Company Analysis of Oil and Gas Company in Western Europe-Royal Dutch Shell
Royal Dutch Shell (Shell) is engaged in oil and gas exploration and production, transportation and marketing of natural gas and electricity, and marketing and shipping of oil products and chemicals. It is a holding company which owns direct and indirect investments in a number of companies comprising the group. The company also has interests in renewable sources of energy such as wind and solar and hydrogen. The company has extensive operations in more than 110 countries around the world. It is headquartered in The Hague, the Netherlands and employs about 356,000 people.
Shell generates revenues through five business divisions: oil products, chemicals, gas and power, exploration and production, and oil sands. The oil products division conducts its operations in more than 100 countries and territories. The oil products division comprises the downstream businesses of manufacturing which includes refining and supply and distribution; marketing which includes retail, business to business (B2B), and lubricants; Shell Trading; and Shell Global Solutions.
The manufacturing portfolio of Shell's oil products division includes interests in over 40 refineries, with a capacity of more than 4 million barrels per day. The distribution network includes more than 300 distribution facilities, 3,000 storage tanks, and 9,000 kilometers of pipeline in about 70 countries. Shell is one of the largest single branded retailers with more than 46,000 service stations spanning 90 countries. The B2B business of Shell sells fuels and special products to a broad range of commercial client base through six separate businesses: Shell Aviation, Shell Marine Products, Shell Gas (LPG), Commercial Fuels, Shell
Bitumen, and Shell Sulphur Solutions.
Shell Trading, engaged in trading and shipping activities, trades about 15 million barrels of crude oil equivalent per day. Shell Global Solutions provides business and operational consultancy, technical services, and research and development expertise to Shell companies and the energy and processing industries across the world. It supports the oil products, gas and power, and chemicals businesses of Shell. The chemicals division, a part of the company's downstream business, produces and sells petrochemicals to industrial customers worldwide. These products are used in manufacturing plastics, coatings, and detergents; which in turn are used in items such as fibres and textiles, thermal and electrical insulation, medical equipment and sterile supplies, computers, paints, and biodegradable detergents. The division produces base chemicals such as ethylene, propylene, and aromatics; and intermediates chemicals such as styrene monomer, propylene oxide, solvents, detergent alcohols, and ethylene oxide. The chemicals portfolio of the company includes several joint ventures: Infineum, Saudi Petrochemical Company (SADAF), and China National Offshore Oil Corporation and Shell Petrochemicals Company (CSPCL).
Infineum is a 50:50 joint venture between Shell and Exxon Mobil. It formulates, manufactures, and markets high-quality additives used in fuel, lubricants, and specialty additives and components. Infineum has manufacturing centers in seven countries: the US, Mexico, Brazil, Germany, France, Italy, and Singapore. SADAF produces base and intermediate chemicals for international markets. It is a 50:50 joint venture between Shell and Saudi Basic Industries Corporation (SABIC). CSPCL is a 50:50 joint venture between
Shell and CNOOC Petrochemicals Investment. The company produces a variety of petrochemicals for the Chinese market.
The gas and power division forms a part of Shell's upstream business. The division works closely with the exploration and production division. The gas and power division liquefies and transports natural gas, develops power plants, and markets gas and electricity on a worldwide scale for consumption by industry, commerce and business establishments, and residential and government consumers. It is also involved in gas to liquids (GTL) and coal conversion technologies. The company's gas and power business operates in 33 countries around the world. The exploration and production (E&P) division, a part of Shell's upstream business, explores for and recovers oil and natural gas around the world. The division's activities are spread across 37 countries, and conducted along with joint venture partners.
In 2007, the company's total hydrocarbon production (excluding production from oil sands) totaled 3,234 thousand barrels of oil equivalent (boe) per day. During 2007, the company participated in 314 successful exploratory wells in Australia, Brunei, Egypt, Germany, Malaysia, Netherlands, Nigeria, Oman, Kazakhstan and the US. During 2007, proved developed and undeveloped reserves of Shell subsidiaries totaled 6,686 million boe. The E&P division is supported by the exploration and production R&D Directorate which in engaged in application of technology to enhance the cost-efficiency and performance of the company's exploration and production activities. The directorate has two main research and development laboratories, one in the Netherlands and another in the US. Additional technology facilities are in Oman, Qatar, Norway, Canada, and India.
The oil sands business, which is a part of Shell's downstream business, produces synthetic crude oils for use as refinery feedstocks. The business activity of this division constitutes two steps: the extraction of bitumen from the oil sands at the Muskeg River Mine in north-eastern Alberta; and upgrading the bitumen to synthetic
crude oil at the Scotford Upgrader near Edmonton, Alberta. Shell holds 60% of interest in the existing oil sands mining interest through a joint venture with Chevron (20%) and Marathon Oil (20%). Shell also reports a non-operating segment, corporate, which represents the functional activities supporting the whole group. This segment consists of the following functional activities: holdings and treasury, headquarters and central functions, and Shell insurance operations. The corporate segment accounts for the insurance underwriting results and the functional costs that have not been allocated to the other segments. In addition, it
also accounts for the interest and other income of non-operational nature, interest expense, non-trading currency exchange effects, and tax on these items.
