The Shell Company: The Oil and Gas Projects

The demand for energy has soared due to the global population increase and the demand has shifted eastward with India and China dominating it (Singh and Santos, 2009). Shell understands that the product will never meet the demand from the way the world is responding to the energy crisis. New sustainable sources of energy are being explored and responsible energy solutions are being investigated (Singh and Santos, 2009). The energy challenge is an ever-increasing one in this age where the global population has exceeded double that in 1950; the population is expected to further increase by another 40% by 2050 (The energy challenge, Shell). Our future generations will need tremendous energy if economic growth is to occur. It remains to be seen how this challenge is to satisfy the spurting demand through changes in economics and environment but going about it in a socially responsible manner, not forgetting the greenhouse gas emissions. The prevalent changes that are occurring in China and India where the economic development is passing through an energy-intensive phase enhance the need for extra energy. The present sources of oil and natural gas will not go beyond 2015; energy will have to be used efficiently and other sources of energy will have to be researched into and tapped as is possible. Solar energy, wind, and biofuels will have to be used and more nuclear energy, coal, oil, and natural gas will have to be found. Carbon dioxide emission, which accounts for most of the greenhouse emissions and poses a danger to global climate, must be controlled.

Two problems are facing the energy challenge. One is that governments are not keeping pace with the necessity and policies are always made a little late (The energy challenge, Shell). An effective policy has not been framed yet even as we expect that Greenhouse Gas emissions may continue to rise and reach uncontrollable and unsafe-for-life concentrations by 2050; this scenario has been named “Scramble” (The energy challenge, Shell). The second scenario named “Blueprints” shows that governments have started the introduction of innovative taxes, standards, and policies to change social behavior and escalate the “energy efficiency of vehicles, buildings and transport fuels”. A price put on GHG emissions in international trading is believed to place some control in innovation (The energy challenge, Shell). Vehicles could increase fuel efficiency when electric cars take to the roads. Industries are capturing carbon dioxide and storing it as a method to increase energy efficiency. If all goes well, the emissions are expected to start falling by 2030 and keep falling after that; the “Blueprints” would probably be scoring higher than “Scramble” in the long run. Even with all these efforts, scientists believe that emission concentrations would still be higher than safe ones (The energy challenge, Shell). This study is discussing how Shell has reached a position of leadership through the lessons it has learned over the years. This paper is elaborating the various organizational styles in the different activities and the experiences of Shell as a global leader.

Project Overview

This project is about the development of a business strategy for an oil and gas organization wanting to attain leadership in the field and expand its business globally. The aim is to provide sufficient material to management graduates who are working on a project for the expansion of organizational activities to different parts of the globe. Shell is also having a placement period for the students for a hands-on experience.

Background

“Shell is a global group of energy and petrochemical companies. Our aim is to meet the energy needs of society, in ways that are economically, socially and environmentally viable, now and in the future” (Who we are, Shell).

The lessons learned by Shell is discussed below as:

1. Lessons learned from recruitment
2. Lessons learned on the essential necessity of exploring new oil sources
3. Lessons from senior manager structural change
4. Lessons of expected problems
5. Lessons in streamlining work
6. Lessons in Business Organisation
7. Lessons on business growth
8. Lessons on expansion
9. Lessons to Best practices
10. Innovations and Technologies evolved through learning
11. Lessons in environmental safety
12. Lessons learned from recruitment

Shell has changed its strategy to find more and different sources of energy. The key enablers are the human resources of the company; “highly skilled employees in highly demanded disciplines in engineering and finance” from India and China are required to be recruited (Singh and Santos, 2009). Shell values the lessons learned from previous experiences and encounters. The feedback has helped them design new strategies and implement them. Project managers and their teams upgrade their knowledge and experience and change their behaviors and attitudes. These efforts reduce errors within the organization and initiate an innovative attitude.

Considering the human capital as essential in a growing company, Shell has recruited highly skilled employees from India and China (Singh and Santos, 2009). In 2005, 2697 were recruited. The number went up to 5440 in 2006 whereas the aim had been to raise the number to 14000 new recruits by 2008. Shell faced the challenge of attracting and motivating recruits to select Shell over other multi-national companies. The recruitment market being lucrative, Shell had plenty of competition. The objective opted for was to recruit many people in a cost-effective manner.

