Supporting service activities
We centralise services to support our business and these are located where the required skills and expertise are available. This enables us to share specialised expertise and functional advice and reduce costs.
Operating companies using these centralised services pay a fee in line with industry practice. The fee is charged to the companies that benefit from the services, using methodologies endorsed by the OECD.
This is known as transfer pricing and is closely monitored by governments and tax authorities. They check that Group costs like these are allocated appropriately and not overinflated and charged to high-tax jurisdictions where they can be deducted from revenues and used to lower taxable profit.
Our centralised service activities include:
Finance and Data Operations
Finance and Data Operations is part of the Finance organisation that provides centralised data and compliance activities to the group. These centres provide the businesses with access to reliable data and analysis which allow them to understand their financial profile and performance.
The centres are in key hub locations such as Poland, the Philippines and India. The choice of location is based on available expertise and skilled staff, as well as costs which compare favourably to alternative third-party outsourcing solutions. The centres provide significant employment opportunities, with 7,500 staff worldwide. These activities may enjoy some local tax exemptions where, for example, certain employment levels are met.
Daily treasury operations include management of foreign exchange for the many different currencies that are needed by Shell around the world, advising and financing subsidiaries and joint ventures, and managing surplus funds and Shell’s bank accounts.
Financing oil and gas projects, which can take years to develop, requires significant capital. Our operating companies require a balance between equity and long-term loan funding. To provide loan financing we have capitalised lending entities in Bermuda, the Netherlands, Switzerland, Singapore and the UK.
Treasury reviews the funding needs of Shell’s operating companies on a case-by-case basis. Loans are made and interest is due on those loans in the same way as if those loans had been provided to that entity by an independent bank or financial institution. The funding offer and acceptance are made by the boards of the Shell lending and borrowing companies.
The oil and gas industry can face severe, low-frequency risks and there is often a requirement to be appropriately insured against such events. Globally, there are few insurers who are able to insure against some of these risks. Shell – like other major oil and gas organisations – self-insures most of its risk exposure. This means we maintain sufficient capital and reserves in a regulated entity.
In 2018, Shell’s insurance activities were carried out in Switzerland and Bermuda.
Our insurance activities use robust methodologies and processes to assess, mitigate and manage risk. This includes the valuation of risk so that it can be properly accounted for in decision-making, and analysis of the causes of losses so that they can be reduced in the future.
Shell companies have access to specialist expertise in long-term brand building, consistent brand strategy and global marketing campaigns. Supporting services also include advice on all intellectual property including patents, industrial design, copyright and trademarks. Local operating companies focus on local execution and on shorter-term marketing strategies tailored to their markets.
For more information on our trademark management, refer to the case study on Switzerland.