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Shell plc

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Royal Dutch Shell plc
Company typePublic

(LSE: RDSA / RDSB)

(NYSE: RDS.A / RDS.B)
ISINGB00B03MLX29
GB00B03MM408 Edit this on Wikidata
IndustryOil and gas
PredecessorPetroleum-Maatschappij "Moeara Enim" Edit this on Wikidata
Founded1907
HeadquartersNetherlands The Hague, Netherlands
Area served
Worldwide
Key people
Jorma J. Ollila (Chairman)
Jeroen van der Veer (CEO)
ProductsPetroleum, natural gas, and other petrochemicals
RevenueIncrease $ 458.361 billion (2008)
Increase $ 51.091 billion (2008)
Increase $ 26.277 billion (2008)
Total assetsIncrease $ 282.401 billion (2008)
Total equityIncrease $ 127.285 billion (2008)
Number of employees
102,000 - March 2009
SubsidiariesShell Oil Company
Shell Nigeria
Shell Canada
WebsiteShell.com

Royal Dutch Shell plc, commonly known simply as Shell, is a multinational petroleum company of Dutch and British origins. It is the second largest private sector energy corporation in the world, and one of the six "supermajors" (vertically integrated private sector oil exploration, natural gas, and petroleum product marketing companies). The company's headquarters are in The Hague, Netherlands, with its registered office in London (Shell Centre).[1]

The company's main business is the exploration for and the production, processing, transportation, and marketing of hydrocarbons (petroleum and natural gas). Shell also has a significant petrochemicals business (Shell Chemicals), and an embryonic renewable energy sector developing wind, hydrogen and solar power opportunities. Shell is incorporated in the UK with its corporate headquarters in The Hague, its tax residence is in Netherlands, and its primary listings on the London Stock Exchange and Euronext Amsterdam (only "A" shares are part of the AEX index).

Forbes Global 2000 in 2009 ranked Shell the second-largest company in the world, behind General Electric. In 2007, Fortune magazine ranked Shell as the third-largest corporation in the world, behind Wal-Mart and ExxonMobil.

Shell operates in over 140 countries. In the United States, its Shell Oil Company subsidiary, headquartered in Houston, Texas, United States, is one of Shell's largest businesses.

History

The Royal Dutch Shell Group was created in February 1907 when the Royal Dutch Petroleum Company (legal name in Dutch, N.V. Koninklijke Nederlandsche Petroleum Maatschappij) and the "Shell" Transport and Trading Company Ltd of the United Kingdom merged their operations[2] – a move largely driven by the need to compete globally with the then predominant US petroleum company, John D. Rockefeller's Standard Oil. The terms of the merger gave 60% of the new Group to the Dutch arm and 40% to the British and is now mostly seen as a Dutch company in line with the original ownership. To celebrate its centenary in 2007 Shell launched a scholarship fund.[3]

Royal Dutch Petroleum Company was a Dutch company founded in 1890 by Jean Baptiste August Kessler,[2] along with Henri Deterding and Texaco, when a Royal charter was granted by King William III of the Netherlands to a small oil exploration and production company known as "Royal Dutch Company for the Working of Petroleum Wells in the Dutch Indies" (now Indonesia)[4].

The "Shell" Transport and Trading Company (the quotation marks were part of the legal name) was a British company, founded in 1897 by Marcus Samuel and his brother Samuel Samuel.[2] Initially the Company commissioned eight oil tankers for the purposes of transporting oil.

Chart of the major energy companies dubbed "Big Oil" sorted by latest published revenue

In 1919, Shell took control of the Mexican Eagle Petroleum Company and in 1921 formed Shell-Mex Limited which marketed products under the "Shell" and "Eagle" brands in the United Kingdom. In 1932, partly in response to the difficult economic conditions of the times, Shell-Mex merged its UK marketing operations with those of British Petroleum to create Shell-Mex and BP Ltd,[5] a company that traded until the brands separated in 1975.

