / bbl. Let ‘em rot I say. Low oil prices will hopefully get the corrupt rich Sheiks out of English football.
Happy Christmas to you as well John. It is no exaggeration to say that this website is one of the most significant on the internet in holding a Corporation to account. For years now we have seen what happens when corporate greed and power goes unchecked – just this week with the $50billion Madoff scandal and of course the sleazy history of Lehmann Brothers, Enron and all the other supposedly great companies brought to their knees by incompetence and director greed.
Director greed is alive and ill in Shell as well - as this website has demonstrated over the years. To those of us who worked for a corporation which, whilst certainly not run by Saints, was at least manned in the main by people you could trust and respect it is all very depressing. It is now clear that the Watts “reserves” saga was in some respects the tip of the iceberg and there are undoubtedly those amongst Shell’s current leaders and amongst the recently retired who ought to be brought to justice – as, of course, should the ineffable Watts.
Your website makes a major contribution to keeping the eyes of the world on what Shell does. Your success is remarkable and I have no doubt that Shell takes note of the chat and the postings on this site. Whether they will actually institute the internal reforms they should under their new Swiss head cheese remains to be seen. Then certainly should!
We would like to wish all visitors a Merry Christmas and Happy New Year - as happy as it can be given the bleak economic situation. Our thanks especially to regular contributors, Paddy Briggs, MUSAINT, “Guest” and a disillusioned Dutch Shell pensioner.
Musaint: it might sound like a cracked record, but Shell has focussed on high capex projects recently, apparently believing that $100 oil was here to stay…I’m told that the “low case” used in screening exercises until very recently was $50/barrel.
How come I have NEVER heard a Shell executive say ‘we (or I) should have done it differently’ or ‘we were wrong’. It is the same with politicians. And bankers. What does this tell us?
The irony (or one of them) is that Shell’s Scenario Planning is supposed to help the grappling with uncertainty. It doesn’t - and it never did. Knee Jerk is the order of the day - now more than ever…
Presumably Jeroen’s comment about the viability of high capex projects improving as costs fall will be taken as justification for massaging the economics so that reserves can be booked even when sub-economic…in the vain hope that costs will fall sufficiently to solve the problem sometime next year…does this all sound rather too familiar?
With the oil price at $36, a lot of SEC reserves will disappear…I guess Shell will be renting a lot of tankers in the next few weeks to keep oil off the market
The New Zealand story is truly scandalous. The checks and balances on Shell’s advertising seem completely absent these days. Much of the corporate advertising on the go in the UK is borderline disThe New Zealand story is truly scandalous. The checks and balances on Shell’s advertising seem completely absent these days. Much of the corporate advertising on the go in the UK is borderline disingenuous and the whole V-Power campaign has been shown by the (UK) Consumers Association to be making highly questionable claims. Corporate and Marketing communications in Shell always struggled but in my day at least we did try and ensure that what we put out was legal, decent, honest and truthful. I can honestly say that I never authorised advertising which made false or questionable claims – but the same rigour just doesn’t apply today. You get the feeling that those taking the decisions just don’t know what they are doing. All very sad and shocking.
Peter, we have not reached peak oil production yet, although we may not be far away from it. However, the recent high oil prices have resulted in many projects being undertaken by the oil industry which will increase supply over the next few years. At the sane time, many other projects (generally outside the oil industry) have been undertaken which will reduce demand for oil (wind poower, wave power, nuclear power, improved fuel efficiency of vehicles, more energy efficient homes…). Most significantly, the rates of growth of many countries have been slowed by the price of oil, limiting the growth in demand for oil (and encouraging the use of alternative fuels). At $50 per barrel there is little incentive for the investments required, but at higher oil prices it becomes much more attractive to invest in existing fields (almost all of which still contain more than 50% of the oil originally in place). If the oil price is high, it becomes economically viable to increase the percentage of oil recovered.
Well written article Paddy. I seriously hope that Shell does get rid of its headquarters in London as indeed the amount of cost savings must be beneficial to the company. It will also reduce Greedy Gordon’e cut of the cake, so I expect him to kick up a fuss. That said, is there a requirement to have an “HQ” in the UK for some legal purpose? If yes, why not some sleazy office in Soho?
Paddy, good story, I agree mostly. But two flaws: Upstream is now run centralised since about 10 years. Have you noticed the results? We used to have the best brains at the coalface (in the opcos) and could deal with local circumstances. The other flaw is that you think Shell has become more Dutch. Ha ha ha ha, the dutch have been ethnically cleansed many years ago and with the retirement of Jeroen, they will all have disappeared. Perfidious Albion has struck many moons ago and in the process brought in their american brothers. Don whatever his name was (predecessor of Louw as head HR in EP) gave many speeches in the late 80s and early 90s pointing out that the Dutch only were doing reasonably well in the engineering sides of upstream and downstream but Finance, HR, Marketing, Commercial etc i.e. where all the bullshitters were/are, were firmly in hands of the brits. He said so much more eloquently than me of course.
But other than that your story is fine. Just change the word central office to head office. It shows your age (I often do the same…)
So now we know where the funding for the share buybacks, the dividends…and all those high capex projects came from… the name Robert Maxwell springs to mind
A couple of years ago the cost-cutting measure was taken to close the London office of the investment team who handled the Shell Contributory Pension Fund (SCPF). The management of investments in this UK fund (by far the largest fund in the UK with 40,000 members, mostly Brits) was transferred to The Netherlands and merged with the team who looked after the Dutch fund. The actual day to day investment management is separate but there is now one Dutch based investment department where there used to be two separate departments in London and The Hague. It would be interesting for anyone examining the performance of the Dutch fund to compare and contrast it with the SCPF. The rules in Holland and the UK are of course somewhat different but I can’t see any reason, in principle, why one of the two funds (The UK one) would outperform the other (the Dutch fund). But I’m not an expert and I am sure that Shell will explain in due course!
#30another pensioner on Dec 12th, 2008 at 12:42 pm
Refer the posting of the Reuters article. The spokeswoman could not say how much it would cost Shell to bring the fund from 85% to 105%. Apparently we have yet another ‘token woman’ in this position. No doubt with a cute smile and very friendly. Maybe I can help. It is very simple: the obligations are around 12 billion euros, so Shell will need to cough up something in the order of 2 billion euros to repair it all. Same magnitude as the fines and moneys that had to be paid after the reserves scandal. Perhaps this sweet ’spokeswoman’ should pick up the phone and call the pensionfund. They should know exactly Shell needs to pay!
Dear Mussaint and Nowrooz, your postings warrant a short reply. Have no fear, I am not suffering and have my private finances taken care off and zero worries there. Mussaint, I believe that they dropped to 85% (under 105% all alarm bells start and they need to go hat in hand to the authorities and do things) because they overinvested in stocks. And this brings me to the point I tried to make: Shell was endeared some years ago to the MBA jargon of consultants and other idiot gurus and introduced a.o. ‘Olympic Targets’. You remember them: ‘citius, altius, fortius’ (faster, higher, stronger). Couple this to the preferred attitude as fostered by Brinded et all of ‘Promise is better than Performance’ and you have a recipe for disaster.
And all the old codgers are still around and looking innocent. They simply do not feel shame. And yes, I have sent a letter or an email two years ago to the pensionfund asking them why not hive off the surplus and invest that in super safe and dull bonds. The pompous reply was that I need not worry, should look at their track record, they employed the best professionals in the world, were way within the legal limits and basically told me politely to piss off and mind my own business, all was well and I should look at the long term. Unfortunately I don’t have a copy anymore.
And Nowrooz, I hope I sufficiently explained why I posted this chat? I am not moaning about my own pension, I indeed have more than enough. But if you still take exception: I noticed many postings from you on this chatbox. My question to you: there are a few billion people who are hungry every day and yet you are wasting your time on posting chats on Donovan’s site! Why don’t you spend your time better and relieve some of that suffering?
And Mr. Donovan, you seem to have a direct line to Wiseman. Perhaps you could ask him to confirm or otherwise the rumour I have picked up a few weeks ago that Shell in this credit crisis has borrowed money from the Pensionfund or made the Pensionfund invest in some projects. If that is correct, I would like to see the opinion of Mr Wiseman on the ethics of this. No doubt it is within the law, but is it ethical?
A quote from the blog at http://www.pacificenvironment.org/blog/
“We are struck time and time again by similarities between Shell’s activities on Sakhalin Island and the company’s current strategies in the Alaskan Arctic. Shell could easily write a textbook on how to break promises, give and take bribes, buy off scientists, employ divide and conquer tactics with local opposition, and emasculate environmental assessment processes.”
“Shell Pensioner” - couple of points / questions. Firstly if the Dutch legal limit is to have 105% coverage how come Shell has got away with 85%? I am sure that many, many, pension funds of large companies are suffering badly due to the collapse of world-wide markets, not just Shell. (Agree that a shift to bonds may have helped, however, hindsight is such a powerful tool!!). I’m not sure that the pension funds are that bad compared to others, and anyway I’m sure you’re not suffering because the “coverage” has come down - no doubt your monthly pension paid has not dropped has it?
There is a number of things that you can do. First demand a comparison between the Dutch fund and the UK Fund. The UK Fund is presently around 100% funded - it was around 135% a year or so ago. The 100% is OK but not sparkling. Your fund’s 85% is not good and you are entitled to know why.
Secondly demand to know why the leaders of Shell have created a super Pension fund which allows them to have seven figure pensions. The sheer greed of this defies belief - but then greed breeds greed doesn’t it?
Thirdly you are entitled to know, as are all the UL Pensioners, how Shell chooses those that run the Pension Funds. Here in the UK the head honcho of the Shell Contributory Pension Fund is the millionaire Clive Mather. He was the guy who walked away from his assignment with Shell Canada with not only $CND10m in his back pocket but a commensurate Pension for life. Can we really trust such an individuals to look after the rest of us - let alone the poorer Pensioner on less than £10K a year?
It is all food for thought but if we give in we are dead. We must fight on!
I just received a letter from Shell Pensionfund (dutch) that the coverage has dropped to 85% (Dutch legal limit is 105%). About a year ago it was around 170% I believe. Some amateurs have been gambling with the fund and now there is a huge shortfall. I still have the letters of the past where they were congratulating themselves with the good management and strategies… And no doubt cashing in big bonusses. Why did nobody convert shares to bonds when there was this enormous surplus? That would be good husbandry. But like other shell functions, it always has to be better and more. First the stupid reorganisation of the nineties, then the reserves scandal, then the projects scandals, now the pensionfunds. And as a retiree there is nothing one can do.
