Royal Dutch Shell Group .com

The Guardian: Interview: Lord Oxburgh, chairman of Shell Transport and Trading: Is all well with Shell?

Terry Macalister
Saturday December 11, 2004

Ron Oxburgh is an unlikely oil tycoon if ever there was one. The new chairman of Shell is a fellow of the Royal Society, leader of a House of Lords science committee and regarded by most who know him as a "pretty decent chap".
But the 70-year-old, with a distinguished career within academia and the Ministry of Defence behind him, is also a man who speaks his mind.

That is not something historically associated with a secretive and bureaucratic organisation such as Shell.

This week the UK chairman was happily firing verbal missiles at the government over radioactive waste while explaining to the Guardian how he admired BP's chief executive, Lord Browne, and how his own Anglo-Dutch oil conglomerate was facing organised crime in the Niger Delta area. He accepts that Shell has been through some nasty self-imposed scrapes but also feels that it has been misrepresented by the media and others in the outside world. So much so, he says, that he also began to believe some of the more negative images of the company.
An example? "Well, Shell has been heavily criticised about its activities in Nigeria. Yet earlier this year I went down to Warri in the middle of Delta and as part of a stakeholder dialogue I met with NGOs, women's organisations, provincial governors and paramount chiefs.

"I had expected to be on the back foot all the time but attitudes were just so different from what I had expected. They said Shell was one of the things that worked in this country. One NGO was yelling about Ken Saro-Wiwa [the hanged poet-environmentalist whose fate some attributed in part to Shell] and others said, 'sit down, you know it's not their fault'. Another person said, 'you know what the problem is [with this country] - it's corruption. We should follow Shell, which refuses to become involved with this.' Everyone clapped. It was quite a remarkable occasion." Remarkable indeed. It is hard to imagine this high-minded soul in his suit and tie mixing it in the Delta region with a host of feisty local activists. Then again Oxburgh might come over at first instance as a polite British gentleman from an era when such things counted, but he has plenty of modern fizz about him.

So what about all that polluted water and other environmental degradation in the Nigerian mangrove swamps that Shell has left behind?

"It is very hard-working down there but you have to remember that two-thirds of the spills are caused by people tampering with the pipelines.

"They drill into them deliberately and then there is the fact that we immediately pay compensation - and the bigger the spill, the bigger the compensation. Also, local people get paid to clean up."

There are worse developments than this, argues the Shell chairman, who joined the company as a non-executive director in 1996.

"The arrival of a sort of mafia has made things even more difficult. Special vessels come into land and siphon off 20,000 barrels of oil through surface hatches and then load it on to waiting tankers. As much as 10% of Nigeria's oil goes this way. It's really, really big organised crime." Environmental problems are also happening closer to home. Shell - as reported in this paper this week -has suffered a series of North Sea gas leaks and has been rapped over the knuckles by the Health and Safety Executive. A confidential report from the safety regulator severely criticised the oil major for a lack of onboard safety training, poor equipment maintenance and other deficiencies on the Brent Charlie platform.

Oxburgh admits that he was not aware of this latest incident but insists safety is at the heart of the company's agenda. "We get regular [management] reports on health and safety, but any deaths [such as the one on the Brent field in 2003] are one too many."

The North Sea and Nigeria are just two of more than 100 countries where Shell and its 120,000 staff are operational and not every incident will find its way to the very top table. "But I must say I have just come back from Australia where we have a plant that has just celebrated two million man hours without a single incident," he explains.

And generally, Oxburgh argues, the company has recovered a lot of its poise and purpose since January, when it first announced that it needed to downgrade its global reserves by more than 20% to meet the rules of the United States' markets regulator, the securities and exchange commission. By March, the chairman of the managing directors, Sir Phil Watts, was shown the exit along with the exploration director and Oxburgh was promoted from non-executive director to chairman of Shell Transport & Trading.

He now believes that Shell made it worse for itself by not changing its reporting measures when the new SEC rules came out in 2001, but also by not being clear in its external communications that much of the downgrades was technical and had no real financial implications.

