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Royal Dutch Shell PLC is most commonly known to everyone as Shell. Its a Dutch and British foundation company. Its a worldwide petroleum company which deals in different energy sectors like natural gas, oil. Shell is a worldwide gathering of companies handling the business related to energy and petrochemical products. Shells aims to achieve the energy needs of today's society, they want to achieve this by following the methods that are inexpensively, communally and environmentally feasible, now and in the upcoming future.
Shell is considered as a global energy organisation and business hence they believe in high quality of performance and ethical behaviors. People and companies around the work judge our performance based on our work. Royal Dutch Shell PLC's status is always upheld by the methods that we follow to achieve our values and goals, keeping in mind the company needs to be true, reliable and value the people and the customer all around the world. Shell is located in over 90 countries.
Royal Dutch Shell PLC's Business strategy
Our strategy is "More Upstream, Profitable downstream." We are focusing on delivery and growth, leveraging our strong portfolio. (www.shell.com, 2010)
Shell in current environment is planning to go through a innovative and fresh phase of expansion, and they have summarized plans to tremendously increase the companies performance and the lower the involved costs.(www.shell.com, 2010)
Shell is looking up to achieve the Upstream manufacture to go up to 3.5 million barrels of oil equivalent per day (mboe/d) in 2012, the company will see an a huge profit and increase in the manufacture percentage (compared to the 11 percent in the year 2009). (www.shell.com, 2010)
Apart from this, the Shell business is appraising to get more than 35 new projects from various 8 billion barrels of oil equivalent energy resources. This new projects achievement will help in strengthening the upstream expansion to 2020. (www.shell.com, 2010)
Product marketing part of Shell business will maintain consistency to keep a track on the focal point of earning enough profits. Shell wants to get out of the refining ability by 15 percent and the wholesale marketplaces by 35 percent. Sell will be out of the development expenditure to increase the worth of production and marketing groups. (www.shell.com, 2010)
Shell is expecting a huge profit and high currency flow from the different projects currently on board and also the new projects acquired down the lane. Company believes that the currency in flow will develop by 50% from 2009 to 2012 (it will in a $60/bbl oil price world) and by over 80% with $80/bbl oil prices. (www.shell.com, 2010)
Assessing the message of Chairman in Annual Report 2009
In this section we will assess the message that was given by the Chairman of Shell in the annual report for the year 2009.
The year 2009 was the year of recession and no company was saved from this issue. In order to finance new projects companies were unable to get support from banks due to recession and new conditions. The Chairman stated that even though market was having issues, Shell worked hard to be still the most competitive in the global economy. Shell kept on working on the energy projects along with the capital spending through out 2009.As per the Chairman once the recession is over, global economy will become strong again and the demand for oil and gas will increase tremendously. Message focuses on controlling the carbon dioxide emission along with the growth in energy sector. Message stated that due to Shell's innovative technology, it is in a profitable condition in today's world which focuses on low carbon energy method.
As per the chairman, Shell is one of the best companies as it has the capability to locate and produce oil and natural gas in different placed and conditions (be it inside oceans or frozen ice). Chairman believes that this capability of Shell will definitely aid in producing fuels from unique resources like agricultural and industry wastages. The company is already focusing on applying the available technology to develop lean burning fossil fuel, like natural gas. Being the leaders in the field of liquefied natural gas, company wants to convert this in transport fuel and lubricants of high efficiency and performance. Shells aim to apply its technology in difficult projects operating on huge scales. Chairman stated that they were able to bring the offshore fields to on-stream in Russia and Brazil. Shell is focusing on extracting extra value from every bit of energy utilized in there operations. They want to produce more products that can enable the customers to energy efficient.
At last the Chairman has concluded that Shells goal is to make the world having immense supply of energy, which is affordable and maintainable.
In the Annual report of Shell for 2009, company has highlighted the factors that can be a risk to the company in the current environment (politics, competitive and industrial etc). As per the report
Shell is subjected to changes in the value of crude oil, natural gas and even chemical products.
Shell is completely depending on the current difficult projects in order to produce hydrocarbon in large scale later in future.
