HISTORY OF OIL INDUSTRY IN PAKISTAN1947 At the time of independence there were no more than few companies, it was the case with oil industry. There was no oil refinery in Pakistan except a very small at Rawalpindi. At that time the total requirement of Pakistan was 0.4 million tons. There were four foreign and one local company in Pakistan these were: BURMAH OIL Market petroleum products. BURMAH OIL Oil extracting company. CALTEX Market petroleum. ESSO Marketing. ATTOCK OIL Oil exploration company. 1952Burmah discovered natural gas at Sui in Baluchistan named as Sui gas. Before partition Railways was on coal, but at the time of partition India refused to provide coal, so railways has to convert on diesel oil. 1955The consumption of oil shot up by 3 million tons. 1960Consumption in East and West Pakistan shot up by 4.2 million tons OGDC was established. Government asked the foreign companies to set up a refinery, they agreed with following conditions: Ø Refinery should in Karachi Ø Capability will be 1.5 million tons. Ø They will provide crude to refinery only. Government also permitted a Pakistani company, Pakistan National Oil. 1962Pakistani refinery came into being. It only produced petroleum but not lubricant. So PNO established a plant at Korangi (Karachi) for lubricating oil with a capacity of 0.5 million tons. 1964Dawood petroleum was established. 1965On September 1965 India attacked Pakistan so the oil reserves came to lowest and government asked the foreign companies to bring crude refined and provide the army but they refused. PNO was asked to do so, it brought the oil and the need of army was fulfilled. These companies annoyed the government and it turned against them. 1970In 1970, when 51% of the shareholding was transferred to Pakistani invertors. The name of the company changed to Pakistan Burmah shell (PBS) limited. The shell and Burmah groups of retained the remaining 49% in equal proportions.ed Pakistan so the oil reserves came to lowest and government asked the foreign companies to brin g crude refined and provide the army but they refused. PNO was asked to do so, it brought the oil and the need of army was fulfilled. These companies annoyed the government and it turned against them. 1970In 1970, when 51% of the shareholding was transferred to Pakistani invertors. The name of the company changed to Pakistan Burmah shell (PBS) limited. The shell and Burmah groups of retained the remaining 49% in equal proportions. 1971Again the war broke between Pakistan and India. All crude oil was imported from other countries and its storage was concentrated at Kemari Terminal Karachi. The enemy blasted whole storage point. So the need to spread the storage points
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At the time of independence there were no more than few companies, it was the case with oil industry. There was no oil
refinery in Pakistan except a very small at Rawalpindi. At that time the total requirement of Pakistan was 0.4 million tons.
There were four foreign and one local company in Pakistan these were:
BURMAH OIL Market petroleum products.
BURMAH OIL Oil extracting company.
CALTEX Market petroleum.
ESSO Marketing.
ATTOCK OIL Oil exploration company.
1952
Burmah discovered natural gas at Sui in Baluchistan named as Sui gas. Before partition Railways was on coal, but at thetime of partition India refused to provide coal, so railways has to convert on diesel oil.
1955
The consumption of oil shot up by 3 million tons.
1960
Consumption in East and West Pakistan shot up by 4.2 million tons OGDC was established. Government asked the foreign
companies to set up a refinery, they agreed with following conditions:
Ø Refinery should in Karachi
Ø Capability will be 1.5 million tons.
Ø They will provide crude to refinery only.
Government also permitted a Pakistani company, Pakistan National Oil.
1962
Pakistani refinery came into being. It only produced petroleum but not lubricant. So PNO established a plant at Korangi(Karachi) for lubricating oil with a capacity of 0.5 million tons.
1964
Dawood petroleum was established.
1965
On September 1965 India attacked Pakistan so the oil reserves came to lowest and government asked the foreign
companies to bring crude refined and provide the army but they refused. PNO was asked to do so, it brought the oil and the
need of army was fulfilled. These companies annoyed the government and it turned against them.
1970
In 1970, when 51% of the shareholding was transferred to Pakistani invertors. The name of the company changed to
Pakistan Burmah shell (PBS) limited. The shell and Burmah groups of retained the remaining 49% in equal proportions.ed
Pakistan so the oil reserves came to lowest and government asked the foreign companies to bring crude refined and provide
the army but they refused. PNO was asked to do so, it brought the oil and the need of army was fulfilled. These companiesannoyed the government and it turned against them.
1970
In 1970, when 51% of the shareholding was transferred to Pakistani invertors. The name of the company changed to
Pakistan Burmah shell (PBS) limited. The shell and Burmah groups of retained the remaining 49% in equal proportions.
