Russ Ford – Tight gas overview


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Shell held a field visit for Socially Responsible Investors in Houston and in the Haynesville gas field, Louisiana, at which Russ Ford, EVP onshore gas, John Hollowell, EVP deepwater and Paul Goodfellow, VP production onshore gas all presented. The focus of the presentations and visit was to illustrate Shell’s tight gas operations in the context of sustainable development and our commitment to responsible deepwater operations.

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Russ Ford – Tight gas overview

  2. 2. DEFINITIONS AND CAUTIONARY NOTEResources: Our use of the term “resources” in this presentation includes quantities of oil and gas not yet classified as SEC proved oil and gas. Resources are consistent with theSociety of Petroleum Engineers 2P and 2C definitions.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 where references are made to Royal Dutch Shell plc and its subsidiaries in general. Likewise, the words “we”, “us” and “our” are also usedto refer to subsidiaries in general or to those who work for them. These expressions are also used where no useful purpose is served by identifying the particular company orcompanies. ‘‘Subsidiaries’’, “Shell subsidiaries” and “Shell companies” as used in this presentation refer to companies in which Royal Dutch Shell either directly or indirectlyhas 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 controlare 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/orindirect (for example, through our 24% shareholding in Woodside Petroleum Ltd.) ownership interest held by Shell in a venture, partnership or company, after exclusion of allthird-party interest.This presentation contains forward-looking statements concerning the financial condition, results of operations and businesses of Royal Dutch Shell. All statements other thanstatements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based onmanagement’s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differmaterially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of RoyalDutch Shell to market risks and statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions. These forward-looking statementsare identified by their use of terms and phrases such as ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, “scheduled”, ‘‘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 futureoperations 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 potentialacquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject tointernational sanctions; (j) legislative, fiscal and regulatory developments including regulatory measures addressing climate change; (k) economic and financial marketconditions in various countries and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, delays oradvancements in the approval of projects and delays in the reimbursement for shared costs; and (m) changes in trading conditions. All forward-looking statements contained inthis presentation are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance onforward-looking statements. Additional factors that may affect future results are contained in Royal Dutch Shell’s Annual Presentation / Form 20-F for the year ended December31, 2010 (available at and ). These factors also should be considered by the reader. Each forward-looking statement speaks only as ofthe date of this presentation, 29 November 2011. 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 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.We may have used certain terms in this presentation that United States Securities and Exchange Commission (SEC) strictly prohibits us from including in our filings with the SEC,such as resources and oil in place. U.S. Investors are urged to consider closely the disclosure in our Form 20-F, File No 1-32575, available on the SEC website can also obtain these forms from the SEC by calling 1-800-SEC-0330. 2 Copyright of Royal Dutch Shell plc 29 November 2011
