Russ Ford- UBS Global Oil & Gas Conference – May 24, 2011

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Russ Ford, EVP Onshore Gas, presented an update to Shareholders at the UBS Global Oil & Gas conference. This included updates on Shell’s tight gas operations in the United States. …

Russ Ford, EVP Onshore Gas, presented an update to Shareholders at the UBS Global Oil & Gas conference. This included updates on Shell’s tight gas operations in the United States.

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  • 1. ROYAL DUTCH SHELL PLC RUSS FORD EVP – ONSHORE GAS UPSTREAM AMERICAS UBS Global Oil & Gas Conference Austin, Texas May 24, 20111 Copyright of Royal Dutch Shell plc 24/05/2011
  • 2. DEFINITIONS AND CAUTIONARY NOTEReserves: Our use of the term “reserves” in this presentation means SEC proved oil and gas reserves for all 2009 and 2010 data, and includes both SEC proved oil and gas reserves and SEC provenmining reserves for 2008 data.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 areconsistent with the Society of Petroleum 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 2008) excluding changes resulting from acquisitions, divestments and year-average 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 andChemicals segment earnings. 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 resultsof operations and is a measure to manage the performance 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 forconvenience 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 thosewho work for them. These expressions are also used where no useful purpose is served by identifying the particular company or companies. „„Subsidiaries‟‟, “Shell subsidiaries” and “Shellcompanies” as used in this presentation refer to companies in which Royal Dutch Shell either directly or indirectly has control, by having either a majority of the voting rights or the right to exercise acontrolling 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 controlare 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 forconvenience to indicate the direct and/or indirect (for example, through our 24% shareholding in Woodside Petroleum Ltd.) ownership interest 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 other than statements of historicalfact 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 andassumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements.Forward-looking statements include, among other things, statements concerning the potential exposure of Royal Dutch Shell to market risks and statements expressing management‟s expectations,beliefs, estimates, forecasts, projections and assumptions. These forward-looking statements are identified by their use of terms and phrases such as „„anticipate‟‟, „„believe‟‟, „„could‟‟, „„estimate‟‟,„„expect‟‟, „„intend‟‟, „„may‟‟, „„plan‟‟, „„objectives‟‟, „„outlook‟‟, „„probably‟‟, „„project‟‟, „„will‟‟, „„seek‟‟, „„target‟‟, „„risks‟‟, „„goals‟‟, „„should‟‟ and similar terms and phrases. There are a number offactors 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 productionresults; (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 acquisitionproperties 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 potential litigation and regulatory measures as a result of climate changes; (k) economic and financial market conditions in various countriesand 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 delaysin the reimbursement for shared costs; and (m) changes in trading conditions. All forward-looking statements contained in this presentation are expressly qualified in their entirety by the cautionarystatements 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, 2010 (available at and ). These factors also should be considered by the reader. Each forward-lookingstatement speaks only as of the date of this presentation, 24 May 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 inferred from the forward-lookingstatements contained in this presentation. There can be no assurance that dividend payments 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 actualproduction or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We use certain terms in this presentation, such as resources andoil in place, that SECs guidelines strictly prohibit us from 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 onthe SEC website You can also obtain these forms from the SEC by calling 1-800-SEC-0330. 2 Copyright of Royal Dutch Shell plc 24/05/2011
