Shell under the skin, 10 years after crisis
By Andrew Callus
LONDON (Reuters) - A decade ago, Royal Dutch/Shell's (RDSa.L: Quote) boss was fighting to close the gap between the truth about his company's oil and gas reserves and the much larger figure in its accounts.
He lost the fight, and his job. Scandal engulfed one of the world's biggest companies, exposing years of neglect.
Fast forward to May 2013, and the surprise news that chief executive Peter Voser will retire next year caused barely a ripple. Shell has recovered shareholder confidence. But while the risks may all be in the open now, they remain big.
Multi-billion dollar Floating Liquefied Natural Gas (FLNG) projects and a foray into the world's most inhospitable drilling climate north of Alaska are among the Anglo-Dutch group's heavier technology investment bets. Capital spending is spiraling, and its production from mature fields sputters. All the while, oil and gas prices look shaky.
Some investors want Shell to pull in its horns and keep more for bigger dividends. Voser, who became finance director during the 2004 reserves crisis and CEO in 2009, is having none of it.
"No. One learning out of all this, for every person in this organization now, is you spend capex through the cycle. Don't try to read it, don't slow down. It will cost you more when you want to grow afterwards," he told Reuters last week.
"I know a lot of investors and analysts. They all think they can read the market ... slow down, grow later, shrink to grow, all these buzzwords, but one thing in our industry is very clear; it takes you five to seven years to recover a strategic slowdown ... The market changes its views in three to six months, and you can't change that fast in our industry."
As Voser enters his last months in the job, Shell still suffers from underperforming production, an accident-prone exploration record offshore Alaska, and the running reputational sore of Nigeria, where spills, oil theft and pipeline sabotage are devastating the Niger Delta's ecology and cost 60,000 barrels of oil a day in lost production. Much of its U.S. gas production is uneconomic at current prices. Continued...