- Teaching Notes
During the 1990’s, world events, such as Russia’s increased oil production and Asia’s economic meltdown, caused excess oil supply and low world prices. This case reports actual efforts by Shell Gabon (SG), a wholly owned subsidiary of Royal Dutch Shell (RDS), a major Dutch oil company, to control its costs during that time period in order to obtain necessary funding for capital expenditures.
By 1996, most of the oil on land in SG’s region was depleted, and the number of barrels produced had decreased without a corresponding reduction in operating costs. Accordingly, the unit operating cost per barrel (UOC) increased. SG needed capital development funds from RDS to expand off shore operations. However, in its peer comparison, SG had one of the highest UOC and was ...