Shell

Section 3.4 Petrochemical Nanotechnology

By: Sarah Mousaad, Nicholas Sanchez, Dennis Sullivan

Nanotechnology
1959: Envisioned by Richard Feynman
Engineering of systems at molecular level Enhanced properties

Familiar Examples: Carbon Nanotubes

Petrochemicals

Critical Issues
Demand for energy increase from about 400 EJ a year to 2000 to 640-750 by 2025. From: Engineering and Physical Sciences Research Council ( EPSRC). Report of the Nanotechnology Strategy Group. October 2006. Pg. 22. need for efficiency and sustainability Nanotechnology shows promising results

Strategy
Collaborative increased R&D investment Investment within infrastructure Critical mass of resources

Nanotechnology Potential
Potential to revolutionize oil and gas refining

One of the most promising and rapidly growing fields of R&D

Just now beginning to reveal practical applications Enhanced materials Gas separations Nonabsorbent fibers corrosion inhibitors light weight membranes used to filter impurities from heavy oil and tight gas

Justification
Production of more efficient, inexpensive, and environmentally sounds products Greater demand for harder to process crude oils Capacity to process them has not increased

Shell Technology Ventures Fund 1B.V.and NanoDynamics Inc. joint ventured

Implementation
Maintain world class research and development program aimed at realizing full potential of nanotechnology Facilitate products of new technologies in products Support responsible development of nanotechnology Develop educational resources, skilled workforce, and supporting infrastructure and tools to advance nanotechnology

Strategic Fit
Enhanced petrochemicals will Improve economies and environmental impact Modifying Olefins

Fluid additives sustain higher temperature pressure

Growth Opportunities
2050 - Nanotechnology on energy production, distribution, and consumption will be in traditional energy sector 2015 of newly designed materials & manufacturing processes will be built at the nanoscale level.

SPACE Analysis
Visual representation: Financial strength Competitive advantage Environmental stability Industry strength

Factors Determing Competitive Advantage Market Share Small Product Quality Inferior Product Life Cycle Late Product Replacement Cycle Variable Customer Loyalty Low Competitions Capacity Utilization Low Technological Know How Low Vertical Integration Low New Speed of Product Integration Slow Average-6 = R = Relative Importance of Factor C = Chance of Sustaining E = Combined Effect Critical Facotrs: -1.11

R 0 0 0 0 0 0 0 0 0 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 3 3 3 3 3 3 3 3 3 4 4 4 4 4 4 4 4 4 5 5 5 5 5 5 5 5 5 6 6 6 6 6 6 6 6 6 Large Superior Early Average High High High High High 9 9 8 4 7 3 9 8 7

C 0.8 0.9 0.5 0.6 0.7 0.6 0.9 0.7 0.5

E 7.2 8.1 4 2.4 4.9 1.8 8.1 5.6 3.5

Total:

45.6

Royal Dutch Shell has a significant amount of market share and is a leader in alternative energies. Important considerations include market share and technology accumalation. Integration of nanotechnology with petrochemicals requires surpurb product quality and technology innovation. Comments: Integration of nanotechnology with petrochemicals will increase market share, build customer confidence, and produce efficent and afforabale new products. R Small Inferior Late Variable Low Low Low Low Slow 2.89 0 0 0 0 0 0 0 0 0 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 3 3 3 3 3 3 3 3 3 4 4 4 4 4 4 4 4 4 5 5 5 5 5 5 5 5 5 6 6 6 6 6 6 6 6 6 High Balanced Solid Low High Easy Balanced Fast High 9 8 8 7 8 3 8 8 8 C 0.9 0.9 0.8 0.8 0.7 0.9 0.8 0.8 0.8 Total: E 8.1 7.2 6.4 5.6 5.6 2.7 6.4 6.4 6.4 54.8

Factors Determing Financial Strength Return on Investment Leverage Liquidity Capital Required Vs. Capital Available Cash Flow Ease of Exit from Market Risk involve in Business Inventory Turnover Economies of Scale & Experience Average = Critical Facotrs:

A significant amount of capital is required for the integration of advanced nanotechnology research and usage within petrochemicals. Royal Dutch Shell will have to focus on long term investment within capital and R&D. of nanotechnology with petrochemicals requires surpurb product Comments: Integration of advanced nanotechnology has risks and takes time for implementation. Royal Dutch Shell's increased investment in R&D and successful implementation of nanotechnology will allow for increased market share and reliable products.

