Royal Dutch Shell SWOT & PESTLE Analysis

Strength

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Weakness

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Opportunity

1. Rising demand for LNG worldwide: In 2018, there was rapid growth in LNG use due to demand for cleaner fuel in Asia. The demand worldwide increased by 27 million tons to 319 million tons. It is expected to rise to 384 million tons in 2020. Europe and Asia are expected to absorb the expected additional LNG supply of 35 million tons in 2019. China’s import of LNG rose by 16 million tons in 2018, an increase of 40% over 2017, due to urban air quality improvement efforts. By the end of 2018, Australia’s LNG exports were on par with those of Qatar. Both the countries are well positioned to supply LNG to developing countries across Asia. Shell is the largest marketer of LNG. It has competitive positions in Japan, China, South Korea, Jordan and Malta. Shell has developed the largest LNG liquefaction capacity through joint ventures. In 2020, due to COVID-19, the demand for LNG slowed down and grew by 1% as the entire global gas demand declined. However, the share of LNG in the global gas supply is expected to increase in the longer run, from 13% to 25% by 2050.

2. Positive outlook for the African oil and gas industry: Though Africa was the hardest hit region during the 2014-15 oil price crash, it has quickly revived. This revival was due to international and African oil companies adapting to the low-price environment and a partial recovery in the price of oil. By the end of 2017, Africa had an estimated 487.7 tcf of proven gas reserves, 7.1% of the global quantity. The continent also had 125 billion bbl of proven oil reserves. Shell has a large presence in Africa. In the early 1980s, Shell and Egyptian General Petroleum Corporation formed a joint venture named Badr Petroleum Company in Egypt. Shell and Endeavor Energy are developing a FSRU (Floating Storage Regasification Unit) in Ghana as part of a project to provide power to western part of Ghana. In 2019, Africa accounted for 8.8% of the global total oil production with Nigeria coming first with 2.2%, followed by Algeria, Angola and Libya.

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Threat

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Political

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Economic

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Social

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Technological

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Legal

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Environmental

1. Rising focus on sustainability across the world: The rising awareness on sustainability has made it imperative for companies to focus on sustainability initiatives. Such initiatives help in improving social perception of companies. Shell’s approach to sustainability is to provide clean energy solutions by balancing short term and long-term interests. The company implements sustainability concepts in its projects. Shell focuses the most on three of the UN’s sustainable development goals: goal 7 (access to affordable and sustainable energy), goal 8 (economic growth and decent work) and goal 13 (action on climate). In 2020, Shell managed to reduce net carbon footprint from 78 g CO2e/MJ to 75. Scope 1 GHG emissions went down to 63 million tons of CO2 from 73 in 2019. Upstream flaring saw a large reduction from 5.9 million tons of CO2 to 3.8 million tons in 2020.

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