Shell PLC · LSE:SHEL
Shell — Royal Dutch Shell — Q4 2006 Earnings Presentation
102 slides from Shell's earnings presentation, Feb 1, 2007
Slide 1: Delivery and Growth: Leveraging a Strong Portfolio
DELIVERY AND GROWTH LEVERAGING A STRONG PORTFOLIO ROYAL DUTCH SHELL PLC 1 FEBRUARY 2007
Slide 2: Jeroen van der Veer, Chief Executive
DELIVERY AND GROWTH LEVERAGING A STRONG PORTFOLIO JEROEN VAN DER VEER CHIEF EXECUTIVE
Slide 3: Disclaimer Statement
DISCLAIMER STATEMENT This presentation contains forward-looking statements concerning the financial condition, results of operations and businesses of Royal Dutch Shell. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking s
Slide 4: Agenda
AGENDA INTRODUCTION Jeroen van der Veer Chief Executive EXPLORATION & PRODUCTION Malcolm Brinded Executive Director – Exploration & Production GAS & POWER Linda Cook RENEWABLES & CO2, TECHNOLOGY Executive Director – Gas & Power OIL PRODUCTS Rob Routs Executive Director – Downstream FINANCIAL FRAMEWO
Slide 5: Strategy on Track
STRATEGY ON TRACK STRATEGY CONTEXT MORE UPSTREAM, GROWTH ENERGY DEMAND PROFITABLE DOWNSTREAM • Cash generation + reinvestment • Portfolio choices • Environment + sustainability • Unconventionals + renewables • Competition COMPETITIVE • Downstream includes chemicals RETURNS PRIORITIES DELIVERY + GROW
Slide 6: Portfolio Developments
PORTFOLIO DEVELOPMENTS SHELL DOWNSTREAM PORTFOLIO DEVELOPMENT SHELL UPSTREAM PORTFOLIO DEVELOPMENT Refining capacity million b/d Oil & gas production million boe/d 5 5 4 4 EUROPEAN REFINERY RATIONALISATION 3 3 ENTERPRISE OIL DEA ACQUISITION OIL SANDS 4D SEISMIC 2 2 HORIZONTAL DRILLING TEXACO ACQUISI
Slide 7: Increasing Project Complexity and Integration
INCREASING PROJECT COMPLEXITY AND INTEGRATION OIL SANDS UPGRADING CUSTOMERS REFINING & CHEMICALS CONVENTIONAL LNG & GTL OIL & GAS UPSTREAM DOWNSTREAM 6
Slide 8: Robust Financial Performance Continues
ROBUST FINANCIAL PERFORMANCE CONTINUES FINANCIAL PERFORMANCE CASH USES AND SOURCES 2006 2006 2005 % $bln $ bln $ bln 30 CCS EARNINGS 25.4 22.7 +12 CASH FLOW FROM OPERATIONS* 39.5 35.6 +11 25 BASIC CCS EPS (US$) 3.96 3.41 +16 20 DIVIDEND PER SHARE (€) 1.00 0.92 +9 SHARE BUY-BACK 8.2 5.0 +64 15 10 • R
Slide 9: Major Growth Hubs and Key Progress
MAJOR GROWTH HUBS AND KEY PROGRESS AOSP / Peace River Sakhalin In-Situ acquisitions Sakhalin/ Ormen Lange Shell Canada offer Gazprom France downstream Kashagan California downstream Pinedale review China lubes divestment and bitumen Port Arthur Pearl Qatargas 4 MAJOR GROWTH HUBS Singapore chemicals
Slide 10: Technology and Innovation
TECHNOLOGY AND INNOVATION NON STOP INNOVATION MEETING CHALLENGES NEW HORIZONS • LNG • Deepwater • Wind, Solar • Catalysts • Tight Gas • Biofuels, Hydrogen • Seismic Imaging • GTL Fuel • Coal-To-Liquids • Smart Wells • Coal Gasification • Oil Shale CO2 SOLUTIONS 9
Slide 11: Malcolm Brinded, Exploration & Production
DELIVERY AND GROWTH LEVERAGING A STRONG PORTFOLIO MALCOLM BRINDED EXECUTIVE DIRECTOR EXPLORATION & PRODUCTION
Slide 12: 2006: A Successful Year for Upstream
2006: A SUCCESSFUL YEAR FOR UPSTREAM UPSTREAM UNIT CASH* Rolling 4 quarters 24 • Earnings: $15.2 bln • Production 3,473 kboe/d 20 • Major investment decisions 16 Athabasca expansion 1, Pearl GTL, Deep Water 12 • Strong performance on reserves and resources 8 • Nigeria onshore remains challenging 4 .
