Shell PLC · LSE:SHEL
Shell — Royal Dutch Shell — Investor Day (2008)
51 slides from Shell's investor day presentation, Dec 30, 2008
Slide 1: Building New Heartlands
ROYAL DUTCH SHELL PLC BUILDING NEW HEARTLANDS JEROEN VAN DER VEER CHIEF EXECUTIVE
Slide 2: Definitions and Cautionary Note
DEFINITIONS AND CAUTIONARY NOTE Reserves: Our use of the term “reserves” in this presentation means SEC proved oil and gas reserves and SEC proven mining reserves. Resources: Our use of the term “resources” in this presentation includes quantities of oil and gas not yet classified as SEC proved oil
Slide 3: Agenda
AGENDA INTRODUCTION Jeroen van der Veer Chief Executive OIL PRODUCTS, CHEMICALS & Rob Routs OIL SANDS Executive Director - Downstream EXPLORATION & PRODUCTION Malcolm Brinded Executive Director – Exploration & Production GAS & POWER Linda Cook Executive Director – Gas & Power FINANCIAL FRAMEWORK Pet
Slide 4: Financial Performance
FINANCIAL PERFORMANCE EARNINGS INVESTMENT $ Bln $ Bln 30 40 35 25 30 20 25 15 20 10 15 5 10 5 0 2004 2005 2006 2007 0 -5 2004 2005 2006 2007 UPSTREAM (INCL. OIL SANDS) CORPORATE NET CAPITAL INVESTMENT SHARE BUY-BACKS DOWNSTREAM DIVESTMENTS/OTHER DIVIDENDS CCS earnings 3
Slide 5: Building New Heartlands
BUILDING NEW HEARTLANDS STRATEGY ON TRACK • Unchanged view of industry landscape • More upstream, profitable downstream • Capital discipline, portfolio approach PRIORITIES • Process + personal safety • Operational excellence + top quartile assets • Project management • Technology 4
Slide 6: Energy Landscape
ENERGY LANDSCAPE ENERGY USE CAPITAL INTENSITY IS INCREASING Millions barrels oil equivalent/day Capex per boe oil & gas production ($) 350 15 300 10 5 250 0 200 91-93 94-96 97-99 00-02 03-05 06-07 AVERAGE OF OIL MAJORS 150 IHS-CERA UPSTREAM CAPITAL COSTS INDEX 100 2000 = 100 200 50 0 150 1975 2000 2
Slide 7: Building New Heartlands: Industry Landscape and Shell Strategy
BUILDING NEW HEARTLANDS INDUSTRY LANDSCAPE SHELL STRATEGY HIGHER PRICES & COSTS PORTFOLIO SHIFT • NEW LEGACY ASSETS • UPSTREAM + SELECTIVE DOWNSTREAM NEW ENERGY COMPETITORS CHALLENGE TECHNOLOGY • NEW HYDROCARBON RESOURCES • CLEANER FUELS, CO2 SOLUTIONS COMPLEX PROJECTS PORTFOLIO MANAGEMENT SUSTAINED
Slide 8: Investing in Technology
INVESTING IN TECHNOLOGY R&D SPENDING INNOVATION In $mln Operations today 1200 • Safety + reliability • Production performance • Margin optimization 1000 • Product differentiation Delivering growth 800 • Exploration • Deepwater • LNG 600 • GTL • Oil Sands 400 Shaping the future • EOR & Arctic 200 • C
Slide 9: Project Management & Operational Performance
PROJECT MANAGEMENT & OPERATIONAL PERFORMANCE STANDARDISED PROJECT MANAGMENT APPROACH ‘TARGET ZERO’ ON SAFETY Injuries - TRCF per million working hours 4 3 Assess Select Define FID Execute 2 Feasibility Concept Project Design& Study Selection Specifications Construction 1 98 99 00 01 02 03 04 05 06 0
Slide 10: New Legacy Assets Under Construction