  • 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 24/05/2011
  • 4. NATURAL GAS OUTLOOKNATURAL GAS DEMAND SHELL GAS CAPABILITIESBCM3,0002,5002,000 1990 2000 2010ESOURCE: IEA Inaugural cargo QatarGas 4 arriving at Hazira terminalNATURAL 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 wind power CAPITAL COST LONG-RUN MARGINAL COSTCCGT: COMBINED CYCLE GAS TURBINE SOURCE: SHELL ANALYSIS BASED ON EU DATA 4 Copyright of Royal Dutch Shell plc 24/05/2011
  • 5. STRATEGY & CAPITAL ALLOCATIONSTRATEGY CAPITAL INVESTMENT $ BlnUpstream 150 Profitable growth; price upside >80% of total capital spending 100% SOUR HEAVY OIL & EOR Sustained exploration investment TIGHT GAS 100 EXPLORATIONDownstream DEEPWATER UP- Stable capital employed STREAM 50% TRADITIONAL Fewer refineries; upgrade chemicals assets 50 More concentrated marketing positions INTEGRATED GAS CHEMICALS DOWN- REFINING Down- stream STREAM MARKETINGFinancial outlook 0 0% 2007-10 2011-14 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 24/05/2011
  • 6. ROYAL DUTCH SHELL PROJECT UPDATE6 Copyright of Royal Dutch Shell plc 24/05/2011
  • 7. GROWTH DELIVERYINTEGRATED GASPEARL GTL (QATAR) QATARGAS 4 (QATAR) GORGON (AUSTRALIA)Pearl GtL plant under construction Inaugural Qatargas 4 cargo arriving at Shell Barrow Island Hazira Regasification Terminal Commissioning underway; ~12  7.8 mtpa LNG + 70 kboe/d  3 LNG trains; 15 mtpa months start-up condensates  Carbon capture & storage 1.6 bcf/d wet gas:  First gas into plant – Jan 2011  Exploration upside • 120 kboe/d NGL/ethane  First LNG export – Feb 2011  Shell 25% • 140 kboe/d GTL  At capacity – Apr 2011 100% Shell in partnership with QP  Shell 30% Part of Shell’s new integrated gas potential of ~500 kboe/d 20157 Copyright of Royal Dutch Shell plc 24/05/2011
  • 8. GROWTH DELIVERYDEEPWATERMARS-B (GULF OF MEXICO) BC-10 PHASE 2 (CAMPOS, BRAZIL) GUMUSUT-KAKAP (MALAYSIA)Development concept Phase 1 FPSO Construction yard at Johor Bahru TLP capacity ~100 kboe/d  Peak production ~30 kboe/d  Peak production ~135 kboe/d New resources at Mars field  Argonauta O-North field  Semi submersible Floating West Boreas + South Deimos  Tie-back to Phase 1 FPSO Platform System Water depth 950 meters  Water depth 1,600 meters  Water depth 1,200 meters Shell 72% (operator)  Shell 50% (operator)  Shell 33% (operator) Part of Shell’s new deepwater potential of ~200 kboe/d 20158 Copyright of Royal Dutch Shell plc 24/05/2011
  • 9. GROWTH DELIVERYHEAVY OIL & EORAOSP-1 (CANADA) SCHOONEBEEK (NETHERLANDS) PDO (OMAN)AOSP Jackpine mine Schoonebeek EOR development Qarn Alam steam development AOSP Exp. mine & upgrader  Started up Jan 2011  Qarn Alam steam injection onstream ~100 kboe/d  Steam injection for 20 kboe/d  Harweel miscible gas flood 255 kboe/d capacity built in  ~120 mln bbls potential over  Amal Steam ~10 years 25 years  Increased recovery factors: Next focus: optimization +  Shell 30% (operator) <10% to >30% debottlenecking  ~90 kboe/d 100% peak Shell 60% (operator) production potential  Shell 34% New heavy oil potential of ~90 kboe/d 2013-149 Copyright of Royal Dutch Shell plc 24/05/2011
  • 10. ROYAL DUTCH SHELL NA ONSHORE GAS FOCUS10 Copyright of Royal Dutch Shell plc 24/05/2011
  • 11. GROWTH OPPORTUNITYSHELL GLOBAL GAS OPPORTUNITY Deep Basin Germany Ukraine Groundbirch Foothills Marcellus Changbei North Shilou Pinedale Jinqui Eagle Ford Haynesville Fushun (JAA) studyGLOBAL GAS RESOURCES Sao Francisco CBM Shale ~12,000 Conv South Africa (JAA) Study Arrow - CBM TCF entio nal Key Shell positions Tight TIGHT GAS GRAND ANIVA SHALE GAS CBM11 Copyright of Royal Dutch Shell plc 24/05/2011
