1. Company 2. Integrated 3. Upstream 4. Downstream 5 ... · 55 Downstream overview 57 Oil Products 61 In Focus: Convenience retail 62 Chemicals 1. Company overview 2. Integrated Gas

4. DOWNSTREAM

Our Downstream business consists of Oil Products andChemicals activities. They form part of an integratedvalue chain that trades and refines crude oil and otherfeedstocks into products that are moved and marketedaround the world for domestic, industrial and transportuse. The products we sell include gasoline, diesel,heating oil, aviation fuel, marine fuel, biofuel,lubricants, bitumen and sulphur and we provideelectric-vehicle charging points. We also produce andsell petrochemicals for industrial use worldwide.

55 Downstream overview57 Oil Products61 In Focus: Convenience retail62 Chemicals

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54 Shell 2019 Investors' Handbook 2015-2019

DOWNSTREAM OVERVIEW

Cash flow from operations

$7.3 billion

Availability

91%weighted average for refineries andchemical plants

Retail sites

45,000Shell-branded retail sites, serving more than30 million customers daily

Barrels of crude traded

10 millionper day

Refineries

15 in operationdelivering 2.5 million barrels of refinedproducts per day

Global lubricant supplier

#1for 13 consecutive years

DIVESTMENTS▪ In the Kingdom of Saudi Arabia, we completed the sale of our 50%

interest in Shell Saudi Arabia (Refining) Limited (SASREF), a jointventure in Jubail Industrial City, to Saudi Arabian Oil Company(Saudi Aramco) for $631 million.

▪ In the USA, our subsidiary Equilon Enterprises LLC, doing business asShell Oil Products US, announced in June 2019 that we reached anagreement for the sale of Martinez Refinery in California to PBFHolding Company LLC for a $1.0 billion consideration. The sale wasconcluded in February 2020 in exchange for $1.2 billion whichincludes the refinery and inventory.

▪ Also in the USA, in March 2020, we announced our intention to sellthe Puget Sound refinery in Washington and the Mobile site inAlabama.

Downstream key statistics2019 2018 2017 2016 2015

CCS earnings ($ million), of which: 6,277 7,601 8,258 6,588 10,243Oil Products 5,798 5,717 5,576 4,940 8,654Chemicals 479 1,884 2,682 1,648 1,589

CCS earnings excluding identified items ($ million) 6,680 7,567 9,082 7,243 9,748Cash flow from operating activities ($ million) 7,296 13,928 12,429 3,556 14,076Oil Products sales volumes (thousand b/d) 6,561 6,783 6,599 6,483 6,432Chemicals sales volumes (thousand tonnes) 15,223 17,644 18,239 17,292 17,148Refinery processing intake (thousand b/d) 2,564 2,648 2,572 2,701 2,805Refinery availability (%) 91 91 91 90 90Chemical plant availability (%) 89 93 92 90 85Cash capital expenditure ($ million) 8,926 7,408 6,090 5,925 5,117Capital employed ($ million) 70,859 56,633 56,431 52,672 46,280Employees (thousands) [A] 36[A] 39[A][B] 42[A][B] 46[A] 43[A] Excludes employees seconded to joint ventures and associates.[B] As revised.

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Downstream CCS earnings and ROACE [A]$ billion %

10

0

20

2015 2016 2017 2018 2019

Refining & Trading

Marketing

ROACE (RHS)

Chemicalsa

a

c

c

b

b

0

5

10

[A] Earnings and ROACE on CCS basis excluding identified items.

Downstream cash capital expenditure$ billion

a

a

b

b

Growth

Non-growth

2015 2016 2017 2018 20190

5

10

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DOWNSTREAM OVERVIEW continued

OIL PRODUCTS

Shell retail site

Oil Products is a market-facing business within Shell's LeadingTransition theme. We aim to extend the leading position we have in theindustry as we thrive through the energy transition. The integratednature of the Oil Products business and our trading optimisationcapabilities make it resilient to market downturns. It is stronglypositioned to offer new customer choices in response to energy systemchanges, allowing it to play an important role in meeting thechallenges of the energy transition.

