Transcript of "Scoffone citi climate_conference_06062011"
ROYAL DUTCH SHELL PLC BIOFUELS OUTLOOK LUIS SCOFFONE CITI CLIMATE CONFERENCE LONDON JUNE 6, 20111 Copyright of Royal Dutch Shell plc 06/06/2011
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 “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‟‟, „„estimate‟‟, „„expect‟‟, „„intend‟‟, „„may‟‟, „„plan‟‟, „„objectives‟‟, „„outlook‟‟,„„probably‟‟, „„project‟‟, „„will‟‟, „„seek‟‟, „„target‟‟, „„risks‟‟, „„goals‟‟, „„should‟‟ 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 potential litigation and regulatory measures as a result of climate changes; (k) economic andfinancial market conditions in various countries and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmentalentities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; and (m) changes in trading conditions. All forward-lookingstatements contained in this presentation are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not placeundue reliance on forward-looking statements. Additional factors that may affect future results are contained in Royal Dutch Shell‟s 20-F for the year ended 31 December,2010 (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, 6 June 2011. 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 inferred from theforward-looking statements contained in this presentation. There can be no assurance that dividend payments will match or exceed those set out in this presentation in thefuture, or that they will be made at all.We may use certain terms in this presentation, such as resources and oil in place, that the United States Securities and Exchange Commission (SEC) guidelines strictly prohibitus 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 on the SEC websitewww.sec.gov. You can also obtain these forms from the SEC by calling 1-800-SEC-0330.2 Copyright of Royal Dutch Shell plc 06/06/2011
ROYAL DUTCH SHELL MACRO ENVIRONMENT3 Copyright of Royal Dutch Shell plc 06/06/2011
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 ESTIMATES5 Copyright of Royal Dutch Shell plc 06/06/2011
SHELL: 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 INTEGRATED GAS More concentrated marketing positions 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 RETURNS6 Copyright of Royal Dutch Shell plc 06/06/2011
SHELL & CO2NATURAL GAS BIOFUELSQatarGas 4: First Cargo arriving at Hazira terminal Raizen: Sugar cane harvestingCARBON CAPTURE AND STORAGE ENERGY EFFICIENCYMongstad: CCS Project Shell Fuelsave: 1 liter less per tank7 Copyright of Royal Dutch Shell plc 06/06/2011
ROYAL DUTCH SHELL TRANSPORTATION FUELS8 Copyright of Royal Dutch Shell plc 06/06/2011
TECHNOLOGY DIFFUSIONTIME TO MATERIALITYTJ/Year It takes 30 years to span 1.0E+09 the 1000-fold growth to 1.0E+08 get from „test‟ scale to materiality (1-2% of total 1.0E+07 primary energy supply) "Materiality" Thereafter deployment 1.0E+06 rises linearly to ultimate 1.0E+05 share in the mix Focus must be on the 1.0E+04 technologies we know 1.0E+03 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 Total Oil Nuclear LNG Biofuels - 1st Gen Biofuels - 2nd Gen Solar Photovoltaic Wind CCS "Laws"Haigh/Kramer – Nature 462 (2009)9 Copyright of Royal Dutch Shell plc 06/06/2011
TRANSPORT DEMAND GROWTHWORLD PASSENGER TRANSPORT ROAD WORLD FREIGHT TRANSPORT ROADbillion vehicle km per year billion vehicle km per year40,000 40,00030,000 30,00020,000 20,00010,000 10,000 0 0 2000 2010 2020 2030 2040 2050 2000 2010 2020 2030 2040 2050 Liquid Hydrocarbon Fuels Gaseous Hydrocarbon Fuels Oil remains dominant next two decades Biofuels 1st gen Electricity Strong growth in biofuels Biofuels 2nd gen Hydrogen Strong efficiency improvements required Electrification making inroads next decadeSOURCE: IEA, SHELL SOURCE: IEA, SHELL10 Copyright of Royal Dutch Shell plc 06/06/2011
