Responsible Investment Annual Briefing

Transcription

1 Responsible Investment Annual Briefing Socially responsible investors Royal Dutch Shell plc April 16, 2018 #makethefuture

2 Definitions and cautionary note This presentation contains data and analysis from Shell s new Sky Scenario. Unlike Shell s previously published Mountains and Oceans exploratory scenarios, the Sky Scenario is targeted through the assumption that society reaches the Paris Agreement s goal of holding global average temperatures to well below 2 C. Unlike Shell s Mountains and Oceans scenarios which unfolded in an open-ended way based upon plausible assumptions and quantifications, the Sky Scenario was specifically designed to reach the Paris Agreement s goal in a technically possible manner. These scenarios are a part of an ongoing process used in Shell for over 40 years to challenge executives perspectives on the future business environment. They are designed to stretch management to consider even events that may only be remotely possible. Scenarios, therefore, are not intended to be predictions of likely future events or outcomes and investors should not rely on them when making an investment decision with regard to Royal Dutch Shell plc securities. Additionally, it is important to note that Shell s existing portfolio has been decades in development. While we believe our portfolio is resilient under a wide range of outlooks, including the IEA s 450 scenario (World Energy Outlook 2016), it includes assets across a spectrum of energy intensities including some with above-average intensity. While we seek to enhance our operations average energy intensity through both the development of new projects and divestments, we have no immediate plans to move to a net-zero emissions portfolio over our investment horizon of years. Although we have no immediate plans to move to a net-zero emissions portfolio, in November of 2017, we announced our ambition to reduce our net carbon footprint in accordance with society s implementation of the Paris Agreement s goal of holding global average temperature to well below 2 C above pre-industrial levels. Accordingly, assuming society aligns itself with the Paris Agreement s goals, we aim to reduce our Net Carbon Footprint, which includes not only our direct and indirect carbon emissions, associated with producing the energy products which we sell, but also our customers emissions from their use of the energy products that we sell, by around 20% in 2035 and by around 50% in Also, in this presentation we may refer to Shell s Net Carbon Footprint, which includes Shell s carbon emissions from the production of our energy products, our suppliers carbon emissions in supplying energy for that production and our customers carbon emissions associated with their use of the energy products we sell. Shell only controls its own emissions but, to support society in achieving the Paris Agreement goals, we aim to help and influence such suppliers and consumers to likewise lower their emissions. The use of the terminology Shell s Net Carbon Footprint is for convenience only and not intended to suggest these emissions are those of Shell or its subsidiaries. The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate legal entities. In this presentation Shell, Shell group and Royal Dutch Shell are sometimes used for convenience where references are made to Royal Dutch Shell plc and its subsidiaries in general. Likewise, the words we, us and our are also used to refer to Royal Dutch Shell plc and its subsidiaries in general or to those who work for them. These terms are also used where no useful purpose is served by identifying the particular entity or entities. Subsidiaries, Shell subsidiaries and Shell companies as used in this presentation refer to entities over which Royal Dutch Shell plc either directly or indirectly has control. Entities and unincorporated arrangements over which Shell has joint control are generally referred to as joint ventures and joint operations, respectively. Entities over which Shell has significant influence but neither control nor joint control are referred to as associates. The term Shell interest is used for convenience to indicate the direct and/or indirect ownership interest held by Shell in an entity or unincorporated joint arrangement, after exclusion of all third-party interest. This presentation contains forward-looking statements (within the meaning of the U.S. Private Securities Litigation Reform Act of 1995) 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 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. Forwardlooking 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 aim, ambition, anticipate, believe, could, estimate, expect, goals, intend, may, objectives, outlook, plan, probably, project, risks, schedule, 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 presentation, 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 addressing climate 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. No assurance is provided that future dividend payments will match or exceed previous dividend payments. All forward-looking statements contained in this presentation 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 risk factors that may affect future results are contained in Royal Dutch Shell s 20-Form for the year ended December 31, 2017 (available at and ). These risk factors also expressly qualify all forward-looking statements contained in this presentation and should be considered by the reader. Each forward-looking statement speaks only as of the date of this presentation, 16 April Neither Royal Dutch Shell plc nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking 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 presentation. We may have used certain terms, such as resources, in this presentation that the United States Securities and Exchange Commission (SEC) strictly prohibits us from including in our filings with the SEC. U.S. Investors are urged to consider closely the disclosure in our Form 20-F, File No , available on the SEC website 2

3 Panels PANEL 1 PANEL 2 Nigeria Net Carbon Footprint Osagie Okunbor Managing Director SPDC Monika Hausenblas EVP Safety and Environment Rupert Thomas VP Environment Harry Brekelmans Director Projects and Technology Angus Gillespie VP CO 2 (transitioning) John MacArthur VP CO 2 (transitioning) 3