Slide 13: Sustained EP Focus: Where We Want to Be
SUSTAINED EP FOCUS WHERE WE WANT TO BE • Sustain Heartlands Higher • Leverage Technology Plays Upside • More Integrated Gas • Grow Unconventionals Portfolio management PORTFOLIO TODAY Exploration & new positions • Robust cash generation • Leader in gas Consistent project delivery • Around 60 bln boe
Slide 14: Industry Evolution
INDUSTRY EVOLUTION NEW INDUSTRY DYNAMICS CHANGING HYDROCARBON MIX EXTRA HEAVY OIL • New players OIL SHALES UNCONVENTIONAL GAS • Intense competition for ‘Easy Barrels’ OIL SANDS • Increasing host government demands CONVENTIONAL CONVENTIONAL • Technology plays OIL GAS Resource volumes remaining in pla
Slide 15: EP - What It Takes to Win
EP - WHAT IT TAKES TO WIN TECHNOLOGY INTEGRATION SCALE • More R&D, more • Across value chain • Mega-projects impact • Sub-surface / surface • Global knowledge • Exploration • Gas to markets transfer differentiator • Producing refined • Supply chain • Increased recovery products (GTL, oil management
Slide 16: Middle East and Caspian Growth
MIDDLE EAST AND CASPIAN GROWTH EXPANDING PORTFOLIO DIVERSE AND GROWING PRODUCTION 2002 • New legacy assets • Doubling production • Significant exploration • Strong partnerships • Long term growth 2002 PRODUCTION MAJOR PROJECTS UNDER CONSTRUCTION NEW OR EXPANDED BUSINESS DEVELOPMENT 15
Slide 17: Delivering Production, Demonstrating Capability
DELIVERING PRODUCTION, DEMONSTRATING CAPABILITY NIGERIA: BONGA/ERHA RUSSIA: SALYM USA: ONSHORE GAS • First deepwater projects in • Fastest well to date 7 days • 15% lower well costs vs. Nigeria • 80% Russian content & competitors (Pinedale) • 2006 production >50% 95% Russian staff • 15 rig and 130+
Slide 18: Strong Performance on Reserves and Resources
STRONG PERFORMANCE ON RESERVES* AND RESOURCES 2005/2006 PERFORMANCE (BILLION BOE) 2005 2006 2005/06 • Significant & diverse Exploration & Business resource base Development resource 2+ 2+ >200% additions • Full replacement of Reserves additions reserves and resources 1.0 2.0 >100% longer term Produc
Slide 19: Delivering New Resources
DELIVERING NEW RESOURCES EXPLORATION AVERAGING >1 BILLION BOE/YEAR Beaufort Sea US & Canada Canada Acreage, BlackRock 19th Round Orphan Basin Onyx SW NA Gas Plays Kazakhstan Ukraine Colorado Permits Tunisia GoM Algeria S. Texas swap Libya Qatar Ubah Venezuela East Sabah Kolo Creek Crux Bobo Australi
Slide 20: Exploration to Production
EXPLORATION TO PRODUCTION • 1999-2006: strong exploration performance • Added ~12 billion boe resources • Final investment decision on ~75% of discovered volumes by end of the decade MAJOR DISCOVERY PROJECTS: EXAMPLES PROJECT MATURITY: TODAY DIVESTED 6% Halfdan APPRAISAL 12% Onyx SW DESIGN Kashagan
Slide 21: Sustain Heartlands - Nigeria
SUSTAIN HEARTLANDS - NIGERIA ONSHORE • Security • Execution Capacity DEEPWATER • Bonga & Erha production • Exploration Success LNG • NLNG Expansions • Growth Options 20
Slide 22: Major Project Flow
MAJOR PROJECT FLOW PORTFOLIO DEVELOPMENT MAJOR PROJECT DECISIONS 2006 bln boe resources Capacity Location (100% 15 kboe/d) AOSP BC10 Brazil 100 Perdido Gorgon Qatargas 4 AOSP EXPN 1 Canada 100 10 Kashagan Pearl GTL PINEDALE USA 50 Peace River Sakhalin SOUTH TEXAS USA 30 5 PERDIDO USA 130 Pohokura DE
Slide 23: Key Projects Under Construction
KEY PROJECTS UNDER CONSTRUCTION PROJECTS > $100 mln USD SHIFTING PRODUCTION MIX Ormen Lange Salym AOSP Expansion Sakhalin Ph II Kashagan Pinedale Corrib Changbei Perdido Pearl GTL Ursa Qatargas 4 South Texas Deimos Harweel Gbaran/Ubie Phase 1 E11 Forcados Yokri BC-10 Bonga NW Angel 06 12-14 SHELL SH
Slide 24: Long Life Assets
LONG LIFE ASSETS PRODUCTION FROM NEW LONG-LIFE ASSETS (POST FID) kboe/d Shell share 1,000 • Average unit cash flows 900 stronger than existing portfolio 800 today 700 600 • Long-term stable cash flow and 500 production 400 300 200 SAKHALIN KASHAGAN AOSP 100 PEARL SALYM US ONSHORE GAS 0 QLNG ORMEN LA
Slide 25: Leverage Technology Plays - Ultra Deep Water
