Presentation on Shell’s Alaska activities Dec 4th & 5th 2012


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On the 4th and 5th of December 2012, Marvin Odum, Director Upstream Americas, and David Lawrence, Executive Vice-President Exploration & Commercial Upstream Americas, held a round table on Alaska with shareholders. The importance of arctic exploration as well as the safety measures put in place to mitigate and respond to unlikely incidents were discussed.

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Presentation on Shell’s Alaska activities Dec 4th & 5th 2012

  1. 1. ROYAL DUTCH SHELL PLCALASKA UPDATELONDON/THE HAGUEDECEMBER 4/5th, 2012Copyright of Royal Dutch Shell plc 4 December, 2012 1
  3. 3. DEFINITIONS AND CAUTIONARY NOTEThe companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate entities. In this presentation “Shell”, “Shell group” and “RoyalDutch 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 subsidiaries in general or to those who work for them. These expressions are also used where no useful purpose is served byidentifying the particular company or companies. „„Subsidiaries‟‟, “Shell subsidiaries” and “Shell companies” as used in this presentation refer to companies in whichRoyal Dutch Shell either directly or indirectly has control, by having either a majority of the voting rights or the right to exercise a controlling influence. The companiesin which Shell has significant influence but not control are referred to as “associated companies” or “associates” and companies in which Shell has joint control arereferred 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 23% shareholding in Woodside Petroleum Ltd.) ownershipinterest held by Shell in a venture, 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 otherthan statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that arebased on management‟s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance orevents to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning thepotential exposure of Royal Dutch Shell to market risks and statements expressing management‟s expectations, beliefs, estimates, forecasts, projections andassumptions. These forward-looking statements are identified by their use of terms and phrases such as „„anticipate‟‟, „„believe‟‟, „„could‟‟, „„estimate‟‟, „„expect‟‟,„„intend‟‟, „„may‟‟, „„plan‟‟, „„objectives‟‟, „„outlook‟‟, „„probably‟‟, „„project‟‟, „„will‟‟, „„seek‟‟, „„target‟‟, „„risks‟‟, „„goals‟‟, „„should‟‟ and similar terms and phrases. Thereare 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 theforward-looking statements included in this presentation, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand forShell‟s products; (c) currency fluctuations; (d) drilling and production results; (e) reserves estimates; (f) loss of market share and industry competition; (g) environmentaland physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of suchtransactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, fiscal and regulatory developmentsincluding potential litigation and regulatory measures as a result 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 ofprojects and delays in the reimbursement for shared costs; and (m) changes in trading conditions. All forward-looking statements contained in this presentation areexpressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-lookingstatements. Additional factors that may affect future results are contained in Royal Dutch Shell‟s 20-F for the year ended 31 December, 2011 (available and ). These factors also should be considered by the reader. Each forward-looking statement speaks only as of the date of thispresentation, 4 December 2012. Neither Royal Dutch Shell nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-lookingstatement 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 inferredfrom the forward-looking statements contained in this presentation. There can be no assurance that dividend payments will match or exceed those set out in thispresentation in the future, or that they will be made at all.We use certain terms in this presentation, such as resources, that the United States Securities and Exchange Commission (SEC) guidelines strictly prohibit us fromincluding 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 You can also obtain these forms from the SEC by calling 1-800-SEC-0330.Copyright of Royal Dutch Shell plc 4 December, 2012 3