A pioneering capability program called Shell exchange for non-marketing specialists was initiated; the program included development of “marketing skills, process creation and knowledge management” (Singh and Santos, 2009). Learning from the interviewing of business stakeholders inside and outside marketing and the analysis of issues in new marketing plans, 2 suggestions were identified. The best candidates would be attracted if a thrilling brand positioning was developed, something different to other companies. Benefits other than salary also needed to be considered; reducing the reliance on salary was the main idea. A motivating experience had to be created to retain the employees (Singh and Santos, 2009).

Developing that differentiated brand proposition so that it would remain in the hearts of all employees, current and future, was the challenge; widespread research, qualitative and quantitative, was done in six countries. The aim was to discover the peoples’ attitude towards the employer, Shell, the participants being from inside the company and outside it. This resulted in the Employer Value Proposition (EVP) with the theme of “Achieving more together” (Singh and Santos, 2009). It highlighted the expectations of the employees from the company Shell which occupied a strong leadership position in the energy market. The recruitment managers and marketeers were involved in a multi-channel programme to enhance their abilities to recruitment with the new policies of Shell (Singh and Santos, 2009). Virtual classrooms, conferences and brochures were used. A different EVP was generated for experienced professionals with a different target audience. Their different motivations and expectations were respected.

Novel communication campaigns were initiated after the EVPs were analysed. Recruitment tools and processes were refined and the messages to the candidates had guidelines for improved communications. A cost-effective method of advertisement was created in the “Ad Creation Tool”. Local markets were allowed to give finishing touches to the global campaign at a website. This ensured the continuous communication of new EVP to the candidates without much extra expenditure and actually sent better messages to the recruits.

How recruits are handled once they applied to Shell is a novel venture of Shell. A new coordinated candidate-centred approach among the marketing, operations, recruiting and line managers helps the candidate to reach the inner precincts of Shell in a highly motivated situation (Singh and Santos, 2009). Shell had earlier used a Shell-centric perspective which did not provide reassurance and motivation to recruits from their point of view and learnt that candidates were not impressed by it. The candidate’s journey came to be a “classic brand funnel approach”. Seeing things from a candidate’s viewpoint, the Candidate Journey model was instituted and it has become “the bedrock of business approach” in Shell (Singh and Santos, 2009). The HR team used the skills and abilities they evolved through experience in attending to candidate needs. The concept was new but the team was excellent.

The steps that were taken to motivate the candidate to be proud of a job in Shell included the following. The organizational structure placed candidates first on the priority list (Singh and Santos, 2009). Recruitment became a function; it placed strategic, structural, and cultural emphasis on it and the candidate experience was considered a collaborative experience of Shell. Roles and responsibilities of staff who are involved with various steps of the candidate’s journey are defined so that there is no chance of recruits being lost on the journey. A website was developed to help the employees involved in the candidate journey to become thorough with the process and the philosophy (Singh and Santos, 2009). Performance of the team and improvements were identified in the candidate experience survey.

One lesson learnt from research about recruitment was that the process of recruitment was slow in Shell between the first assessment and the receipt of an offer. (Singh and Santos, 2009). The eager candidates would be just swept up by other competitors. Earlier, the slowness was justified as many stakeholders were involved in the recruitment process. With the decision to improve the candidate experience, the journey was reduced to 39 days from 81 and candidate satisfaction obviously became better. The Shell xchange or capability programme included virtual classrooms for teaching marketing fundamentals. Every person in recruitment was able to understand the main principles of marketing and the candidate journey included “insight, segmentation, brand positioning, brand activation and marketing planning” (Singh and Santos, 2009). The employees involved were sent for training in the Marketing Society’ Marketing Leadership programme which turned out to be useful to them. Data analysis, prioritization and refining of activities were used to improve the current capability. The new and highly skilled were to be doubled in spite of strong competition and weak brand equity (Singh and Santos, 2009).

