The role of international energy companies in developing countries
“International energy companies make massive profits in the developing world by exploiting lower levels of environmental protection and lower wages.”
That’s a commonly held view. But is it the whole story? No one would deny that mistakes have been made in the relations between powerful energy companies and developing nations, but this should be balanced against the positive contribution that energy companies are making.
Developing countries have energy needs too
Developing countries are already an important market for energy companies and changing patterns of market growth mean they will become even more important in the future. By 2050, we expect developing countries will need five times more energy than today. Exploring for, and producing oil and gas around the world will be key to meeting this demand because of their affordability, convenience and abundance.
Working against energy poverty
From the perspective of the developed world it is very easy to take energy availability for granted. Most of our energy needs in the home can be satisfied by literally flicking a switch. But in the developing world, energy often comes in the form of ‘biomass’ fuels – wood, crop residues and animal dung. Collection of these fuels is hard work and time consuming, and burning these poorly-combusted fuels makes a significant contribution to greenhouse gas emissions. There is also a direct human cost, with the premature deaths of 1.6 million women and young children, largely from acute respiratory illnesses caused by the domestic pollution from using these fuels. That is a life lost every 20 seconds. Reducing poverty in the developing world and maintaining prosperity in today’s industrialised economies depends on expanding the supply of convenient and secure modern energy. International companies have a role to play to provide affordable and efficient energy.
Contributing to the wealth of developing countries
Our biggest contribution to society is through our products – the energy and petrochemicals that modern economies need. But our operations can also make a strong, positive contribution to developing countries: revenues for host governments, and jobs and income for staff, local contractors and suppliers:
In 2006, we paid governments over $17 billion in corporate taxes, and $1.6 billion in royalties. We collected $71 billion in excise duties and sales taxes on their behalf.
In developing countries, oil and natural gas revenues can bring widespread benefits. Managed well, the money can fund services such as schools and hospitals and diversify the economy. We encourage and support host governments’ efforts to use energy revenues wisely. See our section on 
Payments to governments.
Using local suppliers and contractors is also a way for us to encourage development. Based on an annual internal questionnaire to our senior country representatives, in 2006, we had programmes in place to promote the use of local suppliers in over 90% of the low and medium income countries where we operate. It is estimated that we spent approximately $10 billion on goods and services from locally owned companies in these countries. See our section on Buying Locally for more details.
For an overview this and other Social Performance data (including previous years), see our Social data table.
Helping human development
When an energy company works in the developing world, a large number of local employees are exposed to the technology and working practices of sophisticated modern organisations. Very often those skills can be transferred to other areas of entrepreneurial activity within the host country.
We can also help human development more directly. Based on an annual internal questionnaire to our senior country representatives it is estimated that we spent approximately $140 million on social investment activities in 2006. The largest programmes were in Nigeria and the USA. This amount is separate from the activities of the independent Shell Foundation.
Enabling developing countries to work with international companies gives them access to the best technology and working practices available today.
Enterprise solutions to poverty
The Shell Foundation, an independent UK registered charity, was established with an endowment of $250 million from Shell in 2000. It aims to apply business thinking and principles to helping solve social problems arising from the links between energy and poverty, energy and the environment, and the impact of globalisation on vulnerable communities. In the five years since it was set up, the Foundation has successfully developed a new model to empower entrepreneurs in developing countries to start businesses and grow the local economy. It has also piloted a successful market-driven response to Indoor Air Pollution, a little known global killer that takes the lives of 1.6 million poor people each year.
For more information see: www.shellfoundation.org - opens in a new window.
Millennium Development Goals
The United Nations’ Millennium Development Goals (MDGs) are eight specific development targets to be achieved by 2015. They include halving extreme poverty, providing universal primary education and reversing the spread of diseases such as HIV/AIDS. We provide details of how we are contributing to each of these goals in our section on Millennium Development Goals.