4 Nigeria panel Clean-up and UNEP progress Collaboration and progress under MOU (Bodo) HYPREP 2 $10 million take-off grant, and project coordinator appointed Reduction of oil spilled to environment from operational spills Theft and sabotage continues (increase in 2017), long-term trend improving SPDC JV 1 spills Thousand tonnes Volume of operational spills Volume of sabotage spills Operational spills >100kg Sabotage spills >100kg Number Production and theft Thousand barrels per day Thousand barrels of oil equivalent per day >70% reduction operational spills (volume) from 2016 Cap and pile attachment to avoid repeated sabotage 1 SPDC JV = 30% Shell, 55% NNPC, 10% Total, 5% Agip; all data on 100% basis unless otherwise stated Theft SPDC JV production (RHS) Hydrocarbon Pollution Restoration Project this body was established under the Nigerian Ministry of Environment, aimed at the sustainable clean-up of Ogoniland 4

5 Net Carbon Footprint panel Ambitions: Reduce Net Carbon Footprint 1 of our energy products by ~20% by 2035 Be in line with society Net Carbon Footprint by 2050 Ambition to reduce Net Carbon Footprint 1 of our energy products by around 20% by 2035 Covers full range of emissions from energy products (Scope 1, 2 and 3 3 ) Additionally, includes emissions produced by customers when they use the energy products we sell Seeks to drive strategy over time in step with society 5-year reviews Reductions estimated based on our expectation of societal trajectory to meet Paris goals Ambition for Net Carbon Footprint 1 WtW gco 2 e/mj 1 Shell business as usual ~20% reduction by 2035 In line with society by 2050 Society trajectory 2 Shell trajectory 2 Emissions from energy products included 1 Net Carbon Footprint measured on an aggregate well to wheel or well to wire basis, from production through to consumption, on grams of CO 2 equivalent per megajoule of energy products consumed; chemicals + lubricants products are excluded. Carbon Footprint of the energy system is modelled using Shell methodology aggregating lifecycle emissions of energy products on a fossil-equivalence basis. The methodology will be further reviewed and validated in collaboration with external experts 2 Potential society trajectory includes analysis from Shell scenarios estimate of Net Zero Emissions by 2070 and IEA Energy Technology Perspectives 2017; Potential illustrative Shell trajectory 3 Scope 1,2,3 emissions limited to activities associated with bringing energy products to the market, Scope 3 emissions only includes Category 11: Use of sold products 5

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7 Responsible Investment Annual Briefing Socially responsible investors Royal Dutch Shell plc April 16, 2018 #makethefuture

8 Definitions and cautionary note This presentation contains data and analysis from Shell s new Sky Scenario. Unlike Shell s previously published Mountains and Oceans exploratory scenarios, the Sky Scenario is targeted through the assumption that society reaches the Paris Agreement s goal of holding global average temperatures to well below 2 C. Unlike Shell s Mountains and Oceans scenarios which unfolded in an open-ended way based upon plausible assumptions and quantifications, the Sky Scenario was specifically designed to reach the Paris Agreement s goal in a technically possible manner. These scenarios are a part of an ongoing process used in Shell for over 40 years to challenge executives perspectives on the future business environment. They are designed to stretch management to consider even events that may only be remotely possible. Scenarios, therefore, are not intended to be predictions of likely future events or outcomes and investors should not rely on them when making an investment decision with regard to Royal Dutch Shell plc securities. Additionally, it is important to note that Shell s existing portfolio has been decades in development. While we believe our portfolio is resilient under a wide range of outlooks, including the IEA s 450 scenario (World Energy Outlook 2016), it includes assets across a spectrum of energy intensities including some with above-average intensity. While we seek to enhance our operations average energy intensity through both the development of new projects and divestments, we have no immediate plans to move to a net-zero emissions portfolio over our investment horizon of years. Although we have no immediate plans to move to a net-zero emissions portfolio, in November of 2017, we announced our ambition to reduce our net carbon footprint in accordance with society s implementation of the Paris Agreement s goal of holding global average temperature to well below 2 C above pre-industrial levels. Accordingly, assuming society aligns itself with the Paris Agreement s goals, we aim to reduce our Net Carbon Footprint, which includes not only our direct and indirect carbon emissions, associated with producing the energy products which we sell, but also our customers emissions from their use of the energy products that we sell, by around 20% in 2035 and by around 50% in Also, in this presentation we may refer to Shell s Net Carbon Footprint, which includes Shell s carbon emissions from the production of our energy products, our suppliers carbon emissions in supplying energy for that production and our customers carbon emissions associated with their use of the energy products we sell. Shell only controls its own emissions but, to support society in achieving the Paris Agreement goals, we aim to help and influence such suppliers and consumers to likewise lower their emissions. The use of the terminology Shell s Net Carbon Footprint is for convenience only and not intended to suggest these emissions are those of Shell or its subsidiaries. The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate legal entities. In this presentation Shell, Shell group and Royal Dutch Shell are sometimes used for convenience where references are made to Royal Dutch Shell plc and its subsidiaries in general. Likewise, the words we, us and our are also used to refer to Royal Dutch Shell plc and its subsidiaries in general or to those who work for them. These terms are also used where no useful purpose is served by identifying the particular entity or entities. Subsidiaries, Shell subsidiaries and Shell companies as used in this presentation refer to entities over which Royal Dutch Shell plc either directly or indirectly has control. Entities and unincorporated arrangements over which Shell has joint control are generally referred to as joint ventures and joint operations, respectively. Entities over which Shell has significant influence but neither control nor joint control are referred to as associates. The term Shell interest is used for convenience to indicate the direct and/or indirect ownership interest held by Shell in an entity or unincorporated joint arrangement, after exclusion of all third-party interest. This presentation contains forward-looking statements (within the meaning of the U.S. Private Securities Litigation Reform Act of 1995) 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 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. Forwardlooking 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 aim, ambition, anticipate, believe, could, estimate, expect, goals, intend, may, objectives, outlook, plan, probably, project, risks, schedule, 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 presentation, 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 addressing climate 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. No assurance is provided that future dividend payments will match or exceed previous dividend payments. All forward-looking statements contained in this presentation 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 risk factors that may affect future results are contained in Royal Dutch Shell s 20-Form for the year ended December 31, 2017 (available at and ). These risk factors also expressly qualify all forward-looking statements contained in this presentation and should be considered by the reader. Each forward-looking statement speaks only as of the date of this presentation, 16 April Neither Royal Dutch Shell plc nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking 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 presentation. We may have used certain terms, such as resources, in this presentation that the United States Securities and Exchange Commission (SEC) strictly prohibits us from including in our filings with the SEC. U.S. Investors are urged to consider closely the disclosure in our Form 20-F, File No , available on the SEC website 8

