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Chemicals investor briefing: Re-shaping Shell, to create a world-class class investment case

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Shell plc
Shell plc

Graham van’t Hoff, EVP Chemicals, Royal Dutch Shell plc, hosted a live video webcast about our Chemicals business.

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Royal Dutch Shell October 13, 2017 Royal Dutch Shell plc October 13, 2017 Re-shaping Shell, to create a world-class investment case Chemicals Investor Briefing John Abbott – Downstream Director Graham van’t Hoff – EVP Chemicals #makethefuture
Royal Dutch Shell October 13, 2017 John Abbott Downstream Director Royal Dutch Shell plc
Royal Dutch Shell October 13, 2017 3 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. No assurance is provided 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, 2016 (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 presentation, October 13, 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.
Royal Dutch Shell October 13, 2017 4 Energy challenge Source: UN Population Fund; UN World population Prospects (2015 revision); World Urbanisation Prospects (2014 revision); IEA, Energy Technology Perspectives 2015; Shell New Lens Scenarios Growing population Global population will increase from around 7.4 billion today to nearly 10 billion by 2050, with 67% living in cities Rising demand Global energy demand will likely be almost 60% higher in 2060 than today, with 2 billion vehicles on the road (800 million today) Ongoing supply Renewable energy could triple by 2050, but we will still need large amounts of oil and gas to provide the full range of energy products we need Mitigating climate change Net-zero emissions is a potentially achievable societal ambition Growing global demand for energy as population and living standards increase
Royal Dutch Shell October 13, 2017 Strategy “Let’s make the future” STRATEGIC  Focus portfolio on resilient positions  Invest in advantaged projects  Value chain integration OPERATIONAL  Reset cost and capital spending  First class execution projects and operations  Unrelenting focus on HSSE and licence to operate Leader: value + influence Reducing our carbon intensity Shared value with society World-class investment case  FCF/share + ROCE growth  Conservative financial management 5
Royal Dutch Shell October 13, 2017 Strong free cash flow and returns Driving strategy in multiple time horizons CONVENTIONAL OIL + GAS CHEMICALS OIL PRODUCTS DEEP WATERINTEGRATED GAS SHALES NEW ENERGIES Cash engines: today Growth priorities: 2016+ Future opportunities: 2020+ Competitive + resilient Funds dividends + balance sheet FCF + ROACE pathway Affordable growth in advantaged positions Material value + upside Managed exposure Path to profitability Cash engines 2020+ Relentless portfolio high-grading 6
Royal Dutch Shell October 13, 2017 7 Downstream Cash engine  Further strengthen our financial performance  Upgrading our portfolio  Returns + free cash flow improvement  Chemicals growth priority Marketing Refining & Trading Chemicals Growth priority  Differentiated products  Brand leverage + customer offer  Selective growth  Full integration with trading  Improve retained assets  Reducing refining capacity  Advantaged feedstock from Upstream and refining  Strong product portfolio with proprietary technology  Focused growth into differentiated leading positions
Royal Dutch Shell October 13, 2017 Graham van‘t Hoff Executive Vice President - Chemicals
Royal Dutch Shell October 13, 2017 9 Agenda Chemicals demand Position of Shell Chemicals within the industry Shell Chemicals strategy Execution Financial performance Growth projects Q&A 01 02 03 04 05 06 07
Royal Dutch Shell October 13, 2017 10 Solar impulse: 90% of the aircraft’s structure made from chemical technology
