International Expansion Strategy of

By: Sanket Dave (16) Rashi Garg (21) Kritika Nigam (38) Parin Shah (46) Goral Shroff (49) Nishant Singla (50) Vaibhav Wadhwa (55)

Flow of presentation
Introduction to Royal Dutch Shell history Swot analysis & Competitors Shell's growth in the international market

Market Entry and expansion strategies adopted by Shell

a)Joint Ventures b) Wholly Owned Subsidiaries c) Licensing

Factors influencing the Internationalization of Shell and challenges

Controversies in International Expansion Recommendations

Shell at a Glance
A global group of energy and petrochemical companies, Shell is headquartered in The Hague, the Netherlands The parent company of the Shell group is Royal Dutch Shell plc, which is incorporated in England and Wales Created by the merger of Royal Dutch Petroleum and UK-based Shell Transport & Trading largest company in the world, in terms of revenue, and one of the six oil and gas "super majors"

Raison d etre: The objectives of the Shell group are to engage efficiently, responsibly and profitably in oil, oil products, gas, chemicals and other selected businesses and to participate in the search for and development of other sources of energy to meet evolving customer needs and the worlds growing demand for energy. Core Values: -Integrity -Honesty -Respect for people People: Shell employs around 87,000 people in more than 70 countries and territories

Businesses of Shell
Upstream
searches for and recovers crude oil and natural gas liquefies and transports natural gas, and operates the infrastructure needed to deliver both oil and natural gas to market

Downstream Projects & Technology

manages Shells refining and marketing activities for oil products and chemicals Refining includes manufacturing, supply and shipping of crude oil. Marketing sells a range of products, including fuels, lubricants, bitumen and liquefied petroleum gas (LPG), for home, transport and industrial use

manages the delivery of major projects and drives research and innovation to develop new technologies It is also responsible for providing leadership across Shell in the areas of safety & environment and contracting & procurement

SWOT
Strengths -Strong market position -Vertically integrated operations -Exploration technological capabilities -Invested into other energy sources: Hydrogen, LNG, Wind, Solar Weakness -Oil industry is very competitive industry -Violation of anti-corruption laws -Legal proceedings against Shell -Spills in Nigeria -Alternative energy source venture has not yet paid off

Opportunities -Development of Upstream portfolio -Investment in Advanced Biofuels -Large untapped oil reserve in Brazil

Threats -Competition : ExxonMobil, BP, Chevron, ConocoPhillips -Environmental Regulations -Depletion of the oil reserves

Royal Dutch competitors are

1. Exxon Mobil

2. Chevron Corp.

3. British Petroleum

Exxon Mobil
Irving, Texas 40, 000 gas and service stations Reserves of 13.6 billion barrels of OE Daily production is 6.4 million barrels Major producer of petrochemicals

BP (British Petroleum)

Founded as Anglo Persian Oil Company London, UK 80 countries, 20,700 sites , 86000 employees 2.8 million barrels of oil a day 18.3 billion barrels of OE- reserves Refining availability : 94.8%, reflecting strong operations around global refining portfolio

Chevron Corporation
Merger of Texaco Inc. and Chevron San Ramon, California 11.6 billion barrels of OE in reserves 2.6 million barrel of oil each day 26, 000 gas stations Global refining capacity of 1.95 million barrels of oil per day

Shells presence in the International Market

Growth of Shell in the International Market

Initial years
Fast expansion all over the world, including European, North American and Asian areas Oil exploration and production were developed in Romania (1906), Russia (1910), United States (1912) and many other parts By 1938, its crude oil production per day accounted for more than 10 percent of the world total production

In 1980s offshore exploration technology and projects were developed, such as the Troll in Norway and the Gulf of Mexico

Contd.

Expansion into Eastern Europe

With the collapse of Communist regimes in Eastern Europe in 1989, Shell gained access to markets in these regions The first operation was started in Hungary though the joint venture structure Soon the business expanded at a quick speed to many other Eastern European countries, including Russia

Contd.

