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ROYAL DUTCH SHELL PLC<br />
STRATEGY UPDATE<br />
MARCH 16, 2010
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
Page 2 of 78<br />
PETER VOSER<br />
CHIEF EXECUTIVE OFFICER<br />
SIMON HENRY<br />
CHIEF FINANCIAL OFFICER
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
CONTENTS<br />
SLIDE: OPENING SLIDE ................................................................................................<br />
................................<br />
............................................................. 5<br />
SLIDE: PETER VOSER ................................<br />
................................................................................................<br />
................................................................. 6<br />
SLIDE: DEFINITIONS AND CAUTIONARY NOTE ................................................................<br />
........................................................... 7<br />
SLIDE: SHELL FINANCIAL PERFORMANCE AND PRIORITIES ................................................................<br />
........................................ 8<br />
SLIDE: OIL & REFINING OUTLOOK ................................................................................................<br />
........................................... 10<br />
SLIDE: NATURAL GAS OUTLOOK ................................................................................................<br />
................................<br />
............................................. 13<br />
SLIDE: REJUVENATING THE PORTFOLIO: 2004+ ................................................................<br />
...................................................... 15<br />
SLIDE: STRATEGY & CAPITAL ALLOCATION................................................................<br />
ALLOCATION<br />
.............................................................. 17<br />
SLIDE: STRATEGY TIMELINE ................................<br />
................................................................................................<br />
.................................................... 18<br />
SLIDE: PERFORMANCE FOCUS 2009-2010+ 2009 ................................................................<br />
............................................................. 19<br />
SLIDE: HSSE PRIORITY ................................<br />
................................................................................................<br />
............................................................. 20<br />
SLIDE: 2009-10 COST FOCUS ................................<br />
................................................................................................<br />
.................................................. 21<br />
SLIDE: COST FOCUS IN ACTION ................................<br />
................................................................................................<br />
............................................... 22<br />
SLIDE: OPERATING PERFORMANCE ................................................................................................<br />
........................................ 24<br />
SLIDE: PERFORMANCE RFORMANCE FOCUS: DELIVERY OF NEW PROJECTS ................................<br />
................................................................. 25<br />
SLIDE: DOWNSTREAM PROFITABILITY ................................................................................................<br />
.................................... 26<br />
SLIDE: STRENGTHENING DOWNSTREAM ................................................................<br />
................................................................ 28<br />
SLIDE: REDUCING REFINING EXPOSURE ................................................................................................<br />
.................................. 29<br />
SLIDE: MORE CONCENTRATED MARKETING POSITIONS ................................................................<br />
.......................................... 30<br />
SLIDE: UPGRADE CHEMICALS ASSETS EXAMPLE US GULF ................................................................<br />
....................................... 31<br />
SLIDE: GROWTH DELIVERY ................................<br />
................................................................................................<br />
..................................................... 32<br />
SLIDE: CONVERTING RESOURCES TO PRODUCTION ................................................................<br />
................................................ 33<br />
SLIDE: GROWING SEC PROVED RESERVES POSITION ................................................................<br />
............................................... 34<br />
SLIDE: DELIVERING ON NEW PROJECTS ................................................................................................<br />
.................................. 36<br />
SLIDE: ATHABASCA OIL SANDS PHASE 1 EXPANSION ................................................................<br />
.............................................. 37<br />
SLIDE: PROJECT PROGRESS IN QATAR: GTL + LNG ................................................................<br />
................................................... 38<br />
SLIDE: LEADERSHIP ERSHIP IN GLOBAL LNG................................................................................................<br />
LNG<br />
........................................ 39<br />
SLIDE: GROWING UPSTREAM PROFITABILITY + PRODUCTION................................<br />
PRODUCTION.................................................................<br />
40<br />
SLIDE: NEW GROWTH DOWNSTREAM MANUFACTURING ................................................................<br />
...................................... 41<br />
SLIDE: NEW GROWTH DOWNSTREAM MARKETING ................................................................<br />
................................................ 42<br />
Page 3 of 78
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
SLIDE:MATURING NEXT GENERATION PROJECT OPTIONS ................................................................<br />
....................................... 43<br />
SLIDE: GROWTH LANDSCAPE................................<br />
................................................................................................<br />
.................................................. 44<br />
SLIDE: 2009 EXPLORATION & APPRAISAL SUCCESS ................................................................<br />
................................................. 46<br />
SLIDE: DEEP WATER GULF OF MEXI MEXICO ................................................................................................<br />
................................... 47<br />
SLIDE: AUSTRALIA GAS: 2009 DRILLING SUCCESS ................................................................<br />
................................................... 48<br />
SLIDE: AUSTRALIA UNDERPINS NEXT TRANCHE OF SHELL LNG GROWTH ................................<br />
................................................ 49<br />
SLIDE: NORTH AMERICA TIGHT GAS: PORTFOLIO BUILD-UP................................................................<br />
BUILD<br />
.................................... 50<br />
SLIDE: NORTH NORTH AMERICA AMERICA TIGHT TIGHT GAS: GAS: GROWTH POTENTIAL POTENTIAL & COST PERFORMANCE PERFORMANCE ............................... 52<br />
SLIDE: NORTH AMERICA HEAVY OIL POTENTIAL ................................................................<br />
..................................................... 53<br />
SLIDE: PROGRESS WITH NEW IRAQ OPPORTUNITIES ................................................................<br />
.............................................. 55<br />
SLIDE: BIOFUELS: SHELL AND COSAN POTENTIAL ................................................................<br />
................................................... 56<br />
SLIDE: NEW PORTFOLIO OPTIONS FOR POST-2014 POST GROWTH................................................................<br />
.................................. 58<br />
SLIDE: SIMON HENRY ................................<br />
................................................................................................<br />
............................................................. 60<br />
SLIDE: FIVE YEAR PERFORMANCE TRACK RECORD ................................................................<br />
.................................................. 61<br />
SLIDE: CONVERTING INVESTMENT INTO CASH FLOW 2009 2009-12 ................................................................ ................................<br />
62<br />
SLIDE INVESTMENT AND BALANCE SHEET ................................................................<br />
.............................................................. 64<br />
SLIDE: EXPLORATION & DEVELOPMENT PLANS ................................................................<br />
...................................................... 67<br />
SLIDE UPSTREAM PSTREAM REGIONAL OUTLOOK ................................................................................................<br />
.................................. 68<br />
SLIDE: FINANCIAL FRAMEWORK ................................................................................................<br />
................................<br />
............................................. 71<br />
SLIDE: PETER VOSER ................................<br />
................................................................................................<br />
............................................................... 72<br />
SLIDE: STRATEGY TIMELINE ................................<br />
................................................................................................<br />
.................................................... 73<br />
SLIDE: SUMMARY ................................<br />
................................................................................................................................<br />
................................... 74<br />
SLIDE: Q&A ................................<br />
................................................................................................................................<br />
............................................ 75<br />
APPENDIX CHARTS ................................<br />
................................................................................................<br />
................................................................. 76<br />
Page 4 of 78
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
SLIDE: OPENING SLIDE<br />
ROYAL DUTCH SHELL PLC<br />
STRATEGY UPDATE<br />
LONDON<br />
MARCH 16, 2010<br />
INVESTOR PRESENTATION<br />
1 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
Page 5 of 78
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
SLIDE: PETER VOSER<br />
ROYAL DUTCH SHELL PLC<br />
PETER VOSER<br />
CHIEF EXECUTIVE OFFICER<br />
2 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
1. Ladies and gentlemen welcome welcome to the Royal Dutch<br />
Dutch<br />
<strong>Shell</strong> annual strategy update… update<br />
2. …and nd especially especially thank thank you you to to those those who who have<br />
travelled so far. far<br />
3. Simon imon and I will will take take you you through through where where we we are are in<br />
in<br />
<strong>Shell</strong>, and where we want to be. Then Then we we will will both both be<br />
joined by Malcolm, Marvin, Mark Mark and and Matthias Matthias to take<br />
your questions.<br />
Page 6 of 78
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
SLIDE: DEFINITIONS AND CAUTIONARY NOTE<br />
DEFINITIONS AND CAUTIONARY NOTE<br />
Reserves: : Our use of the term “reserves” in this presentation means SEC proved oil and gas reserves for all 2009 data, and includes bboth<br />
SEC proved oil and gas reserves and SEC proven mining<br />
reserves for 2007 and 2008 data.<br />
Resources: : Our use of the term “resources” in this presentation includes quantities of oil and gas not yet classified as SEC proved ooil<br />
and gas reserves or SEC proven mining reserves. Resources are<br />
consistent with the Society of Petroleum Engineers 2P and 2C definitions.<br />
Organic: : Our use of the term Organic includes SEC proved oil and gas reserves and SEC proven mining reserves (for 2007 and 2008) exc excluding changes resulting from acquisitions, divestments and<br />
year-end pricing impact.<br />
To facilitate a better understanding of underlying business performance, the financial results are also presented on an estim estimated current cost of supplies (CCS) basis as applied for the Oil Products and<br />
Chemicals segment earnings. Earnings on an estimated current cost of supplies basis provides useful information concerning tthe<br />
effect of changes in the cost of supplies on Royal Dutch <strong>Shell</strong>’s results<br />
of operations and is a measure to manage the performance of the Oil Products and Chemicals segments but is not a measure of ffinancial<br />
performance under IFRS.<br />
The companies in which Royal Dutch <strong>Shell</strong> plc directly and indirectly owns investments are separate entities. In this presenta presentation “<strong>Shell</strong>”, “<strong>Shell</strong> group” and “Royal Dutch <strong>Shell</strong>” are sometimes used for<br />
convenience where references are made to Royal Dutch <strong>Shell</strong> plc and its subsidiaries in general. Likewise, the words “we”, “us “us” and “our” are also used to refer to subsidiaries in general or to those<br />
who work for them. These expressions are also used where no useful purpose is served by identifying the particular company or companies. ‘‘Subsidiaries’’, “<strong>Shell</strong> subsidiaries” and “<strong>Shell</strong><br />
companies” as used in this presentation refer to companies in which Royal Dutch <strong>Shell</strong> either directly or indirectly has control, by having either a majority of the vvoting<br />
rights or the right to exercise a<br />
controlling influence. The companies in which <strong>Shell</strong> has significant influence but not control are referred to as “associated companies” or “associates” and companies in which <strong>Shell</strong> has joint control<br />
are referred to as “jointly controlled entities”. In this presentation, associates and jointly controlled entities are also referred to as “equity “equity-accounted investments”. The term “<strong>Shell</strong> interest” is used for<br />
convenience to indicate the direct and/or indirect (for example, through our 34% shareholding in Woodside Petroleum Ltd.) own ownership interest held by <strong>Shell</strong> in a venture, partnership or company,<br />
after exclusion of all third-party interest.<br />