  • 12. GROWTH OPPORTUNITYHISTORY OF SHELL IN NORTH AMERICA GAS Panther Well 1951 - Foothills 2001 - Pinedale Groundbirch Deep Basin Foothills Pinedale Marcellus Eagle Ford Haynesville 2004 - Deep Basin 2007 – Haynesville 2010 – Marcellus/Eagle 2008 - Groundbirch Ford Acres (thousands) 0 1,000 2,000 Foothills Pinedale Deep Basin Haynesville Groundbirch Marcellus Eagle Ford ~40 tcfe of resource potential Acreage positions in low marginal cost plays12 Copyright of Royal Dutch Shell plc 24/05/2011
  • 13. COMPETITIVE PERFORMANCECOMPETITVE POSITIONINGCOMPETITIVE LIFTING COSTSLifting costs $/mcfe  Built significant, contiguous positions in resource2 Other Direct Operating Cost plays across North America  Acreage growth (+ 1.3 million net acres in 2010)1  Resource growth: East Resources Inc. + Eagle Ford acquisition 20100  High value positions: exploration running room, Petrohawk Ultra Shell EnCana EOG XTO Chesapeake Talisman low break even prices SOURCE: 2009 PUBLIC REGULATORY PUBLICATIONS LEARNING CURVE ACCELERATION SHELL ASSET BREAK EVEN PRICE Indexed Well Delivery Time per year since first production $/mcfe – End 2010 120 8 100 6 80 4 60 2 40 Pinedale - 2002 Early Deep Basin - 2006 0 20 Deep Basin - 2008 Haynesville - 2008 Mature plays Emerging plays Total Groundbirch - 2008 0 0 1 2 3 4 5 6 7 8 9 BREAKEVEN PRICE ENTRY COST Years13 Copyright of Royal Dutch Shell plc 24/05/2011
  • 14. COMPETITIVE PERFORMANCEHAYNESVILLECOMPETITIVE DRILLING COSTSHaynesville drilling environment  Production up by 40% since 2010  Q1 2011 production ~300 mmcfe/d*  93% acreage retention by year end  Strong cashflow DRILLING COST REDUCTIONS Well Drilling Cost Drilling costs lowered by ~50% ($millions)  Underbalanced and Hard Rock Drilling 12 Magnolia Drilling Performance Improvement  Pad drilling (2011)  Drill days reduced from 98 days to 35 days 6 Completion costs lowered by ~30%:  Consistent HF design yields improved efficiency 0 MULTIPLE WELLS FROM SINGLE ~50%  Cycle time reduced PAD 2008 2009 2010 Q1 2011 * Shell Share production14 Copyright of Royal Dutch Shell plc 24/05/2011
  • 15. COMPETITIVE PERFORMANCEMARCELLUSSHELL APPALACHIA – DRILLING RIGAppalachia drilling environment  Purchased in mid-2010  650,000 contiguous acres  10 Shell rigs  Several wells drilling in <10 days  Q1 2011 production ~50 mmcfe/d TYPICAL WELL SCHEMATIC  Advantages  Contiguous acreage  Liquids potential in SW Pennsylvania  Market proximity  Challenges  Regulatory Environment  Gas Infrastructure15 Copyright of Royal Dutch Shell plc 24/05/2011
  • 16. GROWTH DELIVERYNORTH AMERICAN GAS GROWTH POTENTIAL~2015 PRODUCTION SCENARIOS INVESTMENT FLEXIBILITYBcf/d 2011 investment: ~$3 billion; >400 wells4 Deep Basin Foothills Canada3 Groundbirch2 Pinedale Haynesville1 Marcellus USA Eagle Ford0 ~$15 Bln ~$20 Bln ~$25 Bln 2011-2015 Investment PRODUCTION GROWTH Flexibility in capital allocation Kboe/d Mmscf/d 2,000  Gas price, Affordability, Lease expiry 300  Creates a range of production growth 1,500 outcomes 200 1,000 Budget for a rolling 6-12 month program  Operational continuity 100 500  Performance vs. Plan 0 0 2006 2007 2008 2009 2010 2011 201216 Copyright of Royal Dutch Shell plc 24/05/2011
  • 17. SUSTAINABLE GROWTHPAD DRILLING: REDUCING SURFACE FOOTPRINTPINEDALE: SHELL OPERATED JONAH: NON-OPERATED Up to 4 pads each pad having up to 32 wells Up to 64 pads with each pad having a single wellSQUARE MILE OVERVIEW SQUARE MILE OVERVIEW Adjacent gas fields, different development impacts Shell setting new standards for surface footprint reduction17 Copyright of Royal Dutch Shell plc 24/05/2011
  • 18. SUMMARY Robust Portfolio Competitive Performance Strong Cash Generation18 Copyright of Royal Dutch Shell plc 24/05/2011
  • 19. ROYAL DUTCH SHELL Q&A19 Copyright of Royal Dutch Shell plc 24/05/2011