Our Oil Products business, together with our integrated Trading andRefining portfolio, is expected to deliver ROACE of more than 15% andorganic free cash flow of between $8 billion and $9 billion per year by2025 at $60 per barrel (real terms 2016) and mid-cycleDownstream conditions.

REFINING AND TRADINGREFININGWe have interests in 15 refineries worldwide, after the completion ofthe sale of the Martinez refinery in February 2020. In recent years wehave sought to unlock value by achieving closer integration with Shell

Trading and Chemicals. We have operating hubs in Rotterdam,Singapore and the US Gulf Coast, and there are some structurallyadvantaged sites in other locations. Across our portfolio, Shell canprocess around 2.5 million barrels of crude oil a day into a wide rangeof products, including petrochemicals, gasoline, diesel, heating oil,aviation fuel, marine fuel, lubricants, LPG, sulphur and bitumen. Around41% of our refining capacity is in the Americas, with 42% in Europeand Africa, and 17% in Asia and Oceania.

Our refineries can operate flexibly, allowing us to adjust what theymake so we can sell the most economically advantageous mix ofproducts. We are also investing in targeted projects at some of ourrefineries to further enhance our competitive edge.

Refining plays a key role in powering Shell’s global, customer-focusedDownstream value chain. The flexibility, scale and geographic spreadof our refining portfolio support Shell’s Trading and Supply business tocompetitively supply our Marketing businesses and external customers.Six of our refineries are deeply integrated with Shell’s stand-alonechemicals manufacturing sites. Five refineries also producepetrochemicals. This integration allows us to optimise how we use ourresources. Our Norco and Deer Park refineries on the US Gulf Coast,for example, produce high-value oil products and provide secure,advantaged feedstocks for the nearby Shell-operated Geismarchemicals manufacturing plant.

Improvements in efficiency and operational reliability are helping toincrease profitability and reduce CO2 emissions. In Germany, we arebuilding a power plant in our Rhineland refinery and chemicalscomplex that is expected to lead to a reduction of 100 thousandtonnes of CO2 emissions per year. Residual heat from our Pernisintegrated refining and chemicals complex in the Netherlands providesheat and hot water to 16 thousand homes in Rotterdam, allowing thecity to reduce its GHG emissions by around 35 thousand tonnesa year.

We are also deploying advanced digital technologies across ourrefineries to help keep our equipment running safely and efficiently for

Pernis refining and chemicals complex, Rotterdam, the Netherlands

longer. For example, we created a digital early warning system at ourPernis refinery that uses predictive analytics and machine-learningalgorithms to monitor the status of valves in real time. Since comingonline in late 2018, this digital early warning system has identifiedproblems with two separate valves that our employees were able to fix,preventing unplanned downtime. If the valves had failed, Pernis wouldhave experienced a material cost. We are replicating this technologyacross the portfolio, including at our Jurong Island manufacturing site inSingapore and at select upstream operations.

TRADING AND SUPPLYShell Trading and Supply is one of the largest energy tradingoperations in the world. This global organisation combines our networkof trading companies, industry-leading shipping and maritimecapabilities, and a network of supply and distribution activities, asintegrator and optimiser.

Through our main trading offices in London, Houston, Singapore, Dubaiand Rotterdam, we trade crude oil, natural gas, LNG, electricity,refined products, chemical feedstocks and environmental products. Wehave the experience and international scope to deliver sustained,

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growing cash returns by capitalising on trading opportunities inherentin Shell’s asset and market positions around the world.

Operating in around 30 countries, with more than 125 Shell and jointventure terminals, we believe our supply and distribution infrastructureis well positioned to make deliveries around the world. This includessupplying feedstocks for our refineries and chemical plants, andfinished products such as gasoline, diesel and aviation fuel to ourMarketing businesses and customers.

Our Shipping & Maritime business has a high level of expertise anddecades of experience. It is responsible for ensuring that all our globalmaritime activities are safely managed, including a fleet of around 40LNG carriers and 10 oil tankers. In addition, we typically have morethan 230 oil and LNG vessels on time charter. There are around 2,000vessels associated with Shell on the water on any given day, includingthe ships, barges, drilling rigs, supply boats, FPSOs, and floatingstorage and regasification units.