This presentation contains forward-looking looking statements concerning the financial condition, results of operations and businesses oof<br />
Royal Dutch <strong>Shell</strong>. All statements other than statements of historical<br />
fact are, or may be deemed to be, forward-looking statements. Forward-looking looking statements are statements of future expectations tthat<br />
are based on management’s current expectations and<br />
assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to ddiffer<br />
materially from those expressed or implied in these statements.<br />
Forward-looking looking statements include, among other things, statements concerning the potential exposure of Royal Dutch <strong>Shell</strong> to mar market risks and statements expressing management’s expectations,<br />
beliefs, estimates, forecasts, projections and assumptions. These forward-looking looking statements are identified by their use of term terms and phrases such as ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, ‘‘estimate’’,<br />
‘‘expect’’, ‘‘intend’’, ‘‘may’’, ‘‘plan’’, ‘‘objectives’’, ‘‘outlook’’, ‘‘probably’’, ‘‘project’’, ‘‘will’’, ‘‘seek’’, ‘‘targ ‘‘target’’, ‘‘risks’’, ‘‘goals’’, ‘‘should’’ and similar terms and phrases. There are a number of<br />
factors that could affect the future operations of Royal Dutch <strong>Shell</strong> and could cause those results to differ materially from those expressed in the forward-looking statements included in this<br />
presentation, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for the <strong>Shell</strong>’s products; (c) currency fluctuations; (d) drilling and production<br />
results; (e) reserve estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition<br />
properties and targets, and successful negotiation and completion of such transactions; ( (i) the risk of doing business in developing countries and countries subject to international sanctions; (j)<br />
legislative, fiscal and regulatory developments including potential litigation and regulatory measures as a result of climate changes; (k) economic and financial market conditions in various countries<br />
and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with gover governmental entities, delays or advancements in the approval of projects and delays<br />
in the reimbursement for shared costs; and (m) changes in trading conditions. All forward forward-looking statements contained in this presentation are expressly qualified in their entirety by the cautionary<br />
statements contained or referred to in this section. Readers should not place undue reliance on forward forward-looking statements. Additional factors that may affect future results are contained in Royal<br />
Dutch <strong>Shell</strong>’s 20-F for the year ended 31 December, 2009 (available at www.shell.com/investor and www.sec.gov ). These factors also should be considered by the reader. Each forward-looking<br />
statement speaks only as of the date of this presentation, 16 March 2010. Neither Royal Dutch <strong>Shell</strong> nor any of its subsidiaries undertake any obligation to publicly update or revise an any forwardlooking<br />
statement as a result of new information, future events or other information. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking<br />
statements contained in this presentation. There can be no assurance that dividend payments will match or exceed those set out in this presentation in the future, or th that they will be made at all.<br />
The United States Securities and Exchange Commission (SEC) permits oil and gas companies, in their filings with the SEC, to ddisclose<br />
only proved reserves that a company has demonstrated by actual<br />
production or conclusive formation tests to be economically and legally producible under existing economic and operating cond conditions. We use certain terms in this presentation, such as resources and<br />
oil in place, that SEC's guidelines strictly prohibit us from including in filings with the SEC. U.S. Investors are urged to consider clos closely the disclosure in our Form 20-F, File No 1-32575, available on<br />
the SEC website www.sec.gov. You can also obtain these forms from the SEC by calling 11-800-SEC-0330.<br />
3 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
4. Firstly, please take a moment to look at the the disclaimer<br />
statement.<br />
5. We’ll cover quite a lot in this presentation, but before before I<br />
get into the details let me say that my priorities are all<br />
around profitable growth and a more competitive<br />
performance from <strong>Shell</strong>.<br />
6. We have plans in place to reduce cos costs ts and sell down<br />
non-core core positions.<br />
7. Growth to 2012 will drive a substantial step-up step in cash<br />
flow...around ...around 50% higher in a $60 per barrel oil price<br />
world, and at least 80% more in a $80 per barrel oil<br />
price world.<br />
8. All this is underpinned by a new wave of project start-<br />
ups in Qatar, North America and Asia-Pacific. Pacific.<br />
Page 7 of 78
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
9. And beyond beyond that, that, we we have an upstream portfolio that<br />
can grow to at least 2020 and some interesting<br />
downstream opportunities<br />
opportunities.<br />
10. We have come a long way, but there is much<br />
more to do at t <strong>Shell</strong>, and I am very energized around<br />
that.<br />
SLIDE: SHELL FINANCIAL PERFORMANCE AND<br />
PRIORITIES<br />
FINANCIAL PERFORMANCE AND PRIORITIES<br />
EARNINGS<br />
$ Bln<br />
35<br />
30<br />
25<br />
20<br />
15<br />
10<br />
5<br />
0<br />
-5<br />
UPSTREAM<br />
DOWNSTREAM<br />
CURRENT COST OF SUPPLY REPORTED EARNINGS<br />
4 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
Page 8 of 78<br />
2005 2006 2007 2008<br />
CORPORATE<br />
DIVESTMENTS/OTHER<br />
2009<br />
PRIORITIES<br />
COMPETITIVE PERFORMANCE<br />
PROFITABLE GROWTH<br />
SHARPER DELIVERY
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
11. Let me me start with the financial performance.<br />
Earnings have have averaged over $20 billion per year over<br />
the last last five years, but fell sharply in 2009 2009 due due to to the<br />
recession, despite <strong>Shell</strong>'s self self-help help programmes and<br />
$2 billion of cost savings.<br />
12. Although oil oil companies companies have been cushioned cushioned<br />
from the downturn by OPEC's actions, , <strong>Shell</strong> has been<br />
disadvantaged recently, due to higher higher exposure exposure to<br />
to<br />
refining and natural gas, where margins are hard- hard<br />
wired to the economy.<br />
13. We don’t rely on a recovery in the macro<br />
environment.<br />
14. It is what it is.<br />
15. So we are sharpening up.<br />
16. Let me set out the priorities for everyone in <strong>Shell</strong>.<br />
17. We have a talented workforce workforce at at <strong>Shell</strong> <strong>Shell</strong> with with a very<br />
good intellectual horsepower and drive, and strong<br />
business acumen.<br />
18. But when when I I became became CEO CEO in in the the middle middle of last<br />
year, I did think that the organisation of the company<br />
was working against us.<br />
19. <strong>Shell</strong> had become too complicated, and a slower<br />
than I’d like, and working on too many areas reas and<br />
options.<br />
20. So we we started started to change change that that with with the<br />
the<br />
reorganization last last year, year, which which I I called called Transition<br />
Transition<br />
2009. That That reorganization reorganization is now complete, complete, but we<br />
don’t stand still here.<br />
Page 9 of 78
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
21. Shareholders are investing in <strong>Shell</strong> <strong>Shell</strong> for for profitable<br />
growth…<br />
22. …and so o are we. w<br />
23. This is all about about cash cash flow flow from operations,<br />
operations,<br />
investment in new projects, and cash returns to<br />
to<br />
shareholders.<br />
24. …and I want to to see sharper sharper delivery delivery of of our<br />
our<br />
strategy, and an a even more commercial focus in<br />
everything that we do.<br />
25. Let me me make some comments about the oil & gas<br />
outlook<br />
SLIDE: OIL & REFINING OUTLOOK<br />
OIL & REFINING OUTLOOK<br />
CRUDE OIL SUPPLY<br />
Global oil production million boe/d<br />
120<br />
80<br />
40<br />
0<br />
1990 2000 2007 2020 2030<br />
SOURCE: IEA<br />
REFINING CAPACITY<br />
Million bbl/d<br />
15<br />
10<br />
5<br />
0<br />
5 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
26. Firstly on oil markets.<br />
Page 10 of 78<br />
Currently producing<br />
fields<br />
Crude oil to be<br />
developed or found<br />
Unconventional oil<br />
NGLs<br />
2000 2002 2004 2006 2008 2010 E<br />
SPARE REFINING CAPACITY<br />
GLOBAL REFINING<br />
MARGINS (RHS)<br />
SHELL ANALYSIS<br />
$/bbl<br />
8<br />
6<br />
4<br />
2<br />
0<br />
� Robust oil demand expected for medium<br />
term<br />
� Natural field decline drives sustained<br />
industry upstream investment<br />
� Oil expected to trade in $50-$90/bbl<br />
range<br />
� Refining industry excess capacity
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
27. Looking at the the short term. The The International<br />
International<br />
Energy Agency Agency expects 1.6 million barrel barrels barrel per day of<br />
oil demand growth in 2010, after a decline in 2009.<br />
28. This is an improvement, but oil market<br />
fundamentals do remain weak in the short-term. short<br />
29. With OPEC spare spare capacity around 6 6 million<br />
barrels per day day, OPEC will likely be managing against<br />
the downside again this year.<br />
30. Looking into the medium term, the oil oil market<br />
picture is more positi positive, ve, with demand growth driven by<br />
the non-OECD, OECD, and natural field field declines declines. declines<br />
31. By 2020, the world world will will need need about about 40 40 million<br />
million<br />
barrels per day of new oil production on stream, from<br />
fields that haven’t been developed yet.<br />
32. To give you some perspective, 40 40 millio million millio barrels<br />
per day is equivalent to about 4 times Saudi Arabia, or<br />
or<br />
10 UK and Norway North Seas.<br />
33. These are not new observations. But it is a huge<br />
challenge for for the the industry, and and an opportunity for<br />
<strong>Shell</strong>.<br />
34. You can have a a big debate about oil prices. For<br />
us, it is about long term trends, and we we expect oil price<br />
averages typically in the $50-$90 $50 per barrel range…of<br />
course with short short-term term peaks and troughs.<br />
35. Demand emand erosion comes in at the top end, and<br />
replacement cost supports support the bottom end.<br />
36. We screen all Shel <strong>Shell</strong>’s oil projects inside this<br />
range.<br />
Page 11 of 78
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
37. Now, on refining.<br />
38. This is an industry industry that that normally normally moves moves on 5 to 7<br />
7<br />
year cycles.<br />
39. We saw about 2 million barrels per day of new<br />
refining capacity capacity in in the the market market in in 2009, at a time when<br />
demand is under pressure. The result is the weakest<br />
refining environment for over 20 years.<br />
40. It remains to be seen how quickly industry refining<br />
margins will recover, and and we we continue continue to reduce<br />
<strong>Shell</strong>’s refining portfolio.<br />
41. Turning to natural gas gas.<br />
Page 12 of 78
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
SLIDE: NATURAL GAS OUTLOOK<br />
NATURAL GAS OUTLOOK<br />
NATURAL GAS DEMAND GROWTH<br />
BCM<br />
3,000<br />
2,500<br />
2,000<br />
1990 2000<br />
SOURCE: IEA<br />
NATURAL GAS ADVANTAGE: EXAMPLE CCGT<br />
� Abundant global gas resources ~250 years<br />
reserves at current production<br />
� CCGT: gas-fired fired power compared to coal:<br />
CCGT: COMBINED CYCLE GAS TURBINE<br />
6 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
42. Short-term, term, wwe<br />
e are seeing pressure on natural<br />
gas margins from weak demand globally from the<br />
recession, and a 220%<br />
% increase in worldwide industry<br />
LNG capacity in 2009 2009-10.<br />
43. However, we believe that the medium-term<br />
medium<br />
outlook for natural gas does remain positive and this is<br />
a strong growth theme for <strong>Shell</strong>.<br />
44. From a customer perspective, which is is mostly<br />
mostly<br />
the electrical electrical power power generators, gas gas has a a scale, and<br />
a cost advantage over over other types of of fuel, with with low<br />
emissions.<br />
Page 13 of 78<br />
• 40% more energy efficient<br />
• 50-70% less CO2<br />
2010E<br />
• CCS retrofit at similar cost per MWh<br />
• Better complements with wind power<br />
SHELL GAS CAPABILITIES<br />
ATTRACTIVE ECONOMICS FOR ELECTRICITY PRODUCERS<br />
$/MW hour<br />
Solar Thermal<br />
Wind<br />
Nuclear<br />
Coal<br />
CCGT<br />
SOURCE: SHELL ANALYSIS BASED ON EU DATA<br />
GALLINA LNG SHIP<br />
GALLINA LNG SHIP - SINGAPORE<br />
0 50 100 150 200<br />
CAPITAL COST<br />
LONG-RUN MARGINAL COST
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
45. For long distance gas, such as supply into North<br />
Asia and Europe, Europe, we expect that industry will continue<br />
continue<br />
to prefer long term contracts contracts rather rather than spot, spot, to<br />
to<br />
guarantee security of supply from capital intensive gas<br />
projects.<br />
46. Spot markets are attractive in self-supplying supplying<br />
markets and during recessions, but these are a not<br />
deep markets, and you can have substantial price<br />
price<br />
spikes in the up up-cycle, cycle, which is not good news for<br />
customers.<br />
47. For U.S. gas prices, we expect prices typically in<br />
a $4 - $8 range range, with shorter-term term highs and lows. We<br />
plan our North American gas pro projects jects within this<br />
range.<br />
48. So those those are are some some comments on on the the macro.<br />
Positive on on medium term term oil oil & & gas gas markets, strong<br />
strong<br />
cyclicality in downstream, and downside risks across<br />
the board in the 2010 recession.<br />
49. Turning to strategy.<br />
Page 14 of 78
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
SLIDE: REJUVENATING THE PORTFOLIO: PORTFOLI : 2004+<br />
REJUVENATING THE PORTFOLIO:<br />
2004+<br />
Nigeria T6<br />
Corrib<br />
Kashagan<br />
Phase 1<br />
Delaware City<br />
refinery<br />
Angola Block 18<br />
NWS T4<br />
Nanhai<br />
2004 2005<br />
2006 2007<br />
7 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
50. <strong>Shell</strong> has has come come a a long long way in the last last 5 years.<br />
years.<br />
51. We have seen large swings swings in in oil prices, but we<br />