Learned Outcomes of new recruitment strategy

1. Massive growth was instituted and recruitment targets were beaten. 1.66 million candidates were hired.
2. The marketing budget and the cost per hire were much reduced by concentrating on the candidate and after the EVP was intimated (Singh and Santos, 2009).
3. Shell’s employer brand was improving in the eyes of candidates. They were beginning to perceive Shell above other competitors. They could recommend Shell to associates (Singh and Santos, 2009).
4. By increasing the marketing capabilities of employees, it was easier to transfer them into other jobs within the organization. Employees in recruitment marketing were equally comfortable with marketing products.
5. The employees were much motivated in bettering their marketing abilities.

Lessons learnt on the essential necessity of exploring new oil sources

The Royal Dutch Shell company has understood or “learnt” from its experiences that the energy demand can only be met with exploring “newer pastures” and newer technologies. It is meeting the energy challenge by developing advanced technologies to discover oil and gas in more remote or hostile sites (Singh and Santos, 2009). New techniques are being use to extend the lives of the existing fields. Unconventional sites are being found for increasing production and one significant example is the oil sands, wind projects being another. The cleaner-burning technique is being enhanced where liquefied natural gas and gas-to-liquid products are concerned. Supplying a great amount of biofuels, the Shell company has resorted to using straw and algae for making them. Assuring sustainability forms part of the agenda. Shell has several demonstration projects all over the world solely for carbon capture and storage. Research, development and the testing of various technologies and processes are done here (Singh and Santos, 2009).

Lessons from Senior manager structural change

One change for addressing the new issues of energy was the establishment of a new senior manager structure (Royal Dutch Shell, 2009). Operating performance and technology needed to be at the sharpest: this triggered the changes in management roles and responsibilities. The aim was to increase accountability and shoot performance to heights where the delivery of innovative projects and technologies are concerned (Royal Dutch Shell, 2009). Mr. Peter Voser, who is the new CEO, commented that changes would sharpen the focus. Acceleration of plans was to control complexity, reduce the corporate overheads, limit costs with faster decision-making and delivery.

Lessons of expected problems

The management is aware that the future operations of the Royal Dutch Shell depends on various factors which could change or present as new problems. They are:

1. Fluctuations of prices in crude oil or natural gas.
2. The variation in demand of products
3. Fluctuations of the currency
4. Results of drilling and production
5. Estimates of reserves.
6. Loss of market share and heavy industrial competition
7. environmental and physical risks
8. risks in acquisition of properties and targets and successful completion of transactions
9. developments in legislations, regulatory and fiscal aspects. Litigations also could occur.
10. economic situations and financial market conditions.
11. political risks.

Lessons in streamlining work

Three organisations in Shell; Exploration and Production, Gas and Power and Oil Sands manage upstream activities which have two businesses: Upstream Americas (in North and South America) and Upstream International( for the rest of the world). Marvin Odum became the Executive Director for Upstream Americas (Royal Dutch Shell, 2009). He had previously been Executive Vice-President for EP Americas. Malcolm Brinded who was previously the Executive Vice president for Exploration and Production Technology was made the Executive Director of the Upstream International. Wind was also included in Upstream (Royal Dutch Shell, 2009). Downstream business which includes Refining, Marketing and Chemicals was expanded to include Trading and Alternative Energy Activities. Mark Williams is the Director. Experience has taught Shell that their executives are equally experienced with the marketing knowledge and its latest aspects and can be placed in different positions in their various businesses with no qualms about a misfit.

Shell’s major project delivery is ensured of the best technical services and technology in Upstream and Downstream through the Projects and Technology division. Safety and environment performance is also handled in this business. The Director is Mathias Bichsel.

The Executive Committee has been reorganized (Royal Dutch Shell, 2009). Simon Henry, the Chief Financial Officer and Hugh Mitchell, Chief Human Resources and Corporate officer (a retitled position) are both involved with the reallocation of activities. Beat Hess continues as General Counsel.

The aim of all these senior managerial changes is to simplify the activities and improve efficiency. The Chief Executive, Mr. Jeroen van der Veer, believes that this senior manager structure change is only temporary and that efficiency can be improved only with more frequent innovative changes in a continuously competitive world. The industry and challenges keep changing: today they are “high costs, volatile energy prices and competition for new products” (Royal Dutch Shell, 2009). Competitive positions can be maintained only by continuously improving momentum through raising the pace of strategy execution (Singh and Santos, 2009).

