Shell's Alternative Business Models: Fracking

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Carlos Moura

EGS Individual Assignment
Shell’s Alternative Business Models: Hydraulic Fracturing

Table of Contents
1. Forward 2

2. Context 3

3. Hydraulic Fracturing4

4. Actors
4.1. Shell5.
4.2. Community6
4.3. Government 7

5. The opponents perspective7

6. Conclusion9

7. References 10

Word count: 1980
(excluding Table of Contents and References)

1. Forward
In June, 2010, an annual favorability poll by Gallup covering the 24 largest industries in the US, rated the oil industry 24th out of 24 for the seventh year in a row (Jones 2010). Despite multinational Oil and Gas companies having the most advanced social responsibility and governance programs across industries and being the largest investors in alternative energy sources globally, this sentiment is shared by many citizens and organizations worldwide. This case study forms part of a larger work on the ethical behavior of Shell Oil Company (hereafter referred to as Shell) which will be submitted by Syndicate 1, and focusses on the organization’s commitment to alternative business models. In addition to the core business of oil and its various sub-models, Shell has committed to two main business models to help them achieve “more energy, less carbon dioxide”, namely bio-fuels and gas. The focus of this paper is specifically on the gas model, and the sphere of discussion is further narrowed down to concentrate on the issue of Hydraulic Fracturing in the Karoo region of South Africa, as this reserve will represent a significant percentage of Shell’s gas potential in the region. The logic behind this is threefold. Firstly it helps to ‘thin-slice’ the very wide subject of alternative business models because the arguments and issues raised here can be applied to a variety of models. Secondly, it offers an opportunity to explore an ethically contentious issue, as will become increasingly common in modern business decision making. Lastly, the issue is current, local, and relates to a larger discourse which has been going on internationally for some years. The work follows interviews with executives of Shell based in Johannesburg, namely Bonang Mohale (General Manager), Stephanie Brown (Head of Legal) and Leon Lizamore (Strategy and Stakeholder Manager) who, as can be expected, were adept at echoing the company stance on the Karoo issue. Alternative sources of information however, offer another perspective. The paper begins by briefly explaining the context of gas as an alternative business model, and related to this, the process of Hydraulic Fracturing, or Fracking as it is more commonly known, is described. The positions of the actors in this issue are then outlined from an ethical perspective. Shell’s stance and justification for Fracking in the Karoo is offered. This is followed by the perspective of communities which will be affected by Shell’s operations, and the effect on broader society via the government. These conflicting interests are examined against latest findings on the subject which provides an objective backdrop before concluding. 2. Context

In order to meet the energy demands of a rapidly increasing global population for the next 25 years alone, the International Energy Agency (IEA) estimates that the world will need to invest some $38 trillion in infrastructure. Even with technological advances, supplying this energy will become increasingly difficult in an environment where human activity is progressively contributing to adverse climate change. With strong government support, renewable energy could meet up to 30% of the world’s energy demand by 2050 (compared to 13% today), but getting to that level would require unprecedented growth from new energy sources. Analysis shows that fossil fuels and nuclear energy could meet at least 70% of global demand in 2050 (Shell Sustainability Report 2011). In line with popular...
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