Don’t be silly! Haven’t you seen Shell’s latest Shell World magazine? On the cover we have the claim “Smiling customers, every site, every visit, every day”. That’s the rhetoric. The reality is, as ever, totally different.
I think it is unfair to point the finger at Shell stations only. Last Thursday for example I failed to ge windscreen wash from two Total garages near where I live. So I think it unfair to target Shell (do they actually own these garages?) as it would appear many others fail to keep their stocks updated.
Retail is detail – as the saying goes. Last year I reported that within 24 hours of the really cold weather arriving my local Shell petrol station had run out of de-icer. Roll forward a year and exactly the same has happened. A phrase about breweries and piss-ups springs to mind about the shower that runs Shell Retail in the UK these days…
Mr Donovan. Like many colleagues I enjoyed your email discussions with Richard Wiseman. His ego needed deflating. Are you aware that it was his blunder that allowed you to grab the domain name for Royal Dutch Shell Plc? He boasted in an article in ManagingPartner magazine (10 October 2005 Volume 8 Issue 5) that he personally headed the legal team handling the unification of the group following the reserves debacle. Blowing his own trumpet Richard described himself as the “conductor of the legal orchestra”. His high regard for himself, verging on self-worship, is evident in his emails. Unfortunately it is unwarranted. In addition to the domain name blunder there was also a major cock-up on tax penalties on UK shareholders in Royal Dutch Petroleum. The tax blunder that also generated a heap of negative publicity can also be blamed on the incompetent orchestra leader. What do you do with a person who can’t play his own instrument? Give him a stick and call him a conductor.
MUSAINT, we will make the declassified documents available to the news media. Shell knows th documents are authentic and has not challenged this fact. We will be pursuing the Shell Al Yamamah oil-for-arms story as will become apparent.
I know that you were involved with the Shell pensions “system” at one time Paddy. I am absolutely sure that your facts are correct, so have Shell ever commented / responded to the basic fact they are not looking after their pensioners? Couls Mr. D. write an email aka the “Shell Saudi” story? Better still, if these facts can be backed up with documentation, why not a letter to the tabloids?
Paddy Briggs: Musaint The conventional prejudices of the privileged of the saloon bars of leafy suburbia and the blue shires – and wrong in just about every detail ! Heigh ho…
Each to their own view, but, I will take bets from all and sundry that no Government will go ahead and lead the way viz renewables / oil shale etc without a desire to benefit themselves and not mankind as a whole. As for the UN, don’t get me started.(P.S. don’t frequent bars!!)
The conventional prejudices of the privileged of the saloon bars of leafy suburbia and the blue shires – and wrong in just about every detail ! Heigh ho…
Nice idea to leave it to the likes of the UN, unfortunately they are very often as useful as the present Arsenal defence. Even if left to a Government they would each be strongly tempted to go the route that most proffers their own selfish desires (e.g Greedy Gordon would want it only if he could tax the hell out of it, Nigeria only if they could get the revenue into their overseas bank accounts). Apart from international oil and some Arab states (who are unlikely to be too interested), no Government / person will have the skill / money to go into some of the renewable areas that oil companies will go into. For sure when oil prices creep back up over many years as peak oil etc. is reached / passed then oil shales etc. will very definitely become viable. Then and only then will Governments truly step in for the pickings.
Fully agree. My guess is that oil sands will have a significant part to play along with all the other energy sources - sustainable and renewable. I want to see global energy supply and demand co-ordinated at the very highest level – probably by a powerful UN agency. It has to be outside of the commercial world that major strategic decisions are made. Shell and the rest step in and out of Renewables and non-traditional sources at the drop of a hat (or an oil price!). You can’t leave it to them…
Paddy, fair comment - and since all the majors follow the same policies to a large extent we have a never ending cycle of boom and bust. However, it’s worth remembering that BP was looking at the oil sands 40 or 50 years ago, recognising that they contained more oil than was known to exist in the Middle East. At that time they were sub-economic and technically challenging, but even after the oil shock of 1973 nobody tried to exploit them on a large scale. On a small scale oil sands are economically viable, but on the huge scale envisaged until a few weeks ago they may never be viable. On a small scale the environmental impact is manageable, but on larger scales the impact is unsustainable - and in terms of emissions of CO2 and other pollutants the environmental impact is comparable with China’s use of coal for power generation.
It’s all knee-jerk stuff. Oil price rises – oil sands become essential. Oil price falls – we can do without them. All in the space of a very few months. At the same time Shell’s self-congratulatory (but asinine) corporate advertising tries to persuade us that they are innovative and have a long term multi-energy view. As I have argued recently at a strategic level you just can’t leave it to the Shells and the BPs of this world to make energy investment decisions in the public interest. They are far to influenced by the events of the short term - and their directors’ wishes to improve their scorecards and compensation!
Shame about the oil sands: just when Shell thought it had solved it’s reserves problem by getting the SEC to change the rules, the falling price of oil has wiped out the economic case for the new oil sands projects…the capex of the existing projects is sunk, but the opex of these projects is also astronomical (in both cash and environmental terms)…how long the existing projects continue is anyone’s guess. Are oil sands going to go the way of the huge open cast lignite mines/power station projects in Germany??
Agree, Shell HR is lousy and they are liars!
I am an experienced Hire and less than 2 years, have had 2 job changes! It is the WORST corporate culture ever seen. The HR come and give conflicting statements, even if all are in same location - Shell Center.
Advise: DONOT JOIN SHELL - Shell treat external experienced hires BADLY, especially ones who question the rife cronyism and corruption!
Interestingly, one of performance measures in CEP (a leadership rating measure) is ‘Relationships within Shell’ - read that as ‘degree of closeness established’ with cheats and liars in the Top management.
Cheating, Lying and Bullying is in Shell’s DNA. I heard people are often Bullied and the Bully stays in Shell and victim forced to leave. That is how Shell manages Talent pipeline.
Curios that the “Fan” should want to be entertained on this site! I wouldn’t have thought that it is the purpose of the site to cater for such short attention spans. I think that over the past few weeks the site has come even more into its own. Some very good chat here, as well as the fine selection of news stories that the Donovans do for us. Even my own “blather” (not hiding behind a pseudonym!) has been well received judging by the positive Emails I have received - including some confidentially from surprising sources!! But I don’t aim to entertain – try “Strictly Come Dancing” if that is what you want…
I am really a fan your site, Donovan, but it has become stale and boring. No news, nothing. Briggs continues to blabber on - no idea of the real issues. Ditto your other guests. Get some fresh stuff. This site is becoming obsolete rapidly. I used you for my research, but your no good to me anymore.
Musaint: I agree that many of the projects have a long lead time and you may well be right in your assertion that the oil price will have risen when these high capex projects come on stream. But the same arguments were being made in 1986/7 in the North Sea, and it took 20 years for the oil price to recover. In the meantime, huge capital investments are required, which have to be funded - perhaps no problem while interest rates stay low and money is easy to find. But it will not be possible to maintain the quarterly figures, dividends and buybacks on which the market is focussed, if the oil price stays low.
The speed with which some projects take to get to first oil etc. because some rather poor project management skills in Shell, they should be OK as by then the oil price may have come back up again.
Looks like Shell bet the farm on sustained high oil prices, while Exxon waited… How long can Shell survive with oil prices at ~$40/bbl? Many new projects were being screened at $50-$70/bbl prices. Increased prices will return, but with a deepening recession it may be a few years before we see $100/bbl again. In the meantime, where will the cash for the dividends, buybacks, and investments be found?
Ed Crooks of the FT: who are your sources? Claiming Linda Cook is admired for her knowledge, I wonder which knowledge? She may have some dirt on many because she surely does not have great know-how on the business itself. She can smear many for the old Tejas Gas debacle. Believe me, she is the most senior ‘token women’ in the business world. And Brinded used to be a nice guy but the last few years he does not like anyone holding a different opinion. Those who do are removed swiftly. He has a huge brain but at the same time is the ultimate micromanager in the whole world. He also is a true believer of optimism and promising more than one can deliver. He has done so since his days as MD Expro. Never once did he meet his business targets… So, mr Crooks, better check your sources more carefully!
At $30 - $50/bbl many deepwater projects are likely to be still profitable (even afetr the likes of Greedy Gordon & corrupt Nigerian officials have taken their cut). Others may wish to comment on the other “White Elephants” you mention. My humble view is that not all will be turkeys as the service industries / rigs / construction yards now have to drop their rates to reflect this present economic environment and thereby lower the break-even $ price.
It looks as though Brent is about to fall through $50… Tar Sands? GTL? Shale Oil? Deep Water? These might be long term investments, but in the short term they are “white elephants” - the days of record oil company profits are now behind us.
If Total has $15bn to spend on a friendly takeover, they should perhaps visit The Hague… with Shell’s US liabilities now under control, and friendlier relations between France and the US, Total’s historical concerns about such a move would seem to have been addressed…
It’s noticeable that some of the large movements in Shell’s share price over the past couple of weeks involve relatively small quantities of shares being traded - are Shell’s repeated share buybacks being used to (mis) lead the market? With oil below $60 there will be far less free cash available for this kind of market manipulation.
Anyone who thinks that the euphemism “reclassification” somehow justifies the fraud that was perpetrated on the market should read the attachments to the depositions published on this site.
The intention throughout was to paint a rosier picture of Shell’s reserves in comparison with those of their competitors than could be justified by the facts (Shell’s primary competitors had to work with SEC rules too).
The fact that Shell provided incentives and bonuses to those who complied with Watts’ directives, and suppressed the views of their own reserves auditors should be evidence enough. Walter vd Vijver summed it up when he said that he was “sick and tired of lying”
Annual reports are supposed to be prepared according to a unified set of rules to allow comparisons to be made between companies. Deliberately inflating a company’s asset base (whether its oil in the ground, widgets in the warehouse, or cash in the bank) is fraud.
There was a reserves scandal. It wasdescribed by the US SEC as a securities fraud. The fraud by Shell executive directors cost Shell around $850 million in fines by regulatory authorities, class action settlements, and legal costs of suing parties. Add on Shell’s own legal costs and the whole bill would probably amount to over a billion USD. Of course this is not a major problem for an oil giant making obscene profits.
uscitizen - there is no relationship between remuneration level and “more reserve scandals”, your logic escapes me. Massive salaries (in return for competence??) did not prevent genuine scandals at Enron,Worldcom, Parmalat. By the way, there was no reserves scandal; there was a reserves reclassification.
