NEW LENS SCENARIOS A SHIFT IN PERSPECTIVE FOR A WORLD IN TRANSITION. J.P. Jepp, Shell Canada June 18, 2014

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1 NEW LENS SCENARIOS A SHIFT IN PERSPECTIVE FOR A WORLD IN TRANSITION J.P. Jepp, Shell Canada June 18, 2014

2 WARNING: UNCERTAINTIES AHEAD This scenarios book contains forward-looking statements that may affect Shell s 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, forwardlooking statements. Forward-looking statements are statements of future expectations that are based on management s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of Royal Dutch Shell to market risks and statements expressing management s expectations, beliefs, estimates, forecasts, projections, and assumptions. These forward-looking statements are identified by their use of terms and phrases such as anticipate, believe, could, estimate, expect, goals, intend, may, objectives, outlook, plan, probably, project, risks, seek, should, target, will, and similar terms and phrases. There are a number of factors that could affect the future operations of Royal Dutch Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this scenarios book, including (without limitation):(a) price fluctuations in crude oil and natural gas; (b) changes in demand for Shell s products; (c) currency fluctuations; (d) drilling and production results;(e) reserves estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition 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) legislative, fiscal, and regulatory developments including regulatory measures addressingclimate change; (k) economic and financial market conditions in various countries and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, delays or advancements in the approval of projects, and delays in the reimbursement for shared costs; and (m) changes in trading conditions. All forward-looking statements contained in this book are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-looking statements. Additional factors that may affect future results are contained in Royal Dutch Shell s 20-F for the year ended December 31, 2012 which is available at and These factors also should be considered by the reader. Each forward-looking statement speaks only as of the date of this scenarios material, June 18, Neither Royal Dutch Shell nor any of its subsidiaries undertake any obligation to publicly update or revise any forwardlooking 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 statements contained in this scenarios book.

3 Agenda 1) Why do we do the Shell Scenarios? 2) The New Lens Scenarios- Introduction 3) Mountains vs. Oceans- comparison 4) Primary Energy Demand- Regional Scenarios 5) Primary Energy Demand- Road Transport 6) Mountains vs. Oceans- Cumulative CO2 7) Conclusion 3

4 WHY DO WE DO THE SHELL SCENARIOS? In the 1960s, Shell economists and engineers began to look at the political, social, and economic forces affecting Shell The initial work allowed Shell management to better manage the 1973 oil crisis. This was the start of Shell Scenarios. Since then, generations of Shell analysts have looked into the future to identify uncertainties, challenges and opportunities. Summaries of some of these have been regularly shared outside Shell, contributing to important public debates. 4

5 MOUNTAINS OCEANS 5

6 NEW LENS SCENARIOS WORLD ENERGY MODEL Comprehensive country and sector analysis N. America Latin America Asia developed Asia developing Middle East & N. Africa Sub Saharan Africa Europe EU15 EU New 12 East other West other Heavy Industry Agriculture Services Transport (passenger) Transport (freight) Residential (heating) Residential (appliances) Non-energy use Total Final Consumption Conversion technologies Total primary energy demand Supply/Demand USA China Russia Japan India Germany France Canada UK South Korea etc Crude Oil Unconventional oil Natural Gas Unconventional gas Coal Nuclear Hydroelectricity Biomass New renewables: Wind Solar Tidal Wave Geothermal Waste Solid Hydrocarbon Liquid Fuels Oil derived Gas derived Coal derived Biofules (1 st gen) Biofuels (2 nd gen) Gaseous Hydrocarbon Electricity Heat Solar Hydrogen 6

7 WE ARE ENTERING AN ERA OF VOLATILITY & TRANSITIONS Intensified Economic Cycles Political and Social Instability Building a Mini Lateral World Demographic Transitions Urbanization Challenged Environmental Boundaries Emerging Resources- Shale Gas 7

8 MOUNTAINS SCENARIO A VIEW FROM THE TOP Political - Influence remains concentrated in the hands of the currently powerful - Leaders create stability via methods that promote the status quo Economic - Rigid power structures and institutions hampers overall economic development - Some emerging economies see middle class grow, and then stagnate Social Energy Climate - Inequalities continue to rise and expand in many societies - Young people lead increasing rebellion over social injustice - Slowed economic growth and compact cities alleviate demand pressures - Shale gas reaches widespread success; Gas becomes energy backbone - Slowing demand for liquid fuels limits growth - Sluggish economy and displacement of coal by gas = lower CO2 emissions - CCS becomes success as a way to maintain our way of life 8

9 EJ/year MOUNTAINS TOTAL PRIMARY ENERGY BY SOURCE Oil Biomass Gasified Biomass Traditional Geothermal Other Biofuels Coal Nuclear Solar renewables Natural Gas Biomass/Waste Hydroelectricty Wind 9

