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Slide 1 of 37 26 June, 2000
• Flaws in the Capital Allocation Process
• The Capex requirements
• The Over-promise on delivery
• The Way Ahead
Excom Early Look Business Plan 2000
Slide 2 of 37 26 June, 2000
The Good News • High quality internally consistent data
submissions • Abundance of projects competing for
funds: – 1.9 bln US$ Exploration – 7.0 bln US$ Production
Slide 3 of 37 26 June, 2000
The Bad News • Projects appear over-optimistic both in
Exploration and Production
• The Capital Allocation Process appears to be flawed with overstatements of key parameters to secure funds We run the risk of initiating an Over-promise Under-delivery Cycle……...
Slide 4 of 37 26 June, 2000
Exploration-Overstated Value?
0 1000 2000 3000 4000 5000 6000 7000 8000 9000
10000 11000 12000
0 250 500 750 1000 1250 1500 1750 2000 Cum Expex ($ mln)
Cum
ulat
ive
IBV
($ m
ln)
0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35
0-10 10-20 20-30 30-40 40-50 50-60 60-70 70-80 80-90
1999 CA 2000 CA Pos to FID shows
no major differences in 99 submission to 2000
Pos to FID
Expe
x Sp
end
(N
orm
alis
ed)
Salkhalin pre-consolidation 2000 Raw Data Submission
Each Exploration $ spend in 2001 adds $9 IBV at PSV14
1999 Raw Data Submission Each Exploration $ spend in 2000 adds $6 IBV at PSV14
Slide 5 of 37 26 June, 2000
0
100
200
300
400
500
600
2001 2002 2003 2004 2005 2006 2007
Oil
Nigeria
MRH
Gas Deepwater
Time to FID and first production in data submissions very optimistic
and unrelated to historic performance
The majority of 2001 exploration spend is for projects planned
to take FID in 2002
Exploration: Overstated Delivery? Ex
pex
2001
($ m
ln)
Slide 6 of 37 26 June, 2000
US$
mln
MO
D
CAPEX REQUEST 2001-2005 Raw Data Submission
EP-Global Capex per CA Cat, Theme.ep 0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
2001 2002 2003 2004 2005
Commercial Resource Proposed A & D Activity New E & A Firm E & A EB2 New Dev. > $20 mln Shell Share Tranche 3 Tranche 2 Tranche 1 PostFID Project Corporate Existing Asset
Proposed spend is ca $7 bln per year over the Plan Period*
*including follow-on E&A Woodside, and Shell Canada, excludes Saudi gas
Total Capex request 2001 = $7.1 bln Total Commitments 2001 = $2.7 bln
Commitment levels suspect
Slide 7 of 37 26 June, 2000
Production Forecast per Region and CA Cat - Raw data.rep
0
500
1000
1500
2000
2500
3000
3500
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Production: Can we deliver on this promise?
Nigeria (SPDC) Nigeria (SNEPCO) Others
2266 LE
2291 2351 2327 2319
Nigeria is major part of EP Growth Inside existing portfolio …..
Others are USA, Angola, Iran, Athabasca, Brasil, etc
Dai
ly P
rodu
ctio
n (K
boe/
d)
Slide 8 of 37 26 June, 2000
Production Forecast per Region and CA Cat - Raw data.rep
0
500
1000
1500
2000
2500
3000
3500
2000 2001 2002 2003 2004 2005
Commercial Resource Proposed A & D Activity New E & A (Non Approved expex) Firm E & A (Approved expex Funds) EB-2 New Dev. > $20 mln Shell Share Tranche 3 Tranche 2 Tranche 1 PostFID Project Corporate Existing Asset
OIL PRODUCTION 2001-2005 Raw Data Submission
Prod
uctio
n ‘0
00 b
bl/d
Oil Production from Existing Assets halves during Plan Period (10 % per year)
Post FID and tranches replaces decline in Existing Asset base
Growth relies on E&A
Slide 9 of 37 26 June, 2000
Major Concerns
• Existing Assets require 800 Million US$ in 2001 without adding production...
• Most large post-FID projects indicate underdelivery compared with 1999
• New projects have very aggressive FID dates (36 FIDs in 2001 excluding big tickets e.g. Saudi Gas) and possibly overstated value promises
• E&A Follow Up extremely optimistic when compared with history
• Not enough funds for promising projects and strategic options
Slide 10 of 37 26 June, 2000
CAPEX CREAMING CURVE
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
0 1000 2000 3000 4000 5000 6000 7000
Existing Asset Post FID Project Options
NPV
($m
ln)
Cumulative Capex in 2001 ($mln)
The promise The delivery
AOSP EA NLNG
Bonga Main Malampaya
Historical performance raises questions over ambitious future promises
But…some big projects approved were poorer ranking
Slide 11 of 37 26 June, 2000
Exploration Discoveries 1990-1999 Development Percentage @1.1.2000
0%
20%
40%
60%
80%
100%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
90-94 25% Developed
95-99 7% Developed
10 years ONLY 15% Developed
34%
5 year Plan Period
Promise
Plan Excl. Sakhalin & OKIOC
>> 34% Development percentage Exploration discoveries within 5 years has not been achieved to date ….
