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Ben van Beurden will need more than PR skills to navigate Shell’s choppy seas

Screen Shot 2014-01-21 at 09.07.53Ben van Beurden gave a flawless performance last week as he stepped onto the public stage for the first time as chief executive of Shell and sought to explain how the company had cut its annual profits in half despite a year of sky-high oil prices. He should have been torn limb from limb, but instead City analysts were content to believe his well-spun litany of excuses, mostly blaming outside forces rather than the poor decision-making and performance of the team he now leads. …he could not entirely escape personal responsibility, since he was formerly head of chemicals and, for nine months last year, head of the group’s huge downstream division. Pet projects of Voser’s will feel the axe. Divestments will be made, spending curtailed and writedowns – multibillion-dollar ones, clearly – taken. Van Beurden knows what failure looks like, as he was a personal assistant to former chairman Sir Philip Watts when Watts was axed over the reserves scandal of 2004.

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The new boss put up a brave showing last week, but he faces a battle to stop the oil firm from sailing into more trouble

The Observer,

Ben van Beurden gave a flawless performance last week as he stepped onto the public stage for the first time as chief executive of Shell and sought to explain how the company had cut its annual profits in half despite a year of sky-high oil prices.

The Shell lifer was able to paper over the reasons for Shell’s “loss of momentum”, as he called it, through a mixture of boundless self-confidence and strong communication skills.

He should have been torn limb from limb, but instead City analysts were content to believe his well-spun litany of excuses, mostly blaming outside forces rather than the poor decision-making and performance of the team he now leads. The Shell share price has dipped a mere 3% since a profit warning two weeks ago.

Obviously the Dutchman could have admitted the scale of the failure and blamed it all on his predecessor, but that is not the Shell way. Besides, he could not entirely escape personal responsibility, since he was formerly head of chemicals and, for nine months last year, head of the group’s huge downstream division.

Van Beurden, who beat finance director Simon Henry to the top job, has some advantages over predecessor Peter Voser in that he exudes a quiet engineer’s charm rather than the more brittle affability of the Swiss financier.

The Dutchman remains largely unknown outside the group and yet must quickly convince investors he can turn the lumbering Anglo-Dutch firm, which spent an astonishing $46bn last year, into a more nimble, dynamic and profitable beast.

Van Beurden insisted he was at the financial results conference to explain the background story that led to a 71% fall in quarterly earnings and a profit warning two weeks ago. More details of the future strategy, he said, would arrive at the Shell management day on 13 March. But he still gave clear indications of the direction of travel.

Pet projects of Voser’s will feel the axe. Divestments will be made, spending curtailed and writedowns – multibillion-dollar ones, clearly – taken.

Van Beurden has already suspended drilling in the Arctic this summer but the whole operation is under review. Onshore production in the Niger delta and shale operations in the US are under threat: not because they face opposition from environmentalists but because they provide no or lousy returns for the cash deployed.

It is also clear that parts of the growing liquefied natural gas (LNG) portfolio, an area where Van Beurden spent a decade for Shell, are also going to be slowed down or sold off. It is not that Shell is going off LNG or gas: it just cannot afford to proceed with all the schemes it has going, particularly those in Australia. Under the Voser regime, Shell became bloated: building the world’s largest ship – Prelude – for LNG could become as a symbol of that if it fails to perform as hoped.

The group has spent $5bn in the Alaskan Arctic with nothing yet to show for it but bad publicity. When the US gas price collapsed it made a mockery of Shell’s late charge into the American shale lands. The offshore and LNG interests in Nigeria remain a money-spinner but onshore production is disastrous as the security situation in the delta has gone from bad to worse.

Van Beurden has already promised to cut capital expenditure to $37bn this year while keeping the level of dividend spending up at $11bn. It is not all enlightened self-interest.

Big Oil is under attack on Wall Street for underperformance compared with other sectors, while independent oil companies such as Chesapeake Energy and Hess Corp in the US are being targeted by shareholder activists.

The danger is that Shell’s already poor production profile – output fell by 5% in the last quarter – could be made worse by lower spending, and its long-term growth profile threatened.

Van Beurden knows what failure looks like, as he was a personal assistant to former chairman Sir Philip Watts when Watts was axed over the reserves scandal of 2004. The driven Dutchman will want to succeed where others failed or stuttered – but he will need true grit as well as charm and eloquence to do so.

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