NEW LEGACY ASSETS UNDER CONSTRUCTION KEY PROJECTS UNDER CONSTRUCTION CHANGING BUSINESS MIX Capital Employed 100% Gjoa 90% AOSP Kashagan Sakhalin II Corrib 80% N America Port Arthur 70% Qatargas 4 Tight Gas Pearl GTL 60% Nigeria Gumusut Perdido 50% Oman Singapore Chemicals 40% BC-10 30% NWS/Pluto 20%
Slide 11: Rejuvenating the Portfolio
REJUVENATING THE PORTFOLIO Capacity/production growth Oil & Gas production mix 2006 to 2013-15 kboe/d/d 0 50 100 150 200 250 300 350 GTL Upstream LNG upstream 2004 2013-15 Tight/Sour Deepwater Heavy Oil & EOR TRADITIONAL TIGHT/SOUR LNG GTL DEEP WATER HEAVY OIL & EOR Refining GTL Products Refining ca
Slide 12: New Production Options 2012+
NEW PRODUCTION OPTIONS 2012+ ALBERTA KAZAKHSTAN HEAVY OIL N. AMERICA TIGHT GAS & OIL SHALE NIGERIA AUSTRALIA PRE-FID POTENTIAL FOCUS EXPLORATION BASIN • Designing ~20 new projects MAJOR RESOURCE POSITIONS • ~6 billion barrels discovered resources • ~800 kboe/d production potential 11
Slide 13: Low Carbon Opportunities
LOW CARBON OPPORTUNITIES ACTIVITIES TODAY DEVELOPING NEW TECHNOLOGIES Shell greenhouse gas emissions Choren plant 120 110 100 Mln. tonnes of CO2 equivalent 90 97 98 99 00 01 02 03 04 05 06 07 • Voluntary emissions targets • Next generation biofuels • Energy efficiency • CO2 capture and storage • Fla
Slide 14: Businesses Presentations
ROYAL DUTCH SHELL PLC BUILDING NEW HEARTLANDS BUSINESSES PRESENTATIONS
Slide 15: Rob Routs, Oil Products, Chemicals & Oil Sands
ROYAL DUTCH SHELL PLC BUILDING NEW HEARTLANDS ROB ROUTS EXECUTIVE DIRECTOR OIL PRODUCTS, CHEMICALS & OIL SANDS
Slide 16: Reshaping the Manufacturing Portfolio
RESHAPING THE MANUFACTURING PORTFOLIO MANUFACTURING 2004-2007 AVERAGE REFINERY CAPACITY Kbbl/d 180 160 140 Nanhai Port Arthur 120 Singapore 100 80 2004 Projection 2010 • Global refiner ~4mln bbl/d • Refinery capacity reduction of 11% since 2004 • >20% increase in average refinery REFINERY CHEMICALS
Slide 17: Manufacturing Projects Under Construction
MANUFACTURING PROJECTS UNDER CONSTRUCTION PORT ARTHUR REFINERY SINGAPORE CHEMICALS • Integrated with Bukom refinery • Expansion of 325 to ~600 kbbls/d • 800 Kta Ethylene cracker • Flexible crude slate, including Oil Sands Bitumen • 750 Kta MEG plant • 155 Kta Butadiene extraction plant Integration &
Slide 18: West to East Marketing Portfolio
WEST TO EAST MARKETING PORTFOLIO MARKETING 2004-2007 SHELL MARKETING SALES % per region 2004 Projection 2010 Russia Nordics Ukraine Turkey China Malaysia India USA EAST Indonesia EUROPE OTHER • #1 global branded fuels retailer – number of sites, market share and brand preference • Improving retail c
Slide 19: Operational Excellence: Manufacturing
OPERATIONAL EXCELLENCE: MANUFACTURING PROCESS SAFETY INCIDENTS REFINERY AVAILABILITY % relative to 2005 base year % of EDC 100 94 80 92 60 90 40 20 88 0 86 2005 2006 2007 2004 2005 2006 2007 COSTS* (EXCLUDING ENERGY) % compared to industry refining average • Reliability led strategy • Process safety
Slide 20: Shell Is an Industry Leader in Biofuels
SHELL IS AN INDUSTRY LEADER IN BIOFUELS Cellulosic OVER 5 BILLION LITRES BLENDED IN 2007 ethanol using enzymes from Ethanol/Biodiesel wheat straw ~1 billion litres blended into gasoline/diesel High quality synthetic biofuel (BTL) from wood residue Cooperation Agreement on Enzyme Technology Ethanol S
