Royal Dutch Shell Company - Inter-Relationships - Case Study Example

Royal Dutch Shell Company Name Institution Course Date Royal Dutch Shell Company Introduction Key Attributes of the Company The Royal Dutch Shell explores for natural gas as well as crude oil across the globe, from sources, like coal formations, shale and tight rock as well as in conventional fields. Shell has for many years worked hard to develop natural gas and new crude oil supplies from different fields. The various segments in the company include Corporate, Upstream, Downstream as well as Integrated Gas. As pointed out by Reuters (2016), Shell cools natural gas to generate liquefied natural gas (LNG) which could be shipped safely to various markets across the globe. Besides that, the company converts gas into liquids. Shell trades and markets carbon-emission rights, natural gas, crude oil, LNG, as well as electricity and also sells LNG as energy for marine vessels as well as heavy-duty vehicles. Other products sold by Shell include bitumen, aviation fuel, diesel, sulphur, gasoline, marine fuel, heating oil, and lubricants. In Australia, Shell’s plants generate different types of base chemicals and intermediate chemicals (Reuters, 2016). Shell Australia was established in 1901, as a subsidiary of Royal Dutch Shell Company. Since then, the company has expanded its Australian activities into coal mining, petrochemicals as well as oil exploration. In 2014, Shell Australia sold its downstream business but retained the aviation fuel business as well as upstream businesses such as onshore coal seam gas, liquefied natural gas (LNG) as well as exploration. Shell Australia has maintained a substantial portfolio of exploration with enormous representation in reserves and permits offshore the Northern Territory and Western Australia. As pointed out by Shell Australia (2017), Shell Australia has invested enormously in Geelong Refinery, Clyde Refinery as well as the Gorgon LNG Project.  Inter-Relationships between the Company and Its Natural, Social and Economic Environments Given that the conventional oil reserves are diminishing faster, Shell has come up with new forms of oil reserves which have an enormous effect on the environment. Unconventional oil reserves have much higher carbon emissions, and Shell has invested a lot of resources in the projects associated with extracting oil from unconventional reserves. Shell normally engage governments, communities, environmental experts and NGOs in its operations to facilitate the development of sustainable plans and to adjust seismic activities schedule where stakeholder and environmental sensitivities are a factor (Shell Australia, 2017). In terms of social forces, Shell Australia operations not only affect the environment but also its workforces since there are various health and security issues to take into account. At the global level, consumers are participating in responsible consumption and Shell has been obliged to promote responsible consumption. Shell has continually been accused of damaging the environment and misleading the consumers. In consequence, this has damaged its reputation amongst the consumers. Oil prices have recently increased; thus, leading to heavy government taxations and increase in the cost of production. The demand for energy has increased tremendously and it has been projected to continue increasing in the coming years. This has consequently become a major challenge since the oil and gas natural reserves have become fewer and cannot meet the increasing demand. For this reason, Shell has started investing in new projects that would facilitate extraction of oil and gas from unconventional reserves. The economic slump, exchange rates, taxation and inflation are some of the economic factors that affect shell. Main Body Implications of Climate Change for the Company Climate changes have made Shell and other oil companies to find ways of meeting the increasing oil demand and finding ways to reduce CO2 emissions. Because of climate change, Shell has decided to invest in technological developments that would allow the company to reduce its greenhouse gas emissions. To move towards low-carbon solutions, the company has been forced to adopt the meaningful ‘carbon pricing’ mechanisms. The company has welcomed the efforts made by the Australian government to obligingly achieve the global climate agreement. The company has invested heavily in the lowest-carbon biofuel and is still exploring options for second-generation biofuels. The company is investing in energy solutions opportunities; for instance, combining solar as well as wind power with gas so that the consumers remain connected to energy. Besides that, the company has decided to combine sustainable biomass gasification with carbon dioxide (CCS) capture and storage in the generation of power (Shell Global, 2016). Climate change will enormously impact the rigs considering that the increasing harsh conditions would not only affect production but also the worker safety. Climate change will also affect the infrastructure since the increasing sea levels would by mid-century lead to the disappearance of the Gulf Coast’s shoreline by at least two feet (Keystone Energy Tools, 2015). There will be higher sea levels in the Southeast, which consequently will intensify hurricanes, winds and flooding. As a result, the infrastructure would be damaged severely and oil distribution would be disrupted (Keystone Energy Tools, 2015). The Company Impacts on Climate Change Akin to other fossil fuels, the production and transport of oil have resulted in environmental degradation. Oil production results in greenhouse gas emissions and air pollution, which contributes to environmental destruction and climate change. Shell has destroyed more habitats In Australia and its offshore oil production has led to some oil spills. Oil production and use have enormously contributed to global greenhouse gas emissions, which consequently have increased CO2 concentrations in the air and the subsequent climate changes. Shell pollution is virtually related to all activities all through the oil and gas production stages. Aerosols, gas emissions, wastewaters, and solid waste generated during the oil production process have intensified the acid rain, greenhouse effect, groundwater contamination, and poorer water quality. During the exploration activities, the dust, as well as emissions from seismic surveys, vehicles, and earth-moving equipment, have contributed to climate change (TEEIC, 2015). Some of Shell’s pollutants consist of volatile organic compounds (VOCs), oxides of nitrogen, particulates, sulphur dioxide, and carbon monoxide. When VOCs and Nitrogen oxides combine, they create ground-level ozone. The Current Planning and Management Strategies and Policies of the Company and the Broader Industry With Respect To