By JON REES, FINANCIAL MAIL ON SUNDAY: 20 Sept 2015

Some green campaigners seem to believe Shell boss Ben van Beurden would be happy dunking polar bears in thick, black crude oil if it helped make the planet even hotter.

But van Beurden, the 57-year-old engineer who has run Royal Dutch Shell for nearly two years and has given the company the green light to drill in Arctic waters, believes his view of the world’s future is considerably more honest than that of many environmentalists.

‘The amount of energy we consume is going to double in the first half of the century so we will have to supply twice as much as we do today as an industry. Most renewables produce electricity, and electricity is just 20 per cent of the energy mix. Where is the other 80 per cent going to come from?’ says the Dutchman.

Van Beurden is in the middle of his own plan to boost Shell’s part in that. His £43 billion deal to acquire UK-based BG Group, with its huge deep water oil wells off the coast of Brazil and its giant gas reserves, is the biggest deal in the sector for a decade and transformational for Shell, extending still further its dominance of the global natural gas industry.

‘We are not an oil and gas company now, we’re a gas and oil company,’ says van Beurden.

So, of course, he has a vested interest in the world accepting his arguments on the continued primacy of fossil fuels. Indeed, he will be adding BG’s 7.6 million tons of annual greenhouse gas emissions to Shell’s 76 million tons if the deal goes ahead. The Australian consumer watchdog has questioned the deal, raising concerns that it is not in consumers’ interest since it could limit the supply of gas to the domestic market.

Van Beurden’s acquisition of BG will probably be the defining moment of his tenure as boss of Shell. Back in April he moved so quickly to clinch the deal for BG – which was in disarray following management upheaval – that there were rumours that he was concerned that US oil rival Exxon was waiting in the wings should he fail.

But BG’s shares are now trading at a discount to Shell’s offer, after all the energy groups have been hit by the plunging oil price and the fall-off in commodity prices led by China’s economic slowdown.

Van Beurden is adamant that the deal will go through. He says: ‘No question it will go ahead. We have to clear regulatory hurdles but we are making good progress. I am still confident we will be ready for closing in the beginning of next year.’

Nor will Shell’s dividend be threatened as a result, says van Beurden. All the major oil companies’ dividends have an important place in investors’ hearts since they are traditionally maintained in all but the severest circumstances.

‘I think it is a very important part of our proposition to investors. We have a very long track record of not cutting the dividend and, in the main, growing it with inflation. That is something we want to preserve.

‘When we did the BG transaction, people might have been worried it would put the dividend at risk. But I wanted to make sure that is not the case. For the rest of the year it will be $1.88 per share and it is going to be at least that amount next year.’

Some see the deal as being driven by the oil price slump. The price of Brent crude has fallen from $115 a barrel in June 2014 to $48 today as supply outstrips demand.

After years of searching for oil and gas in some of the most inhospitable – and therefore expensive – places on the planet, companies such as Shell have now been forced back on growth through acquisition, say critics.

Certainly Shell, like all the other big oil companies, has suffered. Its share price has fallen by a third over the past year to 1599p, valuing the company at £100 billion.

Shell has announced 6,500 job losses this year and has also said it would reduce investment by about £7 billion to £30 billion this year.

But van Beurden is an optimist. He says: ‘Before the fall in the oil price our debt burden was 12.4 per cent. Right now it is 12.7 per cent. So we have a lot of firepower. I have to keep enough options open for the time when the recovery comes.

‘If you take a slightly longer term view than today, then I think nobody really is served by a lot of volatility in the price of an energy commodity because it creates cyclical behaviour and investment, and unpredictability. Maybe today we enjoy low oil prices but if, as a result, we have very high oil prices again in a few years we will feel differently about it. In the end the benefits, if any, are short term and tenuous. When will the price of oil go up? I wish I had a precise answer for that.’

Shell is not turning its back on Britain’s own oil fields, adds van Beurden, saying: ‘We are investing £2 billion in North Sea assets that are young and fresh. There is running room left in the North Sea.’

He makes his case on business and environmental affairs with an articulacy and cogency that marks him out among his equally stratospherically rewarded but more tight-lipped peers. Van Beurden earned €24 million (£17.6 million) last year, though most of that was pension contributions boosted to take account of tax changes. His annual salary was a more modest £4 million.

The UN conference on climate change opens in Paris in December, and van Beurden has already signed his name to an open letter calling for the implementation of a proper widespread system of pricing carbon emissions to cut greenhouse gases – necessary if the world is to hit its target of limiting global temperature rise to two degrees Celsius above pre-industrial levels.

‘I do think we can see a path that will get us to a system which is carbon neutral,’ he says. ‘But I object to the notion that it is a simple thing to do – that the only thing required is for companies like ours, people like myself, to step off the hose because we are the ones blocking it.’

Van Beurden accepts it is not a debate which he can leave at the office when he goes home to the Netherlands, not with four children aged between six and 21.

He says: ‘I like to think that I do not need my children to provide me with a conscience. But my children are more critical, more open and better informed than perhaps I was at their age. There is a very critical debate in our house on the role the company plays, what other advocates say, what governments do – and “what about you, Papa?”

‘I want to explain what we are doing, how we are acting, and to make them conscious of the fact that their quality of life is highly dependent on energy. It is a fact that, in the wider debate, is very, very easily forgotten.’

Van Beurden is adamant that exploring for oil in the Arctic is manageable, saying: ‘A very significant part of the world’s oil and gas production already comes out of the Arctic. We deal with very significant risks all the time, we mitigate them, we understand them.

‘Engineers have a can-do mentality, that’s why we enjoy the quality of life that we all take for granted.’

SOURCE

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