How an oil and gas giant outmaneuvered low oil prices

Italian oil and gas company Eni has transformed under a leader determined to reduce costs without cutting jobs—instead including employees in the turnaround mission.

Transforming a business that must reduce costs doesn’t always have to mean pain for employees—even if that business is a multinational energy company hit hard by dropping oil prices. In this interview, Eni CEO Claudio Descalzi speaks with McKinsey’s Rik Kirkland about navigating the oil and gas company amid drastic drops in oil prices, securing exploration successes, reinvesting capital gains, and driving a comprehensive culture change.

Video of Interview

Transforming an oil and gas giant

I wanted to reduce costs without cutting head count, and I wanted to optimize the structure of the company. Reorganization was very useful, and we got about €800 million per year of cost reduction by just changing the organization and distributing resources in a different way. Those were the first steps.

Then we turned to the refinery. The refinery was exceeding capacity in Italy—which was also the case in Europe overall, but in Italy especially—by about 40, 50 million tons per year. So we shut down the one refinery that caused the big losses for the company, and the same thing was done for the chemical business.

I had to study, because I had to talk to and convince the people that we have to change. Not just culture in terms of costs, but culture in terms of technology, applications, and final output for the chemical and refinery businesses. It was an interesting and intense activity. I had to be involved personally because I had to convince my people—not just give an order or use a consultant—I had to work with them. That was a big three-year effort.

What’s the right amount of risk?

My main objective at the very beginning was to bring the cash neutrality from about $120 per barrel—which is very high, because if you have a cash neutrality at $120 per barrel and the price is $110, you lose $10 per barrel—so the issue was to go from $120 down to about $50 per barrel, where it is now.

I started in 2011, 2012. I called it dual exploration. What I thought to do, is say, “I take a high stake in the asset.” Between 70 percent and 100 percent. I take the risk. I go and select an asset with a low risk, but in a good place, as I told you, close to our facilities. Once I give value to this asset, I can sell at a very high value. Because I have big stake, I can sell at 30 percent, 40 percent, 50 percent.

I remain with the 40 percent; that is a typical stake to operate. And I operate, but I can’t anticipate the cash in. You can imagine when I started this, we start the exploration, then we develop. Before cashing in, you can wait for four, five, or six years, then you can cash in immediately. So you reduce your risk. You de-risk your position in the country. In the last three and a half years, we got €9.1 billion from exploration selling, with a capital gain of €8.1 billion, so a very high capital gain, that allowed us to reinvest. That is something that we started immediately.

Retraining to support a transformation

When you retrain, you have the opportunity to communicate, to explain not just what your employees are going to do—so you give them a drive, direction—but also what is happening in the company. Because we are a big company, and when you talk with the first line or the second line, they know what is happening.

Then you go down, down, down in the scale, and people don’t know. They are scared. They don’t understand. They receive very scary messages from outside, from the press, from the television, from the world. So you have to explain where you are going.

The market for energy in Africa and beyond

We are the biggest exploration and production company in terms of equity production and research; we are in 15 countries. In Africa there is a lot to do in terms of access to energy, so we need to develop the African energy market. Consumption, it has to grow. But it is still at the very beginning, considering that it represents 15 percent of the worldwide population, which uses 3 percent, 4 percent of the worldwide energy. Europe is 7 percent, and consumption is at 12 percent, 13 percent. And Africa needs energy. Normally the model was different, so we’d find gas and oil and do exports. Africa has a lot of energy, but it doesn’t have access to energy. More than 650 million people don’t have access to electricity, so you cannot think that they can develop themselves. That is a wonderful market.

I don’t think that oil and gas is going to disappear because it’s not sustainable, as some argue. We cannot do differently, because when we talk about renewables and electrical cars, we talk about ourselves—we think about Europe, we think about the US, and we represent the US, Europe, Japan, New Zealand, and Australia, or 14 percent of the world population. Eighty-six percent are in a different kind of situation. They don’t have gasoline. They don’t have electricity. They don’t have power.

So they need oil and gas. They need renewables, clearly. They need a different energy mix.

The secret to staying balanced and resilient

First of all, it’s family. You must have a strong family. A strong family, wife, children, a situation where you can be comfortable and you know that you have them with you, and that is quite important.

And then passion. When there is passion, there is adrenaline, and you love what you are doing, you are never tired. When you love your people, you think that you have to talk to them because you have to convince them, they have to understand that you are with them, you are not tired.

I grew up in this company, so all my family’s here, because I have all my people; we grew up together, and we are still together. I started my 37th year in the company.