  4. 4. GLOBAL ENERGY OUTLOOKDEMAND GROWTHEnergy demand outlook in million boe/d  9 billion people in 2050400  Energy demand +60% 2010 – 2050  Solar, Wind and Biofuel only 1% of energy mix today; growing to 10-15%300 by 2050  Hydrocarbons continue to be some 70% of energy mix in 2050200100 ALL FORMS OF ENERGY WILL BE NEEDED 0 1980 1990 2000 2010 2020 2030 2040 2050 Oil Solar Shell Natural gas Other renewables activities Biomass Nuclear Wind CoalCopyright of Royal Dutch Shell plc 4 December, 2012 4
  5. 5. ARCTIC ACTIVITY: INDUSTRYSIGNIFICANT DRILLING ACTIVITY: 1960s TO PRESENT Significant drilling offshore  >250 wells offshore/ Canada archipelago Arctic North Archipelago America US Beaufort 174  ~500 wells onshore Prudhoe Chukchi 5 Bay area 30  Drilling in Norwegian and Russian arctic North Slope 494 85 Canada Alaska Beaufort 85 = Number of wellsCopyright of Royal Dutch Shell plc 4 December, 2012 5
  6. 6. RESOURCE POTENTIALSHELL ARCTIC POSITIONS Arctic SAKHALIN  22% of the undiscovered, technically recoverable resources in the world 1 UNITED STATES CHUKCHI Alaska NIGLINTGAK  ~30 billion bbls of oil and 221 tcf of BEAUFORT natural gas 1 CANADA NORTH POLE RUSSIA  Alaska Outer Continental Shelf SALYM (mainly Chukchi and Beaufort) to BAFFIN BAY contain ~27 bln bbl oil and 132 tcf of natural gas 2 GREENLAND KAZAKHSTAN KASHAGAN MAJOR UNDISCOVERED NORWAY RESOURCES IN MATURE ORMEN LANGE HYDROCARBON AREA1 USGS Estimates from US Department of the Interior US Geological Survey “Circum-Arctic Resources Appraisal”, 20082 MMS Estimate from US Department of the Interior Minerals Management Service “Undiscovered Oil and Gas Resources, Alaska Federal Offshore”, 2006Copyright of Royal Dutch Shell plc 4 December, 2012 6
  7. 7. ALASKA PRODUCTION HISTORY 1957 –Swanson River 1977 - Trans- 1989-1991 Shell 2001 – BP Northstar oil field, Kenai Alaska Pipeline /Chevron explore Chukchi field, Beaufort Sea, Peninsula completed sea and drill 5 wells becomes operational 1963 – Shell drills first 1981 - Kuparuk oil 2000 – Conoco Alpine 2002 – Encana, Beaufort Bbl/d offshore oil well in Alaska field onstream , field, becomes Sea, McCovey Prospectproduction Conoco operated operational drilled 1967 – ARCO (BP) Prudhoe Bay oil field 1987– BP/Exxon 2005 – Shell acquires discovered Endicott Field, leases in Beaufort Sea2,500,000 Beaufort Sea, 1969 –Sinclair/ARCO becomes operational. (BP) Kuparuk oil field 2008 – Shell discovered acquires leases in Chukchi sea2,000,000 1974 - Trans- Alaska Pipeline started1,500,000 2011– ENI Nikaitchuq starts1,000,000 production, Beaufort Sea 500,000 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003 2008 2011 Cook Inlet Kuparuk & Milne Point Colville River & Northstar Prudhoe Bay North Slope – Other FieldsCopyright of Royal Dutch Shell plc 4 December, 2012 7
  8. 8. ALASKA OFFSHORE DEVELOPMENTS BP Northstar, Beaufort Sea, 2001 BP Endicott, Beaufort Sea, 1987 BP Endicott, Beaufort Sea, 1987 OFFSHORE EXPLORATION + PRODUCTION UNDERWAY ARTIFICIAL ISLAND DEVELOPMENTS ENI Nikaitchuq, Beaufort Sea, 2011Copyright of Royal Dutch Shell plc 4 December, 2012 8
  9. 9. ALASKA DRILLING: WELL CONTROL Consequences Hazard Control & Response & Barriers Incident Recovery Minimize Mitigate likelihood consequences CONTROL & BARRIERS: RESPONSE & RECOVERY  Known pressures – previous drilling  Cap & Contain system  Drilling mud  Arctic containment dome  Blow out preventers  Arctic containment system  Rigorous training for operators  Oil spill response equipment  Real time operating center  2nd rig in theatre for relief well  Drilling well on paperCopyright of Royal Dutch Shell plc 4 December, 2012 9
