Transcript of "Evandro Gueiros - proposed Shell and Cosan Downstream & Biofuels JV in Brazil - 9 November 2010 "
ROYAL DUTCH SHELL PLC PROPOSED SHELL – COSAN JVBRAZILNOVEMBER 20101 Copyright of Royal Dutch Shell plc 9/11/2010
ROYAL DUTCH SHELL PLC PROPOSED SHELL – COSAN JV EVANDRO GUEIROS Cautionary note: The proposed JV between Shell and Cosan is still dependant on certain regulatory approvals. As such, all material presented here by Mr.Gueiros is in his capacity as a designate member of the future leadership team. Currently he is a Shell employee and a member of the project transition team which is in place to prepare the future organization. No members of this team have been involved directly or indirectly in the management of any of Cosan’s businesses. Any questions relating to what the proposed JV might or might not do should only be2addressed after of Royal Dutch merger control9/11/2010from the relevant competition authorities have been obtained. Copyright all suspensory Shell plc approvals
DEFINITIONS AND CAUTIONARY NOTEThe proposed JV between Shell and Cosan is still dependant on certain regulatory approvals. As such, all material presented here by Mr.Gueiros is in his capacity as a designate member of the future leadership team. Currentlyhe is a Shell employee and a member of the project transition team which is in place to prepare the future organization. No members of this team have been involved directly or indirectly in the management of any of Cosan’sbusinesses. Any questions relating to what the proposed JV might or might not do should only be addressed after all suspensory merger control approvals from the relevant competition authorities have been obtained.Reserves: Our use of the term “reserves” in this presentation means SEC proved oil and gas reserves for all 2009 data, and includes both SEC proved oil and gas reserves and SEC proven mining reserves for 2007 and 2008data.Resources: Our use of the term “resources” in this presentation includes quantities of oil and gas not yet classified as SEC proved oil and gas reserves or SEC proven mining reserves. Resources are consistent with the Society ofPetroleum Engineers 2P and 2C definitions.Organic: Our use of the term Organic includes SEC proved oil and gas reserves and SEC proven mining reserves (for 2007 and 2008) excluding changes resulting from acquisitions, divestments and year-end pricing impact.To facilitate a better understanding of underlying business performance, the financial results are also presented on an estimated current cost of supplies (CCS) basis as applied for the Oil Products and Chemicals segmentearnings. Earnings on an estimated current cost of supplies basis provides useful information concerning the effect of changes in the cost of supplies on Royal Dutch Shell’s results of operations and is a measure to manage theperformance of the Oil Products and Chemicals segments but is not a measure of financial performance under IFRS.The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate entities. In this presentation “Shell”, “Shell group” and “Royal Dutch Shell” are sometimes used for convenience wherereferences 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 subsidiaries in general or to those who work for them. These expressions are alsoused where no useful purpose is served by identifying the particular company or companies. ‘‘Subsidiaries’’, “Shell subsidiaries” and “Shell companies” as used in this presentation refer to companies in which Royal Dutch Shelleither directly or indirectly has control, by having either a majority of the voting rights or the right to exercise a controlling influence. The companies in which Shell has significant influence but not control are referred to as“associated companies” or “associates” and companies in which Shell has joint control are referred to as “jointly controlled entities”. In this presentation, associates and jointly controlled entities are also referred to as “equity-accounted investments”. The term “Shell interest” is used for convenience to indicate the direct and/or indirect (for example, through our 34% shareholding in Woodside Petroleum Ltd.) ownership interest held by Shell in aventure, partnership or company, after exclusion of all third-party interest.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 tobe, 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 uncertaintiesthat 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 potentialexposure 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 termsand phrases such as ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, ‘‘estimate’’, ‘‘expect’’, ‘‘intend’’, ‘‘may’’, ‘‘plan’’, ‘‘objectives’’, ‘‘outlook’’, ‘‘probably’’, ‘‘project’’, ‘‘will’’, ‘‘seek’’, ‘‘target’’, ‘‘risks’’, ‘‘goals’’, ‘‘should’’ and similar termsand 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 thispresentation, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for the Shell’s products; (c) currency fluctuations; (d) drilling and production results; (e) reserve 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 ofsuch transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, fiscal and regulatory developments including potential litigation and regulatory measures as aresult of climate changes; (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 presentation are expressly qualified intheir 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 RoyalDutch Shell’s 20-F for the year ended 31 December, 2009 (available at www.shell.com/investor and www.sec.gov ). These factors also should be considered by the reader. Each forward-looking statement speaks only as of thedate of this presentation, 9 November 2010. Neither Royal Dutch Shell nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking statement as a result of new information, future eventsor 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. There can be no assurance that dividendpayments will match or exceed those set out in this presentation in the future, or that they will be made at all.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 conclusiveformation tests to be economically and legally producible under existing economic and operating conditions. We use certain terms in this presentation, such as resources and oil in place, that SECs guidelines strictly prohibit usfrom including in filings with the SEC. U.S. Investors are urged to consider closely the disclosure in our Form 20-F, File No 1-32575, available on the SEC website www.sec.gov. You can also obtain these forms from the SEC bycalling 1-800-SEC-0330. 3 Copyright of Royal Dutch Shell plc 9/11/2010
AGENDA PRESENTATION: INTRODUCTION SHELL & COSAN Q&A DEMONSTRATION BIOLOGICAL PEST CONTROL GEO-MONITORING SATELLITE TECHNOLOGY SITE VISIT AGRICULTURAL SITE INDUSTRIAL SITE4 Copyright of Royal Dutch Shell plc 9/11/2010
SHELL IN BRAZIL In Brazil since 1913 ~2,200 staff Largest private exploration & production company producing in the country Upstream offshore and onshore Downstream fuels and lubricantsUPSTREAM GROWTH: BC-10 ON STREAM 2009 DOWNSTREAM: FUELS & LUBRICANTS5 Copyright of Royal Dutch Shell plc 9/11/2010
SHELL AND BIOFUELSSHELL PORTFOLIO COMMITTED TO SUSTAINABILITY SHELL GLOBAL BIOCOMPONENT SHELL’S BIOCOMPONENT FEEDSTOCK PURCHASE Q4 2009 PURCHASES COVERED BY SUSTAINABILITY CLAUSES IOGEN CODEXIS VIRENT CELLANA Corn Wheat Fully signed up First Gen Technology Next Gen Next Gen Distribution Partnership Manufacture Feedstock Sugar Cane Other Partially signed up Rape Seed and yet to sign up Worlds largest biofuels distributor: 9 billion liters in 2009 Sustainable sourcing of 1st generation biofuels Leading technology and next generation portfolio Global research capabilities $12 bln proposed JV with Cosan6 Copyright of Royal Dutch Shell plc 9/11/2010
INTRODUCING COSAN COSAN INSTITUTIONAL VIDEO CLICK HERE TO WATCH7 Copyright of Royal Dutch Shell plc 9/11/2010
PROPOSED SHELL-COSAN JV STRUCTURE 50% Management 50% Company JV’s face to the market Facilitate the building of a unified corporate culture Sugar, Ethanol, Cogeneration & Downstream Co Biotechnology Co Production of sugar and ethanol Supply, distribution and sale of fuels in Brazil. Co-generation activities Network of about 4,500 fuel stations throughout Brazil - third largest fuels retailer in the country as of Technology activities: Iogen & Codexis 2009, with strong potential for future growth8 Copyright of Royal Dutch Shell plc 9/11/2010
ASSETS CONTRIBUTED TO THE PROPOSED JVSHELL COSAN Brazilian downstream assets including: Sugar cane crushing capacity: currently ~60 million ~2,740 branded retail sites tonnes per annum from 23 mills Supply and distribution assets Ethanol production capacity: currently ~2 billion litres per annum Aviation fuel business All Co-generation plants Next generation biofuels: Brazilian downstream assets including: Commercialization rights Iogen Energy ~1,730 retail sites 16.4% share interest in Codexis Supply and distribution assets ~ US$1.6 billion in cash, paid over two years Ethanol logistics assets Net debt of ~US$2.5billion Additional debt of R$500 million from BNDES9 Copyright of Royal Dutch Shell plc 9/11/2010
PROPOSED JV: MAJOR FUELS DISTRIBUTOR IN BRAZILSHARE OF BRAZILIAN RETAIL FUELS DISTRIBUTION 36.1 % 4,470 retail sites, 53 depots Fuel sales volume ~18 billion litres per year or ~24% share of total Brazil downstream fuels: 21.3 % 20.6 % 18.2 % ~18% share of Brazil retail fuels 5.4 % ~16% share of the Brazil commercial fuels 12.8 % 3.8 % ~37 % share of aviation fuels LEADING IN OPERATIONAL EFFICIENCY Petrobras1 Ultra 1,2 Joint Venture AleSat 3 Others MONTHLY VOLUME PER RETAIL SITE (THOUSAND LITERS, 2008) 285NUMBER OF RETAIL SITES 18,429 238 227 221 185 7,121 5,415 169 4,470 1,730 1,520 2,740 Petrobras1 Ultra 1,2 Joint Venture AleSat 3 Others Shell Cosan BR Chevron Ipiranga IndustrySource: data provided by Cosan sourced from Sindicom 2008 and ANP (1) Pro forma for Petrobras and Ultra’s stake in Ipiranga (2) Pro forma for Texaco’s acquisition by Ultra10 Copyright of Royal Dutch Shell plc 9/11/2010 (3) Pro forma for AleSat’s acquisition of Repsol’s downstream assets