we<br />
have kept a steady course with strategy to to create long<br />
term shareholder value value with with an an organic organic growth growth plan.<br />
52. Returns eturns to shareholders were more than $70<br />
billion.<br />
53. Total capital investment in the last five years was<br />
$140 billion, on, which was 90% higher than the prior five<br />
year period.<br />
54. We have corrected for the the underinvestment in the<br />
the<br />
past, launching new projects in in upstream and<br />
and<br />
downstream.<br />
Page 15 of 78<br />
Gbaran<br />
Harweel Ubie Ph 1<br />
Afam Gas Bonga NW<br />
Changbei NWS T5/Angel<br />
Bakersfield<br />
refinery<br />
Intergen<br />
Gasunie<br />
Salym<br />
Bonga Main<br />
Nigeria T4<br />
Qalhat LNG<br />
Pearl GTL BC-10<br />
QatarGas 4 Perdido<br />
Gumusut<br />
AOSP Expansion 1<br />
Ursa Princess Singapore<br />
Waterflood Chemicals<br />
Port Arthur<br />
North Rankin B<br />
Retail JVs<br />
Turkey/<br />
Ukraine<br />
Erha Main<br />
Nigeria T5<br />
2008<br />
Gorgon LNG<br />
Caesar Tonga<br />
LA refinery<br />
<strong>Shell</strong> Canada<br />
Minorities<br />
RAG<br />
Duvernay<br />
Skarv/Idun<br />
Arrow assets<br />
French refineries<br />
NOGAT<br />
Nigeria ABO<br />
Sakhalin dilution<br />
BEB<br />
Nigeria T6 NWS T5/Angel<br />
Ormen Lange<br />
Changbei<br />
Deimos<br />
Afam Gas<br />
Ursa Princess<br />
Waterflood<br />
BC-10<br />
Sakhalin<br />
Final<br />
Investment<br />
Decisions<br />
Acquisitions<br />
(Disposals)<br />
2009<br />
Start-ups
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
55. At the same time, we have refreshed the portfolio<br />
with $16 billion billion of of selective selective acquisitions in<br />
undeveloped d upstream and growth growth downstream<br />
positions, and sold $ $30 billion of non-core core assets assets.<br />
56. We rebuilt our project delivery capabilities - new<br />
people and new training…<br />
57. ….and .and we improved our longer term options, with<br />
a step up in exploration spending and and R&D<br />
R&D<br />
investment.<br />
58. I think today <strong>Shell</strong> is an industry leader in<br />
technology and innovation.<br />
59. So good good progress. But where are we going from<br />
here?<br />
60. Let me summarize it it.<br />
Page 16 of 78
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
SLIDE: STRATEGY & CAPITAL ALLOCATION<br />
STRATEGY & CAPITAL ALLOCATION<br />
Upstream<br />
� Profitable growth; price upside<br />
� >80% of total capital spending<br />
� Sustained exploration investment<br />
Downstream<br />
� Stable capital employed<br />
� Fewer refineries; upgrade chemicals assets<br />
� More concentrated marketing positions<br />
Financial outlook<br />
� Generating surplus cashflow through cycle<br />
� Investing for growth; competitive payout<br />
� Substantial cashflow growth<br />
8 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
61. Upstream, we stick to the strategy strategy of of growth<br />
investment, with a strong focus on exploration. exploration<br />
62. Downstream, I expect stable capital employed, an<br />
improvement in the manufacturing portfolio, and more<br />
focus in marketing.<br />
63. On the financial inancial side, and and Simon Simon will give you all<br />
the details details later, later, I I want <strong>Shell</strong> <strong>Shell</strong> to to be positioned to make<br />
growth investments and to generate surplus cash flow<br />
after capital investment and dividends across the<br />
cycle.<br />
64. Turning to timeline.<br />
Page 17 of 78<br />
CAPITAL EMPLOYED<br />
$ Bln<br />
200<br />
150<br />
100<br />
Technology – People – Operating Performance<br />
50<br />
0<br />
2009 2012<br />
UPSTREAM<br />
DOWNSTREAM<br />
100%<br />
75%<br />
50%<br />
25%<br />
0%<br />
2009 2012<br />
EUROPE AMERICAS<br />
ASIA PACIFIC OTHERS
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
SLIDE: STRATEGY TIMELINE<br />
STRATEGY TIMELINE<br />
REJUVENATING PORTFOLIO:<br />
UPSTREAM & DOWNSTREAM<br />
2004 2008<br />
9 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
65. I look at our strategy as a set set of different time<br />
layers.<br />
66. In n the near term it is all about raising our game on<br />
the performance side…sharper<br />
side…sha<br />
delivery…profitability…competitiveness<br />
delivery…profitability…competitiveness… …<br />
67. ….then delivering on the growth projects that we<br />
have launched in the last five years…this is growth to<br />
2014…<br />
68. …and working on new options for the next next wave<br />
of investment, that can grow the cash flow flow after after 2014.<br />
Page 18 of 78<br />
PERFORMANCE<br />
FOCUS<br />
MATURING NEXT GENERATION<br />
PROJECT OPTIONS<br />
NEW WAVE OF<br />
PRODUCTION<br />
GROWTH<br />
2012 2015+
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
SLIDE: PERFORMANCE FOCUS F 2009-2010+ 2010+<br />
10 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
69. So now now I I look at at the nearer term in in more more detail…<br />
detail<br />
70. … performance focus.<br />
71. Firstly on safety.<br />
Page 19 of 78<br />
ROYAL DUTCH SHELL PLC<br />
PERFORMANCE FOCUS<br />
2009-10+
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
SLIDE: HSSE PRIORITY<br />
HSSE PRIORITY<br />
SUSTAINABLE DEVELOPMENT<br />
11 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
72. Both personal personal and and process safety are embedded<br />
in the strategy, and the remuneration structure for<br />
staff.<br />
73. We have made progress on safety safety aand<br />
on other<br />
performance measures in 2009.<br />
74. Our ur flaring continued its dow downward nward trend, with<br />
over 10% reduction compare compared to 2008…<br />
75. …and we had a lower number of operational<br />
spills.<br />
76. However, we still had fatalities last year, year, and and we<br />
have to make further improvements here.<br />
Page 20 of 78<br />
Project<br />
profitability<br />
Environment Technology<br />
Social<br />
Safety<br />
‘GOAL ZERO’ ON SAFETY<br />
Injuries - TRCF per million working hours<br />
4<br />
3<br />
2<br />
1<br />
'99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09<br />
Employees and contractors per million working hours; <strong>Shell</strong> operated facilities<br />
� Focus on personal and process safety<br />
� Industry leader in Sustainable Development
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
77. The reorganization last year year has put put more more of of our our<br />
staff into nto front line sustainable development development activities,<br />
activities,<br />
rather than than head head office, office, and I hope to see the benefits<br />
of that in the future.<br />
78. Turning to costs…<br />
SLIDE: 2009-10 10 COST FOCUS<br />
2009-10 10 COST FOCUS<br />
TOP DOWN REORGANIZATION IMPLEMENTED<br />
Previous structure……. ……new new top level<br />
structure 1 1st July 2009<br />
E&P<br />
GAS & POWER<br />
OIL SANDS<br />
OIL PRODUCTS<br />
CHEMICALS<br />
12 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
79. We reorganized the company last year, in a<br />
programme called ‘Transition 2009’, 2009’ , and we<br />
announced that that 5,000 employees will leave <strong>Shell</strong> <strong>Shell</strong>. <strong>Shell</strong><br />
80. These changes, combined with other initiatives,<br />
have reduced underlying costs by over $2 $2 billion in<br />
in<br />
2009.<br />
81. Cost reduction and performance are now<br />
embedded in <strong>Shell</strong>, and we will push this programme<br />
forward in in 2010, with more focus and more urgency.<br />
Page 21 of 78<br />
UPSTREAM<br />
INTERNATIONAL<br />
UPSTREAM AMERICAS<br />
DOWNSTREAM<br />
PROJECTS &<br />
TECHNOLOGY<br />
COST DELIVERY & TARGETS<br />
2009 Achievements<br />
Faster decisions and implementation<br />
Clear accountabilities<br />
Competitive focus<br />
� Transition 2009 programme complete �<br />
� 5,000 staff reduction �<br />
� $2 billion underlying cost savings �<br />
Continuing momentum<br />
� $1 billion cost savings potential 2010<br />
� 2,000 staff reduction 2010-11
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
82. Some 2,000 2,000 staff will will leave leave the company in 2010<br />
2010-<br />
11, mostly mostly from corporate functions functions and and Downstream.<br />
Downstream.<br />
83. For 2010, I expect cost savings of of at at least least $1<br />
$1<br />
billion.<br />
84. I look at costs very closely. But equally<br />
importantly, rtantly, these changes are all about improving the<br />
the<br />
efficiency of our organisation.<br />
85. This means making decisions and and implement<br />
implement<br />
strategy more quickly…having clear<br />
accountabilities…and a more competitive focus by<br />
<strong>Shell</strong>.<br />
86. This will be a powerful platform for ffuture<br />
uture<br />
performance, and let me give you some some examples…<br />
examples…<br />
SLIDE: COST FOCUS IN ACTION<br />
COST FOCUS IN ACTION<br />
EXAMPLE: CONTRACTING & PROCUREMENT EXAMPLE: CORPORATE FUNCTIONS<br />
Deepwater Rig rate - $ 000/day<br />
480<br />
440<br />
400<br />
2009 2010 2011 2012<br />
SHELL COMPETITORS<br />
� Global market: $26 billion, 185 rigs<br />
� <strong>Shell</strong> market share: ~5%; 10-11 rigs<br />
� Global procurement strategy<br />
� ~10% below competition to end 2012<br />
13 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
Page 22 of 78<br />
SHARED SERVICE CENTRES<br />
Increasing role of “off-shoring”<br />
� 6,700 staff in shared service centres<br />
(+20% from 2008)<br />
Downsizing of traditional locations
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
87. Last year we saw opportunities to lock lock in rigs, at at a<br />
time when the market was loose.<br />
88. We increased our our bargaining power power by looking at<br />
our world-wide wide rig requirements.<br />
requirements<br />
89. We have locked in in deep water rigs rigs to to the end end of<br />
of<br />
2012, some some 10% below where we think major<br />
competitors are are positioned, implying a competitive<br />
cost advantage of $100 $ million per year.<br />
90. Looking at our own costs. In In a company the the size<br />
size<br />
of ours, we have around 25,000 staff involved in<br />
support activities such as Finance, HHuman<br />
uman Resources<br />
and IT.<br />
91. Most of these people are in our traditional<br />
centres, like Western Europe and and the US, which are<br />
high cost, cost, and and not not always the best markets markets for<br />
recruitment.<br />
92. We have set up a network of 6 shared service<br />
centres to handle the bulk of these support activities,<br />
with around 7,000 staff established established in these sites.<br />
93. I expect our headcount to continue to fall in<br />
in<br />
traditional centres as this off off-shoring shoring continues.<br />
Page 23 of 78
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
SLIDE: OPERATING PE PERFORMANCE<br />
100%<br />
95%<br />
90%<br />
95%<br />
90%<br />
94. Turning to operations.<br />
95. You can see the track record, which which is good.<br />
96. We are putting a lot of focus on areas like<br />
reducing unplanned downtime, and and being being as as efficient<br />
efficient<br />
as possible when we take assets off-line off line for planned<br />
maintenance.<br />
97. The impro improvement vement in reliability of our upstream<br />
facilities for example, have increased <strong>Shell</strong>’s<br />
production by over 20,000 barrels per day in the last<br />
few years...<br />
98. …squeezing queezing more and and more out out of <strong>Shell</strong>’s <strong>Shell</strong>’s assets, assets<br />
whilst ensuring we maintain asset integrity.<br />
Page 24 of 78<br />
OPERATING PERFORMANCE<br />
OIL & GAS PRODUCTION RELIABILITY<br />
2006 2007 2008 2009<br />
DOWNSTREAM AVAILABILITY<br />
% of EDC<br />
Chemicals<br />
2005 2006 2007<br />
14 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
Refining<br />
2008 2009<br />
LNG RELIABILITY<br />
100%<br />
95%<br />
90%<br />
2006 2007 2008 2009<br />
DOWNSTREAM API PROCESS SAFETY INCIDENTS<br />
# of safety incidents<br />
80<br />
60<br />
40<br />
20<br />
0<br />
2006 2007 2008 2009
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
SLIDE: PERFORMANCE ERFORMANCE FOCUS: DELIVERY OF NEW<br />
PROJECTS<br />
PERFORMANCE FOCUS: DELIVERY OF NEW PROJECTS<br />
Kboe/d<br />
99. We have had good success with with starting up<br />
complex projects, projects, and you can see the two examples<br />
here – Sakhalin in in Russia Russia and and Ormen Ormen Lange Lange in<br />
in<br />
Norway, which are both huge projects …some<br />
…some<br />
400,000 barrels per day for each.<br />
100. This is an important theme for <strong>Shell</strong> when you<br />
look at the number of projects that we we have coming coming on<br />
on<br />
stream in the next few years, and the new P&T<br />
organisation will have a big role to play in that.<br />
101. Turning to Downstream performance.<br />
performance<br />
Page 25 of 78<br />
ORMEN LANGE RAMP-UP<br />
400<br />
200<br />
0<br />
Q4 07 Q4 08<br />
SUCCESSFUL SAKHALIN START-UP<br />
Kboe/d<br />
400<br />
200<br />
0<br />
15 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
Planned<br />
production<br />
Planned<br />
production<br />
Q4 09<br />
Q1 09 Q2 09 Q3 09 Q4 09<br />
PRODUCTION PLAN<br />
Ormen Lange onshore gas processing plant<br />
Lunskoye Platform
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
SLIDE: DOWNSTREAM PROFITABILITY<br />
25%<br />
20%<br />
15%<br />
10%<br />
5%<br />
0%<br />
102. This his is a business where we have historically<br />
historically<br />
invested not not only in large integrated positions positions in in key<br />
key<br />
markets, but also in in smaller assets assets in in a long list of<br />
countries.<br />
103. So we we are are taking taking action action here, refocusing refocusing this<br />
portfolio into the best do downstream wnstream integrated<br />
positions.<br />
Page 26 of 78<br />
DOWNSTREAM PROFITABILITY<br />
LONG-TERM TERM RETURNS ENHANCEMENT STEEP DOWNTURN IN 2009<br />
ROACE<br />
1990 1994 1997 2000 2003 2006 2009<br />
DOWNSTREAM ROACE (annual)<br />
DOWNSTREAM ROACE (5 year average)<br />
16 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
CCS Earnings - $ Bln<br />
Portfolio actions create long term uplift<br />
Managing Refining & Chemicals cycles<br />
Cushion from lower volatility earnings in Marketing<br />
10<br />
8<br />
6<br />
4<br />
2<br />
0<br />
-2<br />
-4<br />
2003 2004 2005 2006 2007 2008 2009<br />
REFINING<br />
CHEMICALS<br />
CURRENT COST OF SUPPLY REPORTED EARNINGS<br />
MARKETING & TRADING<br />
DIVESTMENT & OTHERS<br />
GLOBAL INDUSTRY REFINING MARGIN (RHS)<br />
$/Bbl<br />
10<br />
8<br />
6<br />
4<br />
2<br />
0<br />
-2<br />
-4
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
