Shell EP Americas. IPAA 75 th Annual Meeting. Raoul Restucci CEO, EP Americas

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1 Shell EP Americas IPAA 75 th Annual Meeting Raoul Restucci CEO, EP Americas 26 October 2004

2 Disclaimer Disclaimer statement The following presentation contains forward-looking statements as defined in section 102 of the Private Securities Litigation Reform Act of 1995, that are subject to risk factors associated with the oil, gas, power, chemicals and renewables business. It is believed that the expectations reflected in these statements are reasonable, but may be effected by a variety of variables which could cause actual results or trends to differ materially, including, but not limited to: price fluctuations, actual demand, currency fluctuations, drilling and production results, reserve estimates, loss of market, industry competition, environmental risks, physical risks, the risk of doing business in developing countries, legislative, fiscal and regulatory developments including potential litigation and regulatory effects arising from recategorisation of reserves, economic and financial market conditions in various countries and regions, political risks, project delay or advancement, approvals and cost estimates. Cautionary Note to US Investors: The United States Securities and Exchange Commission ( SEC ) permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions.

3 Topics North American Gas Supply / Demand Gap Shell s Gas Strategy Portfolio, Technology & Operations Industry Challenges

4 North American Gas Market Forecast Gas Supply and Demand BCF / Day Supply Demand Canada US Mexico Supply Excludes LNG imports Includes Arctic pipelines Exploration success is critical to supply Demand Driven by power generation Increasing oil sands consumption Assumes some industry displacement Source: NPC, Balancing Natural Gas Policy, Fueling the Demands of a Growing Economy, 2003

5 Gap Growth in the North American Gas Market 20 Gas Gap: Demand - Supply BCF / Day Project Challenges Tight Gas, CBM, BC Gas Arctic Pipeline timing/cost LNG terminal timing Industry Challenges Demographics / The Big Crew Change Limited Acreage Access HSE Sustainable Development Source: NPC, Balancing Natural Gas Policy, Fueling the Demands of a Growing Economy, 2003

6 US Supply Sources 80 Pipeline Imports 60 New Unconventional Capital intensity up on all fronts BCF/d 40 LNG imports New Fields Growth mainly in unconventionals 20 Existing Fields New Fields LNG Growth expected from 2-2.5% market share near term to 12-15% by 2025 Existing Wells Source: NPC, Balancing Natural Gas Policy, Fueling the Demands of a Growing Economy, 2003

7 Balanced Portfolio of High Margin Developments GoM Deep Shelf Unconventional Pinedale / Alberta High UDC Steep declines North American Gas High Opex Sustainable Base GoM Exp & Dev Mars Basin Brazil Exp & Dev Deepwater % Undeveloped Volumes (Proved Reserves + Mining Volumes) Heavy Oil Aera Peace River AOSP Development

8 North American Gas Portfolio Mackenzie Delta Foothills Rockies South Texas Sable Island Gulf of Mexico Deep Shelf Deep Water LNG Terminals Altamira Baja Cove Point Elba Island Gulf Landing

Offshore Exploration Activity Hub Development Exploration Joseph Ram Powell Ram Powell G Auger Brutus Holstein Mars Ursa Deimos Vrede Na Kika Coulomb

9 Offshore Exploration Activity Hub Development Exploration Joseph Ram Powell Ram Powell G Auger Brutus Holstein Mars Ursa Deimos Vrede Na Kika Coulomb Cheyenne Caesar Tahiti 1500' Great White 4000' 6000' 8000' 10000' Plesiosaurus # of Prospects GOM Prospects > 200 mln boe

10 Shell Operations in South Texas Houston Laredo Vicksburg Wilcox McAllen mln scf/d Corpus Christi Jan-01 Shell Operated Production (TG) Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04

11 South Texas Well Cost Evolution Conventional 1989: $4.1 mln Increasing Challenges Smaller reserve targets Multizone depletion UB DWC 2003: $3.5 mln Conventional 2003: $9.0 mln Technology Implementation EnerFrac Fracture Optimization Tubingless / Multizone Completions Underbalanced Drilling with Casing

12 South Texas Drilling Safety Incident Rates Total Recordable Incident Rate SHELL - TRIR IADC - TRIR ½ years w/o a Construction Recordable 2 ½ years w/o a D & C Recordable Incident Rates Days Away Incident Rate IADC - DAIR SHELL - DAIR

13 Opportunity Identification: Integrated Regional Studies Green River Basin Reservoir Properties Data Integration - Seismic - Stratigraphy - DST and pressures - Petrophysics - Thermal Maturity - Outcrops Structure & Stratigraphy DST and Pressure

14 Pinedale Position in the Green River Basin Total Anticline gas in place: 160 TCF Operated Position: ~13,000 acres Pinedale 3 Miles Tight, Cretaceous sandstones Dry Gas (~ 7 bbl condensate / mln scf) Mi tic An les le da ne 30 Pi 550 Total 40 Acre Spacing e lin JONAH

15 Pinedale Production Ramp Up Shell Operated Gas Production (TG) Strong production growth to 2014 Step change in safety performance Lower drilling / completions costs High realized price / forward trends Platform to build future positions mln scf/d $ mln Jan Jul-02 Jan-03 Jul-03 Jan-04 Average Well Cost Jul-04 20% Reduction YTD Drilling Completion Facility

16 Pinedale Technologies / Operations DRILLING Slim Hole Tubingless Design Under balance PDC Bits Skid Rigs COMPLETIONS Flow Through Frac Plugs Flareless Completion Coil Tubing Drill Outs 24 Hour Frac Operations

17 Sustainability on the Pinedale Anticline Lease stipulations and beyond: No activity mid-nov. to May 1 Extra precautions against spills No activity near active nesting Doing work safely at - 40º Historic Trail & viewshed Eliminate flaring operations Engaging stakeholders Minimizing well site footprint Water re-use studies

Shell Canada Resources Gas Foothills Gas The core of E&P Mackenzie Delta Gas Project Caroline Burnt Timber Jumping Pound CALGARY Gas Field Shell Gas Plant Waterton 427 mln scf/d in 2003

18 Shell Canada Resources Gas Foothills Gas The core of E&P Mackenzie Delta Gas Project Caroline Burnt Timber Jumping Pound CALGARY Gas Field Shell Gas Plant Waterton 427 mln scf/d in 2003 High reliability 1st quartile unit cost performance Niglintgak (100% Shell): 1.0 TCF, 150 mln scf/d Pipeline (1300 km): Target Start Up Activities: Engineering, Regulatory Application

19 Shell LNG Pathways into North America Shell US Gas & Power Baja, Mexico (0.5+) Existing Terminals Cove Point Elba Island New Projects Mexico Altamira, Baja Gulf Landing Lake Charles, LA Everett, MA Cove Pt, MD (0.25) Elba Island exp. (0.36) Elba Island, GA Sakhalin, Malaysia, Australia Existing Construction/reactivating/expansion Shell prospects ( ) Shell capacity, bcf/d Gulf Landing (0.9+) Altamira (0.4+) South America Africa, Middle East

20 Industry Challenges High prices inflation & capital intensity Increasing unconventional component, high activity Can t drill our way out of supply shortfall Will LNG keep pace? Crew change / image / access Leveraging basin knowledge / experience / technology SD We need to work together

Impacts of Canadian Electricity and Gas Exports in the United States

Impacts of Canadian Electricity and Gas Exports in the United States for Natural Resources Canada Prepared by Ziff Energy 01GC-2021-03 1117 Macleod Trail S.E. Calgary, Alberta T2G 2M8 Tel: (403) 265-0600