Shell Fracking

Topics: Petroleum, Natural gas, Coal Pages: 6 (1602 words) Published: January 29, 2014

How has Shell's new business strategy of
Fracking
affected sales growth and how will it affect the profit growth going forward?

(not done)
Word Count:____

Introduction:
Royal Dutch Shell or Shell, which it is commonly called, is a global company which seeks to be the leader in the gas and oil industry. Founded in 1907, Shell’s mission is to deliver the best value to its shareholders, while helping to meet energy demands all around the world. In addition to its role as an energy company, Shell strives to drive innovative ideas and to create technology solutions. One of these innovative ideas is known as “fracking”. Gaining financial information from Shell as it relates to the profits and losses due to fracking is difficult to acquire. Because of this we will need to analyze this method and consider its strengths and weaknesses along with its opportunities and threats in order to determine if it positively affects Shell’s profits.

Fracking Process

Fracking, also known as hydraulic fracturing, which is defined as a “procedure of creating fractures in rocks and rock formations by injecting a mixture of sand and water into the cracks to force underground to open further. The larger fissures allow more oil and gas to flow out of the formation and into the wellbore, from where it can be extracted.” A wellbore is a hole that forms the well for the purpose of extracting natural resources from the ground and is also known as a drillhole. This hole is often encased in steel or cement. Once the natural gas is extracted out of the grown Shell does different things with it. Some of the natural gasses are used to produce electricity to power homes, buildings and more.

SWOT Analysis

Strengths:
A strength of fracking is that it extracts more gas and oil than other techniques at a lower cost. Previously it was less expensive to use coal to generate electricity because the costs of extracting natural gas and oil were higher. Thanks to fracking, it now costs less for natural gas to generate electricity than it does for coal. Testosterone pit says that gas “plants have lower capital costs than coal plants—$600 to $700 per kW versus $1,400 to $2,000 kW” This has increased the amount of electricity being produced by natural gasses. As you can see from this graph the coal produced electricity has decreased from 2001 to 2012. The Natural Gas produced electricity has increased. Natural gas releases two to three times less carbon dioxide than coal does, making it a lot safer for the atmosphere. Because of the small amount of carbon dioxide that natural gas releases, the progression of global warming is slowed. In relation to other methods, fracking is reasonably cheap and may become the quintessential method for extraction of oil and gas. The strengths of fracking could potentially boost Shell’s profits along with entice more investors which would increase their performance in the market. However exact numbers of Shell’s profits from the fracking industry are unknown and not stated in their financial reports. We can only assume from the Gross Profit (below) that these strengths cause an increases in net profit.

Income Statement
2008
2009
2010
2011
2012
Gross Profit
(billion)
$60.673
$56.753
$70.518
$87,987
$85,695

Weaknesses:
These fracking weaknesses contribute to creating a poor image on fracking. These images … Tests on groundwater provide evidence that fracking creates pollution in the water source as well as in nearby wells. Also studies show that fracking has caused earthquakes, which can lead to injuries and property damage and many other problems. Some of these earthquakes, although small, can be the catalyst for larger, more dangerous earthquakes according to experts. The act of fracking consists of pumping a mix of water, sand and a small amount of lubricant into the ground. That lubricant contains harmful chemicals and once fracking is complete, the chemicals that...
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