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Shell’s shake up


Last updated at 10:47 PM on 27th May 2009

Peter Voser is determined to shake the functionaries at Royal Dutch Shell out of their sleepyeyed lethargy. 

In an email to his staff yesterday, the oil giant’s CEO-elect described his firm’s organisation as too complex and ‘too consensus-oriented’. 

Internal costs are twice what they were in 2002, while the oil price has more than halved in the past year. Jobs will have to go – perhaps in the thousands. 

Painful though it will be, Voser’s sweeping re-organisation is long-overdue. Instead of lumbering along like a government ministry, Shell must show greater dynamism. 

In a low oil-price environment, the need to strip out layers of management and costs is that much more urgent. Tony Hayward embarked on a similar process after taking BP’s reins two years ago. Shell is well behind the times. 

As Voser said in his email, he is counting on his 102,000 employees to come along for the ride. 

To earn their respect and support he will need to lead by example. Yet the inhabitants of Shell’s boardroom retain a record of feathering their own nests despite subpar performance. 

Shareholders’ unprecedented rejection of Shell’s recent share awards highlights this culture of self-indulgence. 

The directors must mend their ways. Surrendering the last year’s handout would help. 
Toppling remuneration committee head Sir Peter Job would prove the board takes this seriously. 

The key question looking ahead is whether the dividend is secure. Shell’s efficiency efforts will only go part way towards ensuring this. 

A rebound in the oil price – bullishly predicted by the Saudis yesterday – is the key swing factor. 

But more importantly, Shell will need to rediscover its dexterity with the drill bit. 

Unlike its smaller rivals such as BG Group, Shell struggles with reserve replacement. 

Its reliance on Canada’s costly and environmentally toxic oil sands remains a blight on its brand rather than an asset. The situation in Nigeria is as tragic and dysfunctional as ever. 

The true test of Mr Voser will be whether he turns around Shell’s exploration and production division in a world of scarce opportunity. 

If he does, then he and his colleagues will be able to collect future share awards with their heads held higher. 

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