1971
Again the war broke between Pakistan and India. All crude oil was imported from other countries and its storage was
concentrated at Kemari Terminal Karachi. The enemy blasted whole storage point. So the need to spread the storage points
in the whole country was felt. The 5 foreign companies were asked to do so but they refused because of cost, then
government decided to establish storage places itself.
1973
There were energy crises through the world. Almost all of the countries nationalized the oil companies. Everyone realized
that petroleum products were very essential.
1974
Pakistan storage Development Corporation was established.
1976
PSO was found in December 1976 as a result of merger of here oil companies:
1. Pakistan National Oil.
2. Premier Oil Company.
3. ESSO.
1993
In February of 1993, as a result of a decision by Burmah oil to divest in Pakistan and the deregulation policy of the
government, the shell petroleum company bought the shares of Burmah Oil Company and 2% shares from the market and
become the major shareholder in the shell Pakistan limited (SPL).
INTRODUCTION OF SHELL PAKISTAN Ltd.
HISTORY
Shell is a multinational company and in Pakistan it is operating as a public limited company by the name “Shell Pakistan Ltd.
Shell is a superior brand name with a 100 year history in this region, infect the company is still in possession of a fuel
storage tank from 1899. However, the documented history of the Royal Dutch/shell group the Indo-Pak subcontinent dates
back to 1903 when a partnership was struck between the shell transport and trading company and the Royal Dutch
petroleum company to supply petroleum products in Asia.In 1928 to enhance their distribution capabilities, the marketing interests of the Royal Dutch/shell group and Burmah Oil
Company by limited in India were merged and the Burmah shell oil storage distribution and storage company of India was
born. After the independence of Pakistan in 1947, the name was changed to the Burmah shell oil distribution company of
Pakistan.
In 1970, when 51% of the shareholding was transferred to Pakistani invertors. The name of the company changed to
Pakistan Burmah shell (PBS) limited. The shell and Burmah groups of retained the remaining 49% in equal proportions. In
February of 1993, as a result of a decision by Burmah oil to divest in Pakistan and the deregulation policy of the
government, the shell petroleum company bought the shares of Burmah Oil Company and 2% shares from the market and
become the major shareholder in the shell Pakistan limited (SPL).
Shell launched a change programme, which will transform the company by the turn of the century, with major implications for
the petroleum industry in Pakistan.
More subtle, but equally uncompromising, has been the change in the company’s culture to reflect the values which shellinternationally believes will bring commercial success through a greater focus on the customers.
Frequently fine tuning and tweaking of a company strategy. First in one department or functional area and then in another,
are quite normal. On occasion, quantum changes in strategy are called for when a competitor makes a dramatic move,
when technological breakthroughs occur or when crises strikes and managers are forced to makes a radical strategy
alteration very quickly. Because strategy move and new action approaches are ongoing across the business.
An organization’s strategy forms over a period of time and then reform the number of changes begins to mount. Current
strategy is typically a blend of holdover approaches fresh actions and reactions, and potential moves in the planning stage.
Except for crises situations (where many strategy moves are often made quickly to produce a substantially new strategy
almost overnight) and new company starts - ups (where strategy exists mostly in the form of plans and intended actions), it
is common for key elements of company to emerge in bits and pieces as the business develops.
WHAT DOES A COMPANY’S STRATEGY CONSIST OF?
Company’s strategies concern how: how to grow the business, how to satisfy customers, how to auto compete rivals, how to
response to changing market conditions, how to manage each functional piece of business, how to achieve strategic and
financial objectives.
STRATEGY AND STRATEGIC PLANS
Developing a strategic vision and mission, establishing objectives, and deciding on a strategy are basic direction-setting
tasks. They map out where the organization is headed, its short range and long-range performance targets, and the
competitive moves and internal action approaches to be used in achieving the targeted results. Together, they constitute a
strategic plan.
Annual strategic plan seldom anticipate all the strategically relevant events that will transpire in the next 12 months.
Unforeseen events, unexpected opportunities or threats, plus the constant bubbling up of new proposal encourages
managers to modify planned actions forge “unplanned” reactions postponing the redrafting of strategy until its time to work
on next year’s strategic plan is both foolish and unnecessary.
STRATEGY IMLEMENTATIONAL EXECUTION
The administrative is to create “fits” between the way things are done and what it takes for effective strategy execution. The
stronger the fits the better the execution strategy. The most important fits are between strategy organizational capabilities,
between strategy and reward structure between strategy and internal support system, and between strategy and the
organization culture.
The strategic implementing task is easily the most compacted and time-consuming part of strategic management. It cutacross virtually all facts of managing and must be initiated from many points inside the organization. The s trategy
implementer’s agenda for action emerges from careful assessment of what the organization must do differently and better to
carry out the strategic plan proficiently. Each manager has to think how much internal practices deviate from what the
strategy requires and how well strategy and organizational culture already match.
