Responsible Leadership: Navigating the Energy Transition
Mar 19, 2018
Shell Canada’s President and Country Chair, Michael Crothers, shared his thoughts on leadership and the future of energy with Engineering students at the University of Alberta in Edmonton on March 19, 2018.
It’s not every day that your university invites you to deliver a lecture, let alone one kicking off a new series founded by members of your audience. It seems like just yesterday I was here in this faculty doing some of the things that first-year chemical engineering students do…and it is a shock to realize that I started studying in this faculty 38 years ago! More on that in a moment.
I’d first like to thank the University of Alberta, the Faculty of Engineering and School of Business for hosting this event. I’d also like to acknowledge that the land on which we gather is traditional Treaty 6 territory for many Indigenous Peoples, including Cree, Saulteaux, Niisitapi (Blackfoot), Métis, and Nakoda Sioux.
And I very much want to thank Charles Hantho for being the founder and supporter of the Hantho lecture series and for being here tonight. You have been a leader, pioneer, and visionary in Canada’s business community for many decades, and it’s an incredible honour to be asked to share my thoughts on responsible leadership and the energy transition.
I graduated from U of A in the auspicious year of 1984. When I think back to that time, it is paradoxically both very distant yet recent due to the many vivid and fond memories of my time as a student here.
It was here at UofA’s Faculty of engineering that I received some of my first and most important lessons in responsible leadership. But first, a quick few words about 1984, the year I graduated.
I didn’t have email in 1984 – I didn’t know how lucky I was! – nor did I have a PC, but I had an HP-11C calculator that could actually run programs. None of us had cellphones but we had rotary dial 1950’s style phones in Lister Hall (we called them “Al Capone phones”) that I spoke to my parents on but I was careful not to talk too long because it was expensive. Telus was not even a company then – who remembers AGT?
The term “global warming” had appeared as the title of a US scientific paper in 1975 but people weren’t talking about climate change. It was 1997 before the Kyoto Protocol was signed.
Shell was among the first major oil and gas companies to acknowledge climate change around that time. However, the big energy debate in this province in my first year of university wasn’t about pipelines or carbon prices but about the National Energy Program and a vision of market forces versus government intervention. Differences between provincial and federal governments are not new!
In Canada, we were a few years away from getting the lead out of gasoline, governments were setting new fuel economy standards, and North American automakers were facing tough competition in the form of high-quality vehicles from Asia which were being built with revolutionary principles of production. As for me, I was the proud driver of a lime green 1976 Ford Maverick. Its body was covered in rust, it was awful to drive in winter, but, man, could that V8 go!
What could a young chemical engineering student learn almost forty years ago in this seemingly technologically deprived environment that would still be relevant today? Well, in addition to learning about Laplace transforms, distillation and catalysis, I unwittingly learned a lot about leadership.
Three things really stand out for me:
As a young student engineer, I dabbled in student journalism. I wrote stories in the University newspaper on behalf of my classmates, 40% of whom were women in my Chemical Engineering class. Now, I hope this won’t come as a surprise or a shock to any of you, but even back in the early 1980s, engineers suffered from what you might call an image problem. I hadn’t yet joined the oil industry, so I didn’t know tough it can be to challenge damaging stereotypes. But I gave it the good old college try.
Trying to counter the “all engineers are boors” rhetoric and stereotypes, I wrote articles about the cool things we were doing, wanting non-engineering students to understand the amazing people I had been getting to know, who had such wide interests, great talent and intellect. Looking back, I see now that I was celebrating diversity before I even knew what to call it.
Decades later, I work at a company – Shell – where diversity is a huge value and priority, and it’s something I personally champion along with colleagues on our country leadership team. We believe celebrating and cultivating diversity and inclusion is the right thing to and we know it helps us perform better in our businesses. That’s just one thing responsible leaders do.
Then there was Engineering Week. These events too were more diverse and more artsy than we might think at first. They featured political satire, music, feats of technology and yes, too much beer with the occasional verging into going-too-far territory. But this can make for good learning.
One year the Aggies pumped liquid manure over the Mechanical Engineering Building and then some engineers returned the favour by releasing mercaptan – a very smelly sulfurous chemical - in the Ag Building. This wasn’t something to be proud of. But we learned another small lesson in responsible leadership – our students apologized and made it clear our engineering faculty had crossed the line between fun and simple vandalism.
