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Royal Dutch Shell

2007 Schools Wikipedia Selection. Related subjects: Companies

   Royal Dutch Shell PLC
       Type     Public

                ( LSE: RDSA / RDSB)
                ( NYSE: RDS.A / RDS.B)
     Founded    1907
   Headquarters The Hague, The Netherlands Flag of Netherlands
    Key people  Jeroen van der Veer, CEO
                Jorma Ollila, Chairman
     Industry   Oil and gas
     Products   Oil
                Natural gas
                Petrochemicals
     Revenue    $318.845 billionUSD(2006)
    Net income  $26.311 billionUSD(2006)
    Employees   112,000
     Website    www.shell.com

   Royal Dutch Shell PLC is a multinational oil company (" oil major") of
   British and Dutch origins. It is one of the largest private sector
   energy corporations 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 head offices
   (also known as the "central offices") are in The Hague and London (
   Shell Centre) .

   The company's main business is the exploration for and the production,
   processing, transportation and marketing of hydrocarbons (oil and 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
   the Netherlands, and its primary listings on the London Stock Exchange
   and Euronext Amsterdam (only "A" shares are part of the AEX index).

   Shell's revenues of $318.8 billion in 2006 made it the second-largest
   corporation in the world by revenues behind only ExxonMobil. Its 2006
   gross profits of $26 billion made it the world's second most profitable
   company, after ExxonMobil and before BP. Forbes Global 2000 in 2006
   ranked Shell the seventh largest company in the world. It operates in
   over 140 countries. In the United States, its subsidiary is Shell Oil
   Company, with headquarters in Houston, Texas, and is one of Shell's
   largest businesses.

History

   The Royal Dutch/Shell Group of companies 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 - a move largely driven by the need to compete globally with
   the then monopolistic American oil company, Standard Oil. The terms of
   the merger gave 60% of the new Group to the Dutch arm and 40% to the
   British. To celebrate its centenary in 2007 Shell launched a
   scholarship fund

   Royal Dutch Petroleum Company was a Dutch company founded in 1890 by
   Jean Baptiste August Kessler, along with Henri Deterding and Hugo
   Loudon, when a Royal charter was granted by Dutch king Willem III to a
   small oil exploration company known as "Royal Dutch Company for the
   Exploration of Petroleum Wells in the Dutch Indies".

   The “Shell” Transport and Trading Company (the quotation marks are
   official) was a British company, founded in 1897 by Marcus Samuel and
   his brother Samuel Samuel.

   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 1931, 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, a company that traded until the brands
   separated in 1975.
   Shell Centre building in London, UK
   Shell Centre building in London, UK

   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 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.

   Under the old capital structure, Shell's ADRs were traded on the New
   York Stock Exchange under RD (Royal Dutch) and SC (Shell).

Origin of the name and logo

   .

   The origin of the brand name “Shell” is linked to the origins of The
   "Shell" Transport and Trading Company. 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 realised there was potential in
   exporting lamp oil from the region and commissioned the world's first
   purpose built oil tanker, the Murex, to enter this market. By 1907 the
   company had a fleet of oil tankers. The Shell emblem is one of the most
   familiar commercial symbols in the world. Known as the "Pecten" after
   the sea shell, the giant scallop, Pecten maximus, on which its design
   is based, the current version of the logo was designed by Raymond Loewy
   and introduced in 1971.

Businesses

   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

   The Upstream provides 2/3rds of Shell's revenues.
   The Upstream provides 2/3rds of Shell's revenues.

