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Financial Times: COMPANIES UK: Van der Veer's vision for a unified Shell: “Jeroen van der Veer, the first chief executive of the newly restructured Royal Dutch Shell, is used to skating on thin ice.”: “The company was already struggling with its reserves figures before it had to cut them five times last year.”: Wednesday 20 July 2005


By Thomas Catan


Jeroen van der Veer, the first chief executive of the newly restructured Royal Dutch Shell, is used to skating on thin ice.


The 57-year-old Dutchman has twice completed the Elfstedentocht 135-mile race along frozen canals through 11 cities in the Netherlands.


But even that cannot be as demanding as the task at hand - righting the third largest oil company following its devastating reserves accounting crisis last year.


The debacle spurred a boardroom purge, class-action lawsuits and a complete reorganisation of the company's century-old governance structure.


Speaking to the Financial Times ahead of today's formal listing of the newly unified company in London, Mr Van der Veer is informal and unpretentious - a long way from the caricature of a swaggering oilman. He speaks English with a Dutch accent; his tone is measured and moderate at all times.


In other words, Mr Van der Veer is the consummate Shell Man - something that disappointed those who felt that the company needed a radical break with its conservative and consensus-driven culture.


But he is not about to apologise for his style.


"Basically, when I think about my style, I do two things," he says. "First, is that you try to keep your feet on the ground [and focus on] where the company is at the moment. [You] try to form a good picture about the good and the bad, founded in reality. Do not be too optimistic or too pessimistic, have a kind of feeling for what's going on, what's the mood of the people.


"The second thing I try to do is think where the company should be so many years from now. After you come to certain insights or conclusions, you try to share that mental picture of where the company should be longer term. The picture drives the inspiration for our people to bring the company there," says Mr Van der Veer.


The oil and gas industry is arguably more intensely competitive than ever - a fact he readily acknowledges.


Behind the record earnings at international oil companies, there is deep uncertainty about their future.


The countries that own easily accessible resources no longer need the oil majors to extract it or sell it to foreign markets. At the same time, newly aggressive state companies from countries like China and India are muscling in on their territory, striking deals directly with resource-rich states.


Backed by governments, they have access to cheap capital on a scale comparable to the oil majors and yet can offer trade and aid deals that public companies cannot match.


The result is that oil companies are having an increasingly hard time replacing the reserves of oil and gas they have pumped - a key measure of their future value.


And none more so than Shell. The company was already struggling with its reserves figures before it had to cut them five times last year.


So can the multinationals compete with state oil companies?


"I think the answer is yes but you have to do your homework very well," Mr Van der Veer says. "You can only [beat] those kinds of companies by being ahead with technology and innovation, so you can work cheaper or you can access oil with your technology [that] they can't access. Or you are better at project management."


To meet that challenge, the Shell boss has introduced a series of changes. He is setting up two new "academies" to improve the management of large-scale, multi-billion dollar projects and to sharpen the commercial proposals the company makes to host governments.


Shell suffered a severe setback last week when it revealed that Sakhalin-2, its flagship Russian gas project, would be at least eight months late and $10bn (£5.7bn) over budget.


Mr Van der Veer hopes the project academy will put an end to such problems.


He will similarly hope that his commercial academy will prevent a recurrence of another recent setback in Oman, where the government transferred operation of one of its prize oil fields to a rival with more ambitious development plans. "The commercial academy is how to make proposals which really fit the agenda of the country, he says. "So it is back to being good entrepreneurs in a very classic way."


Welcome though Mr Van der Veer's proposals are, critics say his plans will do little to solve the problems at Shell - principally the company's failure to find and produce enough oil and gas. Many analysts have said that Shell must buy some additional reserves through company acquisitions - something it has steadfastly refused to do.


"We are not afraid or shy to do large acquisitions but they should create shareholder value at different energy prices as well," he says. "Very large acquisitions at the moment - that is very hard to see how they create shareholder value."


Shell has said it may acquire small companies in the range of $1bn to $9bn, and the company recently engaged in an asset swap with Gazprom, Russia's state-controlled gas monopoly. Mr Van der Veer says the company will continue to look for other asset swaps, which are less dependent on the oil price remaining high.


In fact, he thinks that, over the long term, oil prices are unlikely to remain at the current high levels. Shell continues to use $25 a barrel as a yardstick by which to measure profitability of future projects.


"If you do it that way, a scenario is not a gamble on the future," he says. "It is a logical way to deal with uncertainty."


Mr Van der Veer says he remains convinced that the future lies in executing large projects, and the problems at Sakhalin-2 have done nothing to deter him.


"I am absolutely clear the place for Shell is to do those very large mammoth or elephant projects," he says. "That is where we can show our value, and if we do a good job of course, can create income." 


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