As needed changes and identified, management must supervise all the details of implementation and apply enough
pressure on the organization to convert objectives into results. Depending on the amount of internal change involved, full
implementation can take several moths to several years.
WHY STRATEGIC MANAGEMENT IS AN ONGOING PROCESS
Because each one of the five tasks of strategic management requires constant evaluation and a decision whether to
continue or change, a manager cannot afford distraction. Nothing about the strategic management process is final all prior
actions are subject to modification as conditions in the surrounding of environment change and ideas for improvement
emerge, strategic management is a process filled with motion. Changes in the organization situation, either from the insideor outside or both, fuel the need for strategic adjustments.
The task of evaluating performance and initiating corrective adjustments is both the end and the beginning of the strategic
management cycle. The match of the external and internal events, grant that revision in mission, objective, strategy and
implementation will be needed sooner or later. It is always incumbent on management to push for better performance to find
ways to improve the existing strategy and how it is being executed. Changing external conditions add further impetus to the
need for periodic revisions in a company’s mission. Performance adjustment object ive, strategy and approaches to strategy
execution.
Adjustments usually involve fine-tuning. But occasions for major strategic re-orientation do arise some time prompted by
significance external development and sometimes by sharply sliding financial performance. Strategy managers must stay
close enough to the situation to detect when changing conditions require a strategic response and when they don’t. It is thei r
job to scene the winds of change, recognize changes early, and initiate adjustments.
THE BENEFITS OF A “STRATEGY APPROACH” TO MANAGING
Today managers have to think strategically about their company’s position and impact of changing conditions. They have to
monitor the external; solution closely enough to know what kind of strategic changes to initiate. Simply said, fundamentals of
strategic management cede to drive the whole approach to managing organizations.
The advantages of first-rate strategic thinking and conscious strategic management include:
1. Providing better guidance to the entire organization on the crucial point of “what it is trying to do and to achieve.”
2. Making managers more alert to the winds of change, new opportunities and threatening development.
3. Providing managers with a rationale for evaluating competing budget requests for investment capital and new staff a
rationale that argues strongly for steering resources into strategy-supportive results producing areas.
4. Helping to unify the numerous related decisions by managers across the organization.
5. Creating a more proactive management posture and counteracting tendencies for decisions to be reactive and defensive.
EXTERNAL ENVIRONMENT
For the analysis of external environment following are important factors (PEST):
Ø Political –legal forces
Ø Economic forces
Ø Socio cultural forces
Ø Technological forces
POLITICAL FORCES: -
In Pakistan there are rapid changes of Government since poison. Each government that came in power condemned the
planning work done by the precious government. The slow development due to political instability but now the present
government is very stable to grow because govt. is providing incentives to different industries.
LEGAL FORCES: -
Legal component consists of legislation that has been passed. This component prescribes rules or laws that all members ofsociety must follow e.g. labour policy, employees’ social security scheme 1965 Partnership Act 1932 company 1984.
ECONOMIC FORCES: -
In Pakistan GNP is 5.41 and inflation rate is very high which is 12.7. The balance of payment position in Pakistan is -3.5%.
The employment rate is 34.94 million.
ECONOMIC OVERVIEW
Currency: Pakistani Rupee
Average Exchange Rate (20/1/02): U.S.$1 = 60.5 rupees
The market capitalization of this company is 5.79 billion Pakistan Rupees (US$96.42 million). Closely held shares (i.e., those
held by officers, directors, pension and benefit plans and those shareholders who own more than 5% of the stock) amount to
over 50% of the total shares outstanding: thus, it is impossible for an outsider to acquire a majority of the shares without the
consent of management and other insiders. The capitalization of the floating stock (i.e., that which is not closely held) is 2.33
billion Pakistan Rupees (US$38.83 million).
Dividend Analysis
During the 12 months ending 6/30/01, Shell Pakistan Limited paid dividends totaling 12.50 Pakistan Rupees per share.
Since the stock is currently trading at 165.15 Pakistan Rupees, this implies a dividend yield of 7.6%. The company has paid
a dividend for 4 straight years.
During the same 12 month period ended 6/30/01, the Company reported earnings of 30.12 Pakistan Rupees per share.
Thus, the company paid 41.5% of its profits as dividends.
PROFITABILITY ANALYSIS
On the 63.63 billion Pakistan Rupees in sales reported by the company in 2001, the cost of goods sold totaled 44.75 billion
Pakistan Rupees, or 70.3% of sales (i.e., the gross profit was 29.7% of sales). This gross profit margin is significantly better
than the company achieved in 2000, when cost of goods sold totaled 91.1% of sales.
