The Squeeze: Oil, Money and Greed in the 21st Century. Tom Bower

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СКАЧАТЬ export Western ethics to those countries and attend to a multitude of other problems. The fact is we simply do not have the authority to carry out these tasks. And I am not sure we should have that authority.’ That opinion was opposed by Mark Moody-Stuart and Phil Watts.

      Primed by his experiences with Brent Spar and Nigeria, Watts put together a list of tasks under the heading ‘Reputation Management’. For Watts, Brent Spar had been ‘a life-changing experience … We had done a technically excellent job but we had all missed the big trick. A time bomb was ticking – we missed it and we all thought we were doing our best … We never dreamt we would get that much attention.’ But if Brent Spar was Watt’s ‘big wake-up call’, he found that Nigeria ‘keeps us awake all the time’. By April 1996 he had compiled a list of initiatives, including ‘Ethics, Human Rights, Political Involvement, and the key items for the review of the Business Principles’. The ‘stewardship over Shell’s reputation’ was Watts’s priority.

      Greenpeace’s campaign against the oil companies had focused on Shell’s exploration in the West Shetland islands. Ignoring the environmental lobby, Herkströter realised, was pointless. The initiative, he noted, had been seized by BP’s John Browne. Spotting the tide of opinion, Browne had, amid fanfare, delivered a speech at Stanford University urging the world to ‘begin to take precautionary action now’ to protect the environment. Shell’s directors agreed to embrace the same ideology. The corporation crafted public statements promoting its intention to be more open, to acknowledge human rights and to protect the environment by including renewable energy projects in its core business plan. In the future, said Herkströter, Shell would engage with Greenpeace to discuss the reduction of greenhouse gases in coal gasification and biofuels. Satisfied that he had fulfilled the public relations requirements, Herkströter approved the purchase of one fifth of Canada’s Athabasca tar sands for C$27 million, a relative pittance. The total estimated reserves were 1,701 billion barrels of oil. Shell anticipated extracting 179 billion barrels. Exploitation of the tar sands was uneconomic while oil was at $15 a barrel, but would be profitable once the price hit $40, although the process offended Shell’s newfound commitment to protect the environment. The tar’s extraction would require the felling of 54,000 square miles of forest, an area the size of New York state, and as a consequence wildlife would be killed and water polluted. Huge amounts of power would be required to create the steam or hot water needed to separate the bitumen from the clay, and more power and chemicals were required to separate the light petroleum from the bitumen. The whole process created three times more carbon than conventional oil operations. In The Hague, the purchase was mentioned as manifesting Shell’s ability to play both sides of the argument.

      At the end of 1997, Herkströter retired. Mark Moody-Stuart, his successor, was dissatisfied with his inheritance. Appointed as ‘Mr Continuity’, Moody-Stuart, a Cambridge geologist and a Quaker who loved sailing, regarded his predecessor’s changes as timely but ineffectual. Few of the reforms had materialised. ‘Shell needs drastic remedial measures,’ he said, while fearing that the majority of Dutch directors would resist even the appointment of senior directors from outside the corporation. Shell had already missed out on two important investments. Approached by the governments of Angola and Azerbaijan to develop their oil, the company had refused requests for preliminary cash bonuses, and the opportunities were seized by BP and Exxon. Under Herkströter, Moody-Stuart lamented, Shell had even ignored the middle way. Adrift and unacclimatised to the new world, Shell had allowed its long-nurtured relationships with the governments of Oman, Nigeria and Brunei to deteriorate, and earnings were falling. In 1998 the company’s profits were $5.146 billion, compared to $8.031 billion in 1997. ‘There will be a coming crisis if we don’t change,’ warned Moody-Stuart. ‘Change is a pearl beyond price.’ The obstacles were Shell’s fragmented culture, divided management and entrenched country barons who had successfully frustrated Herkströter’s reforms. To many British employees, the Dutch engineers’ arrogance was stultifying. Convinced of their superiority, they regarded their rivals at Exxon, Chevron and especially BP with measured contempt. Yet some refused appointments in unpleasant oilfields, preferring to remain in the comfort of European and American offices, focused on investment and process rather than practical work on the ground. Convinced of the righteousness of science and engineering, the LNG department had seriously advocated building a terminal near the Bay Bridge in San Francisco.

      ‘I’m clearing out the cupboard,’ Moody-Stuart announced, planning instant surgery. Offices around the world were closed and country chairmen demoted, 4,000 staff were dismissed, 40 per cent of the chemicals plants sold, $4.5 billion of bad investments written off, capital spending cut by one third and, most dramatically, American Shell lost its independence. Appallingly managed and beyond financial control, US Shell represented 22 per cent of the company’s assets, yet contributed only 2.6 per cent of its earnings. Walter van de Vijver, a 42-year-old engineer, was dispatched to integrate the American company with its European owner. The cost of Moody-Stuart’s surgery was huge. Shell’s net income fell by 95 per cent, from $7.7 billion in 1997 to $350 million in 1998. There was little optimism that things would improve. The oil price in 1998, Moody-Stuart believed, was ‘likely to stay at $10’, and the likelihood of it going above $15 was ‘low’. At those prices, Shell’s profits, like BP’s and Exxon’s, were certain to fall further.

      Moody-Stuart’s parallel agenda was to reform Shell’s ‘Business Principles’. A team had been working since September 1997 to develop a five-year strategy to resolve dilemmas involving human rights, global climate change and environmental problems. A larger question was whether any of these activities made sense in a ‘world of $10 oil’. Moody-Stuart was emphatic that his strategy was to generate profits ‘while contributing to the well-being of the planet and its people’. By then Watts had completed his study to alter Shell’s reputation. To boost employees’ self-esteem and to celebrate the ‘transformation process’, Moody-Stuart agreed that Watts, the new head of exploration and production, should stage a stunt. At a conference of 600 Shell executives in Maastricht in June 1998, Watts was propelled onto the stage in a spaceship, dressed in a spacesuit. ‘I have seen the future and it was great,’ he yelled to his audience, all of whom were wearing yellow T-shirts emblazoned with the slogan ‘15 per cent growth’. The onlookers were, remarked one eyewitness, ‘gobsmacked’ by Watts’s attempt to remake his ‘dour, pedantic image’. Everyone understood his agenda, however: Shell’s reserves were falling, and targets needed to be stretched. Managers were formally urged to ‘improve our effectiveness’. The message was ‘improve the score card’. At the end of his presentation, Watts urged his flock to sing Beethoven’s ‘Ode to Joy’: ‘Somewhat over the top,’ Moody-Stuart admitted. ‘We all do foolish things occasionally.’ Galvanising morale had been important. The oil majors were facing a torrid time. Those that failed, Moody-Stuart knew, would be buried alive. Executives from four American oil companies – Mobil, Amoco, Arco and Texaco – had approached Shell seeking mergers or to be bought. Shell’s split structure made that impossible. The company, Moody-Stuart knew, needed a counterplot to resist the unexpected challenge posed by BP.

       FIVE The Star

      John Browne understood oil better than most. Shell’s Mark Moody-Stuart, Chevron’s David O’Reilly and Exxon’s Lee Raymond could not match Browne’s intellect and bravado, but none had as much to prove. Employed by BP since leaving Cambridge University, the son of a BP executive who had met his Romanian mother, a survivor of Auschwitz, in post-war Germany, Browne understood that trouble and taboos had been inherent within BP since its creation. During his youth he had lived with his parents in Iran and had witnessed the company’s arrogance and subsequent humiliation. The industry’s rollercoastering battles ever since encouraged his taste for audacious gambles to rebuild a conglomerate СКАЧАТЬ