I’m really lucky, honestly. And I thank God that I have this lucky life.

Source: mckinsey.com; Oct 2017

Shell-7-Eleven split: Why breaking up was the right move by Shell

Shell unveiled plans to end its 11-year partnership with convenience store chain 7-Eleven in a bid to take back its petrol stations in Singapore. A Shell spokesperson told Marketing the stores would be renamed as Shell Select and has also paired up with the likes of McDonald’s to offer “options that are aligned to its customer value propositions”.

Currently, the revamp is already underway and several industry players Marketing spoke to applauded the move by the petroleum giant, saying that this was a means for the station to “take back control” of the customer journey and create a more seamless end-to-end experience.

According to Andrew Crombie, brand consultant and former CEO at Fitch, Southeast and North Asia, the move will create a more seamless end-to-end experience to meet the demanding expectations of the modern mobile customer. This gives them a chance to break the predictable fuel/convenience model offered by most fuel brands.

Crombie added that Shell has an incredible asset in its distribution network, and a huge opportunity to gain first-mover advantage in reshaping the overall mobility and convenience offer against other fuel brands.

“It can’t fully realise this opportunity if it has to negotiate or coordinate each initiative with a third party operator,” Crombie said. He added that with the split, Shell will be in control of the convenience store and the products it offers. It will also have more opportunities to test new concepts and vary its offers geographically and create a more integrated overall concept for each site.

“A lot has changed since the relationship has started in 2006. Customers are more aware and more connected and their needs are different. And mobility is in the midst of a major change. To take best advantage of this change, Shell needs to be able to control every element of its overall offer and this move to part ways with 7-Eleven in Singapore makes this more achievable,” Crombie explained.

From a branding perspective, Crombie agreed that without doubt, 7-Eleven drew the short end of the stick as it loses a ready nationwide-distribution network with convenient parking, and with a regular and reliable clientele. He added:

7-11 loses significant brand presence as its signage numbers are reduced and the strong association of brand credibility and modernity that comes from Shell.

Agreeing with Crombie was Jane Perry, managing director of Geometry Global Singapore, who deemed the move strategic for Shell to better differentiate its business from competitors. The partnership with 7-Eleven, she said, made offering a seamless customer experience for its consumers challenging.

“This is because both Shell and 7-Eleven have strong brand equities – hence the seamlessness of the customer experience might be compromised in the process,” Perry said. She added:

It is also challenging to marry the brand equities of two retail heavyweight brands.

“The move will give Shell 57 more touch-points to engage and connect with consumers. This is something which it was unable to do before as it had no control of customers entering another retail environment,” Perry said.

Perry said the bold separation will give an opportunity for Shell to innovate throughout the entire fuel station experience and offer something different for consumers.

“Customer engagement through fuel stations is something which is still lagging behind in Singapore, when compared to the rest of the world. It’s an experience which at times still feels quite transactional and disjointed,” Perry added.

Simon Bell, managing director of FITCH said currently the partnerships in place between convenience stores and fuel stations are typical with nothing unique or differentiated. Bell added the move was smart of Shell to invest in its own brand and extend the customer experience from forecourt to convenience store, rather than to share its limelight and real estate with 7-Eleven.

“In branding, having an own-able experience is the holy grail. Done right, retail wields this power. To me, Shell is focusing on Shell (or finding new partners such as McDonald’s) that will assist it to achieve this. The point of difference will come in how the new relationship (whether convenience store, fast food or something else) can complement and enhance the Shell forecourt and station experience,” he added.

Source: marketing-interactive.com; 3 Oct 2017

Chevron Lubricants creates new units to align with regional growth strategy

Chevron Lubricants is creating two new business units following the retirement of Farrukh Saeed as vice president, Asia Pacific Region on 31 July 2017, after more than 34 years with the company. The formation of the two new operations will support ongoing expansion and sales growth in the broader Asia Pacific region.

Chevron Lubricants did not comment to additional queries by Marketing at the time of writing.

The new units are said to be in alignment with its regional growth strategy. The Thailand, Sri Lanka, Pakistan, Philippines, Vietnam, Malaysia, Singapore and Indonesia operations will now be part of a new Asia/Pakistan lubricants business unit. In addition, the Greater China business unit will be responsible for China, Taiwan and Hong Kong finished lubricants operations including the growing e-commerce activity in these countries.

Rochna Kaul has been appointed to serve as general manager for the Asia/Pakistan Lubricants business unit, based in Singapore. Kaul previously served as general manager, Chevron International Products, based in South Africa.