Factors Determing Environmental Stability Technological Changes Small Rate of Inflation Inferior Demand Viability Late Price Range of Competing Products Variable Barries to entry into Market Low Competitive Pressure/Rilvary Low Price Elasticity of Demand Low pressure from substitue products Low Average-6 = R = Relative Importance of Factor C = Chance of Sustaining E = Combined Effect Critical Facotrs: -3.00

0 0 0 0 0 0 0 0

1 1 1 1 1 1 1 1

2 2 2 2 2 2 2 2

3 3 3 3 3 3 3 3

4 4 4 4 4 4 4 4

5 5 5 5 5 5 5 5

6 6 6 6 6 6 6 6

Large Superior Early Average High High High High

R C E 9 0.8 7.2 7 0.8 5.6 8 0.9 7.2 7 0.6 4.2 8 0.7 5.6 8 0.9 7.2 7 0.7 4.9 7 0.8 5.6 Total: 47.5

High infrastructure, capital and R&D costs has slowed market entry. As more investment goes into nanotechnology towards petrochemicals, competition will contiue to increase, allowing for better products Nanotechnologyis the future for advanced materials and substances. More efficent and sustainging petrochemicals will allow for increased market share. R C E 9 0.9 8.1 8 0.9 7.2 8 0.8 6.4 9 0.9 8.1 7 0.7 4.9 8 0.9 7.2 7 0.8 5.6 8 0.8 6.4 7 0.8 5.6 Total: 59.5

Comments:

Factors Determing Industry Strength Growth Potential Profit Potential Financial Sustainability Tehcnological Know-How Resource Utilization Capital Intensity Ease of Entry into Market Productivity, Capacity, Utilization Other: Manufacturer's Bargaining Power Average = Critical Facotrs:

Small Inferior Late Variable Low Low Low Low Slow 4.17

0 0 0 0 0 0 0 0 0

1 1 1 1 1 1 1 1 1

2 2 2 2 2 2 2 2 2

3 3 3 3 3 3 3 3 3

4 4 4 4 4 4 4 4 4

5 5 5 5 5 5 5 5 5

6 6 6 6 6 6 6 6 6

Large Superior Early Average High High High High High

The nanotechnology has an extremely large growth potential. Its availability to any market gives its industry a high demand for future investment. Capital is needed for long-term sustainable growth. Royal Dutch Shell's increased investment within nanotechnology is a strategic move for future growth in market share, customer satisfaction, reduced costs and more efficent products. The benefits and marvelous technological breakthroughs within nanotechnology in petrochemicals can bring revolutionary results and products.

Comments:

Source: Rowe, Alan J., Mason, Richard O., Dickel, Karl E., Mann, Richard B., Mockler, Robert J. Strategic Management. 4th Ed. Reading, MA: Addison-Wesley, p. 264. 1999.

Financial Strength 2.89

5 4

Industry Strength -4.17

Conservative

3 2 1

Aggressive

High -6 -5 -4 -3 -2 -1 -1 -2 -3 Defensive -4 Competitive Advantage -1.11 -5 Environmental Stability -3 Competitive 1 2 3 4 5 6

Comments: Royal Dutch Shell is generally in a strong competitive position. It is important for Shell to increase sales by continuing to invest in new technologies Source: Rowe, Alan J., Mason, Richard O., Dickel, Karl E., Mann, Richard B., Mockler, Robert J. Strategic Management. 9th Ed. Reading, MA: Addison- Wesley, p.265. 2008.

Industry
Late introduction or early growth stages Lack of real products in market may be deterrent for raising funds required for commercialization of products Companies are unable to sustain solely based on revenues Funding is vital to further research activities

Competitive Advantage
Vertically integrated operations
Global market Share Economies of scale Synergies Cross-marketing opportunities