January 14, 2016 / 3:44 PM / 3 years ago

Shell names top executive to head BG during complex integration

LONDON (Reuters) - Royal Dutch Shell’s (RDSa.L) top executive planning the integration of BG Group BG.L will become transitional CEO of BG after expected completion of the $48 billion acquisition next month, company sources said.

Shell's company logo is pictured at a gas station in Zurich April 8, 2015. REUTERS/Arnd Wiegmann

The appointment of Dutchman Huibert Vigeveno to oversee the complex merger of the two global businesses comes as no surprise.

Vigeveno was appointed last August to spearhead the joint Shell-BG integration committee along with BG’s Sinead Lynch, and had previously headed Shell’s operations in China and had also worked for the Anglo-Dutch company in Brazil, two key markets for the combined group.

He is likely to oversee hundreds of job cuts as part of 2,800 redundancies already outlined by Shell, which represent roughly 3 percent of the combined group’s workforce.

Shell CEO Ben van Beurden will head the merged entity after the planned Feb. 15 completion of the deal while BG’s Chief Executive Officer Helge Lund is set to step down on the day the merger is signed.

Implementing cost cuts and successfully integrating the two companies will be crucial for Shell, which has had to adapt to the industry’s worst downturn in at least three decades after oil prices fell by more than 70 percent over the past 18 months.

“The integration of BG Group is the single most critical process for Shell to be successful this year,” said Jefferies analyst Jason Gammel.

“This will be about knitting the two organisations together ... It is an incredibly complex process of putting two organisations that were doing the same thing together.”

A Shell spokesperson confirmed Vigeveno’s appointment as transitional CEO of BG, adding that the appointment is conditional upon, and effective from, completion of the recommended Shell-BG combination. 

A BG spokesman declined to comment.

Integration of BG’s business and corporate operations is expected to take many months.

Vigeveno will be tasked with integrating BG’s oil and gas production and trading operations as well as its corporate business into Shell’s much larger operations.

He will also manage the implementation of part of $3.5 billion of cost savings and synergies by 2018 which Shell has identified in recent months in various segments including corporate, administrative and IT operations as well as in oil and gas marketing and shipping costs.

Shell has already started a major restructuring of its oil and gas production, or upstream, operations ahead of the merger. It has established a stand-alone integrated gas business led by Maarten Wetselaar as part of a global upstream organisation under the direction of current Upstream Director Andrew Brown. An unconventional resources organisation will also be set up.

The deal is largely expected to win the required support of Shell and BG shareholders later this month, even though the sharp decline in oil prices has raised concerns among some investors.

BG’s current boss Lund, who had previously led Norway’s Statoil STL.OL through a period of spectacular growth, has yet to indicate his plans for after he steps down.

The merger will add around 20 percent to Shell’s oil and gas production and will turn it into the world’s top LNG trader and a major offshore oil producer with a large focus on Brazil.

Editing by Susan Fenton

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