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Shell to dispose of its downstream assets and business completely?

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Screen Shot 2015-07-31 at 19.22.09A report in The Times today describes the plans for Shell Centre development:

London waterfront to take on new look with Italian backing

On the face of it it raises the question as to why, given the movement of the centre of gravity in Royal Dutch Shell to The Netherlands, RDS would want to hold onto a large London office at all. Why be almost unique among large multinationals in having two head Offices?

The answer is in the article. “One Southbank Place will be the new headquarters for Shell International’s downstream business”. 

Many observers have suggested that with the takeover of BG RDS will become even more of an upstream company than it already is. The “downstream” (marketing, refining and chemicals mainly) has few if any synergies with this upstream business. The idea of economies of scale along the supply chain from exploration through to sales has long since gone. Marketing is local whereas Exploration and Production (E&P) benefits from global coordination and direction. They are separate businesses. RDS is now putting itself in a position to dispose of its downstream assets and business completely. The strength of the Shell brand  suggests that a stock market quotation for a “Shell Marketing” business would be popular as investors realise that a focused downstream business management could deliver performance far better than when it is (as now) part of an upstream dominated RDS. This entirely separate global company would be managed from Shell Centre and the ties with The Hague would be removed. 

The issue of brands and corporate identity is relatively easy to resolve. The “Shell brand” would go to the London based business. RDS in The Hague could revert to being “Royal Dutch” or it could (as BG and BP did) just use the acronym name “RDS”. To avoid confusion RDS would no longer use the Shell emblem (the “Pecten”) but it is unlikely that would be a serious issue for what is predominantly a B2B business. 

Shell presently has a large office in Bank Street Canary Wharf. Some corporate departments could stay here as the downstream moved to Shell Centre and other activities moved to The Hague. But it is likely that this would be  a small specialist service office for primarily London (City) based activities.  

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