Royal Dutch Shell October 13, 2017 11 Chemicals Growth priority *Cracker base chemicals (Aromatic derivatives, Ethylene, Propylene and Isobutylene). Source: IHS/Shell analysis Chemicals demand outlook  Shell produces key petrochemical building blocks  Limited impact of recycling  Chemicals enabling CO2 reduction 0 100,000 200,000 300,000 400,000 500,000 2000 2005 2010 2015 2020 2025 2030 N. America S. America Europe Middle East Asia Others Petrochemicals* demand in kT per annum Asia 37% Asia 52%
Royal Dutch Shell October 13, 2017 12 Chemicals Eight core markets SOURCE: McKinsey Global Institute, IHS, Shell analysis Diverse end-uses drive chemical demand Consumer Clothing, furniture, toys Construction PVC pipes, plywood, insulation Packaging Bottles, food packaging, crates Agriculture Fertiliser Electronics Phone casings, resins Transportation Upholstery, car body parts Durables & industrial Wiring, cables, hoses Energy and water Fuel additives, water treatment Share of chemicals volume, 2015 24% 23% 20% 10% 7% 7% 6% 2%
Royal Dutch Shell October 13, 2017 Chemicals Growth priority Positioning in the competitive landscape  Access to advantaged feedstock  Process technologies  Big integrated sites  Large scale  Customised solutions  Product-materials innovation  Production close to markets  Medium scale sites 13 BASE CHEMICALS/ SOLUTIONSPERFORMANCE Pure Chemical Companies FEEDSTOCKS CONSUMERS INTERMEDIATES Add Differentiation
Royal Dutch Shell October 13, 2017 14 Chemicals Value chains C2 C4 C6 C3 C1 Ammonia Methanol Acetic Acid / VAM Urea Ethylene Propylene Propylene Oxide Acrylic Acid Super Absorbents Butadiene Butenes Solvents Benzene Phenol Toluene Xylene TDI Paraxylene Polycarbonate No Shell participation Shell participation PTA INTERMEDIATES Agriculture EO/MEG Alpha olefins HODer Surfactants Consumer Polyethylene Polyester Films Containers Packaging Packaging Polypropylene Polyols Polyurethane foam Consumer Styrene Polystyrene Moulded panels Consumer Construction MDINBZ / aniline Electronics Elastomers Automotive Fibres Consumer NAPHTHA/HEAVYLIQUIDS(OIL) ETHANE LPG BIOBASEFEED C8 BASE CHEMICALSFEEDSTOCKS PERFORMANCE END PRODUCTCONVERTER METHANE
Royal Dutch Shell October 13, 2017 Chemicals Growth priority Positioning in the competitive landscape Competitors are actively acquiring or developing differentiation further down the value chains Source: company reports, Shell analysis 15 FEEDSTOCK PRODUCTS & MARKETS AdvantagedGeneric SolutionsBase Chem/Intermediates Established Integrated Oil companies Moving towards specialties Low cost operators In-market advantage Active aggregation of technology and position
Royal Dutch Shell October 13, 2017 Chemicals Strategy Advantaged Feedstock First Class Footprint Strong Product & Customer Portfolio Excellence Every Day & HSSE Access Advantaged Feedstock Monetize With Competitive Advantage Technology A highly profitable hydrocarbon upgrader 16
Royal Dutch Shell October 13, 2017 Organisational design Board CEO Downstream Director EVP Chemicals Downstream integration Projects & Technology Upstream & Integrated Gas Refining Chemicals Trading & SupplyIntegrated Sites 17
Royal Dutch Shell October 13, 2017 18 Balanced feed portfolio - enhanced portfolio resilience SOURCE: CMAI, IHS, Oil – Shell Modelling Base chemicals cycles Feedstock portfolio has shifted to advantaged feed and more gas Key to robust profitability is keeping a balanced exposure to different regions, feedstocks, markets and therefore, margin sources Indicative industry margins ($/mT) 67% 33% 53% 47% 2007 2016 Liquid Gas 1990 1996 2002 2008 2014 Advantaged Feedstock First class footprint Strong product & customer portfolio Excellence every day & HSSE Ethane cracker margin USGC Naphtha margin NEA Naphtha margin WE Feedstock disparity Oil Gas Feed ParityOil Gas Feed Parity