In November 2004, following a period of turmoil caused by the revelation that Shell had been overstating its oil reserves, it was announced that the Shell Group would move to a single capital structure, creating a new parent company to be named Royal Dutch Shell plc, with its principal listing on the London Stock Exchange and the Amsterdam Stock Exchange and its headquarters and tax residency in The Hague in the Netherlands. The unification was completed on 20 July 2005. Shares were issued at a 60/40 advantage for the shareholders of Royal Dutch in line with the original ownership of the Shell Group.[6]

In November 2007 Shell acquired a majority stake in some gas fields owned by Regal Petroleum in Ukraine.[7]

Name and brand

A Shell-sponsored Ferrari F60 Formula One motor racing car

The name Shell is linked to the Shell Transport and Trading Company.[8] In 1833, the founder's father, also Marcus Samuel, founded an import business to sell seashells to London collectors. When collecting seashell specimens in the Caspian Sea area in 1892, the younger Samuel realized there was potential in exporting lamp oil from the region and commissioned the world's first purpose-built oil tanker, the Murex (Latin for a type of snail shell), to enter this market; by 1907 the company had a fleet. Although for several decades the company had a refinery at Shell Haven on the Thames, there is no evidence of this having provided the name.

The Shell brand is one of the most familiar commercial symbols in the world. Known as the "pecten" after the sea shell Pecten maximus (the giant scallop), on which its design is based, the current version of the brand was designed by Raymond Loewy and introduced in 1971. The yellow and red colours used are thought to relate to the colours of the flag of Spain as Shell built early service stations in the state of California which had strong connections with Spain.[9]

The slash was removed from the name "Royal Dutch/Shell" in 2004.[10]

Businesses

The upstream provides two thirds of Shell's revenues

One of the original Seven Sisters, Royal Dutch Shell is the world's second-largest private sector oil company by revenue, Europe's largest energy group and a major player in the petrochemical industry.

Core businesses

Shell has five core businesses: exploration and production (the "upstream"), gas and power, refining and marketing, chemicals (the "downstream"), and trading and shipping. The company operates in more than 140 countries.

Shell oil depot in Kowloon, Hong Kong

Shell's primary business is the management of a vertically integrated oil company. The development of technical and commercial expertise in all the stages of this vertical integration from the initial search for oil (exploration) through its harvesting (production), transportation, refining and finally trading and marketing established the core competencies on which the company was founded. Similar competencies were required for natural gas, which has become one of the most important businesses in which Shell is involved, and which contributes a significant proportion of the company's profits.

While the vertically integrated business model provided significant economies of scale and barriers to entry, there has been much less interdependence recently between the businesses, and each business now seeks to be a self-supporting unit without subsidies from other parts of the company.

The petroleum and gas business is increasingly an assembly of independent and globally managed business segments, each of which must be profitable in its own right.

The downstream, which now also includes the chemicals business, generates a third of Shell's profits worldwide and is known its global network of more than 40,000 petrol stations and its 47 oil refineries.

Diversification

A Shell oil refinery in Martinez, California

Over the years Shell has occasionally sought to diversify away from its core oil, gas and chemicals businesses. These diversifications have included nuclear power (a short-lived and costly joint venture with Gulf Oil in the USA); coal (Shell Coal was for a time a significant player in mining and marketing); metals (Shell acquired the Dutch metals-mining company Billiton in 1970) and electricity generation (a joint venture with Bechtel called Intergen). None of these ventures were seen as successful and all have now been divested.

In the early 2000s Shell moved into alternative energy and there is now an embryonic "Renewables" business that has made investments in solar power, wind power, hydrogen, and forestry. The forestry business went the way of nuclear, coal, metals and electricity generation, and was disposed of in 2003. In 2006 Shell sold its entire solar business[11] and in 2008, the company withdrew from the London Array which is expected to become the world's largest offshore wind farm.[12]

Shell also is involved in large-scale hydrogen projects. HydrogenForecast.com describes Shell's approach thus far as consisting of "baby steps", but with an underlying message of "extreme optimism".[13]

Management

Shell CEO Jeroen van der Veer

Executive committee

Shell's executive committee consists of Jeroen van der Veer (CEO), Linda Cook (Executive Director Gas and Power), Malcolm Brinded (Executive Director Exploration and Production), Peter Voser (CFO), and Rob Routs (Executive Director Downstream Oil Products and Chemicals). In March 2007 it was announced that van der Veer's contract as CEO would be extended to June 2009, some twenty months beyond his normal Shell retirement date of October 2007.[14]

On 29 October 2008, it was announced that Voser would succeed to the position of Chief Executive Officer effective 1 July 2009.[15]

Non-executive directors

On 4 August 2005, the board of directors announced the appointment of Jorma Ollila, then Chairman and CEO of Nokia, to succeed Aad Jacobs as the company’s non-executive Chairman from 1 June 2006. Ollila is the first Shell Chairman to be neither Dutch nor British.