9 Donny Ching Legal Director Royal Dutch Shell

10 OPL 245 Fact recap Year Event Malabu awarded licence for OPL Shell Nigeria Ultra Deep ( SNUD ) farms in 2001 Federal Government of Nigeria ( FGN ) revokes the Malabu Licence 2002 SNUD bids for and is awarded OPL 245 by FGN and later signs a PSC with Nigerian National Petroleum Corporation ( NNPC ) 2002 Various litigations follow 2006 FGN settles litigation with Malabu and reallocates licence to Malabu Malabu and SNUD now have competing legal rights to the Block 2007 Shell (SNUD) commences Bilateral Investment Treaty arbitration against the FGN for wrongful expropriation 2008 FGN seeks resolution, negotiations commence Negotiations now include ENI Settlement with FGN negotiated with Attorney General of FGN, Minister of Petroleum Resources, Minister of Finance and senior NNPC officials Settlement achieved. FGN receives $1.3 bln: Shell releases signature bonus in return for the licence and pays $ mln to ENI (NAE); ENI (NAE) pays FGN $1, mln for rights to the block; Malabu relinquished all claims on OPL 245 in exchange for payment from FGN of $1, mln 2017 Court of Milan decided that Shell and its four former employees should be remanded for trial 2018 Court of Milan decided that first hearing is postponed to 14 May 1 A full chronology of events is available in the additional information slides 10

11 OPL 245 No case to answer Shell media statement: Based on our review of the Prosecutor of Milan's file and all of the information and facts available to us, we do not believe that there is a basis to convict Shell or any of its former employees. If the evidence ultimately proves that improper payments were made by Malabu or others to then current government officials in exchange for improper conduct relating to the 2011 settlement of the long standing legal disputes, it is Shell s position that none of those payments were made with its knowledge, authorisation or on its behalf. We believe the trial judges in Italy will conclude that there is no case against Shell or its former employees. Shell attaches the greatest importance to business integrity. It s one of our core values and is a central tenet of the Business Principles that govern the way we do business. Shell has clear rules on anti-bribery and corruption and these are included in our Code of Conduct for all staff. There is no place for bribery or corruption in our company. 11

12 OML 42 Criminal complaint Shell media statement: Based on what we know now from an internal investigation, we suspect a crime may have been committed by our former employee, Peter Robinson, against Shell in relation to the sale process for Oil Mining Lease (OML) 42 in Nigeria in We have filed a criminal complaint with the Dutch authorities and are considering other steps we could take. We were stunned and disappointed when we learned about this issue. Our Code of Conduct, our Business Principles and our core values of honesty, integrity and respect govern the way we do business. We work tirelessly to uphold these principles and we expect high standards of behaviour from everyone who works for Shell. Where those standards are breached we are committed to taking the appropriate action, and to learning lessons. Based on our current understanding, we believe OML 42 and OPL 245 are unrelated. On OPL 245, we continue to believe, from our review of the Prosecutor of Milan's file and all of the information and facts currently available to us, there is no case to convict Shell or its former employees. 12