COSAN: ETHANOL & SUGARGLOBAL ETHANOL PRODUCERS BRAZILIAN SUGARCANE PRODUCERSPRODUCTION BLN LITRES PER YEAR (ESTIMATE 2010/2011) 80 MLN TONNES (ESTIMATE 2010/2011) 6 60 5 40 4 20 0 3 Sugarcane crushing capacity: 2 ~60 mtpa from 23 mills market leader in Brazil; market share ~10% 1 ~ 2 bln litres ethanol production capacity per year, growth aspiration to 4 bln litres per year 0 Sugar production > 3 mtpa Cogeneration installed capacity 625 MW, excess electricity for sale this year: 1,200-1,500 GWhSource: data provided by Cosan, sourced from Czarnikow Group11 Copyright of Royal Dutch Shell plc 9/11/2010
SOCIALREGULATION COSAN INDICATORS Labour conditions strictly regulated via the 41,000 employees (during peak of harvest) of Labour Law Consolidation which 36,000 operational, of which 27,000 agri-workers Cosan contributed to and is signatory to additional commitments: Cosan uses own labour on owned and leased lands, initiates harvest on third party land National Commitment for the Improvement of Labor Conditions in Sugarcane Production Manual harvesters: workday 7hrs 20mins, wages ~60% above minimum wage Agro-Environmental Protocol for the Sugar and Ethanol Sector (Green Protocol) Training :~25 hours per employee per year Better Sugarcane Initiative (BSI) standards Mechanization: Cosan accelerated & reached 64% in areas with slope <12% Safety: 84% reduction in accidents Ethanol & Sugar division versus last year Social investment in communities: Cosan Foundation: educating ~ 600 children Other social initiatives reaching ~70,000 peopleCOSAN FOUNDATION Data provided by Cosan12 Copyright of Royal Dutch Shell plc 9/11/2010
ENVIRONMENTCOSAN: REDUCING IMPACTS, DELIVERING BENEFTIS Brazilian sugar cane ethanol best performing biofuel: European Renewable Energy Directive assigns sugar cane ethanol with a 71% GHG savings, compared to gasoline U.S. EPA designated Brazilian sugarcane ethanol as an advanced biofuel due to its 61% reduction of total life cycle GHG emissions Cogeneration of electricity from by-product bagasse: reducing emissions & generating revenues from electricity sales 625 MW installed capacity, with excess electricity for sale this year between 1,200 to 1,500 GWh Recycling of by-products: vinasse, filter cake and ash used as natural potassium-rich fertilizer Accelerated mechanization reduces emissions & water use Closed water circuits in 19 of 23 units Cosan pioneered biological pest control Satellite geo-monitoring - a unique competitive advantageData provided by Cosan13 Copyright of Royal Dutch Shell plc 9/11/2010
ENVIRONMENTLAND USE Cosan’ uses ~700 thousand hectares representing SUGARCANE PRODUCING AREAS IN BRAZIL ~0.1% of Brazil’s total area or ~0.2% of its arable land Brazilian sugar cane for ethanol uses less than ~0.6% of Brazil’s total area and less than ~1.5% of its arable land In Brazil, land availability and opportunities for productivity increases in cattle raising significantly mitigate indirect land use change Government regulation: Forest Code currently under review; Legal Reserves of 20% of land to include Permanent Protected Areas Agro Ecological Protocol defines lands suitable for sugarcane production based on agro- climatic, environmental and social criteria Proposed JV agreement includes requirement for impact assessment (including indirect impacts) for greenfield expansions14 Copyright of Royal Dutch Shell plc 9/11/2010
SHELL SUSTAINABILITY DUE DILIGENCEOBJECTIVES OUTCOME Review capabillities Robust sustainability principles, standards and Assess compliance operating procedures embedded in proposed JV agreement Benchmark performance with international best practice, particularly Better Sugarcane Initiative Detailed action plan agreed to underpin above and address areas of improvement. Develop action plan for proposed JV Targets agreed to ensure all mills/volumes achieve Better Sugar Cane Initiative (BSI) Certification according to its five key principles: obey the law DUE DILIGENCE INCLUDED respect human rights and labour standards 23 MILL SITES AND manage input, production and processing ASSOCIATED PLANTATIONS efficiencies to enhance sustainability actively manage biodiversity and ecosystem services continuously improve key areas Management sustainability appointed and part of leadership team1515 Copyright of Royal Dutch Shell plc Copyright of Royal Dutch Shell plc 9/11/2010 9/11/2010
SUMMARY Proposed Shell – Cosan Joint Venture: a leader in sugar cane ethanol & sugar with growth aspirations a major fuels position in the Brazilian growth market Brazilian sugar cane ethanol widely recognized as one of the most sustainable & commercially viable types of biofuels Proposed JV committed to progress sustainability with robust principles, standards and operating procedures agreed1616 Copyright of Royal Dutch Shell plc Copyright of Royal Dutch Shell plc 9/11/2010 9/11/2010
ROYAL DUTCH SHELL PLC PROPOSED SHELL – COSAN JV Q&A17 Copyright of Royal Dutch Shell plc 9/11/2010
ROYAL DUTCH SHELL PLC PROPOSED SHELL – COSAN JV BRAZIL NOVEMBER 201018 Copyright of Royal Dutch Shell plc 9/11/2010
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