Shell Petroleum Company Limited, United Kingdom - Assignment Example

Regents Shell Oil Company, United Kingdom by [Lecturer’s and Number] Shell Petroleum Company Limited UnitedKingdom Table of contents Contents Table of contents 2 Introduction. 3 Tax and Legal Operations of Shell UK. 3 Environment Pollution Challenges Facing Shell UK. 4 Future Research and Developments by Shell UK 7 References 9 Introduction. Shell Petroleum Company Limited, United Kingdom is one of the subsidiary companies of the Royal Dutch/Shell groups of companies. Shell UK is involved in the exploration and production of oil products, chemicals, gas, and power. The smaller divisions of the company specialize in exploration and production of hydrogen, coal, forestry and renewables. In the recent years, Shell has established itself as a successful company in the industry. Since its withdrawal from the Global Climate Coalition lobby group in1998, Shell Petroleum Company has strived to promote itself as a green company that cares about environmental pollution. The oil sector in the United Kingdom accounts for approximately 13.3 % of FTSE 100 [1]. In the United Kingdom, Shell Petroleum Company is ranked among the largest players in this oil industry. Shell Petroleum Company is one of the barometer companies of the United Kingdom’s economy. Therefore its failures and successes are likely to be reflected in economy of the United Kingdom (Shell.co.uk, 2014). Shell Oil Company contributes very much to the United Kingdom, not just by delivering energy, but also through tax revenues, employment, and investment that boost the economy of the country.  The company employs 6,500 people in the United Kingdom. The company aims to explore new gas and oil reserves to increase energy supply for the country. Shell UK, also provides conducive working environment for its employees to avoid fatalities associated with oil companies. Due to energy challenges, the company is striving to produce more natural gas since natural gas is cleaner than oil. In the 2013, Shell UK, produced the same volume of natural gas as that of oil. The company is continuing with intensive research to make its products safer for the environment. However, the challenge of environmental pollution is still persistent especially due to the production and consumption of non-renewable sources of energy (Shell.co.uk, 2014). Tax and Legal Operations of Shell UK. Corporations in the energy sector of the United Kingdom including Tullow, Shell, and BP use tactics that reduce the amount of tax they remit to the government. In 2011, tax was set by HMRC at 26%. The companies make huge profits, but the amount of tax they give to the government increases marginally and even falls in some cases. Oil companies in the country can avoid paying heavy tax by minimising the amount of profit that goes through the companies’ books in United Kingdom. Instead, they route the profit through international networks of subsidiaries. Moreover, the companies enjoy military and political support. At least four of the United Kingdom government departments offer unconditional business support to oil companies. The companies also supported by military convoys, intelligence-gathering, and lobbying. They also enjoy frequently involvement by high-level civil servants and ministers (Shell.co.uk, 2014). The United Kingdom government provides a lot of support to the oil companies including Shell. Shell UK and other oil companies are offered subsidised loans. The UK provides ample financial support to operations of oil extraction and transportation abroad through the Export Credit Guarantee Department (ECGD) and through the International Financial Institutions such as European Investment Bank, EBRD, and the World Bank Group. Shell UK and other oil companies in the country channel their cash flows through their networks of subsidiaries. Most of these operations are performed in high secrecy of the offshore jurisdictions. Shell UK is committed to tax havens, with many tax-dodging subsidiaries than its competitors. It has estimated 523 high-secrecy subsidiaries outside the country (Seddon, 2010). Environment Pollution Challenges Facing Shell UK. Shell UK and other oil companies have increased the production of petroleum products over years. The increased production of these products has increased pollution of the environment. The abundance and affordability of oil makes it a very reliable source of energy. Shell UK has tried different ways to produce cleaner petroleum products. However, producing clean and environment-friendly petroleum products is a challenge to Shell UK and other oil companies. Most people in the United Kingdom and rest of the world are not usually concerned with the source of the energy they consume but rather the reliability of the energy. Most industries depend heavily on this product because it is reliable. Using other forms of energy such as hydroelectricity would be very expensive to run these industries. Furthermore, hydroelectric power is prone to failures and could cause losses to these industries. Shell UK has increased its research to produce cleaner petroleum products, but the complexity of making clean petroleum products can be proved by the years it has taken. The demand and use of petroleum products increases gradually due to continuous industrialization in the United Kingdom. Other sources of energy cannot easily replace petroleum products. For instance, solar energy cannot produce enough energy to run heavy industries. It is also unreliable due to weather and climatic changes. Solar energy is not easy to store despite being renewable. Heavy industries require a stable supply of energy like diesel. This makes the industries’ income reliable and will be able to pay their workers while making profits. Many people all over the world earn their living out of petroleum products. Any measures meant to restrict the operations of oil companies such as Shell UK will definitely affect the lives of many people. There also many people employed due to the transportation and sale of petroleum that would be adversely affected the use of oil faces restrictions (Marriott, Kronick and Stockman, 2008). Combustion of petroleum products is a major cause of environmental pollution. When petroleum products are burnt in limited air supply, they produce carbon monoxide; a toxic gas that can cause mental confusion, dizziness, nausea and severe headaches. This can cause death if not treated in time. Carbon dioxide is another gas emitted by burning coal which pollutes air if not controlled properly. Researches indicate that the amount of carbon dioxide gas has increased to about 31% after pre-industrial revolution. The accumulating levels of these gases will lead to the melting of polar ice caps; normally referred to as global warming and has serious effects such as climatic changes and submergence of some dry lands. Shell UK and other oil industries faces criticism for such pollutions that are challenging to eliminate (Wrenn and Venosa, 2008). Other hazardous gases emitted from burning petroleum products include nitrogen