   Shell has five core businesses: Exploration and Production ( the
   "Upstream"), Gas and Power, Refining and Marketing ( the "Downstream"),
   Chemicals, and Trading/Shipping, and operates in more than 140
   countries.
   Shell Oil Depot in Kowloon Hong Kong c1988
   Shell Oil Depot in Kowloon Hong Kong c1988

   Shell’s primary business was, and 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 Group 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. Whilst in the past the vertically integrated business model
   gave significant economies of scale and provided Shell with the
   opportunity to establish barriers to entry both geographically and on a
   more global scale this has been less a possibility in more recent
   times. As a result although the vertical integration remains there is
   much less interdependence between the businesses and each is now
   charged with being a self-supporting independent business without cross
   subsidies from other parts of the business chain. Shell's oil and gas
   business is increasingly an assembly of independent and globally
   managed business segments each of which must be profitable in its own
   right. This can be a source of criticism as some consumers see huge
   profits accruing from upstream income whilst price rises instituted by
   the independent downstream business anger motorists and other
   consumers.
   A Shell oil refinery in Martinez, California.
   A Shell oil refinery in Martinez, California.
   A Shell Gas Station near Lost Hills, California
   A Shell Gas Station near Lost Hills, California

   The "Downstream" (which now also includes the Chemicals business)
   generates 1/3rd of Shell's profits worldwide and is most recognised by
   its global networks of more than 40,000 petrol stations and its 47 Oil
   refineries.

Chemicals

   The chemicals business, involving the production and marketing of a
   range of hydrocarbon-derived chemical products, was a logical step
   downstream from the processing of crude oil in the refinery. Some of
   the chemicals diversifications, e.g. agrichemicals, have been disposed
   of following major restructuring in Shell Chemicals over the past ten
   years, but there is still a large core chemicals business within the
   company.

Diversification

   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 disposed of.

   In recent years Shell has moved tentatively into alternative energy and
   there is now an embryonic " Renewables" business which 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. Shell is, however, one of the
   world's largest investors in several renewables fields, such as solar
   and wind . In 2004, Shell ranked fourth worldwide in terms of sales of
   solar products . Shell is also one of the world's largest investors in
   wind energy - Shell WindEnergy is to have a major share in the world's
   largest wind farm, the London Array (1GW) .

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

Business priorities

   Shell's principal focus remains on its core business activities. The
   strategy is described as being to invest in “more upstream and
   profitable downstream" . Capital investments in 2006 totalled $24.896
   billion of which just $418 million (< 2%) was in businesses (including
   Renewables) other than the core Oil, Gas and Chemicals sectors. .

Ownership

   Prior to unification on 20 July 2005, the group was a dual listed
   company. The two holding companies were the Royal Dutch Petroleum
   Company of the Netherlands and the Shell Transport and Trading Company
   plc of the United Kingdom. These two companies jointly owned all the
   operating companies in the group, although some (e.g. Shell Canada)
   also have local shareholders and are traded on local stock markets. The
   Shell interest in subsidiaries was always divided 60/40 in favour of
   Royal Dutch. In many cases, subsidiary companies are held in
   partnership with other companies or governments.

   Even now, likely for tax reasons, the company's shares are divided into
   two classes, A and B, representing the former Royal Dutch and Shell
   shares respectively.

   Although to meet company law in all countries, there were executive and
   non-executive nominated directors of both Royal Dutch and Shell
   Transport and Trading, the Group had in fact been run by an executive
   body called the "Committee of Managing Directors" (CMD), whose members
   were the (executive) Managing Directors of the two parent companies.

Management

   Executive Committee:
     * Jeroen van der Veer, Chief Executive of Royal Dutch Shell,
     * Linda Cook, Executive Director Gas & Power
     * Malcolm Brinded, Executive Director Exploration & Production,
     * Peter Voser, Chief Financial Officer
     * Rob Routs, Executive Director Downstream Oil Products & Chemicals

   On 4 August 2005, the board of directors of Royal Dutch Shell plc
   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.

   In March 2007 it was announced that Mr. 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. . He will be the first modern
   executive director of Shell to stay in office beyond the age of 60.

Corporate responsibility and Reputation

   The risks attached to much of the business operations of Energy/Oil
   companies, such as Shell, are such that their operations are subject to
   particular scrutiny by stakeholders - especially environmental and
   human rights groups and local communities. Over the years Shell has
   been criticised in respect of a number of its operations. These have
   included its businesses in South Africa and Nigeria (especially in
   relation to public unrest of the Ogoni and the execution of Ken
   Saro-Wiwa) as well as its attitude to the environment (e.g. the
   disposal of the Brent Spar production platform in Britain).