Royal Dutch Shell October 13, 2017 Buenos Aires Singapore Scotford Sarnia Durban 19 Chemicals Focused and balanced footprint China in-market Small Chemical activities at group refineries Advantaged gas feed site Integrated Chemical/refinery mega sites/clusters US Gulf coast FEP & Stanlow Moerdijk, Pernis Nanhai Rheinland Shell-CNOOC JV – Petrochemical complex Capacity* is regionally balanced 33 40 27 Portfolio consolidated from 133 locations in 1998 to 15 today * Base Chemicals Capacity (C2+C3+bz); Portfolio includes Shell operated (12) and non-operated (3) Americas Europe Asia Advantaged Feedstock First class footprint Strong product & customer portfolio Excellence every day & HSSE Deer Park Geismar Norco Mobile Bukom Jurong
Royal Dutch Shell October 13, 2017 Chemicals Market-leading process technologies Underpinned by high performance proprietary catalysis systems Shell Chemicals proprietary technology  OMEGA (Monoethyleneglycol)  SMPO (Styrene Monomer/Propylene Oxide/Polyols)  SHOP (Higher Olefins and Detergent Alcohols)  DPC/PC (Diphenyl carbonate)  Shell has been active in petrochemicals since 1929  Long history of product & technology development  ~1,000 customers:  Annual product sales: >17 million tonnes  Long-term contracts and relationships with strong partners Advantaged Feedstock First class footprint Strong product & customer portfolio Excellence every day & HSSE 20
Royal Dutch Shell October 13, 2017 21 Chemicals Operating and safety performance Downtime as % of capacity Chemicals plants – unplanned downtime % Advantaged Feedstock First class footprint Strong product & customer portfolio Excellence every day & HSSE 0 2 4 6 8 10 12 2012 2013 2014 2015 2016 Unplanned downtime without “big-hits” Unplanned downtime “big-hits” impact
Royal Dutch Shell October 13, 2017 22 Chemicals Financial and competitive performance Earnings and ROACE on CCS basis, excluding identified items; Shell ROACE calculations for 2012 has been restated for the impact of IAS 19; source: company reports, Shell analysis $ billion Earnings % 0 5 10 15 20 25 30 13Q1 14Q1 15Q1 16Q1 17Q1 Competitive performance – ROACE 4Q rolling Ensure robust performance under different market conditions and grow base business 0 40 80 120 0 1 2 3 2010 2011 2012 2013 2014 2015 2016 17Q2 4Q Rolling Average Brent oil price (RHS)Earnings Average: $104 Average: $49 $/barrel Shell DOW XOM LyondellBassell  Improve base business  Expand current base portfolio  Adding to portfolio - growth Average earnings 2010 - 2016
Royal Dutch Shell October 13, 2017 Under construction 23 Chemicals Growth projects Million metric tonnes Ethylene capacity 0 2 4 6 8 2000 2005 2010 2015 2020 2025 Nanhai II Pennsylvania cracker USGC restructuring Nanhai I Bukom start-up 23 Geismar, USA Nanhai, China Pennsylvania, USA  425,000 metric tonnes additional Alpha Olefins capacity  New liquids cracker and derivatives units  Capacity: ~1.2 million metric tonnes ethylene per annum  50/50 JV CNOOC  Greenfield FID 2016  Capacity: ~1.5 million metric tonnes ethylene per annum and polyethylene derivatives 2006 Nanhai 2010 USGC go-light strategy 2010 Singapore 2016+ China + USA LiquidGas 2022 Feedstock mix
Royal Dutch Shell October 13, 2017 24 Chemicals Growth projects: AO4 Geismar expansion  Fourth Alpha Olefins (AO4) unit - 425,000 tonnes additional capacity  Capacity increases to 1.3 million mt  Integrated with ethylene crackers at Deer Park and Norco  Based on Shell’s proprietary technology  Start up H2 2018 Geismar, LA Leading AO4 site in the world
Royal Dutch Shell October 13, 2017 25 Chemicals Growth projects: CNOOC & Shell Petrochemicals Company (CSPC) CSPC’s Petrochemicals complex  CSPC: 50/50 JV Shell & CNOOC  Ethylene cracker unit: 1 million mt current capacity  Phase 2 under construction  Additional 1.2 million mt ethylene cracker  Integrated with CNOOC’s co-located refineries  Deploys industry leading Shell proprietary technologies (i.e. SMPO, POD, EO/EG) Xinjiang Inner Mongolia Shandong Beijing Tianjin Jiangsu Shanghai Zhejiang Fujian Hainan SichuanTibet Qinghai Guangdong Yunnan Heilongjiang Liaoning Jilin Shaanxi Hunan Hubei Most competitive cracker in China