Climate Change and Sustainability At Shell, sustainability touches on every operational area considering that the company is planning to deliver the energy required by the increasing population responsibly. The company intends to achieve this by respecting the environment as well as the people’s safety. The company understands that sustainability is crucial for the longevity of its business as well as its role as a society’s member. The company’s approach towards sustainability is integrated across its business activities by running a responsible, efficient, safe as well as profitable business. As pointed out by Shell Australia (2016), this is the company’s approach that includes having tools, processes and global standards in position to manage community involvement, environment and safety. The company is still looking for innovative ways to improve how it operates and to prevent incidents of adverse social and environmental impacts of its facilities as well as projects. For this reason, the company normally use annual sustainability report to demonstrate its performance. In the coming years, cleaner energy would be needed due to the increasing environmental pressures. For that reason, Shell has started investing in advanced technologies and low-carbon energy solutions that would help reduce emissions as well as low-carbon energy solutions. The company has made a lot of contributions to the public dialogue on climate and energy policy (Shell Australia, 2016). The company is utilising its innovation, technology and know-how to deliver cleaner energy that would help meet the growing needs for efficient energy. Shell has welcomed the Paris Agreement, which came into force in late 2016. This agreement tries to reduce the global warming to less than 2 °C through the management of environmental and climate pressures. According to Shell Global (2016), the Paris Agreement explains the urgent need for policies which could facilitate the ushering in a low-carbon future. Particularly, the needed foundation to support the establishment of the global carbon emissions market has been enshrined in Article 6 of the Agreement. Besides that, Shell is a member of Oil and Gas Climate Initiative (OGCI), which is a CEO-led organisation comprising of ten companies from oil and gas industry that have shown commitment to reduce greenhouse gas emissions by investing in climate change solutions. As pointed out by OGCI (2015), the member companies of OGCI generate approximately 10$ of the energy in the world; therefore, they are well positioned to systematically manage climate change challenge. OGCI companies are finding new business models to enable the companies to pay a dynamic as well as a competitive role in a reduced GHG future. Shell and other OGCI companies have invested enormously in biofuel businesses with the aim of leveraging sugar cane suitability for ethanol production (OGCI, 2015). As mentioned by Nakhle (2016), the Paris Agreement is more accommodating as compared to the Kyoto Protocol. The Kyoto Protocol created precise binding targets for emissions reduction, particularly for the developed states. However, it led to tension between China and the US, the world’s biggest polluters. Therefore, the Paris Agreement has an improved global reach and steers clear of the dissimilarity between developing and developed countries. According to the agreement, developing economies must get support to put the commitments into practice; pledging $100 billion annually through ‘climate finance’ (Nakhle, 2016). Unlike the Kyoto Protocol, the Paris agreement has not specified any targets for carbon reduction; instead, the targets would be voluntarily determined by individual countries. Whereas a number of experts consider that the Paris accord is weak because it lack binding targets, other believe that devoid of the flexibility offered by the accord, an agreement could have never been reached. Furthermore, it is difficult to coerce countries to become part of the team fight against climate change, particularly with existence of more pressing social as well as economic needs. According to the agreement, individual countries must regularly report on their implementation efforts and the level of emissions. Still, voluntary reporting poses some limits, particularly for the oil companies that are strongly interested in downplaying risks. Conclusion In conclusion, this piece has demonstrated that Shell is actively working to improve sustainability and reduce GHG emissions through technologies, innovation, operational excellence, and project design. The company has invested heavily in new technologies in order to lower GHG emissions, improve energy efficiency, as well as capture and store carbon dioxide. Shell’s initiatives seek to maintain the company’s competitiveness and ensure compatibility with major partners. Companies in the oil and gas industry have started recognising the effects of their processes such as emission of CO2; therefore, they are trying to find the alternative process so as to reduce CO2 emissions. References Keystone Energy Tools, K. (2015, October 24). How Will Climate Change Affect The Oil & Gas Industry? Retrieved from Keystone Energy Tools : http://keystoneenergytools.com/blog/how-will-climate-change-affect-the-oil--gas-industry-1 Nakhle, C. (2016, February 10). After Paris Climate Deal, Major Changes Are Still a Long Way Off. Retrieved from Carnegie Middle East Center: http://carnegie-mec.org/2016/02/10/after-paris-climate-deal-major-changes-are-still-long-way-off-pub-62752 OGCI. (2015). More energy, lower emissions Catalyzing practical action on climate change. Oil and Gas Climate Initiative. Reuters. (2016). Royal Dutch Shell PLC. Retrieved from Reuters: http://www.reuters.com/finance/stocks/companyProfile?symbol=RDSa Shell Australia. (2016). What sustainability means at Shell. Retrieved from Shell Australia: http://www.shell.com.au/sustainability/what-sustainability-means-at-shell.html Shell Australia. (2017). Environment. Retrieved from Shell Australia: http://www.shell.com.au/sustainability/environment.html Shell Australia. (2017). Who we are. Retrieved from Shell Australia: http://www.shell.com.au/about-us/who-we-are.html Shell Global. (2016). Climate change and energy transitions. Retrieved from Shell Global: http://www.shell.com/sustainability/environment/climate-change.html#vanity-aHR0cDovL3d3dy5zaGVsbC5jb20vZ2xvYmFsL2Vudmlyb25tZW50LXNvY2lldHkvZW52aXJvbm1lbnQvY2xpbWF0ZS1jaGFuZ2UuaHRtbA Shell Global. (2016). Sustainability Report. Retrieved from Shell Global: http://reports.shell.com/sustainability-report/2016/energy-transition/our-work-to-address-climate-change.html TEEIC. (2015). Oil and Gas Exploration Impacts. Retrieved from Tribal Energy and Environmental Information Clearinghouse : https://teeic.indianaffairs.gov/er/oilgas/impact/explore/index.htm Read More