Safety remains the top concern for any energy company’s success, the former chief of Royal Dutch Shell plc told a Houston audience last week.
Jeroen van der Veer, who joined Shell at the age of 23, became CEO in 2004 and served until 2009, when he retired (see Daily GPI, July 31, 2009). He talked about what makes a successful exploration and production (E&P) company — and a successful leader — at the KPMG Global Energy Conference.
“There is zero tolerance for incidents…in our industry,” van der Veer told the audience. The public scrutinizes a company’s every action, good and bad, and E&Ps must remain vigilant. “People expect large companies to be 100% compliant with rules and regulations, even if they have nothing to do with safety. If there is one exception to the rule, it will be magnified” by the media, whether it has anything to do with an E&P’s installation or not.
One energy-related accident, such as BP plc’s Macondo well blowout, can impact the entire industry for months.
“If you have a tsunami in Japan, nuclear reactors close in the south of Germany,” he said. “There are a lot of emotions…that get translated by politicians to do things that don’t make sense. The net result of closing plants in Germany means more coal consumption, which is a strange thing” for a country that is attempting to become a “green” consumer, said van der Veer.
Whether Shell adequately managed its offshore Alaska drilling campaign was not addressed in the speech. After encountering court battles, permit delays and equipment malfunctions, Shell in February said it would delay its Alaska offshore drilling program until at least 2014 (see Daily GPI, Feb. 28). The planning has been ongoing since van der Veer was in charge, and he told the audience that he agreed with the company’s decision to take a step back before moving ahead.
Public perception of an E&P operation and whether it can be executed well and safely is critical, he said. “It is not only that you think you can do things safely in the Arctic, but you have to convince many people who are reluctant to believe you,” van der Veer said. “It is hard to maintain the needed permits if the public has huge doubts.”
The Arctic has been and can be safely explored and produced, but public acceptance may take some time, he added. “Many holes have been drilled in the Arctic…It is not totally new, what we are doing.” However, “we are not going to operate in the Arctic if we think it will bankrupt the company.”
He pointed to the “remarkable development” of shale gas in the United States and Canada, which could be developed in Europe, “but you have all the problems” regarding the use of the term “fracking” [hydraulic fracturing]. What they actually are referring to is drilling, but it has stalled exploration.
“In Europe, they think we can have a fossil free society in 50 years…If you look at several energy scenarios, in 50 years, renewables will gain market share, but oil and natural gas will still provide more than 50% of the total supply.
“Current age also needs to be considered in selecting the next CEO and how many potential years they are likely to be able to serve, van der Veer said. The burden always rests with top management to remain actively involved with meeting and training the management. Remaining “actively involved” is more than just a statement. Being CEO of Shell was grueling.
“You work all the time,” van der Veer said. “There is no work-life balance. You have to realize that. It is only work.” At Shell, the job was “all the time,” with about 200 managers reporting directly to him. He retired at age 60. Today as chair of Platform Beta Techniek, or National Platform Science & Technology, the work week is “only” about 60 hours. The platform has been commissioned by the Dutch government, education and business sectors to ensure there are enough educated people in science and technology. The goal is to not only make careers in science more appealing but also to introduce educational innovations to inspire and challenge young people. Van der Veer also serves on several boards.
“Good leaders make sure that everyone understands the next steps and how it will impact them,” he told the KPMG audience. “You have to make clear to people how to win over the competition…”For Shell, this was with technology. It has become one of the most innovative companies.”
Current Shell CEO Peter Voser has announced his retirement, but no one has been named as his replacement (see Daily GPI, May 3). Considered likely candidates to take over are CFO Simon Henry, 51, and Marvin Odum, 54, who is president of the Upstream Americas division.
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