Royal Dutch Shell October 13, 2017 26 Chemicals Growth projects: Pennsylvania Chemicals Falcon Pipeline 1.5 mtpa Ethylene Cracker Co- generator 3 polyethylene Units Ethane Natural Gas Catalyst, Shell Comonomer Ethylene Cracker bottom streams (C3+) Polyethylene Surplus power export (100 MW) Rail logistics Truck logistics Steam & Power Facility Future Uniquely differentiated project in USA
Royal Dutch Shell October 13, 2017 27 Chemicals Growth projects: Pennsylvania Chemicals Components of competitive advantage:  Locally sourced and long-term contracted ethane with supply cost advantage  > 70% of the North American polyethylene market sits within 700-mile radius  Economic development, job creation and investment incentives from the State of Pennsylvania 14% 21% 35% 6% 6% 5% 4% 4% 3% 1% 1% West Canada Pacific Mountain West North Central West South Central South Atlantic East South Central Mid Atlantic New England East Canada East North Central Shell site 70% of North American PE Demand Chemicals industry production hub Share of PE demand
Royal Dutch Shell October 13, 2017 28 Chemicals Organic growth Earnings and ROACE on CCS basis, excluding identified items; Shell ROACE calculations for 2012 has been restated for the impact of IAS 19 $ billion 0 5 10 15 20 0 2 4 2009 2010 2011 2012 2013 2014 2015 2016 17Q2 4Q rolling mid- 20's Earnings + ROACE Targets aspiration per year mid-’20s:  Earnings: ~$3.5 - 4 billion  Cash flow: ~$5 - 6 billion  Base capex: ~$1 - $1.5 billion  Improve base business  Expand current base portfolio  Adding to portfolio – growth % Earnings ROACE (RHS)
Royal Dutch Shell October 13, 2017 29 Chemicals - Key messages  Putting safety first  Strong heritage, scale and performance  World-scale assets in strategic locations  Process technology advantages Leader: value + influence Reducing our carbon intensity Shared value with society World-class investment case
Royal Dutch Shell October 13, 2017 Questions & Answers John Abbott Director Downstream Graham van’t Hoff Executive Vice President - Chemicals Royal Dutch Shell October 13, 2017
Royal Dutch Shell October 13, 2017

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Chemicals investor briefing: Re-shaping Shell, to create a world-class class investment case

  • 1. Royal Dutch Shell October 13, 2017 Royal Dutch Shell plc October 13, 2017 Re-shaping Shell, to create a world-class investment case Chemicals Investor Briefing John Abbott – Downstream Director Graham van’t Hoff – EVP Chemicals #makethefuture
  • 2. Royal Dutch Shell October 13, 2017 John Abbott Downstream Director Royal Dutch Shell plc
  • 3. Royal Dutch Shell October 13, 2017 3 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. No assurance is provided 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, 2016 (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 presentation, October 13, 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.
  • 4. Royal Dutch Shell October 13, 2017 4 Energy challenge Source: UN Population Fund; UN World population Prospects (2015 revision); World Urbanisation Prospects (2014 revision); IEA, Energy Technology Perspectives 2015; Shell New Lens Scenarios Growing population Global population will increase from around 7.4 billion today to nearly 10 billion by 2050, with 67% living in cities Rising demand Global energy demand will likely be almost 60% higher in 2060 than today, with 2 billion vehicles on the road (800 million today) Ongoing supply Renewable energy could triple by 2050, but we will still need large amounts of oil and gas to provide the full range of energy products we need Mitigating climate change Net-zero emissions is a potentially achievable societal ambition Growing global demand for energy as population and living standards increase
  • 5. Royal Dutch Shell October 13, 2017 Strategy “Let’s make the future” STRATEGIC  Focus portfolio on resilient positions  Invest in advantaged projects  Value chain integration OPERATIONAL  Reset cost and capital spending  First class execution projects and operations  Unrelenting focus on HSSE and licence to operate Leader: value + influence Reducing our carbon intensity Shared value with society World-class investment case  FCF/share + ROCE growth  Conservative financial management 5
