Shell Crown Prince: ‘We must show more predictable financial results’

Translation of an article published by the Dutch financial newspaper, the FD. 

 

Shell Crown Prince: ‘We must show more predictable financial results’

Shell has had a bad year. The global corona pandemic left a huge hole in the financial results. The oil and gas multinational had to write off more than $20 billion on oil and gas fields and announced it would cut thousands of jobs.

Bert van Dijk 31 Dec ’20

Huibert Vigeveno is in charge of all Shell refineries and petrol stations. These will play a key role in the coming years, expects the 51-year-old Dutchman, tipped as a successor to Shell CEO Ben van Beurden. About CO₂ emissions: ‘There is often a gap between what a company promises and what it actually does. With us it is the other way around. ‘

Huibert Vigeveno: ‘In the past it was too often within Shell: which products can we make? Then we will bring it to the market. I actually want more focus on the customer. ‘ Photo: Tammy van Nerum for the FD

Shell has had a bad year. The global corona pandemic left a huge hole in the financial results. The oil and gas multinational had to write off more than $ 20 billion on oil and gas fields and announced it would cut thousands of jobs. For the first time since World War II, Shell lowered its dividend. Investors, meanwhile, walked away (the stock price almost halved in 2020) and got into shares of new energy companies en masse.

Still, Huibert Vigeveno is positive, he says in an interview with the FD. The 51-year-old Dutchman has been on the board of directors since early 2020, where he is responsible for all refineries, petrol stations, chemical plants, trading activities, lubricants and biofuels of the oil and gas multinational. Vigeveno is considered an important candidate to eventually succeed Ben van Beurden, now 62, as CEO of the group.

More than half of the 30 million Shell customers a day also buy something other than petrol or diesel from Shell. Photo: Tammy van Nerum for the FD

An internally distributed PowerPoint presentation, held by the FD, shows, among other things, the staffing of the new organizational structure. The name Huibert Vigeveno is at the very top, just below that of Van Beurden. Where in the past the oil and gas production branch was the core of Shell, the pendulum is slowly shifting to the downstream side: refineries, gas stations, chemicals and oil and electricity trade. In other words, largely the activities of Vigeveno.

Vigeveno appears on the screen wearing a red sweater with a yellow Shell logo and a Shell petrol pump in the background for an online conversation about the future of the gas station, the transformation of refineries and the energy transition. The message is clear: here is a commercial marketing man.

Just before the FD wants to end the video connection at the end of the interview, Vigeveno comes up with an afterburner: ‘One thing I haven’t said yet: the value of the Shell brand is now $ 47 billion. That makes it worth more than Nike or Starbucks. ‘

Listen better to the customer

Brand manager Vigeveno has set himself one important goal: listening better to the customer. ‘In the past it was too often: which products can we make? Then we will bring it to the market. I want to focus more on the customer and help him or her profitably to reduce CO₂ emissions. More than a thousand companies have indicated that they will become climate neutral by 2050, but they have no idea how. This offers us enormous opportunities, because we have the products that can help them achieve their objectives in the short, long and medium term. ‘

The customer comes first, Vigeveno repeats it a few times during the conversation. ‘We have 45,000 petrol stations worldwide and 30 million customers every day who buy from us. These are more locations than Starbucks or McDonald’s, for example. And in the coming years we will expand that to 55,000 petrol stations and 40 million customers. ‘

The growth of electric driving – Vigeveno also has an electric car itself – means that motorists will stay longer at the petrol station. More than half of the 30 million customers a day already buy something other than petrol or diesel from Shell. A sandwich, a cup of coffee, use of the internet and clean toilets. The petrol station is no longer just a point of sale for petrol.

This is also evident from the financial results. In the first nine months of this corona year, profit from Shell’s marketing activities grew slightly to over $ 3.74 billion. ‘We even had the best quarter ever with marketing in the third quarter.’ In addition to the sale of fuel and other products at petrol stations (the margin for franchisers has already been reduced), Shell also understands marketing as bitumen and kerosene for aircraft. But much less has flown in 2020.

