A decade ago, Royal Dutch/Shell's boss was fighting to close the gap between the truth about his company's oil and gas reserves and the much larger figure in its accounts.
He lost the fight, and his job. Scandal engulfed one of the world's biggest companies, exposing years of neglect.
Fast forward to May 2013, and the surprise news that chief executive Peter Voser will retire next year caused barely a ripple. Shell has recovered shareholder confidence. But while the risks may all be in the open now, they remain big.
Multi-billion dollar Floating Liquefied Natural Gas (FLNG) projects and a foray into the world's most inhospitable drilling climate north of Alaska are among the Anglo-Dutch group's heavier technology investment bets. Capital spending is spiralling, and its production from mature fields sputters. All the while, oil and gas prices look shaky.
Some investors want Shell to pull in its horns and keep more for bigger dividends. Voser, who became finance director during the 2004 reserves crisis and CEO in 2009, is having none of it.
"No. One learning out of all this, for every person in this organisation now, is you spend capex through the cycle. Don't try to read it, don't slow down. It will cost you more when you want to grow afterwards," he told Reuters last week.
"I know a lot of investors and analysts. They all think they can read the market ... slow down, grow later, shrink to grow, all these buzzwords, but one thing in our industry is very clear; it takes you five to seven years to recover a strategic slowdown ... The market changes its views in three to six months, and you can't change that fast in our industry."
As Voser enters his last months in the job, Shell still suffers from underperforming production, an accident-prone exploration record offshore Alaska, and the running reputational sore of Nigeria, where spills, oil theft and pipeline sabotage are devastating the Niger Delta's ecology and cost 60,000 barrels of oil a day in lost production. Much of its U.S. gas production is uneconomic at current prices.
Cash flow has doubled to $46 billion (30 billion pounds) in three years, and company predictions are above $40 billion until 2015, but 2013 capital spending will be $34 billion - $8 billion more than the company was planning for as recently as 2011, with no significant extra work on the calendar.
Add in the $11 billion annual dividend and the level of cash generation looks more necessary than comfortable.
Shell acknowledges it is "capital constrained".
Many of the challenges it faces are common to its peers. The big three, Exxon Mobil, Shell and Chevron, are absent from some of the most promising new provinces - prime deepwater Brazilian acreage and the potentially prolific gas fields off east Africa. Aggressive service companies, smaller, nimbler rivals, and deep-pocketed state-backed National Oil Companies (NOCs) have muscled up as competitors.
SPUTTERING GROWTH ENGINES
There are also worries about the unpredictability of production from provinces like the North Sea, where mature assets generate cash for new projects.
After a disappointing fourth quarter 2012, Deutsche Bank analysts said investors "are being asked to take a lot on trust". First quarter results went on to delight the market.
It's a dispiriting pattern, said a 30-year Shell veteran. "We outperform in the first quarter. We do OK in the second, then the third quarter is bad and the fourth is worse. We just don't get the up-time that others do."
Voser accepts this.
"Consistency of operational performance is the big operational theme we are driving at Shell now since 2011 ... We are not yet there. But it is now firmly on the agenda of the frontline businesses to get that right, and the improvements we are seeing are very encouraging."
Ten years after the crisis, sheer scale, structural reform and bold investments have ensured survival and healed scars.
The world number-two's record on absolute returns - share appreciation plus re-invested dividends - shows the wounds were skin-deep anyway. Though it has underperformed Exxon over the past 10 years, it outperformed over five years and 40. (link.reuters.com/wep48t)
Voser's spend-through-the-cycle philosophy reflects his experience in the 2008-2009 financial crisis, when shareholder pressure held back investments, and in the mid-1990s, when the seeds of Shell's reserves crisis were sown.
Back then, Shell had a heavily decentralised structure - corporate speak for ungovernable, isolated business fiefdoms - so the communication of problems and solutions broke down.
A 1995 reorganisation effort was eclipsed by tumbling oil prices. Shell cut investments and costs, adopting the "contractor model" trend - firing career engineers, rehiring them as contractors.
"That worked in 98-2002," said a former Shell senior manager who asked not to be named. "Contractors were cheap, plus it takes a while for the weakening of those core strengths to work through. By 2003, when business was picking up, contractors were thin on the ground."
STRUGGLING TO KEEP UP
Other big oil companies found a new way to grow; Exxon bought Mobil, BP acquired Amoco and Arco. Total acquired Fina and Elf, and Chevron bought Texaco. Sclerotic, committee-driven Shell just watched.
Life extensions for fields in the North Sea, Oman and Malaysia maintained the illusion that Shell was keeping up.
"We were struggling," recalls Voser. "We didn't have the growth story to present like all the others. Into that came the reserves crisis, which was the trigger for what we then had to do."
Phil Watts was top executive when the scandal broke in January 2004, overseeing a group owned 60 percent by Royal Dutch Petroleum, based in The Hague, 40 by London-based Shell Transport & Trading. The dual-board, dual-ownership set-up was later swept away.
Watts had previously been head of exploration and production (E&P) in some of the overbooking years. An independent investigation found he had suppressed calls by his successor at E&P, Walter Van de Vijver, to address the gap between reported proved reserves and proved reserves under regulatory guidelines.
Ironically, one project Watts championed and saved from cost cuts became Shell's flagship cash cow last year, making the company the leader in gas technology. That project is Pearl GTL in Qatar, which turns gas into diesel and is the world's biggest such plant. Shell also leads the industry in LNG, thanks in part to the Watts years, and is set to extend that position by 2017. (link.reuters.com/mak72t)
Gorgon, a gas field off Australia's coast and a central part of the overbooking, is slated to start producing by 2015.
The 20 percent reserves downgrade was announced on January 9, 2004, and in March 2004, Watts and Van de Vijver resigned over the overbookings in Australia, Oman, Nigeria and Brunei.
For years, the independent investigation by law firm Davis Polk & Wardwell showed, executives had exchanged emails about "lying" and "fooling the market". The would-be whistleblower, Van de Vijver, wrote in December 2003 that a report on the real reserves position "needs to be destroyed".
When Jeroen van der Veer replaced Watts, he called Voser, a close colleague who had left Shell in 2002 for Swiss engineer ABB, to be finance director.
Both men were from the downstream refining, marketing and chemicals side of the business. Traditionally, the upstream oil and gas producing arm is seen as the driver of the business.
"Van der Veer instituted the importance of bad news travelling upwards quickly," said the former senior manager. "I had to give him quite a lot. We also started quarterly performance reviews in 04/05. There, people tell you what's wrong before you give them their grilling. We learned a lot from the downstream, which never lost sight of the importance of those things the way the upstream did."
Van der Veer, who left the board last week, forced through the board and share unifications investors clamoured for.
His team dumped decision by consensus and removed layers of management, but made sure the old business fiefdoms were still accountable for their results.
They also rehired technological expertise and brought forward key projects. In one board meeting in 2006, Pearl, the LNG project Qatargas 4, and a Canadian oil sands project - big cashflow drivers today - got the go-ahead.
From 2009, Voser stepped up the globalisation, axing 20 percent of management jobs. He appointed fellow Swiss national Matthias Bichsel to push standard procedures and kit where possible and develop technology to cut costs.
"If you look at the world going forward, where will an energy company like Shell differentiate itself from the upcoming NOCs, from the service companies?," Voser said.
"It can only be in the breakthrough technologies and innovations. That's for decades what we have done and where we spend our money ... That's were our future will be."