Royal Dutch Shell PLC announced plans for major restructuring of its organization, with its 200 most senior managers initially affected (see Personnel Moves, p. 36).
Effective July 1, the company will merge its exploration and production, gas and power, and oil sands units into two new divisions to improve operating performance and technology. With 22,000 people working in the three segments, thousands of jobs are potentially at risk with the overhaul. Officials said the 2,000 employees at Shell’s headquarters in The Hague will be strongly affected.
In other recent company news:
- Eni SPA and Enel SPA will assign to OAO Gazprom a 51% stake in SeverEnergia, a Russian holding company with exploration and production licenses. The deal is expected to close in June.
- China National Petroleum Corp. subsidiary PetroChina, taking a first-ever step away from its parent company, has agreed to pay $1.02 billion to Keppel Corp. for a minority stake in Singapore Petroleum Co.
- Valero Energy Corp. agreed to acquire Dow Chemical Co.’s 45% interest in the Total Raffinaderij Nederland NV (TRN) for $725 million.
Shell revamp
The restructuring measures are intended to simplify Shell’s company structure, improve project implementation, and cut costs. They are similar to recent initiatives by BP PLC and ExxonMobil Corp.
A Shell spokesman told OGJ no figures had been given on job cuts or potential economic savings. “Some people will have to internally apply for their jobs as it will be redefined; others will have to leave.”
The revamp began with the abrupt resignation of Linda Cook, head of gas and power, whose division will be subsumed with oil sands and with exploration and production into two new streamlined units. She left by “mutual agreement,” Shell said.
Cook’s departure was June 1, prior to new chief executive Peter Voser succeeding Jeroen van der Veer on July 1. Cook had competed for the position; she has been with the company 29 years, the last 5 as executive director of gas and power, Shell trading, global solutions, and technology. Under her tenure, Shell’s LNG capacity increased over 60% in the last 5 years.
Analysts welcomed Voser’s plans that stress cost-cutting and operational performance, but they have concerns about subdividing the upstream between two directors. David Thomas, analyst at Citigroup Inc., said, “[T]he level of financial disclosure under the streamlined reporting lines may be less than has been the case to date.”
Upstream will consist of two businesses: upstream Americas covering North and South America, and upstream international, covering the rest of the world.
Shell’s high upstream costs are a major issue because it is developing unconventional production, such as Canadian oil sands, GTL, and LNG. The company expects to invest up to $32 billion this year.
Shell’s downstream division will contain the refining, marketing, and chemicals businesses and will be expanded to include trading and alternative energy activities in Shell, excluding wind, which will be part of upstream. Mark Williams will be the director of downstream.
“A new business—projects and technology—will combine all of Shell’s major project delivery, technical services, and technology capability covering both upstream and downstream. It will also oversee Shell’s safety and environment performance,” said Shell.
Gazprom-SeverEnergia
Enel and Eni have given Gazprom until 2010 to pay the $1.5 billion for the stake in two tranches. “As a result of the transaction, Eni and Enel’s equity will cash in $900 million and $600 million dollars, respectively,” said Eni.
The new shareholding in SeverEnergia will be Gazprom holding 51%, the Italian partners, 49% (via a joint venture between Eni and Enel holding 60% and 40%, respectively).
This agreement builds upon a deal that was signed in April giving Gazprom until May 30 to implement its option to buy the stake (OGJ Online, Apr. 11, 2009). SeverEnergia was formerly known as EniNeftegaz and was two production companies belonging to the defunct OAO Yukos.
By 2013, SeverEnergia hopes to produce at least 150,000 boe/d focusing on west Siberian fields. SeverEnergia has the Arcticgaz, Urengoil, and Neftegaztechnologia E&P licenses, which hold an estimated 5 billion boe.
“The parties also agreed to produce first gas by June 2011 from the Samburskoye field. The parties have 90 days to define the plan and obtain all the necessary authorizations, including the extensions of the licenses by Rosnedra, the Russian authority regulating the exploitation of the country’s mineral and oil resources,” said Gazprom.
Enel Chief Executive Officer and General Manager Fulvio Conti said this partnership would enable Enel to grow in the Russian market throughout the entire value chain, from gas fields to generation and sale of electricity. “From this perspective, the entry of Gazprom provides us with a guarantee of being able to continue contributing a reliable supply of gas to our Russian power plants at advantageous conditions through our SeverEnergia gas quota.”
PetroChina-SPC deal
“SPC will become a new platform for the implementation of our international strategy and will provide a broader foundation and stable path for development,” PetroChina said of the agreement signed by PetroChina International (Singapore) Pte. Ltd., and Keppel Oil & Gas Services Pte. Ltd.
PetroChina said it purchased 45.51% of the Singaporean company’s issued share capital, adding that it also intended to make an offer for the remaining shares upon completion of the agreement.
The Chinese firm said that SPC is a regional energy company with interests in petroleum refining and marketing and that it owns a 50% stake in SPC, one of the island nation’s three major refiners.
SPC also is engaged in oil and gas exploration, with production properties in China, Indonesia, Vietnam, Cambodia, and Australia.
The agreement marks a first for Petro- China, which has previously relied on support from CNPC for overseas agreements, with all business handled via a joint venture known as CNPC Exploration & Development Co.
The agreement between PetroChina and Keppel has prompted comment among oil industry analysts. “This should be a landmark as PetroChina is acquiring overseas stake directly (rather than via its state parent before), and we expect Sinopec Corp. to follow suit,” China Merchants Securities analyst Qiu Xiaofeng told the Shanghai Daily.
Analyst Global Insight said, “The purchase through PetroChina...rather than through parent company CNPC could help emphasize the commercial nature of the transaction in order to deflect criticism that PetroChina is pursuing a nationalist grab for energy supplies.”
Valero-TRN deal
TRN owns a 190,000 b/d refinery in the Netherlands’ Zeeland region on the Scheldt River. TRN also owns an interest in the Massvlatke Olie Terminal in Rotterdam, one of the world’s largest oil terminals.
The transaction is subject to regulatory approval as well as a right-of-first refusal held by Total SA, the refinery operator and owner of the remaining 55% interest in TRN, Valero said. The transaction is expected to close in the third quarter.
TRN’s refinery, built in 1973, received major upgrades in the mid-1980s, mid-1990s, and throughout this decade. The refinery has a large, distillate-hydrocracking unit with capacity of 68,000 b/d.
Bill Klesse, Valero chairman and chief executive officer, said the acquisition represented an exceptional entry point into the European market, especially since TRN’s refinery can process a variety of discounted feedstocks primarily into diesel and jet fuel within the world’s strongest diesel market.