Shell’s strategy

“More Upstream, Profitable Downstream”. Delivery and growth are the foci. The business value is created and risks of operations and finances are reduced through contribution to sustainable development. The core of the strategy is on the technology and innovation (Our strategy, Shell).

Lessons in Business Organisation

Upstream Americas, Upstream International, Downstream and Projects and Technology are the various businesses (Our business, Shell). The Upstream International deals with business outside America: oil and gas recovery. Joint venture partnerships with national oil companies are the business strategy in most areas. Liquefaction of gas is another business and the technology used is an active one. The Upstream Americas does the same business across the Americas. It includes the Athabasca Oil Sands Project in Alberta in Western Canada where bitumen is extracted from oil sands and converted into synthetic crudes. The wind power business is also included in Upstream Americas (Our business, Shell).

Downstream business is involved with the distribution of crude oil and oil products to all parts of the world. The business “refines, supplies, trades and ships” crude oil apart from manufacture and marketing of a whole array of products. Products are lubricants, bitumen and LPG for domestic use, transport and industrial use (Our business, Shell). Petrochemicals are produced for industrial customers. The textile industry, medical suppliers and computer manufacturers purchase the raw materials for the plastics, coatings and detergents. The other activities which are included in Downstream are biofuels, solar power and carbon dioxide management in all the businesses of Shell (Our business, Shell). Shell has donned the garb of a world contender and has trading activities in all the main energy markets of the world. An added distinction is that the world’s largest fleets of carriers of LNG (liquefied natural gas) and oil tankers belong to Shell.

Lessons on business growth

Shell aims to become a leading oil and sands operator with its focus on “operational excellence and profitable growth” (Oil Sands Fact Book, 2009). Management of business has included the optimal operations at facilities already present. Building on the capabilities and experiences of the human resources and resorting to principles of health, safety, security, environment and sustainable development, Shell is ready for further improvement. In the second half of 2008, unfavourable costs and poor economics due to low prices of oil, the company went through a difficult phase.

AOSP 1 is the largest construction project for oil and gas in Canada (Oil Sands Fact Book, 2009). It has 5000 skilled building trade members and is the largest trade union projects in Canada. Coming within the top ten oil and gas constructions, it has a maximum of 10000 workers at peak work. Being the largest trainers of skilled workers, Shell has changed the lives of many employees.

Lessons on expansion

Shell and the AOSP Expansion 1 have been permitted to produce 470000 barrels per day on mineable bitumen (Oil Sands Fact Book, 2009). Shell hopes to increase this figure to 777000 soon. The method allows the process at Scotford to add hydrogen so that a gain of volume results. This method is good in that 100 barrels of bitumen give 100 barrels of crude oil daily, carbon waste is not obtained and suphur dioxide emissions are low.

AOSP 1 will be increasing the number of barrels per day from 100000 barrels to 255000 by 2010 or 2011. Scotford Upgrader 2 is being built next to the Upgrader 1. Regulations, market conditions, final project costs and discussion with key stakeholders will influence the outcome in Upgrader 2 (Oil Sands Fact Book, 2009).

Newer expansions are being planned for Jackpine mine, Pierre River Mine, with debottlenecking. The Athabasca business operation in Canada has 1000 employees and includes some 1000 employees of the Muskeg River Mine (Oil Sands Fact Book, 2009). In 2009, Shell Canada Energy became operators of the Jackpine and Muskeg River Mine. The Albian Sands team has merged under Shell Canada Energy office on January 2, 2010.