Our trading capability, deep market knowledge, global portfolio andend-to-end integration within Shell effectively create opportunities todeliver value for our customers and for Shell across our Upstream,Downstream and Integrated Gas businesses.

MARKETINGMarketing represents Shell’s customer-facing businesses: Retail andGlobal Commercial. Our products are marketed around the world fordomestic, industrial and transport use and include transport fuels,lubricants, bitumen, sulphur, and convenience retail.

RETAILShell is the world’s largest mobility retailer, by number of sites, with 45thousand service stations operating in close to 80 countries at the endof 2019. This is more sites than McDonalds or Zara, Carrefour,Starbucks and GAP put together. We operate different models acrossthese markets, from full ownership of retail sites through to brandlicensing agreements.

Every day, more than 30 million customers visit these sites to buy fuel,convenience items including beverages and fresh food, and services,such as lubricant changes and car washes. We offer our businesscustomers Shell Fleet Solutions, a ‘one-stop-shop’ for their mobility andenergy transition needs, providing items including fuel cards, roadservices and carbon-neutral offers. All of this is delivered by a team ofapproximately 500 thousand dedicated, passionate ServiceChampions on Shell-branded forecourts around the world.

The breadth of our operations gives us opportunities to connect withour customers in the online and offline worlds. Increasingly we aremerging the two. The Shell App has around two million active users in35 markets and was the first mobile fuel payment service that allowedcustomers to pay for fuel from their mobile phones.

We have more than 100 years’ experience in fuel development. Aidedby our innovative partnership with Scuderia Ferrari, we haveconcentrated on developing fuels with special formulations designed toclean engines and improve performance. We sold such fuels under theShell V-Power brand in 62 countries as at the end of 2019.

In a growing number of markets, we are offering customers lower-emission solutions, including biofuels, electric-vehicle fast-charging,hydrogen and various gaseous fuels like LNG. During 2019, weintroduced carbon-neutral driving in the Netherlands and the UK,through which we offset customers’ emissions by purchasing carboncredits generated from projects that plant and protect nature likeforests, wetlands and other natural ecosystems.

As one of the largest retailers worldwide, Shell Retail is uniquelypositioned to capitalise on major trends in mobility and convenienceretail. Our network keeps growing, and by 2025, we are planning tohave 55 thousand Shell service stations in more than 90 countries,reaching more than 40 million customers every day. Key growthmarkets such as China, India, Indonesia, Mexico and Russia will have asignificant role in our future expansion – as we continue making life’sjourneys better for all our customers.

Shell mobile App, Pay at Pump service

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OIL PRODUCTS continued

GLOBAL COMMERCIALGlobal Commercial is Shell’s business-to-business organisation whichserves one million business customers. It comprises three businesses –Lubricants, Specialties (Bitumen and Sulphur) and Aviation. All haveunique scale, strength of brand and capabilities.

LubricantsAcross more than 150 markets, we produce, market and sell technicallyadvanced lubricants for passenger cars, motorcycles, trucks, coaches,and machinery used in the manufacturing, mining, power generation,agriculture and construction sectors. We have a global lubricantssupply chain with a network of four base oil manufacturing plants, 29lubricant blending plants, nine grease plants and four GTL base oilstorage hubs. Through our marine activities, we primarily providelubricants, but also fuels and related technical services, to the shippingand maritime sectors. We supply around 210 grades of lubricants andsix types of fuel to vessels worldwide, ranging from large ocean-goingtankers to small fishing boats.

SpecialtiesShell Bitumen supplies customers across 52 markets and providesenough bitumen to resurface 500 kilometres of road lanes every day.Shell Bitumen is used on various road surfaces around the world, fromurban roads and motorways to airport runways and Formula Oneracetracks. Shell is a leader in bitumen technology and has developedinnovative bitumen products that can be mixed and laid at lowertemperatures than conventional asphalt, which helps reduce energyuse and CO2 emissions.