104. Downstream has delivered around $20 $20 billion billion of<br />
of<br />
cash flow after cap capital investment over the last five<br />
years, so this is an important business for <strong>Shell</strong> in its<br />
own right, ight, and as a source of cash for upstream<br />
growth and retur returns to shareholders.<br />
105. This is a highly cyclical segment and restructuring<br />
it is a long game.<br />
106. You can see the improvements we have have made made in<br />
in<br />
long-term average returns here here.<br />
Page 27 of 78
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
SLIDE: STRENGTHENING DOWNSTREAM<br />
STRENGTHENING DOWNSTREAM<br />
Indonesia entry Tongyi acquisition<br />
Differentiated<br />
fuels Turkey JV<br />
China<br />
Nanhai<br />
Shared<br />
service<br />
centres<br />
2006<br />
17 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
107. We are focusing on three areas in<br />
Downstream...t<br />
Downstream...taking aking out cost....selling down non non-core<br />
assets....and investing on a very targeted basis for the<br />
best growth opportunities.<br />
108. I think over the next 22-3<br />
3 years, you will see quite<br />
a change in our manufacturing portfolio, with with exits<br />
from some sites, and start-up start up of new refinery and<br />
chemicals capacity.<br />
109. On the marketing side, we will will be pulling back<br />
back<br />
from some countries, countries, and and growing growing in in others… others<br />
110. …and nd we have important cost programmes<br />
underway.<br />
111. Let me give you more details.<br />
Page 28 of 78<br />
Disposal<br />
LA refinery<br />
US wholesale<br />
Disposal<br />
French<br />
refineries<br />
Offshoring Global procurement<br />
Indirect marketing<br />
models<br />
Singapore<br />
COSAN<br />
Chemicals<br />
JV<br />
Port Arthur<br />
expansion<br />
Greece<br />
exit<br />
2009<br />
Montreal<br />
closure<br />
Marketing reduction<br />
European & NZ refineries<br />
Further headcount reduction<br />
Waste elimination/organisational<br />
efficiencies<br />
2012<br />
Selective<br />
growth<br />
Portfolio<br />
action<br />
Cost
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
SLIDE: REDUCING REFINING REFI EXPOSURE<br />
REDUCING REFINING EXPOSURE<br />
ONGOING REFINING PORTFOLIO REDUCTION INCREASING SCALE AND COMPLEXITY<br />
<strong>Shell</strong> refining capacity – Kbbl/d<br />
5,000<br />
4,000<br />
3,000<br />
2,000<br />
1,000<br />
0<br />
18 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
112. Firstly on refining.<br />
113. We continue to work on improving our our refinery<br />
refinery<br />
position, with asset sales, and new investment to<br />
to<br />
upgrade our most advantaged sites.<br />
114. We have sold some 18% of our refining capacity<br />
since 2002.<br />
115. Today, we are in talks with counterparties oon<br />
o<br />
divestments in New Zealand and Europe, for some<br />
some<br />
15% of <strong>Shell</strong>’s refining capacity...<br />
116. ....and let’s see where we go with that in 2010 2010.<br />
Page 29 of 78<br />
2002-09<br />
-18%<br />
2002 2006 2009<br />
2009-12<br />
-15%<br />
2012<br />
EUROPE & AFRICA AMERICAS ASIA PACIFIC<br />
Kbbl/d Nelson index<br />
Reducing refining capacity<br />
Investing in scale and higher refinery complexity<br />
Value driven disposals strategy<br />
250<br />
200<br />
150<br />
100<br />
2002 2006 2009 2012<br />
AVERAGE REFINERY SIZE REFINERY COMPLEXITY (RHS)<br />
10<br />
9<br />
8<br />
7
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
SLIDE: MORE CONCENTRATED MARKETING<br />
POSITIONS<br />
MORE CONCENTRATED MARKETING POSITIONS<br />
MARKETING PORTFOLIO<br />
100%<br />
75%<br />
50%<br />
25%<br />
0%<br />
Retail<br />
# sites<br />
19 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
117. Turning to marketing. <strong>Shell</strong> is is active active in in more than<br />
than<br />
100 countries in downs downstream tream marketing.<br />
118. For me, this portfolio is is too too scattered, and not<br />
focused enough on profitability and growth.<br />
119. By focussing on fewer markets and leveraging<br />
brands, , we can simplify the business and improve<br />
profitability.<br />
120. We are leaving retail markets where<br />
we have<br />
small networks and and low low volumes. volumes. In In some some markets, markets, for<br />
for<br />
example in the US, we have moved to a a wholesale<br />
supply model model behind <strong>Shell</strong> branded sites, sites, which<br />
improve profitability.<br />
Page 30 of 78<br />
'09 '12 '09 '12 '09 '12<br />
Lubricants<br />
# markets<br />
DIRECT INDIRECT<br />
Aviation<br />
Fuels<br />
# markets<br />
'09 '12<br />
Bulk<br />
Fuels<br />
# markets<br />
EXITS<br />
SIMPLIFYING BUSINESS & MAINTAINING EARNINGS<br />
Example: Retail<br />
100%<br />
75%<br />
50%<br />
25%<br />
DIRECT & INDIRECT MARKETS EXITS<br />
Focus on scale and growth potential<br />
Ongoing concentration of marketing footprint<br />
0%<br />
% Markets % Earnings
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
121. In other markets we will keep a brand presence<br />
presence<br />
through Trademark Licence Agreements or through<br />
agreements with other distributors.<br />
SLIDE: UPGRADE CHEMICALS CHEMI ASSETS EXAMPLE US<br />
GULF<br />
UPGRADE CHEMICALS ASSETS<br />
EXAMPLE US GULF<br />
GAS FEEDSTOCK ADVANTAGE<br />
Gas ($/MMBTU)<br />
25<br />
20<br />
15<br />
10<br />
5<br />
0<br />
2000 2003 2006<br />
GAS CRUDE<br />
US GULF COAST CHEMICALS FEEDSLATE<br />
100%<br />
75%<br />
50%<br />
25%<br />
0%<br />
20 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
122. Chemicals is is a a further further area area where where we we can<br />
can<br />
improve in Downstream<br />
Downstream.<br />
123. Gulf Coast chemicals assets have have been been a<br />
a<br />
particular challenge for <strong>Shell</strong>, <strong>Shell</strong>, where we were<br />
configured to to use use liquids liquids feedstock feedstock in the plants,<br />
plants,<br />
rather than than gas, gas, which which has has been been cheaper.<br />
124. We are mitigating our exposure to liquid feed<br />
stocks, and increasing our feedstock flexibility.<br />
Page 31 of 78<br />
2007 2009<br />
GAS<br />
LIQUIDS<br />
Crude ($/bbl)<br />
150<br />
2009<br />
2010<br />
100<br />
50<br />
0<br />
FIXED COST REDUCTION<br />
Norco & Deer Park Fixed Costs (indexed to 2007)<br />
2007 2008 2009<br />
� Reconfigure assets to improve gas / liquids<br />
feedstock flexibility<br />
� Reducing fixed costs
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
125. In some cases, we choose to shut down down some<br />
units and furnace furnaces, s, reconfiguring the assets to handle<br />
more gas based feedstock feedstock.<br />
126. So I I think think we we have have made made a a good good start start on<br />
on<br />
performance focus, and there is more to to come here.<br />
SLIDE: GROWTH DELIVERY DELIVE<br />
127. Now I turn to the second layer layer of our strategy,<br />
strategy,<br />
which is growth delivery delivery.<br />
128. This covers both both upstream upstream and and downstream<br />
downstream<br />
themes and I will take these together.<br />
Page 32 of 78<br />
ROYAL DUTCH SHELL PLC<br />
GROWTH DELIVERY<br />
21 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
SLIDE: CONVERTING RESOURCES TO PRODUCTION<br />
PRODUCTIO<br />
CONVERTING RESOURCES TO PRODUCTION<br />
Bln Boe resources<br />
30<br />
20<br />
10<br />
0<br />
Longer-term upside Longer Longer-term upside<br />
CONCEPT<br />
SELECTION<br />
DESIGN<br />
UNDER<br />
CONSTRUCTION<br />
ON<br />
STREAM<br />
2008<br />
22 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
129. Let me start on upstream.<br />
130. We have a large oil and gas resource base in<br />
<strong>Shell</strong>. The chart here is a sub-set sub set of the total<br />
resources position.<br />
131. …its where I want to put the focus in the next ten<br />
years or so…. commercialization of these<br />
barrels….turning exploration and technology success<br />
into production and cash flow.<br />
132. We have some 9 billion bbarrels<br />
arrels of oil equivalent of<br />
resources on stream, with a further further 11 billion barrels b of<br />
oil equivalent under construction, with construction<br />
times typically around 3-5 years.<br />
Page 33 of 78<br />
Exploration:<br />
Australia Gas<br />
N. America Tight Gas<br />
Gulf of Mexico<br />
Prelude<br />
Pearls (CMOC)<br />
Gorgon<br />
NA Gas<br />
Caesar/Tonga<br />
Sakhalin<br />
BC-10<br />
CONCEPT<br />
SELECTION<br />
DESIGN<br />
UNDER<br />
CONSTRUCTION<br />
ON<br />
STREAM<br />
2009<br />
Strong portfolio of projects under<br />
construction<br />
� > 11 billion Boe resources<br />
Maintaining momentum for mediumterm<br />
� Design + concept selection > 8 billion Boe<br />
resources
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
133. These are the barrels that will drive drive growth growth to<br />
to<br />
2012-14. 14. Beyond that, that, we we have a a further 8 billion<br />
barrels in the design and concept selection stage,<br />
which will underpin the portfolio portfolio in the middle middle of of this<br />
decade.<br />
SLIDE: GROWING SEC PROVED RESERVES<br />
POSITION<br />
GROWING SEC PROVED RESERVES POSITION<br />
134. 2009 proved reserves replacement was 288% .<br />
135. For 2009, the reserves figures reflect the changes<br />
to SEC guidelines, and you will find all the details in<br />
the Annual Annual Report, which was published today.<br />
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2007-09 RESERVES ADDITIONS<br />
Canada<br />
RESERVES REPLACEMENT<br />
ORGANIC<br />
USA<br />
Norway<br />
Netherlands<br />
Nigeria<br />
MAJOR RESERVES ADDITIONS<br />
ORGANIC INCL. PRICE EFFECTS<br />
Pearl<br />
1 Reserves attributable to Royal Dutch <strong>Shell</strong> shareholders<br />
2 Based on year end prices for 2007 and 2008, and based on 12-month month average price for 2009<br />
3 Excludes acquisitions, divestments and year-end price impact<br />
Slide shows 2007 & 2008 reserves including proven minable oil sands; 2009 reserves additions exclude the 997 million boe of previously booked proven minable oil sands<br />
23 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
Russia<br />
Kazakhstan<br />
China<br />
Qatargas 4<br />
Malaysia<br />
Australia<br />
2007-09 2009<br />
162% 266%<br />
164% 288%<br />
2009 RESERVES PERFORMANCE<br />
� 2009 RRR 288%<br />
� Reserves life at end 2009 ~ 12 years<br />
2007-09 RESERVES AVG. PERFORMANCE<br />
� Organic 3 additions ~ 1.9 billion boe<br />
� Production ~ 1.2 billion boe<br />
� Organic reserves replacement 162%<br />
NET RESERVES 1,2<br />
BILLION BOE 2007 2008 2009<br />
ORGANIC RESERVES ADDITIONS 1.5 1.1 3.2<br />
PRODUCTION 1.2 1.2 1.2<br />
NET RESERVES 11.9 11.9 14.1
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
136. Reserves life life is is now now 12 years, years, which which is around<br />
average for our sector.<br />
137. I think you should look at at long trends on reserves<br />
reserves<br />
figures, because in any one one year, year, the numbers are a<br />
snapshot.<br />
138. If you look at the last 3 years, we have have averaged<br />
over 164% organic reserves replacement. This is a<br />
positive performance...<br />
139. …and we have established some good<br />
momentum here.<br />
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ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
SLIDE: DELIVERING ING ON NEW PROJECTS<br />
DELIVERING ON NEW PROJECTS<br />
KEY POST-FID PROJECTS<br />
24 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
140. We are making good progress with new projects.<br />
141. I think this is one of the most competitive<br />
portfolios of projects under construction in our industry<br />
today.<br />
142. In 2010-11 11 there will be 12 upstream start start-ups,<br />
which will add around 600,000 barrels of oil equivalent<br />
per day in the 2012 2012-13 timeframe.<br />
143. Let me me update you briefly on the largest of these<br />
new projects.<br />
Page 36 of 78<br />
Gjoa<br />
AOSP-1 Corrib<br />
Sakhalin II<br />
NA<br />
Tight gas<br />
Schoonebeek<br />
Port Arthur<br />
Iraq<br />
Kashagan Ph 1<br />
SAS<br />
Perdido Caesar<br />
Tonga<br />
Qatargas 4 Pearl GTL<br />
Singapore Chemicals<br />
Gbaran<br />
Ubie Ph 1<br />
Bonga<br />
NW<br />
BC-10<br />
Harweel<br />
Gumusut-Kakap<br />
Qarn Alam<br />
Amal Steam<br />
North Rankin B<br />
Gorgon<br />
Pluto<br />
T1-3<br />
(Woodside)<br />
OIL & GAS<br />
INTEGRATED GAS<br />
REFINING & CHEMICALS<br />
START-UP UP DATE 0<br />
2009<br />
2010-11 11<br />
2012+<br />
SHELL DIRECT AND INDIRECT POSITION VIA SHELL’S 34% SHAREHOLDING IN WOODSIDE<br />
IMPACT OF KEY START-UPS<br />
Kboe/d<br />
1,500<br />
1,200<br />
900<br />
600<br />
300<br />
2009 2010-2011 2012-2013 2014+<br />
ENTITLEMENT<br />
‘08-’09 START UPS ‘12-’13 START UPS<br />
‘10-’11 START UPS ’14 + START UPS<br />
ENTITLEMENT SHOWN AT $70/BBL
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
SLIDE: ATHABASCA OIL SANDS PHASE 1<br />
EXPANSION<br />
ATHABASCA OIL SANDS PHASE 1 EXPANSION<br />
AOSP CASH OPERATING COSTS<br />
$/bbl<br />
50<br />
40<br />
30<br />
20<br />
10<br />
0<br />
AOSP net cash flows - $ Bln (<strong>Shell</strong>)<br />
0.32.5<br />
2<br />
0.0 0 0<br />
$ 70/BBL OIL PRICE<br />
25 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
144. In Canada, <strong>Shell</strong> is the operator of of the AOSP AOSP oil<br />
sands mining project.<br />
145. We e are a middle-ranking middle ranking oil sands player – NOT<br />
the largest in the industry, which is not the impression<br />
I get when I read the newspapers newspapers sometimes.<br />
sometimes.<br />
146. This project has has gone gone well, well, coming coming on on stream stream end<br />
end<br />
2002 and reaching pay pay-back back within 5 years.<br />
147. The first mine expansion, which was launched launched in<br />
2006, is being commissioned for start up shortly.<br />
148. The Scotford upgrader ex expansion pansion will come on<br />
line in 2011, and at that stage, we will see see the full<br />
ramp up of the expansion project.<br />
Page 37 of 78<br />
2005 2006 2007 2008<br />
FIXED COSTS<br />
GAS COSTS<br />
PRODUCTION AND PROFITABILITY<br />
1<br />
-1<br />
Base project<br />
start up<br />
Competitors<br />
Expansion 1<br />
start up<br />
2009<br />
Kbbl/d<br />
-2<br />
-0.3 -2.5<br />
2000 2002 2004 2006 2008 2010 2012 2012 2014 2014<br />
CASH FROM OPERATIONS<br />
PRODUCTION (RHS)<br />
CAPITAL INVESTMENT<br />
200<br />
100<br />
MINING CAPACITY - INDUSTRY<br />
Kbbl/d oil sands mining capacity<br />
400<br />
300<br />
200<br />
100<br />
0<br />
Suncor<br />
CNRL<br />
Exxon<br />
Mobil<br />
Syncrude consortium distributed to ownership<br />
� Base project on stream since 2003<br />
� Payback in 5 years<br />