Slide 21: Oil Sands: Mining Portfolio
OIL SANDS: MINING PORTFOLIO SHELL ACREAGE POSITION AOSP (100%) • 125,000 total hectares • Recoverable resource estimate ~ 6.5 bln barrels • Bitumen mining status: Kbbl/d Muskeg River Mine – operational 155 Jackpine mine – under construction 100 Additional approved development 215 Pending approval 30
Slide 22: Building a Portfolio of Downstream Options
BUILDING A PORTFOLIO OF DOWNSTREAM OPTIONS • Maximizing value through an integrated North American supply chain from Oil Sands to refining • Leveraging existing assets • Multiple options to match production growth Alberta Upgrading SCOTFORD PERMITTING STATUS Export to Capacity in kbbl/d Pacific Basi
Slide 23: Malcolm Brinded, Exploration & Production
ROYAL DUTCH SHELL PLC BUILDING NEW HEARTLANDS MALCOLM BRINDED EXECUTIVE DIRECTOR EXPLORATION & PRODUCTION
Slide 24: Exploration & Production
EXPLORATION & PRODUCTION EP EARNINGS 2007 RESULTS & MILESTONES $ Bln EARNINGS $14.7 Bln 16 • Oil & gas production 3.2 mln boe/d • Organic reserves additions 1.5 Bln boe 14 NET CAPEX $10.2 Bln 12 • Disposals $5.4 Bln • 11 notable discoveries 10 • FID on 8 projects 8 6 KEY PROJECTS ~1 MLN BOE/D UNDER
Slide 25: 2007 Reserves Update
2007 RESERVES* UPDATE 2007 RESERVES ADDITIONS Norway END 2007 RESERVES 11.9 BLN BOE Kashagan • 2007 organic** additions ~1.5 billion USA boe Qatargas IV • 2007 production ~1.2 billion boe Pearl • Organic reserves replacement 124% Australia • Reserves life ~10 years MAJOR RESERVES ADDITION RESERVES R
Slide 26: Resource Update
RESOURCE UPDATE END 2007 RESOURCES ~66 BLN BOE* RESOURCES TO PRODUCTION (2005-07) Bln boe • Resources life: 55 years 66 Bln boe* • Major progress in Alberta • Exploration replaces production 2005-07 2005-07 performance: ~6 Bln boe taken FID • Pearl GTL, • Qatargas 4 • AOSP Exp. 1 • BC 10 RESOURCE MO
Slide 27: Exploration
EXPLORATION PORTFOLIO 2007-08 PERFORMANCE • Continued to grow and high-grade our Chukchi exploration portfolio • 1.4 Bln boe resources discovered in 2007 • 3 Yr avg. unit finding cost $1.50- GoM $2.0/boe • > 43,000 square kms of new acreage • GoM, Chukchi & Beaufort access • Unique geological insigh
Slide 28: Major Potential in Alberta Heavy Oil
MAJOR POTENTIAL IN ALBERTA HEAVY OIL HEAVY OIL IN ALBERTA GROWTH POTENTIAL Mining – AOSP (60% Shell) • 90 kbbl/d on stream • 60 kbbl/d in construction Grosmont Athabasca • 300+ kbbl/d expansion potential Peace River Fort McMurray ALBERTA In Situ – Thermal and Cold Edmonton Cold Lake • 25 kbbl/d on s
Slide 29: Cost Management – Drilling Rigs
COST MANAGEMENT – DRILLING RIGS DEEPWATER RIG CONTRACTS BEFORE MARKET UPSWING • Rig requirements covered through 2009 with extensions to 2013 • Over $500 mln saved relative to market rates for 08/09 period BULLY RIG • Deployable across entire offshore portfolio (from Deepwater to Arctic) Bully rig s
Slide 30: Shifting the Portfolio