Shell Pakistan Limited's 2001 gross profit margin of 29.7% was better than all three comparable companies (which had
gross profits in 2001 between 3.9% and 5.1% of sales).The company's earnings before interest, taxes, depreciation and amorization (EBITDA) were 1.96 billion Pakistan Rupees,
or 3.1% of sales. This EBITDA margin is worse than the company achieved in 2000, when the EBITDA margin was equal to
5.6% of sales. The three comparable companies had EBITDA margins that were all higher (between 3.2% and 4.8%) than
that achieved by Shell Pakistan Limited.
In 2001, earnings before extraordinary items at Shell Pakistan Limited were 1.06 billion Pakistan Rupees, or 1.7% of sales.
This profit margin is lower than the level the company achieved in 2000, when the profit margin was 3.6% of sales.
The company's return on equity in 2001 was 22.1%. This was significantly worse than the already high 32.0% return the
company achieved in 2000. (Extraordinary items have been excluded).
· They have no proper shades and sitting arrangements at the filling stations because people who came for oil changing and
car washing face difficulties in this regard.
· There is no proper drainage system at filling station.
· There is very little empowerment of employees.
· Shell has eight regional retail managers who are watching the activities of petrol pumps in all over the Pakistan that is
insufficient to handle the problems.
OPPORTUNITIES
· Shell has maintained a tradition of introducing new innovation as compare to its competitors. The example being the
mobile, training unit, quality and quantity unit, Mini-market (select, Jet was (Rianbow), oil change. Lubricants (Rumila
C.D.X,) Helix that is opportunity for Shell to maintain these facilities.
· People perceptions are changing and they prefer digital pumps. So they should renovate their petrol pumps. Shell also has
an opportunity to enter in the nice market.
· Shell has strong financial position so it has opportunity to avail a new market share in CNG business.
· Shell is the market leader due to innovation so it can easily win the customer confidence.
THREATS
· The smuggling of petrol in Baluchistan form Iran is one of the greats threats to the company.
· The fake oil makes up a large share in the market, if such practices are not prohibited it will create a disastrous effects on
sale
· PSO is also servicing in profitable areas.
· Shell is charging few paisas more than their competitor. Shell is facing very stiff competition to PSO and Caltex.
· Entrant of new companies in the refinery sector.
CURRENT MARKETING STRATEGY OF SHELL PAKISTAN LTD.
The current strategy of shell is concentrate on its business and selected market areas. By using this strategy company
expands its business by upgrading petrol pumps in the country.
Especially they are concentrating in the following three areas:
1. Customer service
2. Brand image
3. Quality and quantityCUSTOMER SERVICES: -
Shell Pakistan ltd. is working for customer satisfaction because customers play a very vital role in the prosperity ort failure of
a particular company. That is the reason that shell is operating with the basic aim to satisfy its customers and provide better
and better service to its customers. In brief it can be said that shell gives a strong emphasis on customer services.
SEVEN STEPS FOR BETTER CUSTOMER SERVICES: -
Every shell operation site follows the seven-point formula for providing customer service to its customer is stated below:
1. As customer drive in, guide him to a vacant filing unit by a neatly uniformed attendant of the petrol pump.
2. Then the attendant well comes to that customer from the driver side.
3. Attendant takes the keys form the customer. After that the attendant asks to the customer about the quantities of fuel.4. The attendant shows meter reading before filing the fuel to the customer.
5. After filling the tank the attendant tells the customer to see the meter reading and amount of li ters, hands over the keys
and takes the amount of money.
6. Attendant ask to the customer that he would like to purchase an international high quality of Rimula x.
7. Then the attendant cleans windscreen of the vehicle and says good-bye with smile.
By this procedure a customer feels that he is being given proper attention and he will again come to the filling station to fill
the tank of his vehicle.
· Rainbow Jet Wash and preserver oil change facilities are also available at filling stations.
This procedure applies to existing dealer sites which are to be taken over as COS.
RESPONSIBILITY
The territory manager is responsible to ensure compliance with the procedure.
PROCEDURE AND STANDARDS
STOCK TAKING
At the time of site taken-over company follows the following procedure for stock taking:
The dealer agrees to a target date for handing over the site which is called that “hand over date”. When taking-over the site,
two options are available.
INITIAL WORKING CAPITAL
Working capital requirement at a site is determined keeping in view the sales of the site.
A copy of the invoice of the initial fill to be sent to RSO/2 for recording and the original is to be retained at the site in a
separate file.
