Shell's Van de Vijver: Following record investment, supermajor plans to maximize value

July 17, 2003
"Generally, I think sustainable development is not about 'what' we do, it is very much 'how' we do things. It's about how you go about your business."
Walter van de Vijver, group managing director, Royal Dutch/Shell Group
CEO, Shell Exploration & Production Co.

Steven Poruban
Senior Staff Writer

Following its multibillion-dollar acquisition splurge last year, Royal Dutch/Shell Group plans to focus a majority of its strategic attention now on its newly purchased assets and to "maximize" their value. The Anglo-Dutch company also will strive to maintain the strong presence it has achieved among its supermajor peer group amid increased competition, an ever-changing backdrop of environmentally conscious exploration and development of oil and natural gas, and the continuing development of new sources of energy.

Shell does not plan any big-dollar assets purchases this year, however, despite the wealth of cash it accumulated due to recent high oil and natural gas prices, the company said. "There's no hole burning in my pocket as far as new acquisitions," Walter van de Vijver, group managing director of Shell and CEO of Shell Exploration & Production Co., told OGJ.

Last year, Shell's group of companies reached a record-high level of investment, Van de Vijver noted, spending a total of nearly $26 billion on acquisitions. These included four major deals:

-- Shell unit Shell Oil Co. and Saudi Refining Inc. acquired TexacoChevron Corp.'s interests in Equilon Enterprises LLC and Motiva Enterprises LLC for $3.86 billion (OGJ Online, Dec. 12, 2001).

-- Shell Oil acquired Pennzoil-Quaker State Co. for $1.8 billion in cash and $1.1 billion in debt (OGJ Online, Mar. 25, 2002).

-- Shell unit Shell Resources PLC acquired all shares of UK independent Enterprise Oil PLC for £4.3 billion ($6.19 billion), which included a cash offer of £3.5 billion and assumption of net debt of £800 million (OGJ Online, Apr. 2, 2002).

-- Shell units Shell Petroleum NV and Deutsche Shell GMBH signed an agreement with RWE DEA AG to acquire RWE's share in the 50:50, Hamburg-based joint venture Shell & DEA Oil GMBH in a deal valued at $1.35 billion (OGJ Online, Aug. 19, 2002).

Career path
While attending Delft University of Technology in the Netherlands, Van de Vijver never had plans to join the oil industry. "It sort of happened by coincidence, as I wanted to move abroad and Shell offered the opportunity," he told OGJ, adding, "and I haven't looked back since."

Starting in London, Van de Vijver's first involvement was in the design of North Sea platforms. "From that, I got very interested in what actually happened below the seabed," he said. "That's how my career evolved into becoming a petroleum engineer."

He had an extremely rewarding posting in Oman during a time when Shell was "building and building production," he recalled. He then became involved in the Brent business unit of Shell UK Exploration & Production Co. As general manager of the unit, Van de Vijver initiated and implemented the company's massive Brent redevelopment project. The Brent project, he said, was a "major redevelopment" and was one of the more "interesting" challenges in the executive's career.

Sustainable development
Van de Vijver said Shell is forever focusing on its global position among its supermajor counterparts. "Generally, we've always been very strong in our own business principles, which we started issuing in the 1980s and have been sort of updating regularly," he said. "That's when we first confirmed our commitment to sustainable development, which at that stage was still seen by many in the oil and gas industry as a novel concept," he added.

Now the concept of sustainable development is "in our veins and is part of the day-to-day way that we do business," Van de Vijver said. "It is not something on the side of exploration; it is integrated into everything that we do."

With the strong commitment on Shell's part, "it ultimately makes you feel proud being part of a company," he said. "Wherever we operate, we want to be seen as a 'force for good,' as we say, and that we are really contributing to the development of that country," he said, adding, "We believe in long-term partnerships—that's the only way that we feel we can be successful over the long term. So, it is not an idealistic form of thinking, it is really integrated into the fundamentals about how we want to do business.

"Generally, I think sustainable development is not about 'what' we do, it is very much 'how' we do things," Van de Vijver explained. "It's about how you go about your business."

In the US, Van de Vijver said, it has taken quite a bit of time for industry to gain a high level of comfort about the whole sustainable development concept. "I think that we are definitely not trying to claim that we are better than anyone else, but it is something that, ultimately, is about good business," he said.

Global LNG, GTL schemes
Shell is also positioning itself as an LNG powerhouse among its peer group. "Generally, we are feeling extremely good about our global LNG capabilities, having started that back in the late 1960s in the Far East," Van de Vijver said. "We feel, therefore, that we are uniquely positioned to really capitalize on this LNG business becoming truly global."