  • 6. Royal Dutch Shell October 13, 2017 Strong free cash flow and returns Driving strategy in multiple time horizons CONVENTIONAL OIL + GAS CHEMICALS OIL PRODUCTS DEEP WATERINTEGRATED GAS SHALES NEW ENERGIES Cash engines: today Growth priorities: 2016+ Future opportunities: 2020+ Competitive + resilient Funds dividends + balance sheet FCF + ROACE pathway Affordable growth in advantaged positions Material value + upside Managed exposure Path to profitability Cash engines 2020+ Relentless portfolio high-grading 6
  • 7. Royal Dutch Shell October 13, 2017 7 Downstream Cash engine  Further strengthen our financial performance  Upgrading our portfolio  Returns + free cash flow improvement  Chemicals growth priority Marketing Refining & Trading Chemicals Growth priority  Differentiated products  Brand leverage + customer offer  Selective growth  Full integration with trading  Improve retained assets  Reducing refining capacity  Advantaged feedstock from Upstream and refining  Strong product portfolio with proprietary technology  Focused growth into differentiated leading positions
  • 8. Royal Dutch Shell October 13, 2017 Graham van‘t Hoff Executive Vice President - Chemicals
  • 9. Royal Dutch Shell October 13, 2017 9 Agenda Chemicals demand Position of Shell Chemicals within the industry Shell Chemicals strategy Execution Financial performance Growth projects Q&A 01 02 03 04 05 06 07
  • 10. Royal Dutch Shell October 13, 2017 10 Solar impulse: 90% of the aircraft’s structure made from chemical technology
  • 11. Royal Dutch Shell October 13, 2017 11 Chemicals Growth priority *Cracker base chemicals (Aromatic derivatives, Ethylene, Propylene and Isobutylene). Source: IHS/Shell analysis Chemicals demand outlook  Shell produces key petrochemical building blocks  Limited impact of recycling  Chemicals enabling CO2 reduction 0 100,000 200,000 300,000 400,000 500,000 2000 2005 2010 2015 2020 2025 2030 N. America S. America Europe Middle East Asia Others Petrochemicals* demand in kT per annum Asia 37% Asia 52%
  • 12. Royal Dutch Shell October 13, 2017 12 Chemicals Eight core markets SOURCE: McKinsey Global Institute, IHS, Shell analysis Diverse end-uses drive chemical demand Consumer Clothing, furniture, toys Construction PVC pipes, plywood, insulation Packaging Bottles, food packaging, crates Agriculture Fertiliser Electronics Phone casings, resins Transportation Upholstery, car body parts Durables & industrial Wiring, cables, hoses Energy and water Fuel additives, water treatment Share of chemicals volume, 2015 24% 23% 20% 10% 7% 7% 6% 2%
  • 13. Royal Dutch Shell October 13, 2017 Chemicals Growth priority Positioning in the competitive landscape  Access to advantaged feedstock  Process technologies  Big integrated sites  Large scale  Customised solutions  Product-materials innovation  Production close to markets  Medium scale sites 13 BASE CHEMICALS/ SOLUTIONSPERFORMANCE Pure Chemical Companies FEEDSTOCKS CONSUMERS INTERMEDIATES Add Differentiation
  • 14. Royal Dutch Shell October 13, 2017 14 Chemicals Value chains C2 C4 C6 C3 C1 Ammonia Methanol Acetic Acid / VAM Urea Ethylene Propylene Propylene Oxide Acrylic Acid Super Absorbents Butadiene Butenes Solvents Benzene Phenol Toluene Xylene TDI Paraxylene Polycarbonate No Shell participation Shell participation PTA INTERMEDIATES Agriculture EO/MEG Alpha olefins HODer Surfactants Consumer Polyethylene Polyester Films Containers Packaging Packaging Polypropylene Polyols Polyurethane foam Consumer Styrene Polystyrene Moulded panels Consumer Construction MDINBZ / aniline Electronics Elastomers Automotive Fibres Consumer NAPHTHA/HEAVYLIQUIDS(OIL) ETHANE LPG BIOBASEFEED C8 BASE CHEMICALSFEEDSTOCKS PERFORMANCE END PRODUCTCONVERTER METHANE