This lesson of owning your mistakes and being accountable has never left me. Years later when I was Country Chair for Shell in Ireland I would put it to good use. But let’s hold that thought.
Our profs told our class of 1984 that we were one of the most serious and hardest-working classes they had ever seen. Maybe they said that to every class! But when we graduated in 1984, we certainly needed to be that way. We were graduating into a deep recession and very few of us landed jobs out of school. I remember my third-year summer job with Dome Petroleum was cancelled at the last minute and I ended up working in a beer warehouse instead. That turned out to be a great learning too, about how some people used confrontation instead of collaboration in the workplace.
While at U of A, I experienced the closeness that came from being stretched past our limits, finding latent capacity and the resilience that comes from humour, friendship and teamwork – what better way to prepare for adversity and change?
I learned from the leadership of my peers in what they prioritized, putting relationships first. This was a lesson in valuing people for who they were, not just for their skills. I came into university competing with my fellow students but I left competing with myself and with deep admiration for classmates that I am privileged to still call friends.
When I went into the business world and started working with people and became a leader I never forgot these lessons. In many ways, they’ve formed the guiding principles of my career.
We know that leadership and leaders come in many shapes and sizes. But I think all leadership needs to be responsible. And for me, responsible leadership, for both individuals and companies, comes down to this: putting the interests of others ahead of your own, putting people ahead of your own ego, focusing more on respect and care for others than advancing your own position.
There is a certain degree of humility implied in all of this, including not having all the answers, and recognizing the need to work with others to get things done. This idea of responsible leadership is the thesis of my talk tonight, and responsible leadership starts at the top. In our case, with our global CEO Ben van Beurden.
Late last year, I joined senior leaders at Shell on a conference call with Ben. After a string of four successful quarters where we delivered on our plan, he brought us together to lay out our Executive Committee’s priorities. Here they are:
At Shell, we want to be a world-class investment, we want to thrive in the energy transition, and perhaps even most motivating for me, we want a strong license to operate.
All three are obviously related, and I want to use these three priorities as the frame for the bulk of the remainder of my remarks.
Being a world-class investment is not easy. It requires a good strategy, planning, execution, and discipline. And of course, leadership. In many ways, being a world-class investment for our shareholders, is the foundation of everything else we want to do, including leading the energy transition, and being a force for good in the world.
It’s not easy being a world-class investment during a time of energy transition because pressure is coming from all sides: to move faster, move slower, stick to your base business, abandon your base business, be part of public debate, share ideas on policy. And it’s not easy because change impacts people.
Our scenarios work in which we look at potential futures has informed Shell’s global strategy to accelerate our focus to natural gas. This includes the proposed LNG Canada Project in BC that we’re working on with three partners: PetroChina, KoGas, and Mitsubishi. If we and our partners decide to proceed, the facility would have among the lowest greenhouse gas emissions of any LNG plant in the world. It would take natural gas from Canada, chill it and ship it to Asia to displace coal and reduce CO2 by some 50 million tonnes/year. I’ve been to Beijing twice in the past two months and you can actually see across the street because this winter China shut down dozens of coal-fired power plants and switched to gas.
Part of our strategy also includes focusing on businesses where we have global scale. Strategies are essentially about choices, and most choices are not easy. This focus on gas and our acquisition of BG Group and global scale was behind the tough decision last year to sell most of our stake in our oil sands business. We retain a 10 per cent interest in oil sands mining and upgrading and we continue to operate our upgrader near Fort Saskatchewan.
We also operate our carbon capture and storage project at the Scotford Upgrader. We call it Quest, and it captures over 1 million tonnes of CO2 per year, equivalent to taking 250,000 cars off the road. We’re very proud of that project and its pioneering technology and the way it was done.
It’s a partnership with the Alberta and federal governments, and part of our agreement includes our commitment to share our intellectual property with other projects around the world, so they can lower their costs.
Part of preparing for different future scenarios includes placing bets on a number of innovations. This is why Shell is investing in recharging stations in Europe and in solar panels in California, among other technologies.