  3. 3. ENERGY OUTLOOKGLOBAL ENERGY MIXMln Boe/d Industry outlook400 Hydrocarbons dominate outlook Growth required in all sectors of energy mix300 Energy policy + sustained investment200 Shell Crude oil & oil products100 Natural gas & LNG Biofuels, wind, carbon capture + storage 0 1980 1990 2000 2010 2020 2030 2050 Petrochemicals OIL BIOMASS COAL GAS WIND NUCLEAR SOLAR SHELL ACTIVITIES OTHER RENEWABLESSHELL ESTIMATES3 Copyright of Royal Dutch Shell plc 29 November 2011
  4. 4. NATURAL GAS OUTLOOKNATURAL GAS DEMAND IEA: WORLD ENERGY OUTLOOK 2011, GAS GROWTHBCM Mln Boe/d 30 +23% +189%3,000 25 +29% 20 15 +89%2,500 10 +86% 2008 2035 52,000 0 1990 2000 2010 North Europe Asia Middle OtherSOURCE: IEA America Pacific EastNATURAL GAS ADVANTAGE: EXAMPLE CCGT ATTRACTIVE ECONOMICS FOR ELECTRICITY PRODUCERS $/MW hour GALLINA LNG SHIP - SINGAPORE Abundant, Affordable, Acceptable Solar Thermal Global gas resources ~250 years reserves at Wind current production Nuclear CCGT: gas-fired power compared to coal: Coal • 40% more energy efficient CCGT • 50-70% less CO2 0 50 100 150 200 • Better complements with renewables CAPITAL COST LONG-RUN MARGINAL COSTCCGT: COMBINED CYCLE GAS TURBINE SOURCE: SHELL ANALYSIS BASED ON EU DATA4 Copyright of Royal Dutch Shell plc 29 November 2011
  5. 5. STRATEGY & CAPITAL ALLOCATIONSTRATEGY CAPITAL INVESTMENTUpstream Profitable growth; price upside 100% SOUR >80% of total capital spending HEAVY OIL & EOR TIGHT GAS Sustained exploration investment EXPLORATION DEEPWATERDownstream UP- 50% Stable capital employed STREAM TRADITIONAL Fewer refineries; upgrade chemicals assets INTEGRATED GAS More concentrated marketing positions CHEMICALS REFINING Down- DOWN- stream MARKETING STREAM0%Financial outlook 2007-10 2011-14 Generating surplus cashflow through cycle Investing for growth; competitive payout Substantial cashflow growth GROWTH INVESTMENT – THROUGH CYCLE RETURNS5 Copyright of Royal Dutch Shell plc 29 November 2011
  6. 6. SHELL UPSTREAM AMERICAS OVERVIEWORGANISATION PRODUCTION AND CAPITAL INVESTMENT PRODUCTION CAPITAL INVESTMENT 2010/2014 2011-2014 100% 75% On- Deep- Heavy Explo- shore water/ Oil ration 50% Gas Oil 25% 0% 2010 2014 On-shore DW Oil Sands Explora- UPSTREAM INTERNATIONAL UPSTREAM AMERICAS tight gas operations mining + tion and shale Other Oil In-situ strategy gas operations Growing operations resource base6 Copyright of Royal Dutch Shell plc 29 November 2011
  7. 7. GLOBAL GAS OPPORTUNITY Groundbirch Germany Ukraine Deep Basin Foothills Marcellus Changbei North Shilou Pinedale Jinqui Eagle Ford Haynesville Fushun (JAA) studyGLOBAL GAS RESOURCES Sao Francisco CBM Shale ~12,000 Conv entio South Africa (JAA) Study Arrow - CBM TCF nal Tight Key Shell positions TIGHT GAS GRAND ANIVA SHALE GAS CBM7 Copyright of Royal Dutch Shell plc 29 November 2011
  8. 8. NORTH AMERICA TIGHT GASPRODUCTION GROWTH Kboe/d Mmscf/d 2011 tight gas investment: ~$3.5 billion500 2,500 Deep Basin400 Canada Foothills 2,000 Asset sales300 Groundbirch 1,500 Pinedale200 1,000 Haynesville USA100 500 Marcellus 0 0 Eagle Ford 2006 2007 2008 2009 2010 H1 2011 2012 Groundbirch Tight gas break-even price of $3-$5/mcf Deep Basin Foothills Drive for competitive performance 2011 ~ 300 Wells Pinedale Marcellus Eagle Ford Haynesville JV 8 Copyright of Royal Dutch Shell plc 29 November 2011
  9. 9. COMPETITIVE POSITIONINGCOMPETITIVE LIFTING COSTSLifting costs $/mcfe Built significant, contiguous positions in resource Other Direct Operating Cost plays across North America2 Acreage growth (+ 1.3 million net acres in 2010) Resource growth: East Resources Inc. + Eagle Ford1 acquisition 2010 High value positions: exploration running room, low break even prices0 Petrohawk Ultra Shell EnCana EOG XTO Chesapeake Talisman LEARNING CURVE ACCELERATION SHELL ASSET BREAK EVEN PRICE Indexed Well Delivery Time per year since first production $/mcfe – End 2010 120 Pinedale - 2002 8 100 Early Deep Basin - 2006 6 Deep Basin - 2008* 80 Haynesville - 2008 4 60 Groundbirch - 2008 2 40 0 20 Mature plays Emerging plays Total 0 BREAKEVEN PRICE ENTRY COST 0 1 2 3 4 5 6 7 8 9 10 Years* DEEP BASIN EAST ONLY9 Copyright of Royal Dutch Shell plc 29 November 2011
