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Shake-up in pipeline as Shell chief eyes costs

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By Ed Crooks

Published: November 19 2008 23:41 | Last updated: November 19 2008 23:41

Royal Dutch Shell is considering changing the structure of its top executive team, in a move seen by some industry insiders as a precursor to a wider shake-up under Peter Voser, who takes over as chief executive in July.

Shell has still not yet appointed a successor to Rob Routs, the head of its refining, chemicals and oil sands businesses, who retires at the end of the year.

Internal candidates are going through a selection process, and a decision is likely to be announced next month, but Shell is still weighing up whether to make the job a board-level appointment, as Mr Routs was.

The uncertainty over Mr Routs’ replacement has fuelled speculation inside and outside the company that a restructuring is looming. This could include a new drive to cut costs to cope with a period of lower oil prices.

The announcement of his successor is unlikely to be accompanied by any radical moves, but Mr Voser is expected to begin exerting his influence on the company soon. He comes from a finance background, without an instinctive attachment to any of the group’s operations. Analysts expect him to have a clear focus on financial performance.

Shell’s return on capital over the next five years will be significantly lower than peers among the “big five” international oil companies, according to Jason Kenney of ING, the bank.

That reflects Shell’s heavy investment programme, which is intended to develop long-lived assets that will pay off in the next decade and beyond. In the next few years, however, Shell will have to begin to demonstrate to shareholders the results of that investment.

One benefit of downgrading the status of the oil sands and oil products job, which includes Shell’s highly successful refining, marketing and chemicals businesses, would be to allow an enhanced role for Linda Cook, the executive director for gas and power, to encourage her to stay.

She could be given board level responsibility for the refining, marketing and chemicals business, which could be combined with her existing role.

Ms Cook was a contender for the chief executive’s position, and could be tempted by senior posts at other big companies. A US citizen, she is highly regarded at Boeing, where she is a non-executive director.

Shell has suffered a loss of talent in the past six months, including Lynn Laverty Elsenhans, 52, who reported to Mr Routs as head of refining and chemicals and was seen as a strong candidate to succeed him. Losing too many more top executives would be embarrassing.

Reshaping the top jobs could also clear the way for a pared-down corporate structure.

Shell’s executive committee has eight members, of whom five are board directors: Mr Routs, Ms Cook, Mr Voser, currently chief financial officer, Jeroen van der Veer, the chief executive who steps down at the end of June, and Malcolm Brinded, head of exploration and production.

Cutting the number of executive directors to four would echo changes at BP, where a year ago three business segments became two when the gas, power and renewables operation was broken up as part of the cost-cutting push launched by Tony Hayward, who took over as chief executive last year.

Unlike BP’s radical moves, which followed the crisis at the end of Lord Browne’s tenure, Shell’s efficiency drive has been slow and steady.

It employed 104,000 at the end of last year, and expects to keep that number up to 2010, with cuts in functions such as finance offset by hiring of technical specialists.

By contrast, BP is reducing its headcount from 97,600 at the end of last year to about 80,000.

If Mr Voser wants to keep up, in what is set to be a turbulent time in the oil industry, he may have to take some bigger steps.

Need to avert brain drain

Three who left:

Lynn Laverty Elsenhans

Previously head of refining at Shell, where she reported to Rob Routs, she left in July to become chief executive and president of Sunoco, the US’s second-biggest independent refiner. 

Mark Hanafin 

Previously global vice-president of gas and power for Shell Trading, based in Houston, he left in July to become managing director of Centrica’s upstream division, responsible for gas production and electricity generation.

David Aldous 

Previously executive vice-president for strategy, he announced this month he was leaving to become chief executive of Range Fuels, a leader in cellulosic ethanol produced from plant waste.

Two who remain:

Linda Cook 

Head of the gas and power division, she runs Shell’s highly successful liquefied natural gas operation. Although she is admired for her knowledge of the business and her toughness, some who know her question whether she has the leadership skills to be a top chief executive. 

Malcolm Brinded 

Since 2004 he has been head of exploration and production, the glamour job in any oil company, but his reputation took a knock early on as he struggled to clean up after the reserves misreporting scandal. Good both with top-level relationships with governments and with his own staff.


In depth: Oil – Oct-30

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