Royal Dutch Shell is the largest oil producer company in Europe whose origin can be traced in Netherlands and Great Britain. The firm’s corporate headquarters are located in Hague, Netherlands while its registered office is in London, United Kingdom.
The energy and petrochemical giant is listed in Amsterdam’s Euronext and London Stock Exchange. According to Fortune Global 500, Royal Dutch Shell ranks as the second largest multinational company with Wal-Mart being the number one. With a massive $285,129,000 in revenues, $12,518,000 after-tax profits and $292,181,000 assets in according to its 2010 financial statements, Shell overtook global giant Exxon Mobil to be the market leader within the petroleum refining industry. The firm’s incumbent Chief Executive Officer (CEO) is Peter R.
Voser. Shell has a human resource base of 102,000 employees and operates in more than 90countries. Its biggest operations are in United States and it operates as Shell Oil Company with its corporate headquarters in Houston, Texas. Other major countries where the firm operates include Japan, Nigeria, Qatar, and Australia and so on.
There are a number of political risks affecting the firm’s operations in its international operation.
Nigeria has one of the biggest oil and natural reserves in the world estimated to last at least forty years. Shell is facing unending crisis of militants in the Niger Delta. Niger Delta, the largest producer of oil and natural gas in Africa has been facing attacks from armed militia men leading to the company losing millions of dollars (Frynas, 1998, pp.457-478). Kidnapping and ransom is rampant in this volatile region, forcing shell and other oil and petroleum multinationals such as Agip, Total, Chevron and ExxonMobil to spend millions of dollars in beefing up security.
For instance from 2005, Shell Nigeria reported bombings of major pipelines followed by pockets of attacks on the installations and facilities. The people being targeted are mainly the contractors and the staff. Demands for monster share of oil revenues from the region and release of militants arrested by government authorities are Main reasons for the sporadic attacks (Shell report, 2005). However in 2009, amnesty program was introduced to encourage ceasefire and make the militants to voluntarily surrender the weapons (Tatersall, 2010, para.
2). Another factor affecting the firm’s operations in Nigeria relates to the upcoming general elections. With the next presidential elections scheduled to be held in April 2011, the country is bound experience intense political tension. This would negatively impact the operations of oil conglomerates in the region. It is unknown if the current head of state, President Goodluck Jonathan, will run for the top seat. Considering that he hails from Niger Delta, his supporters expect him to contest for the race. Elections have had effect on Shells operations. Nigerian Government struck a deal with the armed militants in the Niger Delta to stop sabotage against pipelines belonging to Shell, but there are reports that the militants are not satisfied with government promises of jobs and other financial aids.
Therefore, there is a high probability that the militants will be used by the politicians for intimidation purposes. As a political consultant for Shell Company with regard to its operation in Nigeria, the company in conjunction with the government should increase monetary rewards to the militants in addition to creating more employment opportunities for the locals. This will have an effect of reducing poverty by providing steady income to the people of Niger delta.
Royal Dutch Shell has various stakeholders. A stakeholder refers to a party with a vested interest in a firm’s course of operation. The stakeholder can be either an internal such as the shareholders and the employees or external such as the customers and local communities (Docstoc, 2010, pp.
4-13). Other stakeholders include oil producing countries. Satisfying the needs of all stakeholders is not an easy task as simple as it appears. For example, setting the pricing of fuel has been challenging for the company.
Natural gas and crude petroleum prices have been rising steadily leading to an increase in profits from the company (Press TV, 2010). Such price increases affects the demand of petroleum by motorists. This arises from the fact that local gas stations hike gas prices.
Shell must also satisfy the needs of the local communities. However it comes at a cost.
For instance in Nigeria, Shell has been forced to embark on environmental rehabilitation occasioned by oil spills. Clean ups and remediation is costing the company million of dollars (Shell report, 2005, pp.29).
These cleanups are meant to restore the land which has been polluted heavily by decade of oil spills. The government and Shell have been forced to pay people of Niger Delta $1.5 million for causing environmental damage.
The Shell code of conduct clearly stipulates the beliefs and values which are applied in the daily operation of the company . The general business principles are eight and they include principle of economics, principles of competition, principle of business integrity, principle of political activities of companies and of employees, principle of health, safety, security and environment, principle of local communities, principle of communication and engagement, and principle of compliance (Shell international limited, 2006, pp. 15-16). It’s mandatory for Royal Dutch Shell to follow the code of conduct when operating in the foreign countries.
For instance, it must comply with laws of the foreign country it operates otherwise it risks facing legal actions. It must pay corporation tax as expected by the governments, and also abide to environmental laws existing in the countries. Shell BP has many social programs in the countries of operations. For example in Nigeria, Shell is tackling issue s related to corruption (Shell report, 2005, pp.
28). In addition, the company has embarked on serious anti corruption campaigns in Nigeria to sensitize the people on the need to eradicate the vice. In the recent past, Shell has investigated its contractors and consequently interdicted those found guilty. Royal Dutch Shell management team must monitor politics and economic performance so as to make effective operational decisions.
Docstoc. (2010). Balancing stakeholders needs @ shell-Business Ethics. Retrieved August 2010 fromhttp://www.docstoc.
com/docs/25433898/Balancing-Stakeholder-Needs–Shell—BUSINESS-ETHICS Frynas, J. (1998). Political Instability and business: Focus on Shell in Nigeria. Third World Quarterly. Volume 19, Issue 3. New York: Butterworth.
Press TV. (2010). Shell profits hike 50% on oil price. Retrieved August 16, 2010. Fromhttp://www.presstv.ir/detail.aspx?id=124717§ionid=3510213 Shell.
(2005). The Shell sustainability report 2005. Retrieved August 16, 2010. Fromhttp://www.shell.com/static/envirosoc-en/downloads/sustainability_reports/shell_report_2005.
pdf Shell International Company. (2010). Shell code of conduct: How to live by the Shell General Business principles. London: St lves Westertham Press. Tatersall, N. (2010). Factbox- Key political risks to watch in Nigeria.
Retrieved August 16, 2010 fromhttp://www.foxbusiness.com/markets/2010/08/02/factbox-key-political-risks-watch-nigeria/