Lessons to Best practices

Shell had invested in Athabasca 50 years ago. Now best practices, learnt and evolved from earlier practices of predecessors, are used in Athabasca. The following are tried and tested methods which have evolved over the years (Oil Sands Fact Book, 2009)

1. The hydrogen addition technology at Scotford upgrader has the capacity to produce 100 barrels of crude oil from 100 barrels of bitumen. No coke waste product is obtained.
2. AOSP Expansion 1 is a high-temperature froth treatment which decreases energy use by 10% when compared to present techniques. This method has the advantage of greatly reducing 40000 Greenhouse gas emissions per year (Oil Sands Fact Book, 2009)
3. Sulphur recovery is being done as per regulations through advanced sulphur recovery systems. Though production increases by 100000 barrels per day, the carbon dioxide emissions are actually reduced by 10%.
4. A carbon capture and storage project called Quest is being evaluated by Shell for establishment at Scotford.
5. A tailings pilot plant has been installed at Scotford for producing trafficable tailings which help to support the ongoing reclamation

Innovations and Technologies evolved through learning

1. Shell Enhance Froth Treatment, an innovative technology has decreased costs and improved energy efficiency in oil sands production of oil. This treatment allows the use of smaller equipment, reduced water consumption and reduced energy for production. The new technique helps to stop the release of greenhouse gas emissions up to 40000 tonnes.
2. Quest, the new Carbon Capture and Storage project, allows the compression of high quality carbon dioxide for cost-effective transportation through pipelines for storage in deep geological areas. It could be used later.
3. Scotford Upgrader allows 99 % sulphur removal.
4. The carbon dioxide is far better than that produced in other companies.
5. Shell has received accreditation of ISO 14001 for environmental management.

Lessons in environmental safety

Shell reports on various aspects including tailings, air emissions, groundwater monitoring, initiatives in environmental safeguard, quality of river water, waste management, wetland research, conservation and reclamation and erosion control.

Shell’s enterprising projects

Shell has been the greatest integrated export-oriented oil and gas project. Now it has decided to help meet Asia’s demand for petrochemicals. Its major projects are elaborated below.

Sakhalin II

The world’s largest project of Shell is in Russia. Russia’ first off shore project Sakhalin II is Shell’s project. It happens to be “one of the world’s largest integrated, export-oriented oil and gas project” (Major projects, Shell). By 2010 its full capacity will be providing an additional 5% of the world’s liquid natural gas (LNG) capacity. 8% of the expected requirement of gas needs of Japan and 5 % of that of Korea is expected to be satisfied through this Russian project. The Lunskoye platform in the sub-Arctic sea of Okhotsk was selected as the site for the gas well and the production started in March 2009. The full capacity of 9.6 million tonnes is expected in 2010. One problem is that temperatures here can drop to -45 degrees Celsius. Russia has become an exporter of LNG for the first time and Japan has bought it for the first time from Russia.

Shell Eastern Petrochemicals Complex

The largest petrochemical projects, Shell Eastern Petrochemicals Complex, in Singapore, will be enabling Shell to have a leading position in Asian markets where the petrochemical markets are expanding (Major projects, Shell). This facility is 100% owned by Shell. Bukom Island has the 800,000-tonnes-a-year ethylene cracker and butadiene extraction unit while Jurong Island has two plants: the 750,000 tonnes-a-year MEG plant and a butadiene plant. Feedstock for the new ethylene cracker is to be obtained from the refinery already in Bukom Island.

Port Arthur Refinery

The Port Arthur Refinery in Texas which is partially owned by Shell is expanding its capacity of crude oil in the refinery (Major projects, Shell). Motiva Enterprises which is running the show is 50% owned by Shell and the remaining by Saudi Aramco. Six hundred thousand barrels of oil are expected this year up from the 325000 barrels now being obtained. The expansion will make this refinery the largest in the US. The local community is helping in the expansion and a large number of jobs would be created here during the expansion to the tune of 4500 construction jobs and 300 permanent jobs. Shell is providing branded fuels gasoline, diesel and aviation fuel in one of the largest networks (Major projects, Shell).

Qatargas 4

Shell has made an entry into Qatar’s LNG sector through Qatargas 4. This is the seventh project of Shell for LNG supply projects expected to yield 7.8 million tonnes per annum of LNG from a single train. Clean-burning natural gas is obtained here (Major projects, Shell). Tomorrows transport fuels and lubricants would be mostly made from clean-burning gas. Three billion barrels-of-oil-equivalent gas from North Field will be processed here over a lifetime, the project being a joint effort with Qatar Petroleum. 40000 workers from 50 nations are working on a building about the size of Central Park in New York. It will produce fuel for 160000 cars per day and oil each year to make lubricants for 225 million cars (Major projects, Shell).

