Oil is often considered a political commodity, but there is
only a limited supply. Due to the Worlds’ dependence on oil as a
primary energy source, governments are becoming more and more
concerned about the availability of oil in the future. In the
global competition to secure energy sources, oil fields are
attracting an immense amount of interest from foreign investors.
The want and need for oil resources by industrialized, wealthy
nations has put an immense amount of power in the hands of oil-
reserve holding countries. About eighty percent of the worlds’
oil and gas reserves are held by state-owned enterprises, along
with governments. Most of the oil-reserve holding countries are
developing countries with evolving, fragile governments, which
causes risks and issues for foreign investors. Many political
issues are associated with the corruption and complications of
nations reliant on revenue from oil.
connotations applied are not always true for all corporations.
Both government stability and the increasing emergence of state-
owned oil enterprises can be beneficial and detrimental to
investors and suppliers. Shells investments and expansion in the
However, the negative
high-risk area of Sub-Saharan Africa, specifically Nigeria,
baffles business investors due to the risky political
instability that exists in those sectors. How has Shell been
able to succeed and excel in a location with so much instability
and risks?
Stability in an investment is a must for any rational
foreign investor. Being that oil is in constant demand and
affects the fortunes of governments’, serious political risks in
the investment of oil exist and should be considered. Even
though Africa is known to be labeled by business investors as
extremely unstable, Shell continues to be successful with their
investments in oil there. In particular, the political
instability in Nigeria carries a huge wave of risks for any
investor. Despite the risks, Nigeria is one of Shells main oil
contributors in the African region. One reason for Shells
confidence in their Nigerian location is that although their
government has had frequent and dramatic changes, the policies
involving the oil industry have not been altered.
The quality of oil is another key factor for foreign
investors. The quality of oil in Nigeria is much higher than the
oil found elsewhere. This is one of the main advantages that
Shell benefits from in its risky investment. Oil companies do
not only have to be concerned about the costs of extraction of
oil and its materials, but also the process of refining the oil.
The higher the oil