Shell Sulphur Solutions is a business that manages the complete valuechain of sulphur, from refining to marketing. The business providessulphur for use in applications such as fertilisers, mining and chemicals.It also develops new technologies for sulphur that benefit sectors suchas agriculture. Shell’s patented Thiogro technologies have been usedto produce nearly 1.5 million tonnes of sulphur-enhanced fertilisers,resulting in increased crop yields that help feed the world’sgrowing population.

AviationShell Aviation has a refuelling and lubricants presence across morethan 60 countries. Customers range from private pilots to the world’slargest airlines. Shell Aviation offers customers solutions to assist withreducing their emissions generated by the combustion of the fuel.

BIOFUELSThe international market for biofuels is growing, driven largely by theneed to reduce GHG emissions from transport, but also to improveenergy security and support the agricultural sector. Sustainablebiofuels are expected to play an increasingly important role in helpingto meet fuel needs and reduce CO2 emissions.

Today, we are one of the world’s largest blenders and distributors ofbiofuels. We continue to build capacity in conventional biofuels thatmeet our corporate and social responsibility criteria. In 2019, weblended more than 10 billion litres of biofuels into our petrol and dieselworldwide. The production, purchase, trading, storage, blending anddistribution of biofuels are part of our everyday business.

In 2011, Shell and Cosan launched the Raízen biofuels joint venture(Shell interest 50%) in Brazil to produce ethanol, sugar and electricity,and to supply, distribute and sell transport fuels. With a productioncapacity of more than 2.5 billion litres a year of ethanol from sugarcane, Raízen is one of the world’s largest sugar-cane ethanolproducers. The deal marked our first move into the mass production ofbiofuels. In 2015, Raízen opened a second-generation biofuels plant,which uses technology from our earlier programmes with Iogen Energy.In 2019, Raízen produced 2.5 billion litres of ethanol and 3.8 milliontonnes of sugar from sugar cane. The JV also produced 19.5 millionlitres of second-generation ethanol from sugar-cane bagasse – (residuefrom the initial extraction process) – that was obtained from a facilitythat is integrated with the Costa Pinto mill.

We continue to invest in the research and development of new ways toproduce biofuels from sustainable feedstocks, such as wastes andcellulosic biomass from non-food crops. We are also investing in

Helix Ultra Lubricants being inspected at Grasbrook Lubricants Centre,Germany

renewable natural gas, for use in natural-gas-fuelled vehicles. In 2018,we announced plans to expand the JC Biomethane plant in Oregon,USA, which we acquired in the same year. The plant transformsorganic waste into methane-rich biogas through anaerobic digestion.

In 2019, Shell announced that it will support SkyNRG to developEurope’s first dedicated sustainable aviation fuel (SAF) productionplant. Together with World Energy, we have agreements with AirFrance and Lufthansa to fuel their flights from San FranciscoInternational Airport. The type of sustainable aviation fuel we supplycan reduce CO2 emissions by up to 85% compared with conventionaljet fuel.

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PIPELINESShell Pipeline Company LP (Shell interest 100%) owns and operates 10tank farms across the USA. It transports more than 2 billion barrels ofcrude oil and refined products a year through about 6,000 kilometresof pipelines in the Gulf of Mexico and five US states. Our various non-Shell-operated ownership interests provide about a further 14,000pipeline kilometres.

We carry more than 40 types of crude oil and more than 20 grades ofgasoline, as well as diesel, aviation fuel, chemicals and ethylene.

Shell Midstream Partners, L.P., a midstream master limited partnership,owns, operates, develops and acquires pipelines and other midstreamassets in the USA. Its assets consist of interests in entities that owncrude oil and refined products pipelines and terminals that serve as keyinfrastructure to transport onshore and offshore crude oil production toGulf Coast and Midwest refining markets. It also delivers refinedproducts from those markets to major demand centres. Its assets alsoinclude interests in entities that own natural gas and refinery gaspipelines that transport offshore natural gas to market hubs and deliverrefinery gas from refineries and plants to chemicals sites along the GulfCoast. Shell controls the general partner.

