Shell executive balances two energy worlds

By Marissa Luck, Staff Writer Feb. 1, 2019

Shell has named Gretchen Watkins as the new president of its North American operations in Houston. Watkins is the former CEO of Maersk Oil. Friday, Jan. 4, 2019, in Houston. Photo: Marie D. De Jesús, Houston Chronicle / Staff photographer

Gretchen Watkins’ family was living an idyllic life in Copenhagen, where bicycles outnumber cars on many the city’s roadways. The oil industry veteran said it was the norm for her kids to take public transportation to commute.

That was less than a year ago. Now her family has moved from one of the most bicycle-friendly cities in the world to a city dominated by highways and traffic congestion. Watkins, 50, went from living in a country whose leaders are debating ambitious new climate laws to a city whose fate is tied to the proliferation of fossil fuels.

It’s been almost a year since Watkins relocated her family to Houston so she could prepare to take over in one of Shell Oil Co.’s most iconic positions: She officially started as Shell’s president of U.S. operations in January, the first female in a position typically filled internally by longtime male employees.

Watkins will have to win the hearts and minds of 20,000 employees as she oversees the oil major’s vast operations in the U.S. She also will serve as executive vice president of unconventional oil and gas production and exploration in the U.S., Canada and Latin America.

The former Maersk Oil CEO knows her business fossil fuels — but she doesn’t shy away from the existential crisis facing her industry.

“Climate change is real and is a problem that the society needs to engage in, and we want to engage in a leading way,” Watkins said, sweeping her hands forward in front of her new office mural, which features blown-up photos of wind turbines next to refineries.

As a top executive at one of the world’s biggest energy companies, Watkins is walking a tightrope. She’s expanding her company’s investment in fossil fuel production at same time it’s trying to plan for a post-peak oil world where electric vehicles dominate the roadways. It’s building offshore oil and offshore wind projects simultaneously.

Decades ago, Shell’s own scientists warned of the dangers its own products could have the climate in a now public 1988 internal report on the impact of fossil fuels on the environment. Yet it wasn’t until 10 years later that the company started seriously reporting its progress on sustainability. Last December, Shell became the first oil major to link progress on its climate change target to its executives’ pay — and earlier the company said it wants to halve its net carbon footprint by 2050. A key question remains, though, about whether Shell and other oil majors can cut greenhouse gas emissions without undercutting their own businesses.

For Watkins, the challenge is exactly what drove her into her position, picking this role over several other opportunities.

“We have so much yet to do as an industry. We are an industry that innovates quickly. We have attracted some of the great brains of the world, and I feel like we have now an opportunity, but also really an obligation, to be part of the future of energy,” Watkins said.

Related: Shell starts big new petrochemical project

Watkins is now one of the most powerful oil executives in the country, but she stumbled into the energy industry almost accidentally. The Cincinnati native was a mechanical engineering student at Pennsylvania State University when a recruiter from Amoco cold-called her after spotting her résumé. Houston sounded interesting, she said, so she and another engineering friend piled into her Volvo and drove 1,500 miles to the Bayou City. The internship got her hooked on the industry, and a few months after graduation she accepted a job offer to be facilities engineer for Amoco, a part of BP, in New Orleans.

That launched a career traversing six countries and the corporate leadership roles of some of the biggest energy companies in the world, including BP, Marathon Oil Corp. and Maersk Oil.

At Amoco, she was encouraged to broaden her experience beyond engineering roles. In the early 2000s, she became the right-hand woman of the company’s marketing chief, Anna Catalano, in London in what was a considered a “launching pad” for high-potential individuals, Catalano said in an interview.

Catalano said the engineer learned quickly about communications.

“She was really good at doing the job that actually crossed a lot of business segments. … There was a lot of politics. That’s something that Gretchen has a keen sense for. She has a good antenna for understanding how an organization works — the unwritten and written rules,” recalled Catalano, who is retired from BP but now serves on several boards of directors. “She is someone who has a good instinct for people and how to get people who don’t report to one another to actually cooperate.”

The two each had young children and stay-at-home husbands, and they shared a similar sense of humor. Their friendship lasted long past Watkins’ time at Amoco, and today Watkins still considers Catalano her mentor. So it wasn’t surprising when Watkins called Catalano for advice when she got a job offer from Shell.

At the time, she was CEO of Maersk Oil, the oil arm of the huge international shipping business, which was about to be acquired by French oil major Total. Watkins had been promoted to CEO in 2016 after successfully overseeing the operations of the company as chief operating officer at a time low oil prices were roiling the industry. But the Total merger put her at a career crossroads she hadn’t anticipated facing earlier, she said.