13 Ben van Beurden Chief Executive Officer Royal Dutch Shell

14 Strategic ambition Thrive in the energy transition World-class investment case 2017 Year of transformation Strong financial delivery and strengthened financial framework Growth momentum Resilient and relevant portfolio positioned long term Reduce the Net Carbon Footprint of our energy products in line with society Strong license to operate 14

15 ESG programme Key events Responsible Investment Annual Briefing (since 2006) 2018: Board engagement day Chairman roadshows Remuneration Committee roadshows Engagements with IIGCC 1 (CA ) 1 Institutional Investors Group on Climate Change, 2 Climate Action 100+ initiative 15

16 Leading in transparency RDS reporting 2017 Announcement of Net Carbon Footprint ambition (November 2017) 2017 CDP Climate change score: B Inclusion in the Dow Jones Sustainability Index 2018 progress Disclosures aligned to Task Force on Climate-related Financial Disclosures (TCFD) Shell Energy Transition report published Annual report: additional disclosures on climate change risk and strategy Sky meeting the goals of the Paris agreement scenario published Strategic ambition Thrive in the energy transition 16

17 Hans Wijers Chair of the CSRC Royal Dutch Shell

18 Corporate and Social Responsibility Committee Hans Wijers 1 (Chair) Sir Nigel Sheinwald 2 Linda G. Stuntz 3 Catherine J. Hughes 1 Hans Wijers stands down as a Director of the Company at the close of business of the 2018 Annual General Meeting to be held on May 22, On March 14, 2018, the Board appointed Sir Nigel Sheinwald as Chair of the Corporate and Social Responsibility Committee with effect from May 23, On March 14, 2018, the Board appointed Linda G. Stuntz as member of the Corporate and Social Responsibility Committee with effect from May 23, She will stand down as a member of the Audit Committee on May 22,

19 Areas of focus CSRC topics Pernis refinery site visit, The Netherlands Approach to the energy transition Methane Greenhouse gas (GHG) metrics in remuneration Nigeria Groningen Security Afam VI power plant, Nigeria Net Carbon Footprint Nature based solutions Ethics and compliance Groningen Nigeria 19

20 Rewarding performance in line with delivery of strategy GHG metrics in remuneration The GHG metrics in the 2018 scorecard have evolved and coverage has increased to close to 90% of the Scope 1 and 2 operated emissions, compared to 60% in 2017 CEO personal performance agreement includes strategy and progress in new energies Scorecard aligned for Directors and staff Annual bonus scorecard design Scope expanded: Upstream and Integrated Gas GHG intensity in 10% Environment 10% GHG management 10% GHG management million tonnes CO 2 e (4%) Refining GHG intensity measured in tonnes CO 2 e Strategy drives change Remuneration follows and supports strategy 10% Safety 5% Process safety 5% Personal safety 5% Process safety 5% Personal safety per UEDC 1 (3%) Chemicals GHG intensity measured in tonnes CO 2 e per tonne of chemicals production (3%) Cash flow from operating activities Operational excellence Sustainable development 1 Solomon s Utilised Equivalent Distillation Capacity 20

21 How the CSRC looks at climate change Fully support the Paris agreement We believe that the need to reduce GHG emissions, which are largely caused by burning fossil fuels, will transform the energy system in this century. (RDS Annual Report 2017) Management of risks and opportunities Managed in accordance with other significant risks through Board and Executive Committee Supported by standards, policies and controls Board and Board subcommittee involvement Board strategy sessions throughout 2017 on changing global energy market, energy transition and climate change 2018 priorities: Energy transition New energies business strategy implementation CSRC Remuneration Committee Audit committee 21

22 Ben van Beurden Chief Executive Officer Royal Dutch Shell

23 HSSE performance Goal Zero on safety Injuries TRCF/million working hours 4 million working hours Operational spills Volume in thousand tonnes 10 Number of spills TRCF Working hours Volume Number Upstream flaring Million tonnes CO 2 e 15 Process safety Number of incidents HSSE priority Performance and transparency Tier 1 incidents Tier 2 incidents 23

24 Embedding a Culture of care Golden rules: comply, intervene and respect Protecting our reputation and driving competitive advantage Care Human performance and care Care for people in projects Physical environment Safety leadership Behavioural and road safety Caring for individuals and their work environment Programmatic approach to maximise worker welfare and performance in projects Camp and office design supporting care Intentional and relentless focus on personal and process safety across Shell Social performance HR organisational effectiveness Contracting and Procurement Diversity and inclusion Better business outcomes Sustain societal license to operate Respect for people Explicit recognition of care in how we do business A diverse and inclusive work environment 24

25 Performance Nigeria Operational spill volume reduction >70% Increased number of sabotage-related spills Commenced Bodo spill clean-up under Bodo Mediation Initiative The SPDC JV Afam VI power plant supplied ~15% of the nation s grid-connected electricity in 2017 Livewire alternative livelihoods Oil theft and sabotage impacts onshore operations Workers at the Afam VI Power Plant 25

