Section 3.4 – Petrochemical NanotechnologyBy: Sarah Mousaad, Nicholas Sanchez, Dennis Sullivan

Shell

Nanotechnology1959: Envisioned by Richard FeynmanEngineering 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 infrastructureCritical mass of resources

Nanotechnology PotentialPotential to revolutionize oil and gas

refiningOne of the most promising and rapidly

growing fields of R&DJust now beginning to reveal practical

applicationsEnhanced materials

Gas separationsNonabsorbent fibers corrosion inhibitorslight weight membranes used to filter

impurities from heavy oil and tight gas

JustificationProduction of more efficient, inexpensive,

and environmentally sounds productsGreater demand for harder to process

crude oilsCapacity to process them has not

increasedShell 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 – ½ of newly designed materials & manufacturing processes will be built at the nanoscale level.

SPACE Analysis

Visual representation:

Financial strength Competitive advantageEnvironmental stabilityIndustry strength

Factors Determing Competitive Advantage R C EMarket Share Small 0 1 2 3 4 5 6 Large 9 0.8 7.2Product Quality Inferior 0 1 2 3 4 5 6 Superior 9 0.9 8.1Product Life Cycle Late 0 1 2 3 4 5 6 Early 8 0.5 4Product Replacement Cycle Variable 0 1 2 3 4 5 6 Average 4 0.6 2.4Customer Loyalty Low 0 1 2 3 4 5 6 High 7 0.7 4.9Competitions Capacity Utilization Low 0 1 2 3 4 5 6 High 3 0.6 1.8Technological Know How Low 0 1 2 3 4 5 6 High 9 0.9 8.1Vertical Integration Low 0 1 2 3 4 5 6 High 8 0.7 5.6New Speed of Product Integration Slow 0 1 2 3 4 5 6 High 7 0.5 3.5

Average-6 = -1.11Total: 45.6

R = Relative Importance of FactorC = Chance of SustainingE = Combined Effect

Critical Facotrs: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.

Factors Determing Financial Strength R C EReturn on Investment Small 0 1 2 3 4 5 6 High 9 0.9 8.1Leverage Inferior 0 1 2 3 4 5 6 Balanced 8 0.9 7.2Liquidity Late 0 1 2 3 4 5 6 Solid 8 0.8 6.4Capital Required Vs. Capital Available Variable 0 1 2 3 4 5 6 Low 7 0.8 5.6Cash Flow Low 0 1 2 3 4 5 6 High 8 0.7 5.6Ease of Exit from Market Low 0 1 2 3 4 5 6 Easy 3 0.9 2.7Risk involve in Business Low 0 1 2 3 4 5 6 Balanced 8 0.8 6.4Inventory Turnover Low 0 1 2 3 4 5 6 Fast 8 0.8 6.4Economies of Scale & Experience Slow 0 1 2 3 4 5 6 High 8 0.8 6.4

Average = 2.89 Total: 54.8

Critical Facotrs:A significant amount of capital is required for the integration of advancednanotechnology research and usage within petrochemicals. Royal DutchShell 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 forimplementation. Royal Dutch Shell's increased investment in R&D and successful implementation of nanotechnology will allow for increasedmarket share and reliable products.

Factors Determing Environmental Stability R C ETechnological Changes Small 0 1 2 3 4 5 6 Large 9 0.8 7.2Rate of Inflation Inferior 0 1 2 3 4 5 6 Superior 7 0.8 5.6Demand Viability Late 0 1 2 3 4 5 6 Early 8 0.9 7.2Price Range of Competing Products Variable 0 1 2 3 4 5 6 Average 7 0.6 4.2Barries to entry into Market Low 0 1 2 3 4 5 6 High 8 0.7 5.6Competitive Pressure/Rilvary Low 0 1 2 3 4 5 6 High 8 0.9 7.2Price Elasticity of Demand Low 0 1 2 3 4 5 6 High 7 0.7 4.9pressure from substitue products Low 0 1 2 3 4 5 6 High 7 0.8 5.6

Average-6 = -3.00 Total: 47.5

R = Relative Importance of FactorC = Chance of SustainingE = Combined Effect

Critical Facotrs: 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

Comments: Nanotechnologyis the future for advanced materials and substances. Moreefficent and sustainging petrochemicals will allow for increased market share.

Factors Determing Industry Strength R C EGrowth Potential Small 0 1 2 3 4 5 6 Large 9 0.9 8.1Profit Potential Inferior 0 1 2 3 4 5 6 Superior 8 0.9 7.2Financial Sustainability Late 0 1 2 3 4 5 6 Early 8 0.8 6.4Tehcnological Know-How Variable 0 1 2 3 4 5 6 Average 9 0.9 8.1Resource Utilization Low 0 1 2 3 4 5 6 High 7 0.7 4.9Capital Intensity Low 0 1 2 3 4 5 6 High 8 0.9 7.2Ease of Entry into Market Low 0 1 2 3 4 5 6 High 7 0.8 5.6Productivity, Capacity, Utilization Low 0 1 2 3 4 5 6 High 8 0.8 6.4Other: Manufacturer's Bargaining Power Slow 0 1 2 3 4 5 6 High 7 0.8 5.6

Average = 4.17 Total: 59.5

Critical Facotrs: The nanotechnology has an extremely large growth potential. Its availabilityto any market gives its industry a high demand for future investment. Capitalis needed for long-term sustainable growth.

Comments: Royal Dutch Shell's increased investment within nanotechnology is a strategicmove for future growth in market share, customer satisfaction, reduced costsand more efficent products. The benefits and marvelous technological breakthroughs within nanotechnology in petrochemicals can bring revolutionary results and products.

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 5 Industry Strength2.89 -4.17

4

Conservative 3 Aggressive

2

1High

-6 -5 -4 -3 -2 -1 1 2 3 4 5 6-1

-2

-3Defensive Competitive

-4

Competitive Advantage -5 Environmental Stability-1.11 -3

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.

IndustryLate introduction or early growth stagesLack 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 AdvantageVertically integrated operations

Global market Share Economies of scale Synergies Cross-marketing opportunities