Bonga discovered ‘95, onstream 2003 Brazil, not a well drilled yet, production by 2005
Sable Island
Slide 12 of 37 26 June, 2000
Shell Malaysia (total) KN ROUND 2 01-2000 1999 Shell Malaysia (total) KN S1S2 01-2000 1999 Shell Iran Soroosh /Nowrooz 01-2000 11-1999 Shell USA Oregano 05-2000 04-2000 Shell USA Serrano 05-2000 04-2000
Norske Shell Garn West 03-2000 04-2000 Shell USA North Marlin 04-2000 07-2000 Shell UK Expro Mandarin 10-2000 09-2000
Turkmenistan, Uzbekistan, Uzbekistan Alan & Kandym 07-2000 01-2001
Brunei Shell Champion West Existing Facilities 12-2000 01-2001 SOGU Dan Infill and Debottlenecking 03-2000 03-2001 Shell Egypt N.V. Obaiyed South Devt 11-2000 07-2001 Shell UK Expro Goldeneye 10-2000 12-2001 Shell Australia NWS LNG Expansion U/S 03-2000 01-2004 Shell Australia ALNG LNG Train 1 U/S 09-2000 01-2004 Brunei Shell Egret Development 10-2000 01-2004
Shell Capsa Cerro Tuyunti Sth. 11-2000 ?
Shell USA Na Kika 05-2000
Shell UK Expro Cleaver Bank High 10-2000 10-2001
A/S Norske Shell Sogn Gjoa Development 09-2000 ? Shell Devt. Pakistan B.V. Kirthar Block : Bhit dev 03-2000 ?
Country Projects with FIDs in 2000
MAJOR PROJECT FIDs 2000 from BP’99 BP ‘99 Timing
CA 2000 Timing
07-2000
SPDC Cawthorne Channel 09-2000 10-2000 SPDC Bonny Terminal Refurbishment 07-2000 07-2000
Slipped
On-time
Slide 13 of 37 26 June, 2000
MAJOR PROJECT FIDs 2000 from BP’99
No
of M
ajor
FID
s in
Pla
n
• 12 major Base Plan projects planned for FID in 2000 (BP 99) - 5 will now take FID • 13 major Options projects planned for FID in 2000 (BP 99) - 6 will now take FID
0
5
10
15
20
1999 99 Actual 2000 00 LE 2001
Bangestan Kuwait Oil 25
30 Champion Dan Infill T2T upstream Cleaver Bank Egret Bangestan Obayied South Goldeneye
25
30 Options Deferred Base Deferred Options Plan/Actual
Base Plan/Actual
36
Slide 14 of 37 26 June, 2000
Country Project VAR coverage in 2001 on Total Capex
MAJOR PROJECTS WITH PROMISES OF FID IN 2001….
36 Projects with >20 mln spend excluding Major Options e.g. Bangestan, Saudi Gas
Total Capex from 2001 FID projects amounts to $4 bln in plan period
Australia (Direct) Gorgon SMDS Upstream 0 Brunei Champion West Central Platform Dev 1 Brunei East Gas Expansion 4 Brunei Egret Development. Phase 1 3
Denmark Halfdan Phase III 102 Denmark Halfdan Phase II 41 Denmark GSA4 13 Denmark Dan Infill and Debottlenecking 8 Denmark Skjold Phase II 32 Egypt Obaiyed South & Compression I 26
Malaysia 96 PSC : BT/SF Stage IVC(SF30) WI Int. 1 New Zealand Pohokura Development 3 Nigeria (SNEPCO) Erha Main 48 Nigeria (SNEPCO) EWTF (Extended Well Test Facility) 118 Nigeria (SPDC) 92 Offshore Pipeline AF - NLNG 1-5 87 Nigeria (SPDC) 49 UGHELLI 24 Nigeria (SPDC) 66 OTUMARA - NLNG 4/5 16 Nigeria (SPDC) 67 SAPELE 1 Nigeria (SPDC) 45 OGUTA 3 Nigeria (SPDC) 61 BONNY - NLNG 3 1 Nigeria (SPDC) 98 WAGP 22
FID (5 %)
Concept (3 %)
Feasibility (42 %)
Initiation (<1 %)
No VAR (50 %)
2001 Capex
2001-2005 Capex (Risked)
46 75 38 40
475 65 75 42
32 85
31 26
902 128 184 122 117 90 77 29
22
Slide 15 of 37 26 June, 2000
Norway Kollsnes and Vestprosess Upgrade 0 Philippines Malampaya Oil Rim Devt - unrisked 6 Russia (Rest of) Salym 29 Syria Souedie 0 UK Goldeneye 7 UK Loyal Phase II (W.o.S) 31 UK Puffin Field Development 9 UK Schiehallion Extension Claw 9 UK Scoter 0 UK Schiehallion North Channel 0 USA Holstein 26 USA Habanero 0 USA Manatee 14 USA Alex Gas Devt Phase 2 22 Venezuela 02 - 05 Further Dev. (1) 0
MAJOR PROJECTS WITH FID IN 2001 - continued