SHIFTING THE PORTFOLIO CHANGING PRODUCTION MIX DEVELOPING LONGLIFE ASSETS KBOE/d 100% 1000 90% 900 80% 800 70% 700 60% 600 50% 500 40% 400 30% 300 20% 200 10% 100 0% 0 2004 2013-15 2007 08-09 10-12 13-15 Key post FID projects; Shell share TRADITIONAL TIGHT/SOUR OTHERS LNG GTL LONG LIFE DEEPWATER HEA
Slide 31: Delivery
DELIVERY UPSTREAM UNIT CASH $/BOE • Unit cash ahead of competitors 26 • Projects under construction average 22 unit cash flows stronger than existing portfolio today 18 14 10 2004 2005 2006 2007 COMPETITOR RANGE SHELL Upstream earnings plus depreciation plus exploration expense divided by oil and ga
Slide 32: Exploration & Production: Key Messages
EXPLORATION & PRODUCTION: KEY MESSAGES Consistent strategy delivering results Leading in exploration performance Growing, diverse resource base Long term growth potential Top quartile operations Leading unit cash generation 31
Slide 33: Linda Cook, Gas & Power
ROYAL DUTCH SHELL PLC BUILDING NEW HEARTLANDS LINDA COOK EXECUTIVE DIRECTOR GAS & POWER
Slide 34: Shell's Global LNG Portfolio
SHELL’S GLOBAL LNG PORTFOLIO LEADING POSITION … AND 5 NEW TRAINS UNDER CONSTRUCTION NLNG T6 Sakhalin T1 & 2 Start Up 2008 Start Up 2008-09 Qatargas 4 NWS T5 Pluto Start Up 2010+ Start Up 2008 OPERATION CONSTRUCTION LNG SUPPLY: IMPORT CAPACITY: Start Up 2010+ 33
Slide 35: LNG: Maintaining IOC Leadership
LNG: MAINTAINING IOC LEADERSHIP CAPACITY GROWTH LEADERSHIP Shell share, year end, mtpa LNG capacity, year end, mtpa 25 25 20 20 15 15 10 10 5 5 0 0 2005 2006 2007 2008-9 2010+ Shell Exxon BP Total Chevron AUSTRALIA BRUNEI MALAYSIA NIGERIA 2007 2012 OMAN SAKHALIN QATARGAS 4 PLUTO Includes only projec
Slide 36: NW Australia: Driver for Future LNG Growth
NW AUSTRALIA: DRIVER FOR FUTURE LNG GROWTH CAPACITY GROWTH Shell share, mtpa 20 Sunrise: 38% 15 Prelude: 100% Browse (BCT): 25% 10 Possible NWS: 22% future capacity 5 Pluto: 31% Gorgon Gorgon: 25% Pluto T1 T1-3 NWS T5 0 NWS T1-4 OPERATION CONSTRUCTION OPERATION CONSTRUCTION DESIGN BUSINESS DEVELOPME
Slide 37: Shell's LNG Portfolio: Asia Pacific
SHELL’S LNG PORTFOLIO: ASIA PACIFIC SHELL LNG SALES PORTFOLIO* ASIA PACIFIC LNG PRICING 2012 est LNG Price ($/mmbtu) 14 12 New Contracts in 2007 10 8 ASIA PACIFIC NORTH AMERICA EUROPE 6 Shell 2007 Sales • Pricing reflects contractual terms • Current strong market to be reflected in future 4 Shell sa
Slide 38: Qatar Pearl GTL: World Scale Plant
QATAR PEARL GTL: WORLD SCALE PLANT PEARL GTL • Progress in line with expectations • ~35% complete • ~20,000 workers on site (> 35,000 by year end) • First 4 GTL reactors on site REACTORS INSTALLATION PEARL CONTRUCTION POTABLE WATER TANKS 37
Slide 39: A Growing Wind Energy Business
A GROWING WIND ENERGY BUSINESS WIND ENERGY • Leverage Shell capabilities • Project management and operations • Power marketing and risk management • Financing • Focus on North America CABAZON INSTALLED CAPACITY GROWTH MW, Shell share 600 400 Mt Storm Phase I & II 200 0 2005 2006 2007 2008-9 est UNIT
Slide 40: Gas & Power