Other non-executive directors include Maarten van den Bergh, Wim Kok, Nina Henderson, Lord Kerr, Adelbert van Roxe, and Christine Morin-Postel.

Corporate responsibility and reputation

Main articles: Controversies surrounding Royal Dutch Shell and Royal Dutch Shell environmental issues
Shell Research and Technology Centre, Amsterdam

Shell's compliance to corporate social responsibility also includes its UK and international Shell livewire programmes. This initiative has over 26 years experience of encouraging young people to start and develop their own businesses in the UK and 26 other countries in the world.[16]

Shell has been criticised for its businesses in Africa, notably in relation to protests of the Ogoni in 1995,[17] Shell offered to settle the case with US$15.5 million shortly before the start of a trial in New York.[18] and opposition to the company has widespread support in the delta.[19]

In the 1990s, protesters criticized the company's poor environmental record, particularly the pollution caused by the disposal of the Brent Spar platform in Britain.[20] Shell's responsed by publishing an unequivocal commitment to sustainable development, supported by executive speeches reinforcing this commitment.[21]

Shell Oil (the U.S. subsidiary) was one of the first companies to leave the Global Climate Coalition, a lobby group which had opposed restrictions on greenhouse gases.[22] Shell is also a founding member of the World Business Council for Sustainable Development, which Watts led as Chairman in 2002/2003.

Delivering the annual business lecture hosted by Greenpeace in 2005, Shell chairman Lord Oxburgh said that we must act now on global warming or face a "disaster", and encouraged governments to provide a regulatory framework to encourage the reduction of greenhouse gas emissions.[23]

Lawsuits against Royal Dutch Shell with respect to its activities in Nigeria

Main article: Wiwa family lawsuits against Royal Dutch Shell

Beginning in 1996, the Center for Constitutional Rights (CCR), EarthRights International (ERI), Paul Hoffman of Schonbrun, DeSimone, Seplow, Harris & Hoffman and other human rights attorneys have brought a series of cases to hold Shell accountable for alleged human rights violations in Nigeria, including summary execution, crimes against humanity, torture, inhumane treatment and arbitrary arrest and detention. The lawsuits are brought against Royal Dutch Shell and Brian Anderson, the head of its Nigerian operation.

The United States District Court for the Southern District of New York set a trial date of June, 2009. On 9 June 2009 Shell agreed to an out of court settlement of 15.5 million USD to victims' families. However, the company denied any liability for the deaths, stating that the payment was part of a reconciliation process. In a statement given after the settlement, Shell suggested that the money was being provided to the relatives of Saro-Wiwa and the eight other victims, in order to cover the legal costs of the case and also in recognition of the events that took place in the region. Some of the funding is also expected to be used to set up a development trust for the Ogoni people, who inhabit the Niger Delta region of Nigeria.

Shell whistleblowers

Shell has set up a global internet-based facility for whistleblowers to report alleged violations of the law or the Shell general business principles, a voluntary code of ethics pledging transparency, integrity and honesty in all of Shell's business dealings.[24] The introduction at the global helpline website says "Reporting and addressing suspected violations of the law or the Shell General Business Principles (SGBP) is of critical importance in protecting our reputation and the value of the Shell brand." Whistleblowers are asked to provide identity details but anonymous reports are also accepted. The Global Helpline operated by Global Compliance, Inc. is available to "customers, suppliers, partners, advisers and employees of Shell".[25] A prominent gripe site of Shell is royaldutchshellplc.com.

