Shell Is Going Slow In India

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Royal Dutch Shell Plc

What do the below expected profits of Royal Dutch Shell tell us?
What do the below expected profits of Royal Dutch Shell tell us? | Source

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Performance of Shell

Deal With Qatar Petroleum

Royal Dutch Shell Plc and Qatar Petroleum have signed a $6.4 billion petroleum plant deal last December. The agreement was to develop a petrochemical production facility in Qatar. Qatar Petroleum is a State-run company. It will have 80% stake in the proposed joint venture. Shell will hold the remaining 20% stake. The final joint venture agreement will be signed by the two partners in early 2013. The project will start production in 2017. Two years back, Exxon Mobile proposed a similar joint venture. The present joint venture with Shell will not replace the one with Exxon. Qatar is the world’s largest exporter of liquefied natural gas.

Deal With Iraq

Iraq has concluded a deal with Shell. According to this agreement, most of the international energy firms may have to surrender the gas from Iraq’s southern region to an export and processing project led by Shell. Oil giants like BP, Shell, Exxon of USA, CNPC of China and Eni of Italy signed the agreement with the Iraqi government.

North Sea Oil Spill Was Reported Two Days Late

Shell said that the North Sea oil pipeline was still leaking sometimes back. Shell reduced the pressure on the pipeline to reduce the flow of oil. Shell informed that around 100 tonnes of oil amounting to around 750 barrels had leaked into the sea. This figure is hardly comparable with the nearly 5 million barrels of oil spilt into the Gulf of Mexico by BP last year. But the company did not say anything about the clean-up operation. Environmental group Greenpeace criticised about lack of information on the leak. Shell informed about the leakage only two days after it occurred.

Shell’s Plans in India

What about Shell’s plan regarding India? Shell is not ready yet to enter exploration activity in India. But it is in favour of growing retail business in India. Vikram Mehta is the Chairman of Shell Companies in India. The company wants to first consolidate its retail business in India before venturing into exploration activities.

Crude Oil Price Rising Due To Political Reasons

Crude oil price is rising not because of the fundamentals, but because of the unrest in West Asia and North Africa. Of course demand has increased for oil. There is sufficient supply to meet the increased demand. OPEC has the capacity to produce 4.5-5 billion barrels of crude oil every day. This supply was disturbed to the extent of 2.5 billion barrels a day due to the troubles in Egypt and Libya in the past. About 22 GW of energy was affected due to the Japanese catastrophe. Japan depended on nuclear power to the extent of around 27%. Some thermal plants were also affected there due to natural calamity. Japan was forced to switch over to gas-based power plants in order to tide over the energy crisis. Spot gas production was diverted from Europe to Japan. Japan requires an additional 9-12 million tonnes per annum of gas for its needs. Therefore there is every chance for the price of LNG to increase in the future.

Test your knowledge in crude oil

Iranian conflict may spiral world crude oil price

Iranian conflict may spiral  world crude oil price
Iranian conflict may spiral world crude oil price | Source

Shell Is Going Slow In India

Iranian Conflict

Increase in crude oil price is because of the possible conflict of Iran with USA and the Western nations over its nuclear ambitions. Israel also may attack Iran at any time in self defence. The increase in the oil and gas prices has impacted countries like India very badly. This will further drive inflation figures up. Consequently there will be a hike in the interest rates also which will affect growth.

Shell’s Activities in India

Shell has a business services centre in Chennai in India. This centre is involved in providing financial support to the Shell group worldwide. Shell is engaged in several business activities in India like ATF, retail, petrol, bitumen, lubricants, diesel, LNG terminal, gas business, marketing and re-gasification, Shell has a technology centre in Bangalore, the tech capital of India. This tech centre caters to all Shell firms in the world in areas ranging from refining to petroleum engineering to pure R&D. Shell is also involved trading business in India. Shell trades chemicals and crude oil. Shell has the technology licensing business for PSU enterprises in Kochi, Mumbai & Vizagapatnam and Reliance Refineries.

Shell Awaiting Clarifications from Indian Government

Shell has not bid in NELP (New Exploration Licensing Policy) rounds. Shell rates the exploration chances in India as poor compared to other countries. But there were rumours in the past that instead of BP, Shell would partner with India’s biggest private sector firm Reliance Industries for oil and gas exploration in the KG Block. India has at present two LNG terminals at various levels of commissioning. Shell is planning to increase the natural gas capacity in Hazira in India. Shell is awaiting clarifications from the government of India on the market pricing mechanism before embarking on an expansion of its retail business in India.

Vast Opportunity in Russia

After BP Plc’s alliance with Russia’s oil company collapsed, opportunity was thrown open to other players to tap one of the world’s largest untapped oil resources. If the Russian oil company looks for new partners to tap oil and gas from Kara Sea in Russia’s Arctic, it will present immense opportunities for companies like Shell. There is a chance to tap 15 billion barrels of oil equivalent to more than five years of crude oil production in USA.

Not a Good Q4 Result

Shell has disappointed the stock markets with its Q4 results. Chevron and Exxon Mobile performed better than Shell. But Shell’s results are better than its rival BP’s. The costs of the Gulf of Mexico oil spill is pressing BP. Shell’s earnings on current cost of supply increased to $5.7 billion from $1.2 billion in the corresponding period of the previous year. Last year, Shell suffered from huge refining losses.

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Comments 3 comments

Trsmd profile image

Trsmd 4 years ago from India

Shell has not opened enough outlet in India, without opening how it will be popular? Thanks for sharing:)

ramkimeena profile image

ramkimeena 4 years ago from India Author

Dear Trsmd,

I thank you for your valuable comments. I fully agree with your observation.

Best wishes to you,

charmike4 profile image

charmike4 4 years ago from Adelaide, South Australia

Interesting insight into Shell's activity in the emerging nation of India ramkimeena. I believe that India will be the next China and multi-nationals will need to consider India in their plans to capitalise on the propensity to buy, especially in the aspirational middle classes. Cheers Michael

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