  11. 11. OIL SPILL RESPONSE Oil spill response animationCopyright of Royal Dutch Shell plc 4 December, 2012 11
  13. 13. SHELL ARCTIC OVERVIEW 2012 DRILLING IN CHUKCHI AND BEAUFORT 2012 ACTIVITIES COMPLETED SAFELYCopyright of Royal Dutch Shell plc 4 December, 2012 13
  14. 14. SHELL INVESTMENT IN ALASKAALASKA SPEND 2006 - 2012 ~$5 BILLION CAP & CONTAIN SUPPORT VESSELS  First of its kind custom built  More than 20 support vessels in Arctic Containment System place  Pre-built capping stack DRILLING ENGAGEMENTCapitalised Expensed Leases Exploration expense Drilling & Support Overhead Capping and Containment  Two Arctic drill ships in place  450 community visitsCopyright of Royal Dutch Shell plc 4 December, 2012 14
  15. 15. CHUKCHI + BEAUFORT Chukchi Beaufort Barrow Wainwright Kaktovik Point Lay Deadhorse Kuparuk Point Hope Prudhoe Bay Trans Alaska Pipeline Kivalina Shell Anadarko Total Conoco Repsol Others Exxon Chevron BP ENI Statoil Pipelines COMPETITIVE SHELL ACREAGE POSITIONCopyright of Royal Dutch Shell plc 4 December, 2012 15
  16. 16. ALASKA DRILLING SEASON Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov DecTypical Ice Year Beaufort Ability to drill in hydrocarbon zone Whaling break Ability to drill top Chukchi hole only Permit LIMITED DRILLING WINDOW  Short ice free season  Beaufort whaling shutdown  Chukchi blackout period from HC zones Copyright of Royal Dutch Shell plc 4 December, 2012 16
  17. 17. 2012 MOBILIZATION AFFINITY ARCTIC CHALLENGER/CORBIN FOSS Fuel supply & CSR tanker Containment system barge & tug NOBLE DISCOVERY Drill ship FENNICA Primary Ice management KULLUK Drilling rig TOR VIKING Anchor handling & secondary LAUREN FOSS/TUUQ ice management Supply & waste storage NANUQ ENDEAVOR/PT OLIKTOK Spill recovery & accomodation Spill recovery barge & tug KLAMATH/GUARDSMAN ARCTIC SEAL Spill recovery barge & tug Landing craft TUKPUK HARVEY EXPLORER NORDICA landing craft Supply vessel Primary ice management HARVEY SPIRIT HARVEY SISAUQ Supply vessel Supply vessel/waste AIVIQ Anchor handling & secondary ice management 22 VESSELS IN THEATRE Drilling Rig Aviation Support Vessel Oil Spill Response ~2,000 PERSONNEL 2012 ACTIVITIES COMPLETED SAFELYCopyright of Royal Dutch Shell plc 4 December, 2012 17
  18. 18. 2012 PERFORMANCE CHALLENGES  Heaviest ice year for a decade  Kulluk could not start drilling before the whaling season began  Permits uncertainty around Arctic Containment System  Containment dome damaged during testing  Whaling hunt prolonged due to bad weather and funeral Discoverer is re-supplied during 2012 operations RESULTS  2 top holes drilled  >20 vessels and 2,000 employees/contractors with some 12,000 employee rotations  Successful mobilization + demobilization  Positive support from regulators + community  First time all permits in a useable form were received Drilling in Alaskan watersCopyright of Royal Dutch Shell plc 4 December, 2012 18
  19. 19. ROYAL DUTCH SHELL PLCALASKAMARVIN ODUMDIRECTOR UPSTREAM AMERICASCopyright of Royal Dutch Shell plc 4 December, 2012 19
  20. 20. STAKEHOLDER ENGAGEMENT + PERMITTING> 450 STAKEHOLDER ENGAGEMENTS MULTIPLE PERMITTING BODIES + JURISDICTIONS Kaktovik Barrow  Alaska Dept. of Environmental Conservation Wainwright Nuiqsut Point Lay  North Slope Borough Point Hope  Alaska Eskimo Whaling Commission Kivalina # of engagements < 10 Kotzebue  National Marine Fisheries Service Kiana 11 - 20 Shishmaref >20  Bureau of Ocean Energy Management/Bureau of Safety and Environmental Enforcement  Environmental Protection Agency  Fish and Wildlife Service  United States Coast Guard LOCAL SUPPORT FOR SHELL Community engagementCopyright of Royal Dutch Shell plc 4 December, 2012 20
