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Copyright of Royal Dutch Shell plc
LNG Outlook
1
Copyright of Royal Dutch Shell plc 2
Definitions &
cautionary note
Reserves: Our use of the term “reserves” in this presen...
Copyright of Royal Dutch Shell plc 3Copyright of Shell International B.V.Copyright of Royal Dutch Shell plc
Copyright of Royal Dutch Shell plc
0
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Global energy demand growth by fuel (b...
Copyright of Royal Dutch Shell plc
Gas provides competitive, flexible, cleaner energy
Average Time Required To Come Online...
Copyright of Royal Dutch Shell plc
Policymakers increasingly choose gas
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Leaders’ Communique pledged to ‘enhance collabor...
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J F M A M J J A S O N D
Range 2010-2014 2015 2016
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A-rated B-rated No...
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New FIDs required to meet demand growth after 2020
LNG supply/demand gap
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Changing drivers of LNG demand growth
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LNG to take larger share of European gas demand
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Policy and macroeconomics driving gas demand growth in China
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Southeast Asia to become net LNG importer by 2035
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Potential demand upside from transport sector
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Summary
 Strong growth in LNG supply in 2016, one-third of new supply online
 LNG dem...
Shell LNG Outlook - February 2017
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Shell LNG Outlook - February 2017

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The Shell LNG Outlook, launched in London on February 20th, is an assessment of the global liquefied natural gas (LNG) market. It finds that China and India were two of the fastest growing buyers, with the number of LNG importers worldwide up to 35, from 10 at the start of the century.

Read the Shell LNG Outlook in full at http://www.shell.com/lngoutlook

Published in: Investor Relations

Shell LNG Outlook - February 2017

  1. 1. Copyright of Royal Dutch Shell plc LNG Outlook 1
  2. 2. Copyright of Royal Dutch Shell plc 2 Definitions & cautionary note Reserves: Our use of the term “reserves” in this presentation means SEC proved oil and gas reserves. 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. Resources are consistent with the Society of Petroleum Engineers (SPE) 2P + 2C definitions. Discovered and prospective resources: Our use of the term “discovered and prospective resources” are consistent with SPE 2P + 2C + 2U definitions. Organic: Our use of the term Organic includes SEC proved oil and gas reserves excluding changes resulting from acquisitions, divestments and year-average pricing impact. Shales: Our use of the term ‘shales’ refers to tight, shale and coal bed methane oil and gas acreage. Underlying operating cost is defined as operating cost less identified items. A reconciliation can be found in the quarterly results announcement. The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate legal entities. In this release “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 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 by identifying the particular company or companies. ‘‘Subsidiaries’’, “Shell subsidiaries” and “Shell companies” as used in this release refer to companies over which Royal Dutch Shell plc either directly or indirectly has control. Entities and unincorporated arrangements over which Shell has joint control are generally referred to as “joint ventures” and “joint operations” respectively. Entities over which Shell has significant influence but neither control nor joint control are referred to as “associates”. The term “Shell interest” is used for convenience to indicate the direct and/or indirect ownership interest held by Shell in a venture, partnership or company, after exclusion of all third- party interest. This release 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 to be, 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 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’’, ‘‘goals’’, ‘‘intend’’, ‘‘may’’, ‘‘objectives’’, ‘‘outlook’’, ‘‘plan’’, ‘‘probably’’, ‘‘project’’, ‘‘risks’’, “schedule”, ‘‘seek’’, ‘‘should’’, ‘‘target’’, ‘‘will’’ and similar terms and 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 this release, 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 potential acquisition properties 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 regulatory measures addressing climate change; (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. There can be no assurance that future dividend payments will match or exceed previous dividend payments. All forward-looking statements contained in this release are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-looking statements. Additional risk factors that may affect future results are contained in Royal Dutch Shell’s 20-F for the year ended December 31, 2015 (available at www.shell.com/investor and www.sec.gov). These risk factors also expressly qualify all forward looking statements contained in this release and should be considered by the reader. Each forward-looking statement speaks only as of the date of this release, February 20, 2017. Neither Royal Dutch Shell plc 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-looking statements contained in this release. With respect to operating costs synergies indicated, such savings and efficiencies in procurement spend include economies of scale, specification standardisation and operating efficiencies across operating, capital and raw material cost areas. We may have used certain terms, such as resources, in this release that United States Securities and Exchange Commission (SEC) strictly prohibits us from including in our 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.