FID (5 %)
Concept (3 %)
Feasibility (42 %)
Initiation (<1 %)
No VAR (50 %)
Country Project VAR coverage in 2001 on Total Capex
Total Capex from 2001 FID projects circa $4 bln in plan period
2001 Capex
2001-2005 Capex (Risked)
53 83
129 26
151 65 62 57 55 21 327 39 33 22 64
36 Projects with >20 mln spend excluding Major Options e.g. Bangestan, Saudi Gas
Slide 16 of 37 26 June, 2000
Existing Assets / Post FID Ranking (2001 Capex > $20 million) $1
4/bb
l Attr
activ
enes
s
Strategic Imperative Low Medium High
High
Medium
Low
1 2 4
3 7
6 8 9
5
$14/bbl
45%
65%
MRH Nigeria Deepwater Gas Oil
Australia - NWS Existing US Canada Existing Assets Malaysia - MLNG PSC New (F23/F6/E11 Comp.)
Netherlands -NAM Plan - Scenario 1
Abu Dhabi - Existing Oil Business Denmark - Halfdan Phase I Oman - 1a PB01M NFA TRAN1 2000 W
Syria - AFPC Existing Facilities
UK - Existing assets
Oman - GISCO Philippines - Malampaya Gas Devt
SPDC - 42 FORCADOS YOKRI - NLNG 3 SPDC - 48 SOKU - NLNG 1-2
USA - Brutus
USA - Crosby
Argentina - VALLE MORADO Egypt - POST FID Obaiyed Malaysia - MLNG Dua PSC New (M4. B11. etc) Iran - Soroosh/Nowrooz Integ. SPDC - 90 EA Equity and Carry - NLNG 3 SPDC - 91 Offshore Pipeline - NLNG 1-5 Canada - Athabasca Oil Sands Project Brunei - Ampa Fairley Rationalisation Phase 1
USA - Ursa UK - ExAss Brent Gas Contract SNEPCO - Bonga-Main SPDC - 02 Value Preservation SPDC - 03 Bonny Terminal Norway - Troll Oil Russia - Caspian Pipeline Consortium Sakhalin - Molikpaq UK - ExAss Skua USA - Aera Equity
Slide 17 of 37 26 June, 2000
$14/
bbl A
ttrac
tiven
ess
Strategic Imperative Low Medium High
High
Medium
Low
1 2 4
3 7
6 8 9
5
$14/bbl
45%
65%
MRH Nigeria Deepwater Gas Oil
Base
Options
Egypt - Obaiyed South & comp. I Netherlands - NAM Plan - Scenario 3
Netherlands - NAM Scenario 2 - 1st Increml tranche UK - Tranche1 FID01 USA - Tranche 1. DW. non-EB2. FID 2001 SPDC - 49 UGHELLI Oman - 2aPB01M DEV TRAN1 2000 W
Syria - AFPC Tranche 1a (FID 2000) Thailand - Tranche 1 S1 2000 UK -Tranche1 FID00 committed
USA - Oregano
USA - Holstein SNEPCO - Ext. WTF Russia - Salym UK - Tranche1 FID01 FOP UK - Schieh infill 1 UK - Loyal Phase II
USA - Nakika
UK - Tranche3 FID01 FOP UK - Foin Infill1 UK - Foinaven East
SNEPCO - Erha Main UK - Tranche 3 FID01 FOP
EMPT
Y
$ 5.5 BLN CAPEX CEILING FOR EXISTING OUs Tranches 1-3 & New Projects (FID Q3+ 2000 & 2001 Capex > $20 mln)
Slide 18 of 37 26 June, 2000
Tranches 1-3 & New Projects (FID Q3+ 2000 & 2001 Capex > $20 mln)
$14/
bbl A
ttrac
tiven
ess
Strategic Imperative
Low Medium High
High
Med
ium
Low
1 2
4
3 7
6 8 9
5
$14/bbl
45%
65%
MRH Nigeria Deepwater Gas Oil
Base
Options
Syria - AFPC Tranche 1a (FID 2000)
Thailand - Tranche 1 S1 2000
UK -Tranche 1 FID00 committed
USA - Oregano
USA - Holstein SNEPCO - Ext WTF Russia - Salym
UK - Tranche1 FID01 FOP
UK - Schieh infill 1
UK - Loyal Phase II
USA - Nakika
UK - Tranche3 FID01 FOP UK - Foin Infill1 UK - Foinaven East SNEPCO - Erha Main
UK - Tranche 3 FID01 FOP
Total Capex (2001) in Box 1 is $470 mln Total Capex (2001) Box 2 is $200 mln
Total Capex (2001) in Box 3 is $910 mill
EMPT
Y
Projects inserted to Base Plan
$ 5.5 BLN CAPEX CEILING……DENMARK & BIG PROJECTS IN
Slide 19 of 37 26 June, 2000
CAPEX CREAMING CURVE NPV Bln $
Cumulative Capex in 2001
AOSP EA NLNG
Malampaya Deepwater Options Na Kika Holstein Serrano Oregano
Existing Assets Post FID New Devt &
Tranches Big Tickets
Bonga Main
Ehra
A
ngol
a 18
Dev
B
ange
stan
Sa
khal
in
Zapo
lyar
noye
Sout
h Pa
rs
B
razi