On the new Asia/Pakistan business unit, Kaul said: “We have experienced steady growth in our Asian markets. We will continue to drive our full portfolio of lubricant products across the region. Our focus is to be a reliable partner and to invest in our strategic brands.”

Baomin Guo has been appointed general manager for the Greater China Lubricants business unit, based in Beijing. Guo was previously advisor to the president, Chevron Lubricants.

“Our new business unit signals the increased strategic focus we are placing on the Greater China market,” said Guo. “Chevron’s relationships with leading companies and OEMs has grown steadily and we have quickly established new digital sales channels for the passenger car segment with China’s leading e-commerce and online-to-offline (O2O) platforms.”

Source: marketing-interactive.com; 2 Aug 2017

Shell Malaysia launches first official online store on Lazada

Shell_Malaysia_Official_Online_Store_Screenshot

Shell Malaysia Trading has launched its first official Shell online store on e-commerce platform Lazada Malaysia.

The move is aimed to ensure the “genuine” Shell Helix motor oil more easily accessible to discerning car owners across Malaysia, said Shell Malaysia in a statement to A+M. The online store is also offering engine oil service packages at selected authorised workshops in the Klang Valley and Johor. They will also have access to product technical support on guidance for the respective Shell Helix motor oil types.

Car owners who purchase an engine oil service package from the online store will be contacted by the official Shell distributor to arrange their preferred service venue, date and time slot followed by a confirmation via SMS. In conjunction with the launch, shoppers will get an e-voucher from Lazada Malaysia worth up to RM30 for every purchase of Shell motor oil or oil service packages from 3 to 10 August 2017 on its online store.

Shell Lubricants executive director of Southeast Asia and Oceania, Troy Chapman said Malaysia was the first market in Southeast Asia to enable online purchase of genuine Shell Helix products and service packages from an official channel.

“Today, we are proud to be the first oil and gas company in Malaysia to have an official presence on a leading e-commerce platform such as Lazada Malaysia. This initiative would help expand our market coverage and reach significantly and complement our extensive brick and mortar network in this country, which has been built over the past 125 years,” Chapman said.

Lazada Malaysia, chief executive officer Hans-Peter Ressel added, “This is a winning collaboration for Lazada and Shell that first and foremost, benefits the consumers as they now have unparalleled access to a wide range of official Shell Helix products via our platform. Brands such as Shell recognise the strategic importance of e-commerce in Southeast Asia and we look forward to working together with Shell in growing its online presence not just in Malaysia but across the region,” he said.

Source: marketing-interactive.com; 3 Aug 2017

Why mobile video is massive and other lessons from Mobile World Congress 2017

Forget 5G, connected cars, virtual reality and waterproof phones; the most important trend at Mobile World Congress was mobile video.

How do we know? Look at the keynote speakers: the top dogs from Turner, Vice, Netflix and Discovery were all in town.

On other stages numerous TV networks, media and social media companies, as well as the biggest brands, e.g. Shell, Red Bull and Lufthansa, were talking up mobile video.

Why are these media bosses doing keynotes in Barcelona? Partly they are looking for new distribution networks for their own video content, such as Netflix. But mostly they are wooing brands to the lucrative branded/sponsored video market.

If video is the new mobile (Facebook CEO Zuckerberg told shareholders in February 2017 that the company was going “video-first” because “video is a megatrend on the same order as mobile”), then mobile video is the giant honeypot.

And publishers, broadcasters, social media, content creators and creative/digital agencies are swarming all over it.

…The highlight of Shell’s multi-platform #makethefuture campaign is a music video entitled ‘Best Day of My Life’ that showcases six artists and six alternative energy ideas from young innovators, which has racked up 48 million views on YouTube in five months.

If branded content can achieve stats like that, it’s no wonder brands are falling in love with video.

Click here for full article

Source: clickz.com, 15 Mar 2017

How video storytelling and mobile have transformed Shell’s corporate marketing

Shell’s global corporate marketing has shifted entirely from one dominated by traditional media (i.e. TV and print advertising) and brand messages to one dominated by digital media and video-led storytelling.

And the stories it tells are no longer about Shell the company, they’re about the alternative energy start-ups it helps.

Malena Cutuli Group Head of Integrated Brand Communications & Capability at Shell talked to Andy Favell for ClickZ at Mobile World Congress 2017’s Modern Marketing Summit:

“Six years ago, when I joined the company, Shell’s global corporate marketing was 80% traditional communications and now we are doing 85% digital and content creation and 15% traditional. And that is for countries where digital is not easy to find, such as in Africa.”
The Shell corporate marketing team hasn’t run a TV ad for four years, with the exception of in China, where the last TV ad ran two years ago.