OUTSTANDING BILLS
All outstanding bills for utilities etc. incurred by the site before the hand over date have to pay by the dealer. Any outstanding
amount should be mentioned in the site take-over note and recovered form the out-going dealer.
PRODUCT RECEIPT PROCEDURE
PURPOSE
To ensure that the quantity and specifications of the received product match with that ordered.
SCOPE
This procedure applies to all company operated sites for the receipt of all products and applies to of wet Stock as well as
packed lubricants.
RESPONSIBILITY
The site manager is responsible to ensure compliance with the procedure.
PROCEDURE AND STANDARDS
Fuels
The site manger should be present at the site during the decantation of the product.Before decantation the site manager should tally the product specification with the grade ordered. All seals should be
checked for integrity and numbers matched with those on the invoice.
Lubes
At the time of receipt of lubes, the site manager should check the quantity ands specification mentioned on the invoice with
that of the indent placed.
It should be made sure that the product received is not damaged or leaking.
BANK ACCOUNTS
In case of authorized bank signatories. The name of the Site manager may be included in operating deposit account.
However, site mangers are not authorized signatory to operate Imprest account.
INDNTING AND PAYMENT PROCEDURES
FUEL
After the initial fill, all products will be financed by the cash proceeds from the initial fill. Payment of fuel made under
following Process:
· The price for fuels is the indent price and invoices must be prepared on this basis.
· All supplies are to be made as per arrangement with the depot/installation (COD/DOD or advance DD).
· All cheques/DD’s must be made out for exactly the same amount as the invoice and drawn in favour of shell Pakistan Ltd.
· Each cheques/DD must be handed over to the truck driver after noting the particulars of the cheques/DD. All the copies of
invoice site copy of the invoice to be retained on the site and a file maintained.
Lubes
After the initial fill, all products will be financed by the cash proceeds from the initial fill. Payment of f uel made under
following Process:
· Indent should be placed on telephone at the nearest supply point.
· A cheque/DD for the exact value of the invoice should be drawn in favour of shell of Pakistan Ltd.
· Details of cheque/DD number and date should be noted on the invoice when precut is delivered at the site.
· Site of the company has a copy of the invoice, the site manger red band copy returned to the truck driver on which all
cheques details will have to be recorded.
CREDIT SALES
PURPOSE
Credit is extended to the customers in a manner that the exposure of the company is minimized.
SCOPE
Applies to all company operational sites.
RESPONSIBILITY
It is the responsibility of the territory manager to ensure that all credit accounts are approved by the regional manger.
Approval of the credit terms and operation lies with the regional manager of the recommendation of the territory manager.
Maintenance of al the necessary credit customers and sales records in the responsibility of the site manger under the
supervision of the territory manager.
PROCEDURE AND STANDARDS
Account opening: -
All new credit accounts can only be opened with the approval of RRMs. The customer should apply in writhing to RRM for
opening a credit account with the site. The application should contain the following basic details:
I. Customer name
II. Customer address
III. Number and type of vehicles etc.
CREDIT LIMITS
I. In case of the default of payment by the customer the site will stop extending credit to the customer.
II. The site will first try to recover the credit amount form the customer. In case the customer does not pay the balance within the month, the balance amount will be deducted from the security deposit and the account will be closed.
III. The site will send a security deposit deduction note to specify the deduction of the security deposit for a particular
customer and send the amount to the site to balance off the credit sales.
PRODUCT TESTING
PURPOSE
Tested product is authorized and is accounted for in daily stock. Product testing is a process of taking fuel product from the
nozzles for the purpose of testing that dispensers are dispensing the right quantity of the product. Since this product is not
considered as the sold product a proper accounting process needs to be in place.
RESPONSIBILITY
It is the responsibility of the site manger to ensure that all the product testing is conducted in his presence and that all the
testing is properly authorized by the territory manager and in case of testing due to QCU and maintenance staff. The
signatures of the concerned staff are taken. Testing may also be conducted by the weights and measures officials.PROCEDURE AND STANDARDS
· To conduct ay testing of the product it is mandatory that the measuring cylinders kept at the site should be vetted by the
quality control unit.
· The amount of the product withdrawn from each nozzle is noted and after the completion of testing the product if decanted
in the tank.
· All the necessary testing should be conducted in the presence of the site manger.
· It is to be ensured by the site manger that the entire tested product is decanted back into the respective tanks.
· The site is also supposed to enter the product testing amount in the SMS along with the details o the date, amount of
product from respective nozzles and testing conducting authority.
IMPREST ACCOUNT OPERATION
PURPOSE
To ensure that all Territory Managers and aware of the imprest account operating procedures. This is one to ensure that the
company exposure is reduced by using correct banking practices. The Imprest Account procedures have been designed to
ensure implementation of standards of imprest operation outlined in Management Policies and Procedure Guide.
