With 2001 results showing earnings at $12 billion, the second-highest ever, chief executive Paul Skinner sees stability as key to maintaining Shell's success. Ella Shanahan reports
Shell's geographical diversification provides for a strong underpinning of the business in uncertain political times such as these, Mr Paul Skinner, group managing director of the Royal Dutch/Shell Group, believes. But he does not rule out the possibility of another oil crisis.
"I would never say never because geopolitics is a very uncertain thing and clearly there is today a heightened tension in the world which is having a significant impact on the movement of oil prices. We have seen oil prices escalate from $17-$18 a barrel to $25 and part of the sharp increase is a reflection of increasing tensions in the Middle East."
However, he says stabilising oil prices lies more in the hands of governments and less in the hands of companies like his. And he believes, by consistent investment in countries such as Nigeria "where we've had to work in difficult circumstances" and in the Middle East, that energy companies can make a significant contribution to the development of these economies.
"What we can do is something very central to our mission: to continue to develop new energy sources which can contribute to economic growth in the world. We don't like wild gyrations in energy prices which inevitably lead to uncertainty or instability in the development of economies, and anything which threatens world economic growth is something which is damaging to our business," he says.
Shell - of which he also is managing director in the transport and trading company and chief executive of Shell Oil Products worldwide - is one of the big three international energy companies. Operating in 135 countries, it has major explorations in offshore Nigeria, especially the Bonga field, the largest hydrocarbon discovery of 2001 in the global upstream industry, the Brutus project in deep water in the Gulf of Mexico, and in the North Sea off Britain, Norway, Denmark and the Netherlands.
"What makes us different is the fact that, from a geographical point of view, we're probably the most diverse overall and, in terms of the business for which I am responsible, we have got the biggest portfolio, which is significantly bigger than the others. One thing which differentiates us to an increasing extent from Exon Mobil and BP is the importance we attach in all we do to the concept of sustainable development. . . We have for many years looked at long-term energy scenarios. Long-term planning is very well embedded in Shell."
Shell is involved in three areas of alternative energy - hydrogen, solar and wind.
On hydrogen, he says: "We believe that the world will find its way, sooner or later, to the hydrogen economy. . . We're looking at it as a transportation fuel, looking at ways of storing and distributing hydrogen."
But he warns: "The internal combustion engine is going to fight very hard to remain a major force in global transportation."
On solar energy, he says: "We see significant energy applications for solar energy, not least in developing countries - to give two examples, in both South Africa and India - and recently we have entered into a large-scale transaction to acquire the solar energy business of Siemens.
The solar energy business is in its early days. It's not a significantly profitable business but we believe it could be significant in the total energy mix for us to justify the investments we're making."
On wind power, he says: "For the time being, it's one of the energy forms closest to providing reasonable rates of return in the short- to medium-term."
Last month, Shell posted full-year results for 2001 showing earnings at $12 billion, the second highest ever and only 9 per cent below the record results for 2000, performances that could be seen as coinciding with Mr Skinner's appointment. He cites strengthening energy prices and "significant transformation" of the business internally as major contributory factors. These internal changes included reducing the annual cost base of the company by $5 billion a year, changes in capital investment policy, introducing individual performance contracts for senior management and becoming more customer-focused.
Looking to the future, he says: "The energy business, built around oil, has been running since 1875, so it's well into its second century and it's a business which has shown itself to be remarkably resilient to change of all sorts. I have little doubt that it will go on delivering smarter solutions to energy consumers for a long time to come."
Shell has been in Ireland for 100 years, with a turnover last year of €1 billion and net income after tax of €25 million. It produces petrol, diesel, gasoil, heavy, medium and light fuel oils, lubricants and bitumen. It covers the Republic and the North, employs 200 people and has 250 retail sites, of which it owns 100 and operates 60. Mr Skinner believes Ireland has become an attractive place in which to invest. "I hope we will find opportunities which will enable us to continue with that investment in our main businesses. I think the areas in which we are likely to invest in Ireland are in our retail and commercial businesses, which are the mainstays of our operations here, but I wouldn't exclude investments in some of the areas like renewable energy and other energy forms."
A Londoner with a degree in law, Mr Skinner has spent 35 years with Shell, the greater part of his career in the oil products business. This meant living in Greece, Nigeria - during "the so-called oil shock period" - New Zealand and Norway, until his return to Britain 10 years ago.
"I was in principle ready to go on and continue travelling because it's been a genuine privilege to live and work in different environments but, with ageing parents and growing children, it probably was a good thing to come back." Now dividing his time between his home in Britain and The Hague, he admits he still is "two-thirds of the time away".
His wife Rita, a barrister, decided, he says, "to give up her career and follow me around the world and has been a very valuable supporter over all those years in many countries, where she has effectively been an unpaid member of my extended management team and provided a great deal of help".
Now that their children have flown the nest - Phillip (29) has a theatrical production company in London and Alexander (26), a Harvard-educated economist, works with the Treasury in London - Mrs Skinner has set up her own greeting cards business, Help With A Greeting.
A young 57, Mr Skinner faces retirement in three years. It's mandatory, he says, putting out the company line about renewal of the company and bringing along new leaders, but he adds with a grin "it irks a bit actually".
And he admits: "It's difficult to contemplate retirement as a sort of precipice. My intention would be, one way or another, to maintain an involvement in business."
He is a non-executive director of the Rio Tinto mining company and a director of INSEAD, the European business school in France.
A strong believer in a work/life balance, his interests include skiing, golf, fishing, opera and modern political history. He considers himself fortunate to be able to experience bits of modern political history in the course of his job "and meeting Bertie Ahern this morning. . . it's always an interesting aspect of what we do".
And did he touch on the vexed question of taxes when they met in his constituency office? "We didn't discuss taxes," Mr Skinner says diplomatically.
Name:
Paul Skinner.
Title:
Group managing director of the Royal Dutch/Shell Group, managing director of Shell Transport and Trading Company, chief executive Shell Oil Products.
Age: 57.
Family:
Wife Rita, sons Phillip and Alexander.
Education:
Law degree from Cambridge.
Career:
Took part in Shell University Studentship support scheme at college and joined the company in chemicals in the UK in 1966. He has spent the bulk of his career in the oil products business, particularly in trading. He held a number of chief executive appointments before becoming president of Shell International Trading Company in 1991. He became chief executive of Oil Products in 1999 and group managing director in January 2000.
Why in the news?
Shell Ireland, an all-island company, is 100 years old this year and he came to Dublin to celebrate it.
