Game Plan

For a recent event in Dubai, Shell called on the services of Michael Schumacher to back up its road safety campaign. This type of clout demonstrates just how big the firm is – and it is oil and gas activities that provide the core of the firm’s activities.

In the Middle East the company has dealt in oil and gas for over 100 years, and is showing no signs of slowing down. Raoul Restucci executive vice president – Shell Upstream International, describes the company’s role in the Middle East region.

“We operate and have ambitions in just about every country in the Middle East and North Africa. We are actively involved in over 14 countries, in one form or another. Our key positions remain Oman and Qatar in terms of oil and gas development opportunities, and in the downstream sector there is of course Saudi Arabia,” states Restucci.

“To be honest, across the entire region we have a very significant spread and opportunities over the whole value chain,” he adds.

The company’s solid stature and reputation can offer its clients a number of advantages. “IOCs like Shell bring to the table long term win-win arrangements. Through the difficult stages we will carry on irrespective because we have a long term approach to things. Whether it is financial crises, political challenges, embargos or sanctions, we stay through thick and thin,” comments Restucci.

The rise of NOCs and their increasing capabilities has led to large international oil companies changing the way they present themselves. “In the early development and exploration stages in the 1930s, 1940s and 1950s, the IOCs brought the major capabilities and skills and then we entered a phase of nationalisation. Now you find that many of these NOCs are very well established with a very strong skills base and are excellent stewards of their natural resource base. Very often they have strong financial capacities,” explains Restucci.

“What companies like Shell bring to the table are key areas of technology and technology deployment. It’s not just about developing the special technology; it is the application of the integrated skill set that goes around it. It’s about how you bring a whole technology platform and successfully deploy it. Technology is not about having it, it is about using it,” he adds.

Two areas where Shell is currently working most prolifically are Qatar and Oman. In Oman Shell is involved in the enhanced oil recovery (EOR) projects which the country has pinned many of its oil export hopes. “In our established positions, our largest investments are in Qatar and Oman in upstream. For downstream it is Saudi Arabia, where we have invested in excess of US$8 billion. In terms of the oil and gas stream, you’ve got in Oman an increasing shift from conventional oil to EOR activities going forward.

“In Qatar there is a massive level of investment and activity. We have got about 75 000 contractors helping us develop QatarGas 4, the LNG project there, but also the gas to liquids (GTL) project, which is the largest plant in the world. That is without doubt the largest investment at the moment that we have in the region,” Restucci affirms.

Like all of the major international oil companies, Shell has a close eye on Iraq and the potential investment opportunities there. “It is a very large resource base which is undeveloped. We have participated in round one of the licensing and we now have teams which are participating in round two,” reveals Restucci.

“We signed a Heads of Agreement in September 2008 on what we call the South Gas joint venture which is a partnership between the South Gas Company, which has 51%, Shell holds 44% and Mitsubishi, which holds 5%. The project starts by collecting the flared gas in significant volumes, processing and treating it and then resupplying the local power generation and LPG units.”

Restucci adds that any surplus volumes of gas could eventually be exported, but in the initial phase the collected gas will just be treated, processed and put back into the national economy for much needed domestic power generation.

Recently, Major IOCs Total and Chevron pulled out of Kuwait, and speculation was raised whether other major international oil companies would follow suit. However, Shell is staying put in a country where it has a long standing presence, Restucci says.

“We have been involved in Kuwait since 1948 so we have an extensive legacy of options, particularly in the downstream sector. And in the future I expect a continued working engagement with Kuwait Petroleum. It is part of a long established relationship and I think we are building our presence, and I’m quite excited about some of the discussions going on at the moment.”

Shell has supplied LNG to Kuwait and has a team in the country which is working on the development of potential upstream opportunities.

The Middle East currently has a number of hotbeds of oil and gas activity, almost too many to choose from. Although specialised technology can be required to access some of these hotbeds, Shell is aiming to reach all of them, and with the resources it has to call upon, it is managing it.

“If we look at exploration, we are heavily involved in opportunities in Saudi Arabia where we have had encouraging results and a continued commitment there. We are also at the early stages of a very significant programme in Libya,” Restucci says.

“We have had very successful exploration and drilling in the western area of the desert in Egypt; we are very excited because we have a new position in the Nile delta which we have just recently started drilling.
“The quality of the seismic surveys in Oman is really unlocking a lot more potential there too. And of course it is all hands on deck to try and secure a number of development opportunities in Iraq, so I guess there are a number of exciting hotbeds.”

One of the strengths of Shell is that with its many divisions and resources, clients can benefit from a more integrated approach. “We bring extensive knowledge in supply chain management in terms of the integrated approach and the integrated value chain. So by setting up a partnership with Shell, you could start with a simple exploration opportunity, but then you know that you have the development, marketing, trading and the processing capabilities,” reveals Restucci.

“It is the opportunity for the integrated value chain and I guess that is why today we continue to be successful across the region in setting up new partnerships.”

Despite the expected recovery in the economy, there have been lessons to be learnt from 2009, as Restucci describes.

“You can only go so fast I guess. If you go beyond your means sooner or later you have to square up. You can’t go beyond your means for too long.

“I think companies have learnt that lesson, we have been in business for over 100 years we have had our ups and downs and various cycles but the reality is that we continue to be pretty confident and we remain bullish about
going forward.”

With a recovery in sight, Shell is hopeful of a good year ahead in 2010. Restucci says stability in the market would be one of his hopes for 2010, as volatility has played a significant part in this year’s business. However, he believes a good year in 2010 will be carrying on in the same vane as previous ones.

There are challenges facing Shell. An increasing complexity of projects is one of the issues that Restucci believes the company will have to hurdle in the future. Another is attracting and retaining the best people and in doing so, keeping the skills set of the company at the same level.

“But the real challenge is to continue to attract and develop local entities that are seen as local but can also leverage global expertise. I think that is the right mix and that is one of our success factors here,” Restucci concludes.

Raoul Restucci: in profile

• Raoul assumed his present position in May 2005. Prior to this role, Raoul was chief executive officer for the Americas for Shell Exploration & Production with responsibility for Shell’s E&P businesses in the western hemisphere

• Raoul has filled a number of roles in addition to his responsibilities at Shell. After working in The Hague in production technology, he held several positions in Brunei in the areas of well-site operations, production engineering and economics.

• Raoul joined Shell International in 1980, following his graduation from Nottingham University with a degree in mining engineering. In addition, Raoul is an alumnus of HRH Prince of Wales Business & Environment Program.

NUMBERS GAME

+ 100
countries where Shell operates

~102,000
number of employees

2%
amount of world’s oil Shell produces

3%
amount of world’s gas Shell produces

3.2
million barrels of gas and oil Shell produces every day

+25
refineries and chemical plants Shell runs (figures for 2008)

1
ranking by Fortune 500 in 2009