  21. 21. ENGAGEMENT + COMMITMENT6 YEARS OF ENGAGEMENTS & OUTREACH Strategic stakeholder initiatives to 3-D mapping: North Slope to Washington, DC North Slope Residents: Listening, adjusting, cooperating: respect for dialogue  CAA, NSB Science agreement, jobs/contracting Stakeholder engagement (450+ visits) Using Traditional knowledge and modifying the program Put tools in the hands of those that would support usOPERATIONAL EXCELLENCE A higher bar: Oil Spill Response, Technology, Science & MOUs Economic “justice” for stakeholders via local business development Traditional practices Operational Commitments: whaling, transit, PSOs, emissionsRESOLUTION Making the case for Shell‟s Alaska Program A more aggressive legal and outreach strategy Stronger permits that “learned” from past deficiencies Mitigate the drive to litigation Community engagementCopyright of Royal Dutch Shell plc 4 December, 2012 21
  22. 22. POTENTIAL DEVELOPMENTYEAR ROUND ACTIVITY ARCTIC PIPELINE ENVIRONMENT Development concept Ice gouge LONG TERM DEVELOPMENT OPTIONS IN CASE OF DISCOVERY Strudel scourCopyright of Royal Dutch Shell plc 4 December, 2012 22
  23. 23. SHELL IN ARCTIC CONDITIONSWORLDWIDE EXPERIENCE ALASKA DRILLING + DEVELOPMENT HISTORY Kashagan (2000s) Cook Inlet (1960s – 1990s) Sakhalin (2000s) Beaufort + Chukchi (1980s-1990s)Copyright of Royal Dutch Shell plc 4 December, 2012 23
  24. 24. VISION FOR LONG TERM SUCCESS SUSTAINED LICENSE TO OPERATE  Exploration + development success  Alignment with stakeholders  National energy policy INCREASED UTILIZATION OF DRILLING DAYS  Equipment readiness  Expand fleet capability  Realize learning curve on drilling efficiency ENHANCE VENTURE VALUE  Integrated activity planning  Early program definition  Contracting for long term cost reduction Kulluk in Dutch Harbour, 2012Copyright of Royal Dutch Shell plc 4 December, 2012 24
  25. 25. ROYAL DUTCH SHELL PLCALASKAQ&ACopyright of Royal Dutch Shell plc 4 December, 2012 25
  26. 26. ROYAL DUTCH SHELL PLCALASKAAPPENDIXCopyright of Royal Dutch Shell plc 4 December, 2012 26
  27. 27. CHUKCHI SEA Shell Popcorn, 1990 Shell Shell Crackerjack 1991 Burger-A, 2012 Chevron Diamond, 1991 Shell Burger-1, 1990 Barrow Shell Klondike, 1989 Wainwright Shell Conoco Repsol ENI Statoil Well Location EXPLORATION WELLS 1989-1991; BURGER GAS DISCOVERY KNOWN PRESSURES AND TEMPERATURES KEY ACTIVITY: BURGER APPRAISALCopyright of Royal Dutch Shell plc 4 December, 2012 27
  28. 28. BEAUFORT SEA Shell Anadarko Total Conoco Repsol Others Well Location Exxon Chevron BP ENI Statoil Pipelines ENI, Nikaitchuq Production 2011 BP, Northstar Encana Antares Production 2001 McCovey 2002 Exxon 1985 Shell BP, Endicot Production 1987 Sivulliq, 2012 Amoco (BP) Galahad 1991 Amoco (BP) Belcher 1989 Kaktovik Nuiqsut Point Thomson, Exxon Prudhoe Bay Under development Deadhorse Oil and Gas Oil, Gas and Condensate Trans Alaska Pipeline NEAR-OFFSHORE EXTENSIVELY DRILLED KNOWN PRESSURES AND TEMPERATURES KEY ACTIVITY: SIVULLIQ EXPLORATION PROSPECTCopyright of Royal Dutch Shell plc 4 December, 2012 28
  29. 29. ALASKA FLEET: RIGS ARCTIC RIGS  Turret moored drill ship  Ice strengthened sponsons  State of the art emissions control Noble Discoverer: Chukchi sea rig  Moored semi-submersible rig: Shell owned  Conical hull  Ice class rig: designed for arctic  State of the art emissions control MUTUALLY SUPPORTING RIGS MAJOR INVESTMENT FOR MULTI Kulluk: Beaufort sea rig YEAR CAMPAIGNCopyright of Royal Dutch Shell plc 4 December, 2012 29
  30. 30. SUPPORT VESSELSICEBREAKER + LOGISTICS OIL SPILL RESPONSE MV Aiviq: Ice class anchor handler Nanuq: Oil spill response vessel 2 primary + 2 secondary ice management vessels  Multiple oil spill response vessels pre-positioned in Multiple supply vessels theatre Redundant equipment with two operating areas  500,000 bbl Arctic tanker pre staged Fleet capable of operating in ice conditions if  Onshore and nearshore equipment pre staged necessary  Fully certified equipment and trained staff  Co-ordination with Coast GuardCopyright of Royal Dutch Shell plc 4 December, 2012 30
  31. 31. CAP + CONTAIN SYSTEM Arctic containment system Capping Stack:  First response if BOPs fail  Shell commissioned equipment Arctic Containment System (ACS):  Consists of containment dome and production vessel  Interoperable with capping stack FIRST PRE-DEPLOYED CAP & CONTAINMENT SYSTEM FOR ANY Shell capping stack WELL WORLDWIDECopyright of Royal Dutch Shell plc 4 December, 2012 31