That doesn’t mean you won’t see a Shell ad on TV. TV advertising is still used by the retail marketing team (which is separate to Malena Cutuli’s brand communications group), to help sell Shell’s products – but you won’t see TV ads about Shell the company.

Click here for full report

Source: clickz.com, 20 Mar 2017

Shell showcases its heritage as part of new campaign

Limited Edition Shell Heritage Canisters

As a part of its new campaign and 125th anniversary, Shell, an oil and gas company, has launched a collection of limited edition Shell heritage canisters in Malaysia. This collection illustrates the various designs of Shell stations and pumps, from the 1920s until the 1980s. A limited edition Shell tanker and Helix car care kit with designs depicting vintage Shell motor oil canisters has also been launched.

In July, earlier this year, the company had launched a new web series called #StationStories. The campaign featured a series of stories celebrating the journeys of its customers, of which almost 10 million people visit its stations in Malaysia each week.

The web series was conceptualised to be a reflection of Shell’s three-year transformation programme to create ‘meaningful relationships’ between brands and customers and encourage people to participate with the organisation in ways that are valuable to them.

Source: marketing-interactive.com; 20 Sep 2016

Shell: “Roofvertisements”

Looks like petrol prices is not the only thing hitting the roof

toll-shell

Commemorating its 125th anniversary in Malaysia, Shell unveiled two giant roof advertisements (“roofvertisements”), celebrating the people who have helped it become one of the country’s leading fuel retailers – its customers.

Roofvertisements are a unique form of advertising which relies on images being split into smaller pieces, which are then glued onto roof tiles to create a continuous image.

Located on rooftops of major toll plazas in the Klang Valley, they feature a collection of quotes and faces of Shell customers.

“For the last 125 years, Shell has grown from strength to strength, and our customers have been integral to our success. We are grateful for their support, and we are continuously learning, innovating, and improving to serve our customers better.”

“Our roofvertisements feature some of our customers who have made their journeys with us, and we hope their quotes and faces will inspire other Malaysians,” said Ben Mahmud, Head of Retail Marketing, Shell Malaysia Trading.

Last year, Shell embarked on a three-year transformational programme, Welcome to Shell, which aims to deliver a superior customer experience at all Shell sites. The programme is Shell’s ongoing promise to provide personalised customer service and enhanced facilities for its customers so that they can feel more at home when they visit Shell sites across the country.

Shell Malaysia debuted Malaysia’s first roofvertisement at the Duta toll plaza earlier this year. Shell’s new roofvertisements are installed at the Batu 3 and NKVE Subang toll plazas, and are made out of 4,400 tiles and 5,100 tiles respectively.

Source: marketingmagazine.com.my; 11 Aug 2016

Shell Malaysia brings back #StationStories as part of transformation programme

Shell StationStories

As part of its celebrations to celebrate Shell’s 125 years in Malaysia, the multi-national oil company has launched a new web series called #StationStories.

The campaign features a series of stories celebrating the journeys of its customers, of which almost 10 million people visit its stations in Malaysia each week. #StationStories was a project that Shell had tested mid last year in Malaysia alongside the Netherlands market where it tapped on the potential to connect with its customers while they are pumping petrol. The original series produced in 2015 garnered close to six million views from the six videos produced.

This year the brand decided to bring the series back due to the positive response from the first installation. The videos from this year’s activation start with the question “Where are you going?” making a connection to stories from real people.

#Stationstories is said to be a reflection of Shell’s three-year transformation programme to create “meaningful relationships” between brands and customers and encourage people to participate with the organisation in ways that are valuable to them.

The brand worked with Edelman Malaysia to run a pre-selection strategy and production with Brandbase. The challenge was to deliver a process that identified unique customers without affecting the actual production and making the interviews seemed staged. The Edelman team spoke to more than 100 customers at seven Shell stations across Malaysia to search for special stories.

The campaign is set to run until November, where the last video in the series will be released and runs across Facebook and YouTube with Shell’s website as the main hosting page.

The first spot features married couple Khayrul and Rosneh who tell the story of how they first met and what it takes for their marriage to work. The cheeky exchange garnered around 218,000 views on YouTube. Take a look at the spot:

The second spot features a man called Awi and his three children who visits the station often to get fruit juice for his children.  He reflects on his journey as a single father, its difficulties and the thoughts from his children about his struggle as a father trying to raise three children. One of the children eventually starts crying after being moved by what her father struggles.