Shells current project might get delayed to the current environmental changes and challenges.
Failure to manage the huge employees can affect the reputation of Royal Dutch Shell PLC.
Shells operate in over 90 countries which can develop political problems also.
Royal Dutch Shell PLC's business development in Malaysia
In a country like Malaysia, Shell can mainly aim to increase there business and develop in to maximum in terms of strength, security and atmosphere. At this point of time the main aim of Shell is reduction in the release of the carbon dioxide gas and there by to save the atmosphere from it's after effects. In Malaysia, Shell's business development clearly relies and depends on the following areas:
Carbon dioxide management: Shell wants to increase there energy business by reducing the carbon dioxide. Shell is opting for different methods which include development of carbon capture and storage technology, aid in development of superior bio-fuels, and coal gasification technology. (Shell, 2010)
Energy effectiveness: Shell believes that if the residents of Malaysia will pay attention to the energy-efficient fuels and lubricants, it will help to increase the effectiveness of that particular source of energy. (Shell, 2010)
Energy safety: We know that like every where in the world, energy requirement in Malaysia also has increased. Shell needs to meet this demand by extracting more energy from the current resources and keep on searching for new resource locations. Shell needs to make sure that the energy resources are not wasted as it can lead to depletion of the energy resources. (Shell, 2010)
Energy variety: In order for Shell to develop in field of energy in Malaysia, they will need to utilize all the available sources of energy. Currently there is a very high requirement of energy in Malaysia hence Shell need to achieve this by not only using oil or gas but other sources like solar and fossil fuels. (Shell, 2010)
To increase the business in Malaysia, Shell has recognized many center businesses in Malaysia, which provide services and proficiency to the Asia Pacific region and, in some cases, globally also.
The other areas where Shell can still show development will be the Upstream in other words manufacture or production, downstream in other words marketing of the developed products and there projects and technology.
Energy policies and global market development in Malaysia
Malaysian Energy Policies: In this section we will highlight the energy policy of Malaysia (local, national and international policy). Malaysia has already showed that they are able to achieve success and development due to the energy sector. Energy plays a very important role in there development and to sustain it. Due to this reason only Malaysia gives important to strategy planning and maintenance of the energy when developing any plan or policy. Malaysia has developed policies to maintain the energy resources over the years. They have done this to meet the current energy requirement and future requirements.
The five main energy policies implemented in the country has been listed below:
NATIONAL PETROLEUM POLICY (1975): NATIONAL PETROLEUM POLICY was formulated in 1975. The aim of development of National Petroleum policy was to regulate and provide guidance to the fast developing petroleum industry in Malaysia. This policy was enforced as the petroleum industry was developing massively. The policy was meant to be developed with an objective of effective utilization of resources by the industries and nation wide usage.
The goal of NATIONAL PETROLEUM POLICY was to make sure petroleum resources are being utilized efficiently. Malaysia wanted to make sure adequate resources are available to domestic usage by there people. The aim was to increase the scope of investment in Malaysia as it was already considered for product marketing activities.
NATIONAL ENERGY POLICY (1979): NATIONAL ENERGY POLICY was formulated in 1979. The aim of National energy policy was to guarantee resourceful, safe and environmentally maintainable stock of energy resource in the future. This policy had three main objectives: Supply Objective,
Usage objective and Environment related objective.
NATIONAL DEPLETION POLICY (1980): National Depletion policy was formulated in the year 1980. This policy was introduced to save the natural oil resources. This policy was implemented as Malaysia was tremendously increasing the production of the crude oil hence the oil reserves would have been depleted easily and soon.
(Image source: Eighth Malaysian Plan 2001-2005)
FOUR-FUEL / DIVERSIFICATION POLICY (1981): Four fuel diversification policies was formulated and implemented in the year 1981. This policy was introduced to stop using oil as the only source of electricity production. The aim of this policy was to ensure safe usage of all the four sources of energy as oil, gas, hydro and coal and develop a mixed energy. Due to this Four fuel diversification policies, the usage of gas in electricity production increased tremendously whereas the usage of oil in the energy generation decreased highly (from 11% of year 1995 to 6% in the year 2000).