Corporate communications

Shell Centre building next to the London Eye in London, UK

Shell's advertising regarding its renewable energy business has been described as a "greenwash" by some non-governmental organization critics,[26] but praised by other commentators.[27]

In August 2008, the British Advertising Standards Authority (ASA) ruled that Shell had misled the public in an advertisement, claiming that a $10 billion oil sands project in Alberta, Canada was a "sustainable energy source".[28]

Oil reserves

In 2004, a disclosure about the overstatement of oil reserves was seen as the most serious crisis encountered in the Group’s nearly 100 years of history. The Economist asked in an article dated 11 March 2004 whether Shell could be seen as "another Enron", but answered its own question with "importantly, Shell's shifting of reserves (from “proven” to “probable”) simply cannot be compared with the phantom profits and bogus assets booked by Enron. That is because the oil and gas actually still exists, and Shell still owns them as real, usable assets".[29] The crisis led to the dismissal of the chairman of the Committee of Managing Directors Philip Watts, and prompted a major reorganisation of the Group.

Health, safety, and other issues

Main article: Royal Dutch Shell safety concerns

A number of incidents over the years led to criticism of Shell's health and safety record, including repeated warnings by the UK Health and Safety Executive about the poor state of the company's North Sea platforms.

The company suffered another blow in public relations when problems arose at the massive Sakhalin-II project in Russia and the controversial Corrib Gas Field development in Ireland. Shell's social investment initiative the Shell Foundation has also run into some controversy. In 2007 Friends of the Earth alleged that the damage caused by Shell's oil activities to local communities and the wider environment could be assessed at $20 billion.[30] Accusations have also flown about the conduct of Shell in Nigeria[31]

Corporate governance

Shell service station in Hiroshima, Japan

Traditionally, Shell was a heavily decentralised business worldwide (especially in the downstream) with companies in over 100 countries, each of which operated with a high degree of independence. The upstream tended to be far more centralised with much of the technical and financial direction coming from the central offices in The Hague. Nevertheless. there were very large "exploration and production" companies in a small number of major oil and gas production centres such as the United Kingdom (Shell Expro, a Joint Venture with Exxon), Nigeria, Brunei, and Oman.

The downstream business, which in some countries also included oil refining, generally included a retail petrol station network, lubricants manufacture and marketing, industrial fuel and lubricants sales and a host of other product/market sectors such as LPG and bitumen. The practice in Shell was that these businesses were essentially local and that they were best managed by local "operating companies" – often with middle and senior management reinforced by expatriates. In the 1990s, this paradigm began to change, and the independence of operating companies around the world was gradually reduced. Today, virtually all of Shell’s operations in various businesses are much more directly managed from London and The Hague. The autonomy of “operating companies” has been largely removed, as more "global businesses" have been created.

United States and Canada

Service station near Lost Hills, California

Through most of Shell's history, its business in the United States, Shell Oil Company was substantially independent with its stock ("Shell Oil") being traded on the NYSE and with little direct involvement from the group’s central offices in the running of the American business. Such practice also changed in the 1990s when Shell first bought out the shares in Shell Oil that it did not own and then took a more hands-on approach. In Canada, also previously very independent, Shell has completed its purchase of the shares in Shell Canada that it did not own, to apply the new global business model.

Australia

Main article: Shell Australia

In Australia, retailer Coles Group (now part of Wesfarmers) purchased the rights to the retail business from the existing Shell Australia multi-site franchisees in 2003 for an amount less than A$100 million. The purchase was made in response to a popular discount fuel offer by rival Woolworths Limited launched some years earlier.

Coles Express' only affiliation with Shell is that Shell is the exclusive supplier of fuel and lubricant products, leases the service station property to Coles, and maintains the presence of the "pecten" and other Shell branding on the price board and other signage. Coles Express sets fuel and shop prices and runs the business, provides convenience and grocery merchandise through its supply chain and distribution network, and directly employs the service station staff.