l
Chi
na
Woo
dsid
e D
eal
Saud
i Gas
Li
bya
N
EMED
FID in next 30 months
Success Case $ 3-4 Bln/yr
Slide 20 of 37 26 June, 2000
The Way Forward..(1) • We accept the flaws in the process, challenge the submissions at the
workshop, build the 2000 Plan and make a “promise adjustment” at Excom level:
– existing assets minus 200 Million US$ – post-FID minus 400 Million US$ – weed out “false promises” to the tune of 400 Million US$ – adjust production promise
Manage Improvement through the scorecards
We must address the integrity flaws in the CA process and send a very strong signal...
Slide 21 of 37 26 June, 2000
• We demand a resubmission….we change the workshop:
– We explain our problems to the delegates at workshop. – We ask the delegates to return to their OU/NVOs and rework their
submissions and restore reality – Key OU/NVOs will be invited for a hard challenge session with the
Excom (large OUs) or their RBD.
• After resubmission of sanitised data, a final ranking will be done with the RBA/RFA community.
The Way Forward..(2)
Slide 22 of 37 26 June, 2000
Two Possible Schedules
Workshop
Workshop
OU Financials
Allocation
Final OU Plan
OU Financials
Excom Adjustment
Improve
Resub- mission
Final OU Plan
27-28/6 10/7 6/9 14/9
Improve
10/7 17/7 28/7 6/9
Improve/challenge EPB-RBD
Slide 23 of 37 26 June, 2000
BACKUPS ….DETAILS
Slide 24 of 37 26 June, 2000
KEY METRICS - RAW DATA
Deepwater excludes SNEPCO Ranked out production in 2001 63,000 bbls/d Does not reflect OUs outside EP control - (SOGU)
Value continues to be dominated by traditional OUs Nigeria dominance of production growth not reflected in value
Slide 25 of 37 26 June, 2000
Short Term Oil Projects are predominantly in Shell Expro…..
UTCs $3.5 - 5.5/bbl VIRs [$14] 0.4 - 0.8 low / medium strategic fit. …….
SHORT TERM OPPORTUNITIES ….RANKED OUT
Slide 26 of 37 26 June, 2000
CAPEX CREAMING CURVE - THE BUILDING BLOCKS
25000
27000
29000
31000
33000
35000
37000
39000
41000
4000 4500 5000 5500 6000 6500 7000
Tranche 1 Tranche 2 Tranche 3 New Dev. > $20 mln Shell Share EB2
Tranche 3 Tranche
1
NPV $14
Cumulative Capex in 2001
DE-GSA4
EG-Obaiyed South
NI-Ughelli
BR-Champion West
UK-Goldeneye Malampaya Oil rim
NI-LNG 4/5 DE-Halfdan II TCGP Salym
Sunrise Puffin Bangestan NI-LNG 1-5
Holstein Na Kika
Ehra NI-Oguta BR-East gas exp DE-Dan infill
The promise
On merit NaKika, Holstein & Ehra do not rank
Tranche 2
Slide 27 of 37 26 June, 2000
“EXISTING ASSET” CATEGORY CAPEX 2001
EP-Global Capex on Existing Assets.rep
0
20
40
60
80
100
120
140
160 U
SA
Nig
eria
(SPD
C)
UK
Om
an
Abu
Dha
bi
Net
herla
nds
Bru
nei
Aus
tral
ia (D
irect
)
Syria
Mal
aysi
a
Nor
way
Egyp
t
Ger
man
y
Den
mar
k
Gab
on
New
Zea
land
US$
mln
MO
D
Country Name Capex 2001 Abu Dhabi 52 Australia (Direct) 27 Brunei 34 Denmark 7 Egypt 15 Gabon 7 Germany 13 Malaysia 17 Netherlands 47 New Zealand 2 Nigeria (SPDC) 152 Norway 15 Oman 81 Syria 23 UK 144 USA 160 Total 794
ie 800 mln - 18% of Devt Capex Budget…… • Same level as 2000 • no additional production generated • keeping brownfield plant operating & ready for new devts • Value adding or value erosion (vs 502Fs)
Slide 28 of 37 26 June, 2000
OIL & GAS PRODUCTION 2001-2005 BY OU Raw Data Submission
Production dominated by the big three in plan period
Without Nigeria growth,… - still only 2 OUs ~ 300+ Kboe/d S/S - 5 OUs ~ 200 - 300 kboe/d by 2005 - 3 OUs ~100 - 200 kboe/d by 2005 - 10 OUs~ <100 kboe/d OUs by 2005
Nigeria Largest producer by 2005 with threefold growth!