26 Thrive in the energy transition Societal challenge Increasing population 7 billion >10 billion Increasing energy demand 570 Exajoules 1000 Exajoules Challenge for more and cleaner energy Reduction required in the carbon intensity of every unit of energy consumed Need to reduce CO 2 emissions 32 gt CO 2 e CO gt CO 2 e current policies Net Zero Emissions Sources: Population UN World Population projections; Energy consumption: 2015 IEA World Energy Outlook (WEO) 2017; 2070 outlook Shell scenarios analysis from A better life with a healthy planet CO 2 emissions: 2015 IEA WEO 2017; 2040 IEA WEO 2017 Current policies scenario; 2070 Shell scenarios analysis from A better life with a healthy planet 26

27 Sky Meeting the goals of the Paris agreement New scenario launched March 2018 World primary energy by source EJ/year 1,200 World total CO 2 emissions from energy GT CO 2 /year 40 1, Oil Biofuels Natural Gas Coal Solar Other Renewables Biomass Nuclear Wind Assessed by MIT 2 as limiting temperature increase to 1.75 C Grounded in current energy system NDC 1 process ratchets aggressively to 2030 Progressively becomes goal-driven ( normative ) to meet Paris aims Unprecedented and sustained collaboration required Deep electrification, global power generation grows by factor of five Aggressive efficiency improvement Liquid and gaseous fuels remain in hard-to-electrify sectors Renewables largest sources of energy from 2050s CO 2 emissions peak in 2020s Net-zero emissions by 2070 Sky scenario impact estimated at around 1.75 C Additional potential from greater reforestation Collaboration with MIT 2 1 Nationally Determined Contributions; 2 Massachusetts Institute of Technology 27

28 Thrive in the energy transition Driving to resilience and ambition Demonstrating Shell s approach across multiple time horizons TIME HORIZON 1-3 YEARS 5-10 YEARS >10 YEARS SHORT TERM MEDIUM TERM LONG TERM GHG management Focussed on operational action Strategic positioning and portfolio resilience Disclosures aligned to TCFD recommendations Net Carbon Footprint methodology Covers full range of emissions from our energy products through to consumption Included in annual bonus scorecard Demonstrate financial resilience of portfolio to energy transition and climate change actions Sustainable development 10% GHG management 5% Process safety 5% Personal safety 28

29 Resilience Financial framework CFFO excluding working capital $ billion $99 $52 $44 $ Capital investment flexibility $ billion (per annum) Oil products 4-5 Conventional oil + gas 4-5 Integrated gas 4-5 Deep water 5-6 Chemicals 3-4 Shales $# Average Brent oil price ($/bbl) New energies 1-2 Total Growing free cashflow Capital discipline and flexibility Strong balance sheet Oil price $40-$100 per barrel range likely to 2030 $10 per barrel movement in Brent prices, around $6 billion cash flow impact indicative estimate 1 At $40/bbl impact of -$15 billion on CFFO 2 At $100/bbl impact of +$21 billion on CFFO 3 $10 per tonne CO 2 movement in global CO 2 price, around $1bn billion pre-tax impact on cash flow Applying more resiliency criteria to capital allocation Lower break-even prices Shorter payback periods Improving project delivery 1 Significant variations in oil and/or gas prices will potentially impact certain operating costs, or result in foreign exchange movements, the effect of which are not reflected in this price sensitivity; 2 Assuming oil price fell from around $65 per barrel today to $40 per barrel money of the day; 3 Assuming oil price rose from around $65 per barrel today to $100 per barrel money of the day 29

30 Resilience Portfolio Diverse business segments Geographic diversity Active portfolio management Cash engines Marketing earnings Projects waiting FID: average break-even <$30 OIL PRODUCTS INTEGRATED GAS CONVENTIONAL OIL + GAS DEEP WATER Growth priorities Chemicals earnings SHALES Permian direct field expenses -33% in 2017 Emerging opportunities CHEMICALS DEEP WATER INTEGRATED GAS Since BG, underlying operating expenses -11% Resilience from NEW ENERGIES SHALES Americas Asia EU + Africa CHEMICALS Pennsylvania ethylene cracker expected top quartile CO 2 intensity diverse and actively managed portfolio Assessed risk of Operations across energy system Global business in more than 70 countries Focus on cost reduction Improving CO 2 performance stranded assets as low Strength of integrated model In 2017, 19 countries accounted for 80% of CFFO 1 The forward-looking breakeven price for pre-fid projects is calculated based on all forward-looking costs associated with pre-fid projects in our development portfolio. Accordingly, this typically excludes exploration & appraisal costs, lease bonuses, exploration seismic and exploration team overhead costs. The forward-looking breakeven price for pre-fid projects is calculated based on our estimate of resources volumes that are currently classified as 2C under the Society of Petroleum Engineers Resource Classification System. As these pre-fid projects are expected to be multidecade producing projects, the less than $30 per barrel projection will not be reflected either in earnings or cash flow in the next five years 30

