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Funeral in Berlin for many of Shell’s top brass

May 28, 2009

Senior jobs are on the line at the oil company as the incoming chief executive unveils an efficiency drive

Up to 200 Shell executives from around the world flew to Berlin this week for an unusual two-day meeting.

The gathering, which began on Tuesday, offered a final chance to bid farewell to Jeroen van der Veer, the mild-mannered Dutchman who has steered Shell through some rocky times over the years. The chief executive is due to retire next month but the mood was hardly celebratory, for his replacement, Peter Voser, has wasted no time in making his mark.

The executives were also in Berlin to hear Mr Voser outline his plans yesterday for a radical overhaul at the world’s second-largest listed oil company. This will involve thousands of job losses, including many of their own.

Mr Voser, Shell’s chief financial officer for the past five years, has had plenty of time to prepare for this day. A drive to slash costs and boost efficiency by streamlining and simplifying the organisation formed a key part of his pitch for Mr van der Veer’s job.

In the past few years, Shell’s reputation – along with its share price – has suffered from a series of lengthy delays and budget overruns on huge deals such as the $22 billion (£13.7 billion) Sakhalin-2 project in Russia and the Pearl gas-to-liquids plant in Qatar.

In response, Mr Voser yesterday laid out a detailed plan to tackle these problems. “The industry, and Shell, faces considerable challenges, from high costs, volatile energy prices, and competition for new projects,” he said.

His solution is to follow in the footsteps of ExxonMobil, the industry leader, by creating a separate unit, Projects and Technology, responsible for masterminding large-scale projects with the aim of cutting costs. Matthias Bichsel, who like Mr Voser is a Swiss national, has been appointed to lead this division.

Mr Voser has taken the knife to thousands of jobs across Shell’s middle and senior management in a dramatic drive to slash costs and boost efficiency by merging three core divisions and cutting other regional businesses.

In many ways, the shake-up completes a transition that began in 2004 after a scandal surrounding the misreporting of Shell’s reserves of oil and gas, which highlighted concerns about the Anglo-Dutch oil group’s opaque decision-making structure.

It has also thrown up some telling power shifts within the organisation. Malcolm Brinded, Shell’s British head of exploration and production, who was once tipped as a rival to Mr Voser for the top job, will now lead Upstream International. This is one of two new businesses that Mr Voser has spun out of Shell’s Gas and Power, Exploration and Production, and Oil Sands businesses.

To ease decision-making at Shell – which has always been known for its “collegiate” approach – Mr Voser has decided to slash the number of executives who serve on the group’s board of directors from five to three.

One space opened up this week with the abrupt departure of Linda Cook, the American Gas and Power chief, who is the most high-profile victim of the reshuffle. The retirement this year of Rob Routs, Shell’s downstream boss, opened up another seat.

Under the new structure, Mr Brinded will continue to sit on a trimmed-down board along with Mr Voser and Simon Henry, Mr Voser’s replacement as chief financial officer.

Mr Voser claims the restructuring “will increase accountability in the company and improve Shell’s performance on delivering new projects and developing new technologies”.

In another move that reflects the growing importance oil companies attach to building relations with the US Administration of President Obama, a small, dedicated unit based in Washington has been created to oversee relations with the Government. This unit will be headed by Roxanne Decyk, Shell’s director of corporate affairs and sustainable development.

While the restructuring is likely to affect almost every one of the 110 countries in which Shell operates, the group’s headquarters in The Hague is expected to be worst hit.

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