  3. 3. Copyright of Royal Dutch Shell plc 3Copyright of Shell International B.V.Copyright of Royal Dutch Shell plc
  4. 4. Copyright of Royal Dutch Shell plc 0 5000 10000 15000 20000 45% 18% 15% 13% 2% 7% 4 Global energy demand growth by fuel (bcm) Source: Shell interpretation of Wood Mackenzie Q4 2016 data 0 1000 2000 3000 4000 5000 45% 26% 22% 7% Global gas demand growth by sector (bcm) GLOBAL GAS DEMAND GROWTH BY REGION (BCM) 0 1000 2000 3000 4000 5000 39% 25% 15% 21% Global gas demand growth by region (bcm) Gas playing a prominent role in meeting growing energy demand
  5. 5. Copyright of Royal Dutch Shell plc Gas provides competitive, flexible, cleaner energy Average Time Required To Come Online, Minutes Supporting renewable generation growth Capital Cost Of Power Plants KW/yr Gas plants are cheaper to build & operate $0 $100 $200 $300 $400 $0 $2,000 $4,000 $6,000 $8,000 lb/MWh gross Addressing local air quality concerns 0 0.2 0.4 0.6 0.8 SO2 NOx PM2.5 5 Negligible emissions from gas Coal Emissions, Supercritical Pulverized Coal Boiler Natural Gas CCGTOvernight Capital Cost ($/kW) Fixed Operation & Maintenance Cost ($/kW-yr) RHS Time to synchronise with grid Time to reach full load Negligible emissions from gas 300 15 85 80 22 0 50 100 150 200 250 300 350 400 Coal Gas CCGT Gas Large OCGT Source: IEA, NETL 2015-Cost & Performance baseline for Fossil Energy Plants, NETL; Life Cycle Greenhouse Gas, DECC Life-cycle GHG Emissions: kg CO2e/MWh,100-year Global Warming Potential 518 1,133 0 200 400 600 800 1000 1200 Average Natural Gas Fleet, baseload Coal Average Fleet, baseload Facilitating climate change objectives 54% lower than coal emissions
  6. 6. Copyright of Royal Dutch Shell plc Policymakers increasingly choose gas 6 Leaders’ Communique pledged to ‘enhance collaboration on solutions that promote natural gas’ as ‘a less emission- intensive fossil fuel’ 170+ members agreed sulphur limit in shipping fuel of 0.5% from 2020 LNG as a fuel contains virtually zero sulphur vs. 3.5% specification for global marine fuel today 13th Five Year Plan targets 45 bcm of incremental gas consumption by 2020. China has suspended more than 100 coal-fired plants either approved or under construction “We have given priority to move towards a gas based economy. Effort must be made to increase natural gas production while also creating import infrastructure to meet the growing domestic demand.’’ Prime Minister Modi France and Canada announced plans to phase out coal fired generation by 2023 and 2030 respectively. They join Austria, Belgium, Britain, Denmark and Portugal in pledging to close coal fired generation by the end of the next decade EU Liquefied Natural Gas Strategy acknowledged critical role of gas in support of energy security, increasing competitiveness and greenhouse gas emissions targets
  7. 7. Copyright of Royal Dutch Shell plc 0 20 40 60 80 100 120 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8 2 2008 2009 2010 2011 2012 2013 2014 2015 2016 PM 2.5 Gas to Coal ratio Emission reduction policies drive increased gas demand 7 UK: Lower CO2 emissions Beijing: Improving air quality 0 2 4 6 8 10 12 - 2 4 6 8 10 12 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 MtCO2eTWh UK Power Dynamics £18/t CO2e floor kicked in Action Plan for Air Pollution Prevention Beijing Olympic Games Closure of coal boilers Germany: Static CO2 emissions 0 5 10 15 20 25 30 - 5 10 15 20 25 30 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 MtCO2eTWh German Power Dynamics Power CO2 Emissions WHO PM 2.5 guidance Coal generation PM 2.5 Gas vs. coal consumption ratioPower CO2 Emissions Coal generation Gas generation Gas generation Source: Aurora Energy Research; Embassy of the USA – Beijing, China; National Bureau of Statistics of China