GAS & POWER STRONG FINANCIAL PERFORMANCE ACTIVE PORTFOLIO MANAGEMENT LNG LEADERSHIP • Operating excellence • Volume growth • Exposure to strengthening Asian market PEARL GTL UNDER CONSTRUCTION COAL AND WIND OPPORTUNITIES FOR LONG TERM TRACK RECORD OF DELIVERY 39
Slide 41: Peter Voser, Chief Financial Officer
ROYAL DUTCH SHELL PLC BUILDING NEW HEARTLANDS PETER VOSER CHIEF FINANCIAL OFFICER
Slide 42: Financial Strategy Unchanged and on Track
FINANCIAL STRATEGY UNCHANGED AND ON TRACK Global portfolio Financing capacity ranking Through-cycle Selective deals flexibility Competitive Returns Operating Dividend growth performance Non-core asset Share buy-back sales 41
Slide 43: Changing Cost Landscape
CHANGING COST LANDSCAPE INDUSTRY COST LANDSCAPE Cost index % Offshore rigs • Industry inflation ~20% Offshore installation vessesls • Strong segmentation of inflation impact Land rigs • Not restricted to the traditional oil & gas sector €/$ Oil Price • Shell portfolio and self-help Engineering & pro
Slide 44: Costs & Portfolio
COSTS & PORTFOLIO COMPETITIVE PROJECT COSTS SPENDING ON LONG-LIFE PROJECTS Integrated development costs $/BOE Years of plateau production 30 25 20 20 15 ~55% of Capex >50% of capex Average development cost on long-life 10 on long-life ~$7/BOE production 10 production 5 0 0 0% 25% 50% 75% 100% 0% 25%
Slide 45: Financial Outlook of Key Projects
FINANCIAL OUTLOOK OF KEY PROJECTS CAPITAL ALLOCATION & PROFITABILITY PROJECT LIFE AND RETURNS Profitability Index IRR <5 5 – 15 >15 <5 5 – 15 >15 Project life (years) 2004-05 environment: ~$50/bbl crude and ~$10/bbl USGC 2005-06 environment ~$70/bbl crude and ~$15/bbl USGC Post-FID incl. 2007 start-
Slide 46: Established Track Record
ESTABLISHED TRACK RECORD PERFORMANCE CULTURE CAPITAL DISCIPLINE PORTFOLIO & CHOICES • Simpler structure • Prudent balance sheet • Major project decisions • Operating performance • Payout • Exit from non-core and profitability assets • Sustained investment • Investment capability • Re-phasing of marg
Slide 47: Jeroen van der Veer, Chief Executive
ROYAL DUTCH SHELL PLC BUILDING NEW HEARTLANDS JEROEN VAN DER VEER CHIEF EXECUTIVE
Slide 48: Building New Heartlands
BUILDING NEW HEARTLANDS STRATEGY ON TRACK • Unchanged view of industry landscape • More upstream, profitable downstream • Capital discipline, portfolio approach PRIORITIES • Process + personal safety • Operational excellence + top quartile assets • Project management • Technology 47
Slide 49: Handout
HANDOUT as @
Slide 50: 2005-2007 Reserves Summary
2005-2007 RESERVES1 SUMMARY RESERVES IN MLN BOE Movements 2005 2006 2007 Organic2 reserves additions 1,044 1,991 1,504 Year end price effect -60 -59 -183 Production -1,287 -1,268 -1,210 Acquisition & divestment 18 65 -1,115 Total subsidiaries and affiliates movements 1,002 1,997 206 Year end positio
Slide 51: Key Projects
KEY PROJECTS START UP PROJECT COUNTRY SHELL PEAK LNG 100% PRODUCTS CATEGORY SHELL SHARE PRODUCTION CAPACITY OPERATED % kboe/d mtpa 2006-2007 CHANGBEI CHINA 50 50 DEIMOS PH 1 USA 71.5 30 ERHA NIGERIA 43.75 210 NIGERIA LNG T5 NIGERIA 25.6 4.0 NIGERIA LNG T6 NIGERIA 25.6 4.0 ORMEN L ANGE NORWAY 17 420