Not sure what this gratuitous insult adds to your argument. I doubt that my logic always mystifies – even I would struggle to be that opaque!
“You need to do some research…”
Research what? I am quite aware that there has been a spiral of corporate compensation that “justifies” the Shell top executive salaries. I don’t need to research that – it’s in the public domain. Doesn’t make it right, though – and that’s my point.
“To say that you can get a CEO for Shell, one of the top 5 companies in the world for $1,500,000 / year is ludicros. Geez, you are talking about a $355 billion dollar a year company, you will not find any one qualifed to run this company for that amount of money”
RUBBISH! The trap you fall into is to assume that because other companies pay ridiculous compensation therefore Shell needs to as well. Why? Barack Obama’s salary as President of the United Sates will be only $400,000. Doesn’t seem to have put him off seeking the job! I want top people to be decently remunerated but I have little doubt that the attractions of running Shell at around $1.5million a year would be sufficient to attract some pretty good people. The Dutch companies you refer to seem to do all right despite being “paid on average only about a quarter of what US CEOs make”.
“Perspective is important dude!” With respect you seem to have only one perspective, that of the harlot through the ages. “If I didn’t do it someone else would”. My perspective is somewhat broader than this – and a lot more morally robust – Dude!
Paddy - as usual your logic mystifies. You need to do some research before making comments like;
“As far as Director’s compensation is concerned the main driver of the obscene remuneration of Shell and other oil companies directors in recent times has been the Banks and the other financial institutions. This led undoubtedly to a spiral across the corporate sector as a whole. Hopefully this will now all change! Mark Moody-Stuart was paid £1m in 1998 – I think that you could find a decent CEO for Shell today at this level!”
Shell execs are not paid nearly the “obscene” numbers that other companies pay their execs. You will not find Shell execs getting 30-50 million dollars/year. To say that you can get a CEO for Shell, one of the top 5 companies in the world for $1,500,000 / year is ludicros. Geez, you are talking about a $355 billion dollar a year company, you will not find any one qualifed to run this company for that amount of money, which I know is a huge amount of money to folks like us, but not for folks who work at that level. You want more reserve scandals, hire incompetency at that level. The issue has happened in the past granted, but it had nothing to do with competency, rather principles. You try to hire someone to run Shell and tell them their salary is $1,500,000, you will get laughed at! Do some research on what people get paid for jobs like that, dial it back some and you get our salary structure - which is not obscene at all for this size company.
Check out this data from “By the Fault” blog - In 2005, the Dutch economy ranked 16th in the world, with a GDP of €505 billion. Despite running world-class companies, Dutch CEOs are paid on average only about a quarter of what US CEOs make. And the Dutch have come to believe that that is too much. And so Dutch citizens are pressing lawmakers to do something about it.
Thanks for your message. I’m looking for a new paradigm (sorry for the word but it works I think!) which includes the following elements:
(1) Energy supply and demand managed as a coherent whole within which energy policy has a long term strategy. This needs international cooperation and strong Government and extra Government involvement. This cannot be left to Shell and the other multinationals whose aspirations are much shorter term and whose whole raison d’être is hydrocarbon based.
(2) Investment policy to be determined at the same level as Energy policy, of which it is of course part. Investment cannot be left to the vagaries of private corporations often whimsical priorities (often compensation driven).
(3) To put above into effect there has to be a far greater involvement on the part of Western Governments (US and Europe) in energy policy – they should be directing far more the key decision making of Shell and the rest.
As far as Director’s compensation is concerned the main driver of the obscene remuneration of Shell and other oil companies directors in recent times has been the Banks and the other financial institutions. This led undoubtedly to a spiral across the corporate sector as a whole. Hopefully this will now all change! Mark Moody-Stuart was paid £1m in 1998 – I think that you could find a decent CEO for Shell today at this level!
“Taking on the oil barons” - Paddy some reasonable points you put across. However, Obama will for sure fall away from some of his promises to do this that and the other (they all do). As for the usual tax oil companies due to their huge profits I just cannot agree with you on that. You know that to continue to try and find new oil costs vast sums of money, e.g. deepwater wells >$30 million which if dry …… Just cut the taxation on all oil products might help more. You also state that the Shell top man gets 10 times more than his predecessor of 10 years ago. That’s the norm I would expect for most companies after a period of ten years (Shell top boys are not high in the salary league). You have to pay to keep the top people even if you think they’re of limited use (vdVeer generally has had good reporting in the papers for turning Shell around and his successor is also well rated by the papers in the UK. As for Global Warming, well this summer in the UK has been bloody awful - cold and wet, so bring on global warming I say.
Guest - you raise the fundamental question that is so often missed in discussions of resources such as the tar sands. That is what is the relative “value” of “pristine environment” versus “economic benefits” - and we can add “social” to complete the classic SD deabte. The Alberta, and in fact Canadian, economy overall has been well served by the hydrocarbon extraction business for many years - however there are legitamite questions as to the “cost”. Governments have failed to provide strong balanced rules that lay out the trade off that is expected. Governments are the tool of the people who have to provide this “policy” input. With no balanced framework for industry to be held within (including for example limits on water use, social support requirements in small communities or…) we see industry push their view of acceptable. The fact that Shell “committed” to a GHG target for its first tar sands project of “5% less that the displaced imported crude” (on a wells to wheels basis) is lost in all the projects with no commitments. Likewise water reuse commitments and socail investmnets are quickly dismissed due to a lack of overall vision. The Alberta Government has begun a land use framewrork process that is designed to create policy rules on the trade offs and limits. Perhaps this is a limit on total amount of projects - time will tell. Some will say this is all too little too late but, in my view, we must get the framework fixed. There are many benefits and many costs - an all or none approach from either side of the spectrum is not tenable. We need to start working together with parties on all sides of the issue to seek a middle ground. The world will continue to produce and consume hydrocarbons for a significant time yet. Canada - both conventional oil and gas and oil sands will be part of it.
Canadian: While your comments about the energy balance and CO2 emissions are justified in some cases, much of the tar sand/shale deposits are deep and require huge energy inputs to develop/extract/process. I note that you did not respond to the most egregious failing of the tar sands developments, that of environmental impact. What price a pristine environment?
Notice that Safety was low down the list of priorities during Gordon Brown’s visit to the Pearl GTL plant, no Safety Helmets or any sort of PPE. Andy Brown should be given a rocket for that.
Guest - Pembina Institute (hardly a friend of the tar sands)has suggested that as little as $1 to 3 / bbl would be all that it would cost to deal with CO2 emissions. We can argue if amount is right but even at $10/bbl the delta against the base breakeven cost of development is still within error range. My view - can have both. By the way comments stating no net energy value are factually challenged.
In calculating the breakeven point for the tar sands, what price do you put on the environment? And what price on the CO2 emissions from the extraction/refining process? Production of hydrocarbon fuel from tar sands requires the use of almost as much energy as is contained in the fuel produced
Musaint - depends on what you mean by “break even project costs”. YTD operating costs alone are in the $35/bbl range (for Syncrude - largest producer). Clearly if you are looking at new projects and want a return on capital break even will be much higher. Current view here is that new projects probably require greater than $70 oil to break even. Recent cost overruns would suggest that a number nearer $100 might be more appropriate.
Top of Voser’s agenda must be to hive off the Downstream. Refineries to a Refinery specialist company; Marketing as a new separately traded and customer focused Shell branded business. The split of British Gas into an upstream and downstream model (BG and Centrica) is the model. Royal Dutch then concentrates on what it does best - upstream oil and gas. Oh, and all the silly Renewables gets the boot as well.
Voser will succeed Jeroen v.d.Veer. Great relief it is not that silly woman Cook or the mother of all micrmanagers, the man with the facial hair, Brinded.
MUSAINT: When I reached 40 unbroken years and I’m still working, the milestone was not even mentioned at all. I pointed out the milestone to Head of HR in the region I work and he just said Shell don’t award 40 yrs service which wasn’t my question to him anyway.
The article discussing teh relative sizes of BP and Chevron omits to say that the market capitalisation of Shell is currently $134bn - Shell, BP, and Chevron are now essentially the same size and each is less than half of the size of Exxon. Which two of these three might we reasonably expect to merge?
“uscitizen” - you infer that I (and most others) post on this sort of website only when we feel wronged. In my case this is incorrect as I defend Shell far more than I attack them (Mr.D could confirm this or just look back in the archives). You also state that you do not get to see why the person complaining is upset or if their comments are based in reality. I believe in my posting I clearly gave my reason for complaint and I would ask you to check with many other E&P expats if they got a final thank-you (email, verbal, letter, phone-call etc.) from their bosses in The Hague upon retirement. I certainly did not after 30 years and ending up in a senior position. So my point that Shell regards its staff as its greatest asset most certainly does not apply to those about to retire. “Staff is our greatest asset” remains about the worst Shell HR driven statement ever - its there to look good. To say that my posting is dishonest seems somewhat over the top - all statements are what happened to me and what I feel about a poor HR feeley-feeley statement. Shell is a reasonably good company, it does provide a great deal of help to communities it works in, but, some aspects regarding its own staff are poor. Pensions for some are awful (see Paddy Briggs articles on this).
Musaint - it is a well proven fact that most people who post on these type sites feel they have been wornged and will post about that. What folks do not get to see is why they are upset or if the comments are based in reality. You will not be able to discern that about me either. But I am always telling people they must also talk about what they are proud of, I am proud of Shell. I have worked here over 28 years and see them treat people as their number one assett over and over. We take care of people during rough times, like a Hurricane. We took care of our peoples needs and the communities needs. So for you folks you wander to this site because you are mad about gas prices, remember this, Musaint has some reason to feel the way he does, what is it? I respond to his post by saying it borders on dishonesty and does not reflect my company! Ps I am not a Vice president, rather a working hand at a refinery!
There is little modern case for Shell, BP or the rest to be involved in petrol retailing or much of the rest of the marketing “Downstream”. There are no vertically integrated benefits any more - every internal transaction is done at a product market value transfer price. So it is quite true, as MUSAINT says, that there is little money for Shell in the oil marketing business – and lots of hassle. Shell should get the hell out of it and leave it to people, like Tesco, who know what they are doing.
People and especially the press (headlines, even if nonsense, can sell papers) who believe that Shell et al make their vast profits at the pump are stupid. Why does this story forever get printed. The pumps produce a very small amount of profit for oil companies. As for Greedy Gordon blaming them he is a moron. He taxes at the wellhead, at the pump and adds VAT on - he is the person to blame for pump prices.
