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Cook leads in Shell’s two-horse race

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Cook leads in Shell’s two-horse race

By Ed Crooks

Published: July 21 2008 20:22 | Last updated: July 21 2008 20:22

Royal Dutch Shell is on the brink of a historic step. If, in the following six months or so, it appoints Linda Cook to be its next chief executive, it will become the first oil major to have a woman chief executive and the biggest company in the world in any industry to be led by one.

Yet the prospect of such a noteworthy move has inspired a muted reaction from industry observers.

Although Shell’s executive director of gas and power is seen by many as having the edge over Malcolm Brinded, the other contender in the two-horse race, neither candidate is being swept home on a wave of acclamation. One adviser to the industry said Shell had failed to groom an outstanding internal candidate for its succession.

That Shell will appoint internally seems almost certain. Outside candidates will be considered, but Jorma Ollila, the chairman, last year backed the idea of promoting an insider to replace Jeroen van der Veer, who steps down next June after five years at the helm.

The withdrawal from the race of Peter Voser, the chief financial officer who has been in talks with UBS, where he is already a director and head of the audit committee, has left Ms Cook and Mr Brinded, the executive director of exploration and production, as the two contenders.

Both have strengths, but both also have significant weaknesses.

Perhaps Ms Cook’s greatest advantage is that she is in the right place at the right time. Gas is an increasingly important business for western oil companies: the need for integrated chains of production, transport and marketing favours big international groups and gives them a competitive advantage at a time when their traditional oil business is increasingly vulnerable.

Liquefied natural gas is a particularly attractive opportunity and Shell’s LNG business, run by Ms Cook, is the world’s biggest.

As Neil McMahon of Sanford Bernstein, the investment firm, says: “My money is on Linda Cook, [and] always has been. She leads the red-hot LNG division, which is a strong part of the future.”

Jason Kenney of ING adds that her experience in Canada, where the oil sands are another important prospect for future growth, is also an advantage. “Linda Cook’s background with Shell’s Canadian asset base, a key heartland for future cash flow, and her current role in the key integrated gas business gives her the edge over Malcolm Brinded,” he says.

However, in spite of those strengths, Ms Cook is not seen as the inevitable choice. One analyst says he “fell off his chair” when he read that she was now seen as the front-runner.

She also has her critics in the industry, with some saying she lacks the experience at the highest level of the exploration and production business – still widely seen as the industry’s ultimate test of character and ability.

Her last period in Shell’s E&P division was as its director of strategy and business development in 1998-2000. At that time it was run by Sir Philip Watts, who later became the company’s chairman before being forced to resign in 2004 as a result of the reserves mis-statement scandal.

One industry expert suggests that if appointed, she will need to work hard at restoring morale in E&P.

There are no such concerns about Malcolm Brinded’s CV: he has run E&P for four years, and was in charge of Shell’s UK offshore business in the 1990s. At 55, a 34-year Shell veteran, he is the more experienced of the two, with a reputation as a prodigious master of detail.

One industry adviser also highlights his good reputation among the national oil companies that are Shell’s partners in some of its most important territories, such as Nigeria and Russia, where he is a member of the foreign investors’ councils. However, his record also has flaws. Shell’s own record in E&P has been hardly outstanding: reserves replacement has been strong recently but 2008 is expected to be a sixth successive year of falling production.

In the minds of some outside the company, Mr Brinded’s image is still tarnished by memories of the aftermath of the reserves scandal in 2004.


In April of that year, when he was new in the job, he talked about having “drawn a line” under the reserves figures, after the third writedown forced by Shell’s efforts to get to grips with past overstatements.

He spoke too soon – the reserves had to be written down twice more: modestly in May, and then by a large amount the following year. That experience can never be completely forgotten.

Having a woman competing for the job gives the contest an added twist. It is hard not to hear implied sexism in some criticism of Ms Cook, who has fought her way to the top in what is still a male-dominated industry.

In the UK sector of the North Sea, for example, about 50,000 people worked offshore in 2006, of whom just 1,800 were women, the majority in catering.

Yet, as Mr McMahon says, “it makes a huge statement in this industry to have a woman make it to the top”.

In an industry desperate to attract staff, appointing Ms Cook will show that women, too, can have careers at the highest level. Ultimately, the lack of an obvious successor may not matter.

As Jon Rigby of UBS points out, Mr Van der Veer received a muted welcome when he took over from Sir Philip in 2004, having run Shell’s chemicals business.

“No one would have picked him out at the start, but Van der Veer has done an incredibly good job of steadying the company and setting the strategy,” Mr Rigby says.

That strategy, of making huge investments in long-term projects such as oil sands and LNG, should start to pay off in the next decade.

“The next CEO is potentially on to a real winner, because they have got all these projects coming on stream that will benefit from a high oil price,” Mr Rigby says. “So whoever the CEO is, they could look like a hero.”

In depth: Oil – Apr-29

Shell resumes Nigeria field production – Jun-24

Copyright The Financial Times Limited 2008

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