Putting safety first is one of the most important ingredients for a successful major energy company, said former Royal Dutch Shell CEO, Jeroen van der Veer, sharing a list of problems that executives need to watch out for.
Van der Veer spoke Thursday at the KPMG Global Energy Conference in Houston.
Energy companies are being scrutinized mercilessly by the public, he said. They not only need to have a sterling no-accident record, but also must demonstrate that they are vigilantly following all regulations.
“There is zero tolerance for incidents by the public in our industry,” van der Veer said. “People expect large companies to be 100 percent compliant with rules and regulations, even if they have nothing to do with safety. If there is one exception to the rule, it will be magnified by the newspapers, even if it has nothing to do with the installations.”
In the current environment, an energy-related accident in one company or country may have an impact industry-wide.
“If you have a tsunami in Japan, they close the nuclear reactors in the south of Germany,” van der Veer said. “There are a lot of emotions in the public that gets translated by politicians to do things that don’t make sense. The net result of closing plants in Germany means more coal consumption, which is a strange thing if you try to portray yourself as a green country.”
Van der Veer also indicated that European countries could benefit from replicating the North American model of shale gas development, given the boost it has provided to the economy.
“Shale gas has been a remarkable development in the US and in Canada,” van der Veer said. “It has helped the country in energy and in increased self-confidence. If I look at Europe, we have pretty good shale gas, but you have all the problems of people saying it is fracking. For political reasons, there are moratoria and delays, even to do the exploration.”
High energy costs combined with a largely non-migratory labor force has made Europe non-competitive, van der Veer said, all of which could make shale gas development beneficial.
“In Europe, they think we can have a fossil free society in 50 years,” van der Veer said. “If you look at several energy scenarios, in 50 years, renewables will gain market share, but oil and natural gas will still provide more than 50 percent of the total supply.”
Leadership also means being actively involved in training the next tier of managers, van der Veer, who later told FuelFix that he spent three to four hours a week as a CEO, training the roughly 200 managers that he had direct responsibility for.
Clear and direct communication to employees is also key, to ensure that they are engaged in the strategy.
“Good leaders make sure that everyone understands the next steps and how it will impact them,” van der Veer said. “You have to make clear to people how to win over the competition: For Shell, this was technology – it has become one of the most innovative companies.”
The former Shell executive steered clear of saying whether Shell’s operation in Alaska could have been run better, but said that he agreed with the decision to wait until at least 2014 to begin exploration. Shell’s drilling rig Kulluk ran aground off a small island near Kodiak Island at the end of 2012, after it unexpectedly lost power in stormy conditions in the Gulf of Alaska.
Public perception of an operation, and whether it can be safely executed, is critical for a project to succeed.
“It is not only that you think you can do things safely in the Arctic, but you have to convince many people who are reluctant to believe you,” van der Veer said. “It is hard to maintain the needed permits if the public has huge doubts.”
Van der Veer is also confident that the Arctic has and can be safely drilled, but acknowledged that public acceptance of this may take some time.
“There are many holes that have been drilled in the Arctic – it is not totally new, what we are going to do,” van der Veer said. “We are not going to operate in the Arctic if we think it will bankrupt the company.”