Home delivery

Vigeveno sees more room for growth. ‘In almost all the major markets where we are located, more than 90% of the people live within 20 minutes of a Shell station. You can optimize that. Before the corona outbreak, we already had a few hundred stations that also delivered all kinds of articles from the Shell store via Deliveroo and Uber Eats. There are already thousands of them and that number is still growing. ‘

In the meantime, Shell is expanding the number of charging points. ‘We now offer access to 165,000 charging points worldwide. That will increase. ‘

Building more charging points is one of the actions in a wide range of measures that, according to Vigeveno, demonstrates that Shell is working on the energy transition. This is sometimes criticized from NGOs and society: Shell does far too little.

Huibert Vigeveno: ‘We must ensure that you can charge in as many places as possible: at home, at work and certainly at gas stations.’ Photo: Tammy van Nerum for the FD

Vigeveno: ‘We do a lot, but maybe we don’t say enough about it. There is often a gap between what a company promises and what it actually does. For us it is the other way around, I think, and that story must be brought better and more consistently into the spotlight.

‘In the Netherlands, we announced more than € 1 billion in investments in the energy transition in 2020. Think of wind at sea, an investment in Moerdijk to reduce CO₂ emissions by 10% and the installation of two hundred fast charging points at our stations. The energy transition will also have major consequences for refineries. We now have fourteen refineries worldwide. We’re going to reduce that to six. The refinery will be an energy park. Soon it will no longer be about the question: how much crude oil can I process into products in the refinery, but which products can I make that the customer asks for? Less bulk-driven and more high-quality chemistry, for example. ‘

That also means making fewer oil products that are ultimately burned by a customer, such as gasoline and diesel, and more products that contain the CO₂, such as bitumen (asphalt) and lubricating oil.

Exodus from investors

The question is whether this is enough to regain the confidence of the financial world. This is desperately needed, as investors have en masse left the traditional oil and gas sector in recent years and turned to green companies such as Orsted, Vestas and Iberdrola.

Vigeveno’s response to the investor exodus: “We need to be profitable in the energy transition and deliver more predictable financial results. We are already demonstrating this with our marketing activities: year in year out 6% to 7% growth and a return on capital of more than 20%. That is very attractive for financial markets. ‘

Still, regaining confidence is still a chore, as investors today look at more than just financial results. Even within Shell, things are rumbling here and there. Recently, a number of ‘green’ managers left Shell, because they believe that Shell is not moving fast enough in the energy transition. ‘You have to see it in the context of the very big reorganization that we are now in the middle of,’ says Vigeveno. “Unfortunately, 7,000 to 9,000 jobs are disappearing and functions are being merged.”

He does not think Shell is moving too slowly. ‘We are the only oil and gas multinational company that has linked climate targets to our remuneration. And if you look at the growth ambitions of BP and Total: we have already been there for a long time. If you add up their number of stations and customers, you still don’t get to what we have. ‘

The top job

Ben van Beurden is the longest-serving CEO of Shell since Lo van Wachem in the late eighties of the last century. The presentation of a new strategy in early February could be a natural time for a leadership change. Vigeveno, together with Maarten Wetselaar, head of Shell’s gas division, which also includes wind farms and solar farms, is considered an important candidate to succeed Van Beurden.

But Vigeveno does not say anything about a possible promotion. ‘I’ve been in this job for one year now and I’m really enjoying it. It has been a very turbulent year and I am proud of how we got through it. We are in 150 countries and everything has continued to run in all countries. ‘

CV

Huibert Vigeveno is still largely unknown to the outside world, but within Shell is engaged in a major international career that started 25 years ago in chemistry and trading. He then held senior marketing positions and headed Shell’s Chinese operations for five years. In 2016 he became responsible for the integration of BG Group. BG Group (the first letters stand for British Gas) was Shell’s largest acquisition in the past hundred years.

Vigeveno worked for Shell in London, Houston, Mexico City, Rio de Janeiro, Sao Paolo, The Hague and Beijing. He has been on the Shell Board of Directors since January 2020 and from London he manages all Shell refineries, petrol stations and chemical plants in the world. Downstream, as the division within Shell is called, will play a key role in the new strategy that Shell will present at the beginning of February in the coming years.

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