Shell’s CEO move points to ongoing downstream plans

Shell's newly appointed chief executive Ben van Beurden (AFP PHOTO/ROYAL DUTCH SHELL/REINIER GERRITSEN)

Shell’s newly appointed chief executive Ben van Beurden (AFP PHOTO/ROYAL DUTCH SHELL/REINIER GERRITSEN)

Royal Dutch Shell selected  its refining  leader, Ben van Beurden, as its next CEO, signaling  plans to leverage chemical and refining expertise to keep pace with the growing role of energy’s downstream sector.

Van Beurden will take the top job in 2014, succeeding  CEO Peter Voser in 2014, who announced in May his plans to retire in the next year.

“Ben brings great experience to the role,” said Marvin Odum, US-based Shell Oil President, in an interview with the Chronicle. “He has worked across a number of businesses, he understands the businesses well and he brings deep, deep experience in the downstream side of our business.”

Van Beurden, 54, has been downstream director since January. In 2005, van Beurden worked in Houston as the vice president of manufacturing excellence for Shell, overseeing high-performance initiatives in refining and chemicals manufacturing.

Odum said that Van Beurden’s chemical and refining background could be good for Gulf Coast’s petrochemical plants and refineries.

“We’re having a deep look at chemical opportunities in North America, like the investigation we are doing in Pennsylvania, and Ben’s a supporter of that program,” Odum said, citing a potential plastic feedstock plant investment in western Pennsylvania as an example.

No. 1: Energy companies dominate Fortune Global 500

Van Beurden, a Dutch national, joined Shell in 1983 and has held a number of technical and commercial roles in both the Upstream and Downstream businesses. He graduated with a Master’s Degree in Chemical Engineering from Delft University of Technology, the Netherlands.

Peter Voser will leave Shell at the end of March 2014, marking the end of 29 years with the Company.

Executive moves: Siemens energy-related business unit taps new CEO

The announcement defied rumors that US-based Odum or current chief financial officer Simon Henry were the top names in the running to succeed Voser.

“I don’t even think this guy Ben was even in the running of the names that was even being speculated on a couple months ago,” said Stephen Simko, an analyst for investment research firm Morningstar in Chicago. “For now it’s definitely a wait and see.”

Van Beurden will lead the company to meet ambitious production targets: 4 million barrels a day of output by 2017, up from 3.6 million in the first quarter of 2013.

And Shell investors are watching closely whether the company’s capital spending will turn into the promised revenue streams. The company plans to spend more than $30 billion a year in capital projects.

One of van Beurden’s challenges will be managing the future path of these big ticket investments, including some with tumultuous histories.

Struggling with regulatory demands and heated protest from environmentalists, Shell conducted preliminary drilling last summer in Alaska’s Chukchi and Beaufort seas. It canceled plans to return in 2013, however, after setbacks including the grounding of one of its rigs while it was in transit late last year.

Henry, the chief financial officer, said during Shell’s May earnings call that the company hopes to return to the Arctic in 2014, but analysts say it will be an uphill battle to retain investor confidence.

“Alaska is not a pretty picture,” said Fadel Gheit, an analyst with Oppenheimer. “They spent $3 billion and have nothing to show for it.”

Gheit likewise predicts that Shell’s Port Arthur Motiva Enterprises refinery, which Shell co-owns with Saudi Aramco, will be another headache for van Beurden. The Motiva plant, the largest refinery in North America, has had a troubled recent history, shutting down for several months in June 2012 following a fire.

But van Beurden’s larger challenge will be persuading investors that integrated companies like Shell still make for attractive investments.

“In my view, history has shown that investors prefer pure plays,” Gheit said. “Shell, like Chevron, continues to defend the integrated model, but that is not what the market is saying. Basically, most investors want a pure play, because they can take advantage of the market pricing of the securities better than an owner of a bigger company conglomerate.”

Also on Fuel Fix:

Shell says Gulf find may hold 100 million barrels