31 Thrive in the energy transition Ambition Net Carbon Footprint Ambition to reduce Net Carbon Footprint 1 of our energy products by around 20% by 2035 Covers full range of emissions from energy products (Scope 1, 2 and 3 3 ) Additionally, includes emissions produced by customers when they use the energy products we sell Ambition for Net Carbon Footprint 1 WtW gco 2 e/mj 1 Shell business as usual ~20% reduction by 2035 Ambitions: Reduce Net Carbon Footprint 1 of our energy products by ~20% by 2035 Be in line with society Net Carbon Footprint by 2050 Drive strategy over time in step with society 5-year reviews Reductions estimated based on our expectation of societal trajectory to meet Paris goals Society trajectory 2 Shell trajectory 2 In line with society by Net Carbon Footprint measured on an aggregate well to wheel or well to wire basis, from production through to consumption, on grams of CO 2 equivalent per megajoule of energy products consumed; chemicals + lubricants products are excluded. Carbon Footprint of the energy system is modelled using Shell methodology aggregating lifecycle emissions of energy products on a fossil-equivalence basis. The methodology will be further reviewed and validated in collaboration with external experts 2 Potential society trajectory includes analysis from Shell scenarios estimate of Net Zero Emissions by 2070 and IEA Energy Technology Perspectives 2017; Potential illustrative Shell trajectory 3 Scope 1,2,3 emissions limited to activities associated with bringing energy products to the market, Scope 3 emissions only includes Category 11: Use of sold products 31

32 Scope of our Net Carbon Footprint Emissions from energy products included within the Net Carbon Footprint framework Third-party crude Oil and gas Extraction Third-party products Refining Sales Oil Key 2 Emissions from bringing own products to the market (Scope 1,2) Emissions from bringing third-party products to the market (Scope 1,2) Emissions from use of own products (Scope 3) Emissions from use of third-party products (Scope 3) Contributions included in bringing products to market (Scope 1,2) Third-party gas Processing Liquefaction Gas-to-liquid Third-party products Sales Natural gas LNG GTL Full lifecycle 1 of our energy products, including consumption 1 The lifecycle calculation tracks the energy molecules end-to-end but does not include emissions associated with construction or decommissioning of facilities 2 Scope 1,2,3 emissions limited to activities associated with bringing energy products to the market, Scope 3 emissions only includes Category 11: Use of sold products 3 CCS: Carbon Capture and Storage, NBS: Nature based solutions Renewable Energy Processing Sales Biofuels and power Third-party products Net of CO 2 sinks such as CCS, NBS 3 32

33 Shareholder resolution response Shell s approach goes further than shareholder resolution requests We include emissions from: (The production of) Shell s energy products Energy products from third parties, processed in our facilities Energy products from third parties, sold by us, and The use of these energy products Potential business activities identified, such as growing new energies business Our Net Carbon Footprint ambition moves in line with society Shell cannot predict society and government future actions Therefore: aligned to society s progress In step with society s drive to align with Paris goals Reassess progress every five years linked to NDC 1 process Shell s approach is wide-ranging and progressive 1 Nationally Determined Contributions 33

34 Thrive in the energy transition Case studies Biofuels R&D: IH 2 Adapting our retail network Hydrogen network development UK, Germany and USA 20+ recharge locations UK & Netherlands IH 2 demonstration facility, India 500 ultra-fast charge posts with IONITY in next 2 years Europe Integrated charging solutions Pilot facility operating in Bangalore Meets GHG reduction mandates, to be considered advanced biofuels Can use a broad spectrum of forestry, agricultural and sorted municipal waste as feedstock Multiple opportunities to offer low-carbon fuels Shell Recharge electric vehicle (EV) charging in UK and The Netherlands Partnered with IONITY to install EV charging on major routes across 10 countries in Europe Hydrogen in UK, Germany and California, USA 34

35 Questions and Answers Ben van Beurden Chief Executive Officer Hans Wijers Chair of the CSRC Harry Brekelmans Projects and Technology Director Donny Ching Legal Director

36 Maarten Wetselaar Integrated Gas and New Energies Director Royal Dutch Shell

37 Policy actions for clean energy Global G20 endorses role of gas in energy transition IEA recognises CO 2 emissions reductions from coal-to-gas switching and renewables (China, US and UK) National China favours gas and renewables and reforms gas market South Korea prioritises renewables and gas Germany supports public-private partnerships for Hydrogen refuelling network Widespread policy support for Integrated Gas and new energies Regional EU policies supporting coal phase out: >10 countries announce ambitions EU agreed to strengthen Emissions Trading Scheme EU power market reforms: accommodate renewables and distributed energy Local Policymakers targeting air quality Beijing meets ambitious 2017 air quality targets Berlin closes local coal-fired power plants to improve air quality 37

