Shell

What are TNCs and how do they influence energy?

TNCs are large companies which operate in multiple countries

The world's largest TNCs hold a lot of power and influence over governments in today's globalised world

However, their power can be used in a negative way to interfere with elections and put pressure on government to grant exploration rights

TNCs can be organised in 2 ways, vertically or horizontally

Most energy TNCs are organised vertically

This means that they own and run the organisation at every stage

TNCs role in energy exploration and production

TNCs are at the forefront of finding and extracting from resource frontiers

Many people blame TNCs for making the concept of the resource curse a reality for local people due to social and environmental exploitation

LIC governments are more easily influenced or corrupt

Background

Shell is an Anglo-Dutch TNC with its headquarters in the Netherlands but operates in 70 countries. it employs over 100,000 people and produces 3.1 million barrels or oil per day. Its main areas of production are in Niger Delta and South East Asia.

Shell is vertically integrated:

Exploration

Refining - Shell owns 47 refineries

Distribution and marketing - it has its own shipping tankers

Petrochemicals

Power generation

Increasingly move to renewables

Pros of Shell and TNCs

TNCs have a large role to play in helping LICs develop

Shell has spent over $12 billion in lower income countries supporting education, healthcare and economic prosperity

The Shell development corporation is based in Nigeria and has invested in improving maternal healthcare through building clinics and funds local apprenticeships as well as offering small loans to local businesspeople to help encourage development in the Delta.

$159 million has been spent on voluntary social projects worldwide since Shell began operating

TNCs meet the bulk of our needs and explore resource frontiers to help meet demand

In February 2020 Shell gained 70% interest in operating in the North Sea.

Investment in renewables is also present

Shell invests heavily in hydrogen energy and is improving wind and electric car charging points across HICs

Energy TNCs are also very lucrative

In 2013 Shell pain $20 billion globally in corporation tax

For LICs, this money is essential

Cons of Shell and TNCs

Environmental exploitation and the resource curse is very real if TNCs are present

The infamous Bodo oi spill in Nigeria caught international attention both due to the environmental damage but also due to Shell's reluctance to offer any compensation the the locals

Exploitation and production may not always have social and environmental considerations as the forefront

In 2008 a pipe owned by Shell was damaged, caused the single largest loss of mangrove habitat in history. Shell finally agreed to accept responsibility for the damage and paid out $55 million in 2015

This was 7 years after the event

Resource curse - socially

The Niger Delta contains Ogoniland, home to a community that fought back against Shell

Shell has extracted $30 billion worth of crude oil from the land of the Ogoni people since the 1950s. Oil revenue makes up 80% of the Nigerian economy and 1/2 of that comes from Shell

This has had its consquences from the Ogoni people, many of whom live without electricity or running water, who see none of the oil.

Power over governments

As the TNCs bring in so much money they have a huge amount of soft power over governments in both developing and developed countries

The oil giant Shell claimed it had inserted staff into all the main ministries of the Nigerian government, giving access to politician's every move in the oil-rich Niger Delta.

Oil makes up 88% of Nigeria's foreign exchange earnings. Through influencing the government TNCs can seek to keep environmental laws relaxed to make gaining exploration and extraction licences easier

In the UK there is hesitancy to tax profits of energy companies as they are so valuable to the UK economy

Shell and Tar Sands

Shell invested in Tar Sands and the development of new technology and resource frontiers as part of their business