The unlisted video garnered around 323,000 views on YouTube. Watch it here:

Source: marketing-interactive.com; 13 July 2016

Shell Malaysia on a mission to transform customer experience on the road

Shell is on a mission to make the brand synonymous with the “highest standard of hospitality” on Malaysian roads by 2017. Head of retail marketing for Shell Malaysia, Ben Mahmud, talks to Campaign Asia-Pacific about making it a reality.

In mid-2015, Shell Malaysia conducted a consumer survey, which led the brand to some very interesting insights about what makes drivers and retail customers happy.

“Overall, we concluded that customer service is an essential part of the shopping experience for Malaysians,” said Ben, in an email interview.

The survey found that:-

  • 87 percent of respondents say a smile from store staff makes them happier than receiving a gift (80 percent) or reward (76 percent)
  • Almost half (49 percent) revealed that poor customer service makes them more annoyed than being late for an appointment (46 percent) or waiting for a delayed flight, train or bus (43 percent)
  • More than half (55 percent) have refrained from purchasing a brand if the staff is not friendly
  • Inversely, more than half (54 percent) of respondents have purchased something extra when staff was friendly to them.

“The results demonstrate the importance of service in strengthening our relationships with our customers, which supports the initiatives we were already undertaking with ‘Welcome to Shell’,” he added.

Launched in 2015, Welcome to Shell is a three-year transformational programme, which aims to deliver a “superior customer experience” at all Shell sites in the country. It is a promise from the brand to deliver personalised customer service, enhanced offerings and site facility upgrades for its customers.

It is a three-year strategic shift to enhance our retail business,” Ben said. “Ultimately, we want to make our customers’ journeys better, so that they leave a little happier than when they arrived.”

According to the company, this includes a comprehensive service and hospitality training for station crew to deliver an exceptional standard of service. Enhanced offerings and site upgrades include a new retail design for Shell Select stores, availability of freshly prepared food and beverages from deli2go, as well as new and improved facilities such as prayer rooms and toilets at selected stations.

Humanised approach and out-of-the-box marketing

The transformation programme has also extended to the fuel retailer brand’s marketing strategy, with Ben reporting a shift from a product-centric marketing approach to a more humanised approach that lends the brand a more emotional touch.

“We believe this softer approach can help drive brand love for Shell, as we connect with our customers on a more personal level,” he added. “This is why we have changed our approach in terms of creatives and brand presence across the country, beyond our stations.”

The company does not disclose its advertising and marketing budget, but Ben said that the bulk of the company’s investment is focused on enhancing the customer experience at its stations and ensuring it generates sufficient brand awareness, encompassing key touchpoints.

Ben shared that with a more personal approach, the emphasis was on reaching out to customers on the road and engaging them directly, driving awareness in a manner that will bring the Shell brand to top-of-mind.

“This is why we had to relook at the mediums available to us, to see where we could use them creatively in a way that was eye-catching and different,” he added.

Shell Roofvertisement

This relook led to the conceptualisation of Shell’s ‘Roofvertisement’—the first ad placement on the roof of a tollgate in the country. It is a concept that is new for the country, one that Ben claims takes advertising a step further by allowing it to be captured via satellite photos in Google Maps.

A team of over 12 contractors and two sky lifts spent 16 days putting the ad together onto the rooftop of the Duta tollgate, one of the tolls in Kuala Lumpur with the highest traffic.

The advertisement was assembled like a jigsaw puzzle out of 10,800 tiles all individually cropped and glued to create the advertisement, which measures 396.65 feet wide.

“We felt that this installation was impactful, as it would reach out to over 200,000 to 500,000 estimated motorists who go past the Duta toll on a daily basis, and the figure is said to increase during the holidays and festive season,” said Ben.

“More than just capturing our brand itself, the messages on our advertisement aims to create and strengthen the awareness for Welcome to Shell and showcase our promise to provide warm and friendly customer service at Shell sites across the country,” he added.

Ben also shared that since the launch of Welcome to Shell, the team has realised that consumers now have much higher expectations in terms of content that is highly personalised and emotionally engaging.

“They pay attention to content that challenges their conventions and helps them reframe their beliefs towards our brand,” he said. “With that in mind, we are currently in the midst of finalising our communication plans for 2016 and are prioritising our initiatives in customer-based engagements that will inspire participation and sustain their involvement with the brand.”

Source: campaignasia.com; 06 Apr 2016