Not too keen on “Mission Statements” - they often are there just to pay lip service to shareholders or “powers-that-be”. Just be honest and realistic - and that includes this site. I remember Shell clearly stating that “people were their greatest asset” - I have to unfortunately admit this was / is total bull-shit. After 30 years in the company and not one word of thanks from Central Office (telephone, fax, face-to-face, email etc.) such a statement from Shell is verging on typical HR dishonesty.
Great to see that oil prices are now at $63/bbl and falling - great for just about all I reckon. I wonder what Shell’s screening criteria is now? (Anyone in Shell going to supply this?!?!) I remember when it was 10-15-18 (Low-Medium-High) in scenario planning, and some projects still were tested at $7/bbl. Halcyon days!!
We are delighted to announce that the website is now operational on a new more powerful dedicated server, which will speed up site function and hopefully provide a reliable service. There is also an integral News Feed automatically updated with breaking news about Royal Dutch Shell on a 24/7 basis. All services including free access to a library of over 22,000 Shell related articles continue to be available free.
I see the corrupt Nigerian Government is yet again raising taxes and trying to get great cuts in the profit of oil companies (mainly under the guise of the mismanaged and corrupt NNPC). You can bet that in 2 years time or so there will still be no money to spend on communities, schools, roads, basic welfare etc etc. Why - because once again the fat greedy corrupt bastards that are the cancer of Nigeria (Government, NNPC, DPR, State Governors etc.) have all pocketed the countries oil revenue in their foreign bank accounts. No doubt the likes of the Chinese will come in and bail them out in return for oil. Nigeria could be such a great country but are screwed everywhere by corrupt officials.
E&P staff cutbacks in Canada, Nigeria, Assen, Rijswijk, Aberdeem. Does this mean that Shell has finally accepted that its role has been usurped by the NOC’s?
I have read your mission statement and the Wikipedia article. Your website provides an invaluable service to Shell stakeholders by holding Shell senior managers to account. Keep up the good work.
“Another Shell card scam” - not the fault of RDS. In most of the cases that I’ve seen recently they are a result of corrupt workers at Shell petrol stations - often Sri Lankans.
Any updates on the cancellation of Shell’s Canadian tar sands projects? With the current financial crisis and oil prices in free fall, these high capex, high environmental impact projects must be marginal at best
Due to a technical glitch when carrying out security upgrades to the website, all postings on the new version of Live Chat had to be deleted. However, they can all be read by running a search on our internal search facility for “Live Chat Postings”, then select the article: LIVE CHAT POSTINGS 19 SEPT 2008 UNTIL 10 OCTOBER 2008
on Jan 5th, 2009 at 11:32 am
A great resource - many thanks!
on Jan 4th, 2009 at 1:52 am
Interesting suggestion from Business Week…however, Shell might not be able to come up with the necessary finance, while BP might just be able to do so…. the question then becomes whether Total would be willing to act as a white knight to save Shell from BP’s clutches.
on Jan 2nd, 2009 at 3:36 pm
hollymp
Email me at paddy_briggs@yahoo.co.uk and I’ll be pleased to help you.
on Jan 2nd, 2009 at 12:07 pm
Hi, really great site.
Im currently doing a piece of work for my degree regarding the effectiveness of Shell’s communication functions, both Internal and External. I would be really gratefull if someone could provide me with any expert information or guidance on where to find any good literature.
Thanks.
on Jan 2nd, 2009 at 8:32 am
Dear Fellow Pensioners (includes you too Paddy as we are all in the same boat!)- I have a couple of (final?)comments. To pick up on the “right on the nail” comments from fellow pensioner the real scandal in Shell EP has been the departure from the tried and tested practice of only having people at the top (leaders) who actually knew the nuts and bolts of the EP business. This started with the disastrous decision to appoint Cor (if you need geology go to Schlumberger) Herkstroter to the top job. He oversaw the destruction of a E&P organisation which was second to none, the envy of its peer group and a source of pride to all of us working in it. This massive error was compounded by importing huge numbers of US staff totally clueless as to the way the business worked in the many operating units of the world and were typified by an astonishing focus on their year end performance bonus requiring a declaration of success long before the “final result” was actually known. The modus operandi quickly became one of preaching from on high, intolerance of questioning (it’s my way or the highway) and a continual reference to a number of “management guru bibles” - US author only, please. (We were not to know then, but it was all terribly prescient of the US Iraq misadventure). Remember, Mission Accomplished - all Hype, Hypocrasy & Hyperbole with Honesty and Humility totally absent.
PE (petroleum engineering) became Powerpoint and Excel.The virtue and necessity of time consuming solid technical work became a luxury the company could not afford! Ten years on a massive effort has been expended to recover the situation - but of course in the meantime so much has been lost. That is the real scandal. I will never be an apologist for the truly dreadful Watts and his acolytes but in my more generous moments I honestly believe they did not fully understand what they were doing. I once asked him not to use the expression “economic reserves”; by definition reserves ARE economic and the look he gave me was one of “what on earth are you talking about?”. I will leave the matter there but continue to grieve for the company that lost its way.
on Jan 1st, 2009 at 11:44 am
Iain
Good analysis but a bit lopsided and I must react! Of course you are totally correct that the SEC was way behind modern technology and is now making some amends. But to conclude that Shell EP has been an industry pathfinder and somehow the whole world has erroneously dumped on Shell goes a bit too far. I know you very well and I am convinced that your words come from your heart and were not drafted by some Shell PR spindoctor. But you know that we started to lose the battle around the mid 90s on technology development. Until that time we were very good at inventing new technology, a bit less at implementing it quickly and globally and we dithered perhaps a bit longer than really needed. And our internal bureacracy could also be a bit improved at that time. And we were by far the biggest operator in the world and as such earning the money for many of our competitors. We outperformed many (most?) from the early 70s to the mid 90s. But after the mid 90s, all had to be changed in a major way and we lost basic business controls and created a new attitude in the workforce whereby short term views prevailed, promise was better than performance, open communication was a thing of the past and the ensuing cultural revolution led to many disasters. The breaking of SEC rules was just one of them and in my view a minor one but this point was magnified by everyone. It was fodder for the lawyers and easy to find a culprit that could be sacrificed. But there was something bigger going on behind the scenes, less obvious to the general public. We all know (and you certainly better than anyone) that companies like Schlumberger have a lot more know-how and technology development than we have. They ‘stole with pride’ our systems and enhanced them. And then they applied them too! With all the internal turmoil and american political correctnesss flying about, we lost focus and have forgotten how to find and develop new oil and gas in an economic manner. We lost the ability to consistently do giant projects well. Very few are on time and within budget, certainly not 50 % over and 50% under the objectives. You know that the personal greed has exploded and there is little coherence in the company anymore. We used to have the top people near the coalface, now we have a small group in the headoffice and many processes. But we have no real feel of the local conditions anymore.
But having said all this, you are right again that the SEC now themselves should be doing some major ‘mea culpa’ for not overseeing the real criminals in the finance world. Our beloved leader of the past, the borne again christian Philippus Watts, would have made a great investment banker. And he will still occupy a seat next to the likes of bishop Mugabe in his afterlife. And it will be hot there! He was like the present bankers who sold crap and did not even want to know what was in the boxes they sold. It all tumbled when someone opened a box and saw it was empty. In Shell that someone was v.d.Vijver or perhaps Coopman. And like in the finance world it was the messengers that got sacrificed!
Apologies for the long reply, but some very bad things happened (and are happening still, just check with your dutch colleagues who are retired and how their pensionfund has been doing) and these things should not be swepped under the carpet.
And I wish you and all the readers here a very healthy and prosperous 2009 and hope the Donovans continue with this fantastic forum of REAL open discussion. But I still fear Shell, so I shall remain anonymous!
on Jan 1st, 2009 at 11:20 am
Iain
The reserves issue was a scandal not because there was confusion about the categorisation of hydrocarbon reserves. It was a scandal because at the very top of Shell there were lies, cover ups, disingenuous public statements, obfuscation and deceit. The revelations about all this led to further disclosures about the management style of Phil Watts and others in the command chain. Those of us who worked for Shell in the Watts era were not surprised at what emerged – we knew him and some of his cohorts for what they were. It was a scandal alright!
on Dec 31st, 2008 at 11:47 pm
Dear Guest - I have no problem with your comment; infact I agree with it. The SEC “uniform set of rules” to which you refer will now reflect the technologies and techniques of the 21st Century instead of those of the early part of the second half of the 20th. All EP companies will estimate and report accordingly - to the ultimate benefit of the investor community. As I wrote in my previous posting this notable advance is a direct result from the trials and tribulations of Shell and the so-called great reserves scandal. I use the term “so-called” because if all the volumes recategorised had vanished like the money of those investing with the unsupervised, unregulated Madoff, the word scandal would be justified. However the volumes have not vanished inspite of the tsunami of bogus indignation which washed over the company and the many affected employees.
I wish all who contribute and read the contributions on this site a very Happy and spite-free New Year
on Dec 31st, 2008 at 7:32 pm
Hi. Good site.
on Dec 31st, 2008 at 6:35 pm
Have to generally agree what Iain has said, some of which I have voiced earlier. I never realized that the SEC rules for reserves calculation were just for company to company comparison. If true then what a idiotic group the SEC are and the reason why companies such as Shell got nailed with the reserves scandle in 2004.
on Dec 31st, 2008 at 5:54 pm
Iain, with both Brent and WTI both under $40 the SEC rules still won’t allow too many barrels of shale oil or tar sands to be booked. And at the risk of repeating what has been said many times: the SEC rules do not pretend to give an accurate estimate of technically/economically viable reserves, but only a clear set of rules to allow the reserves figures of one company to be compared with another. Annual reports don’t give an exhaustive financial analysis either, but use a uniform set of rules (GAAP) to ensure a degree of consistency between companies. That doesn’t mean the numbers are “right” - just consistent. As a PE I would also almost certainly differ from the SEC figures in making technically sound estimates. But the SEC does not pretend to produce technically sould estimates, just consistent, comparable numbers, prepared according to a uniform set of rules.
on Dec 31st, 2008 at 12:00 pm
So - the SEC have now adopted new “rules” on reporting of hydrocarbon reserves and in doing so recognising the advances in technology used by the Shell petroleum engineering community to which I belonged for many years. In other words we had the confidence based on modern technology and our professionalism to call the volume “proved”. It is no surprise that the vast majority of the volumes were were obliged to “recategorise” is back in the proved category and would not have moved under the revised SEC “rules”. What a shame for all of us (especially the pensioner community) that the SEC had not spent more time overseeing the genuinely corrupt & greedy financial community instead of beating up the “corrupt & greedy” Shell EP business. At least Shell’s misery has led to reserve rule revisions which will benefit all those wishing to invest in EP companies. Infact, I can state that Shell has been proved to be an industry pathfinder (again) inspite of all the opprobrium heaped upon it.
on Dec 30th, 2008 at 4:19 pm
Strange that only 3-4 years ago OPEC were stating they had a preference for a stable oil price around US$30 / bbl. Now the greedy Arabs, left wing Venezuela, corrupt Nigerians and Russian Governments want prices >US$50 / bbl. Let ‘em rot I say. Low oil prices will hopefully get the corrupt rich Sheiks out of English football.
on Dec 25th, 2008 at 2:54 pm
Happy Christmas to you as well John. It is no exaggeration to say that this website is one of the most significant on the internet in holding a Corporation to account. For years now we have seen what happens when corporate greed and power goes unchecked – just this week with the $50billion Madoff scandal and of course the sleazy history of Lehmann Brothers, Enron and all the other supposedly great companies brought to their knees by incompetence and director greed.