  8. 8. Copyright of Royal Dutch Shell plc 0% 20% 40% 60% 80% 100% 0 10 20 30 40 50 2015 2016 2017 2018 2019 2020 Annualized capacity additions Share online MTPA Capacity additions One-third of new LNG supply growth already online LNG volume set to expand 50% from 2014 to 2020 8 Source: Shell interpretation of IHS (LNG Waterborne Trade, Liquefaction Projects Database) and Wood Mackenzie Q4 2016 data 265 100 150 200 250 300 350 400 2006 2008 2010 2012 2014 2016 2018 2020 MTPA Delivered volume Note: only includes projects online by 2016 or currently under construction
  9. 9. Copyright of Royal Dutch Shell plc -4 -2 0 2 4 6 8 Brazil UnitedKingdom Japan Belgium Mexico Argentina Netherlands Malaysia Canada DominicanRepublic Thailand Turkey Colombia Jamaica UnitedStates Portugal PuertoRico Greece Israel Singapore Italy Chile SouthKorea Lithuania Taiwan Poland Indonesia Kuwait Spain UnitedArabEmirates France Jordan Pakistan India Egypt China 2016 import growth dominated by China, India & new entrants Net imports vs 2015 = +17.0 million tonnes Million tonnes Source: Shell interpretation of IHS (LNG Waterborne Trade) data, delivered volumes; red denotes new entrants (2015-2016) Existing demand New entrants 9
  10. 10. Copyright of Royal Dutch Shell plc -5 0 5 10 15 20 Total exports Australia US Rest of World Growth in LNG demand absorbed increase in supply Source: Shell interpretation of IHS data, delivered volumes Net exports: 2016 YoY Net imports: 2016 YoY Million tonnes 10 Million tonnes -5 0 5 10 15 20 Total imports Rest of World Northwest Europe
  11. 11. Copyright of Royal Dutch Shell plc 0% 5% 10% 15% 20% 25% J F M A M J J A S O N D Range 2010-2014 2015 2016 Robust spot prices reflect the market’s ability to absorb new supply 11 Global LNG prices ($/MMBTU) Asia spot (JKM as % Brent) 0 5 10 15 20 25 2000 2002 2004 2006 2008 2010 2012 2014 2016 Energy price range Henry Hub Brent NBP JKM (Platts) Japan LNG Import Coal (ARA) Source: Japanese customs data (Japan LNG import), Platts (JKM), ICE (NBP, Brent, ARA coal), NYMEX (Henry Hub)
  12. 12. Copyright of Royal Dutch Shell plc 0% 20% 40% 60% 80% 100% 2008 2009 2010 2011 2012 2013 2014 2015 2016 A-rated B-rated Non-investment grade Trend to shorter and smaller contracts with emerging buyers 12 Average contract length, years Average contract volume, MTPA LNG buyer credit ratings Investment grade 0.0 0.5 1.0 1.5 2.0 2.5 2008 2009 2010 2011 2012 2013 2014 2015 2016 0 4 8 12 16 20 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: Shell interpretation of IHS (Energy LNG Sales Contracts Database), Moody’s and Fitch data
  13. 13. Copyright of Royal Dutch Shell plc New FIDs required to meet demand growth after 2020 LNG supply/demand gap 13 0 100 200 300 400 500 2000 2005 2010 2015 2020 2025 2030 LNG supply in operation LNG supply under construction Demand forecasts 0 10 20 30 40 50 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 MTPA Overview of LNG FIDs MTPA Source: Shell interpretation of Wood Mackenzie Q4 2016, IHS, Poten, Gas Strategies and PFC.