21st century
Shell expanded its business into China and Russia In China, Shell has built a massive joint venture company with China National Petroleum Corp. (CNPA)-CNOOC and Shell Petrochemicals Company Limited International agreements to benefit companies from various countries like between Shell Energy Holdings Australia Ltd. and its partner Petro China with Australia-based Arrow Energy Limited In the Gulf of Mexico, Shell has started his oil and natural gas production in the Perdido Development Project characterized by the operation of the deepest offshore oil platform Obtains permission for exploration activities in Pakistan, Egypt, Tunisia and French Guiana

Sakhalin-2 Project
Sakhalin-2 is one of the worlds largest integrated, export-oriented oil and gas projects, as well as Russias first offshore gas project Sakhalin Energy Investment Company Ltd., the project operator, is owned by Gazprom, Shell, Mitsui and Mitsubishi The project infrastructure includes three offshore platforms, an onshore processing facility, 300 kilometers of offshore pipelines and 1,600 kilometers of onshore pipelines, an oil export facility and a liquefied natural gas (LNG) plant Virtually all the gas from Sakhalin-2 is sold under long-term contracts to customers in the Asia-Pacific region and North America

Market Entry and Expansion Strategies

Joint Ventures

Wholly Owned Subsidiaries

Licensing

Joint Venture
Its establishment, based on the merger of the British-based Shell Transport and Netherlands-based Royal Dutch

Joint venture plays an important role in Shells international expansion & development strategy

Shells Joint Ventures

Brazil-> Cosan, for Ethanol based fuels China-> Nanhai Petrochemicals Complex, for Oil and Gas USA-> Gulf Oil, for Nuclear Energy

Global-> ExxonMobil
Infineum: For lubricants and fuel additives Aera: For Natural gas, oil exploration and production

Joint venture Infineum International Ltd

Ownership 50% Shell; 50% ExxonMobil 50% Shell; 50% Saudi Basic Industries Corporation

Activities Manufacture and marketing of fuel, lubricant and speciality additives Manufacture of ethylene, styrene monomer, MTBE, ethylene dichloride, caustic soda and ethanol

Locations

Global

Saudi Petrochemical Company (Sadaf)

Al Jubail, Saudi Arabia

ELLBA BV and ELLBA Eastern (Pte) Ltd

50% Shell; 50% BASF

Moerdijk, The Manufacture of styrene Netherlands; Jurong monomer/propylene oxide Island, Singapore

Petrochemical Corporation of Singapore (PCS)

50% Qatar Petroleum International and Shell; 50% consortium of Japanese companies Manufacture of lower led by Sumitomo olefins, aromatics, MTBE
30% Qatar Petroleum International and Shell; 70% Japanese Manufacture of interests, led by polypropylene and Sumitomo polyethylene 50% Shell; 50% CNOOC Petrochemicals Investment Limited

Jurong Island, Singapore

The Polyolefin Company Pte Ltd (TPC) CNOOC and Shell Petrochemicals Company Limited (CSPCL)

Jurong Island, Singapore

Manufacture and sale of Huizhou Municipality, wide range of base Guangdong Province, chemicals and derivatives China

Wholly Owned Subsidiaries

Several subsidiaries in Nigeria starting from 1958, thus contributing to Nigerias local economy. Operation include, oil and gas production from local lands and swaps, as well as the oil detection and exploration in deep water far off the cost. Shell Nigeria Exploration and Production Company Ltd (SNEPCO) and Shell Nigeria Gas Ltd (SNG), which were established respectively in 1993 and 1998.

 SNEPCO - Detection and production of hydrocarbons from Nigerias frontier areas, with the vision of becoming the leader in African market in terms of deep water oil and gas operations. SNG Promote the position of gas in energy industries of Nigeria, which is more reliable and cleaner than the traditional liquid fuel. Also, it has operated a pipeline construction with a length of 80 km, providing reliable guarantee for the gas supply. Shell Petroleum Development Company of Nigeria Ltd (SPDC) This is a wholly-owned Shell company that operates oil and gas production in the Niger Delta on behalf of the partners of an unincorporated joint venture between the government-owned Nigerian National Petroleum Corporation NNPC (55%), Shell (30%), Elf Petroleum Nigeria Ltd a subsidiary of Total (10%) and Agip (5%).