Slide 29 of 37 26 June, 2000
Raw data quality is good, ……….but there is a large request will be a tough competition for funds ……….Large number of attractive new devts & tranche funds
Large amount of funds for existing assets & Post FIDs ca $4 Bln To maintain oil production requires ca $5 Bln, with 100 % delivery
Before we consider more capex funds…..there are some issues….
But new devt “promises” are different from Vol- 1 findings ……….Most post FID projects have been under delivering production ……….Most projects have aggressive schedules vs Vol-1 reality ……….VAR programme will have to be accelerated to meet FID planned ……….Last years E&A followup developments have largely not materialised
How do we avoid an “over promise & under delivery” cycle…?
A few Outcomes from the Raw Data…..….
Slide 30 of 37 26 June, 2000
KEY ISSUES
CURRENT PERFORMANCE • Production under-performance
• 1999: UK, Egypt, SPDC, Syria, Netherlands • 2000 LE: Oil : Essentially on target but SPDC,
Gas : Egypt, Argentina, Netherlands, US
• Major New Project Delivery • 1999 on-stream disappointments due mainly to project schedule delays • 2000 onwards (CA 2000) suggests production under-delivery (sub-surface & facilities) • Reserves Replacement • 2000 LE 24 % with major concerns throughout Plan Period
FUTURE PROMISES • Continued reliance upon Nigeria (and our ability to grow oil production there) • Need to avoid over promising and under delivering cycle. • Continued pursuit of major Capex spend outside of existing portfolio ..are regretting oil?
Slide 31 of 37 26 June, 2000
CAPEX SPEND 2001 BY COUNTRY - Raw Data Submission U
S$ m
ln M
OD
Total Capex request 2001 = $7.1 bln Total Commitments = $ 2.7 bln
Top 5 countries requested 60% of total Capex
Next 10 countries requested 30% of total Capex
The tail = 10 %
Slide 32 of 37 26 June, 2000
RESERVES REPLACEMENT - RAW DATA
You need to believe that the “hopes” in Angola and Brazil and new gas come off to replace reserves...
Woodside Effect
Slide 33 of 37 26 June, 2000
SFR MATURATION RATES - RAW DATA
Slide 34 of 37 26 June, 2000
Sabl
e
Isla
nd
Slide 35 of 37 26 June, 2000
IBV raw data submission versus 1999
0 10000
20000 30000 40000 50000 60000 70000 80000
2000 2001 2002 2003 2004 2005
IBVc
Mln
US
$ 2000 Plan 1999 Plan
- 5% - 1 % 1%
15% 21% 23%
1999 1998
The promise The delivery
1999 & 2000 value creation is limited…….. • data assumes all planned 2000 FIDs are achieved ….unlikely based on LE • highly optimistic forward looking 2001 to 2005 (Nigeria assumed growth not likely…) • eg 2001 assumes we take roughly one big project FID per month (ranked in)….