Director greed is alive and ill in Shell as well - as this website has demonstrated over the years. To those of us who worked for a corporation which, whilst certainly not run by Saints, was at least manned in the main by people you could trust and respect it is all very depressing. It is now clear that the Watts “reserves” saga was in some respects the tip of the iceberg and there are undoubtedly those amongst Shell’s current leaders and amongst the recently retired who ought to be brought to justice – as, of course, should the ineffable Watts.
Your website makes a major contribution to keeping the eyes of the world on what Shell does. Your success is remarkable and I have no doubt that Shell takes note of the chat and the postings on this site. Whether they will actually institute the internal reforms they should under their new Swiss head cheese remains to be seen. Then certainly should!
on Dec 25th, 2008 at 11:52 am
We would like to wish all visitors a Merry Christmas and Happy New Year - as happy as it can be given the bleak economic situation. Our thanks especially to regular contributors, Paddy Briggs, MUSAINT, “Guest” and a disillusioned Dutch Shell pensioner.
on Dec 22nd, 2008 at 12:44 pm
Musaint: it might sound like a cracked record, but Shell has focussed on high capex projects recently, apparently believing that $100 oil was here to stay…I’m told that the “low case” used in screening exercises until very recently was $50/barrel.
on Dec 22nd, 2008 at 12:31 am
How come I have NEVER heard a Shell executive say ‘we (or I) should have done it differently’ or ‘we were wrong’. It is the same with politicians. And bankers. What does this tell us?
on Dec 21st, 2008 at 3:13 pm
The irony (or one of them) is that Shell’s Scenario Planning is supposed to help the grappling with uncertainty. It doesn’t - and it never did. Knee Jerk is the order of the day - now more than ever…
on Dec 21st, 2008 at 10:27 am
I think your comment “Guest” is all too familiar - just like a cracked record I would say.
on Dec 20th, 2008 at 4:41 pm
Presumably Jeroen’s comment about the viability of high capex projects improving as costs fall will be taken as justification for massaging the economics so that reserves can be booked even when sub-economic…in the vain hope that costs will fall sufficiently to solve the problem sometime next year…does this all sound rather too familiar?
on Dec 19th, 2008 at 1:37 pm
WTI is now at $33.70
on Dec 19th, 2008 at 12:17 pm
With the oil price at $36, a lot of SEC reserves will disappear…I guess Shell will be renting a lot of tankers in the next few weeks to keep oil off the market
on Dec 18th, 2008 at 11:05 am
The New Zealand story is truly scandalous. The checks and balances on Shell’s advertising seem completely absent these days. Much of the corporate advertising on the go in the UK is borderline disThe New Zealand story is truly scandalous. The checks and balances on Shell’s advertising seem completely absent these days. Much of the corporate advertising on the go in the UK is borderline disingenuous and the whole V-Power campaign has been shown by the (UK) Consumers Association to be making highly questionable claims. Corporate and Marketing communications in Shell always struggled but in my day at least we did try and ensure that what we put out was legal, decent, honest and truthful. I can honestly say that I never authorised advertising which made false or questionable claims – but the same rigour just doesn’t apply today. You get the feeling that those taking the decisions just don’t know what they are doing. All very sad and shocking.
on Dec 15th, 2008 at 9:11 am
Peter, we have not reached peak oil production yet, although we may not be far away from it. However, the recent high oil prices have resulted in many projects being undertaken by the oil industry which will increase supply over the next few years. At the sane time, many other projects (generally outside the oil industry) have been undertaken which will reduce demand for oil (wind poower, wave power, nuclear power, improved fuel efficiency of vehicles, more energy efficient homes…). Most significantly, the rates of growth of many countries have been slowed by the price of oil, limiting the growth in demand for oil (and encouraging the use of alternative fuels). At $50 per barrel there is little incentive for the investments required, but at higher oil prices it becomes much more attractive to invest in existing fields (almost all of which still contain more than 50% of the oil originally in place). If the oil price is high, it becomes economically viable to increase the percentage of oil recovered.
on Dec 14th, 2008 at 8:29 pm
What is Shell’s status with regard to peak oil?
on Dec 13th, 2008 at 4:13 pm
Well written article Paddy. I seriously hope that Shell does get rid of its headquarters in London as indeed the amount of cost savings must be beneficial to the company. It will also reduce Greedy Gordon’e cut of the cake, so I expect him to kick up a fuss. That said, is there a requirement to have an “HQ” in the UK for some legal purpose? If yes, why not some sleazy office in Soho?
on Dec 13th, 2008 at 12:47 pm
Paddy, good story, I agree mostly. But two flaws: Upstream is now run centralised since about 10 years. Have you noticed the results? We used to have the best brains at the coalface (in the opcos) and could deal with local circumstances. The other flaw is that you think Shell has become more Dutch. Ha ha ha ha, the dutch have been ethnically cleansed many years ago and with the retirement of Jeroen, they will all have disappeared. Perfidious Albion has struck many moons ago and in the process brought in their american brothers. Don whatever his name was (predecessor of Louw as head HR in EP) gave many speeches in the late 80s and early 90s pointing out that the Dutch only were doing reasonably well in the engineering sides of upstream and downstream but Finance, HR, Marketing, Commercial etc i.e. where all the bullshitters were/are, were firmly in hands of the brits. He said so much more eloquently than me of course.
But other than that your story is fine. Just change the word central office to head office. It shows your age (I often do the same…)
on Dec 12th, 2008 at 2:48 pm
So now we know where the funding for the share buybacks, the dividends…and all those high capex projects came from… the name Robert Maxwell springs to mind
on Dec 12th, 2008 at 1:41 pm
A couple of years ago the cost-cutting measure was taken to close the London office of the investment team who handled the Shell Contributory Pension Fund (SCPF). The management of investments in this UK fund (by far the largest fund in the UK with 40,000 members, mostly Brits) was transferred to The Netherlands and merged with the team who looked after the Dutch fund. The actual day to day investment management is separate but there is now one Dutch based investment department where there used to be two separate departments in London and The Hague. It would be interesting for anyone examining the performance of the Dutch fund to compare and contrast it with the SCPF. The rules in Holland and the UK are of course somewhat different but I can’t see any reason, in principle, why one of the two funds (The UK one) would outperform the other (the Dutch fund). But I’m not an expert and I am sure that Shell will explain in due course!
on Dec 12th, 2008 at 12:42 pm
Refer the posting of the Reuters article. The spokeswoman could not say how much it would cost Shell to bring the fund from 85% to 105%. Apparently we have yet another ‘token woman’ in this position. No doubt with a cute smile and very friendly. Maybe I can help. It is very simple: the obligations are around 12 billion euros, so Shell will need to cough up something in the order of 2 billion euros to repair it all. Same magnitude as the fines and moneys that had to be paid after the reserves scandal. Perhaps this sweet ’spokeswoman’ should pick up the phone and call the pensionfund. They should know exactly Shell needs to pay!
on Dec 12th, 2008 at 12:28 pm
Dear Mussaint and Nowrooz, your postings warrant a short reply. Have no fear, I am not suffering and have my private finances taken care off and zero worries there. Mussaint, I believe that they dropped to 85% (under 105% all alarm bells start and they need to go hat in hand to the authorities and do things) because they overinvested in stocks. And this brings me to the point I tried to make: Shell was endeared some years ago to the MBA jargon of consultants and other idiot gurus and introduced a.o. ‘Olympic Targets’. You remember them: ‘citius, altius, fortius’ (faster, higher, stronger). Couple this to the preferred attitude as fostered by Brinded et all of ‘Promise is better than Performance’ and you have a recipe for disaster.
And all the old codgers are still around and looking innocent. They simply do not feel shame. And yes, I have sent a letter or an email two years ago to the pensionfund asking them why not hive off the surplus and invest that in super safe and dull bonds. The pompous reply was that I need not worry, should look at their track record, they employed the best professionals in the world, were way within the legal limits and basically told me politely to piss off and mind my own business, all was well and I should look at the long term. Unfortunately I don’t have a copy anymore.
And Nowrooz, I hope I sufficiently explained why I posted this chat? I am not moaning about my own pension, I indeed have more than enough. But if you still take exception: I noticed many postings from you on this chatbox. My question to you: there are a few billion people who are hungry every day and yet you are wasting your time on posting chats on Donovan’s site! Why don’t you spend your time better and relieve some of that suffering?