  10. 10. DRILLING TECHNOLOGY UNLOCKS NEW GROWTH CHINA + AUSTRALIA JVs WITH PETROCHINA Changbei tight gas North Shilou CBM Daning CBM Jinqiu tight gas Fushun tight gasChina: Fushun driling rigACREAGE TIGHT GAS COAL BED METHANE Arrow Energy LNG China: Changbei drilling rig10 Copyright of Royal Dutch Shell plc 29 November 2011
  11. 11. WELLS MANUFACTURING JVAUTOMATED TRUCK MOUNTED RIGS WELL COSTS Major projects – capex components as % of total spend 100% Increasing 80% share in wells 60% 40% Reducing share in facilities 20% Other Wells Facilities 0% 2010 2012 2014 2016 2018 2020CENTRALISED SUPPLY FACILITY FOR KEY LOGISTICS 50/50 JV with CNPC Tight gas development requires ‘000’s of wells Sourcing rigs, services and drilling equipment from China Integrated plan to drill and complete repeatable, low cost wells11 Copyright of Royal Dutch Shell plc 29 November 2011
  12. 12. ECONOMIC BENEFITS & SUSTAINABLE DEVELOPMENT NORTH AMERICA TIGHT GAS Gas – the cleanest fossil fuel Abundant resources Jobs + energy security SUSTAINABLE DEVELOPMENT: Safety: Shell and Contractor Water Management + Air emissions Good neighbour in community Support state regulation Hydraulic fracturing12 Copyright of Royal Dutch Shell plc 29 November 2011
  13. 13. HYDRAULIC FRACTURINGTECHNOLOGY & SUSTAINABLE DEVELOPMENT SCHEMATIC OVERVIEW BOP Technology Fracing fluid Recycling pit Water injection Water treatment delivered Increases access to new reserves Water table Increases well productivity & ultimate recovery Recent advances in technology: • Multi-stage fracing, horizontal wells Conduct Ground- casing water Surface Sustainable development casing Well design to avoid ground water contamination Requires 1 to 5 million gallons of water per well Sand keeps Water typically treated & re-used fracture open Support chemical disclosure Gas flowing Fractures caused by the pressure of into well fluids pumped from surface13 Copyright of Royal Dutch Shell plc 29 November 2011
  14. 14. SHELL & TIGHT GAS:5 CORE PRINCIPLES Safety & Well Footprint Shell works to reduce its Integrity operational footprint. Shell designs, constructs and operates wells and facilities in a safe and responsible way. Water Community Shell conducts its operations to Shell engages with local protect groundwater and reduce communities regarding socio- water use as reasonably economic impacts that may arise practicable. from our operations. Air Shell conducts its operations in order to protect air quality and control its fugitive emissions.14 Copyright of Royal Dutch Shell plc 29 November 2011
  15. 15. LNG FOR TRANSPORTGREEN CORRIDOR - CANADA Ft. McMurray Shell’s 1st large scale LNG for transport project Edmonton • Ft. McMurray - Calgary – Vancouver • 1st phase: 0.3 mtpa LNG plant Calgary Vancouver Jumping Pound High res picture coming LNG powered truck Canada: Jumping Pound Gas Plant15 Copyright of Royal Dutch Shell plc 29 November 2011
  16. 16. SHELL COMMITMENT “As part of the Shell Business Principles, we commit to contribute to sustainable development. This requires balancing short and long term interests, Customer and Profitability & integrating economic, environmental and social partner focus performance considerations into business decision-making.” Shell General Business Principles Sustainability & Value added growth technology16 Copyright of Royal Dutch Shell plc 29 November 2011
  17. 17. ROYAL DUTCH SHELL PLC Q&A HOUSTON/SHREVEPORT NOVEMBER 201117 Copyright of Royal Dutch Shell plc 29 November 2011