SCOPE
The procedure is applicable to imprest account operation and the reimbursements.
FREQUENCY
This procedure is to be followed whenever, the imprest account is operated and claims for reimbursements are made.
RESPONSIBILITY
It is the responsibility of the Regional Manager and the Territory Manager to ensure that the Imprest Account is operatedand claims for reimbursements are made in accordance with the requirements given in the procedures.
PROCEDURES AND STANDARDS
a) The imprest account should only be used to meet all the expenses of business nature such as salaries housekeeping,
bank charges, etc.
b) Imprest limits for sites are set by RSO on the recommendation of the concerned RRM. All the operating expenses of the
site are detailed in the imprest approval form and the total of all the expenses makes up the imprest limit of the sale.
PRICE CHANGE PROCEDURE
PURPOSE
The purpose of this procedure is to ensure that the changes in the working capital status as a result of the price change of
the product are recorded and reported accurately.
SCOPE
This procedure applies to the change of prices for all grades of fuels and lubricants sold at the site.
RESPONSIBILITY
It is the responsibility of the RRM to ensure that price change takes place at a COS in the presence of a representative of
shell Pakistan limited. It is the responsibility of the site manger to ensure that he change in working capital value is reported
correctly and accurately. The territory manger is responsible for the verification of the accuracy of the above.
PROCEDURE AND STANDARDS
When the price is changed, the following procedure is t be applied at the COS:
Ø The new prices are notified by RSO to FNC/12 supply points and regional offices to update their record accordingly.
Ø Only the concerned territory manger is authorized to change thee prices on COS. At the time of the price change, the sale
is temporarily stopped.
Ø The site manager and the territory manager representative must take a dip of the storage tank and note the meter
readings of all dispensing units jointly.
WETSTOCK MNAGEMENT POLICY
Due to the very nature of petroleum, losses being one of their inherent characteristics play an important role in the efficiency
of petroleum business. The potential of cost saving by improving the controls and reducing the losses is considerable.
A primary responsibility in the site operation is to ensure that the physical losses are kept at minimum so that maximum,
quantity of the product received is delivered to the customer.
MONITORING OF LOSSES
Loss of performance standards are normally assessed on historical basis by comparing monthly results. Effective monitoring
In market development, the company locates any new areas where it could start its business to minimize the risk. Market
development can include new market segment. Shell has no capital problem that is why Shell is working on the direction of
market development. The proof of this is that Shell has expanded its business more than hundred countries. Now Shell is
expanding its business in all small and big cities of Pakistan.
PRODUCT DEVELOPMENT
Shell will feel that the consolidation in their present market does not adequate opportunities after the search for coping with
changing environment. Shell developed the product of CNG. This shows that shell is also working on this direction.
DIVERSIFICATION
Diversification means new product and new market. The two broader concept of diversification are:
1. Related diversification
2. Unrelated diversification
RELATED DIVERSIFICATION
Related diversification means development beyond the present product and market, but still within the broad confines of the
industry in which the company operates. Shell has introduced CNG that is the best example of related diversification.
Unrelated Diversification It is the development beyond the present industry into product/mkt, which have not clear relationship with present
product/mkt. Shell is interested in other business e.g., petrochemicals, coal and metals.
Evaluation of strategic options
We have selected two strategic options for improvement of shell performance asmaintain the leader of quality in the customer services. For this purpose weevaluated them, which is better to achieve the organizational objectives.
Ø Product development.
Ø Market development
To evaluate the options we use the tool of SWOT analysis. There are three steps involved in evaluation of strategy option.
Shell is one of biggest multinational company dealing in Pakistan. As such there is no financial problem facing by shell. By
market development shell can cope with aggressive competitors. By product development (CNG) Shell can decrease its
dependence on particular supplier (Greave Pakistan Ltd.).
By market development the company can capture the market of CNG. Use of CNG reduce the environmental pollution and
save the consumption of fuel.
Developing market (establish new outlets and upgrade existing outlets) increase growth rate and market share
simultaneously.
Feasibility
Through feasibility we will assess how our strategy might work in practice. In product development shell has not sufficient
resources to cope with existing requirement.
In market development shell has sufficient resources to meet the current needs of the customers. Shell also capable to
performing the services in the field of new market.
· Shell can achieve market position by developing the new outlets and improving the services of existing outlets.
· Shell can cope with reaction of competitors by market and product development.· Shell has sufficient technology to fulfill the current requirement of market development.
Acceptability
Through acceptability we will try to assess weather the consequences of proceeding with a strategy are acceptable.