And Mr. Donovan, you seem to have a direct line to Wiseman. Perhaps you could ask him to confirm or otherwise the rumour I have picked up a few weeks ago that Shell in this credit crisis has borrowed money from the Pensionfund or made the Pensionfund invest in some projects. If that is correct, I would like to see the opinion of Mr Wiseman on the ethics of this. No doubt it is within the law, but is it ethical?
on Dec 12th, 2008 at 9:37 am
Shell Pensioner, stop moaning think about the pensionioners who haven’t got a private pension to fall back on.
on Dec 11th, 2008 at 5:36 pm
A quote from the blog at http://www.pacificenvironment.org/blog/
“We are struck time and time again by similarities between Shell’s activities on Sakhalin Island and the company’s current strategies in the Alaskan Arctic. Shell could easily write a textbook on how to break promises, give and take bribes, buy off scientists, employ divide and conquer tactics with local opposition, and emasculate environmental assessment processes.”
on Dec 11th, 2008 at 5:19 pm
“Shell Pensioner” - couple of points / questions. Firstly if the Dutch legal limit is to have 105% coverage how come Shell has got away with 85%? I am sure that many, many, pension funds of large companies are suffering badly due to the collapse of world-wide markets, not just Shell. (Agree that a shift to bonds may have helped, however, hindsight is such a powerful tool!!). I’m not sure that the pension funds are that bad compared to others, and anyway I’m sure you’re not suffering because the “coverage” has come down - no doubt your monthly pension paid has not dropped has it?
on Dec 11th, 2008 at 5:17 pm
Shell Pensioner
There is a number of things that you can do. First demand a comparison between the Dutch fund and the UK Fund. The UK Fund is presently around 100% funded - it was around 135% a year or so ago. The 100% is OK but not sparkling. Your fund’s 85% is not good and you are entitled to know why.
Secondly demand to know why the leaders of Shell have created a super Pension fund which allows them to have seven figure pensions. The sheer greed of this defies belief - but then greed breeds greed doesn’t it?
Thirdly you are entitled to know, as are all the UL Pensioners, how Shell chooses those that run the Pension Funds. Here in the UK the head honcho of the Shell Contributory Pension Fund is the millionaire Clive Mather. He was the guy who walked away from his assignment with Shell Canada with not only $CND10m in his back pocket but a commensurate Pension for life. Can we really trust such an individuals to look after the rest of us - let alone the poorer Pensioner on less than £10K a year?
It is all food for thought but if we give in we are dead. We must fight on!
on Dec 11th, 2008 at 1:37 pm
I just received a letter from Shell Pensionfund (dutch) that the coverage has dropped to 85% (Dutch legal limit is 105%). About a year ago it was around 170% I believe. Some amateurs have been gambling with the fund and now there is a huge shortfall. I still have the letters of the past where they were congratulating themselves with the good management and strategies… And no doubt cashing in big bonusses. Why did nobody convert shares to bonds when there was this enormous surplus? That would be good husbandry. But like other shell functions, it always has to be better and more. First the stupid reorganisation of the nineties, then the reserves scandal, then the projects scandals, now the pensionfunds. And as a retiree there is nothing one can do.
on Dec 8th, 2008 at 11:35 am
Musaint
Don’t be silly! Haven’t you seen Shell’s latest Shell World magazine? On the cover we have the claim “Smiling customers, every site, every visit, every day”. That’s the rhetoric. The reality is, as ever, totally different.
on Dec 8th, 2008 at 10:35 am
I think it is unfair to point the finger at Shell stations only. Last Thursday for example I failed to ge windscreen wash from two Total garages near where I live. So I think it unfair to target Shell (do they actually own these garages?) as it would appear many others fail to keep their stocks updated.
on Dec 8th, 2008 at 9:50 am
Retail is detail – as the saying goes. Last year I reported that within 24 hours of the really cold weather arriving my local Shell petrol station had run out of de-icer. Roll forward a year and exactly the same has happened. A phrase about breweries and piss-ups springs to mind about the shower that runs Shell Retail in the UK these days…
on Dec 7th, 2008 at 6:45 pm
Mr Donovan. Like many colleagues I enjoyed your email discussions with Richard Wiseman. His ego needed deflating. Are you aware that it was his blunder that allowed you to grab the domain name for Royal Dutch Shell Plc? He boasted in an article in ManagingPartner magazine (10 October 2005 Volume 8 Issue 5) that he personally headed the legal team handling the unification of the group following the reserves debacle. Blowing his own trumpet Richard described himself as the “conductor of the legal orchestra”. His high regard for himself, verging on self-worship, is evident in his emails. Unfortunately it is unwarranted. In addition to the domain name blunder there was also a major cock-up on tax penalties on UK shareholders in Royal Dutch Petroleum. The tax blunder that also generated a heap of negative publicity can also be blamed on the incompetent orchestra leader. What do you do with a person who can’t play his own instrument? Give him a stick and call him a conductor.
on Dec 6th, 2008 at 7:17 am
MUSAINT, we will make the declassified documents available to the news media. Shell knows th documents are authentic and has not challenged this fact. We will be pursuing the Shell Al Yamamah oil-for-arms story as will become apparent.
on Dec 5th, 2008 at 8:11 pm
I know that you were involved with the Shell pensions “system” at one time Paddy. I am absolutely sure that your facts are correct, so have Shell ever commented / responded to the basic fact they are not looking after their pensioners? Couls Mr. D. write an email aka the “Shell Saudi” story? Better still, if these facts can be backed up with documentation, why not a letter to the tabloids?
on Dec 4th, 2008 at 11:29 pm
So what is the view on Mark Williams appointment? So much for the rumours of the demise of a downstream executive director position!
on Dec 1st, 2008 at 11:20 am
Each to his own indeed! Having lived in a few places where freedom of speech is, shall we say, “limited” I’ll never take our freedoms for granted!!
on Nov 30th, 2008 at 11:35 pm
Paddy Briggs: Musaint The conventional prejudices of the privileged of the saloon bars of leafy suburbia and the blue shires – and wrong in just about every detail ! Heigh ho…
eh !
on Nov 30th, 2008 at 6:40 pm
Each to their own view, but, I will take bets from all and sundry that no Government will go ahead and lead the way viz renewables / oil shale etc without a desire to benefit themselves and not mankind as a whole. As for the UN, don’t get me started.(P.S. don’t frequent bars!!)
on Nov 29th, 2008 at 11:00 am
Musaint
The conventional prejudices of the privileged of the saloon bars of leafy suburbia and the blue shires – and wrong in just about every detail ! Heigh ho…
on Nov 28th, 2008 at 12:21 pm
Nice idea to leave it to the likes of the UN, unfortunately they are very often as useful as the present Arsenal defence. Even if left to a Government they would each be strongly tempted to go the route that most proffers their own selfish desires (e.g Greedy Gordon would want it only if he could tax the hell out of it, Nigeria only if they could get the revenue into their overseas bank accounts). Apart from international oil and some Arab states (who are unlikely to be too interested), no Government / person will have the skill / money to go into some of the renewable areas that oil companies will go into. For sure when oil prices creep back up over many years as peak oil etc. is reached / passed then oil shales etc. will very definitely become viable. Then and only then will Governments truly step in for the pickings.
on Nov 28th, 2008 at 10:42 am
Fully agree. My guess is that oil sands will have a significant part to play along with all the other energy sources - sustainable and renewable. I want to see global energy supply and demand co-ordinated at the very highest level – probably by a powerful UN agency. It has to be outside of the commercial world that major strategic decisions are made. Shell and the rest step in and out of Renewables and non-traditional sources at the drop of a hat (or an oil price!). You can’t leave it to them…
on Nov 28th, 2008 at 10:17 am
Paddy, fair comment - and since all the majors follow the same policies to a large extent we have a never ending cycle of boom and bust. However, it’s worth remembering that BP was looking at the oil sands 40 or 50 years ago, recognising that they contained more oil than was known to exist in the Middle East. At that time they were sub-economic and technically challenging, but even after the oil shock of 1973 nobody tried to exploit them on a large scale. On a small scale oil sands are economically viable, but on the huge scale envisaged until a few weeks ago they may never be viable. On a small scale the environmental impact is manageable, but on larger scales the impact is unsustainable - and in terms of emissions of CO2 and other pollutants the environmental impact is comparable with China’s use of coal for power generation.
on Nov 28th, 2008 at 9:54 am
It’s all knee-jerk stuff. Oil price rises – oil sands become essential. Oil price falls – we can do without them. All in the space of a very few months. At the same time Shell’s self-congratulatory (but asinine) corporate advertising tries to persuade us that they are innovative and have a long term multi-energy view. As I have argued recently at a strategic level you just can’t leave it to the Shells and the BPs of this world to make energy investment decisions in the public interest. They are far to influenced by the events of the short term - and their directors’ wishes to improve their scorecards and compensation!
on Nov 27th, 2008 at 4:01 pm
Shame about the oil sands: just when Shell thought it had solved it’s reserves problem by getting the SEC to change the rules, the falling price of oil has wiped out the economic case for the new oil sands projects…the capex of the existing projects is sunk, but the opex of these projects is also astronomical (in both cash and environmental terms)…how long the existing projects continue is anyone’s guess. Are oil sands going to go the way of the huge open cast lignite mines/power station projects in Germany??
on Nov 24th, 2008 at 6:06 pm
Agree, Shell HR is lousy and they are liars!
I am an experienced Hire and less than 2 years, have had 2 job changes! It is the WORST corporate culture ever seen. The HR come and give conflicting statements, even if all are in same location - Shell Center.
Advise: DONOT JOIN SHELL - Shell treat external experienced hires BADLY, especially ones who question the rife cronyism and corruption!
Interestingly, one of performance measures in CEP (a leadership rating measure) is ‘Relationships within Shell’ - read that as ‘degree of closeness established’ with cheats and liars in the Top management.