LEVERAGE TECHNOLOGY PLAYS – Ultra Deep Water PERDIDO BC10 USA Spar BRASIL FPSO FPSO Houston Brasilia Perdido Rio de 2400 meters 1800 meters BC-10 Janeiro water depth water depth • Deepest spar ever • Surface drilling equipment • Expected 10-20% improved saving $100 mln USD recovery via subsea • Expe
Slide 26: Leverage Technology Plays - Enhanced Oil Recovery
LEVERAGE TECHNOLOGY PLAYS – Enhanced Oil Recovery (EOR) OPERATIONS GROWTH TECHNOLOGY injection pum p injection w ell production w ell injection w ell alkalin e solution form s surfactants in situ w ater polym er oil bank Aera – US California Oman 10 fold increase in R&D • Steam drive in light oil •
Slide 27: Grow Unconventionals
GROW UNCONVENTIONALS PEARL GAS TO LIQUIDS ATHABASCA OIL SANDS IN SITU CONVERSION • On track to supply 1.6 • First expansion • 25 years of R&D Bcf/d gas to GTL plant sanctioned (100 • Applicable to Oil kboed) Shales and Heavy Oil • Two wellhead jackets • Subsurface heating to be installed in ’07 • In
Slide 28: Summary
SUMMARY STRATEGY • Unchanged and Delivering DELIVERY • Underlying production up 2% • Major Projects on Track GROWTH • Leading Explorer • Reserves and Resource Additions • Strong Portfolio • Long Life Assets • Leveraging Technology 27
Slide 29: Linda Cook, Gas & Power, Renewables & CO2, Technology
DELIVERY AND GROWTH LEVERAGING A STRONG PORTFOLIO LINDA COOK EXECUTIVE DIRECTOR GAS & POWER RENEWABLES & CO2 TECHNOLOGY
Slide 30: Setting the Pace in Integrated Gas in 2006
SETTING THE PACE IN INTEGRATED GAS IN 2006 Nigeria LNG: Qalhat ramp-up T4-5 ramp-up LNG SALES UP 14% T6 construction North West Shelf: T7 FEED 1st LNG to China T5 construction Sakhalin progress Olokola T1-2 into FEED Qatargas 4 construction Broadwater progress Gorgon progress Baja construction Pluto
Slide 31: GP Earnings: Continued Growth
GP EARNINGS: CONTINUED GROWTH NIBIAT* PERFORMANCE REFLECTS $ Bln 3.0 • LNG volume growth 2.5 • Strong LNG prices 2.0 • Marketing & Trading performance 1.5 (North America, Europe, LNG) 1.0 0.5 0.0 -0.5 2002 2003 2004 2005 2006 LNG OTHERS 2002-2003 USGAAP, 2004-2006 based on IFRS * Excludes major dive
Slide 32: Integrated Gas Leadership
INTEGRATED GAS LEADERSHIP EXPLORATION LIQUEFACTION LNG SHIPPING REGAS, MARKETING & TECHNOLOGY & PRODUCTION PIPELINES, TRADING STORAGE World’s 3rd Largest Largest ship Strategic Global Leader in largest gas equity operator positions positions & LNG & producer capacity capabilities conversion technolo
Slide 33: Excellence in LNG Design & Delivery
EXCELLENCE IN LNG DESIGN & DELIVERY DESIGN •Capacity range 2-11 mtpa •Onshore & floating •Modularised construction capability •Lowest CO2 emissions DELIVERY •11 LNG trains ’99-‘06 •Lowest unit cost: Qalhat (Oman) FLAWLESS START-UP •NWS T4: 11 days (2004) •Qalhat (Oman): 9 days (2005) 32
Slide 34: Excellence in LNG Operations & Shipping
EXCELLENCE IN LNG OPERATIONS & SHIPPING 2006 SHELL LNG PLANT RELIABILITY* ACROSS 5 SHELL LNG JVS IN 2006** 100% • Avg. reliability of 98% (“1st quartile”) 98% • Avg. capacity 117% of original design 96% • Efficiency improvements • Debottlenecking 94% • Avg. unit CO2 emissions better than 92% industr
Slide 35: LNG: Maintaining IOC Leadership
LNG: MAINTAINING IOC LEADERSHIP LIQUEFACTION CAPACITY (YEAR END, EQUITY SHARE*), MTPA 25 20 ~Doubling capacity to 2010 QG 4 Sakhalin 15 10 5 0 2004 2005 2006 2007 2008 2009 2010 MAJOR COMPETITORS (ExxonMobil, Chevron, BP, Total) Source: Shell analysis SAKHALIN AT 55% SAKHALIN AT 27.5% * Including in
Slide 36: Nigeria: Continued Delivery in Atlantic Basin
NIGERIA: CONTINUED DELIVERY IN ATLANTIC BASIN NIGERIA LNG (Shell 26%) T1-3 (9.6mtpa) T4-5 (8mtpa) • All volumes firmly contracted • Successful delivery & start-up T6 (4mtpa) • All volumes firmly contracted • On schedule for completion ~year end OPTIONS FOR GROWTH • NLNG T7+ in FEED • OKLNG T1-2 in F
Slide 37: Sakhalin II: Continuing Progress