10 OCEANS SCENARIO A VIEW OF THE HORIZON Political - The current elite recognize their continued success requires compromise - Volatility and multiple constituencies impede policy development (e.g. sprawl) Economic - Steady reform of economic structures keeps pace with emerging nations - Reform unleashes new economic productivity of broader sectors Social Energy Climate - Focus on nation-state issues (rather than multi-lateral) - Increased connectivity enables profound shifts in opinion quickly = volatility - Growth in emerging nations boosts energy demand, squeezes supply - Shale gas does not meet expectations especially outside North America - With limited growth in gas, coal maintains strong role especially outside NA - Periods of high prices unlock new oil resources long oil game - High prices for energy also unlocks expensive sources, and drives end-user EE - Emphasis on renewables and efficiency is not enough - GHG emissions continue to rise; need for significant adaptation 10

11 EJ/year OCEANS TOTAL PRIMARY ENERGY BY SOURCE Oil Biomass Gasified Biomass Traditional Geothermal Other Biofuels Coal Nuclear Solar renewables Natural Gas Biomass/Waste Hydroelectricty Wind 11

12 MOUNTAINS vs. OCEANS PRIMARY ENERGY BACKBONE 12

13 PRIMARY ENERGY DEMAND- REGIONAL 13

14 EJ / year (Energy source) EJ / year (Energy source) PRIMARY ENERGY DEMAND- REGIONAL SCENARIOS (OCEANS) OECD - Total Primary Energy - By Source OECD Non - OECD - Total Primary Energy - By Source Non-OECD Oil Oil Biomass Natural Gasified Biofuels Coal Coal Nuclear Natural Hydro-electricity Gas Biomass & Waste Geothermal Biomass/Waste Biofuels Biomass Traditional Oil Geothermal Natural Other Gas Nuclear Coal Solar Nuclear renewables Hydroelectricity Hydro-electricity Wind Biofuels Biomass - Traditional Biomass & Waste Solar Geothermal Biomass - Traditional Solar 14

15 EJ/ (energy Source) PRIMARY ENERGY DEMAND- REGIONAL SCENARIOS (OCEANS) 200 USA 200 China Oil Biomass Gasified Biomass Traditional Geothermal Other Biofuels Coal Nuclear Solar renewables Natural Gas Biomass/Waste Hydroelectricity Wind 15

16 EJ / year (Energy source) EJ / year (Energy source) PRIMARY ENERGY DEMAND- REGIONAL SCENARIOS- CANADA 16 Canada - Total Primary Energy - By Source Mountains 16 Canada - Total Primary Energy - By Source Oceans Oil Biofuels Oil Biofuels Oil Natural Gas Biomass Gasified Biomass Gasified Biomass Traditional Natural Gas Geothermal Biomass Other Gasified Biofuels Coal Coal Biomass / Waste Nuclear Solids Coal Solar Biomass renewables / Waste Solids Natural Biomass Gas Traditional Biomass/Waste Nuclear Hydroelectricity Biomass Traditional Wind Nuclear Hydro-electricity Geothermal Hydro-electricity Geothermal Solar Wind Solar Wind 16 Other Renewables Other Renewables

17 PRIMARY ENERGY DEMAND- ROAD TRANSPORT SECTOR 17

18 Billion vehicle km PRIMARY ENERGY DEMAND- ROAD TRANSPORT SECTOR- GLOBAL SCENARIOS Mountains Oceans 60,000 60,000 50,000 50,000 40,000 40,000 30,000 30,000 20,000 20,000 10,000 10, Electricity and Hydrogen Gaseous Hydrocarbon Fuels Liquid Hydrocarbon Fuels & Biofuels

19 EJ / year (Energy carrier) EJ / year (Energy carrier) PRIMARY ENERGY DEMAND- ROAD TRANSPORT SECTOR- CANADA 1.6 Canada - Total Final Consumption - By Carrier - Passenger Transport - Road Mountains 1.6 Canada - Total Final Consumption - By Carrier - Passenger Transport - Road Oceans Liquid Hydrocarbon Fuels Gaseous Hydrocarbon Fuels Liquid Hydrocarbon Fuels Gaseous Hydrocarbon Fuels - Commercial Electricity - Commercial Hydrogen Electricity Hydrogen Gaseous Fuels Liquid Fuels FSB Energy - Shell WEM v Mountains - Canada_v2 FSB Energy - Shell WEM v Oceans - Canada_Bulgaria_v1 19

20 EMISSIONS CONTRAST: WORLD CUMULATIVE ENERGY-RELATED CO 2 EMISSIONS 21 st Century cumulative Gt CO 2 3,500 3,000 2,500 2, Mountains Oceans 2ºC Pathway 20

21 GLOBAL ENERGY-RELATED CO 2 EMISSIONS The battle with time

22 IF WE WANT THINGS TO STAY AS THEY ARE, THINGS WILL HAVE TO CHANGE. GIUSEPPE TOMASI DI LAMPEDUSA The Leopard

23 QUESTIONS & ANSWERS 23

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