Slide 36 of 37 26 June, 2000
EP-Global Committed Capex in 2001 by CA-Category.rep
3290
1057
1911
776 1095
459 682
322 93
0
500
1000
1500
2000
2500
3000
3500
EPN EPG EPM EPA EP
Total Capex MOD Committed Capex (MOD)
US$
mln
MO
D
CAPEX REQUEST 2001 BY REGION Raw data Submission
Total Capex request 2001 = $7.1 bln Total Commitments = $2.7 bln
Slide 37 of 37 26 June, 2000
EP-Global Committed Capex in 2001 by CA-Category.rep
US$
mln
MO
D
CAPEX REQUEST 2001 BY THEME Raw data Submission
Total Capex request 2001 = $7 bln Total Commitments = $2.6 bln
Excluding: Woodside, Shell Canada
SNEPCO in Nigeria
Theme ($500 mln)
1552
Slide 38 of 37 26 June, 2000
Production per Region - Raw data.rep 2001 2002 2003 2004 2005 0
500
1000
1500
2000
'000
boe
/d
'000
bbl
s/d
0 500
1000 1500 2000 2500 3000 3500
2000 2001 2002 2003 2004 2005
EPG EPM EPA EPN
EPG EPM EPA
EPN
OIL & GAS PRODUCTION 2001-2005 BY REGION Raw Data Submission
0 20 40 60 80 100 120
Mrd
Sm
3/yr
1999 1998 1997 1996
1999 1996 1997 1998
GAS Gas grows 50 % - across the board
2000
OIL/NGL Liquids grow 50% - predominantly in Nigeria & Brazil
Slide 39 of 37 26 June, 2000
Production per Region - Raw data.rep
0
500
1000
1500
2000
2000 2001 2002 2003 2004 2005
Nigeria MRH Deepwater Gas Oil
GAS
'000 boe/d
'000 bbls/d
0 500
1000 1500 2000 2500 3000 3500
2000 2001 2002 2003 2004 2005
Nigeria MRH Deepwater Gas Oil
OIL/NGL
OIL & GAS PRODUCTION 2001-2005 BY THEME Raw Data Submission Nigeria accounts for
most of the growth in liquids
Bonga
Slide 40 of 37 26 June, 2000
KEY METRICS - RAW DATA
MRH now includes Venezuela hence no value at $14 Deepwater excludes SNEPCO Ranked out production in 2001 43,000 bbls/d Does not reflect OUs outside EP control - (SOGU)
Value continues to be dominated by traditional OUs………... Nigeria dominance of production growth not reflected in value
Incorrect…!
Needs to be updated yet…..
Slide 41 of 37 26 June, 2000
SUMMARY
• Growth in production is a major challenge • Existing oil assets decline 50% by 2005 1,700- 800 kb/d • New project schedules & project forecasts need realism • Growth story dominated by Nigeria • Still Big 3 and small 15
• Reserves replacement is a key issue • Brazil, Angola, CIS - new hope and OKIOC
Given the bullishness of submissions…. Need to calibrate to ensure BP’2000 does not under deliver.
Slide 42 of 37 26 June, 2000
Backups
Slide 43 of 37 26 June, 2000
EP / GP Linked Projects (FID < 3 years) Capex
Ranking
2001 Option Capex ($ mill)
Malaysia MLNG Tiga Base 24 3 GP Australia NWS LNG Train 4 Option 4 6 GP
ALNG Train 1 Option - 5 GP China Ordos / Changbei Option - Expex (in) EP
Russia Piltun-Lunskoye Option - Expex (in) EP Egypt NEMed SMDS Option - Expex (in) EP Iran Iran SMDS Option 2 6
Both Turkmenistan T2T Pipeline to Turkey Option 18 3 EP Saudi Arabia Saudi Maturation Project Option - - EP
Nigeria NLNG 3 Base 501 misc EP NLNG 4 Option 45 misc EP West Africa Gas Pipeline Base 6 3 EP Abuja Gas Pipeline Base 2 3 EP
Venezuela VLNG Option 7 6 GP Namibia Kudu Base - - EP
TOTAL (Base) 533 TOTAL (Options) 76
45%
65%
Capex Matrix Pos.
EP/GP Lead
Current Capex Ranking Cut-Off is Box 3 @ 50%
Slide 44 of 37 26 June, 2000
EP/GP Integrated Economics
Slide 45 of 37 26 June, 2000
KEY ISSUES - EP / GP Linked Projects
Malaysia MLNG Tiga Australia NWS LNG Train 4
ALNG Train 1 ALNG Train 2 NAGV Domgas & FLNG Gorgon SMDS
China Ordos / Changbei Kuqa
Russia Sakhalin (Piltun-Lunskoye) Egypt NEMED SMDS Iran Iran SMDS Turkmenistan T2T Pipeline to Turkey Saudi Arabia Saudi Gas Project
Nigeria NLNG 3 NLNG 4 West Africa Gas Pipeline
Venezuela VLNG Namibia Kudu
Country Project Name Upstream Capex
7 ….
….
…. …. ….
….
….
…. ….
….
…. ….
…. …. …. …. ….