� AOSP Expansion 1<br />
<strong>Shell</strong><br />
COS<br />
• Jackpine mine commissioning underway<br />
• Upgrader expansion on line 2011<br />
• Debottlenecking and synergy opportunities<br />
Chevron<br />
2009 2015<br />
Marathon<br />
Conoco<br />
Nexen
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
149. Once nce this expansion is on stream, we we will will look look for<br />
operating synergies and debottlenecking opportunit opportunities<br />
opportunit<br />
in the portfolio portfolio.<br />
SLIDE: PROJECT PROGRESS IN QATAR: : GTL + LNG<br />
PROJECT PROGRESS IN QATAR: GTL + LNG<br />
QATAR CAPITAL EXPENDITURE<br />
% of total capital expenditure<br />
100%<br />
-3<br />
-6<br />
50%<br />
3<br />
0<br />
0%<br />
2005 2006 2007 2008 2009<br />
PRODUCTION & PROFITABILITY<br />
<strong>Shell</strong> Qatar cash flow (Pearl + Qatargas 4) - $ Bln Production – Kboe/d<br />
6<br />
600<br />
2005 2010 2015 2020 2025<br />
$ 70/BBL OIL PRICE<br />
26 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
150. Turning to Qatar. We have have two two large large projects<br />
projects<br />
under construction there - Pearl gas-to-liquids liquids and<br />
Qatargas 4 LNG.<br />
151. There is a huge amount of activity there, and<br />
and<br />
some of you may have visi visited ted these projects at the<br />
end of last year.<br />
152. Two boilers on the Pearl Gas-to-Liquids Gas Liquids have<br />
been fired up earlier this month - the first step in a<br />
complex start-up<br />
up schedule that has been planned in<br />
detail by by a a team team of of 800 800 operators and technicians.<br />
Page 38 of 78<br />
CASH FLOW<br />
PRODUCTION (RHS)<br />
Pearl + QG4<br />
Major construction<br />
complete end 2010<br />
2010 2011<br />
2030<br />
400<br />
200<br />
0<br />
-200<br />
-400<br />
-600<br />
PEARL GTL: RAMP-UP 2011<br />
Offshore production Kboe/d<br />
300<br />
200<br />
100<br />
0<br />
Major<br />
construction<br />
complete<br />
end 2010<br />
1st feedgas:<br />
processing<br />
unit start-up<br />
<strong>Shell</strong> revenue<br />
and production<br />
entitlement from<br />
first GTL<br />
2010 2011<br />
OFFSHORE GAS<br />
GTL train 2<br />
GTL train 1 start-up<br />
start-up<br />
2012<br />
Volumes at 100% basis<br />
PEARL GTL – FIRST MAJOR EQUIPMENT STARTED-UP<br />
First steam from boilers
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
153. No change nge to guidance here. Major Major construction<br />
construction<br />
at both Pearl GTL and Qatargas 4 is is scheduled scheduled to be<br />
completed by by the the end of of 2010, 2010, with with production production ramp<br />
rampup<br />
throughout 2011.<br />
154. Budgets are are on track, track, with with <strong>Shell</strong>’s <strong>Shell</strong>’s share share of<br />
spending around $18-$19 $18 $19 billion of development cost<br />
for Pearl and $2 billion for Qatargas 4.<br />
155. On today’s basis these two two projects projects alone alone would<br />
would<br />
represent over 10% of our world world-wide wide production. production<br />
SLIDE: LEADERSHIP IN GLOBAL LNG<br />
LEADERSHIP IN GLOBAL LNG<br />
QATARGAS 4<br />
Courtesy of Qatargas<br />
� 26 trains in operation<br />
� 5 trains under construction; 7.6 mtpa for <strong>Shell</strong><br />
� <strong>Shell</strong> ventures supplied >30% of global LNG<br />
volumes in 2009<br />
27 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
156. Qatargas 4 is one of 5 new LNG trains that <strong>Shell</strong><br />
has under construction worl worldwide.<br />
157. Our new LNG capacity under construction will<br />
add some 7.66<br />
million tonnes per year to our LNG<br />
portfolio.<br />
Page 39 of 78<br />
SHELL’S GLOBAL LNG PORTFOLIO<br />
30<br />
20<br />
10<br />
0<br />
LNG - CONSTRUCTION<br />
LNG - OPERATION<br />
Year end mtpa<br />
<strong>Shell</strong> Exxon BP Total Chevron BG<br />
2009 2015<br />
PROJECTS IN OPERATION OR UNDER CONSTRUCTION<br />
QG-4<br />
Gorgon<br />
Sakhalin<br />
Pluto<br />
(Woodside)<br />
REGAS POSITION - CONSTRUCTION<br />
GRAND ANIVA<br />
REGAS POSITION - OPERATION
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
158. These projects..Qatar…Gorgon and others in<br />
in<br />
Australia…will be part of <strong>Shell</strong>’s continued LNG<br />
industry leadership position into into the the middle middle of the<br />
the<br />
decade ecade at least.<br />
SLIDE: GROWING UPSTREAM PROFITABILITY +<br />
PRODUCTION<br />
GROWING UPSTREAM PROFITABILITY + PRODUCTION<br />
ADDING TO UPSTREAM UNIT CASH FLOWS<br />
$/Boe<br />
40<br />
20<br />
0<br />
2009 2012 2009+ start ups: 2012<br />
OIL & GAS PRODUCTION GROWTH impact<br />
Kboe/d<br />
4,000<br />
3,000<br />
2,000<br />
1,000<br />
ENTITLEMENT:<br />
$60/BBL<br />
$80/BBL<br />
PRODUCTION AT $70/BBL<br />
28 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
159. When you put all this together, we expect expect to to see<br />
strong growth in upstream in the the next next few years.<br />
years.<br />
160. I look for financial growth here, not not simply simply a game<br />
game<br />
of chasing barrels.<br />
161. We have inves invested ted for profitability profitability and oil & gas<br />
price upside.<br />
162. You can see that cash flow per barrel, which which is<br />
is<br />
already competitive competitive in our our sector, will will increase in the<br />
coming years.<br />
Page 40 of 78<br />
2009 2010 2012<br />
OIL & GAS<br />
2014<br />
CONVERTING RESOURCES TO PRODUCTION<br />
Continuing to high-grade grade portfolio through new investments + disposals<br />
100%<br />
75%<br />
50%<br />
25%<br />
0%<br />
Resources Production Resources Production<br />
ON STREAM 2009<br />
UNDER<br />
HEAVY OIL & EOR LNG<br />
CONSTRUCTION<br />
SOUR<br />
DEEPWATER<br />
GTL TRADITIONAL TIGHT GAS
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
163. Production volumes should average 3.5 million<br />
barrels per day in 2012, with a ramp-up ramp in n 2011.<br />
164. For 2014, I expect further further production growth, growth, with<br />
with<br />
the final final outcome outcome driven driven by by shorter term term investment<br />
investment<br />
choices, license extensions and and potentially potentially some<br />
some<br />
asset sales.<br />
SLIDE: NEW GROWTH DOWNSTREA<br />
DOWNSTREAM<br />
MANUFACTURING<br />
NEW GROWTH: DOWNSTREAM MANUFACTURING<br />
29 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
165. Turning briefly to to downstream downstream growth growth. growth<br />
166. On the manufacturing side, side, let let me me update you<br />
you<br />
that we are are making making good good progress progress with new new chemicals<br />
capacity acity in Singapore.<br />
167. The new MEG plant came on line there at the end<br />
of 2009, for any chemists out there, that’s mono-<br />
ethylene-glycol. glycol.<br />
Page 41 of 78<br />
PORT ARTHUR REFINERY EXPANSION +325 Kb/d to create 600 Kb/d site<br />
2012 start-up up<br />
SINGAPORE CHEMICALS<br />
750 ktpa MEG<br />
800 ktpa ethylene cracker<br />
2009-10 start-up up
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
168. The ethylene cracker will start up shortly.<br />
169. On the refining side, construction continues continues at<br />
Port Arthur, which is a large refinery expansion project project<br />
on the Gulf Coast. Coast<br />
SLIDE: NEW GROWTH DOWNSTREAM MARKETING<br />
NEW GROWTH: DOWNSTREAM MARKETING<br />
GLOBAL LUBRICANTS MARKET SHARE<br />
%<br />
13<br />
11<br />
9<br />
7<br />
SOURCE: KLINE<br />
GLOBAL BRAND PREFERENCE<br />
%<br />
20<br />
10<br />
0<br />
<strong>Shell</strong><br />
SOURCE: GLOBAL BRAND TRACKER<br />
30 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
170. We continue with growth investments in<br />
marketing.<br />
171. For examp example le our global market share in lubricants<br />
remains high, and we see strong growth and margin<br />
potential in synthetic lubes. Pearl GTL lubricants<br />
products will be the next tranche of of growth here.<br />
172. In Retail, etail, we e launched a new product product last year<br />
called FuelSave, which can deliver fuel savings of<br />
over 2% to our customers, and we we will continue continue to roll<br />
roll<br />
that out in new countries in 2010.<br />
Page 42 of 78<br />
'02 '03 '04 '05 '06<br />
Competitors (Majors)<br />
Q4 2008 Q4 2009<br />
SHELL<br />
EXXON MOBIL<br />
BP<br />
'07 '08<br />
SYNTHETIC LUBES GROWTH<br />
Global Lubricants demand growth (MT) Unit Margin $/bbl<br />
3.8 4.8<br />
35.5 35.1<br />
2008 2012<br />
Synthetics<br />
Main<br />
grade<br />
DIFFERENTIATED FUELS GROWTH<br />
<strong>Shell</strong> Retail Margin by Key Product Category<br />
100%<br />
75%<br />
50%<br />
25%<br />
0%<br />
Differentiated fuels<br />
2006 2009<br />
Main grade Synthetic<br />
MAIN GRADE FUELS NON FUELS PRODUCTS<br />
DIFFERENTIATED FUELS
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
173. So those those are are some some comments on on growth growth delivery<br />
delivery<br />
for the the next next few years, and you can see we have<br />
some exciting projects underway.<br />
SLIDE:MATURING LIDE:MATURING NEXT GGENERATION<br />
PROJECT<br />
OPTIONS<br />
31 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
174. Now, before I hand you over over to Simon on on the<br />
financial side, let me update you on where we are with<br />
options for long term investment. investment<br />
Page 43 of 78<br />
ROYAL DUTCH SHELL PLC<br />
MATURING NEXT GENERATION<br />
PROJECT OPTIONS
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
SLIDE: : GROWTH LANDSCAPE<br />
GROWTH LANDSCAPE<br />
CHANGING LANDSCAPE<br />
Increased oil price outlook<br />
Traditional basin decline<br />
Resources access<br />
Nigeria challenges<br />
Slower pace and higher cost<br />
in Caspian + Alberta<br />
Greenhouse gas regulation<br />
+ fuels mandates<br />
32 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
175. Firstly on the landscape.<br />
176. The oil & gas industr industry y has seen some substantial<br />
changes in the last several years.<br />
177. Customers and governments have concerns over<br />
long term security of supply and emissions. emissions<br />
178. Industry replacement costs have increased due to<br />
project complexity and the tight supply chain chain…<br />
179. …and in n some areas, industry pace has been<br />
been<br />
slower than than expected due to local politics.<br />
politics.<br />
180. All of of this this contributes contributes to to increased oil prices prices and<br />
higher volatility, and makes medium term growth more<br />
difficult for our industry.<br />
Page 44 of 78<br />
SHELL RESPONSE FOR MEDIUM TERM<br />
Positioning for price upside<br />
Exploration step-up<br />
Tight gas and CBM<br />
Monetize Australia gas<br />
Iraq access + potential<br />
Biofuels production + CCS<br />
options<br />
Strategy set in 2004 to manage price + access challenges<br />
Built-in in portfolio flexibility to manage changing landscape
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
181. When we set the upstream strategy in 200 2004-2005,<br />
we did anticipate many of these trends.<br />
182. This is a rather rather uncertain world, and I don’t think<br />
that any company can really predict its upstream<br />
growth rate more than five five years years in in the future.<br />
future.<br />
183. That said, I am pleased pleased that we we have a a larger set<br />
set<br />
of options ons and choices in the <strong>Shell</strong> portfolio, portfolio, and and this<br />
this<br />
does allow us to compensate for unforeseen unforeseen setbacks.<br />
setbacks.<br />
184. This is is a a very very different position position for for the the company<br />
compared to where we were were a few years ago.<br />
185. Let me me show you some examples of our longer<br />
term growth opp opportunities.<br />
Page 45 of 78
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
SLIDE: 2009 EXPLORATION & APPRAISAL SUCCESS<br />
2009 EXPLORATION & APPRAISAL SUCCESS<br />
West Canada<br />
Gulf of Mexico<br />
33 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
186. Firstly on exploration. exploration<br />
187. We spend some $3 billion billion per year on exploration<br />
activities, and I am pleased with the the 2009 2009 results.<br />
188. Exploration added added 2.4 2.4 billion billion barrels of resources<br />
last year, and we are averaging over 1.5 billion barrels<br />
per year, compared to about 1.1 billion barrels of<br />
production.<br />
189. The main areas of performance were the US US Gulf<br />
of Mexico, Australia, and North America tight gas.<br />
Page 46 of 78<br />
2009 exploration adds 2.4 Bln Boe<br />
5-year exploration average >1.5 Bln Boe Boe/ year<br />
5 year average finding costs $2-3/ 3/boe<br />
RESOURCE ADDITIONS<br />
Bln Boe<br />
2.5<br />
2<br />
1.5<br />
1<br />
0.5<br />
0<br />
OIL GAS<br />
Carnarvon Basin<br />
2009 ACREAGE ACCESS<br />
DISCOVERY<br />
APPRAISAL<br />
SUCCESS<br />
'01 '02 '03 '04 '05 '06 '07 '08 '09
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
SLIDE: DEEP WATER GULF OF MEXICO M<br />
DEEPWATER GULF OF MEXICO<br />
34 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
190. 2009 was one of our best years in the Gulf of<br />
Mexico for some time.<br />
191. I would highlight the new new Vito discovery, discovery, which<br />
which<br />
has over 200 million barrels of resources, and<br />
continued exploration exploration success in the Mars Basin, at<br />
West Boreas and South Deimos Deimos.<br />
192. We have also done some ca careful reful appraisal work<br />
at the Lower Tertiary Stones discovery, with with three<br />
wells now drilled.<br />
193. The oil in place numbers there are huge…up to 5<br />
billion barrels, and we are looking into into an an early<br />
early<br />
production system to to assess the the potential potential.<br />
194. Turning to Australia Australia.<br />
Page 47 of 78<br />
W. Boreas, S. Deimos<br />
• <strong>Shell</strong> 100% (operator)<br />
• >150 million boe resources<br />
Vito<br />
• >200 million boe resources<br />
• ~100 kboe/d potential<br />
• <strong>Shell</strong> 55% (operator)<br />
Perdido Spar<br />
• On-stream 2010<br />
• Industry first from Lower Tertiary<br />
sands in deepwater<br />
• ~100 kboe/d, <strong>Shell</strong> 35%<br />
(operator)<br />
Auger TLP<br />
• Cardamom Deep<br />
discovery & appraisal<br />
• ~20 kboe/d potential<br />
• <strong>Shell</strong> 100% (operator)<br />
NEW HUB<br />
Caesar/Tonga<br />
Caesar/<br />
Tonga<br />
• ~50 kboe/d<br />
• 2009 FID<br />
• <strong>Shell</strong> 22.5%<br />
EXISTING PRODUCTION HUB<br />
SHELL LEASEHOLD<br />
>150,000 boe/d new potential for <strong>Shell</strong><br />
Mars B<br />
• Feasibility study for TLP, <strong>Shell</strong> 72%<br />
(operator)<br />
• ~100 kboe/d potential<br />
Stones<br />
• 2-5 bln bbls oil in place; complex<br />
reservoir<br />