Shell Midstream Partners portfolio

OFFSHORE

• Amberjack • Auger• Cleopatra• Endymion• Mars

• Mattox• Na Kika• Odyssey• Poseidon• Proteus

ONSHORE

• Bengal• Colonial• Delta• Explorer

• LOCAP• Refinery Gas Pipelines • Zydeco

TERMINALS & STORAGE

• Anacortes• Colex• Des Plaines• Lockport

• Norco• Portland• Seattle

GATHERING & PROCESSING

• Permian Basin Gas Gathering

Anacortes

Seattle

Portland

Des Plaines

Lockport

Permian BasinGas Gathering

Colex

LOUISIANA MISSISSIPPI

GULF OF MEXICO

Lake Charles

Erath

ConventSt. James

Baton Rouge

Norco/St. Charles

AllianceMP 69P

Clovelly

CaillouIsland

GC19SMI 205A

Houma

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In response to evolving customer lifestyles we are rapidly increasingour range of convenience products and services across Shell servicestations worldwide to make our customers’ lives easier and theirjourneys better. By 2025, our ambition is to generate 50% of ourmargin share from products and services beyond fuel. We will achievethis by making our Shell service stations a retail destination thatenriches the customer's day and contributes to a moresustainable tomorrow.

In North-West Europe, more than 50% of our customers makepurchases other than fuel. We are always seeking to innovate andincrease our range of convenience products and services for our30 million customers per day, across 45 thousand Shell-brandedservice stations worldwide. We believe that collaborating with otherwell-known brands such as Coca-Cola, Costa Coffee, Red Bull andUnilever will help us achieve this growth, as will initiatives such as:

▪ ‘‘on ton the gohe go’ f’ food and beood and bevvereraagegess:: through our fastest-growingcategory deli by Shell (and/or local variants in over 15 marketsincluding offers in Europe, Canada, South Africa, Malaysia,Thailand, Philippines, Singapore and China), deli2go brands and ourpartnership with chef Jamie Oliver in the UK;

▪ ffood and drood and drinkinks delivs delivereryy:: through innovative digital pilot projectssuch as Deliveroo in the UK and Singapore and deli2order beingavailable as an in-car service while filling up at two premium fuelsites in Thailand and seven sites in India;

▪ ccollecollect and pict and pickk-up point-up pointss:: by offering Amazon lockers in the UK andpiloting pick-up points with DHL in Hungary, trialling Click ‘n’ Collectservice in Turkey and using our UK network for drop-off points forparcel returns;

▪ selfself-ser-servvice cice checheck out/onek out/one-s-sttop-shop:op-shop: with Bingo Box in Chinacustomers can self-serve and play in our deli-café, or in Malaysiathey can use the facilities of a fully unmanned store;

▪ becbecoming #1 deoming #1 desstinatination ftion for cusor custtomeromerss:: by teaming up with well-known brands like Freshii in Canada, Pizza Hut in Russia, Billa in theCzech Republic and Austria, Waitrose in the UK and Migrolino inSwitzerland;

▪ cconneconnected while ‘ted while ‘on ton the gohe go’:’: by using digital technology to enablecustomers to pay for their fuel from their car; to pre-order food anddrinks from their car in Turkey and India; and to benefit from freeWiFi while using Shell Recharge services in Singapore;

▪ mamaximising cximising cononvvenience fenience for ceror certtain tain typeypes of cuss of custtomeromer:: by adaptingstations in India to cater for the huge volume of two-wheeler driversand in the Philippines, co-creating ‘Shell Mango’ – a study area forstudents on the second floor of our Shell Select building; and

▪ ccar and bikar and bike sere servvicingicing:: through our network of quality car washesand Shell lubricants service bays.

We aim to minimise waste and help customers reduce, reuse, andrecycle on-the-go:

▪ sussusttainable pacainable packkaagingging:: by being committed to ensuring 100% of ourdeli by Shell range packaging is widely recyclable and made from atleast 50% recycled content by 2025. Packaging for our Jamie Oliverdeli by Shell range is made from recycled material – up to 90%recycled polyethylene terephthalate plastic (rPET) – and has clearlabelling to help customers dispose of it responsibly;

▪ rreducing feducing food wood waasstete:: by partnering with innovative start-up andsocial enterprises like, for example in the Netherlands, 'Too Good ToGo', an app allowing customers to buy surplus food at a third of thenormal price when it would otherwise have gone to waste; and

Convenience retail, deli by Shell

▪ eliminaeliminating unneceting unnecessssarary singy singlele-use pla-use plasstic and enctic and encourouraaging rging reuseeuse:: byinitiatives such as replacing all plastic carrier bags in the UK withcertified compostable bags made from cornstarch and replacingplastic straws in Malaysia with an alternative.

