Rubenstein Baer Shell Scenarios 201203120

What We Can Learn from Scenario Planning at Shell Oil

Leslie Martel BaerPresident, Energy Intersections, LLC

Herb RubensteinExecutive Director, The LEEEGH

ASP 2012

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Global Energy Management (GEM) Program Business School University of Colorado, Denver

Peter SnowdonHead of CommunicationsShell Chemicals

Cintia GavaySenior Research AnalystGlobal Energy ModelingIHS

Acknowledgements

2ASP 2012 Conference Presentation Scenario Planning at Shell Oil Rubenstein, Baer 5/1/2012

Today’s PresentersLeslie Martel Baer

President, Energy Intersections Research, analysis, strategic

planning

Energy Intersections blog Strategy Cross-sector collaboration

Experience business management,

communications, and project management

renewable energy, socially responsible investing and materials recovery industries.

Education MS, Global Energy Management,

CU Denver, Business School MA, English, University of

Michigan. BA, biochemistry, CU Boulder

Herb Rubenstein Executive Director, THE LEEEGH,

Non-profit “Leadership in education, energy,

environment, governance and health” President, Sustainable Business Group

consulting firm to businesses Adjunct professor of strategic

management, Global Energy Management, CU Denver

Founder of the Colorado Chapter, Association for Strategic Planning

Member of the national board of directors of ASP

Author Breakthrough, Inc.: High Growth

Strategies for Entrepreneurial Organizations,

Leadership Development for Educators Leadership for Lawyers Over 100 articles and over 80 videos on

business strategy, entrepreneurship, leadership, and improving organizations


What are Scenarios? Scenarios are not

Projections Forecasts Predictions A preference (usually)

Scenarios are stories Plausible Recognizable Challenging Call for debate and

vision


Allow an organization to answer “What If?”Creates awareness of future possibilitiesAllows for response preparation

Encourages engagement and discussionDiverse viewpoints are gatheredBest ideas, practices are identified

Permits deeper assessment of riskEconomicPoliticalResource (energy)

Why Develop Scenarios?


Shell’s Approach to Scenarios


Three “Known Knowns” Energy demand

will accelerate.

Supply will fall behind.

Environmental stressors will continue to increase.


How will we respond to environmental changes?

What energy technologies will be deployed?

Do the molecules exist to meet supply without worsening environmental stressors?

Are they technologically accessible?

Are there political barriers to them?

Identify “Known Unknowns”


Scenarios show multiple paths to multiple possible outcomes (more than one story is required).Corollary: production of a scenarios does

not imply a probability of or preference for that scenario (usually).

Scenarios do not constitute mandates.Scenario planning does not tell you what to

do. It tells you what the world around you might

do.You can prepare and respond accordingly.

Two Keys to Scenario Development


The Core Scenario Team Starts with

leadership

Represents all levels

Represents all departments/ divisions

“Out-of-the-box” thinkers

~50 internal staff


Workshops held around the globe U.S., Europe Australia Qatar and Kuwait Singapore

In industry and out of industry

Thought leaders; strong networkers

Participate for first 18 months

“Golden Ticket” Stops “That hasn’t happened before” thinking

Additional Invitees


Ask, “What are we together to answer?”

Create a replicable workshop process

Gather existing data

Workshop participants tell stories on data

Fact check draft stories against data, models

Identify the most consistent stories

Brand final scenarios to aid assimilation

Build strategies in response to the stories

The Process


Plausible, recognizable,challenging scenarios

Tested against data andassumptions (e.g., about energy portfolios) are realistic

Clear brand; instant recognition of “stories”

Can be applied to strategic decisions

Challenges status quo

Outcomes


Shell’s Current Scenarios

Blueprints and Scramble


Blueprints Scramble

See the three known knowns as a challenge

Short term: overwhelmed by known knowns

Focus: develop solution suites

Focus: keep the lights on today

Leaders—starting local, mayors—share best

Governments—due to supply/ demand, environment—become nationalistic and competitive

A price on carbon evolves, eventually globally

Focus on coal, “bad” biofuels: independence, nationalism

Greater electrification of the vehicle fleet

Electrification is largely unpursued

Supply-demand gap, but transition is relatively smooth

The gap between supply and demand becomes painful

Highlights of Two Paths:Blueprints & Scramble


Clear Identities, Clear Choices

Coalitions develop Blueprints for a new energy framework

Governments Scramble to secure their own energy supplies


Timeline: Clear Stories


Timeline: Clear Stories (cont’d)


How Shell Applies the Energy Scenarios

Impacting Strategic Decisions


1970s oil Crisis

Growth in unconventional natural gas

Slow down in key market GDPs

OPEC response to rising oil prices

Arab Spring

Anticipating Big Shifts


Pull out of Mackenzie (Alaska to lower 48) piplineWhat will energy prices look like

with/without?

Sell large UK refinery

A First: Shell actively prefers “Blueprints” and is pursue strategies to move markets in that direction

Apply Scenarios to Strategy


Embarking on Scenario Planning


Spectrum of voices; events inside and outside of industry

Clear budgets, timelines, personnel; support from the top

Information flows in all directions; continually collect data

Number of scenarios for your purpose, from draft stories Shell typically produces two IHS operates with three: Global Redesign, Metamorphosis Vortex

Determine the audience of your scenario products Internal market Public (value add?)

Invest in branding; allows audiences to instantly recall implications of a scenario entails by seeing logo, name

Seek support: e.g., Scenario Planning Institute (CSU) for training, research, consulting

Steps for an Internal Process


Transportation FirmLong-term implications of fuel prices?What events in Wall Street Journal imply

one scenario or another?Potential for new fuel options anticipated?

Overseas ManufacturingStories about human capital, resources,

incomeMonitor these storiesDevelop contingency plans?

Save Time & Money:Apply Existing Scenarios


Plausible, recognizable, yet challenging stories Well researched and verified with data Based on today’s realities Describe potential realistic, unfolding realities

High stakes stories Guiding the allocation of billions and trillions of

dollars

Describe multiple possible future realities Need multiple pathways Result in multiple scenarios Might end up “bracketing” reality (e.g., Shell’s

“Recession & Recovery)

Scenarios: Vision for Value

5/1/2012 25ASP 2012 Conference Presentation Scenario Planning at Shell Oil Rubenstein, Baer

Anticipates global economic, energy trends

Creates buy-inthroughout theorganization

Engenders engagement

Offers practical insightinto strategic decisions

A Resource for Creating Change


Thank you!

Questions? Contact Us:

Leslie Martel BaerEnergy Intersections [email protected]

Herb RubensteinThe LEEEGH 303.592.4084 herb@sbizgroup.comwww.theleeegh.orgwww.sbizgroup.comwww.leadershipforeducators.orgwww.leadershipforlawyers.org

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mailto:[email protected]

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http://www.theleeegh.org/

http://www.sbizgroup.com/

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Rubenstein Baer Shell Scenarios 201203120

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