By Emeka Ugwuanyi
Oil major Shell PLC carried out minor reshuffle of its management staff on Monday and plans to combine its integrated gas and upstream businesses into one directorate from July 1 and reduce the size of its executive committee from nine to seven.
The oil giant, according to Energy Intelligence report, will also combine its renewables and energy solutions business with its downstream operations.
The shakeup is one of the first changes to be implemented by new Shell CEO, Wael Sawan. The shakeup is designed to “simplify the organization further and improve performance.” The Shell chief said.
“I believe that fewer interfaces mean greater cooperation, discipline and speed, enabling us to focus on strengthening performance across the businesses and generating strong returns for our investors,” Sawan added.
Shell’s moves are the latest in a string of corporate restructurings taking place across international oil companies (IOCs), as directors seek fit-for-purpose models to accommodate diversifying energy businesses, Energy Intelligence said.
In some cases, restructurings have been financial in nature, to offer investors greater transparency around how various business lines are performing.
In others, restructurings have been about rearranging the nuts and bolts of how companies are organised as new operations in areas like renewable electricity, biofuels and hydrogen gain critical mass.
Shell’s latest restructuring move is in the latter camp, although the major had already taken the other path early last year with the breakout of Marketing and Renewables and Energy Solutions within its financial results.
Shell says Sawan’s initiative will not affect its financial reporting structure, with the reporting segments remaining: Integrated Gas; Upstream; Marketing; Chemicals and Products; Renewables and Energy Solutions; and Corporate.
Is the marriage compatible?
According to Energy Intelligence, the most intriguing part of Monday’s news from Shell is its decision to roll together downstream and renewables into a single management line.
Integrated gas (which includes LNG) and upstream appear at first glance to be a more natural fit than the other combination, which among other things, will bring solar and wind power together with the marketing of oil products.
But the move may been seen as supporting Shell’s vision of becoming a “one-stop shop” energy provider to municipalities, companies and retail consumers, by bundling its end-use products under one managerial line.
Shell has been reporting integrated gas numbers separately from upstream since 2016. The segment has occasionally missed earnings expectations due to a weak LNG trading performance, such as in the third quarter of last year.
Upstream, on the other hand, had a “fabulous quarter” in July-September, according to Shell CFO Sinead Gorman.
Sawan, who became CEO on January 1, previously led integrated gas and renewables at Shell. The restructuring means his previous role on the executive committee will no longer need to be filled.
Instead, upstream director Zoe Yujnovich will lead the new Integrated Gas and Upstream directorate, while downstream director Huibert Vigeveno will take charge of the Downstream and Renewables directorate.
Additionally, Shell’s Strategy, Sustainability and Corporate Relations directorate will be disbanded and its director, Ed Daniels, will step down effective July 1.
Strategy and sustainability will then report to Gorman, “enabling more streamlined planning and better capital allocation decisions,” Shell said, adding that corporate relations would report directly to Sawan.
Shell is due to release its fourth-quarter and full-year earnings on Thursday.