SAKHALIN II: CONTINUING PROGRESS LNG PROJECT STATUS • 9.6 mtpa plant > 95% complete • Excellent safety performance • >95% volumes committed (Japan, Korea, N America) STRATEGIC POSITION • New supply source for Asia Pacific • Diversifying markets for Russian gas • Strong Russian partner • Opportunitie
Slide 38: Qatar: Growth in Middle East LNG
QATAR: GROWTH IN MIDDLE EAST LNG QATARGAS 4 (Shell 30%) •7.8 mtpa LNG capacity (100%) •Focus on premium markets •EPC contract awarded, construction underway QATAR GAS TRANSPORT COMPANY • Shell awarded contract to manage fleet of at least 27 new LNG carriers 37
Slide 39: Australia: Milestones for Continued Growth
AUSTRALIA: MILESTONES FOR CONTINUED GROWTH NORTH WEST SHELF (Shell 22%*) •T1-4 (11.9 mtpa) •T5 (4.2 mtpa) construction progress GORGON (Shell 25%) • Environmental approvals progress • FEED ongoing NEW DEVELOPMENTS • Pluto FEED • Browse business development • Exploration success * including indirect
Slide 40: Portfolio Positioned for Long Term Growth
PORTFOLIO POSITIONED FOR LONG TERM GROWTH LNG GROWTH PORTFOLIO, (SHELL SHARE*) SHELL’S LNG SUPPLY PORTFOLIO Mtpa 60 50 40 30 20 10 OPERATION DESIGN 0 (Gorgon, Pluto, Nigeria T7+, Olokola T1-2, Operation Construction Design Business Persian T1-2) Development CONSTRUCTION BUSINESS DEVELOPMENT (Austral
Slide 41: Shell Leadership in Asia Pacific LNG
SHELL LEADERSHIP IN ASIA PACIFIC LNG VOLUME: Est. 2010 Equity LNG Capacity* (Mtpa) PRICE: Asia Pacific rebound 2006+ Shell pre 2002 price LNG price ($/MMbtU) XOM 2004-5 BP Total 2002-3 BG Oil Price ($ / bbl) Conoco Capturing value from improving market: Chevron • Contract extensions • Price reviews
Slide 42: Leveraging the LNG Portfolio: Driving Optimisation
LEVERAGING THE LNG PORTFOLIO: DRIVING OPTIMISATION MARKETING OPTIMISATION EXAMPLE BUILDING CAPABILITIES • Leading global supply • Diversified regas portfolio • Growing marketing volumes SUPPORTING LNG JVs & CUSTOMERS LNG SUPPLY BASE CASE SPOT CARGO • Ramp-up volumes CUSTOMER DIVERSION • Spot cargoes
Slide 43: Marketing & Trading Leadership in Europe
MARKETING & TRADING LEADERSHIP IN EUROPE SUPPLY LEADERSHIP DIVERSITY OF MARKET AND SUPPLY Equity gas sales 2005, Bcm pa 60 50 40 Russia 30 20 10 Global LNG 0 N. Africa ExxonMobil Shell Total BP Chevron EUROPEAN EQUITY PRODUCTION REGAS CAPACITY REGAS OPPORTUNITY PRODUCTION LNG EQUITY IMPORTS MARKETIN
Slide 44: N. America: Integrating Gas Supply & Market
N. AMERICA: INTEGRATING GAS SUPPLY & MARKET SUPPLY & MARKET POSITIONS STRONG GROWTH IN SHELL GAS SUPPLY Broadwater Cove Point #3 gas marketer Baja Elba Island Gulf of Mexico Altamira 2006 2010 est. REGAS: OPERATION CONSTRUCTION DEVELOPMENT NORTH AMERICAN PRODUCTION PRODUCTION SHELL LNG IMPORTS Sourc
Slide 45: Excellence in GTL
EXCELLENCE IN GTL BINTULU GTL RELIABILITY LEADING EXPERTISE AT BINTULU 100% • >10 years operations 98% • High reliability 96% • Improved catalyst performance 94% • Growing market demand 92% 90% 01 02 03 04 05 06 44
Slide 46: Qatar: Pearl GTL - Construction Underway
QATAR: PEARL GTL – CONSTRUCTION UNDERWAY PROJECT DIMENSIONS • ~120 kboe/d NGLS & ethane • 140 kb/d GTL products • >1 mtpa Baseoil • >2 mtpa Gasoil • >1 mtpa Naphtha PROJECT STATUS • $10 bln commitments • All EPC contracts awarded • Over 1000 design engineers • Site construction activities started 45
Slide 47: Clean Coal Technology for the Future
CLEAN COAL TECHNOLOGY FOR THE FUTURE 15 licenses in China – 5 onstream Dongting construction complete Dec 06 (Sinopec JV) Buggenum (250 MW): since 1994 Nuon new license (600 MW) Stanwell Zerogen (Australia) Ningmei (China, Shenhua) Business Development Coal gasification Monash (Australia, Anglo Clea
Slide 48: Consistent Strategy: Profitability & Growth
CONSISTENT STRATEGY: PROFITABILITY & GROWTH • Strategy unchanged • Successful track record • Global capabilities and market presence • New technologies • Strong growth portfolio 47
Slide 49: Linda Cook, Gas & Power, Renewables & CO2, Technology
DELIVERY AND GROWTH LEVERAGING A STRONG PORTFOLIO LINDA COOK EXECUTIVE DIRECTOR GAS & POWER RENEWABLES & CO2 TECHNOLOGY