• Assessing early production options<br />
• ~80 kboe/d full development potential<br />
• <strong>Shell</strong> 35% (operator)
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
SLIDE: AUSTRALIA GAS GAS: 2009 DRILLING SUCCESS SUCCES<br />
AUSTRALIA GAS: 2009 DRILLING SUCCESS<br />
BUILDING A STRONG INTEGRATED GAS PORTFOLIO<br />
Browse<br />
Concerto, Prelude<br />
� FLNG concept in FEED<br />
� > 1 Tcf addition to >2 Tcf Prelude discovery<br />
� <strong>Shell</strong> 100%<br />
35 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
195. Australia is key growth growth region region for <strong>Shell</strong><br />
<strong>Shell</strong>.<br />
196. We have focused on drilling in <strong>Shell</strong> operated<br />
acreage around Prelude, to firm firm up up our our floating LNG<br />
plans there. there. The 2009 Concerto discovery, combined<br />
with Prelude, take takes s total resources to over 3 TCF.<br />
197. In addition, Chevron-led Chevron led drilling has proved up<br />
more gas around Gorgon, that increases the the chances<br />
for new new LNG LNG trains trains there, there, beyond the three that are<br />
under construction today.<br />
Page 48 of 78<br />
2009 DISCOVERY<br />
0<br />
200 KM<br />
Libra/ Crux<br />
2009 APPRAISAL SUCCESS<br />
Kentish Knock<br />
� Gas discovery<br />
� Development options under review<br />
� <strong>Shell</strong> 50 %<br />
PRE - 2009 SUCCESS<br />
Achilles, Satyr, and YellowGlen<br />
� Potential resources for Gorgon Train<br />
T4+<br />
� <strong>Shell</strong> 25%<br />
SHELL LEASEHOLD<br />
� 5 new discoveries + 1 appraisal success 2009: +3 Tcf<br />
� 10 material discoveries since 2004; 9 Tcf with
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
SLIDE: AUSTRALIA UNDERPINS NEXT TRANCHE OF<br />
SHELL HELL LNG GROWTH<br />
AUSTRALIA UNDERPINS NEXT TRANCHE OF<br />
SHELL LNG GROWTH<br />
SHELL GLOBAL LNG CAPACITY GROWTH<br />
Mtpa<br />
40<br />
30<br />
20<br />
10<br />
0<br />
36 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
198. Globally, we have some some 18 million tonnes per<br />
year of LNG capacity on stream today, today, and and that will<br />
grow by 40% to 26 million tonnes by by 2015.<br />
2015.<br />
199. We have the potential to grow to around around 35<br />
million tonnes per annum by 2020, with Australia<br />
Australia<br />
being the main driver of that.<br />
200. The key pre pre-FID options here include Floating<br />
LNG for our Prelude field as a well as non-operated<br />
positions such as Sunrise and Browse Browse.<br />
201. The forecast here excludes any new Nigeria LNG,<br />
where the the timings are uncertain, and it exclud excludes exclud Curtis<br />
Island LNG in Australia, where we have recently made<br />
a proposal to acquire Arrow Energy Limited Limited.<br />
Page 49 of 78<br />
QG4<br />
Gorgon<br />
Pluto<br />
(Woodside)<br />
2009 2010-15<br />
Prelude<br />
Others<br />
~2020<br />
ONSTREAM CONSTRUCTION DESIGN OPTIONS<br />
Pluto (Woodside)<br />
Gorgon<br />
Curtis Island<br />
North<br />
West<br />
Shelf<br />
Browse<br />
� 7.6 mpta new LNG capacity 2009 2009-15 (~40%)<br />
� ~10 mtpa medium term LNG options<br />
� ~1.4 bcf/d /d (~240 Kboe/d) new production potential<br />
Greater Sunrise<br />
Prelude<br />
NEW HUB EXISTING PRODUCTION HUB
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
202. We will update on the impact of that that transaction transaction at<br />
a later stage.<br />
SLIDE: NORTH AMERICA TIGHT GAS: PORTFOLIO<br />
BUILD-UP<br />
NORTH AMERICA TIGHT GAS: PORTFOLIO BUILD BUILD-UP<br />
TIGHT GAS PORTFOLIO<br />
37 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
203. Turning to North America tight gas….and we<br />
have made very good progress progress here in in 2009.<br />
2009.<br />
204. We have built up a large acreage portfolio in this<br />
this<br />
region, and we are drilling appraisals on these new<br />
positions, which in turn turn drives drives production.<br />
production.<br />
Page 50 of 78<br />
West Canada<br />
Pinedale<br />
South Texas<br />
Haynesville JV<br />
PRODUCTION GROWTH<br />
Kboe/d<br />
21 Tcfe (3.7 bln boe) resources position; 8 Tcfe resources added with 2009 drilling<br />
Since 2001: $9.5 billion E&A + acquisition spend, ($0.45/ ($0.45/mscfe or
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
205. Today, we have material positions in two of the th<br />
most prospective plays; Haynesville Haynesville in in Texas- Texas<br />
Lousiana and the Montney Shale in in Canada. This<br />
adds to our other position positions in South Texas, Pinedale<br />
and Canada.<br />
206. We increased our our resource base by by 8 8 TCF T in<br />
2009 by drilling rilling acreage in the Haynesville and<br />
Montney tney Shale Shale.<br />
207. <strong>Shell</strong>’s total North America tight gas resource<br />
base now stands at 21 TTCF<br />
equivalent or 3.7 billion<br />
barrels arrels of oil equivalent equivalent.<br />
208. All ll this has been put put together together with with a a series series of<br />
of<br />
farm ins, joint ventures and small acquisitions, acquisitions, at a<br />
a<br />
competitive cos cost of forty five cents per thousand cubic<br />
feet.<br />
209. Our production increased increased by by over over 60% 60% in in 2009,<br />
2009,<br />
with more to come.<br />
Page 51 of 78
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
SLIDE: NORTH AMERICA TIGHT GAS: GROWTH<br />
POTENTIAL & COST PERFORMANCE<br />
NORTH AMERICA TIGHT GAS<br />
GROWTH POTENTIAL & COST PERFORMANCE<br />
SPEND OVERVIEW<br />
$ Bln<br />
8<br />
6<br />
4<br />
2<br />
0<br />
2004-05 2006-07 2008 2009 2010 2020<br />
EXPLORATION<br />
& APPRAISAL<br />
DEVELOPMENT ACQUISITION<br />
REDUCING DEVELOPMENT COSTS<br />
Drilling/Completion costs - $ Mln<br />
20<br />
15<br />
10<br />
5<br />
0<br />
1H 092H 09 2008 1H 09 2H 09 2007 2008 1H 092H 09 2008 1H 092H 09<br />
HAYNESVILLE GROUNDBIRCH PINEDALE<br />
38 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
Page 52 of 78<br />
COMPLETION<br />
DRILLING<br />
Potential<br />
DEEP BASIN<br />
PRODUCTION & POTENTIAL<br />
Kboe/d<br />
500<br />
400<br />
300<br />
200<br />
100<br />
0<br />
2004-05 2006-07 2008 2009 2010-11 ~2020<br />
ON STREAM UNDER CONSTRUCTION OPTIONS<br />
� Potential for ~400 kboe/d in 2020<br />
� 2010 -2020 : resources can support $2-4<br />
bln/year<br />
� Growth potential > 250 Kboe/d for <strong>Shell</strong><br />
� $4-6/mmbtu breakeven; further cost<br />
opportunities<br />
� Drilling performance reduces costs<br />
210. We have the resources potential to to more more than<br />
double our our tight tight gas production by 2020, to over<br />
400,000 barrels oil equivalent per day.<br />
211. This is an extremely extremely flexible portfolio, portfolio, and and you can<br />
move the spending levels up or down, down, depending on<br />
near term m gas prices and and rig rates, and spending<br />
choices elsewhere in the company.<br />
212. Economics are attractive in a $4 - $6 gas price<br />
range. As we continue with the appraisal and<br />
development programme programme in tight tight gas, we are seeing<br />
sharp improvements in drilling costs and reduced<br />
drilling times. This improves the econ economics omics of these<br />
developments, and and I I think think there is is more more to to come<br />
there.<br />
Bcf/d<br />
3<br />
2<br />
1<br />
0
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
213. So those are some exploration-driven<br />
exploration driven<br />
examples…Gulf of Mexico..Australia…tight gas.<br />
gas.<br />
214. Now let me move to development<br />
development-led led activities<br />
and options.<br />
215. The first of these is in Canada heavy oil oil.<br />
SLIDE: NORTH AMERICA HEAVY OIL POTENTIAL<br />
NORTH AMERICA HEAVY OIL POTENTIAL<br />
PORTFOLIO<br />
Peace River<br />
Colorado<br />
39 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
216. We will have about 180,000 180 barrels per day of<br />
heavy oil production from Canada, when the AOSP<br />
AOSP<br />
expansion project has ramped up, which starts this<br />
year.<br />
217. After that, that, we will look look at at debottlenecking debottlenecking options<br />
at the mines, ines, and work on the in in-situ situ plays in<br />
Alberta…and you you can see the potential at the chart.<br />
Page 53 of 78<br />
Athabasca<br />
OIL SANDS MINING<br />
Cold Lake<br />
MINING<br />
IN SITU OIL<br />
OIL SHALE<br />
PRODUCTION CAPACITY AND POTENTIAL<br />
Kboe/d<br />
Options can drive ~90 Kboe/d new production for <strong>Shell</strong> ~ 2020<br />
400<br />
200<br />
0<br />
AOSP +<br />
In Situ<br />
2008-09<br />
AOSP -1<br />
2010-11<br />
AOSP Debottlenecking<br />
ONSTREAM CONSTRUCTION OPTIONS<br />
Carmon<br />
Creek<br />
AOSP<br />
Expansions<br />
~2020+<br />
INSITU RECOVERY
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
218. The debottlenecking stages should add some<br />
20,000 - 30,000 barrels per per day day at at a a time for for a few<br />
few<br />
billion dollars each.<br />
219. We are also looking into CCS – carbon capture<br />
and storage – for AOSP, in a project called Quest,<br />
which could capture and store some 1 million tonnes<br />
of CO2 per year.<br />
220. Longer term, term, there is further growth potential potential for<br />
for<br />
<strong>Shell</strong> in the in--situ<br />
situ plays, and in mining expansions.<br />
221. However, we took a pause from launching new<br />
projects in in Alberta Alberta in 2008, due to industry cost<br />
inflation and changes in the tax regime there. there. This all<br />
all<br />
made us more cautious on the pace pace for <strong>Shell</strong> in this<br />
area, although there is clearly good long- long-term<br />
potential.<br />
222. Turning to Iraq.<br />
Page 54 of 78
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
SLIDE: PROGRESS WITH NEW IRAQ OPPORTUNITIES<br />
PROGRESS WITH NEW IRAQ OPPORTUNITIES<br />
MAJNOON DEGASSING STATION<br />
0 100 KM<br />
* $70/BBL OIL PRICE; MAJNOON + WEST QURNA<br />
40 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
223. We have interests in two giant oil fields fields in Iraq,<br />
following the licensing rounds in 2009.<br />
224. At Majnoon, we are building up our team to take<br />
production to the First Commercial Production level level of<br />
175,000 barrels per day. That’s when <strong>Shell</strong> would start<br />
to see cost recovery recovery, , and we hope to be there in 2012.<br />
225. Beyond FCP, there is potential to reach 1.8<br />
million barrels per per day at at Majnoon, and and similar similar levels<br />
at the non-operated operated West Qurna.<br />
226. Fiscal terms are designed to deliver quick pay<br />
back to the the IOCs for for investment, which which is an<br />
appropriate risk risk sharing mechanism mechanism in Iraq.<br />
Page 55 of 78<br />
West Qurna-1<br />
(<strong>Shell</strong> 15%)<br />
Majnoon<br />
(<strong>Shell</strong> 45%)<br />
BASRA<br />
MAJNOON DEVELOPMENT<br />
� Current production ~45,000 Boe/d<br />
� Oil in place > 38 billion Boe<br />
� Leveraging existing infrastructure<br />
MAJNOON OUTLOOK<br />
� Potential for ~1.8 mln Boe/d production in ~2017<br />
� Targeting 175,000 Boe/d 2012 “First Commercial<br />
Production“ (FCP)<br />
� Cost recovery begins at FCP<br />
� Risk management: matching capital employed with<br />
early pay-back<br />
� Short (months) lag between cost and cost recovery<br />
0<br />
100 KM<br />
OIL & GASPotential<br />
for >150 Kboe Kboe/d <strong>Shell</strong> entitlement production* in 2014+
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
SLIDE: BIOFUELS: SHELL AND COSAN POTENTIAL<br />
PO<br />
BIOFUELS: SHELL AND COSAN POTENTIAL<br />
� Retail and aviation<br />
� World’s largest biofuels<br />
distributor<br />
� Advanced biofuels<br />
technology: IOGEN and<br />
Codexis<br />
41 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
227. My final example of our longer longer-term term options is in<br />
biofuels.<br />
228. <strong>Shell</strong> spends more than $3 $ billion per year to<br />
purchase biofuels for oil products mandates, as set<br />
out by host governments.<br />
229. We are negotiating a joint venture with Cosan<br />
here, and Cosan Cosan is an industry industry leader leader in the the area.<br />
Together, there will be synergies in the combined<br />
Brazil downstream portfolios overall, and growth<br />
potential in biofuels.<br />
230. Near-term, term, this will will be all about Cosan’s biofuels<br />
biofuels<br />
production and <strong>Shell</strong>’s marketing capabilities capabilities in Brazil,<br />
with biofuels export export opportunities opportunities in the longer longer-term.<br />
longer<br />
Page 56 of 78<br />
PROPOSED SHELL COSAN JV<br />
(50/50)<br />
� Leading position in Brazil fuel<br />
distribution: ~4,500 stations<br />
� Fully integrated leader in the biofuel<br />
sector<br />
� Growth potential in sustainable<br />
biofuels<br />
� Advanced biofuels technology in<br />
Brazil and USA/Canada<br />
Ethanol fuel in <strong>Shell</strong>’s retail network<br />
Automated sugarcane harvesting<br />
Asset combination + $1.6 Bln cash contribution from <strong>Shell</strong><br />
JV “oil production” 35 Kboe/d + growth potential<br />
� ~1,600 retail stations in Brazil<br />
� Leading producer of sugar and<br />
sugarcane ethanol (~2 billion<br />
litres)<br />
� 21 plants and 2 under<br />
construction
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
231. We also plan to put some of our advanced<br />
biofuels technology into this JV, with future future growth<br />
potential.<br />
232. Actually, just just a few few days days ago, ago, we announced that<br />
the fuel fuel we supply to Ferrari’s Ferrari’s team for for the 2010<br />
Formula 1 season season, contains cellulosic ethanol.<br />
233. This is an advanced advanced biofuel made made from straw straw by<br />
by<br />
our partner tner Iogen, Iogen using non-food food wheat straw and<br />
advanced conversion processes.<br />
234. This will be the first first time time an advanced biofuel has<br />
been used used in in the the race fuel by Ferrari in Formula 1.<br />
235. Let’s see how they go with that.<br />
236. So, some some good opportunities for the longer tterm.<br />
t<br />
237. Let me summarise.<br />
Page 57 of 78
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
SLIDE: NEW PORTFOLIO OPTIONS FOR POST POST-2014<br />
GROWTH<br />
NEW PORTFOLIO OPTIONS FOR POST POST- 2014 GROWTH<br />
RESOURCES OPTIONS >8 BILLION BOE<br />
Bln boe<br />
8<br />
6<br />
4<br />
2<br />
0<br />
In design and concept selection<br />
42 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
238. We have projects in our pre-FID pre FID portfolio that can<br />
support further further growth growth to to 2020...and the growth rate is<br />
is<br />
really an outcome of the pace of investment.<br />
