Royal Dutch/Shell in Nigeria (A)

Harvard Business School Case #399-126

Case Software #XLS-178
Copyright 2011 President and Fellows of Harvard College. No part of this product may be
reproduced, stored in a retrieval system or transmitted in any form or by any meanselectronic,
mechanical, photocopying, recording or otherwisewithout the permission of Harvard Business
School.

Exhibit 2 Financial Summary19921994 (US$ million)a

1994
Income Data
Sales proceeds
Oil and gas
Chemicals
Coal
Other
Gross proceeds
Sales taxes, excise duties and similar levies
Net proceeds
Earnings by industry segment
Oil and gas: Exploration and Production
Refining and Marketing
Chemicals
Other industry segments
Earnings from operations
Corporate items
Minority interests
Net income for the yearb
Assets and Liabilities Data (at year end)
Total fixed and current assets
Net current assets
Total debt
Parent Companies' interest in Group net assets
Minority interests
Capital employed
Cash Flow Data (1992 and 1993 restated in 1994)
Cash flow provided by operating activities
Capital expenditure (including capitalized leases)
Cash flow used in investing activities
Cash flow provided by (used in) financing activities
Dividends paid
Increase/(Decrease) in cash and cash equivalents
Other Statistics
Net income as a percentage of average net assets
Return on average capital employedc
Total debt ratiod

1993

1992

116,027 112,977 114,295

11,069 10,102 10,499
531
570
1,212
1,482
2,165
2,414
129,109 125,814 128,420
34,279 30,641 31,795
94,830 95,173 96,625
2,363
3,193
534
(117)
5,951
433
(117)
6,267
107,852
7,786
11,610
56,142
1,880
69,632

3,000
2,648
(618)
(71)
4,959
(447)
(15)
4,497

3,227
2,202
(367)
(129)
4,933
490
(54)
5,369

99,830 100,819
6,753
6,770
11,541 12,270
51,591 51,851
1,563
1,329
64,695 65,450

11,718
9,482
7,199
321
3,890
1,425

10,272
8,355
7,363
(81)
3,608
(1,022)

12,543
9,104
7,906
763
3,874
775

11.5%
10.4%

8.7%
7.9%

9.7%
9.0%

16.7%

17.8%

18.7%

Source: Royal Dutch/Shell Annual Report, 1996.

a

Footnote missing.

If the cost of sales of the volumes sold in the period is based solely on the average cost of supplies incurred in
the same period (instead of using the first-in, first-out (FIFO) method of inventory accounting used by most Group
companies) and allowance is made for the estimated tax effects, earnings on this estimated current cost of
supplies basis would be as follows:
b

Oil and gas: Refining and Marketing

Chemicals
Earnings on an estimated current cost of supplies basis

3,082
534
6,156

2,989
(618)
4,838

2,772
(337)
5,469

Return on average capital employed is calculated as follows: net income plus minority interests plus total interest
expense, less tax on the interest expense as a percentage of average capital employed.
c

Total debt ratio is calculated as follows: total debt as a percentage of capital employed.

Exhibit 3 Equity Interests in the SPDC-Operated Joint Venture (1951995)

1958 4/1/73 4/1/74 7/1/79 8/1/79 6/30/89 7/1/93
3/31/73 3/31/74 6/30/79 7/31/79 6/29/89
6/30/93

Royal Dutch/Shell
50.0% 32.5%
22.5%
20%
20.0%
30.0%
30.0%
British Petroleum
50.0
32.5
22.5
20.0
Elf
5.0
10.0
Agip
5.0
5.0
NNPC (Nigerian government)
35.0
55
60.0
80.0
60.0
55.0

Source: Company information.

Exhibit 4 Who Gets WhatSPDC Joint Venture

Per Barrel
Costs
Shell
Elf/Agip
Government (through tax, royalty, and NNPC equity)

$4.50
0.70
0.30
9.50
15.00

Source: Company document.

NB: Private partners' share is insensitive to oil price movements between $12.50 and
$23.00 per barrel.

Exhibit 7 Selected Data on Nigerian Economy

Economic Structure (latest available figures)
Economic Indicators

1992

1993

1994

GDP at market prices N (billion)

Real GDP growth at market prices %

549.8
3.0

701.5
2.3

914.3
1.0

1,615.0
2.2

2,135.8
3.3b

Consumer price inflation %

44.6

57.2

57.0

72.8

28.0b

Populationc (million)

91.0

93.6

96.2

99.0

101.8

Exports fob $ (billion)

Imports fob $ (billion)
Current account $ (billion)
Reserves excluding gold $ (million)

11.79
7.18
2.27
967

9.91
6.66
-0.78
1,372

9.46
6.51
-2.13
1,386

10.64
8.22
-3.62
1,443

15.36
7.60
2.13
2,706d

Total external debt $ (billion)

29.02

30.70

33.49

36.1a

38.5

External debt-service ratio %

28.8

13.4

19.4

18.0

12.6

Crude oil production (million b/d)

1.88

1.91

1.90

1.93

2.06

Manufacturing output index 1990 = 100

111.0

99.7

89.2

83.7

84.8f

Average exchange rate (av) N:$

17.30

22.07

22.00

82.3g

81.0g

Origins of Gross Domestic Product 1995

Agriculture
Livestock
Crude petroleum
Manufacturing
Wholesale and retail trade
Government services
Finance and insurance
GDP at factor cost including others
Principal Exports 1995
Petroleum
Cocoa beans
Rubber

1995 1996a

% of Total
31.0
5.8
12.4
6.9
12.2
10.2
9.2
100.0
$ Billion
10.35
0.08
0.06

Principal Imports CIF 1995

$ Billion
Machinery and transport equipment
2.57
Chemicals
2.45
Manufactured goods
2.16

Textiles
Main Destinations of Exports 1995
U.S.A.
Spain
France
India
Germany

0.02
% of Total
39.4
8.9
6.3
4.9
4.9

Food and live animals

Main Origins of Imports 1995
United Kingdom
U.S.A.
Germany
France
Netherlands

1.09
% of Total
13.4
11.8
10.9
8.2
5.7

Source: The Economist Intelligence Unit, Country Report, Nigeria, First Quarter 1997.
a

EIU estimates.

Official estimate.

This series follows the official census held in November 1991. The UN estimated the population in mid-1994 at 108.5 million.

End-September.

Excluding condensates.

June.

Autonomous rate. The official rate, applicable to selected government transactions, remained at N21.9:$1.