   Shell’s response to the problems of Brent Spar and Nigeria was to
   launch an internal review of processes and an external communications
   campaign to persuade stakeholders of their commitment to Corporate
   Social Responsibility. In response to criticism of its track record on
   environmental matters Shell published an unequivocal commitment to
   Sustainable Development, supported by executive speeches reinforcing
   this commitment . At the same time Shell was one of the first companies
   to leave the Global Climate Coalition . Shell Chairman Philip Watts
   gave a 2003 speech in Houston calling for skeptics to get off the fence
   and take action "before it is too late". 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. "Our job is to respond in a
   positive way to a regulatory environment that has to be determined by
   government ... given the urgency, we have to start now."

   Shell's commitment to Corporate Social Responsibility also includes its
   well- respected LiveWIRE Programme. This programme has over 21 years
   experience of encouraging young people to start and develop their own
   businesses in the UK and elsewhere in the world (26 countries)

   Shell has said that it is committed to listening to stakeholders: "Your
   opinions are important to us and we want to listen and respond as best
   we can to your comments and concerns". This included the setting up of
   a global internet based facility for whistleblowers to report alleged
   violations of the law or of Shell General Business Principles (the
   SGBP); a voluntary code of ethics pledging transparency, integrity and
   honesty in all of Shell’s business dealings. Whistleblowers are asked
   to provide identity details but anonymous reports are also accepted.
   The Helpline is available to “customers, suppliers, partners, advisers
   and employees of Shell”.

Corporate communications

   Much of Shell's reputation building advertising concentrated on the
   embryonic Renewables business despite the fact that this remains a very
   small business compared with the core hydrocarbons extraction,
   processing and marketing operations. The corporate advertising campaign
   was (like a similar campaign by BP) described as “ Greenwash” by some
   NGO critics , but praised by other commentators . In response to
   questions which focused on the small percentage of its capital
   investment programme that was directed towards alternative energy Shell
   said that it would be "pointless" to say exactly how much of capital
   expenditure was going into renewable energy schemes. CEO Jeroen van der
   Veer indicated that the investment in renewables was small, saying it
   would be "throwing money away" to invest in alternative energy projects
   that were noncommercial and people could not afford to buy .

Oil Reserves

   Shortly after Shell's well-funded initiatives designed to enhance its
   reputation with key stakeholders there came, in 2004, a disclosure
   about the overstatement of oil reserves which was seen as the most
   serious crisis encountered in the Group’s nearly 100 years of history.
   This crisis led to respected publications such as “ The Economist”
   asking whether Shell could be seen as “another Enron”. Berger &
   Montague, an American law firm then suing Shell said that an “enormous”
   deception had harmed shareholders and “severely overstated” the firm's
   market value “recklessly violated accounting rules and guidelines,
   which resulted in an enormous and shocking overstatement of oil and gas
   reserves.” The crisis led to the dismissal of the Group’s CEO Philip
   Watts and prompted a major reorganisation of the Shell Group.

Other recent problems

   Royal Dutch Shell's image suffered another blow when problems arose
   with 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

Combination of Royal Dutch and Shell

   Shell Research and Technology Centre Amsterdam (SRTCA)
   Shell Research and Technology Centre Amsterdam (SRTCA)

   On 28 October 2004, the company announced its proposal to merge Royal
   Dutch and "Shell" Transport and Trading into one entity, Royal Dutch
   Shell plc, to be "incorporated in the UK but headquartered and tax
   resident in the Netherlands". The new parent company's primary listing
   will be on the London Stock Exchange. On 28 June 2005 investors in both
   Shell Transport and Trading and Royal Dutch approved, at their Annual
   General Meetings, plans to merge the Group's dual-ownership structure
   and create a single company worth £120bn ($219bn). The new company now
   operates in 140 countries and employs around 122,000 people.

