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The Independent: Movement at Shell

The Independent: Movement at Shell

30 April 04

Like a supertanker in mid-ocean, it takes an awfully long time for a bureaucratic monolith such as Royal Dutch/Shell to change course. But yesterday it showed the first signs in months that someone may actually have their hand somewhere in the rough vicinity of the tiller. The share buy-back was a no-brainer for a business gushing cash on the back of $34 oil. The decision to run the company for value not volume is also a step in the right direction.

Shell is even beginning to grasp the rudiments of what makes for good communication. A week ago the company was in an agony of indecision over whether to put the acting finance director up to speak to journalists and analysts about the first quarter results, which, incidentally were in some respects better than those posted by BP three days ago. To everyone’s relief, he was eventually fielded, along with the chairman Jeroen van der Veer and the head of exploration and production, Malcolm Brinded, the one man who has looked in charge of his brief as the sorry saga of the missing reserves has unfolded.

Yet Shell is scarcely headed for calmer waters. The threat of criminal charges from the US Justice Department looms large, and who knows what damage the former chairman Sir Philip Watts could wreck on the current board if and when he chooses to break cover.

The new strategy of focusing on projects which offer a short-term payback may buy off investors for now. But it does not provide a solution to Shell’s underlying problem, which is that for a very long time it has failed to replenish its reserves at the same rate as its competitors, even with the “leave no stone unturned” approach of its former chairman. In the short-term Shell will flatter to deceive as those 4.35 billion barrels of unbooked reserves are added back to the proven category. Yet as we all now know, Shell’s motor is running with the tank only half full.

The company has yet to convince the outside world than it can drag itself into the 21 century. For all the new chairman’s promises to accelerate the review of corporate structure, it remains far from obvious that the Royal Dutch half is as keen as Shell Transport and Trading on a unified board. The supertanker is turning, but it may take an awfully long time to show.

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