“Our culture and strategy are powerful,” Jeroen van der Veer affirmed, in the farewell speech he gave to Royal Dutch Shell’s shareholders when he retired as CEO in May. “We have learned to listen and take action as an integral part of society.” These words seemed to be a subtle reference to the disgrace Shell was in when van der Veer took the helm [in 2004]. News had come out that for years, the company had been making false boasts to the outside world about “proved reserves” of natural gas and oil.
Undeniably, the consequences of the scandal determined van der Veer’s leadership style for quite a while. The new CEO’s guiding ambition was to bring about a revolution in Shell’s corporate values. The culture of egocentrism had to go. Van der Veer’s image as a simple man contributed to his success. “He’s a quiet man; he doesn’t try to impress you with his social position, and he seems modest,” say Piet Verschuren and Harry Verhulp, from Shell’s chapter of the VHP, a trade union federating mid- and upper-level managers. They appreciate the way van der Veer steered Shell’s ship back onto a smoother course, but criticise the insistence on consensus: within the company, it takes an eternity to get approval for a project. Meanwhile, a competitor has already built a new plant…
Despite the complexity of its structure and its high overhead costs, the oil giant succeeded in posting “record profits” of over twenty-six billion dollars last year. According to Roel Gooskens, an analyst with the investment firm Franklin Mutual, the feat was not so amazing: “Oil prices were so high, it was child’s play.”
As for 2008 dividend payments, Shell ranked fourth, behind its competitors Exxon, Total, BP and Chevron. The drop in the price of crude oil has led to significant shortfalls, and profits fell by over half in the first quarter of 2009. Nevertheless, financial experts laud van der Veer for restoring Shell’s credibility to its shareholders.
“Greenwashing” the environmental cost
Compared to the other oil companies, Shell has a head start in the field of prospecting and drilling for what the industry terms “unconventional” oil and natural gas deposits, those that are difficult to reach. In the field of liquefied natural gas, in particular, Shell has become a market leader in the past few years.
Of course, there is a downside to choosing to rely on unconventional fossil fuels: the harder these resources are to convert, the higher their energy and pollution costs. For example, in Canada, Shell extracts oil from tar sands. Not only does this activity scar the landscape, but it also generates significant amounts of greenhouse-gas emissions.
With van der Veer at the helm, Shell promoted an image of itself as a corporation with an ecological soul. This makes former marketing director Paddy Briggs furious. “In the past few years, Shell’s “greenwashing” has been exposed by any credible analyst as an accumulation of lies and half-truths. It is an outrage for van der Veer to have consented to these fraudulent advertising campaigns.”
Besides Canada’s oil sands, Shell hopes to exploit offshore oil deposits near the North Pole. The company paid billions of euros for the right to lease more than four hundred locations in the Chukchi and Beaufort Seas, northwest of Alaska. However, the project was suspended when a US judge ruled that the environmental impact of this drilling had not been fully evaluated. The Inupiat Eskimo community fears that leaking oil could damage the whale and polar bear habitat, and also constitutes a threat to their way of life. American authorities assign a figure of 40% to the probability of a major oil spill (over four thousand barrels) in the Chukchi Sea.
In Russia’s northern regions, Shell would like to tackle the Yamal Peninsula, in the Kara Sea. Last year, it signed the first contracts leading to a partnership with Gazprom, which is now expelling the Nenet indigenous peoples from their lands.
Environmentalists decry Shell’s decision “to opt for the most CO2-intensive and least ecological path.” In the Irresponsible Energy report, Greenpeace and Friends of the Earth calculated that Shell is the oil company with the most rapidly rising increase in per-barrel CO2 emissions.
Moreover, the company’s decision to halt investments in wind and solar energy, preferring biofuel and carbon gas storage research, has attracted the ire of environmental organizations. However, Coby van der Linde, a professor in energy policy at the CIEP (Clingendael International Energy Programme), understands Shell’s choice: “Making fossil fuels more sustainable opens the perspective of major technological developments. It is an interesting path for oil and natural gas companies to pursue, because it is related to their core business.”
Piet Verschuren, of the VHP union of mid- and upper-level management at Shell, the rejection of solar and wind energy “is a shame, and a waste, considering the investments already made. Amongst the personnel, there is some disappointment that Shell is not really an innovative leader.”
Dubious dealings in Nigeria
A closer look at Shell’s oil-extraction activities in Nigeria also reveals a gap between words and reality. Although Shell prides itself on working hand-in-hand with the Nigerian regime, other observers are less than enthusiastic about it. Recently, Shell paid over eleven million euros to settle out of court on a lawsuit in New York which attracted much media attention.
According to one of the most embarrassing charges, Shell allegedly bribed two witnesses to give false testimony against Ken Saro-Wiwa. The leader of the Movement for the Survival of the Ogoni People, who had campaigned non-violently against the devastation of the Niger Delta caused by oil drilling, was hanged with seven other defendants after a dubious trial on November 10, 1995. Moreover, Shell employees may have called in Nigerian military personnel to brutalise villagers protesting against the installation of pipelines.
Shell is also in the defendants’ dock in the Netherlands. Four Nigerian fishermen have joined with the Dutch environmental NGO Milieudefensie to sue the corporation. According to the organisation’s spokeswoman Anne van Schaik, “You can see and smell oil everywhere in the Niger River Delta. A widow whose lands were polluted told us that oil had ruined her manioc crop. But she was so poor that she had to feed it to her children anyway, and they got sick.”
Shell defends itself by saying that it tries by every means to avoid oil spills, and when they do occur, does everything to clean them up.
Safety was the theme of almost every one of Van der Veer’s speeches. Reading the corporation’s 2008 report on sustainability, it seems clear that occupational safety is one of the company’s priorities. These are reassuring words, but they sometimes depart from reality. According to union member Verhulp and VHP secretary Piet Verschuren, “Company-wide, facility-maintenance budgets have been cut to save money.”
“We have learned to listen to society,” Jeroen van der Veer told shareholders last May. Hours later, those same shareholders voted by a sixty percent majority to reject the article in the annual report on compensations, including the bountiful bonuses it granted Shell’s top executives. But the millions had already been paid out. The general meeting also asked a number of questions about Shell’s investments in Iran, demanding full disclosure about them in a country where human rights are denied. “We are quite transparent,” van der Veer replied, and then said no more.