  • 15. Royal Dutch Shell October 13, 2017 Chemicals Growth priority Positioning in the competitive landscape Competitors are actively acquiring or developing differentiation further down the value chains Source: company reports, Shell analysis 15 FEEDSTOCK PRODUCTS & MARKETS AdvantagedGeneric SolutionsBase Chem/Intermediates Established Integrated Oil companies Moving towards specialties Low cost operators In-market advantage Active aggregation of technology and position
  • 16. Royal Dutch Shell October 13, 2017 Chemicals Strategy Advantaged Feedstock First Class Footprint Strong Product & Customer Portfolio Excellence Every Day & HSSE Access Advantaged Feedstock Monetize With Competitive Advantage Technology A highly profitable hydrocarbon upgrader 16
  • 17. Royal Dutch Shell October 13, 2017 Organisational design Board CEO Downstream Director EVP Chemicals Downstream integration Projects & Technology Upstream & Integrated Gas Refining Chemicals Trading & SupplyIntegrated Sites 17
  • 18. Royal Dutch Shell October 13, 2017 18 Balanced feed portfolio - enhanced portfolio resilience SOURCE: CMAI, IHS, Oil – Shell Modelling Base chemicals cycles Feedstock portfolio has shifted to advantaged feed and more gas Key to robust profitability is keeping a balanced exposure to different regions, feedstocks, markets and therefore, margin sources Indicative industry margins ($/mT) 67% 33% 53% 47% 2007 2016 Liquid Gas 1990 1996 2002 2008 2014 Advantaged Feedstock First class footprint Strong product & customer portfolio Excellence every day & HSSE Ethane cracker margin USGC Naphtha margin NEA Naphtha margin WE Feedstock disparity Oil Gas Feed ParityOil Gas Feed Parity
  • 19. Royal Dutch Shell October 13, 2017 Buenos Aires Singapore Scotford Sarnia Durban 19 Chemicals Focused and balanced footprint China in-market Small Chemical activities at group refineries Advantaged gas feed site Integrated Chemical/refinery mega sites/clusters US Gulf coast FEP & Stanlow Moerdijk, Pernis Nanhai Rheinland Shell-CNOOC JV – Petrochemical complex Capacity* is regionally balanced 33 40 27 Portfolio consolidated from 133 locations in 1998 to 15 today * Base Chemicals Capacity (C2+C3+bz); Portfolio includes Shell operated (12) and non-operated (3) Americas Europe Asia Advantaged Feedstock First class footprint Strong product & customer portfolio Excellence every day & HSSE Deer Park Geismar Norco Mobile Bukom Jurong
  • 20. Royal Dutch Shell October 13, 2017 Chemicals Market-leading process technologies Underpinned by high performance proprietary catalysis systems Shell Chemicals proprietary technology  OMEGA (Monoethyleneglycol)  SMPO (Styrene Monomer/Propylene Oxide/Polyols)  SHOP (Higher Olefins and Detergent Alcohols)  DPC/PC (Diphenyl carbonate)  Shell has been active in petrochemicals since 1929  Long history of product & technology development  ~1,000 customers:  Annual product sales: >17 million tonnes  Long-term contracts and relationships with strong partners Advantaged Feedstock First class footprint Strong product & customer portfolio Excellence every day & HSSE 20
  • 21. Royal Dutch Shell October 13, 2017 21 Chemicals Operating and safety performance Downtime as % of capacity Chemicals plants – unplanned downtime % Advantaged Feedstock First class footprint Strong product & customer portfolio Excellence every day & HSSE 0 2 4 6 8 10 12 2012 2013 2014 2015 2016 Unplanned downtime without “big-hits” Unplanned downtime “big-hits” impact
  • 22. Royal Dutch Shell October 13, 2017 22 Chemicals Financial and competitive performance Earnings and ROACE on CCS basis, excluding identified items; Shell ROACE calculations for 2012 has been restated for the impact of IAS 19; source: company reports, Shell analysis $ billion Earnings % 0 5 10 15 20 25 30 13Q1 14Q1 15Q1 16Q1 17Q1 Competitive performance – ROACE 4Q rolling Ensure robust performance under different market conditions and grow base business 0 40 80 120 0 1 2 3 2010 2011 2012 2013 2014 2015 2016 17Q2 4Q Rolling Average Brent oil price (RHS)Earnings Average: $104 Average: $49 $/barrel Shell DOW XOM LyondellBassell  Improve base business  Expand current base portfolio  Adding to portfolio - growth Average earnings 2010 - 2016