Slide 50: Investing in Technology for the Future
INVESTING IN TECHNOLOGY FOR THE FUTURE SHELL TECHNOLOGY INVESTMENT, $ MLN NEW PATENT PUBLICATIONS 2005 1400 350 1200 300 1000 250 800 200 600 150 400 100 200 50 0 0 2005 2006 XOM Shell Chevron Total BP Research & Development Pilots, field-tests & demonstrations Source: Derwent World Patent Index 49
Slide 51: Unlocking Global Hydrocarbon Resources
UNLOCKING GLOBAL HYDROCARBON RESOURCES (>13 TRILLION BOE)* CONVENTIONAL OIL NATURAL GAS OIL SHALES COAL EXTRA HEAVY OIL OIL SANDS ~3 Tboe ~4 Tboe ~3 Tboe ~4 Tboe Exploration Exploration In-situ recovery Clean coal Deepwater Deepwater Maximised recovery Tight gas Novel crude Coal to Liquids EOR LNG u
Slide 52: Leadership in CO2 Management
LEADERSHIP IN CO2 MANAGEMENT MANAGING OUR OWN CO2 EMISSIONS ADDRESSING CO2 INTENSITY BASELINE EMISSIONS • Increasing gas and LNG supply • CO2 sequestration / EOR Improving efficiency • Clean coal technologies Reducing flaring • Biofuels Leading designs • Renewables & Hydrogen CO2 for enhanced oil re
Slide 53: Renewables: Pursuing a Competitive Business
RENEWABLES: PURSUING A COMPETITIVE BUSINESS SHELL WIND ENERGY SHELL SOLAR SHELL HYDROGEN • A leading wind operator • New generation thin film • World’s largest public technology (CIS) transport JV (NL) • 420 MW installed capacity (Shell share) • Improved efficiency • Demonstration projects in • 20 M
Slide 54: Rob Routs, Downstream
DELIVERY AND GROWTH LEVERAGING A STRONG PORTFOLIO ROB ROUTS EXECUTIVE DIRECTOR DOWNSTREAM
Slide 55: Strong Earnings Delivery Continues
STRONG EARNINGS DELIVERY CONTINUES OP CCS EARNINGS CHEMICAL CCS EARNINGS** $bln $bln 8 1.5 6 1.0 4 0.5 2 0.0 0 -2 -0.5 2002 2003 2004 2005 2006 2002 2003 2004 2005 2006 MSD* MARKETING, TRADING & OTHER * MSD = manufacturing, supply and distribution ** CCS basis from 2005 IFRS basis from 2004 54
Slide 56: An Industry Leader: Unit Earnings/Cash Flow
AN INDUSTRY LEADER UNIT EARNINGS/CASH FLOW OIL PRODUCTS CCS EARNINGS OIL PRODUCTS – UNIT CASH FLOW* Rolling 4 quarters; $/bbl Annual + rolling 4 quarters for 2006; $/bbl 5 5 4 4 3 3 2 2 1 1 0 0 Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q4 2003 2004 2005 2006 2003 2004 2005 2006 COMPETITOR RANGE COMPETITOR RANGE SHELL SH
Slide 57: A Challenging Environment
A CHALLENGING ENVIRONMENT • Choice • Security mandates • Lower prices CUSTOMERS REGULATORS • Tighter specifications • Lower emissions • Bio mandates SHELL IS WELL POSITIONED: Portfolio Balance/Shift INDUSTRY Brand Strength DYNAMICS Operational Excellence Technology Leverage • East led demand/capacit
Slide 58: Industry Refining Capacity/Demand Gap Narrows
INDUSTRY REFINING CAPACITY/DEMAND GAP NARROWS BUT, INDUSTRY WILL REMAIN CYCLICAL … FORECAST ADDITIONAL CDU GLOBAL REFINING CAPACITY VS. UTILISATION REFINING CAPACITY Mln bpd Utilisation Mln bpd 100 100% 12 90 90% 10 80 80% 70 70% 8 60 60% 50 50% 6 40 40% 4 30 30% 20 20% 2 10 10% 0 0% 0 65 70 75 80 8
Slide 59: Global Manufacturing Portfolio
GLOBAL MANUFACTURING PORTFOLIO 47 REFINERIES, 9 ETHYLENE SITES REFINING CAPACITY DYNAMIC PORTFOLIO MANAGEMENT mln bbls/d mln t/a 4.7 1212 REFINING 4.4 1010 CAPACITY 4.1 88 ETHYLENE 3.8 66 CAPACITY 3.5 44 00 01 02 03 04 05 06 00 01 02 03 04 05Shell06 share REFINING CAPACITY ≥ 100 KB/D < 100 KB/D ETHY
Slide 60: Strategy on Track: 2006 Achievements
STRATEGY ON TRACK 2006 ACHIEVEMENTS • Divest underperforming/ RESHAPE THE non strategic assets • Earnings $ 8.1 bln PORTFOLIO • Strategic manufacturing growth • Moving East • China - Lubes and Bitumen acquisitions • Brand preference leader CUSTOMER • Differentiated fuels • Turkey retail JV FOCUS TEC
Slide 61: Divesting Non-Strategic Assets, Increasing Focus
DIVESTING NON-STRATEGIC ASSETS, INCREASING FOCUS … CUMULATIVE DIVESTMENT PROCEEDS • Divest non-strategic assets e.g. $ bln • Basell JV 10 • Berre cracker, France • Bakersfield refinery, USA 9 • Los Angeles refinery and related assets, USA 8 • French refining, Puerto Rico petrochemicals, 7 Dominican
