Edited from: strategy and website
Shell states that 2008 was “one of extraordinary global economic turbulence”, with the economic downturn expected to “bite deeper” in 2009. “As Shell, we depend on making the right long-term investments against a range of business assumptions. Such market volatility tests our resolve – and our strategy”, says chairman, Jorma Ollila.
Its downstream businesses of oil products and chemicals experienced a particularly tough latter part of the year in 2008 with demand sliding as a result of the global economic crisis.
Based on its strategy of “more upstream, profitable downstream” will continue to remain a key focus in 2009 and beyond. The company believes that when the economic crisis passes, global demand for energy will continue upward as populations grow and living standards rise; supplies of easy-to-access oil will struggle to keep pace with demand; and an increasing use of fossil fuels will drive up emissions of carbon dioxide (CO2).
The global long-term challenge for Shell remains on how to produce more energy and less CO2. Shell will work to improve energy efficiency at its refineries and chemicals plants, and it will develop more efficient fuels and lubricants.
Technology remains central to Shell’s efforts to produce more oil and gas and to turn them into everyday products. The company’s spending on research and development has also increased as it develops new technologies to unlock difficult resources, such as oil sands too deep to mine and gas heavily contaminated with sulphur. It is also looking at biofuels as a fuel for the future.
Looking ahead, the company expects a net capital investment (net capital investment represents capital investment, less divestment proceeds) of $31–32bn in 2009. The credit crisis and volatile commodity prices that emerged in the second half of 2008 affected many aspects of the business environment.
Many of these effects will probably continue or increase with potential impact on Shell’s partners, customers and suppliers. The company will continue to manage its exposures as well as costs carefully while maintaining its long-term strategy.
Shell chemicals strategy
Shell chemicals companies have been following a consistent strategy since the late 1990s, delivering bulk petrochemicals to large industrial customers, through simpler organisational structures and at the lowest total delivered cost.
While new market opportunities lie in the Asia Pacific region, demand in the established markets of Europe and North America remains considerable.
It will continue to invest and maximising its key assets, with a particular emphasis on strengthening reliability, and taking advantage of the stronger links between chemical manufacturing and oil refining operations.
In Asia Pacific and the Middle East its sights are set on growth. A joint share in the $4.3bn complex at Daya Bay in south east China gives Shell a major financial stake in the Chinese market.
Further expansion in the region is targeted with the expectation that, by 2010, 35% of all capital assets will be in Asia Pacific and the Middle East.
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The Royal Dutch/Shell group of companies produces, processes and delivers energy in more than 110 countries and employs more than 104,000 people. Shell is organised into five core businesses: Exploration & Production; Oil Products; Gas & Power; Chemicals; and Other Industry Segments.
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