Shell is looking for ways to identify and meet customers’ evolvingneeds. This means being agile, nimble, data-driven and, above all,customer-centric in our decision-making. It also means evolving theproducts and services we offer, elevating Shell-branded sites beyondpeople’s traditional expectations of a service station into genuineretail destinations.

Shell was recognised in 2019 (by the US-based National Associationof Convenience Stores), as the European industry leader fortransforming our retail business beyond fuels into a full-serviceconvenience retailer.

IN FOCUS: CONVENIENCE RETAIL

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CHEMICALS

Chemicals is one of Shell’s Leading Transition themes. Petrochemicalsare vital to our evolving modern society, being found in offices, carsand homes. Demand for petrochemicals is set to grow above GDPgrowth levels, with chemical products expected to play a role inlowering the carbon intensity of the global economy. They are lessresource-intensive compared with alternatives and they are lighter,which enables energy efficiencies. The Chemicals business will helpShell thrive through the energy transition.

Chemicals produced by Shell are used by customers to manufacturethousands of final products such as: furniture, clothes, householdappliances and packaging, shampoo and smartphones. Many of themuse fewer resources and have a lower carbon footprint than the glass,paper or metal products they replace. High-performance insulation,synthetic textiles, and low-temperature detergents, for instance, all saveenergy and avoid CO2 emissions.

Our plants produce a range of base chemicals, including ethylene,propylene and aromatics, and intermediate chemicals such as styrenemonomer, propylene oxide, solvents, detergent alcohols, ethyleneoxide and ethylene glycol. We have the capacity to produce around6.5 million tonnes of ethylene a year. In 2019, we supplied more than15 million tonnes of petrochemicals to around one thousand industrialcustomers worldwide.

We operate 10 chemical plants worldwide and have a global balanceof locations, feedstocks and products that allows us to capturecommercial opportunities and get through cycles of lower margins. Weuse oil from Shell refineries in the US Gulf Coast, the Netherlands,Germany, Singapore and Canada. Our joint venture complex in Chinabenefits from deep integration with the adjacent China NationalOffshore Oil Corporation (CNOOC) oil refinery.

We are making good progress in the construction of our majorpetrochemicals complex in Pennsylvania, USA. Once construction iscompleted, the site will have 1.6 million tonnes per annum polyethylenecapacity and will use ethane from the low-cost shale gas basin in

North America to produce polyethylene at scale. Commercialproduction is expected to begin early this decade.

We are a founding member of the Alliance to End Plastic Waste, whichintends to invest about $1.5 billion over five years to help end plasticpollution. The alliance is a major effort by global companies like Shellto minimise and manage plastic waste, and to develop solutions forused plastics by helping to create a circular economy.

In 2019, we announced our ambition to use 1 million tonnes of plasticwaste as feedstock at our global chemical plants by 2025. This is a bigstep towards building a circular economy by using plastic waste toproduce chemicals. The first of our plants to do this in 2019 was Norcoin Louisiana, USA, where we successfully used oil made from plasticwaste to produce chemicals. We intend to scale up the technology anddeploy it at our other chemical plants in Europe, Asia and NorthAmerica, gradually achieving world-scale production by 2025.

Our Chemicals business is expected to deliver between $2 billion and$3 billion organic free cash flow per year by 2025 at $60 per barrel(real terms 2016) and mid-cycle Downstream conditions, representinga ROACE of around 15%.

Geismar Chemical Plant, Louisiana, USA

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Documents

1. Company 2. Integrated 3. Upstream 4. Downstream 5 ... · 55 Downstream overview 57 Oil Products 61 In Focus: Convenience retail 62 Chemicals 1. Company overview 2. Integrated Gas