Slide 62: Investing for Asset Reliability and Growth
INVESTING FOR ASSET RELIABILITY AND GROWTH DOWNSTREAM CAPEX 2003 – 2006 • On-going investment in asset integrity • Investment to strengthen asset base in key markets • Disciplined growth ASSET INTEGRITY, GROWTH CARE/MAINTAIN 61
Slide 63: Growth Investments, Portfolio Choices
GROWTH INVESTMENTS, PORTFOLIO CHOICES • Enhancing strong competitive position • Focusing capex on long term winning Port Arthur Refinery Expansion assets Nanhai Singapore • Leveraging Chemicals integration opportunities MARKETING – MOVING EAST • Increasing exposure to growth markets in the East MARK
Slide 64: Nanhai Petrochemical Complex
NANHAI PETROCHEMICAL COMPLEX SUCCESSFUL COMMERCIALISATION, WORLD CLASS OPERATION • Delivered on-time/on budget • World class safety record • Q4 2006 operating rates near capacity • 1.9 mln tonnes products sold by end 2006 • Over 800 customers in more than 20 provinces in China 63
Slide 65: Chemicals: Operational Excellence & East Growth
CHEMICALS: OPERATIONAL EXCELLENCE & EAST GROWTH MAXIMISE HYDROCARBON SYNERGIES WITH REFINING AND EP STRENGTHENING EXISTING BASE IN AMERICAS AND EUROPE Moerdijk Wesseling Norco Deer Park Nanhai SADAF Singapore • Generate cash DEVELOP NEW AND GROW EXISTING • Low cost growth PLATFORMS IN ASIA & MIDDLE
Slide 66: Singapore Chemicals
SINGAPORE CHEMICALS SHELL EAST ETHYLENE CAPACITY • Largest Shell production centre in tonnes/year Asia Pacific 2,500 • New world scale ethylene cracker and mono ethylene glycol plant 2,000 • Full integration with Bukom - 1,500 advantaged site • Increased complex upgrading 1,000 capacity 500 • Ground
Slide 67: Marketing - Moving East
MARKETING – MOVING EAST CHINA • Retail • Sinopec JV • ~ 300 sites operational • Lubricants • 3rd largest manufacturer • Largest IOC • Bitumen – Koch acquisition • Doubled Shell’s volume CHINA TURKEY • Retail JV • 21% market share INDIA • 22 stations operating – 100 pending INDONESIA INDIA • Jakarta
Slide 68: Shell - The Retail and Lubricants Brand Leader
SHELL – THE RETAIL AND LUBRICANTS BRAND LEADER • #1 Global retail market share 2006 BRAND PREFERENCE* • Improved customer satisfaction Retail • #1 Global market share in branded 20% lubricants1 15% • #1 Global brand preference among 10% passenger car and heavy duty engine-oil 5% 0% consumers2 Shell
Slide 69: Operational Excellence in the Businesses
OPERATIONAL EXCELLENCE IN THE BUSINESSES EXAMPLE: RHEINLAND REFINERY GERMANY Unplanned downtime 4% REFINING • Cost leadership • Reliability & availability • Margin uplift & energy efficiency 2% • Supply chain optimisation 0% MARKETING 2004 2006 • Costs leadership • Shared services • Price management
Slide 70: Operational Excellence in the Back Office
OPERATIONAL EXCELLENCE IN THE BACK OFFICE FROM TO • Complex business models • Simple business models … low cost • High variability across globe • Standard global processes • Assets: In 140 countries (Q1/06) • Assets: In ~ 100 countries by end ‘08 • Many IT applications … high cost • Standard common
Slide 71: Integrated Oil Trading Delivering Profitable Growth
INTEGRATED OIL TRADING DELIVERING PROFITABLE GROWTH DOWNSTREAM INDEXED PERCENTAGE OF 2006 TRADING EARNINGS VOLUME BY LOCATION • Global coverage – % offices in 10 cities 400 100 90 350 • Track record of growth 80 300 and profitability 70 250 60 200 50 • Upstream and Downstream Synergies 150 40 30 100
Slide 72: Leading Edge Capability
LEADING EDGE CAPABILITY Shell GTL CAPACITY • Quality cost-competitive conventional Kb/d fuels 200 • Global leader in differentiated fuels 150 100 • Cutting edge race proven fuels R&D capability 50 • Leadership in GTL 0 Bintulu Pearl • Production at Bintulu 10+ years • Leading position in GTL Base Oi
Slide 73: Leading in Current and Future Bio-fuels
LEADING IN CURRENT AND FUTURE BIO-FUELS TECHNOLOGIES FOR TOMORROW Sunflower Rapeseed Soya Food crops Bio-esters Diesel CHOREN Conversion Biomass Diesel + Residues to Liquids 2nd generation Wheat Sweet corn Sugar cane IOGEN Enzymatic Mogas + Residues hydrolysis 2nd generation Cellulose, ethanol Food