· Shell can increase it profit market share, and growth rate by established and upgrading outlets.
· There is a great financial risk to develop a new product but there is no as such risk in market development.
· In developing a product there is high rate of risk in this way the company may losses its goodwill. This thing badly affect on
the capital structure of the company.
· Shell has strong culture so this is no affect on our new strategy for developing new market.
Selection
There are two issues which needs consideration, first a way in which an organization’s circumstances will dictate which
methods of evaluation are most useful at the time of selecting future strategies.
Secondly, the process by which selection of strategies occurs since how the information from evaluation is used in strategic
decision making.
After the evaluation of the strategic options we are concluded that the market development is the best option so, our
selections is market development. Because it provide a chance to earn more profit and competitive advantage and has a low
risk as compare to other options.
GLOBAL SCENARIOS TO 2020 OF SHELL
PEOPLE AND CONNECTIONS
Shell International builds a set of global scenarios every three years to explore the overarching challenges arising from
changes in the business environment that need to be faced by its businesses. These scenarios provide a useful context fortesting our strategies and plans and help us to anticipate significant changes in the world around us.CONTACTING SHELL
MEDIA RELATIONS
The Group Press Office deals with all media enquiries relating to the Group's corporate activities and its international
businesses. The Press Office also handles all media enquiries about the businesses of Shell in the UK. For urgent media
queries out of office hours, please contact the duty press officer on pager no 07659 129 454 and leave a message and
contact details.
LNG BECOMING A TRULY GLOBAL TRADE
Today the LNG trade is growing - and rapidly becoming truly global. Currently contracted LNG volumes are likely to reach
120 million tons per annum by 2005 - an average annual growth rate of over 5% since 1995.
The number of markets is also increasing. By the end of this decade, new LNG markets will likely be added in China, India
and the Americas.
This of course will require increased shipping capacity. If all current orders are completed, the world's LNG fleet will expand
from 127 active carriers today, to almost 180 in the next five years.
The growth in volumes between now and 2005 will largely come from expansions of existing projects. But several new
projects around the world are likely to be under construction by that time - and will fuel additional growth in the LNG industry
in the second half of the decade.
Within Shell alone, we have interests in five existing LNG projects all of which have expansions under construction or underconsideration. Additionally, we are involved in the development of several new projects - four of which are shown on the
chart: Sakhalin, Timor Sea, Namibia and Venezuela.
The growth in the LNG industry is driven by overall growth in global natural gas demand - but also by the decreasing cost of
delivering LNG competitively to market.
Shell, as technical service provider to the LNG projects in which we participate, has played a key role in capital cost
reductions. Subsequent LNG developments over the past 30 years have demonstrated a 50% reduction in development
costs.
We believe this can be improved upon even more. Our goal is for our next LNG development to be delivered at a significant
improvement over Oman - which is the lowest cost project to date.
NIGERIA LNG A GOOD EXAMPLE
A specific example of the opportunities in LNG is in Nigeria. The first production of LNG in Nigeria was from the first of a
two-train project that came on stream in October 1999. The two trains together now deliver some 6 million tons a year,
mainly to Atlantic Rim and Mediterranean markets.Approval of a third train was granted in 1999. Construction is well underway with first deliveries set for early 2003.
The possibility of a further two-train expansion is already under serious discussion amongst the partners, government and
customers driven by gas availability, cost and customer demand. Once built, Nigeria could be producing almost 15 mtpa by
as early as 2006, making it one of the world's largest LNG producers.
The technological and financial challenges of the original LNG project in Nigeria were considerable. But the project is now
well placed to help meet growing demand in Europe and North America.
I'd like to move now to a completely different climate - to the Sakhalin project in far eastern Russia - where we are partners
with Mitsui and Mitsubishi.
The challenges involved here are much different. The project involves field development, an onshore pipeline to deliver the
gas to an ice-free port, and construction of the liquefaction facilities - for a total estimated cost of $8.9 bln.
Sakhalin LNG will be the first from Russia. It will add a new source of energy supply for Pacific markets and will play a
significant role in guaranteeing energy security in the north east Asian region for years to come.
INNOVATION THE KEY TO OPPORTUNITY
Innovative use of technology is the key to other possible opportunities related to remote gas reserves that remain strandeddue to the prohibitive cost of development.
Shell has recently outlined plans to apply our Floating LNG technology to overcome these difficulties and monetise the Kudu
field offshore Namibia, and the Sunrise field in the East Timor Sea.
In both cases, Floating LNG will enable lower construction costs, a minimal physical footprint, and a higher degree of
flexibility. Depending on the location, up-front capital costs can be reduced by up to 40% - which is often the difference
projects like these need to make them realities.