38 Integrated Gas Cash engine Creating & securing demand Optimisation Managing supply LNG Marketing and trading Gas and liquids production Gas and power Shipping and transport Liquefaction World leader Gas-to-liquids premium products Regasification Gas-to-liquids Growing markets Differentiated portfolio $8-10 billion organic FCF by 2020 Capital employed: Production: Liquefaction volume: LNG sales volumes: Capital investment: $87.5 billion 0.9 mboe/d 33 mtpa 66 mtpa $4-5 billion As of Q4 2017; capital employed includes new energies; average capital investment per annum in period ; Organic FCF by 2020: 2016 RT $60 per barrel 38

39 Reducing methane emissions Product stewardship of gas Methane guiding principles Oil and Gas Climate Initiative Focus on entire gas value chain from production to final consumer Shell led development of principles; 8 companies initially signed and 3 more since Collaborated with industry, academics, NGOs and multilateral organisations Prioritise monitoring, measuring, reporting and reducing emissions Shell now spearheading key actions to advance the principles Commitment to work towards near zero methane emissions target to be announced end 2018 Improve understanding of global methane emissions sources Financial support methane technology commercialisation 39

40 New Energies New Fuels Power Wuppertal, Germany NoordzeeWind, The Netherlands Selective and opportunity driven investment Capital investment $1-2 billion per annum average Focus areas: Biofuels Hydrogen Electric mobility Work in partnerships and consortia Target downstream returns high teens % Focus areas: Trading, marketing and customer access Low-carbon generation and storage Investment in customer access Selective asset ownership Target equity returns of 8-12% 40

41 Power value chain CUSTOMERS OPTIMISATION SUPPLY AND GENERATION Multiple parties are active on the demand side Leverage portfolio flexibility and arbitrage opportunities Not all products are supplied by Shell; some are purchased from third parties Adjacencies to existing businesses Value chain integrator Demand-driven development Secure demand in key markets Commercial, industrial, and residential Optimise intermittent demand and supply Trading opportunities Wind, solar, and selected gas and storage assets Selective capacity ownership to create portfolio flexibility 41

42 Power value chain CUSTOMERS OPTIMISATION SUPPLY AND GENERATION Multiple parties are active on the demand side Leverage portfolio flexibility and arbitrage opportunities Not all products are supplied by Shell; some are purchased from third parties Adjacencies to existing businesses Value chain integrator Demand-driven development New Motion First Utility MP2 Energy LLC Shell Energy North America Shell Energy Europe Shell Energy Australia Carbon credit trading Silicon ranch US onshore wind portfolio NoordzeeWind offshore The Netherlands Borssele 3 and 4 offshore wind 1 1 Projects shown are pre-fid Solar and storage at Shell sites 1 42

43 Delivering a profitable energy access business Steamaco Husk Power Systems SolarNow Commercial response to UN SDG 1 7: Affordable and clean Technology company Universal smart metering platform Serving mini grid companies and other utilities Mini-grid company Hybrid solar PV and biomass gasification solution Reliable electricity on a pay-as-you-go basis Off-grid modular solar solutions for homes and businesses Offers consumer financing Operations in Uganda and Kenya energy Focused in Africa and Asia Operations in India and Tanzania 1 United Nations Sustainable Development Goals 43

44 Maarten Wetselaar Integrated Gas and New Energies Director Royal Dutch Shell

45 Questions and Answers Maarten Wetselaar Integrated Gas and New Energies Director Mark Gainsborough EVP New Energies

46 Additional information

47 NAM A 50:50 Joint Venture with Shell and ExxonMobil March NAM at a distance August 5 years since Huizinge earthquake (force 3.6) November NAM submits updated Hazard and Risk Assessment to SodM 1 January Earthquake Zeerijp with a force of 3.4 on the scale of Richter January SodM advice to minister on gasproduction level. Gasproduction locations Loppersum shut down /19 April Production cut by 10% to 21.6bcm January Minister Wiebes announces new damage protocol November Raad van State announces judgment appeals against Ministry of Economic Affairs amended decision on gas extraction Groningen March Damage claims public desk opened ( NAM at a distance ) March Ministry of Economic Affairs announces Groningen to zero by 2030 Source: 1 State Supervision of the Mines 47