  • 23. Royal Dutch Shell October 13, 2017 Under construction 23 Chemicals Growth projects Million metric tonnes Ethylene capacity 0 2 4 6 8 2000 2005 2010 2015 2020 2025 Nanhai II Pennsylvania cracker USGC restructuring Nanhai I Bukom start-up 23 Geismar, USA Nanhai, China Pennsylvania, USA  425,000 metric tonnes additional Alpha Olefins capacity  New liquids cracker and derivatives units  Capacity: ~1.2 million metric tonnes ethylene per annum  50/50 JV CNOOC  Greenfield FID 2016  Capacity: ~1.5 million metric tonnes ethylene per annum and polyethylene derivatives 2006 Nanhai 2010 USGC go-light strategy 2010 Singapore 2016+ China + USA LiquidGas 2022 Feedstock mix
  • 24. Royal Dutch Shell October 13, 2017 24 Chemicals Growth projects: AO4 Geismar expansion  Fourth Alpha Olefins (AO4) unit - 425,000 tonnes additional capacity  Capacity increases to 1.3 million mt  Integrated with ethylene crackers at Deer Park and Norco  Based on Shell’s proprietary technology  Start up H2 2018 Geismar, LA Leading AO4 site in the world
  • 25. Royal Dutch Shell October 13, 2017 25 Chemicals Growth projects: CNOOC & Shell Petrochemicals Company (CSPC) CSPC’s Petrochemicals complex  CSPC: 50/50 JV Shell & CNOOC  Ethylene cracker unit: 1 million mt current capacity  Phase 2 under construction  Additional 1.2 million mt ethylene cracker  Integrated with CNOOC’s co-located refineries  Deploys industry leading Shell proprietary technologies (i.e. SMPO, POD, EO/EG) Xinjiang Inner Mongolia Shandong Beijing Tianjin Jiangsu Shanghai Zhejiang Fujian Hainan SichuanTibet Qinghai Guangdong Yunnan Heilongjiang Liaoning Jilin Shaanxi Hunan Hubei Most competitive cracker in China
  • 26. Royal Dutch Shell October 13, 2017 26 Chemicals Growth projects: Pennsylvania Chemicals Falcon Pipeline 1.5 mtpa Ethylene Cracker Co- generator 3 polyethylene Units Ethane Natural Gas Catalyst, Shell Comonomer Ethylene Cracker bottom streams (C3+) Polyethylene Surplus power export (100 MW) Rail logistics Truck logistics Steam & Power Facility Future Uniquely differentiated project in USA
  • 27. Royal Dutch Shell October 13, 2017 27 Chemicals Growth projects: Pennsylvania Chemicals Components of competitive advantage:  Locally sourced and long-term contracted ethane with supply cost advantage  > 70% of the North American polyethylene market sits within 700-mile radius  Economic development, job creation and investment incentives from the State of Pennsylvania 14% 21% 35% 6% 6% 5% 4% 4% 3% 1% 1% West Canada Pacific Mountain West North Central West South Central South Atlantic East South Central Mid Atlantic New England East Canada East North Central Shell site 70% of North American PE Demand Chemicals industry production hub Share of PE demand
  • 28. Royal Dutch Shell October 13, 2017 28 Chemicals Organic growth Earnings and ROACE on CCS basis, excluding identified items; Shell ROACE calculations for 2012 has been restated for the impact of IAS 19 $ billion 0 5 10 15 20 0 2 4 2009 2010 2011 2012 2013 2014 2015 2016 17Q2 4Q rolling mid- 20's Earnings + ROACE Targets aspiration per year mid-’20s:  Earnings: ~$3.5 - 4 billion  Cash flow: ~$5 - 6 billion  Base capex: ~$1 - $1.5 billion  Improve base business  Expand current base portfolio  Adding to portfolio – growth % Earnings ROACE (RHS)
  • 29. Royal Dutch Shell October 13, 2017 29 Chemicals - Key messages  Putting safety first  Strong heritage, scale and performance  World-scale assets in strategic locations  Process technology advantages Leader: value + influence Reducing our carbon intensity Shared value with society World-class investment case
  • 30. Royal Dutch Shell October 13, 2017 Questions & Answers John Abbott Director Downstream Graham van’t Hoff Executive Vice President - Chemicals Royal Dutch Shell October 13, 2017
  • 31. Royal Dutch Shell October 13, 2017