oxides. These gases weaken human against diseases such as pneumonia and influenza. The gases cause lung irritation hence dangerous when released into the atmosphere. When they combine with air and water, they form nitric and nitrous acids which cause corrosion and destruction of soil structure. Moreover, the combustion of petroleum products produces sulphur dioxide gas which causes asthma in children. The sulphur dioxide gas combines with water and air forming sulphurous acid; commonly referred to as acid rain. Acid rain is corrosive and causes acidification of soil losing its structure and nutrients (Wrenn and Venosa, 2008). Emerging trends have increased the demand for petroleum products in UK and all over the world. These trends need for backup electricity that is generated using petrol and diesel generators. The raising demands for electronic devices are also increasing the demand for petroleum products. The manufacturing industries producing these devices are expanding while demanding more petroleum products supply. The consumers of these devices are also in need for more supply of electricity. For this reason, petroleum products are needed to supply enough power to cater for this uses resulting higher demand for petroleum products. Many people believed that the consumption of petroleum products will reduce with innovation of other sources of energy such as geothermal electricity and solar energy but these sources have not been able to replace petroleum products. In fact, the uses of petroleum products are increasing even after the improvement of these alternative sources of energy (Goodell, 2006). Environmentalists blame oil companies such as Shell UK for industrial spills. Industrial spills have polluted the environment especially those industries that use petroleum products. The residue that is produced when petroleum products are combusted is sometimes accidentally released into water bodies. The residue has many toxic chemicals that are harmful when released into the water. There have been many incidences of industrial sludge being spilled into rivers and other sources of water. These spills not only endanger the living organisms inhabiting in the water bodies such as fish and other aquatic organisms; but also risk the health of human beings who consume water from these sources. The deposited sludge often contains toxic elements such as arsenic which is very poisonous. Pollution of water bodies by industrial spillages destroys the ecosystem of the water bodies by killing living organisms (Wrenn and Venosa, 2008). Future Research and Developments by Shell UK The company is looking into projects that will drive growth and advancement of the company in the future. The entire Shell Group has about 30 projects under construction including the projects spearheaded by Shell UK. Shell UK is increasing its research to add more crude oil into its processing cycle due to the increasing demand for petroleum products. Adding more crude oil into the processing cycles implies that the company will increase the supply of oil products constantly in the next few decades. In October 2013, Shell UK cut the first steel that will be utilized for the hull of its ground-breaking of project that will manufacture floating LNG project. Shell UK is also planning to invest in carbon capture and storage projects that have been tried in Canada. The carbon capture and storage technology reduces environmental pollution since it reduces the carbon released into the atmosphere (Simpson, 1999). The company is increasing its investments in innovative projects that will be operational in the near future. The funds to invest in the innovative projects come from the prolific cash flows experienced by the company. The funds include the $175-200 billion of cash flows from Shell’s operating activities, with exclusion of the working capital movements, for the period2012-2015. The increasing cash flows are expected to improve the innovative projects planned by Shell UK. Shell has net capital investment that ranges from $120 to $130 billion. It also has a competitive dividend for its shareholders in United Kingdom and other countries. Looking further ahead, Shell UK is considering investing heavily in over thirty additional projects, in conjunction with the other companies and subsidiaries under the Shell Group. This aimed at giving the company attractive options for its longer term operations in the oil industry. The company seemed to be constrained by capital despite its huge cash flow in its attempt to take advantage of opportunities. The company thus aims to focus its resources to the sectors with the greatest potential (Seddon, 2010). Shell UK is planning to take advantage of the potential that is imminent in the integrated gas project. Integrated gas projects include the production of gas-to-liquids (GTL) and liquid natural gas (LNG). The research and development has been piloted and tested in other countries such as the Pearl plant. The integrated gas projects contributed a massive 40% Shell’s total earnings in 2012 when the project was in its initial stages of development. Integrated gas increases the company’s strengths in the exploration and production of better sources of petroleum energy. The exceptional expertise in the creation and marketing of valuable products has provided technical know-how in the management of huge projects. Growth of other companies under the Shell Group of companies benefits the company in exploration of new products and mines since the companies work under the same brand (Islam, Chhetri and Khan, 2010). Shell UK has grown over many years to become one of the prolific oil companies in the country. However, the growth and profitability of the company and other oil companies has faced criticism due to the continuous environmental pollution caused either directly or indirectly by these companies. Environmental hazards associated with petroleum products have been brought into the public’s attention which has in turn turned to environment conservation and protection organizations and agencies. The company is trying to produce environment friendly products, but the process is demanding in terms of skills. It is expected that future research will lead to development of petroleum products that are less destructive to the environment (Islam, Chhetri and Khan, 2010). References Islam, R., Chhetri, A. and Khan, M. (2010). The greening of petroleum operations. Hoboken, N.J.: John Wiley & Sons. Marriott, J., Kronick, C. and Stockman, L. (2008). BP and Shell. [London, Eng.]: Greenpeace. Seddon, D. (2010). Petrochemical economics. London: Imperial College Press. Shell.co.uk, (2014). Shell UK - Shell United Kingdom. [online] Available at: http://www.shell.co.uk/ [Accessed 24 Nov. 2014]. Simpson, R. (1999). Productivity in natural resource industries. Washington, D.C.: Resources for the Future. Wrenn, B. and Venosa, A. (2008). Dispersion of crude oil and petroleum products in freshwater. Cincinnati, Ohio: National Risk Management Research Laboratory, Office of Research and Development, U.S. Environmental Protection Agency. Read More