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1980s to the new millennium
In the 1980s, Shell grew through acquisition and started some of its challenging offshore exploration projects. During the 90s Shell founded its LNG business and at the beginning of the millennium it started moving into new growth areas in the East. In 2005, Royal Dutch and Shell Transport were unified under Royal Dutch Shell plc.
Growth through acquisition
In the 1980s, Shell sought to grow through acquisition. It bought out the remaining 30% shareholding in Shell Oil in 1985 to consolidate its American operations. This was a period of consolidation in the industry through mergers and acquisition activity – a necessary move as trading conditions became difficult. Shell also sold down its stockpile, anticipating to some extent the coming weakness in the oil price.
Plummeting oil prices
In 1986 the oil price collapsed. OPEC had lost power in the market place as other non-OPEC sources came on stream, including the North Sea output. It had initially tried to ignore price pressures through cutting production but it abandoned this strategy in late 1985 and turned on the taps. The price fell over the winter from $31 per barrel to $10.
After years of living with a high oil price, the Group had to adjust to low prices, requiring a change in the way it judged investment projects. The budget was halved within two years: the company had to work much harder to develop new projects more cheaply. Intensive research led to huge improvements in drilling techniques such as slim-hole drilling and directional drilling. The use of 3D seismic became widespread.
Global markets and new technologies
Troll production platform during its tow to site location 80 kilometres north west of Bergen in May 1995 (Copyright of A/S Norske Shell)
The 1980s saw the development of offshore exploration projects, which were in much more challenging conditions than had previously been attempted. The Troll field in Norway was one example; another was in the Gulf of Mexico where a new well was drilled at a depth of 2.3 kilometres, a new record.
In 1989, the Communist regimes of Eastern Europe collapsed, reopening these markets for Shell for the first time since the Second World War. The Group began to steadily accumulate assets; the first was a joint venture in auto retailing in Hungary, which rapidly grew to fifty outlets. But the more strategic ventures were in Russia which offered opportunities for joint production agreements as well as marketing.
The 1990s saw the technology of biomass fuels and Gas to Liquids make giant leaps forward. The basic technology had been established for several decades but the cheap, plentiful supplies of crude oil meant there had been little interest in developing it commercially. The opening of Shell’s Bintulu plant in Malaysia in 1993 was a pioneering step, a precursor to the importance Gas to Liquids was to play in the Group in the following decade.
Shell was criticised over the Brent Spar episode in 1995, which centred on its plans to dispose of the storage platform. The Group learned that public opinion had become much more sensitive to environmental issues. In the next decade, the Group worked much harder to open a dialogue with interested parties regarding its environmental impact and to develop good relations with the communities affected by its work.
Another problem to hit the Group arose from its presence in the Nigerian region of Ogoniland. The tribal minority in the Ogoni were aggrieved with the Nigerian government because they felt denied a proper share of federal revenues from the oil, and what they saw as other fundamental human rights. Their champion was the writer Ken Saro-Wiwa. The oil companies were targeted as “collaborators” with the corrupt government. Shell was accused of environmental despoiliation. The story achieved international notoriety when Saro-Wiwa and eight of his colleagues were sentenced to death by hanging for their activities.
Shell has since strived to follow a policy of demonstrating its community of interests and reciprocal good feeling with both the governments and the local populaces it deals with.
The 1990s were notable for Shell for the development of the LNG gas business. Improved transportation and rising demand made this area of the Group’s activities increasingly important and are expected to continue to do so in the first decades of the twenty-first century.
Meeting increasing energy demand
Shell headquarters in the Hague, Netherlands
The turn of the century saw Shell begin to move into new growth areas of the world – notably China and Russia. It has several huge oil and gas projects in development in Russia, at Salym and Sakhalin, and it has built a massive petrochemicals plant in China to supply its rapidly-growing consumer market. Oil exploration projects have become more complex as the Group finds itself working in increasingly hostile environments. Shell’s record of technological innovation is critical to its ability to partner national governments keen to exploit their natural resources.
The unification of Royal Dutch and Shell Transport and Trading – the birth of Royal Dutch Shell plc
In 2005, the Group underwent a major structural reorganisation as the near century old partnership between Royal Dutch and Shell Transport and Trading was dissolved and Shell unified its corporate structure under a single new holding company, Royal Dutch Shell plc. The headquarters of the new company are in the Hague. July 5, 2007 marked the first centenary of the original partnership.
Tackling the energy challenge
Looking back over 100 years of history, it has been an amazing journey. Mankind has managed to adapt, time and time again, through a century of rapid change and periodic upheaval. So has Shell. There are big challenges in the century ahead, as well. Shell and other energy companies must find more energy to help keep the world’s economy humming, as places like China and India expand at a rapid clip. And they must do so in ways that safeguard society and the environment.