   The type of business structure now to be created was not legally
   possible in 1907 when the Group was established, and the unique form of
   organisation that was then adopted by Shell, although durable, had come
   under criticism in recent years. Some critics thought that as the two
   parent companies had separate boards, with separate memberships, this
   meant that there was a certain amount of (undesirable) independence of
   each of the companies from the other. Others felt that the real power
   in Shell lay not with the two parent company boards at all but with the
   "Committee of Managing Directors" (CMD), which had no legal status but
   nevertheless took all the key operational decisions. The new
   organisation structure follows a more conventional business model (e.g.
   in line with most other private sector oil companies) and most
   commentators have commented favourably on the change, which they
   believe will establish a more transparent and accountable corporation.
   The CMD is abolished under this new structure, board meetings will be
   more executive in character, and there will (now) only be one "Shell"
   AGM each year.

Corporate Governance

   Traditionally Shell was a heavily decentralised business worldwide
   (especially in the downstream) with operating 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
   detailed 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, Oman etc.

   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, bitumen
   etc. The custom and practice in Shell was that these businesses were
   essentially local in character 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 and today virtually all of Shell’s operations in all
   of its 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 in all sectors.
   London is the headquarters of the downstream and other businesses and
   services whilst the management of the upstream business is the primary
   activity in the offices in The Hague.

   Through most of Shell’s history it’s 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.
   This also changed in the 1990s when Shell firstly bought out the shares
   in Shell Oil that they did not own and then took a more hands on
   approach in the running of the business. In Canada (also hitherto very
   independent) Shell intends to purchase the shares in Shell Canada that
   it does not own in order to apply the new global business model to its
   Canadian operations following the American model.

Profit announcement

   On 2 February 2006 Shell released details of its 2005 financial
   performance. Profits broke the record for the greatest annual profit
   for a British (or Dutch) company, with a total of $26.261 billion, up
   by a third from the previous year. Some critics of Shell charged that
   the rise in profits was directly attributable to increases in pump
   prices of petrol and diesel accusing Shell of profiteering at the
   expense of motorists. In fact the profits of Shell and other oil majors
   are always, in the short term, linked in a linear way to changes in the
   price of Crude Oil. When Crude Oil prices rise the upstream
   (production) margin increase. The downstream (refining and marketing)
   margin is largely insensitive to the actual price level.

Merger speculation

   Whilst other multinational oil companies indulged in mega mergers in
   the late 1990s early 2000s (BP with Amoco; Exxon with Mobil; Chevron
   with Texaco; Total with Elf and Petrofina) Shell stayed out of the
   fray. There has, however, continued to be speculation that
   merger/takeover opportunities have been under consideration at the top
   of Shell. The most favoured idea by some commentators is a major merger
   with BP which would create the world’s largest company. Another oft
   mooted option would be for Shell to take over the BG Group - something
   that was close to happening in the 1990s

Trivia

     * British stand-up comedian Jimmy Carr used to work in management for
       the firm, before taking up a redundancy payment, and a career
       change. On the hit BBC show Top Gear Jeremy Clarkson pointed out
       that Royal Dutch Shell made £800,000 an hour, profit. Jimmy Carr
       expressed surprise saying "An hour? That's more than I make in a
       week!"
     * British Conservative politician William Hague worked for a time for
       Shell on assignment from the Management consultants McKinsey.
     * The leader of the Dutch Labour Party (PvdA) and minister of Finance
       of The Netherlands Wouter Bos worked for Shell.
     * Paul de Krom, Member of the lower house of Dutch parliament and of
       the VVD ( People's Party for Freedom and Democracy) worked for
       Shell
     * Enterprise software company Kalido was originally created and then
       spun-out of Shell.
     * 88 year old war veteran and Shell critic, Alfred Donovan, beat
       Shell to the domain name Royaldutchshellplc.com when the merged
       company Royal Dutch Shell Plc was formed.

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