It’s why closer to home we reached an agreement with Edmonton innovator SBI BioEnergy, to commercialize its biofuel technology. Biofuels are essential to decarbonizing transport and they’re one of the most practical, cost-efficient solutions to reducing CO2 emissions
Inder Singh – SBI’s chief executive officer – and his team have been working to turn small everyday things into scalable and, frankly, revolutionary ideas. They’ve discovered a way to convert the oil and fat we throw away every day – like vegetable oils, animal fats, lipids and forestry waste – into renewable diesel and jet fuel. This is exciting stuff, as an engineer, a Canadian, a consumer, and a soon to be grandfather.
As my twin daughters both prepare to become mothers, I can’t help but reflect on the kind of world I want to see their children grow up in – and what I can do personally and through Shell to help us get there.
Setting good strategy and executing on it is a hallmark of responsible leadership, and a key element of being a world-class investment. But that’s all very right brain. And anytime a company pursues a major change, it involves impacts on people. And that is very left brain.
Being part of the team to execute this major divestment of most of our oil sands interest last year was one of the toughest things I’ve ever done as a leader. There were a few reasons for this. I’d been on the team that had launched our oil sands business in 1999 and spent 10 years of my career in it. But those personal feelings were nothing compared to what we had to do as leaders: which was to lead a process which saw 3,000 of our talented employees transfer to the buyer, while continuing safe operations, and then reset and re-energize the rest of our 4200 Shell Canada people.
We did it in our usual Shell way, with lots of care and compassion, but it’s very, very challenging.
We did this in part by taking our global strategy and purpose, and making it real for us in Canada: Fuelling the future together by providing more and cleaner energy for Canada and the world. It’s been a powerful tool to bring people together and leverage their ideas and enthusiasm to shape the future of our company here in Canada.
And I do want to share one of our goals – we call them ambitions – in support of our purpose because it ties to that definition of responsible leadership I outlined a few minutes ago. It’s ambition one, and it’s to be competitive such that we get the investment from Shell to enable more and cleaner energy from Canada. Note the collaborative aspect. We want to provide more energy to our customers in Canada and potentially abroad should our LNG project proceed. We also want to help Canada realize its potential to provide more and cleaner energy to the world. I consider that responsible corporate leadership.
I mentioned earlier that Shell was one of the first oil and gas majors to acknowledge climate change. We’ve also been globally calling for a carbon price for years. We believe government-led carbon pricing mechanisms are the single most effective policy instrument for widespread and permanent reductions in emissions.
This is why we actively supported the truly revolutionary decision by the Government of Alberta to not just increase Alberta’s carbon price but put an overall emissions limit on oil sands production. This means that the industry can grow, but only if it finds a way to reduce the carbon it generates.
Not only did Shell and three other industry leaders support the plan, we worked alongside leading environmental organizations to better understand each other’s views to make recommendations that helped inform the policy. The climate action we’re seeing from Alberta and other jurisdictions shows responsible leadership, clearly on the part of government but also industry and civil society groups through their support. These are very tough conversations – balancing economy and environment.
Just like I’ve always believed that if I did the right thing for the people I had responsibility for, then I would prosper as a leader, we believe our success at Shell Canada is also tied to Canada’s success.
Being a world-class investment is also about being a safe place to work and a safe operator in the community. As many of us know, there’s a strong correlation between safety performance and financial performance. At Shell we work hard to achieve our goal of zero injuries, and we’re continually improving our culture For example, in recent years we’ve recognized the power of stories over statistics in making safety more real and relevant to people.
Keeping people safe is the most important responsibility of any leader at Shell. And when something goes wrong it can be devastating. One of my most important lessons in leadership came early in my career when I was a Production Coordinator at our refinery in Sarnia.
It was there that I had the good fortune to work for our GM Sam Spanglet. Sam had taken a bit of unusual path to a corporate career: he was a former major in the Israeli army. You can imagine how seriously he took safety, because mistakes on a battlefield would have fatal consequences.
I remember early in a turnaround when our site leaders were around a table and Sam was asking about a series of First Aid incidents that had been happening on site. It was clear that Sam didn’t think we were taking them seriously enough.
At first, we were defensive. We’d explained all the safety initiatives we’d developed and implemented but he wasn’t impressed, because clearly all our measures weren’t working and the trend was going in the wrong direction. He challenged us to understand the root causes for why we were experiencing these incidents and during that meeting we began to realize we had not taken the right steps to fully maintain our safety culture and that included me as operations manager.