Licensing
Provides support to its customers through licensing advanced technologies. With a license issued by Shell Global Solutions, the client could get a particular technical assistance or operational consultancy to upgrade its own business performance. A wide range of lead-edge technologies for other refineries, such as hydrocracking, fluidized catalytic cracking, thermal conversion, distillation and so on.

Factors that Influence Internationalization

Exporting Franchising

Licensing

Wholly owned Subsidiaries

Collaborative / Joint Ventures

Turnkey Projects

Factors that Influence Internationalization

Choice depends upon multiple factors
Firm Factors Environment al Factors
Cultural Conditions Economic Conditions Social Conditions

Strategy Experience Features

Internationalization Path of SHELL

Greatly influenced by a factor Unique Company Structure ( 4 types of companies)

The Royal Dutch Shell Group Holding Companie s

Parent Companie s
UK Based The Shell Transport and Trading

Operating Companie s

Service Companie s
-Total 9 Companies -Provide Advice to Operating Co.

Netherlands Based Royal Dutch Petroleum

More than 200 companies

Internationalization Path of SHELL

Different companies employ different method of expansion. Example:

Operating Company: Joint Venture Gain detailed knowledge about local market; Shared risks and costs Service Company: Licensing e.g. Shell Global Solutions; Reduction in Costs and Risks; No major investment in peripheral activities; Immunity against restrictive investment barrier

Environmental factors in that country also matter.

Environmental Challenges Faced by Shell

Oil Spills in Nigeria
Philippines: Oil Depot at Crowded Place

Brazilian Pesticide Disease

Sakhalin: Last 130 Gray Whales Fracking Unconventio nal Gas

Canadi an Tar Sands

Political Challenges Faced (Interference) by Shell

Home States of Shell: UK and Netherlands UK and Netherlands might want to secure their interests/ economic benefits These interests might overpower ethical interests Compromise on human rights of host countries

Political Challenges Faced (Interference) by Shell : Examples

Shells access to Nigerian Government Shells access to Dutch and UK Governments

Shell drafts letters for the UK government to get Libya deal

Shell and Dutch government lining up against U.S. Iran sanctions

Invasion of Iraq: UK and Dutch governments

Invasion of Iraq: UK and Dutch governments understand Shells needs

Muddling through in Nigeria

In 2010, Nigeria accounted for 19% of Shells worldwide production

About Nigeria:
More than 30 million inhabitants Ranks 142 out of 169 in HDI by UN Ranks 134 out of 168 in CPI 54.4% official poverty prevalence Over-reliance on crude oil & gas

1) Oil Spills
299,000

169,000 72% 63% 37,000 28% 72% 37% 28%

National Oil Spill Detection & Response Agency (NOSDRA) Report

Violation of several internationally recognized Human Rights

Right to food, work, adequate standard of living, health & healthy env. Pending court case in Netherlands

2) Primitive Gas Flaring

The natural gas is primitively flared in open air Nigeria represents 111% of Global gas flares Nigerian Gas Association estimates loss of USD 72 Billion to Nigeria Environmental consequences: Heat stress & acid rains Consequences to the local communities: Eyes turn red, quick corrosion of roofs, crack in walls due to ground vibrations etc.

Sakhalin-2 Project (Russia)

Worlds largest integrated oil & gas project, capital expenditure amounts USD 22 Billion Russias first LNG plant, offshore Sakhalin island Case: Western gray whales are on the brink of extinction Only 130 left, with 30 mature females International Union of Conservation of Nature created a panel of independent scientists: Western Gray Whale Advisory Panel (WGWAP) Currently 1 platform operational

Oil Spill in Gulf of Mexico

Recommendations

Paradigm Shift: CSR to CSV Shared Value for:

Environment: Bio-fuel development
People: Hiring & training, Educational & Health facilities The Company: New profit models, Six Sigma, Pension benefits for employees

Thank You