Having been a leader for the past 30 years for deepwater exploration and production, Shell has set up an ambitious and challenging deep water project in Perdido in the Gulf of Mexico (Major projects, Shell). Shell has 35% interest in the project and operates it while Chevron and BP also have interests. The depth of this project comes to 2380 metres which is why it has been described as the deepest wide vertical spar. The production is expected to start in early 2010. The 555 feet cylindrical spar was made in Finland, set off for Texas in May 2008 and reached it in August 2008. It has been secured to the floor of the sea and the drilling and production platform has been installed on it. Production wells are being drilled into place. Shell remembers its social responsibility and has contributed generously for community rehabilitation after Hurricane Katrina. It has social and environmental responsibility in the Gulf of Mexico due to its good relations with New Orleans (Major projects, Shell).

Fields in extremely deep water off the coast of Brazil have been selected for a new project. The project is named Parque das Conchas (Major projects, Shell). The situation is challenging for the establishment of a project here. However the challenges have been overcome and the project is on. This project is rare in that all technology is occurring at subsea level. The drilling programme uses a floating-rig surface (Major projects, Shell). In Brazil, Shell has participated in the Humpback Whales Migration project. Shell operations have always been showing environmental and social responsibility.

The Athabasca Oil Sands Project

Canadian oil sands have a potential of 173 billion barrels of oil recoverable using modern technologies (Oil Sands Fact Book, 2009). More potential is expected which cannot be gauged now. Federal and provincial government regulations have assisted in preserving these oil sands. All legislation for air, water, land, wildlife and socio-economic impacts have saved the oil sands and maintained their precious nature.

Extracting bitumen from oil sands is a new technique of securing synthetic oil and it is used at Athabasca Oil Sands Project. The oil sands are found in northern Alberta at Athabasca, Cold Lake and Peace River (Oil Sands Fact Book, 2009). Technologies used for recovering the bitumen deposits depend on the depth at which they are found. Shell Canada energy has 60 % ownership of the Athabasca oil sands project while Chevron and Marathon Oil Sands have 20% each. 155000 barrels of oil are expected per day. Shell has interests in other oil sand projects at Peace River in situ, Cold Lake in situ and Grosmont and Woodenhouse in situ (Oil Sands Fact Book, 2009).

When bitumen products are situated within 75 metres from the surface, open pit mines are used to get the bitumen deposits up to the surface. The sand is dug and treated with warm water to separate the sand from the bitumen (Oil Sands Fact Book, 2009). The slurry is treated for impurities by using paraffinic solvent. It is then transported via pipeline to the Scotford Upgrader where the paraffinic solvent is recovered and reused. Extraction from sands is 90% efficient while efficiency is only 35 % in the conventional method.

Water management is an achievement for Shell. The extraction of bitumen from oil sands is a water-based process. The Athabasca river is the source of water for the processes. Recycling helps to reduce water usage. Less than 3% of the annual river flow will be used for the extraction of bitumen. The river does not have dams and so seasonal variations are not expected. In low flow conditions, lesser water is withdrawn. Multiple stakeholders decide together how to protect the Athabasca river.

Project purpose

The purpose of the project is to examine the application of lessons learnt reviews in the oil and gas projects- case of shell.

Project Aim

The importance and value of communicating and sharing lessons learnt from projects should not be neglected in organisation. Lessons learnt are a sort of feedback that essentially allows an organisation to improve the way it runs, the project team to upgrade learning and development as well as the project manager to avoid repeating the same errors in similar and future projects. The aim of this project is to look at lesson- learnt application in oil and gas projects, especially in the case of Shell.

Project Objectives

1. To explore the application of lesson learnt reviews within shell and their existence in sonatrach’s project management methodology.
2. To determine the benefits from using effective lessons learnt reviews for shell.
3. To propose a strategy for applying lessons learnt reviews in shell’s similar projects.

Key questions

1. Does shell applies lesson learnt reviews in their projects?
2. What value would apply lessons learnt reviews bring to shell?
3. What would be the benefits of lessons learnt for shell’s future projects?
4. What would be the best strategy for applying lessons learnt reviews in shell?
5. Would shell need to hire an external team to establish lessons learnt reviews or does shell have the competence to do it?
6. What criteria would ensure a successful implementation of the strategy proposed?
7. How much would this the implementation of the strategy cost to shell?