I had inadvertently been stressing compliance to schedule and this was creating risk. All of us had our own epiphanies that day and we started brainstorming together all the things we’d immediately start doing differently, more personal accountability, being more present in the field, and stopping work (at great cost and impact on schedule) to reset safety expectations.
Sam taught us a lot that day. It’s sometimes easy to blame others when you’re a leader but he reminded us to hold up the mirror first as a leader if things are not going well. Acknowledge your part in it and then your people will have the courage to admit their mistakes too – this creates a powerful learning culture that drives performance. Yes, leaders are responsible for strategy, but even more importantly they’re responsible for setting culture, and that includes safety culture. That lesson has never left me.
Being responsible. That includes admitting mistakes. Sometimes these are your own mistakes. Sometimes these are mistakes that have already happened before you land on the scene as the leader. But they both have to be dealt with the same way: with humility and a change in approach. Which brings me to the story of my time in Ireland.
I had the privilege of working as managing director of Shell E&P Ireland for more than three years, beginning in 2011. As part of that role, I led the Corrib gas venture, a project that was initially derailed because it failed to take the local culture into account.
Corrib was one of the most significant engineering projects ever to be undertaken in Ireland. Located in County Mayo, it was developed as what’s called a tie-back facility, with offshore gas connected by a pipeline to an onshore processing terminal.
When Shell acquired the project from Enterprise Oil in 2002, there was an assumption that since all of the permits were already in place, it’d be pretty straightforward. Unfortunately, this didn’t take into account other, non-technical issues that existed in the community. People perceived Enterprise as foreigners showing up to run a pipeline across valuable arable lands without enough consultation. There was resentment brewing before Shell even took over.
In 2005, five of 34 landowners along the shore refused to allow Shell access to areas along the then-permitted pipeline route. They were arrested and jailed for contempt of court for some three months. They were dubbed the “Rossport Five” and became symbols in the community and all of Ireland, for standing against development. In the meantime, the project itself was delayed and an election year arrived. Politicians aligned themselves with the community and permits were withdrawn. Ultimately, all of these non-technical issues ended up delaying the project for several years. When I arrived in 2011, we had only just been granted new permits to resume construction.
Shell didn’t have much of a local presence in 2005 and while our engineering approach was sound, it failed to take into account the local concerns around a first of its kind project like this in Ireland. As one of my colleagues put it, we had failed to do the “social seismic”, in the same way we did the seismic study of the geology. As a result, time and money went to waste with great cost to both Shell and the community.
But Corrib is also the story of bouncing back, learning from our mistakes and ultimately coming out the other side better. From it came a reminder that we must operate collaboratively as we have done in Canada and elsewhere, and are doing now with LNG Canada.
In the case of Corrib, Shell embraced a mediation process to move the project forward, this time fully considering the community’s viewpoint. Following approval, we continued to engage and invest, hiring community liaison officers and creating more than 1,000 jobs and investing millions on local programs and infrastructure directed by the community. By the time I left in early 2015, our amazing Irish team had largely rebuilt trust and relationships were healing.
I think back to my Corrib experience frequently, and it’s a story I never got tired of telling even though it started off terribly. I think this story resonates with me, partly because I’m of Irish descent but also because of my training as an engineer.
Corrib might have been one of the biggest examples for this next and the final lesson I will talk about today, but over my career I’ve learned it again and again. It’s one of the most important lessons for all leaders, and in particular for those who’ve grown up on the technical side.
When I came out of university way back in 1984, I thought the world was rational and thought people made rational choices based on facts. And yes of course there are many rational aspects to people and business. But over the years I’ve learned that emotion often trumps logic. And I want to be clear I don’t see this as a criticism or that logic is somehow superior to emotion. Both are equally valid.
As a responsible business leader, you need to recognize this, and you need to reach out and listen, especially with those with other views. . You need to meet people where they are and not where you think they should be, and above all you need to build trust.
So, to sum up: be humble. Nurture diversity and inclusion. Put others first. Test your ideas against a wide range of options. Create a sense of higher purpose for people to rally around by connecting to their core values and help them get through change. Own your mistakes, and make things better. Don’t assume you have all the answers: work with others. Remember that people are complex and treat them with the utmost respect.