SHELL INDIA

Background
The Royal Dutch/Shell Group (‘Shell’) employs over 119,000 people worldwide and is a leading energy company of the world. Shell has five core businesses: Exploration and Production, Oil Products, Downstream Gas and Power, Chemicals and Renewables, and operates in more than 140 countries across the world. Shell had revenues of over US$ 201 billion in 2003. The Shell Group’s presence in India goes back over 75 years, when it operated in the country as the pioneering oil distribution company, through Burmah Shell, an alliance between the Burmah Oil Company and Asiatic Petroleum (India), in 1928. Shell returned to India with the incorporation of Bharat Shell, a 51:49 joint venture between Shell and Bharat Petroleum Corporation Limited in 1993. In 1996, Shell India Private Limited, a 100 per cent Shell-owned company, was incorporated to oversee the development of businesses in petroleum, natural gas, petrochemicals and renewable energy. The Group’s committed investments in different businesses in India total about US$ 850 million, making Shell one of the top FDI (foreign direct investment) investors in India. Shell currently has interests in natural gas (LNG), liquefied petroleum gas (LPG), lubricants, bitumen and solar energy in India and launched its retail fuel business in India in November 2004. Shell is the only international company to be granted approval by the Indian government for the retail fuels business in India till date. Shell’s US$ 650 million Hazira Port and LNG Terminal, in the Surat district of Gujarat is regarded as a key FDI project, building critical gas infrastructure. Shell has 10 registered companies in India.

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Factors for success
Innovation: Partnerships & business models tailored to local needs
Bharat Shell Limited is a lubricants joint venture between Shell Overseas Investments BV, an affiliate of the Royal Dutch Shell Group and BPCL. Bharat Shell has grown into a company with a turnover in excess of US$ 54.34 million in the local lubricants market. An investment of US$ 16.3 million has gone into the development of a state-of-the-art lube-oil blending plant at Taloja, outside Bombay. This is considered to be among the finest lube-oil blending plants in Asia. Bharat Shell manufactures and markets a range of Shell-branded lubricants in India. Shell lubricants are now available with over 20,000 Shell distributors and dealers, authorised service stations, workshops, select lubricant retail outlets, spare part shops and select BPCL retail outlets. Bharat Shell also services the demanding requirements of large industrial customers, and in its books, amongst many others, are Tata Steel, Tata Motors, Maruti Udyog, Steel Authority of India Limited, ONGC, the
SUCCESS STORIES

Jindal Group, Mahindra & Mahindra, Ford, Coal India Limited, Larsen & Toubro, Tamil Nadu Petro and Thermax. The Shell Group has set up the US$ 650 million Hazira LNG importation & regassification terminal ahead of market. The company is developing a commercial model for the Hazira LNG terminal tailored to local needs, with an innovative balance of short and long-term supply contracts. Shell is actively engaged in stakeholder deliberations on the nature of the regulatory regime in regard to India’s emerging natural gas sector. Shell Solar is actively engaging in partnerships with rural banks such as the Vysya Bank, Syndicate Bank, Canara Bank, the Nethravathi Grameena Bank and others, in order to facilitate finance options that match the cash inflows of customers. These options, coupled with the excellent quality of Shell’s solar panels and post-sales service, have made Shell Solar a trusted name in the rural and semi-urban solar markets.

Best practices from Shell worldwide
Shell has brought its international best practices into India via its local businesses. For example, the company
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entered the Indian lubricant market in 1994 and incorporated best multinational business practices in the area of lubricant blending, with the Lube Oil Blending Plant at Taloja being rated one of the best in Asia. Shell India has taken the following initiatives to ensure quality in manufacturing, production and distribution: • Base oils and additives, the two basic raw materials used in manufacturing lubricants, are procured either from Shell refineries or global sources approved by the Shell Research Centre. This gives it total control over raw material quality from source to finished product. • Products are formulated and tested as per Shell’s Lubricants Quality System. • Production processes are fully automated, which ensures accurate measurement and dosing of ingredients. First-in-first-out inventory movement of packs is ensured through a computerised system. While marketing its products to large industrial customers such as Tata Steel, Tata Motors, SKF, Steel Authority of India Limited and ONGC, Bharat Shell has also ensured that its products are available at spare-part shops, lubricant shops, authorised/ independent workshops and various retail outlets.

Best practice is not restricted to product quality & marketing, but also to health, safety and environment practices and social investments. Shell companies in India have invested considerable resources in truck safety and in promoting safe driving practices, which continue to be a top priority with all of its businesses, including LPG. Shell’s retail stations are modelled along its international lines; with all of the retail innovations that have been the hallmark of Shell’s retail fuels business globally. Shell had already shared its best practices in this arena, via the demonstration sites it set up in India in response to the request by the Indian Government in 1998-2000. Shell follows an ‘environment-friendly’ approach towards its retail stations. The risk towards leakage and groundwater contamination is minimised through underground tanks made up of double walled reinforced fibreglass, double walled flex pipelines with no joints and leak detection systems, some of these innovations being implemented for the first time in India.

Local investments
Shell entered the auto-fuelling segment by setting up its first retail outlet in Bangalore in November 2004. The company has been allowed to set up a network

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of 2000 petrol stations, which it will do in a phased manner. It has earmarked US$ 53 million for the first phase to set up a slew of outlets in Karnataka, Tamil Nadu and Andhra Pradesh. Earlier, Shell had been an active participant in the Government of India’s disinvestments plans for the oil and gas sector, but when the Government, for political reasons shelved these plans, Shell decided to develop its retail business by the organic route. Shell India has said that it will source petrol and diesel locally from MRPL for its upcoming stations and use the importation option only if there are strong commercial reasons for doing so. Shell has not announced any plans to enter the oil-refining business, in view of the excess refining capacity currently available in India. Shell’s Hazira terminal is a world-scale 5 million tonne per annum (mtpa) import terminal (the capacity of which can be raised to 10 mtpa) and an all-weather multi-cargo port. The LNG terminal will be able to deliver at full capacity, about one quarter of India’s annual gas consumption at today’s levels. Shell’s Hazira Project is currently the largest of Shell Group ventures in India. Another global major, Total Gaz Electricite of France has been inducted into the Hazira LNG business as a 26 per cent equity holder. The facility was commissioned in early 2005.

The development of the LNG port into a multicargo port will bring an additional investment of US$ 600 million into India. Shell is bringing in value-adding partners to support port development. Since 1997, Shell India has been manufacturing lubricants at its lubricant oil-blending plant at Taloja, near Mumbai (Bombay). The plant has a capacity of 55,000 metric tonnes per annum, and it is constructed to Shell’s global standards of safety, quality and environment. The industrial customers of Shell Gas are serviced directly by the company from a fullyowned import terminal at Pipavav, Gujarat. Shell India has also set up its bitumen business for manufacturing units for speciality bitumen (polymodified bitumen) in view of India’s ongoing infrastructure development activities.

Future plans
The Shell Group regards India as a strategic investment destination and the policies it adopted in business development have made Shell a preferred partner in India’s growth. This has been amply demonstrated by the outstanding successes achieved by Shell India in this transitional period in India’s energy sector.

SUCCESS STORIES

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