GASOLINE COMPARED TO ALTERNATIVE FUELSWELL-TO-WHEEL CO2 INTENSITIESCONVENTIONAL GASOLINE BASELINE CONVENTIONAL DIESEL BASELINE +34% +50% +12% -11% -16% -6% -40% -33% -84%* -82%* -89%*Source: CONCAWE/JRC/EUCAR WtW report (version 3) * Biofuels numbers do not include possible indirect land use change effects11 Copyright of Royal Dutch Shell plc 06/06/2011
REGULATED MARKETS FOR BIOFUELS Current Mandates Target/future mandate In discussion Pilot Mandates/Area Based Mandate Revoked/Incentives Introduced12 Copyright of Royal Dutch Shell plc 06/06/2011
ROYAL DUTCH SHELL BIOFUELS13 Copyright of Royal Dutch Shell plc 06/06/2011
SHELL AND BIOFUELSSHELL PORTFOLIO COMMITTED TO SUSTAINABILITY SHELL GLOBAL BIOCOMPONENT SHELL‟S BIOCOMPONENT FEEDSTOCK PURCHASE Q4 2010 PURCHASES COVERED BY SUSTAINABILITY CLAUSES Corn Wheat Fully signed up Sugar Cane Other Yet to sign up Rape Seed Worlds largest biofuels distributor: 9.5 billion liters in 2010 Sustainable sourcing of 1st generation biofuels Leading technology and next generation portfolio Global research capabilities14 Copyright of Royal Dutch Shell plc 06/06/2011
SHELL ADVANCED BIOFUELS PORTFOLIO Cellusosic ethanol Enzymes to convert Plant sugars directly from agricultural biomass to transport to transport fuels waste fuels: Gasoline components Sugar Ethanol Cellulosic Ethanol Biomass to Gasoline Diesel components Biomass to Diesel/Jet HVO Microbes To diesel Research & Demonstration Project First Commercial Development Assessment Commercial Roll-out Plant15 Copyright of Royal Dutch Shell plc 06/06/2011
BIOFUELS GROWTHRAÍZEN JOINT VENTURE (COSAN) Brazil: harvesting sugarcane16 Copyright of Royal Dutch Shell plc 06/06/2011
BIOFUELSRAIZEN: ETHANOL & SUGARGLOBAL ETHANOL PRODUCERS BRAZILIAN SUGARCANE PRODUCERSPRODUCTION BLN LITRES PER YEAR (ESTIMATE 2010/2011) 80 MLN TONNES (ESTIMATE 2010/2011)6 605 404 20 03 Sugarcane crushing capacity:2 ~60 mtpa from 24 mills market leader in Brazil; market share ~10%1 2.2 bln litres ethanol production capacity per year, growth aspiration to 4 bln litres per year Sugar production > 3 mtpa0 Cogeneration installed capacity 625 MW, excess electricity for sale this year: 1,200-1,500 GWhSource: data provided by Cosan, sourced from Czarnikow Group17 Copyright of Royal Dutch Shell plc 06/06/2011
RAIZEN: SOCIAL PERFORMANCECOMMITMENTS COSAN INDICATORS Cosan contributed to and is signatory to additional 41,000 employees (during peak of harvest) of commitments: which 36,000 operational, of which 27,000 agri-workers National Commitment for the Improvement of Labor Conditions in Sugarcane Production Agro-Environmental Protocol for the Sugar Manual harvesters: workday 7hrs 20mins, and Ethanol Sector (Green Protocol) wages ~60% above minimum wage Bonsucro formerly the Better Sugarcane Initiative (BSI) standards Mechanization: Cosan accelerated & reached 64% in areas with slope <12% Social investment in communities: Cosan Foundation: educating ~ 600 children Other social initiatives reaching ~70,000 peopleCosan foundation18 Copyright of Royal Dutch Shell plc 06/06/2011
RAIZEN: ENVIRONMENTREDUCING 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 24 units Cosan pioneered biological pest control Satellite geo-monitoring - a unique competitive advantage19 Copyright of Royal Dutch Shell plc 06/06/2011
ROYAL DUTCH SHELL SUMMARY20 Copyright of Royal Dutch Shell plc 06/06/2011
TRANSPORT SECTOR: A MOSAIC OF SOLUTIONS The mobility fuel mix will continue to diversify but hydrocarbon fuels will dominate All transport solutions will face challenges of introduction and adoption. A “mosaic” of solutions will be adopted in different regions of the world. The most effective solutions for achieving a new low CO2 energy future are vehicle efficiency and biofuels Electrification will feature in the long term. A switch from coal to gas in power generation will be important to ensure electric vehicles can fulfil their potential. Emission Concerns Energy 2010 2025 2050 Cost Security Concerns “BAU” “Simple Mosaic” “Full Mosaic” Concerns21 Copyright of Royal Dutch Shell plc 06/06/2011
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