239. We are maturing these and other options, and we<br />
will launch launch new projects according according to to portfolio fit ...<br />
...<br />
240. ...the profitability of the projects...<br />
241. ... and affordability affordability, , which is of course partly<br />
linked to the the development of oil oil prices prices and<br />
and<br />
downstream margins.<br />
242. Net spending will be in the $25-$27 $27 billion range,<br />
with the precise budgets driven by the the timing of the<br />
the<br />
investment decisions.<br />
Page 58 of 78<br />
Resources<br />
HEAVY OIL & EOR<br />
SOUR<br />
TIGHT GAS<br />
LNG<br />
DEEPWATER<br />
TRADITIONAL<br />
TIGHT GAS – N. AMERICA PRELUDE - AUSTRALIA<br />
SUBSTANTIAL PRE-FID OPTIONS TO ~2020<br />
� >8 billion boe resources<br />
� ~35 new projects<br />
� Studies on further options + new exploration<br />
� Portfolio can support growth to ~2020<br />
Long-term growth and investment<br />
� Options to flex annual spending with macro<br />
� $25-$27 Bln/year net capex to drive growth outcomes<br />
Investment decisions driven by<br />
� Portfolio fit<br />
� Affordability<br />
� Profitability
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
243. The macro environment will also have have an an impact<br />
on spending, so with higher higher oil & gas prices, we<br />
expect cost inflation, but at the the same time the<br />
economics ics of short term projects do improve, and our<br />
overall affordability increases.<br />
244. We have deliberately built built in capital flexibility into<br />
the portfolio, portfolio, so we can flex the spending on a shorter- shorter<br />
term basis.<br />
245. So, an an exciting portfolio portfolio under construction construction today,<br />
and a great set of new choices for for the the medium medium-term.<br />
246. With that, I hand you over to Simon for more<br />
detail on the financial side.<br />
Page 59 of 78
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
SLIDE: SIMON HENRY<br />
43 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
247. Thanks Peter.<br />
248. Let me me make some comments on <strong>Shell</strong>’s financial<br />
strategy.<br />
249. I know that there has been quit quite e a bit of<br />
discussion in the market on the outlook for our<br />
financial framework, and especially especially around around sources<br />
and uses of cash, so I’m going to try try to address address some<br />
of those questions here.<br />
Page 60 of 78<br />
ROYAL DUTCH SHELL PLC<br />
FINANCIAL FRAMEWORK<br />
SIMON HENRY<br />
CHIEF FINANCIAL OFFICER
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
SLIDE: FIVE YEAR PERFORMANCE TRACK RECORD<br />
FIVE YEAR PERFORMANCE TRACK RECORD<br />
CASH FLOW GENERATION<br />
$ Bln<br />
25<br />
15<br />
5<br />
-5<br />
-15<br />
-25<br />
* CASH FLOW FROM OPERATIONS MINUS CASH FLOW FROM INVESTING ACTIV ACTIVITIES<br />
44 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
250. Firstly, let’s look aat<br />
t the track record...and record... you can<br />
see the cash cash flow performance and and capital capital allocation<br />
allocation<br />
here.<br />
251. As you know, the macro environment is the single<br />
most significant driver on our cash flows.<br />
252. Cash flow from operations was just over $160<br />
billion in the last five years, when oil prices averaged<br />
$75 per barrel.<br />
253. Over that period, ttotal<br />
otal capital investment was<br />
$140 billion, billion, with with over $70 billion billion returned to<br />
shareholders. .<br />
254. These are large outflows, and we are re careful to<br />
maintain a conservative balance sheet, with gearing gearing at<br />
end-09 09 of 15.5%.<br />
Page 61 of 78<br />
2005 2006 2007 2008<br />
FREE CASH FLOW *<br />
2009<br />
$/bbl<br />
90<br />
70<br />
50<br />
INVESTMENTS AND RETURNS TO SHAREHOLDERS<br />
$ Bln<br />
50<br />
40<br />
30<br />
20<br />
10<br />
0<br />
2005 2006 2007 2008 2009<br />
OIL PRICE (RHS) NET CAPITAL INVESTMENT SHARE BUY BACKS<br />
DIVIDENDS
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
255. 2009 was was a a more more difficult difficult year year for for cash<br />
cash<br />
management, due in a a large large part part to the the recession.<br />
recession.<br />
256. But it’s it’s important important to to note note that that we we maintained maintained our<br />
growth spending strategy into this downturn. downturn<br />
257. This is because we can afford to deliver on thi this<br />
growth plan, and we believe that this is the best way<br />
to create shareholder value.<br />
SLIDE: CONVERTING INVESTMEN<br />
INVESTMENT T INTO CASH FLOW<br />
2009-12<br />
CONVERTING INVESTMENT TO CASHFLOW: 2009 2009-12<br />
CAPITAL UNDER CONSTRUCTION<br />
$ Bln<br />
50<br />
40<br />
30<br />
20<br />
10<br />
0<br />
2007 2008 2009 2010<br />
UPSTREAM DOWNSTREAM<br />
NEW CASH FLOW GENERATION<br />
$ Bln<br />
15<br />
5<br />
-5<br />
-15<br />
-25<br />
2007 2008 2009 2010 2011 2012<br />
PROJECT CAPEX PROJECT CASH FLOWS<br />
POST-FID KEY PROJECTS AND 2009 START-UPS; UPS; INCLUDES GTL, OIL SANDS UPGRADER, LNG<br />
LIQUEFACTION, REFINING, CHEMICALS; FORECAST AT $70/BBL OIL PRICE<br />
45 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
258. Our ambitious investment programme has<br />
resulted in a build build-up of non-productive productive capital on the<br />
balance sheet. We cu currently rrently have about 25% of our<br />
$173 billion billion capital capital employed employed in this capital capital under<br />
construction….or capital unemployed category.<br />
Page 62 of 78<br />
2011<br />
Roll-over of capex to cashflow 2009-12<br />
Group cashflow outlook 2009-2012<br />
� 2009 CFFO $24 billion (ex working capital)<br />
� Increase of ~50% in $60/bbl scenario<br />
� Increase of >80% in $80/bbl scenario<br />
2012 ASSUMES NORMALIZED DOWNSTREAM AND NATURAL GAS ENVIRONMENT
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
259. This position will change in 2010-11, 2010 11, as capital<br />
under construction construction reaches reaches a a peak and then then declines<br />
declines<br />
as new projects come on sstream.<br />
260. The trend is down, although there there could be some<br />
uplift in the 2011 numbers from from new new FIDs, and and you<br />
you<br />
can see the estimate here.<br />
261. As these these new projects come on stream, we<br />
expect quite a roll roll-over er of of capex to cash flow. The<br />
post-FID FID portfolio today, combined with 2009 start-ups start<br />
should be generating substantial cashflow from 2012<br />
and onwards.<br />
262. Group cash flow in 2009 was $24 $24 billion<br />
billion excluding<br />
net working capital movements.<br />
263. We expect that to increase by by around 50% 50% in<br />
2012 at $60 per barrel oil prices, and by y over 80% in a<br />
$80 oil price world.<br />
264. This also assumes assumes a a more more normalized<br />
normalized<br />
environment for downstream and natural gas.<br />
265. It’s also important to note note that that in in 2012 we should<br />
see a higher impact of oil price price changes on on the bottom<br />
line.<br />
266. Oil price sensitivity tod today is about $3.2 billion for<br />
an annual $10 oil price move move, , growing to about $3. $3.5<br />
billion by 2012.<br />
Page 63 of 78
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
267. North America gas price sensitivity will will also<br />
increase, from from about about $360 million per per year year per per $ per<br />
per<br />
thousand standard cubic feet currently, to to over over $450<br />
$450<br />
million per year by 2012.<br />
268. This is because of of the the increase increase in in the the production<br />
production<br />
profile – more barrels and therefore more impact –<br />
and because we are investing in in projects projects with<br />
improved oil price upside.<br />
269. So how how are are we we going to use use this cash?<br />
cash?<br />
SLIDE INVESTMENT AND BALANCE SHEET<br />
INVESTMENT AND BALANCE SHEET<br />
BALANCE SHEET MANAGEMENT<br />
Gearing %<br />
30%<br />
20%<br />
10%<br />
0%<br />
2005 2006 2007 2008 2009<br />
CAPITAL INVESTMENT<br />
$ Bln<br />
46 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
270. We will continue to invest for growth, with the<br />
the<br />
largest proportion proportion of spending in upstream.<br />
Page 64 of 78<br />
Gearing range<br />
2009 2010E 2011-<br />
14E<br />
Organic investment 31 ~28 25 – 30<br />
Acquisitions 1 ~2<br />
Disposals (3) (~1) (up to 3)<br />
Net Capital Investment 28 ~29 25– 27<br />
� Capital spending outlook<br />
• > 80% of total spending in Upstream<br />
• Annual spend assessed against choices +<br />
macro environment<br />
� Balance sheet flexibility<br />
• 0-30% gearing through cycle<br />
� Generating surplus cashflow >$60/bbl<br />
2012<br />
• Start-up of major projects<br />
• Asset sales + cost cutting<br />
� Dividend<br />
• Constant in 2010<br />
• Revised policy<br />
2012 ASSUMES NORMALIZED DOWNSTREAM AND NATURAL GAS ENVIRONMENT
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
271. The precise annual spending level will be be driven<br />
by the investment investment choices choices we we make make and the macro<br />
environment, with some linkage of oil prices and a<br />
industry costs, and of course improved affordability affordability if<br />
if<br />
oil prices are high.<br />
272. We typically complete up to $3 billion billion per year year of<br />
of<br />
asset sales, sales, and and I expect that to continue as part of<br />
normal capital efficiency strategy.<br />
273. On the acquisition side, the upda update te you see here<br />
for 2010 2010 reflects the Cosan joint venture, venture, assuming we<br />
we<br />
succeed in in finalizing finalizing that that deal, and the 2010 impact of<br />
$400 million for the end-2009 end 2009 Woodside rights issue.<br />
274. Potential acquisition costs for Arrow Energy<br />
Limited are not included here here, and we will update at a<br />
later stage.<br />
275. The grou group p should be generating surplus cash<br />
flow above $60 oil prices in 2012 with this framework,<br />
and this will keep balance balance sheet gearing below the<br />
30% ceiling that we see as prudent.<br />
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ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
276. Let me make a comment on our dividend policy.<br />
277. <strong>Shell</strong> has has updated updated its payout policy today, and the<br />
new policy is now in line with major competitors and<br />
market trends.<br />
278. We aim to grow the dividend dividend through time time in in line<br />
line<br />
with our view of the underlying business earnings and<br />
and<br />
cash flow of the he group.<br />
279. We also intend to to introduce a a scrip dividend<br />
dividend<br />
option, subject subject to to approvals approvals at at the the next next AGM, so that<br />
that<br />
investors can opt to receive new shares rather rather than<br />
cash dividends.<br />
280. These changes will enhance both <strong>Shell</strong>’s financial<br />
flexibility, and the potent potential ial for payout to be more<br />
closely linked to <strong>Shell</strong>’s profitability.<br />
281. Dividend for 2010 is expected to be $0.42/share<br />
each quarter, rter, and unchanged from from 2009.<br />
2009.<br />
Page 66 of 78
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
SLIDE: EXPLORATION & DEVELOPMENT PLANS<br />
EXPLORATION & DEVELOPMENT PLANS<br />
North<br />
America<br />
Tight Gas<br />
47 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
282. Peter has outlined our medium term term option set.<br />
This chart gives you a snapshot of the activity activity levels<br />
we are expecting in 2010 and 2011.<br />
283. On the exploration side, we expect to drill some<br />
23 key wells in 2010, including sub sub-salt salt in Brazil, deep<br />
water Gulf of Mexico, and in the North North America America Arctic.<br />
284. For 2010-11<br />
we expect to put at least 10 new<br />
projects into into front end end engineering and design – this is<br />
the step step before you take final investment decision…<br />
decision…<br />
and we hope to take at least 11 FIDs.<br />
285. This is all part part of of the the programme programme to to sustain<br />
sustain<br />
growth after 2012 2012-14 and beyond.<br />
Page 67 of 78<br />
Cardamon<br />
Deep<br />
Mars B<br />
Stones<br />
Vito<br />
Claire Phase 2<br />
Tempa Rossa<br />
Gbaran Ubie Ph. 2<br />
Bonga North<br />
BC10 Phase 2<br />
BS-4<br />
CMOC<br />
Amin Waterflood<br />
Champion<br />
Rabab/Harweel Waterflood<br />
Sabah Gas KBB<br />
2010<br />
EXPLORATION/ APPRAISAL<br />
Prelude<br />
Malikai<br />
Sunrise<br />
2010-11<br />
FEED TARGET<br />
Curtis Island LNG<br />
2010-11<br />
FID TARGET
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
SLIDE UPSTREAM REGIONAL REGIO OUTLOOK<br />
UPSTREAM REGIONAL OUTLOOK<br />
Europe<br />
Strong net cash generation; managed decline<br />
Multiple growth opportunities; sustained investment<br />
Gjoa, Italy onshore 0 oil, 200North 400 Sea Gas600<br />
800 1000 1200 1400 AOSP, Tight Gas, 0 Vito, 200 Mars B400<br />
600 800 1000 1200<br />
Production<br />
Capital<br />
Investment<br />
0 2 4 6 8 10 12 14<br />
0 2 4 6 8 10 12<br />
Asia Pacific<br />
Middle East, CIS, Russia, Africa, Others<br />
Gas drives 0 significant 200 growth 400 from 600 middle 800 of decade<br />
Near term growth;<br />
1000 1200 1400<br />
0 200 longer 400 term opportunities<br />
600 800 1000 1200<br />
Gorgon, Gumusut, Prelude, Malikai<br />
Gbaran Ubie, Qatar, Kashagan, Iraq<br />
Production<br />
CFFO<br />
Capital<br />
CFFO<br />
Investment<br />
Capital…<br />
$ Bln<br />
Kboe/d<br />
CFFO<br />
286. I appreciate many of you are interested in more<br />
details on on how how we deliver deliver the the strategy in in financial<br />
financial<br />
terms.<br />
287. This Upstream focused <strong>slide</strong> shows shows how you you can<br />
expect metrics to develop over over the the coming coming years, years, and<br />
and<br />
you will be able to track track delivery in the the quarterly<br />
quarterly<br />
results as this matches our normal segmentation.<br />
288. Europe is a mature business, production is in<br />
slow managed decline decline with growth projects in Norway,<br />
the UK and Italy and a stable long long-life life position in the<br />
Netherlands. .<br />
289. Capex is 10% - 15% of Upstream total and cash<br />
surplus is is strong, strong, with with high price price upside. A great<br />
portfolio of assets that helps finance investment<br />
elsewhere.<br />
Page 68 of 78<br />
0 2 4 6 8 10 12 14<br />
0 5<br />
10<br />
0 500<br />
OUTLOOK Production AT $60/BBL OIL PRICES<br />
48 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
1000<br />
Americas<br />
Production<br />
CFFO<br />
Capital<br />
Investment<br />