Effective application of leading technology opens up many opportunities. Another example is Gas to Liquids.
Shell has demonstrated that GTL technology can be commercial and that the products are competitive on the world market.
Liquid fuels produced by the Shell Middle Distillate Synthesis process at a commercial scale plant producing 12,000 bpd at
Bintulu here in Malaysia, are so clean they are leading to the creation of new markets.
Development of the next generation plant - capable of producing 75,000 bpd - will require investment in excess of a billion
dollars each. But economies of scale and improved designs will result in s ignificant advantages.
They allow monetisation of gas reserves that would otherwise be uneconomic. They provide extra revenues for resource
owners from new markets for natural gas products. The liquids produced can also substitute for expensive oil imports.
Because of these advantages, by the end of this decade, we believe Gas to Liquids will be a significant industry.
New natural gas markets are opening up and creating new opportunities - particularly here in Asia. Underlying economic
growth - and the related surge in demand for electricity - is the driver in China and India.
SHELL WORKING ON KEY INFRASTRUCTURE
To meet that demand, Shell and other companies are heavily involved in the planning and development of key infrastructure
projects. This infrastructure - which includes pipelines, LNG import terminals, distribution systems, and power plants - will
cost billions of dollars.
In China alone, the total amount to be spent on projects open to foreign investors in order to build domestic natural gas
infrastructure - upstream, midstream and downstream - could be as high as $25 bln over the next ten years.
MATURE MARKETS DIFFERENT
At the other end of the market maturity spectrum are the US and Europe. As markets mature and liberalise, marketing and
trading opportunities emerge. But these opportunities require different capabilities for success.
Instead of billions of dollars for investment in capital-intensive infrastructure projects, these markets require highly skilled
human resources and balance sheets capable of supporting the commercial risks and financial exposures.
Shell's most significant involvement in these areas is through Coral in the US, and Shell Energy in Europe. In these markets,
new technologies and business models are allowing us to develop innovative ways of meeting our customers' needs.As exciting and expansive as the opportunities I've outlined may seem, they are but a few of the wide variety of opportunities
I see in the world's natural gas business. I believe they add up to a significant new path forward for the global gas industry.
Ours is an industry of the future, not of the past.
BUT THERE ARE ALSO CHALLENGES
Delivering these opportunities and growth will not happen without overcoming a number of challenges. We will mention just
four:
a) The need to do business based on principles;
b) The need to contribute to sustainable development;
c) The need to get deregulation right;
d) The need to attract the necessary human resources.
A few decades back, when companies first started producing statements of business principles, there was considerable
cynicism. People thought they were just nice words - public relations material. We believe that, in the 21st century, they are
far more than that. We believe the Shell business principles, and the qualities we demonstrate, will be critical businessassets.
WORKING IN A DIFFERENT WORLD
Our world today is different. It is more global, transparent and fast moving. In this world, living by a clearly articulated set of
business principles is an advantage for our employees, our customers, our suppliers, our partners and the governments with
which we interact. The principles set the boundary conditions within which we do business.
Every commitment is important but, to me, of overriding importance is our commitment to sustainable development. This
commitment encompasses our belief that all we do must take into account not only the economic impact, but also the social
and environmental impact.
We know we can't do this alone. That's why our commitment relies heavily on working together with partners, governments
and local communities to ensure we strike the appropriate balance in all three areas of Sustainable Development.
Another continuing challenge will be to get deregulation right. The California debacle has illustrated for us many of the
potential pitfalls. It is now incumbent on us all - in government and industry - to work together to design systems that prevent
energy shortages or that discourage long term investment.
We must always keep in mind the ultimate aim of producing products and services more efficiently and reliably - andensuring long-term security.
The final challenge is attracting the human capital required to deliver the growth and value. As the number of natural gas
markets increase, and as more and more markets liberalise, the demand for experienced people in our industry rises.
And the demand is not limited to those in traditional natural gas fields such as pipeline engineers and technologists -
although these will remain important. We will also need increasing numbers of experienced international business
developers, regulatory experts, traders, IT systems specialists, and financiers.
Perhaps most importantly, we need strategists, asset operators, managers and marketers with local experience. Success
calls for a diverse work force - one well matched to the diverse markets that will be key to the future.
In summary, our industry is facing a broad range of opportunities. The Shell long- term energy scenarios indicate that
demand for clean, efficient energy is going to grow. And, natural gas, because of its environmental qualities, efficiency, and
technological advances, is going to play an increasingly important role.
But there will also be challenges - such as the attraction of the necessary human and financial capital. Anti globalization and
supply security add to these challenges.
But, the global demand for more and cleaner energy goes on. And I believe our industry is well positioned to meet the