Slide 46 of 37 26 June, 2000
7th June : Exploration Proto-Forum Discussion on expex ranking
26th JUNE - Position in CA 2000 Sequence
13th June : Expex/Capex Data Pack (early rankings/views) to RBAs for Consideration
19th June : Some Regions Holding RBAs & OUs Meeting (Improve data quality & identify implications of expex & capex ranking)
22-23th June : EXPEX Workshop 26th June : EXCOM Raw Data and Issues 27-28th June : CAPEX Workshop
(EP / SIG Alignment Meetings take place as required per region)
10th July : EXCOM Presentation on Expex, Devt Capex & with Early Financials
31st July : EXCOM Presentation on Final Expex & Capex 14th July : OU Investment level letters (Expex, Capex, etc)
11th Aug : OU Investment Confirmation (as per 2001 Scorecard Outlines)
Slide 47 of 37 26 June, 2000
Production Forecast per Region and CA Cat - Raw data.rep
KEY ISSUES - Decline of “Existing Asset” base
Capex mln ($ MOD)
Decline to by half in the plan period…… and cost $0.8 bln/yr to maintain
Production (kbbl/d)
Existing Assets Existing Assets
Slide 48 of 37 26 June, 2000
Production Forecast per Region and CA Cat - Raw data.rep
KEY ISSUES - Arresting the decline with post FID projects
Post FID projects do not arrest the decline…… but cost a further $1.4 bln/yr …...
Capex mln ($ MOD) Production (kbbl/d)
Existing Assets Existing Assets
Post FID projects
Post FID projects
Slide 49 of 37 26 June, 2000
KEY ISSUES - Arresting the decline Adding tranche activity…… cost a $0.8 bln/yr but does not halt the decline
Maintaining current production levels costs $5.1 bln in 2001 and av. of $3.0 bln over plan period
Existing Assets Existing Assets
Post FID projects
Post FID projects
Tranches Tranches
Slide 50 of 37 26 June, 2000
KEY ISSUES Arresting the decline - the new promises
Existing Assets Existing Assets
Post FID projects
Post FID projects
Tranches
Tranches
New development
New development
E&A follow up
E&A follow up
Production (kboe/d) Devt Capex ($ mln)
OU Ceilings
Slide 51 of 37 26 June, 2000
Country Summary report Regional view.rep
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
2000 2001 2002 2003 2004 2005
KEY ISSUES - Allowing further Funds for Existing OUs.
Existing Assets
Post FID projects
Tranches
Devt Capex ($ mln)
OU Ceilings
New development
E&A follow up
Short Term Oil projects and new devts in existing OUs.
2001 2002 2003 2004 2005
Oil Contribution
0
10
20
30
40
50
UTC = ….. VIR avg = ….. Time to prodn = …..
Slide 52 of 37 26 June, 2000
BIG TICKET ITEMS…Planned to take FID by end 2002/early 2003
Sakhalin deal & Gas devt I 150+
Possible People Resources Reqd Capex Requirements $ mln (till 2005)
Saudi Gas development 100+
Zapolynaroye 50+
South Pars 25+
Brazil 25+ Angola 25+
Egypt 25+
Bangestan 25+
China deals 25+(?) Venezuela LNG (?)
MRH Entry Others …. 25+
Nigeria Global DW Business Staffed up
25+
Possibly 500+ Staff required ……..
Sakhalin 40 % Gas devt I Saudi Gas development
Zapolynaroye
South Pars
Bangestan
China deals Venezuela LNG
MRH Others (Kuwait, Lybia )
Brazil - BC-10+ Angola - Blk -18
Egypt - NEMED (no dilute) Nigeria -Ehra
MRH & CIS Business
1500 2400
550
370
670
1400
2000
740
600 7
600
900
Possibly requiring $11,000+ mln in plan period.
Slide 53 of 37 26 June, 2000
Shell Expro - Existing Assets capex
Slide 54 of 37 26 June, 2000
BSP Capex Corporate & Existing Assets
Slide 55 of 37 26 June, 2000
Slide 56 of 37 26 June, 2000
Slide 57 of 37 26 June, 2000
PRODUCTION PERFORMANCE FROM NEW PROJECTS IS DISAPPOINTING……...
POST FID Obaiyed CAPEX
0
10
20
30
40
50
60
70
2000 2001 2002 2003 2004 2005
mln
$ M
OD
1999 2000
OIL
0 2 4 6 8
10 12 14 16 18 20
2000 2001 2002 2003 2004 2005
Prod
uctio
n (x
'000
bbl
s/d)
1999 2000
Gas
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
2000 2001 2002 2003 2004 2005
mrd
Sm
3/yr
1999 2000
VALLE MORADO CAPEX - VALLE MORADO
0
5
10
15
20
25
30
2000 2001 2002 2003 2004 2005
Cap
ex (m
ln $
MO
D)
1999
2000
OIL - VALLE MORADO
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9
2000 2001 2002 2003 2004 2005
'000
bbl
s/d
1999 2000
GAS - VALLE MORADO
0
0.1 0.2 0.3
0.4
0.5 0.6 0.7
0.8
2000 2001 2002 2003 2004 2005
mrd
Sm
3/yr
1999 2000
Argentina
Egypt (…Rosetta same)
First slippage… then less hydrocarbons forecast
+ 15 well Infill Campaign
Slide 58 of 37 26 June, 2000
PRODUCTION PERFORMANCE FROM NEW PROJECTS IS DISAPPOINTING……...