LNG projects that have started up in the Asia-Pacific Basin as well as in the Atlantic Basin, Van de Vijver said, have "globally connected" the LNG markets. Shell's stance is to be able to be the world-class builder of LNG facilities and to have the shipping capabilities to master the LNG market. "We know that places like Europe, like the US, in the future are going to need more and more gas imports in the form of LNG to satisfy their energy needs, and we feel that we have the global capability to compete into it," he said.

Van de Vijver said Shell plans to focus on both regions for its LNG development projects. Given the market-driven nature of the LNG business, he said, the company will ultimately prioritize its basin focus as the market prioritizes it for the company. "We know that in certain areas of the world, like the Asia-Pacific, there are a lot of supply opportunities. At the same time, in the Atlantic Basin, there is demand that needs to be satisfied in Europe and the US. So a lot of it is truly market-driven," he noted.

The LNG business, Van de Vijver said, is a conventional business in that the large financial commitment required for such projects must be backed up with long-term, take-or-pay contracts. "And that is still the business model that we see dominant in the future," he said.

New markets for LNG, such as India, will take additional time, Van de Vijver said, but the very secure markets of South Korea, Japan, and Europe "will still be an anchor for anything going forward." He said, "For us, I can only be very grateful to my predecessors who actually had the courage to start that business, and it's gotten us to where we are today."

Van de Vijver said that the company's gas-to-liquids projects will "remain limited compared with LNG on a global scale." Given the capital intensiveness of GTL schemes and their requirement for "really cheap gas resources," he said, much thought would need to go into development of such projects as an alternative way to monetizing the company's gas. "When it comes to GTL, it will really be focused very much on a sort of niche basis in countries that have very low-cost gas supply and no other opportunity to monetize that gas," he said.

Shell already operates a large GTL plant in Malaysia, which is currently producing nearly 15,000 b/d of middle distillates, Van de Vijver said. The plant, which has been operational for more than 10 years now, will serve as the core of Shell's GTL business, although the company is "currently in the development stage of quite a few new opportunities," mainly focusing in the Middle East, he said.

Partnerships, people
Van de Vijver emphasized Shell's openness to partnering with other companies as one of the supermajor's main strengths. "Let's face it, even a large company like us can't do everything on its own," he said, adding, "You can't be a winner in everything that you do yourself."

Choosing partners remains one of the main challenges of his work, Van de Vijver noted. It requires "being a little bit more outward-focused," he said, adding, "I think a lot of us in the industry, particularly larger companies, can be very busy with ourselves and not necessarily looking out there to see what's happening."

Sometimes choosing partners is about the ability to commercialize certain technologies, he said. "Rather than going around in circles for 10 years," he said, "sometimes it helps to partner with someone with the proven capabilities." Ultimately, he noted, a successful partnership will accelerate the speed to market of certain technologies, thus benefiting the entire industry.

Van de Vijver said that another strength of Shell is its workforce. The company conducts numerous internal surveys and discussions to make sure that it gets the right people with the right capabilities and who want to go to the places where business is being done. "We very much feel that every individual wants to continuously learn," he said. "That is a very central drive in our company, that we are very focused about the continuous professional development and challenge that individuals can have in the company, and that they feel that they continue to learn as they progress in their careers and in the locations that they work."

The company puts a lot of effort in what it calls its "competency development framework," where employees "actually see what sort of competency they have, how they can further develop it, and how it impacts their career," he said. "People ultimately would like to be told, 'Hey, you're doing a good job, and we really appreciate it.' And sometimes you can't take that for granted," he added.

"Without people, we can make all these wonderful plans, but we can't execute them. That's why when I talk about the aspirations that I have for Shell as a company, I always center it around three things, or the three 'Ps': portfolio, performance, and people," Van de Vijver said.

Career Highlights

Walter van de Vijver is a group managing director of Royal Dutch/Shell Group and CEO of Shell Exploration & Production Co.

Employment
Van de Vijver's career with Shell began in 1979 and includes assignments in Qatar, Oman, the US, the UK, and the Netherlands. He started his career as a field engineer and held a variety of jobs in Shell's E&P business before being appointed general manager of the Brent business unit of Shell UK Exploration & Production in 1993. While serving in that position, he initiated and implemented the massive Brent redevelopment project.
In 1997 he became chief executive of Shell International Gas and Shell Coal International in London. Then, in August 1998, he moved to Houston to take up the position of president and CEO of Shell Exploration & Production Co.
In the US, he led the restructuring and repositioning of Shell's E&P and gas and power businesses.

Education, other activities
In 1979, Van de Vijver graduated with an MSc in civil engineering from Delft University of Technology, the Netherlands.