Our Business in 2005

Shell is a global group of energy and petrochemicals companies, operating in more than 140 countries and territories and employing approximately 109,000 people.

Exploration & Production

Oil Products & Chemicals

The Shell Exploration & Production business searches for and recovers oil and natural gas and is the foundation of the petroleum industry. Shell conducts exploration and production activities in more than 38 countries around the world and employs approximately 28,000 staff including contractors. In New Zealand, 400 people work in our exploration business, mainly in New Plymouth with local operator, Shell Todd Oil Services (STOS).

Shell’s Exploration and Production business here continues to be robust and activity levels are at their highest ever. Work in 2005 included development of Pohokura – a significant commercial gas/condensate field; drilling of the two Maui wells known as AD Ihi and East of Ihi, and pursuing other opportunities in the Maui and Kapuni fields. In 2005, Shell focused on maximising the recovery of reserves from its major assets and continued to look for ways to improve the efficiency of production processes.

Shell’s energy production in both liquids and gas helps power New Zealand. Production figures were down in 2005 as we looked to extend the life of Maui and prepared to bring on the Pohokura gas field. In 2005, approximately 42,000 barrels of oil equivalent per day (boe/d) were produced compared to 62,400 boe/d the previous year.

Shell is involved in the full supply chain, enabling it to use global resources to solve local business problems. For example, Shell used its worldwide resources and experience for the benefi t of the Maui Joint Venture in 2005, by mobilising the Nabors rig from the USA just four months after Hurricane Katrina caused major disruption to the North American rig market, to carry out the drilling work that began in 2006 off the Maui A platform. This was a considerable logistical feat given the signifi cant disruption caused by the natural disaster.

Shell remains focused on maximising the recovery of reserves from Maui and Kapuni, and bringing Pohokura onstream in 2006. One of the key developments in 2005, was Shell’s announcement that it wished to assume direct operatorship of the oil and gas assets in New Zealand in which Shell had a material equity interest.
While this has been temporarily put on hold pending legal action, Shell proposed these changes as it believes we can add substantial value to these oil and gas assets by moving away from the current operating structure.

This includes all the activities necessary to transform crude oil into Shell petroleum products and deliver them around the world. Shell Oil Products markets fuels and lubricants for domestic, industrial and transportation use. We refine, supply, trade and ship crude oil and petroleum products internationally, as well as providing technical consultancy and research services.

In meeting our customers’ needs, Shell travels 10 million kilometres per year and makes more than 160,000 deliveries. Our total oil inland trade (TOIT) for 2005 was 2.424 billion litres, slightly down on 2.472 billion litres in 2004.

Shell is the market leader in the three core sectors of the New Zealand oil products market. Our retail, commercial and bitumen customers benefit from a range of products that conform to the highest performance and environmental standards.

Global events again had a significant impact on the New Zealand market in 2005 with Hurricane Katrina affecting the global supply chain and rising crude and refined product prices making the local market particularly volatile. Despite this, we delivered competitive, high quality products and services. Shell again proved itself an industry leader, attaining number onein both market share and brand share of preference.

Shell actively managed fluctuations in demand and supply, ensuring we were able to bring competitive retail fuel prices to customers. Shell’s extensive retail network includes service stations owned by Shell New Zealand and stations operated by independent retailers. We place a strong emphasis on maintaining good relationships with independent operators, and developing our network-wide policies to achieve the ideal balance between the best fuel prices and quality service, thereby achieving increased market share and profitability. We appreciate the confidence that customers have shown in us, and will continue in our commitment to deliver the best possible fuel prices and high levels of service.

In 2005, Shell NZ also rolled out a new Global Retail Business Agreement. The Agreement is a plain English contract for Shell retailers that clearly explains the mutually beneficial relationship between Shell and cluster retailers. By the end of 2005, 78 sites were transferred onto the new agreement, with the rollout continuing in 2006.

Shell’s other businesses – including general and jet aviation, marine and LPG – all had a challenging year but provided positive returns. They remain a valuable part of Shell’s overall fuels and lubes on offer in New Zealand.

Our specialist chemicals business is an important part of our operations. It adds to the diverse products we offer domestic, commercial, and industrial customers throughout the country, and is an example of our dedication to deliver solutions across the full spectrum of the economy.

Shell New Zealand’s chemicals business both manufactures and imports products. The principal activities are the marketing of petrochemicals and the production of detergents. Shell's chemical facility at Gracefield in Lower Hutt, which manufactures detergent intermediates, celebrated 20 years in operation in 2005. It is the only remaining sulphonation unit in Shell Chemicals worldwide.

To enhance our service to petrochemical markets, we contracted additional bulk storage facilities at Mt Maunganui.

Another highlight of the year was Gracefield Chemist Matt Anderson applying Kiwi ingenuity to develop a mini-processing plant to provide laboratory scale detergent samples in an effi cient and cost-effective way. Matt and the Gracefield team used equipment from a closed UK laboratory to develop a scaled-down version of the larger commercial plant. This plant was subsequently developed into a viable commercial sample unit.

Further enhancing Gracefield’s global reputation, Matt then worked with the Shell Chemicals US Research Centre to create samples of development products.

Also in 2005, despite Hurricane Katrina in the US gulf causing supply problems for the chemicals business, both directly and indirectly, Shell New Zealand Chemicals managed to minimise the impact on local customers and industry.