Slide 74: Well Positioned Going Forward
WELL POSITIONED GOING FORWARD CONTINUED INDUSTRY LEADERSHIP IN ANY ENVIRONMENT OP CCS EARNINGS $ bln TRACK RECORD OF STRONG DELIVERY 8 6 4 2 OPERATIONAL EXCELLENCE UNDERPINS 0 • Safety and asset integrity are the highest priority -2 2002 2003 2004 2005 2006 MSD* MARKETING, TRADING & OTHER STRENGHTEN
Slide 75: Peter Voser, Chief Financial Officer
DELIVERY AND GROWTH LEVERAGING A STRONG PORTFOLIO PETER VOSER CHIEF FINANCIAL OFFICER
Slide 76: Financial Strategy and Performance
FINANCIAL STRATEGY AND PERFORMANCE CAPITAL DISCIPLINE PRUDENT BALANCE SHEET • Global portfolio ranking • Rebalancing debt ratios • Selective deals • Through-cycle flexibility COMPETITIVE RETURNS COMPETITIVE CASH FLOW COMPETITIVE PAYOUT • Operating performance • Dividend growth • Non-core asset sales
Slide 77: Q4 2006 Results Highlights
Q4 2006 RESULTS HIGHLIGHTS Q4 Q4 2006 2005 2006 2005 $ bln $ bln $ bln $ bln CCS EARNINGS 6.0 5.4 +11% 25.4 22.7 +12% CASH FROM OPERATIONS* 8.8 7.3 +19% 39.5 35.6 +11% BASIC CCS EPS (US$) 0.95 0.83 +14% 3.96 3.41 +16% DIVIDEND PER SHARE (€) 0.25 0.23 +9% 1.00 0.92 +9% SHARE BUY BACKS 1.4 2.6 8.2 5.0
Slide 78: Q4 2006 Earnings Momentum
Q4 2006 EARNINGS MOMENTUM $ BLN 7 6 5 4 3 Q4 2005 Upstream Downstream OIS/Corporate/ Q4 2006 Minority Interest 77
Slide 79: Businesses Cash Generation and Choices
BUSINESSES CASH GENERATION AND CHOICES Cash sources and uses 2006 KEY DIVESTMENTS IN 2006 $bln • UPSTREAM • Tahiti-South Texas swap 30 • Sakhalin farm out planned for 2007 25 • DOWNSTREAM • Various assets in: 20 • South & Central America • Caribbean 15 • Africa • Pacific Islands 10 KEY ACQUISITIONS
Slide 80: Progressive Payout Development
PROGRESSIVE PAYOUT DEVELOPMENT DIVIDEND GROWTH* VERSUS INFLATION 2006 PAYOUT Indexed, dividends paid in year • Over $16 bln returned to shareholders 225 • Dividend track record ahead of policy 200 DIVIDEND POLICY • Basic policy unchanged 175 • Grow at least in line with inflation • Calculated in US$
Slide 81: Through-Cycle Balance Sheet
THROUGH-CYCLE BALANCE SHEET Debt and gearing levels 25% 20% DEBT RATIOS % BALANCE SHEET CAPACITY 15% 10% • Dividend 5% 0% 2004 2005 2006 • Sustained organic spending $25 DEBT LEVELS $ BLN $20 • Selective acquisitions $15 $10 $5 $0 2004 2005 2006 NET DEBT OTHER OFF-BALANCE SHEET COMMITMENTS 80
Slide 82: Portfolio Development
PORTFOLIO DEVELOPMENT NUMBER OF MAJOR PROJECTS 100 90 80 • Expaning opportunity set 70 60 50 • Investment choices 40 30 • Projects under construction 20 10 0 Business Design Under 2006 Development construction start up 2007-2011 START UP UPSTREAM 2012-2014 START-UPS & OPTIONS DOWNSTREAM Projects lar
Slide 83: Investing for the Future
INVESTING FOR THE FUTURE 2007-08 Average organic capital investment ~80% SPENDING UPSTREAM UPSTREAM • New growth hubs • Unconventionals growth • Integrated assets ASSET INTEGRITY • Safety • Reliability EXPLORATION DOWNSTREAM GROWTH UPSTREAM GROWTH BASE UPGRADING, LNG LIQUEFACTION, GTL GROWTH 82
Slide 84: Competitive Project Costs
COMPETITIVE PROJECT COSTS INTEGRATED PROJECT CONSTRUCTION COSTS / RESOURCES 10 8 Cost $/boe 6 ~$6 PER BOE 4 2 0 Resources (bln boe) DEEPWATER HEARTLANDS UNCONVENTIONALS INTEGRATED GAS Major projects, post-FID and 2006 startups. Includes GTL, oil sands upgraders, LNG liquefaction facilities 83
Slide 85: Capital Spending
CAPITAL SPENDING $ BILLION CAPITAL RECYCLING 2006 2007 • Exit from non-core assets ORGANIC 20 24-25 • Spending focus on new hubs NET ACQUISITION ~1 (5) (DISPOSAL) NET CAPEX ~$22-23 BLN IN 2007 SAKHALIN FARM-OUT (4) • 2007 disposals ~$5 bln • Shell Canada minorities SHELL CANADA 7 NET CAPITAL SPENDIN
Slide 86: Balancing Risk with Growth
BALANCING RISK WITH GROWTH CASH FLOW FROM OPERATIONS BY RISK AREA BALANCED PORTFOLIO • Country risk key in capital allocation • No step-change in risk weighting 2007 2011-14 Average HIGH LOW INTERMEDIATE VERY LOW Source: Shell Group estimates based on Maplecroft Political Risk Index 2006 85