Cheating, Lying and Bullying is in Shell’s DNA. I heard people are often Bullied and the Bully stays in Shell and victim forced to leave. That is how Shell manages Talent pipeline.
on Nov 23rd, 2008 at 1:44 pm
Well said Paddy. The entertainment and some very serious matters are all in the pipeline.
on Nov 23rd, 2008 at 11:43 am
Curios that the “Fan” should want to be entertained on this site! I wouldn’t have thought that it is the purpose of the site to cater for such short attention spans. I think that over the past few weeks the site has come even more into its own. Some very good chat here, as well as the fine selection of news stories that the Donovans do for us. Even my own “blather” (not hiding behind a pseudonym!) has been well received judging by the positive Emails I have received - including some confidentially from surprising sources!! But I don’t aim to entertain – try “Strictly Come Dancing” if that is what you want…
on Nov 23rd, 2008 at 10:00 am
Fan of the site? Nonsense. It is obvious from the rest of your comment that you are flying under false colours.
on Nov 23rd, 2008 at 5:54 am
I am really a fan your site, Donovan, but it has become stale and boring. No news, nothing. Briggs continues to blabber on - no idea of the real issues. Ditto your other guests. Get some fresh stuff. This site is becoming obsolete rapidly. I used you for my research, but your no good to me anymore.
on Nov 22nd, 2008 at 9:39 am
Musaint: I agree that many of the projects have a long lead time and you may well be right in your assertion that the oil price will have risen when these high capex projects come on stream. But the same arguments were being made in 1986/7 in the North Sea, and it took 20 years for the oil price to recover. In the meantime, huge capital investments are required, which have to be funded - perhaps no problem while interest rates stay low and money is easy to find. But it will not be possible to maintain the quarterly figures, dividends and buybacks on which the market is focussed, if the oil price stays low.
on Nov 21st, 2008 at 6:29 pm
The speed with which some projects take to get to first oil etc. because some rather poor project management skills in Shell, they should be OK as by then the oil price may have come back up again.
on Nov 21st, 2008 at 6:18 pm
Looks like Shell bet the farm on sustained high oil prices, while Exxon waited… How long can Shell survive with oil prices at ~$40/bbl? Many new projects were being screened at $50-$70/bbl prices. Increased prices will return, but with a deepening recession it may be a few years before we see $100/bbl again. In the meantime, where will the cash for the dividends, buybacks, and investments be found?
on Nov 20th, 2008 at 7:16 pm
Ed Cooks of the FT paying compliments to Linda Crook…
on Nov 20th, 2008 at 3:04 pm
Ed Crooks of the FT: who are your sources? Claiming Linda Cook is admired for her knowledge, I wonder which knowledge? She may have some dirt on many because she surely does not have great know-how on the business itself. She can smear many for the old Tejas Gas debacle. Believe me, she is the most senior ‘token women’ in the business world. And Brinded used to be a nice guy but the last few years he does not like anyone holding a different opinion. Those who do are removed swiftly. He has a huge brain but at the same time is the ultimate micromanager in the whole world. He also is a true believer of optimism and promising more than one can deliver. He has done so since his days as MD Expro. Never once did he meet his business targets… So, mr Crooks, better check your sources more carefully!
on Nov 19th, 2008 at 8:08 pm
At $30 - $50/bbl many deepwater projects are likely to be still profitable (even afetr the likes of Greedy Gordon & corrupt Nigerian officials have taken their cut). Others may wish to comment on the other “White Elephants” you mention. My humble view is that not all will be turkeys as the service industries / rigs / construction yards now have to drop their rates to reflect this present economic environment and thereby lower the break-even $ price.
on Nov 19th, 2008 at 10:33 am
It looks as though Brent is about to fall through $50… Tar Sands? GTL? Shale Oil? Deep Water? These might be long term investments, but in the short term they are “white elephants” - the days of record oil company profits are now behind us.
on Nov 17th, 2008 at 5:51 pm
If Total has $15bn to spend on a friendly takeover, they should perhaps visit The Hague… with Shell’s US liabilities now under control, and friendlier relations between France and the US, Total’s historical concerns about such a move would seem to have been addressed…
on Nov 13th, 2008 at 9:55 am
It’s noticeable that some of the large movements in Shell’s share price over the past couple of weeks involve relatively small quantities of shares being traded - are Shell’s repeated share buybacks being used to (mis) lead the market? With oil below $60 there will be far less free cash available for this kind of market manipulation.
on Nov 13th, 2008 at 9:16 am
Anyone who thinks that the euphemism “reclassification” somehow justifies the fraud that was perpetrated on the market should read the attachments to the depositions published on this site.
The intention throughout was to paint a rosier picture of Shell’s reserves in comparison with those of their competitors than could be justified by the facts (Shell’s primary competitors had to work with SEC rules too).
The fact that Shell provided incentives and bonuses to those who complied with Watts’ directives, and suppressed the views of their own reserves auditors should be evidence enough. Walter vd Vijver summed it up when he said that he was “sick and tired of lying”
Annual reports are supposed to be prepared according to a unified set of rules to allow comparisons to be made between companies. Deliberately inflating a company’s asset base (whether its oil in the ground, widgets in the warehouse, or cash in the bank) is fraud.
on Nov 12th, 2008 at 10:09 pm
There was a reserves scandal. It wasdescribed by the US SEC as a securities fraud. The fraud by Shell executive directors cost Shell around $850 million in fines by regulatory authorities, class action settlements, and legal costs of suing parties. Add on Shell’s own legal costs and the whole bill would probably amount to over a billion USD. Of course this is not a major problem for an oil giant making obscene profits.
on Nov 12th, 2008 at 9:11 pm
uscitizen - there is no relationship between remuneration level and “more reserve scandals”, your logic escapes me. Massive salaries (in return for competence??) did not prevent genuine scandals at Enron,Worldcom, Parmalat. By the way, there was no reserves scandal; there was a reserves reclassification.
on Nov 11th, 2008 at 12:22 pm
USCitizen
“…as usual your logic mystifies”.
Not sure what this gratuitous insult adds to your argument. I doubt that my logic always mystifies – even I would struggle to be that opaque!
“You need to do some research…”
Research what? I am quite aware that there has been a spiral of corporate compensation that “justifies” the Shell top executive salaries. I don’t need to research that – it’s in the public domain. Doesn’t make it right, though – and that’s my point.
“To say that you can get a CEO for Shell, one of the top 5 companies in the world for $1,500,000 / year is ludicros. Geez, you are talking about a $355 billion dollar a year company, you will not find any one qualifed to run this company for that amount of money”
RUBBISH! The trap you fall into is to assume that because other companies pay ridiculous compensation therefore Shell needs to as well. Why? Barack Obama’s salary as President of the United Sates will be only $400,000. Doesn’t seem to have put him off seeking the job! I want top people to be decently remunerated but I have little doubt that the attractions of running Shell at around $1.5million a year would be sufficient to attract some pretty good people. The Dutch companies you refer to seem to do all right despite being “paid on average only about a quarter of what US CEOs make”.
“Perspective is important dude!” With respect you seem to have only one perspective, that of the harlot through the ages. “If I didn’t do it someone else would”. My perspective is somewhat broader than this – and a lot more morally robust – Dude!
on Nov 10th, 2008 at 11:32 pm
Paddy - as usual your logic mystifies. You need to do some research before making comments like;
“As far as Director’s compensation is concerned the main driver of the obscene remuneration of Shell and other oil companies directors in recent times has been the Banks and the other financial institutions. This led undoubtedly to a spiral across the corporate sector as a whole. Hopefully this will now all change! Mark Moody-Stuart was paid £1m in 1998 – I think that you could find a decent CEO for Shell today at this level!”
Shell execs are not paid nearly the “obscene” numbers that other companies pay their execs. You will not find Shell execs getting 30-50 million dollars/year. To say that you can get a CEO for Shell, one of the top 5 companies in the world for $1,500,000 / year is ludicros. Geez, you are talking about a $355 billion dollar a year company, you will not find any one qualifed to run this company for that amount of money, which I know is a huge amount of money to folks like us, but not for folks who work at that level. You want more reserve scandals, hire incompetency at that level. The issue has happened in the past granted, but it had nothing to do with competency, rather principles. You try to hire someone to run Shell and tell them their salary is $1,500,000, you will get laughed at! Do some research on what people get paid for jobs like that, dial it back some and you get our salary structure - which is not obscene at all for this size company.
Check out this data from “By the Fault” blog - In 2005, the Dutch economy ranked 16th in the world, with a GDP of €505 billion. Despite running world-class companies, Dutch CEOs are paid on average only about a quarter of what US CEOs make. And the Dutch have come to believe that that is too much. And so Dutch citizens are pressing lawmakers to do something about it.
Perspective is important dude!
on Nov 6th, 2008 at 11:28 am
MUSAINT
Thanks for your message. I’m looking for a new paradigm (sorry for the word but it works I think!) which includes the following elements:
(1) Energy supply and demand managed as a coherent whole within which energy policy has a long term strategy. This needs international cooperation and strong Government and extra Government involvement. This cannot be left to Shell and the other multinationals whose aspirations are much shorter term and whose whole raison d’être is hydrocarbon based.
(2) Investment policy to be determined at the same level as Energy policy, of which it is of course part. Investment cannot be left to the vagaries of private corporations often whimsical priorities (often compensation driven).
(3) To put above into effect there has to be a far greater involvement on the part of Western Governments (US and Europe) in energy policy – they should be directing far more the key decision making of Shell and the rest.
As far as Director’s compensation is concerned the main driver of the obscene remuneration of Shell and other oil companies directors in recent times has been the Banks and the other financial institutions. This led undoubtedly to a spiral across the corporate sector as a whole. Hopefully this will now all change! Mark Moody-Stuart was paid £1m in 1998 – I think that you could find a decent CEO for Shell today at this level!
on Nov 5th, 2008 at 6:07 pm
“Taking on the oil barons” - Paddy some reasonable points you put across. However, Obama will for sure fall away from some of his promises to do this that and the other (they all do). As for the usual tax oil companies due to their huge profits I just cannot agree with you on that. You know that to continue to try and find new oil costs vast sums of money, e.g. deepwater wells >$30 million which if dry …… Just cut the taxation on all oil products might help more. You also state that the Shell top man gets 10 times more than his predecessor of 10 years ago. That’s the norm I would expect for most companies after a period of ten years (Shell top boys are not high in the salary league). You have to pay to keep the top people even if you think they’re of limited use (vdVeer generally has had good reporting in the papers for turning Shell around and his successor is also well rated by the papers in the UK. As for Global Warming, well this summer in the UK has been bloody awful - cold and wet, so bring on global warming I say.
on Nov 4th, 2008 at 8:16 pm
Guest - you raise the fundamental question that is so often missed in discussions of resources such as the tar sands. That is what is the relative “value” of “pristine environment” versus “economic benefits” - and we can add “social” to complete the classic SD deabte. The Alberta, and in fact Canadian, economy overall has been well served by the hydrocarbon extraction business for many years - however there are legitamite questions as to the “cost”. Governments have failed to provide strong balanced rules that lay out the trade off that is expected. Governments are the tool of the people who have to provide this “policy” input. With no balanced framework for industry to be held within (including for example limits on water use, social support requirements in small communities or…) we see industry push their view of acceptable. The fact that Shell “committed” to a GHG target for its first tar sands project of “5% less that the displaced imported crude” (on a wells to wheels basis) is lost in all the projects with no commitments. Likewise water reuse commitments and socail investmnets are quickly dismissed due to a lack of overall vision. The Alberta Government has begun a land use framewrork process that is designed to create policy rules on the trade offs and limits. Perhaps this is a limit on total amount of projects - time will tell. Some will say this is all too little too late but, in my view, we must get the framework fixed. There are many benefits and many costs - an all or none approach from either side of the spectrum is not tenable. We need to start working together with parties on all sides of the issue to seek a middle ground. The world will continue to produce and consume hydrocarbons for a significant time yet. Canada - both conventional oil and gas and oil sands will be part of it.
