Introduction to Oil and Gas Environment 3


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Introductionto Oil and Gas Environment

TheRoyal Dutch Shell Group was established from the union between theBritish Shell Transport &amp Trading Company and Netherland’sRoyal Dutch Petroleum firm. Up until 1900s, the two parent businessesexisted as legally distinct corporations. Currently, the Royal DutchShell stands as the world’s major and oldest venture. The owner,Marcus Samuel, took over the ownership from his father (Lawrence2002, p. 72).Through his skills in exploration and managerial competence, Samuelwas mindful of the benefit of dealing in kerosene in the emergingRussian oilfields to serve the large customer base in China. Hisunderstanding of the niche that existed in the exportation ofkerosene through the recently opened Suez made him to invest in newtankers which delivered over 4,500 tons of kerosene to Singapore andBangkok. Sequentially, Samuel founded the Royal Dutch Shell Group(Couplandand Brown 2004, p. 1325).The Royal Dutch Shell Group remains one of the most successful oilcompanies in the whole world because of the efficiency of itsmanagement structure.


Tobegin with, the management structure of Royal Dutch Shell Group isone that tends to strengthen the executive power of theadministrators by offering a vibrant line of authority. It splitsthe staff duties between the professional service organization andtrade center. Through this, it supports the executive purposes tohelp in the provision of customized services to firms within theventure. The fundamental philosophies of the company’sorganizational structure have always been reaffirmed. The RoyalDutch Shell’s management structure can also be looked at from anadministrative perspective. In other words, it can be viewed by howit is run. The daily management exercises of the firm are complexbecause they cover a series of executive mandates. Moreover, theframework through which it is run does not resemble the commonstructures in other oil firms. The Royal Dutch Shell Group’s formalstructure, when looked at from legal and proprietorship perspectives,comprises of various forms of corporate control and coordination. Themanagerial authority of the group is assigned to the board ofmanaging directors, which forms the company’s top administrativeteam. Similarly, the committee comprises five managing executives(Zadek2004, p. 136). Theyinclude the three-affiliate management panel in the headquarters ofRoyal Dutch Petroleum as well as the chairperson and the vice whoworks in the transport and trading sectors.

Theleadership of the board of managing directors rotates between thepremiers and the managing directors. During the rotation ofgovernance, the president takes over from the managing director whilethe vice chair becomes the chairperson. Since executive power isconferred to the board instead of one chief executive, the companysometimes lacks the solid individual control that characterizes otherofficers. The board of managing directors provides the key linkagebetween the governance structure and the executive branch of thecroup. In addition, the board of managing directors links the twoparent firms and the group’s holding corporations. The blend ofexecutive powers at the top, in conjunction with the operativeauthority spread in the 244 companies, implies that Royal Dutch ShellGroup remains highly devolved as opposed to other oil majors (Frynas2003, p. 278).

Nevertheless,the economic and technical representativeness of the oil industry hasalways resulted from the links between downstream and upstreamtechnological and financial activities. In this view, it is the roleof the service ventures to offer the needed coordination. Besides,Royal Dutch Shell has formed, with the assistance of McKinsey, aground structure within the various service firms to handle itsoperational ventures. The structure is perceived as a crucial elementof the company’s ability to enable the freedom of its companieswith concrete business coordination for regional shared aims. Theorganization’s matrix system has been in existence for a longperiod of time. The three scopes of the matrix are revealed by thechief executives of the firm, who are designated for the role ofcoordinators (Kolkand Levy 2001,p. 503). From as early as 1995, the senior management team has alwaysbeen composed of committee of managing directors including thechairperson, vice, three additional bosses, and functionalcoordinators. The functional coordinators comprises the director offinance, group treasurer, planning coordinator, industrial manager,human resource and organization planners, legal director, publicaffairs chief, research managers, as well as the heads in the Hagueand London offices (Boyle2002, p. 7).

Sectionsin the Royal Dutch Shell Group

1)Production and Drilling Department

Thegeneral objective of the production and drilling section is tosecurely supervise the group’s wells and its production operationsas a way of maximizing the value of production while complying withestablished government policies. The quality execution of this aimnecessitates most of the executives at this branch to have skills inboth petroleum and engineering. It is the reason why the departmentis sometimes referred to as the company’s petroleum-engineeringsubdivision. In other words, its core personnel and management arecharacteristically engineers in petroleum. Because of it largenature, The Royal Dutch Shell Group classifies the section in manycategories to suit the needs of reservoir engineers, productionengineers, and exploitation engineers. Because of this form oforganization, the exploitation engineers have the mandate ofaddressing how to cautiously exploit fields through drilling andimproved recovery devices (Forbesand O`Beirne 2013, p. 345). Theyorganize and review reasons for boring and the expenses involved thenadvice on mechanical stages of the drilling process.

Onthe other hand, the reservoir engineers assess the capacity of gasand oil reservoirs, compute retrieval and viability, and developapproaches of reaching final exploitation. They evaluate thepotential reserves in fields and wells. In addition, they work withprivate engineering firms to communicate progressive reports of theavailable reserves. The production engineers have the jurisdiction ofboth production and drilling. Their roles include the dailymanagement operations in the fields, such as boring, wellstructuring, production treatment and handling, as well as equipmentdesign selection. The geophysicists and geologists of explorationdepartments work in unity with the department of petroleumengineering to evaluate the drilling processes (Lawrence2002, p. 73).

Inseveral instances, the Royal Dutch Shell Group opts to contract thedrilling exercises to external drilling servicers instead of doingthe roles without any assistance. However, even while doing theoutsourcing, it is still left with the duty of operating all of itsequipment. In essence, it is unusual for proprietors of the RoyalDutch Shell Group to bring together and handle its drillingprocedures without seeking for external assistance even if it hasadequate funds to do so. Since the company owns and works with rigs,it is the responsibility of the drilling controllers to handle everyaspect of excavation, including repair of rigs, addition of tools,and transfer of equipment.