  14. 14. Copyright of Royal Dutch Shell plc Changing drivers of LNG demand growth 0 100 200 300 400 500 2000 2005 2010 2015 2020 2025 2030 LNG imports by role in meeting gas demand (MTPA) Source: Shell interpretation of Wood Mackenzie Q4 2016 data * Denotes new or emerging LNG importing countries Gas supply solely dependent on LNG  Japan  Korea  Taiwan  Puerto Rico  Dominican Republic  Jamaica*  Panama* Balances LNG supply  Northwest Europe Bunker fuel LNG demand driver  Atlantic Countries/regions  Middle East  Pacific LNG complements domestic and pipeline supply  Southern Cone  Eastern Europe  Southern Europe  North America  China  Singapore  Morocco*  Jordan*  Israel  India  Thailand  Indonesia  Malaysia  Pakistan* LNG replaces declining domestic production into existing demand  Egypt*  Kuwait  UAE  Colombia*  Bangladesh*  Bahrain*  Philippines*  Vietnam* 14
  15. 15. Copyright of Royal Dutch Shell plc LNG to take larger share of European gas demand 0 100 200 300 400 500 600 2010 2015 2020 2025 2030 2035 LNG Russia pipe Other pipe Algeria Norway pipe Indigenous production 2035 demand forecast range: 540-575 bcm 15 European gas supply (bcm) Source: Shell interpretation of Wood Mackenzie Q4 2016, IHS, and Eurogas data
  16. 16. Copyright of Royal Dutch Shell plc Policy and macroeconomics driving gas demand growth in China 16 4% 2015 China’s share of global LNG demand 16% 2030 China total primary energy demand 5% Gas Renewables Nuclear Oil Coal 2015 11% 2030 Gas supply by source 2030, bcm 0 50 100 150 200 LNG imports Other pipeline imports Russia pipeline imports Shale Other unconventional Conventional Source: Shell interpretation of Wood Mackenzie Q4 2016 data Gas demand potential 2030, bcm 400 450 500 550 600 650 +1% GDP growth rate +1% gas demand CAGR +1% gas in energy mix 15% gas in energy mix Demand forecast 0 / /
  17. 17. Copyright of Royal Dutch Shell plc Southeast Asia to become net LNG importer by 2035 17 Indonesia 0 10 20 30 2015 2035 0 10 20 30 2015 2035 0 10 20 30 2015 2035 0 10 20 30 2015 2035 0 10 20 30 2015 2035 0 10 20 30 2015 2035 -100 -50 0 50 100 2015 2025 2035 LNG Export LNG import Net imports Traditional exporters ramping up demand MTPA Vietnam Thailand Philippines SingaporeMalaysia Source: Shell interpretation of Wood Mackenzie Q4 2016 data
  18. 18. Copyright of Royal Dutch Shell plc Potential demand upside from transport sector 0 200 400 600 800 1000 1200 1400 Heavy duty and marine transport LNG industry LNG for transport - Forecast range Heavy duty Marine 18 MTPA equivalent, 2025 Source: Shell interpretation of Wood Mackenzie and IHS  LNG contributes virtually zero sulphur emissions and has reduced particulates and NOx emissions, compared to heavy fuel oil.  LNG can help reduce the well-to- wheel emissions compared to conventional fuels.
  19. 19. Copyright of Royal Dutch Shell plc Summary  Strong growth in LNG supply in 2016, one-third of new supply online  LNG demand growth from China, India and new entrants absorbed supply growth in 2016  Continued LNG supply growth to 2020  Global demand for gas is expected to increase by 2% a year between 2015 and 2030; LNG is set to rise at twice that rate at 4 to 5%  Future LNG demand growth will be driven by: policy, floating storage regasification units, replacing declining domestic gas production, small scale LNG and transport  LNG and Russian gas imports required to balance European gas demand  New investments required to meet growing LNG demand after 2020  LNG trade is changing to meet the evolving needs of buyers, including shorter-term and lower- volume contracts 19Copyright of Royal Dutch Shell plc

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