Shell was impressed that Watkins had a breath of upstream experience in U.S. shale production from her time at Marathon Oil, but also had the perspective of an executive who had worked for major multinational corporations, noted Greg Guidry, who recently retired as Shell’s executive vice president of unconventional oil and gas production, the role Watkins will also assume in addition to running U.S. operations.

“You wouldn’t be able do all those things if you didn’t have the leadership qualities we were looking for,” Guidry said. The U.S. president role is akin to being a diplomat of sorts, working across public and private sector on high-level policy and industrywide challenges.

“You can’t just have commercial and technical command of the business; you have to be able to effectively deal with people both internally and externally in multiple cultures. It’s almost like an ambassador,“ Guidry said. “It takes a special kind of breed.”

On HoustonChronicle.com: Shell makes big Gulf of Mexico oil discovery

She had other worthy prospects, including staying at Total or entering private equity. But Watkins said she was drawn to what she called “three pillars” at Shell: a strong investment case, stewardship with the community and thriving through the energy transition.

“And I just thought, ‘Wow, … that sounds like a company that wants to be part of actually leading, creating the future of the industry,” Watkins said. After being in the industry for 29 years “being a part of creating the future is something that’s really interesting to me and really motivating to me.”

Her position and the scale of the Shell’s U.S. operations means Watkins could help to shape the course of how the energy industry responds to one of its biggest challenges yet.

“You’re at a big enough company where what you do actually matters. That’s where I see her role as being critical because I think Shell is going to be one of the companies” to lead the conversation, Catalano said.

Watkins and other executives face challenges it comes to halving their emissions. According to the company’s own reporting, overall greenhouse emissions at the company have changed little over the past decade, bouncing between 69 million metric tons to 75 million metric tons annually across the company’s global operations. That’s more carbon dioxide than some states produce in an entire year, according to Energy Department. In the next year, Watkins said she wants to develop a U.S.-focused plan for how the company will move forward in the energy transition and start putting it into action. That includes better linking and coordinating efforts already underway across the country.

Watkins also is looking ahead to 2030 – when many analysts expect demand for oil will peak thanks to a shift to more fuel-efficient cars and electric vehicles, plus stricter environmental laws.

“I believe fossil fuels are going to continue to be vitally important to the world beyond 2030. And so I believe Shell will continue to be leading in that arena,” she said. But the portfolio could look substantially different in the long run, with more of a focus on natural gas, petrochemicals and renewable energies.

Watkins, who has extensive experience in shale production, sees natural gas as key to the energy transition. Natural gas production has its own environmental consequences –  research suggests it’s tied to the release of one of the most harmful greenhouse gases, methane — but it is significantly less carbon intensive than coal, for example.

The company recently announced it was moving forward with a liquefied natural gas project on the Canadian west coast. Although Shell will likely focus on building that terminal for several years before moving on to any other LNG investments in North America, Watkins said liquefied natural gas will play in increasingly important role in generating cash flow after 2030.

“I see natural gas as playing a stronger role as the cleanest burning fossil fuel, the transition fuel that allows countries to bridge from fossils to renewables,” Watkins said.

The company aims to accelerate its pace of investment in new energies, putting $1 billion to $2 billion in new energy over the next decade, Shell’s CEO Ben Van Beurden said in a 2017 statement. In December, the company announced a new offshore wind project in New Jersey, adding to its portfolio of six operating wind projects and an offshore wind park in the Netherlands.

Yet many new energy projects aren’t as profitable or lucrative yet as the company would like, Watkins said, and the company will have to see profits rise before investing more heavily in renewables, she said.

“We want to invest in and actually really support and be part of creating technology that allows that to be profitable,” she said.

But by 2030, she added, “I think our new energies portfolio will be substantially bigger than it is today. And we’ll be seeing rising profit streams coming out of those.”

Meanwhile, Shell is vastly expanding its capital investments in traditional fossil fossils in the U.S. with a major offshore drilling platform coming online soon in the Gulf of Mexico and big jumps in oil production from the Permian Basin.

Watkins is likely keenly aware that the bicycles she rode in Copenhagen wouldn’t exist with the fossil fuels needed to produce them.

For her and other Shell executives, the challenge will be how they can meet ambitious climate targets while still delivering value to shareholders.

“We need to make sure that both can exist,” Watkins said.

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