Royal Dutch Shell is predominantly an oil and gas company and as the vast majority of energy consumed is derived from hydrocarbons is at the heart of attempts to meet the energy challenge – satisfying the need for energy security whilst reducing the environmental impact of energy production. With a history going back to 1833, the company, commonly known as Shell, is the world’s second-largest energy company with operations in over 90 countries in oil, gas, and increasingly biofuel businesses. It has been at the forefront of much of the development of the energy sector, has had a few reputational challenges over the years, but is now taking a lead in shifting the supply of energy for the 21st Century towards a more sustainable and environmentally sensitive mix. Although far from being zero carbon, due to some major strategic moves in selecting future growth platforms, of all the international oil companies, Shell has moved to the forefront of bringing about a lower carbon world.
In an industry where operations last for decades, Shell has established a reputation for long term planning based upon scenarios- a specific foresight approach that develops plausible alternative futures and helps organisations prepare for uncertain futures. Shell Scenarios over the years have highlighted such things as the shift in power to OPEC, the emergence of sustainability as a business issue, the potential of biofuels, the impact of carbon, the increasing supply stresses on conventional oil and the potential of a shift to gas.
Alongside the culture and practice of using foresight, which is unquestionably an area where Shell leads the pack, there are three other capability areas where the company believes it has an edge over its peers. These are:
- Technology – development and application of technology to access resources and get products to market.
- Scale – large-scale projects requiring engineering, project management, and financial skills.
- Integration of value chains – from exploration to market.
The combination of these capabilities gives Shell its distinctive competence – ‘the ability to provide integrated solutions at large scale utilising technological breakthroughs.’ On top of this, Shell’s growth platforms are reinforced by its strategy of portfolio management to fund capital investment enabling it to finance projects at a scale beyond the scope of most of its competitors.
Consistent investment in such projects over recent years has enabled Shell to develop a growth portfolio that is seen by analysts as sector leading. Although every investment has its own challenges – think of Sakhalin Island in Russia and the political and environmental problems – there are a growing number of successes that are now driving the company towards a lower carbon future.