Norway, Sweden and Denmark

On 27 August 2007, Royal Dutch Shell and Reitan Group, the owner of the 7-Eleven brand in Scandinavia, announced an agreement to rebrand some 269 service stations across Norway, Sweden and Denmark, subject to obtaining regulatory approvals under the different competition laws in each country.[32]

See also

References

  1. ^ "Investor Centre - Investor contacts" (HTML). Shell International B.V. 2007-06-27. Retrieved 2007-08-30.
  2. ^ a b c Royal Dutch Shell: History
  3. ^ "The Shell Centenary Scholarship Fund" (HTML). Shell Centenary Scholarship Fund. 2007-09-17. Retrieved 2007-08-30.
  4. ^ "History of Shell in Indonesia". PT Shell Indonesia. Retrieved 25 Nov 2008. {{cite web}}: Cite has empty unknown parameter: |coauthors= (help)
  5. ^ Reference and contact details: GB 1566 SMBP Title:Shell-Mex and BP Archive Dates of Creation: 1900-1975 Held at: BP Archive GB 1566 SMBP
  6. ^ Shell shareholders agree merger BBC News, 2005
  7. ^ Shell buys stake in Regal gas fields
  8. ^ "About Shell - The history of the Shell logo" (HTML). About Shell. Shell International B.V. 2007-06-15. Retrieved 2007-08-30.
  9. ^ Business Superbrands, Editor: Marcel Knobil, Author James Curtis (2000), Superbrands Ltd. ISBN 0-9528153-4-6, p. 93.
  10. ^ Royal Dutch Shell Group .com
  11. ^ "SolarWorld Acquires Shell's Solar Business". RenewableEnergyWorld.com. 2006-02-02. Retrieved 2008-08-18.
  12. ^ Shell pulls out of key wind power project, Financial Times, 01 May 2008
  13. ^ Stanley, Dean. "Shell Takes Flexible Approach to Fueling the Future" (HTML). Executive View. Corland Publishing. Retrieved 2007-08-30.
  14. ^ Executive Directors Contracts of service
  15. ^ Shell press release
  16. ^ "What is Shell LiveWIRE?" (HTML). Shell LiveWIRE. Retrieved 2007-08-30.
  17. ^ The My Hero Project - Ken Saro Wiwa
  18. ^ http://www.nytimes.com/2009/06/09/business/global/09shell.html?ref=global
  19. ^ CorpWatch : NIGERIA: Shell may pull out of Niger Delta after 17 die in boat raid
  20. ^ Brent Spar's long saga BBC News, 1998
  21. ^ Ek Kia, Tan (2005-04-19), Sustainable Development in Shell (PDF), retrieved 2007-08-30
  22. ^ ExxonSecrets Factsheet: Global Climate Coalition
  23. ^ Shah, Saeed (2005-01-26). "Shell boss warns of global warming 'disaster'". Independent Newspapers UK Limited. Retrieved 2007-08-30.
  24. ^ "Environment and Society - Shell General Business Principles" (HTML). Environment and Society. Shell International B.V. 2007-05-05. Retrieved 2007-08-30.
  25. ^ Shell
  26. ^ Bruno, Kenny (2002-01-24). "Greenwash Award to Shell for Clouding the Issue" (HTML). Campaigns. CorpWatch. Retrieved 2007-08-30.
  27. ^ Gelbspan, Ross. "A modest proposal to stop global warming" (HTML). Energy Features. Sierra Club. Retrieved 2007-08-30.
  28. ^ Guardian story, Aug. 13, 2008
  29. ^ ROYAL DUTCH SHELL GROUP .COM The Economist
  30. ^ Macalister, Terry (2007-01-31). "Campaigners urge Shell to put profits into clean-up". Business. Guardian News and Media Limited. Retrieved 2007-08-30.
  31. ^ Curse of the Black Gold
  32. ^ "7-Eleven and Shell join forces at 269 petrol stations" (Press release). Shell International B.V. 2007-08-27. Retrieved 2007-08-30.
Wikimedia Commons has media related to Royal Dutch Shell.

Bibliography

  • "A Century in Oil" by Stephen Howarth [1997] ISBN 0 297 82247 0. A History of The "Shell" Transport and Trading Company.
  • "A History of Royal Dutch Shell" by Stephen Howarth and others [2007]. ISBN 978 0199298778
  • "Seven Sisters" by Anthony Sampson (1981) ISBN 978 0553234695
  • "Shell Shock: The secrets and spin of an Oil Giant" by Ian Cummins and John Beasant [2005]. ISBN 1 84018 941 X

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