Shell’s van Beurden gets lucky. Harbour Energy doesn’t
T he straightforward piece of news from the energy sector on Thursday was that Ben van Beurden departed Shell at the end of last year with his pockets full. The chief executive’s pay packet for 2022 rose 53% to a whisker under £10m, the most he’s scooped since his bumper £17.8m in 2018.
As then, the biggest boost to his winnings came via his long-term incentive scheme (LTIP), which in large part is a function of the share price, which itself is heavily influenced by the wholesale prices of oil and gas. Energy prices were already rising thanks to the industry’s underproduction during the pandemic, and then surged after Russia’s invasion of Ukraine. Result: already well-paid executives got even more than they could reasonably have expected.
It is not a fresh revelation that share-based schemes often produce arbitrary and undeserved outcomes (as BP will also demonstrate when its annual report lands on Friday) but the LTIP system is mad. One of van Beurden’s own predecessors, Jeroen van der Veer, put it best when – after he’d left, naturally – he said: “If I had been paid 50% more, I would not have done it [the job] better. If I had been paid 50% less then I would not have done it worse.” That was 14 years ago. Do not expect reform soon.
The other oily story is more complicated. Harbour Energy, the UK’s largest producer in the North Sea, is screaming blue murder over the windfall tax. “It has all but wiped out our profit for the year,” said its chief executive, Linda Cook. “This has driven us to reduce our UK investment and staffing levels.”
The “wipe out” claim is not as it seems because Harbour is taking a $1.5bn charge to cover expected future payments under the windfall tax, or energy profits levy, out to 2028. It will have
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