Brigantine Development Brigantine Development
0
10
20
30
40
50
60
2001 2003 2005
mln
$ M
OD
1999 Capex
2000 Capex
Brigantine Development
0 0.2 0.4 0.6 0.8
1 1.2
2000 2001 2002 2003 2004 2005
'000
bbl
s/d
1999 Oil 2000 Oil
Brigantine Development
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9
2000 2002 2004
mrd
Sm
3/yr
1999 Gas 2000 Gas
42 FORCADOS YOKRI - NLNG 3 42 FORCADOS YOKRI - NLNG 3
0 20 40 60 80
100 120
2000 2001 2002 2003 2004 2005
mln
$ M
OD
1999 Capex 2000 Capex
42 FORCADOS YOKRI - NLNG 3
0 10 20 30 40 50 60 70
2000 2001 2002 2003 2004 2005
'000
bbl
s/d
1999 Oil 2000 Oil
42 FORCADOS YOKRI - NLNG 3
0 0.02 0.04 0.06 0.08
0.1 0.12 0.14 0.16 0.18
0.2
2000 2001 2002 2003 2004 2005 m
rd S
m3/
yr
1999 Gas 2000 Gas
UK
Nigeria
Slide 59 of 37 26 June, 2000
MAJOR Post-FID PROJECTS ….CAPEX Brutus - indications of capex rephasing… Onstream date unchanged
Bonga - indications of capex increase…… indications of slippage…… Onstream date unchanged
Shearwater - capex will be under budget & on time….
Brutus Capex
0 50
100 150 200 250 300 350
1998 2000 2002 2004 Time (Years)
Dev
t Cap
ex ($
mln
)
CA 1999 CA 2000
Costs are expected to be lower...
Bonga Devt Capex
0 50
100 150 200 250 300 350 400 450
2000 2002 2004 2006 Time (Years)
Dev
t Cap
ex ($
mln
)
CA 1999 CA 2000
- Increased drilling costs - Increased project mgmt costs
AOSP - indications that capex 2001 is larger than planned due to slippage in schedule……..
Nowrooz/Sarooz - 2001 & 2002 capex slippage…… Onstream date unchanged
POST-FID 2000 - Underspend Likely 2001 - $400 mln additional
Slide 60 of 37 26 June, 2000
MAJOR Post-FID PROJECTS IN PROGRESS….PRODUCTION Brutus - Peak production in 2002 & 2003 is now lower Not a barrel produced yet….. (Is this a meaningful signal …)
Bonga - Peak production in 2003 & 2004 is lower (system remodelling, revised subsea layouts & well timings)
Shearwater - Production unchanged , capex will be reduced vs budgets.
Brutus Oil Production
0 10 20 30 40 50 60 70 80 90 100
2000 2001 2002 2003 2004 2005 2006 Time (Years)
Oil
Prod
uctn
(kbb
l/d)
CA 1999 CA 2000
lower peak oil production but higher cum production by ca 40 mln bbl by 2016
Bonga Oil Production
40 50 60 70 80 90 100 110 120
2002 2003 2004 2005 2006 Time (Years) Prod
uctio
n (k
bbl/d
)
CA 1999 CA 2000
5 - 7 % decline following further studies.
- revised subsea layouts & well timings
POST-FID Production is lower across the board Cannot find examples of increases…..
Slide 61 of 37 26 June, 2000
“Big Ticket” Items Additional Capex vs BP ‘99 D
evt C
apex
($ m
ln)
Original FID Timings Revised FID Timings
0
500
1000
1500
2000
2500
3000
3500
2001 2002 2003 2004 2005
6062 5371 4962 4945 BP ‘99 CAPEX
Slide 62 of 37 26 June, 2000
Oil Production Difference Major Post FID Projects
1999 vs 2000 CA Raw Data Submission
-21% -12% -27%
+33%
+66%
+6%
-100 -50
0 50
100 150 200 250 300
2000 2001 2002 2003 2004 2005
Years
Mbo
pd
OIL mbopd
CA 1999 CA 2000 Difference % 2000 58 46 -12 -21% 2001 132 116 -16 -12% 2002 317 231 -86 -27% 2003 430 456 26 6% 2004 484 646 162 33% 2005 432 715 283 66%