48 Nigeria environmental performance 2017 >70% reduction operational spills (volume) from briefingnotes Clean-up & UNEP progress Commenced Bodo spill clean-up under Bodo Mediation Initiative HYPREP 2 $10 million take-off grant, and project coordinator appointed Oil spill prevention & remediation Theft protection mechanisms improved Daily overflights + surveillance continue IUCN collaboration on remediation standards and practices Remediation and certification efforts ongoing (92 sites out of 251 remediated in 2017) Social performance initiatives to address underlying cause (Livewire training programmes) Theft and sabotage continues (25% increase in numbers in 2017 following Forcados terminal outage in 2016), long-term trend improving SPDC JV 1 spills Thousand tonnes Volume of operational spills Volume of sabotage spills Production and theft Thousand barrels per day Operational spills >100kg Sabotage spills >100kg Theft Production (SPDC JV) (RHS) Number Thousand barrels of oil equivalent per day SPDC JV = 30% Shell, 55% NNPC, 10% Total, 5% Agip; all data on 100% basis unless otherwise stated 2 Hydrocarbon Pollution Restoration Project this body was established under the Nigerian Ministry of Environment, aimed at the sustainable clean-up of Ogoniland 48

49 Case study: Brent decommissioning Contractor management Brent decommissioning Platforms and infrastructure retirement ~1,000 people >97% planned to be recycled Brent-Delta platform lift Single lift Coordination with >100 companies Extensive contractor collaboration Brent created jobs and contributed > 20 billion in tax revenue 1 Brent, United Kingdom 1 In today s money 49

50 Human rights Integrated approach Informed by Universal Declaration of Human Rights, core conventions of International Labour Organization and UN Guiding Principles on Business and Human Rights Example: Worker Welfare Singapore Example: Voluntary Principles on Security and Human Rights (VPSHR) Tunisia Malampaya, Philipines 50

51 Long term Short term Directors remuneration policy Fixed remuneration Benchmarked against 4 oil majors and 15 European companies Annual bonus 50% cash 50% shares Short-term operational delivery targets 50% bonus in shares, subject to 3-year holding period which remains in force post-leaving 30% CFFO 20% Sustainable development 10% Safety 10% GHG 50% Operational excellence 12.5% Project delivery 12.5% Production 12.5% LNG sales 12.5% DS availability Long Term Incentive Plan (LTIP) World-class investment financial metrics 3-year performance + 3-year holding period which remains in force post-leaving 25% TSR 25% ROACE 25% FCF 25% CFFO Shareholding & holding periods Shareholding requirement: CEO: 7 x base salary; CFO: 4 x base salary Malus + clawback Malus and clawback provision apply to bonus and LTIP 51

52 Health, Safety, Security & Environment Process safety is central in achieving Shell s goal of zero harm to people and the environment Managed by combining asset integrity principles with a risk management approach, supported by visible safety leadership Asset integrity principles Risk management approach Process safety performance Design Integrity Technical Integrity CONTROLS, BARRIERS RECOVERY MEASURES GOAL ZERO NO HARM NO LEAKS Integrity Leadership Threats TOP EVENT Consequences Operating Integrity NO HARM TO PEOPLE NO LEAKS FROM OUR OPERATIONS 52

53 Shareholder resolution response The Board recommends voting against the Follow This resolution Follow This resolution Set and publish targets that are aligned with the goal of the Paris Climate Agreement to limit global warming to well below 2 C. They need to include long-term (2050) and intermediate objectives, to be quantitative, and to be reviewed regularly The company base these targets on tangible metrics such as greenhouse gas intensity metrics (GHG emissions per unit of energy produced) or to use other metrics that the company finds suitable to align its targets with a well-below-2 C pathway These targets need to cover the GHG emissions of Shell s operations and the use of its energy products (*),(*) Scope 1, Scope 2, and category 11 of Scope 3 (emissions from use of Shell s refinery fuel and natural gas products, and sold CO 2 transfers), excluding emissions from use and disposal of nonfuel products Shell response Already announced Net Carbon Footprint 1 ambition (November 2017) Around 50% reduction of Net Carbon Footprint of our energy products by 2050, around 20% by 2035 (gco 2 e/mj) In step with society s drive to align with the Paris goals Reassess every five-years aligned to NDC process Explicit target would need to predict society & government future actions Gives the flexibility to continue to thrive in whatever world society moves towards; recognizes need for action by all society GHG metrics in executive bonus scorecard (since 2017) Reporting aligned to TCFD recommendations Ambition in step with society s drive to align with the Paris goals Shell s Net Carbon Footprint Ambition well beyond scope 1, 2 and 3 emissions of our energy products Includes emissions produced by customers when they use the energy products we sell Includes emissions from elements of energy products life-cycle not owned by Shell, such as: Oil and gas processed - but not produced - by Shell Oil products and electricity marketed by Shell not processed or generated at a Shell facility 1 Net Carbon Footprint measured on an aggregate well to wheel or well to wire basis, from production through to consumption, on grams of CO 2 equivalent per megajoule of energy products consumed; chemicals + lubricants products are excluded. Carbon Footprint of the energy system is modelled using Shell methodology aggregating lifecycle emissions of energy products on a fossil-equivalence basis. The methodology will be further reviewed and validated in collaboration with external experts. 53