It was due to this policy, the government of Malaysia utilized natural gas as the main source of electricity generation (75% of the total energy produced, 10% from water and 9% from coal and 6% from oil respectively). But still the government is monitoring the usage of the resources as depending on one resource can cause depletion.
RENEWABLE ENERGY AS THE FIFTH FUEL POLICY (2000): Malaysia has become a fortunate country having both conservative and non-conservative sources of energy. Oil, gas and coal being fossil fuel are considered under the conservative source of energy which can deplete any time hence smart usage of this resources is necessary. Malaysian government has introduced the renewable energy fuel policy to increase and support the usage of non-conservative source of energy like industry wastage, solar energy, bio gas and bio mass to produce electricity.
Energy Management in Malaysia: Implementation of energy management system in Malaysia has helped them to improve in energy utilization and earn good profits in the global market. Malaysia has opted for energy management to optimize the use of energy and avoid unnecessary wastage of the energy. Energy management in Malaysia focused on appropriate usage of the electricity and fuel resources without compromising on their generation level and product quality in terms of safety and environmental standards. The main principle of the energy management system is to improve expenditure efficiency. Malaysian companies have implemented this energy management system as they know that it will help in earning profits for the organisation.
As per the audit performed by Pusat Tenaga Malaysia (PTM), many companies around Malaysia have achieved success due to the implementation of energy management system. This audit was done under the MIEEIP (Malaysian Industrial Energy Efficiency Improvement program) and another project which was co-founded by Government of Malaysia, United Nations development program and local private sectors. (MIEEIP news, 2006)
Strategic plan for Royal Dutch Shell PLC's development of existing and new business in Malaysia
Development of any business whether it a new one or existing one required appropriate strategy development. To ensure a good growth and profit in a business strategy development is vital. Developing and implementing an excellent strategy can help the company to not only assess the current situation but also to plan the roadmap for the future.
Malaysia is one of top most preferred country for business in today's world. Even though Malaysia is expanding its business in telecommunication industry, electronics, technologies, airlines etc, but the main business of Malaysia still remains in terms of energy. Malaysia appears to be a perfect operating environment for Royal Dutch Shell where it is a major business partner of the Malaysian government (John Donovan, 2006).
Shell aims to acquire new gas resources by offering the customers a competitive value. Royal Dutch Shell PLC in Malaysia mainly deals with Upstream in other words manufacture or production, downstream in other words marketing of the developed products and there projects and technology. Shell aims to achieve this by implementing the following strategy:
Increase the value of our current business and new business on long term basis
Keep focus on challenging cost management
Growing our resource base in such a way that new projects can be brought on stream.
Keep working with strong technical and profitable efficiency and technology.
Develop a examination programme to enhance Shell resource base
Keep being a leader in gas business
Usage of the resources efficiently to avoid depletion
To focus on usage of all the sources of energy available in Malaysia like oil, gas, solar, water, etc.
The above mentioned strategy has been developed as per the energy management system in Malaysia and the energy policies of Malaysia namely National Petroleum policy, National energy policy, National depletion policy, Four-fuel/ diversification policy and the renewable energy policy.
Shell can develop and implement new technologies and integrate the current technologies to increase the revival of oil and gas. In Malaysia, Shell is a contractor to PETRONAS, which works on producing oil and gas located at off-shores of Sarawak and Sabah. Shells wants to increase there share holding to 80 percent from 30 percent. In Sabah, Shell is currently operating for four fields with a 50 percent share holding in three of them whereas 80 percent in the other. Shell also is looking forwards to increase the interest from 35 percent to 40 percent in off shore production sharing contract, used for examination and expansion.
Through this assignment we understand the importance of various resources of energy and its importance in development of any business or country. We have got a brief overview regarding the performance of Shell through the message given by the Chairman himself. We covered the areas where Shell can develop in a country like Malaysia. We studied the energy policies and energy maintenance system of Malaysia. We now know that every business can be developed in any country as long as we are able to identify the areas of development and outline a strategy towards the development of the business.