Inits typical form, the production and drilling department at RoyalDutch Shell Group has a production supervisor for every field. Also,there are gaugers and pumpers as individuals who estimate and devicestrategies of production. On the other hand, the maintenance,repairs, and machine-driven tasks are mainly conducted by expertsubcontractors. The company’s management structures differ from theroutine field operations where standard reservoir pressures areneeded to drive gas and oil into wells. Improved recovery involvessecondary retrieval procedures, such as water swamping, as well astertiary processes, including steam flooding (Spence2011, p. 59).

2)Marketing Department

Becauseof the size and organization of Royal Dutch Shell Group, it sells oiland gas through various departments of marketing. This necessitatesclose coordination between the administration and productiondepartments and marketing sction. The oil marketing has reached itsmature stage when likened with marketing of natural gas. This is thecase because, for several years, there has been no significantstructural change in the manner in which oil marketing should takeits course (Lawrence2002, p. 74).Usually, the marketing of oil is done in a 30-day contract whileselling takes at least two months before it reaches the finalconsumer.

Onthe other hand, the marketing of natural gas in Royal Dutch ShellGroup has undergone several changes in recent years. Moreover, themarketing of natural gas is still going through major modifications.Traditionally, the marketing process of both casing-head gas andnatural gas was not common as the elements were conveyed throughpipeline then sold to consumers (Spence2011, p. 59). However,the situation has changed and gas is now marketed by manufacturers,both small and large, to any type of customer.

CorporateSocial Responsibility

RoyalDutch Shell’s corporateand social responsibility board is one amongst the variouscommissions in the firm. Their interests and&nbspverdicts concerningthe company’s sustainability are merged into Shell’s structureto&nbspreinforce its operations and procedures within the areas ofoperation. The&nbspcorporateand social responsibility board was founded in 2005 with the clearrole of reviewing and advising on performance and policies againstthe general industry principles. Thecorporate and social responsibility team plays an imperative role incontrol by going through sustainability. They help the executivecouncil to realize progress in safety, social and environmentalperformance and their presence is indispensable to the energy segment(Spence2011, p. 60).&nbsp

Asa way of implementing corporate social responsibility, Royal DutchShell carries consistent in-depth appraisals of main parts of thebusiness and observers any important factors of public worry that arerelated to Shell. The firm analyzes a broad scope of sustainabilitymatters, including social, environmental, and health effects of itsprojects and operations. The company bases its corporate socialresponsibility on performance data and information that are obtainedfrom the surrounding communities. Major topics in the corporatesocial responsibility include human rights, climate change, as wellas management of process safety (Lawrence2002, p. 72).The corporate and social responsibility team assesses the company’ssustainability levels, audits results or the sustainable growthmetrics that are essential to the policymaking committees.

Ona yearly basis, the team visits communities to&nbspcommunicate withthem and to help consider whether the firm is putting ethics intopractice. Furthermore, during such social calls, they meet withofficials of the local communities as well as other interested groupsafter which they share their interpretations with the management fordecisions on how to assist in alleviating social issues. For example,in 2015, the group visited communities in&nbspCanada and the sitesof the planned liquefied natural gas (Kwee and Volberda 2011, p 985).Thereafter, they assisted in the evacuation process and built roadsfor the locals.

RoyalDutch group has made an inclusive contribution in the chemicalindustry in terms of corporate social responsibility. On the otherhand, in order to keep up with competition, the management needs toincorporate new policies such as effective marketing programs. Thiswould ensure an increase in sales, thereby, raising theorganization’s market shares. Additionally, it can providedifferent incentives within the retail sector to the consumers. Inorder to deal with the unpredictable industry, Royal Dutch Shellgroup needs to capitalize in research and development (Kwee andVolberda 2011, p 987).

Themarket of gas and oil industry is reasonably complex. However, ShellGroup still manages to engage successfully in chemicals and the otherventures. The corporation is actively employing management strategiesto develop additional ways of alternative energy. It aims to satisfythe growing consumer demands. Currently, competition has toughenedand Royal Dutch Shell is challenged with several entrants such asExxon Mobil and BP. Nonetheless, through effective managementstrategies, Royal Dutch Shell Group has maintained an active channelof distribution which helps it to serve the large sized globalmarket. The business targets at approaches of satisfying clientswhile at the same time it builds brand loyalty. Moreover, it is nowregarded as the market leader through its innovative practices. RoyalDutch Shell Group plans and achieves high-quality information systemswhich assist in improving decision-making and productivity to make itstay ahead of rivals (Romm and Curtis 2012, p. 181).


Boyle,E., 2002. A critical appraisal of the performance of Royal DutchShell as a learning organisation in the 1990s. TheLearning Organization,9(1),pp.6-18.

Coupland,C. and Brown, A.D., 2004. Constructing organizational identities onthe web: A case study of Royal Dutch/Shell. Journalof management studies,41(8),pp.1325-1347.

Frynas,J.G., 2003. Royal Dutch/Shell. NewPolitical Economy,8(2),pp.275-285.

Forbes,R.J. and O`Beirne, D.R., 2013. TheTechnical Development of the Royal Dutch/Shell: 1890-1940.Brill Archive.

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Spence,D.B., 2011. Corporate social responsibility in the oil and gasindustry: The importance of reputational risk. Chi.-KentL. Rev.,86,p.59.

Zadek,S., 2004. The path to corporate responsibility. Harvardbusiness review,82(12),pp.125- 133.