1. INTRODUCTION________________________________________________
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Royal Dutch/Shell officially opened an oil extraction facility on June 19, 2003 in Alberta, Canada where an estimated 180billion barrels lie beneath the tar sands. With the plant rolling out less than 200 000 barrels per day at $12 each, the company faces increased competitive pressures and a growing number of uncertainties. At this point in time, the strategic decision must be made of whether to expand capacity in the tar sands and if so, when.
This study identifies key uncertainties and situational analysis tools to be used by Royal Dutch/Shell to answer the question of capacity expansion (See Figure 1). Uncertainties are classified into four levels with level one being low through to level four; the situation of true ambiguity (Courtney, Kirkland & Viguerie, 1997). “Residual uncertainties” which cannot be accurately predicted even with extensive analyses are of concern REFERENCE/cut out.
Figure 1: Table displaying major uncertainties faced by Royal Dutch/Shell, respective levels of uncertainty and situational analysis tools.
2. UNCERTAINTIES FACED BY ROYAL DUTCH/SHELL__________________________________
2.1 The Price of Oil and Investor Interest In Alberta
Oil price and investor interest can have a significant impact on the success or failure of oil production ventures in Alberta. With the cost of production remaining relatively stable it is the primarily the price of oil that determines the profitability of the oil industry in Alberta and investor interest. In this situation the price of oil and investor interest are intrinsically linked. Advocates pro utilization of this vast and largely untapped resource have assumed th ...