Shell’s CEO has drawn on his experience to remove the “downstream albatross” from around the firm’s neck and revamp its upstream offering.
“Upstream has learned a lot from downstream,” he said.
“Downstream has had its own difficult journey as a sector, but it started way earlier.”
The oil major started transforming its chemicals arm in the 90s before tackling refining and marketing in the early 2000s.
“It was just not attracting the investment that was going to be required to keep it where it needed to be,” Mr van Beurden said.
“We felt that if you benchmarked us, our costs were not competitive and, of course, at a time when the oil price was high there were plenty of people asking, ‘Why on earth keep this albatross round your neck?’.”
He added: “That part of the business had been in crisis mode from the beginning of the century.
“It took us about 10 to 15 years to completely turn that business around and restructure it to a point where it’s now the best performing downstream division in the sector.
“It does $10billion of cash and a 15% return across a cycle.”
But the downstream learnings didn’t instantly transfer to upstream.
It took a whole new level of fear factor to kickstart change.
“What upstream was lacking, I think, was the paranoia that if we don’t do it we’re going to be in real, deep trouble and I think that came with lower oil prices,” he said.
“I think it was absolutely clear this was not sustainable.
“The conviction with which people started pulling ideas out of the downstream came up an order of magnitude.”
The company leader had to take a “dispassionate” approach to weigh up the potential promise associated with Shell’s existing assets and the price realisation in his bottom line.
As Mr Van Beurden discusses the strategy behind Shell’s $30billion in divestments his tone and pace can be likened to a coach delivering a half-time locker room talk to his team.
He said: “In our industry, or in any industry for that matter, it’s all about winning against the other teams, isn’t it? And if you don’t know what game you’re in, if you don’t know the rules, if you don’t know the score it’s hard to win.
“I think we understand the game. We’re not always clear on who the competitors are and we’re not very good at keeping the score. That’s what I meant by having a bottom line focus approach where people understand whether we are winning or not.
“And winning not in a sense that we are making every milestone, that we are operationally excellent and delivering all these projects. That’s all important but it’s not enough. If you do all of that but you still can’t make money, then you’re not winning.”
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