Shell Chemicals restucturing

Dec 17, 1996 01:00 AM

Shell Chemicals intends to minimize the impact of business cycles by the restructuring drive which has been in progress since 1990, reviewing to the portfolio management and increasing globalization. Shell will seek to improve those businesses which are not meeting requirements, through strategic alliances, joint ventures and investment. The aim is to achieve a truly global business based on profitability with growth. The global strategy is to expand investment with the emphasis on core business in, for example, olefins, derivatives and SM/PO. Programs are proposed for investments of about $7.5 billion in China, Singapore, Japan, Brazil and Mexico as well as Europe and the U.S. for the period up to 2000. As for the oil/petrochemical project in Huizhou, Guangdong Province in China, in which Shell aims to build an integrated oil refining and petrochemical complex, the feasibility study is complete, and the project now awaits the decision of the Chinese Government.
Traditionally Shell has been known for its decentralized management. However, it recognizes that its customers are more often serving international markets. Shell Chemical Europe has been set up to better coordinate business activities in Europe, and regional clusters have been formed for other parts of the world. Operating units will continue to play a vital front line role in local marketing activities. Shell Chemicals transferred polyolefins interests to Montell, a joint venture with Himont. It classified its existing businesses into those in which Shell has a leadership position in terms of cost (base petrochemicals), those in which they are the market leader (SM/PO, EO/EG, PET, etc.), new businesses (MMA, Carilon and etc.) and those that are not currently meeting expectations (GPR, PVC, epoxy resins). Of those which are not meeting expectations, Shell is seeking ways to improve them through joint venture, strategic alliances and investment. "Where businesses are seen to no longer fit with strategic objectives then we may take the view that they would be better off with another shareholder" says Evert Henkes, Director of Shell International Chemical Limited.
Shell is aiming to establish a business position which will be robust even at the bottom of the business cycle. Globalization of businesses and strengthening positions in core base petrochemicals where Shell has a cost advantage will be key. In Asia, Shell already has an ethylene plant joint venture in Singapore with Sumitomo Chemical and others. The second phase of this project involving an expansion in capacity is now nearing completion. SM/PO plant by joint investment with Mitsubishi Chemical is scheduled to complete during the first quarter of 1997. In Asia the company has a large-scale project in Huizhou, China. This project involves the building of a petrochemical complex integrated with an oil refinery of 8.0 mmtpy and an ethylene plant of 450,000 tpy. It involves investment of about over $ 5.0 bn. Shell will start works next year if the final approvals are granted soon from China's State Planning Board. If the project is not given the go-ahead then Shell will study investment opportunities in other countries in the region.

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