Financial Times: Staff around the world left reeling as Shell image cracks

By Ian Bickerton and Andrea Felsted

Published: April 21 2004 5:00 | Last Updated: April 21 2004 5:00

Royal Dutch/Shell share-holders are not the only people having to come to terms with the crisis at the company, which this week admitted it had overstated its oil and gas reserves for two years.

The Anglo-Dutch oil giant's 115,000 employees around the world are also facing up to the issues raised by Monday's revelations of how two of its most powerful board members were feuding over the reserves issue.

Although all looks outwardly normal at Shell Centre, the group's UK headquarters on London's South Bank, with the usual stream of people in and out of the building, employees say there is a sense of shock inside the company. There is also a feeling that the reserves debacle will be a turning point for the group.

"The most shocking thing probably for people is that the Shell way is not the right way," says one London-based employee.

Another is more stoical. "It's a big shock to the organisation but we press on," he says.

A Dutch-based employee, on a visit to the London HQ, says the reserves crisis was symptomatic of Shell's introversion.

"If you look at Brent Spar in 1995 and [the issues Shell has faced in] Nigeria, Shell did not understand what was going on in the outside world," he says. "If you look at this, they also have not properly understood and internalised what is going on in the outside world."

Shell was shaken when a Greenpeace campaign in May and June 1995 forced it to abandon plans to dump the redundant Brent Spar loading facility in deep Atlantic waters in a dramatic last-minute climbdown.

But one London-based employee says he believes the reserves debacle will have a "deeper impact than Brent Spar".

That the current crisis will be a turning point for the group is echoed by a former Shell employee who left the company to pursue a career elsewhere.

"Jeroen van der Veer [chairman of Royal Dutch/ Shell's committee of managing directors] will look at this whole story as something [that] is about trust," the former employee says. "I think he will use this to make an issue of company culture. Employees will now begin to see that this may be more than just an incident but might point at something more fundamental."

Staff say the sense of shock is felt particularly in divisions outside of Shell's exploration and production division, which is based in The Hague.

They work in businesses unrelated to oil and gas reserves and are unfamiliar with the complexities of reserves reporting.

But union officials say there is also concern among the group's offshore workforce. According to Jake Molloy, general secretary of the Offshore Industry Liaison Committee, an Aberdeen-based independent oil workers' union, offshore workers fear that the current crisis could result in big asset sales in the North Sea. Shell has already cut back on its drilling activity in the Brent field.

"The feeling that an asset sale is just around the corner is in the forefront of a lot of minds and with these most recent adjustments ... it is only a matter of time until they are working for a different operator," Mr Molloy says.

And the question of trust is also at the heart of union concern. According to Graham Tran, regional officer at Amicus, who has been in touch with workers at Shell's platforms in the North Sea over the last week, the reserves crises raises questions about Shell's integrity.

"We are talking about the day-to-day running of the business offshore in terms of safety and all sorts of things," he says. "The credibility is in tatters."

Shell has moved to reassure employees. Mr van der Veer, who staff say is well respected within the company, has sent an e-mail to employees expressing disappointment about what has happened. He is also understood to have communicated the challenges that the group faces and encouraged staff to help meet them.

But e-mails are unlikely to be enough. After Brent Spar, Shell management knew the only way to take the business and its staff forward was to get out of the executive suite and into the fray.

The shock to Shell's culture from this week's stunning admissions will require a similar offensive.