Slide 87: Operating Performance Focus
OPERATING PERFORMANCE FOCUS • Unification, simplification ~$0.5 bln annual synergies • Operating synergies • Global organisation • Standardisation & offshoring EXAMPLE: EXAMPLE: GLOBAL ORGANISATION SHELL FINANCE SHARED SERVICE CENTRES STANDARD GLOBAL Glasgow PROCESSES Krakow Guatemala Manila Kuala L
Slide 88: 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 assets and profitability • Sustained investment • Re-phasing of marginal • Investment capabi
Slide 89: Jeroen van der Veer, Chief Executive
DELIVERY AND GROWTH LEVERAGING A STRONG PORTFOLIO JEROEN VAN DER VEER CHIEF EXECUTIVE
Slide 90: Summary
SUMMARY 2006 FINANCIAL PERFORMANCE • CCS earnings $25.4 bln • Returns to shareholders $16.3 bln • Strong environment and operating performance DELIVERY AND GROWTH IN 2006 • Reserves* replacement ~150% • Successful exploration and business development; >2 bln boe new resources • 11 growth project sta
Slide 91: Delivery and Growth
DELIVERY AND GROWTH SHELL IN 2004 … OUR RESPONSE Cost inflation PORTFOLIO SHIFT • New legacy assets New • Growth markets East competitors TECHNOLOGY • Unconventionals + exploration • Cleaner fuels, CO2 solutions CO2 challenge Managing risk Sustained investment Standardisation 90
Slide 92: Questions & Answers
DELIVERY AND GROWTH LEVERAGING A STRONG PORTFOLIO QUESTIONS & ANSWERS
Slide 93: Royal Dutch Shell plc
DELIVERY AND GROWTH LEVERAGING A STRONG PORTFOLIO ROYAL DUTCH SHELL PLC
Slide 94: Additional Handouts: Exploration & Production
DELIVERY AND GROWTH LEVERAGING A STRONG PORTFOLIO ADDITIONAL HANDOUTS EXPLORATION & PRODUCTION
Slide 95: Value from Technology
VALUE FROM TECHNOLOGY SMARTER FIELD MANAGEMENT COMBATING RISING COSTS • Over 50 Smart Wells installed since • Innovative low-cost monotower (UK, 2000 NL) • Smart technology and Well & • up to 50% cost reduction Reservoir Management targeting • zero CO2 emissions improved oil recovery by 10-25% • Low
Slide 96: More Integrated Gas - Sakhalin Over 80% Complete
MORE INTEGRATED GAS – SAKHALIN OVER 80 % COMPLETE • First Russian offshore gas platform • Record breaking float-over installation - PA-A (21,800 tonne); worlds heaviest lift - PA-B (28,000 tonne) • Offshore pipe lay work completed • 2 x 800 km onshore pipelines, over 90% now welded • First Russian L
Slide 97: EP Funnel - Major Projects
EP FUNNEL – MAJOR PROJECTS START UP PROJECT COUNTRY SHELL SHARE CAPACITY % 100% KBOE/D 2007-2008 NA KIKA FOURIER USA 50.00 25 DEIMOS PHASE 1 USA 71.50 30 CHANGBEI CHINA 100.00 50 AFAM GAS SUPPLY PROJECT NIGERIA 30.00 40 E11 MALAYSIA 50.00 120 ORMEN LANGE NORWAY 17.20 390 STATFJORD LATE LIFE NORWAY 9
Slide 98: Additional Handouts: Renewables & CO2, Technology
DELIVERY AND GROWTH LEVERAGING A STRONG PORTFOLIO ADDITIONAL HANDOUTS RENEWABLES & CO2 TECHNOLOGY
Slide 99: Carbon Capture and Sequestration: CO2 for EOR
CARBON CAPTURE AND SEQUESTRATION USING CO2 FOR EOR (OFFSHORE NORWAY) PROJECT DESCRIPTION • Capturing CO2 from power generation • Using it for Enhanced Oil Recovery offshore in Draugen & Heidrun fields • Potentially storing >2 mtpa of CO2 PROJECT STATUS • Shell and Statoil agreement • Feasibility stu
Slide 100: Demonstration Project in Rotterdam: Managing CO2 Emissions
DEMONSTRATION PROJECT IN ROTTERDAM MANAGING CO2 EMISSIONS PERNIS REFINERY FUEL CELL BUS Hydrogen CO2 DIRECT CO2 SALES MINERALISATION SEQUESTRATION 99
Slide 101: Carbon Capture and Storage: ZeroGen Project
CARBON CAPTURE AND STORAGE ZEROGEN PROJECT (AUSTRALIA) PROJECT DESCRIPTION • World 1st CO2 capture & storage coal power project in design • Integrated coal-based gasification plant, Rockhampton • 200km CO2 pipeline • CO2 storage in reservoir ~2km below surface Queensland Rockhampton • Resulting in l
Slide 102: Royal Dutch Shell plc
DELIVERY AND GROWTH LEVERAGING A STRONG PORTFOLIO ROYAL DUTCH SHELL PLC