Learning outcomes

Shell has the distinction of prompt and timely delivery of major products due to the efforts of its Products and Technology Division (Our business, Shell). Technology solutions are created in the Research and Innovation section. These services are provided to all sections of Shell in Upstream and Downstream activities (Our business, Shell). The research, advanced exploration and production information is used by third parties too. Overseeing the safety and environment performance is another of the functions of this division. Procurement processes for the whole of Shell are streamlined alongside.

Earnings in 2008 were affected by greater overall operating costs which were dependent on the Albertan economy, lower bitumen production volumes, and a decline in oil prices (Oil Sands Fact Book, 2009). In 2007, the earnings were less due to an unplanned shutdown and a fire at the Upgrader. A gain had been obtained due to a tax rate change. There was a reduction in oil prices when royalty rate increased back to 1% of gross revenue for that year. Oil price rose in 2008 and the operating cost including energy costs was $38.15 but the realised price was $ 88.98 (Oil Sands Fact Book, 2009).

Production was reduced in 2008 due to lower grade of ore, the mine tailings plan, mine maintenance, bad weather, unexpected maintenance, and an unexpected shutdown (Oil Sands Fact Book, 2009). More investment was made in 2008, $3.1billion due to the first expansion phase of the AOSP. Production would be increased by 100000 barrels per day where the Shell share would have been 60000. Investments were also made on tailings management and efficiencies for the operations. Expansions 2 and 3 which were planned had to be postponed till conditions in the market improved. Production growth is being maintained. Efficiency and performance are also enhanced (Oil Sands Fact Book, 2009). Continuous assessment is being done for growth opportunities and expansion.

Conclusion

Shell, a global oil and gas business leader, understands that the production will never meet the demand from the way the world is responding to the energy crisis. New sustainable sources of energy are being explored and responsible energy solutions are being investigated. Our future generations will need tremendous energy if economic growth is to occur. The present sources of oil and natural gas will not go beyond 2015. Energy will have to be used efficiently and other sources of energy will have to be researched into and tapped as is possible. Solar energy, wind and biofuels will have to be used. Carbon dioxide emission which accounts for most of the greenhouse emissions must be controlled. Government policies must address the greenhouse gas emissions on a war footing. Vehicles could increase fuel efficiency when electric cars take to the roads. Industries are capturing carbon dioxide and storing it as a method to increase energy efficiency. This project is about the development of a business strategy for an oil and gas organization wanting to attain leadership in the field and expand its business globally. The prevalent changes that are occurring in China and India where the economic development is passing through an energy-intensive phase enhances the need for extra energy. The various lessons learnt for the different situations in an organization are discussed: recruitment, its outcomes and a new strategy; exploration of new sites for oil, managerial structural changes, expected problems, streamlining work, organization of business, expansion of business, business growth, innovations and technologies, environmental safety and best practices evolved after experience. The outcomes and the changes necessary to increase production are also discussed. Shell’s new major projects are elaborated to understand the level of thinking of the company. How Shell has built itself up from the experiences of the past 50 years and the strategies used are interesting eye-openers to all management students and other entrepreneurs. The change of strategy for drilling of oil in oil fields and details of how Shell has pioneered the extraction of bitumen for crude oil from oil sands as in Alberta, Canada are new information to many. The respect for the safety of the environment and how Shell chips in with its’ “dollar might” for local environmental safety reveals the sincerity and thoughtfulness of the gesture for posterity’s sake.

References

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Our Strategy, 2010. Web.

Major projects, 2010. Web.

Royal Dutch Shell Company, (2009). Royal Dutch Shell announces new senior manager structure. Web.

Shell, (2009). Dated 8/6/09. Retrieved on 28/1/10. No plans to cut N.O. jobs, leadership New Orleans City Business (LA). Dolan Media.

Shell and the Canadian Oil Sands (2009), Web.

Singh, N. & Santos, A.M. (2009). How Shell recruited more for less. Market Leader, Quarter 4, World Advertising Research Center Limited.

The energy challenge, 2010. Web.

Who we are, 2010. Web.