on Nov 4th, 2008 at 8:44 am
Canadian: While your comments about the energy balance and CO2 emissions are justified in some cases, much of the tar sand/shale deposits are deep and require huge energy inputs to develop/extract/process. I note that you did not respond to the most egregious failing of the tar sands developments, that of environmental impact. What price a pristine environment?
on Nov 4th, 2008 at 7:50 am
Notice that Safety was low down the list of priorities during Gordon Brown’s visit to the Pearl GTL plant, no Safety Helmets or any sort of PPE. Andy Brown should be given a rocket for that.
on Nov 3rd, 2008 at 6:24 pm
Guest - Pembina Institute (hardly a friend of the tar sands)has suggested that as little as $1 to 3 / bbl would be all that it would cost to deal with CO2 emissions. We can argue if amount is right but even at $10/bbl the delta against the base breakeven cost of development is still within error range. My view - can have both. By the way comments stating no net energy value are factually challenged.
on Nov 3rd, 2008 at 2:03 pm
have you heard of someone named Harry Lowe who presented a speech on the 10th of Nov in Nigeria? On the Climates and it Effects on the Environment.
on Nov 3rd, 2008 at 8:54 am
In calculating the breakeven point for the tar sands, what price do you put on the environment? And what price on the CO2 emissions from the extraction/refining process? Production of hydrocarbon fuel from tar sands requires the use of almost as much energy as is contained in the fuel produced
on Oct 31st, 2008 at 11:09 pm
Musaint - depends on what you mean by “break even project costs”. YTD operating costs alone are in the $35/bbl range (for Syncrude - largest producer). Clearly if you are looking at new projects and want a return on capital break even will be much higher. Current view here is that new projects probably require greater than $70 oil to break even. Recent cost overruns would suggest that a number nearer $100 might be more appropriate.
on Oct 31st, 2008 at 11:25 am
Is the break-even project costs for oil sands production still around $30/bbl ??
on Oct 30th, 2008 at 8:20 am
Top of Voser’s agenda must be to hive off the Downstream. Refineries to a Refinery specialist company; Marketing as a new separately traded and customer focused Shell branded business. The split of British Gas into an upstream and downstream model (BG and Centrica) is the model. Royal Dutch then concentrates on what it does best - upstream oil and gas. Oh, and all the silly Renewables gets the boot as well.
on Oct 29th, 2008 at 9:31 pm
Now that the first domino has been placed, who will replace Routs? Isn’t he due to retire around year end?
on Oct 29th, 2008 at 8:07 pm
Surprised Peter got the job
on Oct 29th, 2008 at 4:45 pm
Voser will succeed Jeroen v.d.Veer. Great relief it is not that silly woman Cook or the mother of all micrmanagers, the man with the facial hair, Brinded.
on Oct 28th, 2008 at 4:12 pm
MUSAINT: When I reached 40 unbroken years and I’m still working, the milestone was not even mentioned at all. I pointed out the milestone to Head of HR in the region I work and he just said Shell don’t award 40 yrs service which wasn’t my question to him anyway.
on Oct 28th, 2008 at 8:30 am
The article discussing teh relative sizes of BP and Chevron omits to say that the market capitalisation of Shell is currently $134bn - Shell, BP, and Chevron are now essentially the same size and each is less than half of the size of Exxon. Which two of these three might we reasonably expect to merge?
on Oct 27th, 2008 at 5:36 pm
“uscitizen” - you infer that I (and most others) post on this sort of website only when we feel wronged. In my case this is incorrect as I defend Shell far more than I attack them (Mr.D could confirm this or just look back in the archives). You also state that you do not get to see why the person complaining is upset or if their comments are based in reality. I believe in my posting I clearly gave my reason for complaint and I would ask you to check with many other E&P expats if they got a final thank-you (email, verbal, letter, phone-call etc.) from their bosses in The Hague upon retirement. I certainly did not after 30 years and ending up in a senior position. So my point that Shell regards its staff as its greatest asset most certainly does not apply to those about to retire. “Staff is our greatest asset” remains about the worst Shell HR driven statement ever - its there to look good. To say that my posting is dishonest seems somewhat over the top - all statements are what happened to me and what I feel about a poor HR feeley-feeley statement. Shell is a reasonably good company, it does provide a great deal of help to communities it works in, but, some aspects regarding its own staff are poor. Pensions for some are awful (see Paddy Briggs articles on this).
on Oct 27th, 2008 at 4:08 pm
Musaint - it is a well proven fact that most people who post on these type sites feel they have been wornged and will post about that. What folks do not get to see is why they are upset or if the comments are based in reality. You will not be able to discern that about me either. But I am always telling people they must also talk about what they are proud of, I am proud of Shell. I have worked here over 28 years and see them treat people as their number one assett over and over. We take care of people during rough times, like a Hurricane. We took care of our peoples needs and the communities needs. So for you folks you wander to this site because you are mad about gas prices, remember this, Musaint has some reason to feel the way he does, what is it? I respond to his post by saying it borders on dishonesty and does not reflect my company! Ps I am not a Vice president, rather a working hand at a refinery!
on Oct 26th, 2008 at 12:20 pm
There is little modern case for Shell, BP or the rest to be involved in petrol retailing or much of the rest of the marketing “Downstream”. There are no vertically integrated benefits any more - every internal transaction is done at a product market value transfer price. So it is quite true, as MUSAINT says, that there is little money for Shell in the oil marketing business – and lots of hassle. Shell should get the hell out of it and leave it to people, like Tesco, who know what they are doing.
on Oct 26th, 2008 at 9:43 am
People and especially the press (headlines, even if nonsense, can sell papers) who believe that Shell et al make their vast profits at the pump are stupid. Why does this story forever get printed. The pumps produce a very small amount of profit for oil companies. As for Greedy Gordon blaming them he is a moron. He taxes at the wellhead, at the pump and adds VAT on - he is the person to blame for pump prices.
on Oct 24th, 2008 at 6:45 pm
Not too keen on “Mission Statements” - they often are there just to pay lip service to shareholders or “powers-that-be”. Just be honest and realistic - and that includes this site. I remember Shell clearly stating that “people were their greatest asset” - I have to unfortunately admit this was / is total bull-shit. After 30 years in the company and not one word of thanks from Central Office (telephone, fax, face-to-face, email etc.) such a statement from Shell is verging on typical HR dishonesty.
on Oct 24th, 2008 at 5:49 pm
Great to see that oil prices are now at $63/bbl and falling - great for just about all I reckon. I wonder what Shell’s screening criteria is now? (Anyone in Shell going to supply this?!?!) I remember when it was 10-15-18 (Low-Medium-High) in scenario planning, and some projects still were tested at $7/bbl. Halcyon days!!
on Oct 24th, 2008 at 12:01 am
We are delighted to announce that the website is now operational on a new more powerful dedicated server, which will speed up site function and hopefully provide a reliable service. There is also an integral News Feed automatically updated with breaking news about Royal Dutch Shell on a 24/7 basis. All services including free access to a library of over 22,000 Shell related articles continue to be available free.
on Oct 23rd, 2008 at 4:31 am
Musaint, do you know how to breed corruption? Ask those involved in the Corrib project
on Oct 21st, 2008 at 10:20 am
I see the corrupt Nigerian Government is yet again raising taxes and trying to get great cuts in the profit of oil companies (mainly under the guise of the mismanaged and corrupt NNPC). You can bet that in 2 years time or so there will still be no money to spend on communities, schools, roads, basic welfare etc etc. Why - because once again the fat greedy corrupt bastards that are the cancer of Nigeria (Government, NNPC, DPR, State Governors etc.) have all pocketed the countries oil revenue in their foreign bank accounts. No doubt the likes of the Chinese will come in and bail them out in return for oil. Nigeria could be such a great country but are screwed everywhere by corrupt officials.
on Oct 21st, 2008 at 10:16 am
What a cool site.
on Oct 21st, 2008 at 9:10 am
You site very good and interesting . Thanks
on Oct 20th, 2008 at 11:22 pm
Very interesting site. Hope it will always be alive!
on Oct 20th, 2008 at 5:58 pm
why don’t you have iraq oil system
on Oct 20th, 2008 at 9:19 am
E&P staff cutbacks in Canada, Nigeria, Assen, Rijswijk, Aberdeem. Does this mean that Shell has finally accepted that its role has been usurped by the NOC’s?
on Oct 19th, 2008 at 4:48 pm
I have read your mission statement and the Wikipedia article. Your website provides an invaluable service to Shell stakeholders by holding Shell senior managers to account. Keep up the good work.
on Oct 17th, 2008 at 9:50 pm
Does anyone know how big the staff cuts in Aberdeen and Assen will be? Have the staff been notified yet if there staying or going?
on Oct 17th, 2008 at 5:37 pm
We are not all crooks you know…
on Oct 17th, 2008 at 3:37 pm
“Another Shell card scam” - not the fault of RDS. In most of the cases that I’ve seen recently they are a result of corrupt workers at Shell petrol stations - often Sri Lankans.
on Oct 17th, 2008 at 3:33 pm
I wonder how goodd the package is this time round. Rumour has it that it’s not too good.
on Oct 17th, 2008 at 1:10 pm
Guest. I hope you are correct
on Oct 17th, 2008 at 11:11 am
There are rumours of imminent large scale cutbacks in Rijswijk - good news for those who have been waiting for a package!
on Oct 17th, 2008 at 10:31 am
Any updates on the cancellation of Shell’s Canadian tar sands projects? With the current financial crisis and oil prices in free fall, these high capex, high environmental impact projects must be marginal at best
on Oct 16th, 2008 at 11:34 pm
Hey, nice site you ve got!
on Oct 16th, 2008 at 4:43 pm
What happened to Sibir today? Down 33%? Anyone know?
on Oct 16th, 2008 at 9:57 am
“Technical Glitch” sounds like a “cock up” to me.
on Oct 15th, 2008 at 3:16 pm
Due to a technical glitch when carrying out security upgrades to the website, all postings on the new version of Live Chat had to be deleted. However, they can all be read by running a search on our internal search facility for “Live Chat Postings”, then select the article: LIVE CHAT POSTINGS 19 SEPT 2008 UNTIL 10 OCTOBER 2008