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Financial Times: Shell acts to improve on safety record

By Ed Crooks, Energy Editor
Published: March 15 2007 02:00 | Last updated: March 15 2007 02:00

Royal Dutch Shell has created a new global health and safety function and launched a safety programme after 37 employees and contractors were killed in accidents and other incidents last year.

This was one more than in 2005 and a much higher number than that of BP, which has been strongly criticised for its safety performance following the deaths of 15 people in an explosion in its Texas City refinery in 2005.

BP lost only seven people last year, down from 27 in 2005, which included the Texas City deaths.

The Shell figure emerged in the company’s filing to the US Securities and Exchange Commission.

That also showed that Jeroen van der Veer, the chief executive, had his bonus rate cut.

Mr Van der Veer was paid a total of €5.4m (£3.7m) for last year, down from €5.8m in 2005, after the company failed to perform as well as the previous year against its remuneration targets.

Those targets include health and safety performance. His bonus for last year was 1.2 times his salary, well short of the possible maximum of twice his salary and down from 1.25 times salary in 2005.

Of the four performance measures, Shell’s performance on one – cash flow – was excellent.

On another – sustainable development, including factors such as carbon dioxide emissions – it was on target.

The weaker measures were total shareholder returns and operational excellence.

In shareholder returns, assessed over a three-year period, Shell has performed badly, coming fourth in its peer-group of the five “super-major” integrated oil companies, the others being ExxonMobil, BP, Total and Chevron.

In operational excellence, Shell’s record was mixed, being affected by the security problems in Nigeria.

Those problems were responsible for nine of last year’s deaths through kidnapping and assaults. They also caused Shell to lose 180,000 barrels a day of production.

Of the 37 deaths last year, 35 were of contractors and just 2 of Shell staff.

Nigeria was the most dangerous country, with 17 deaths in total.

The Sakhalin-2 project off the far east coast of Russia has also suffered a relatively high death rate.

About 40 per cent of the total deaths were in road accidents.

The number of fatalities was only half the level of ten years ago, but Shell said it was still “unacceptably high”.

It has appointed Kieron McFadyen to the new role of global vice-president for health, safety and the environment. Its new safety plan addresses issues such as the complexity of its safety regulations and relationships with contractors.

*Indago, the oil and gas exploration and production company, plans to pay a special dividend of 60p a share following the sale of all of its production assets and half its exploration assets in Oman to RAK Petroleum of the United Arab Emirates for £194m.

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