He does not hide the fact that the whole episode was debilitating inside as well as outside the group. "The workforce was shattered and suffered severe loss of confidence, but I would have to say that bits and pieces were taken out of context [by the press]."

Did non-executives like himself or directors such as the present chief executive, Jeroen van der Veer, really not know what was going on? "I was totally shocked. The board was not made aware [of the reserves issue] and absolutely nothing was brought to us on this [prior to January]," he argues.

Neither was he aware, he insists, of the terrible fighting going on between Watts and his exploration chief. "Relations between the two people who parted seemed perfectly normal," he says. "There is always tension between colleagues but there were no public rows."

Oxburgh's confidence that Shell is on the mend is based on growing internal staff morale, an increased share price and a positive response from the City to its decision to change the dual company structure to a more orthodox one. Shell shares fell from 415p when the reserves scandal broke to 350p but have been up to 445p in recent weeks, helped no doubt by the continuing high price of world crude.

Van der Veer has already been made chief executive - rather than chairman of the managing directors - but the rest of the changes will not be implemented until the shareholders have agreed to them next summer. At this point Oxburgh will step down.

Whatever the advances made by Shell there must surely be a permanent frustration that the somewhat shy and cerebral Van der Veer will always seem second best to his closest rival, the dynamic and sweet-talking Lord Browne at BP.

"There is certainly not frustration or resentment. John Browne is doing an excellent job for BP; he is a good businessman and has presented BP's case extremely well to the outside world. But John Browne is John Browne, and we have got to develop a different kind of style."

Oxburgh believes the Van der Veer style is a thoughtful and inclusive one that plays well, certainly with Shell staff.

The Shell chairman has a wider view of the energy world than many oil and gas executives, given his position as chairman of the science and technology committee in the House of Lords, where he has sat since 1999.

The cross-bench life peer left nobody in any doubt where his sympathies lay with regard to nuclear power on Thursday, when he laid into the government for its prevarication on waste disposal. The environment minister, Elliot Morley, was furious, saying the select committee was "ignoring the mistakes of the past, when there was narrowly based scientific committees and inadequate consultation".

Such criticism is shrugged off by a strongly independent man such as Oxburgh. The former rector of Imperial College will not spell out that Britain must have a new generation of atomic power stations to meet both energy security - as oil and gas reserves begin to run down - and its greenhouse gas targets. He says: "You can't just dismiss it." He is desperate to ensure the waste issue is not used as an excuse to avoid a debate on the issue of modernisation.

Nuclear power, with its lack of CO2 emissions, might be a convenient way for the government to meet its Kyoto treaty targets but critics say Labour is scared, ahead of an election, of showing any enthusiasm for the nuclear industry, which is still unpopular with the public.

Oxburgh understands this. "We have had nuclear-related incidents that have caused popular concern, such as the Japanese fuel issue with BNFL [when safety checks were falsified], but I think attitudes are changing.

"My guess is that much depends on how you ask the question. If you say, 'do you like nuclear power?' they may say no. But if you say nuclear power might be the only way of coping with the greenhouse gas problem, then people might say, 'maybe we should do it'." Lord Oxburgh, who is also chairman of the Lords science select committee, suggests that nuclear power could not be ruled out as a way of coping with greenhouse gases Photograph: Eamonn McCabe

The CV

Born Liverpool, November 2 1934

Educated Liverpool Institute; University College Oxford - BA and MA; Princeton University - PhD

Career 1960: Lecturer in geology, Oxford University; 1964-78: Emeritus fellow, Cambridge University; 1978-91: Professor of mineralogy, Cambridge University; 1988-93: Chief scientific adviser at Ministry of Defence; 1993 - 2001: Rector, Imperial College of Science; 1996: Non-executive director at Shell Transport and Trading; 1999: Created life peer; 1999-2002: Chairman of trustees at National History Museum; 2001: Chairman of House of Lords science select committee; 2004: Non-executive chairman of Shell Transport and Trading

Recreation Mountaineering, orienteering, reading and theatre

Click here to return to Royal Dutch Shell Group .com