Production<br />
CFFO<br />
Capital<br />
Investment<br />
0 2 4 6 8 10 12<br />
2009 2012 Post-FID Pre-FID<br />
1400<br />
14<br />
1400<br />
14
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
290. Asia-Pacific Pacific has several several strong strong heartlands with<br />
with<br />
many years of of production production left, left, and and includes includes the th high<br />
investment in Australia, overall absorbing maybe 30 30- 30<br />
40% of investment.<br />
291. This region will see significant production and and<br />
cash flow growth from the middle of the the decade.<br />
292. The Americas is likely to be our core growth<br />
region, also taking 30% - 40% of investment vestment with<br />
significant annual flexibility due to the the nature nature of<br />
of<br />
investments in the region.<br />
293. Growth in in both both production and and cash generation generation is<br />
likely to be steady steady and and sustained for at least a decade,<br />
all with attractive price upside and returns.<br />
returns.<br />
294. The remaining aining aggregated regions regions include include in<br />
practice mainly major resource holding countries in<br />
the Middle Middle East, Africa and Russia/CIS.<br />
295. Investment here is currently very high: this this will fall<br />
once Qatar comes on stream, although our new Iraq<br />
Iraq<br />
position will attract significant investment throughout<br />
the decade.<br />
296. This region generates very significant significant growth growth in<br />
in<br />
production and cash flow in the the next next three years and<br />
includes several long life life positions such such as as Sakhalin,<br />
Sakhalin,<br />
Nigeria, Kashagan, Qatar and of course course Oman.<br />
Oman.<br />
297. Thereafter, eafter, the trend in investment and<br />
associated revenues revenues will will be be a a function function of of success in<br />
in<br />
accessing further profitable profitable opportunities in these<br />
these<br />
regions and and the the evolution of the investment climate in<br />
in<br />
established heartlands such as Nigeria.<br />
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ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
298. In addition of cours course, e, we expect some growth in<br />
Downstream cash cash generation, generation, driven driven by by some level of<br />
of<br />
macro recovery, reduced costs and growth growth from the<br />
current refining and chemical investments.<br />
299. Together this should give you confidence confidence in<br />
where the overall growth in cash generation will come<br />
from, and demonstrates the diversity of the portfolio<br />
portfolio<br />
that should both protect against the down-cycle down<br />
and<br />
increase our our exposure exposure to higher higher oil oil and gas gas prices.<br />
prices.<br />
Page 70 of 78
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
SLIDE: FINANCIAL FRAMEWORK<br />
FINANCIAL FRAMEWORK<br />
49 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
300. We look for competitive cash flows from the<br />
company, ny, and expect a substantial step up to 2012,<br />
as downstream and and gas margins start start to to recover, recover, new<br />
new<br />
projects come come on stream, and we take out cost.<br />
301. <strong>Shell</strong> has a strong medium-term medium term portfolio, and we<br />
are planning to sustain our growth investment<br />
investment<br />
strategy, with a portfolio that can support growth to<br />
2020…<br />
302. …and we expect to generate surplus cash flow<br />
after dividends in 2012, assuming assuming oil prices prices above above $60<br />
$60<br />
per barrel and a more normal normal environment for gas<br />
prices and downstream.<br />
303. With that, let me hand you back back to Peter.<br />
Pete<br />
Page 71 of 78<br />
PAY-OUT<br />
� Dividend linked to business results<br />
� Scrip dividend option<br />
� >$10 billion expected in 2010<br />
CASH PERFORMANCE<br />
� ~50 ~50-80% CFFO increase 2009-12<br />
$60 - $80/bbl oil price scenarios<br />
� Surplus cash flow 2012 at $60/bbl<br />
BALANCE SHEET<br />
� 0 – 30% gearing through cycle<br />
� Balance sheet underpins investment<br />
� Capital employed grows steadily<br />
INVESTMENT<br />
� $ 25-27 billion net capex /year<br />
� Up to $3 billion/year asset sales<br />
� Affordability, profitability, portfolio
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
SLIDE: PETER VOSER<br />
304. Thanks Simon<br />
305. We have covered a lot of ground.<br />
306. Let me sum up.<br />
Page 72 of 78
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
SLIDE: STRATEGY TIMELINE<br />
STRATEGY TIMELINE<br />
REJUVENATING PORTFOLIO:<br />
UPSTREAM & DOWNSTREAM<br />
2004 2008<br />
51 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
307. I look at our strategy in a set of different layers.<br />
308. In n the near term…<br />
309. ..it is all about raising raising our our game game on on the<br />
the<br />
performance side…sha side…sharper<br />
delivery…profitability…competitiveness<br />
delivery…profitability…competitiveness… …<br />
310. ….then delivering on the growth projects that we<br />
have launched in in the the last last five five years…this is is growth growth to<br />
2014…<br />
311. …and working on new options for the next next wave<br />
of investment, that can grow the cash flow flow after after 2014.<br />
Page 73 of 78<br />
PERFORMANCE<br />
FOCUS<br />
MATURING NEXT GENERATION<br />
PROJECT OPTIONS<br />
NEW WAVE OF<br />
PRODUCTION<br />
GROWTH<br />
2012 2015+
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
SLIDE: IDE: SUMMARY<br />
SUMMARY<br />
MATURING NEXT GENERATION<br />
OF PROJECT OPTIONS<br />
NEW WAVE OF PRODUCTION<br />
GROWTH<br />
52 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
312. Let me me recap on on the the priorities. The The priorities priorities for<br />
for<br />
me as CEO, and everyone in <strong>Shell</strong>.<br />
313. I want to see a more competitive competitive performance<br />
from <strong>Shell</strong>. I look at profitability, oil & gas gas production<br />
production<br />
and sustainable development.<br />
314. Shareholders are inv investing esting in <strong>Shell</strong> for profitable<br />
growth. So are we. This is all about cash cash flow flow from<br />
from<br />
operations, investment in new new projects, and cash<br />
returns to shareholders.<br />
315. …and I want to to see sharper sharper delivery delivery of of our<br />
our<br />
strategy, and a more commercial focus in everything<br />
that we do.<br />
Page 74 of 78<br />
PERFORMANCE FOCUS<br />
• Upstream growth potential to ~2020<br />
• 8 billion Boe resources; 35 new projects<br />
• Financial growth in focus<br />
• 2009-14 oil & gas growth; +11% 2009-12<br />
• Enhanced Downstream portfolio<br />
• Substantial cashflow growth: ~+50-80%<br />
2009-12<br />
• Improved operating performance<br />
• $1 billion 2010 cost reduction<br />
• Downstream restructuring<br />
Competitive performance – Profitable growth – Sharper delivery
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
317. We have come a long way in recent years, years, but<br />
but<br />
there is a lot more to do and I am really energized ene<br />
around that.<br />
318. With that, let’s go for your questions questions. .<br />
SLIDE: Q&A<br />
Q&A<br />
53 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
Page 75 of 78<br />
ROYAL DUTCH SHELL PLC<br />
STRATEGY UPDATE
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
APPENDIX CHARTS<br />
54 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
Page 76 of 78<br />
ROYAL DUTCH SHELL PLC<br />
APPENDIX<br />
2007-2009 2009 RESERVES SUMMARY<br />
RESERVES IN MLN BOE<br />
Movements<br />
Organic 1 reserves additions<br />
Year end price effect<br />
Production<br />
Acquisition & divestment<br />
Total subsidiaries and affiliates movements 206 1,164 3,420<br />
Year end positions<br />
Total subsidiaries and affiliates reserves<br />
Minority interests<br />
RESERVES Net <strong>Shell</strong> reserves REPLACEMENT RATIOS<br />
2<br />
RESERVES REPLACEMENT RATIOS<br />
RRR Organic<br />
RRR Organic incl. price effects<br />
RRR Reported<br />
1 Excludes acquisitions, divestments and year-end price impact<br />
2 Reserves attributable to Royal Dutch <strong>Shell</strong> shareholders<br />
3 Based on year end prices for 2007 and 2008, and based on 12-month month average price for 2009<br />
Slide shows 2007 & 2008 reserves including proven minable oil sands; 2009 reserves additions excludes the 997 million boe of previously booked proven minable oil sands.<br />
55 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
2007 2008 2009<br />
1,504 1,132 3,158<br />
-183 19 260<br />
-1,210 -1,189 -1,187<br />
-1,115 13 2<br />
11,937 11,912 14,145<br />
17 12 13<br />
11,920 11,900 14,132<br />
2007 2008 2009 2007-09<br />
124% 95% 266% 162%<br />
109% 97% 288% 164%<br />
17% 98% 288% 134%
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
KEY PROJECTS UNDER CONSTRUCTION<br />
Start up Project Country <strong>Shell</strong> Share Peak Production LNG 100% Products Theme <strong>Shell</strong><br />
% kboe/d Capacity<br />
mtpa<br />
Operated<br />
2010-11 AOSP EXP 1 CANADA 60 106 �<br />
CAESAR/TONGA USA<br />
22.5 51<br />
GBARAN UBIE PH 1 NIGERIA 30 250 �<br />
GJOA NORWAY 12 107<br />
HARWEEL OMAN 34 43<br />
NORTH AMERICA TIGHT GAS USA/CANADA Various 100* �<br />
PEARL GTL QATAR 100 320 140 kbbl/d GTL �<br />
PERDIDO USA<br />
35 100 �<br />
PLUTO LNG T1 (WOODSIDE) AUSTRALIA 31 129 4.3<br />
QARN ALAM EOR OMAN 34 36<br />
QATARGAS 4 LNG QATAR 30 280 7.8<br />
SCHOONEBEEK NETHERLANDS 30 20 �<br />
SHELL EASTERN PETROCHEMICALS SINGAPORE 100 800 kta ehtylene DS �<br />
2012-13 AMAL STEAM OMAN 34 22<br />
CORRIB IRELAND 45 57 �<br />
GUMUSUT-KAKAP MALAYSIA 33 135 �<br />
KASHAGAN PHASE 1 KAZAKHSTAN 16.8 300<br />
MAJNOON /WEST QURNA IRAQ<br />
45/15 >30* �<br />
NORTH RANKIN B AUSTRALIA 16.7 268<br />
PORT ARTHUR REFINERY EXPANSION USA<br />
50 325 DS<br />
SAS ABU DHABI 9.5 95<br />
2014+ BONGA NW NIGERIA 55 43 �<br />
GORGON LNG T1-3 AUSTRALIA 25 440 15<br />
DEEPWATER<br />
TRADITIONAL<br />
56 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
Page 77 of 78<br />
TIGHT GAS<br />
LNG<br />
SOUR<br />
GTL<br />
* SHELL SHARE SHELL DIRECT AND INDIRECT POSITION VIA SHELL’S 34% SHAREHOLDING IN WOODSIDE<br />
PROJECT MANAGEMENT + PERFORMANCE<br />
PROJECT STATUS<br />
Construction time elapsed %<br />
Singapore Chemicals<br />
Perdido<br />
Gbaran Ubie Ph1<br />
Harweel<br />
Qatargas 4<br />
Gjoa<br />
AOSP Expansion 1<br />
Pearl GTL<br />
Schoonebeek<br />
Qarn Alam Steam<br />
Corrib<br />
Kashagan Ph 1<br />
Port Arthur<br />
Bonga NW<br />
Gumusut-Kakap<br />
North Rankin B<br />
Caesar/Tonga<br />
SAS<br />
Amal Steam<br />
Gorgon T1 - 3<br />
FID TO FIRST PRODUCTION (TIME)<br />
0% 50%<br />
END 2009<br />
57 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
HEAVY OIL &<br />
EOR<br />
100%<br />
Assess<br />
Feasibility<br />
Study<br />
Select<br />
Concept<br />
Selection<br />
QATAR PEARL GTL - MARCH 2010<br />
Define FID Execute<br />
Project<br />
Specifications<br />
Construction
ROYAL DUTCH SHELL PLC 2010 STRATEGY UPDATE ANALYST SPEECH MARCH 16 th 2010<br />
STRONG PORTFOLIO OF PRE PRE-FID OPTIONS<br />
POTENTIAL 2014-2020 2020 START START-UPS<br />
Phase Project Country<br />
STUDY Bonga North Nigeria<br />
Bonga South West Nigeria<br />
Bosi Field Development Nigeria<br />
Erha North Ph 3 Nigeria<br />
Sabah Gas: KBB Malaysia<br />
Vito USA<br />
AOSP Debottlenecking Ph2&3 Canada<br />
Rabab/Harweel Oman<br />
Browse LNG Australia<br />
Curtis Island LNG Australia<br />
NLNG Train 7 Nigeria<br />
Sunrise Australia<br />
Clair Ph2 UK<br />
Fram Development UK<br />
Gbaran Ubie Phase 3 Nigeria<br />
Pearls (CMOC) Kazakhstan<br />
Stones USA<br />
DESIGN BC-10 Ph2 Brazil<br />
BS-4 EWT & EPS Brazil<br />
Malikai Malaysia<br />
Mars B USA<br />
West Boreas, South Deimos USA<br />
AOSP Debottlenecking Ph1 Canada<br />
Carmon Creek Phase 1 Canada<br />
Pluto LNG T2 (Woodside) Australia<br />
Prelude Australia<br />
Tight Gas North America<br />
1.8 Bab ThG & Hb2 Abu Dhabi<br />
Champion Waterflood Brunei<br />
Gbaran Ubie Phase 2 Nigeria<br />
Kashagan Ph 2 Kazakhstan<br />
Majnoon full field/West Qurna Iraq<br />
Tempa Rossa Italy<br />
Val D'Agri FDP Ph2 Italy<br />
* SHELL CONTRACTOR ENTITLEMENT @$70 SHELL DIRECT AND INDIRECT POSITION VIA SHELL’S 34% SHAREHOLDING IN WOODSIDE<br />
58 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
2007-2009 2009 DRILLING PERFORMANCE<br />
Start up Well name Country <strong>Shell</strong> Share Location Water depth Oil/Gas <strong>Shell</strong><br />
2007 NW-Sabah (Petai-1) Malaysia 20 Offshore ~1400m OG �<br />
Persephone 1 Australia NWS 22 Offshore ~1125m G<br />
Agatha Nigeria 30 Onshore O �<br />
Prelude (+Toccatta appraisal) Australia 1 Offshore ~240m G �<br />
Vicksburg US GoM 58 Offshore ~2255m OG �<br />
Bubut-2 Brunei 50 Offshore ~20m G<br />
Khazar-1 Kazakhstan 52 Offshore ~10m OG<br />
West Tonga US GoM 17 Offshore ~1435m OG<br />
2008 Auezov-1 Kazakhstan 55 Offshore ~10m O<br />
HB-Buko-2 Nigeria 77 Offshore ~18m G<br />
Deep Basin West, BCG Canada ~ 70% Onshore G �<br />
Groundbirch Canada 100 Onshore G �<br />
Haynesville US, Louisiana 50 Onshore G<br />
Iago-2 Australia 33 Offshore ~120m OG<br />
Libra-1 Australia 65 Offshore ~120m OG �<br />
ML-J206T1 Malaysia 35 Offshore ~65m OG<br />
2009 Achilles-1 Australia 25 Offshore ~1150m G<br />
Al Ghubar S Oman 34 Onshore O<br />
Cardamon Deep US, GoM 100 Offshore ~870m OG �<br />
Concerto Australia 100 Offshore ~280m G �<br />
Gro Norway 50 Offshore ~1380m G �<br />
Kentish Knock Australia 50 Offshore ~1220m G<br />
Satyr Australia 25 Offshore ~1100m G<br />
Vito US, GoM 55 Offshore ~1,200m O �<br />
West Boreas US, GoM 100 Offshore ~960m O �<br />
Yellowglen Australia 0 Offshore ~1100m G<br />
Clio-2 Australia 33 Offshore ~950m G<br />
Fram UK 28 Offshore ~180m O �<br />
Groundbirch Canada 87 Onshore G �<br />
Haynesville US, Louisiana 50 Onshore G �<br />
59 Copyright of Royal Dutch <strong>Shell</strong> plc 16/03/2010<br />
Page 78 of 78<br />
%<br />
<strong>Shell</strong> share Peak production<br />
100%<br />
LNG (100%)<br />
capacity<br />
Theme <strong>Shell</strong> operated<br />
55 95 �<br />
55 110 �<br />
44 130<br />
44 40<br />
30 130<br />
55 100 �<br />
60 50<br />
34 40<br />
25 320 > 10<br />
TBD TBD TBD �<br />
27 220 8.4<br />
38 125 ~4<br />
19 105<br />
28 35 �<br />
30 60<br />
55 50<br />
35 80 �<br />
50 35 �<br />
40 35 �<br />
35 60 �<br />
72 100 �<br />
100 tbd<br />
60 30 �<br />
100 40<br />
34 > 100 4.3<br />
100 120 3.6 �<br />
Various > 350<br />
10 45<br />
50 30 �<br />
30 45 �<br />
17 550<br />
45/15 >150* �<br />
25 45<br />
39 60<br />
Operated<br />
HEAVY OIL &<br />
EOR<br />
SOUR<br />
GTL<br />
TIGHT GAS<br />
LNG<br />
DEEPWATER<br />
TRADITIONAL