SMPO: a “jewel” in the Asia Pacific styrenics landscape

Speech given by Fang Yea-Yee

General Manager Styrene and Propylene Oxide

ICIS Asian Aromatics and Derivatives Conference

26 June 2008 Bangkok, Thailand

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Disclaimer statement This presentation 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’’, ‘‘intend’’, ‘‘may’’, ‘‘plan’’, ‘‘objectives’’, ‘‘outlook’’, ‘‘probably’’, ‘‘project’’, ‘‘will’’, ‘‘seek’’, ‘‘target’’, ‘‘risks’’, ‘‘goals’’, ‘‘should’’ and similar terms and phrases. There are a number of factors that could affect the 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 Report, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for the Group’s products; (c) currency fluctuations; (d) drilling and production results; (e) reserve estimates; (f) loss of market 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 potential litigation and regulatory effects arising from recategorisation of reserves; (k) economic and financial market conditions in various countries and regions; (l) political risks, project delay or advancement, approvals and cost estimates; and (m) changes in trading conditions. All forward-looking statements contained in this presentation 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. Each forward-looking statement speaks only as of the date of this presentation. Neither Royal Dutch Shell 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 document. The United States Securities and Exchange Commission (SEC) permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We use certain terms in this presentation, such as “oil in place" that the SEC's guidelines strictly prohibit us from including in filings with the SEC. U.S. Investors are urged to consider closely the disclosure in our Form 20-F, File No 1-32575 and disclosure in our Forms 6-K file No, 1-32575, available on the SEC website www.shell.com. You can also obtain these forms from the SEC by calling 1-800-SEC-0330.

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Good morning. I am very pleased to be given the opportunity to address you today on Styrene Monomer Propylene Oxide (SMPO) technology and its role in the Asia Pacific styrenics landscape. Today, around 20% of global styrene production is based on SMPO technology, and over the past decade SMPO plants have contributed about half of the growth in world styrene production. While SMPO’s contribution to future styrene production growth may not be so prominent, it is likely to remain a very important factor for the foreseeable future.

Source: CMAI 2007

0%

10%

20%

30%

40%

1998 2002 2006 2010

shar

e of

SM

PO in

tota

l SM

cap

acity

(%)

Americas (AM)

Europe/Africa (EUAF)Asia Pacific (AP)Global

Styrene Monomer/Propylene Oxide (SMPO) represents 20% of Styrene Capacity

As most of you know, Shell has significantly grown its styrene business in the past 10 years with five major investments including joint ventures.

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Shell’s Position in Styrene Monomer (SM)

0

500

1000

1500

2000

2500

3000

3500

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

PO

SM

SMPO Seraya

SMPO ELLBA Moerdijk (Moerdijk site)

SMPO Nanhai

SMPO ELLBA Eastern (Seraya site)

Volume (kT)

EB/SM Sadaf SM2

Source: CMAI 2007

EB/SM = conventional styrene to ethyl-benzene

These are primarily styrene/propylene oxide plants, and include: 2 SMPO investments in Seraya, Singapore; 1 SMPO investment in Moerdijk, The Netherlands 1 EB/SM investment in Saudi Arabia and more recently, the SM/PO investment in Nanhai, China, in 2006

Currently, we are the world’s leading global styrene producer, accounting for around 10% of global output. Now, while the lack of visible activity on further investment over the past two years may have caused some people to question whether SMPO technology is still competitive, I can assure you that Shell remains convinced that it is. The objective of my presentation today is two-fold:

• To take a closer look at some of the current and potential future developments in the styrene value chains, particularly demand and supply growth in Asia Pacific, and…

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• To explain why Shell believes SMPO investments will continue to play a significant and relevant role in the future for styrene growth, especially in Asia Pacific where demand growth for both styrene and propylene oxide remains strong.

As most of you know, last month Shell Chemicals revealed that we are actively evaluating plans for world-scale SMPO investments with joint venture partners in Asia Pacific/Middle East to meet customers’ needs in this region. I can also tell you that we are still receiving many requests from petrochemical investors to license Shell’s SMPO technology, which to date we have not done, except for our joint ventures. Today, no regions exist in isolation, so my presentation includes both global context and regional focus, and will encompass trends and developments for styrene and, to a lesser extent, benzene, the key feedstock for styrenics. Global styrene production currently consumes around 50% of global benzene output, and the price of styrene is closely linked to the price of benzene.

Source: CMAI 2007

Historical Styrene Growth Rates

AMERICAS

EUAF

APME

0

10000

20000

30000

1986 1990 1994 1998 2002 2006

SM d

eman

d (k

ta)

90s: 5%/yr2000-07: 3%/yr

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The global context Today, industry estimates suggest global annual styrene demand is around 26 million tonnes. Of this, about 14 million tones per annum is in Asia Pacific and the Middle East, with the rest split roughly evenly between Europe and the Americas. The styrene sector is highly competitive and challenging. Through the 1990s, total global consumption increased by around 5% annually, but since the turn of the century demand growth has slowed to around 3% a year. This slowdown in global growth is mainly caused by competition from other materials and has had the biggest impact in North America and Europe, where it contributed to a virtual standstill in demand. This was the result of the combination of competition from other materials with the migration of value chains to low-cost manufacturing countries - mainly in Asia Pacific, and primarily China. Asia-Pacific is the most exciting region in terms of styrene and derivatives growth. Overall, the region accounts for slightly more than 50% of global styrene consumption. Within Asia Pacific, China is a dominant force in the evolution of both global and regional styrene demand. Between 2007 and 2012, Chinese demand is forecast to grow by 2.5 million tonnes - equivalent to some 60% of global demand growth. During the same period, China’s production is expected to grow by 1.6 million tonnes, roughly equivalent to 40% of the global production growth. However, China’s output will still significantly lag behind domestic demand. I’ll look at China in more detail later. Despite strong regional growth, the Asia Pacific styrenics industry continues to be affected by regional overcapacity, which impacts the profitability of some producers in Asia Pacific. Let’s look at some of the key dynamics driving developments in styrenics. This slide shows the shifts in value that have occurred in the styrenics value chain in the past 10 years or so.

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Source: CMAI 2007, ICIS

Shifting Value in the Styrenics Chain

-200

0

200

400

600

1995-99 2000-03 2004 2005 2006 2007cont

ribut

ion

mar

gin

(US$

/MT)

PSSMBenzeneEthylene

PS = Polystyrene

Higher benzene prices have been a major reason for a significant migration of value upstream to benzene and away from styrene and styrene derivatives. Styrene producers have not been able to pass on benzene price increases due to the substitution of polystyrene (PS) by polyethylene (PE) and polypropylene (PP). As you can see, over the past four years, benzene and to a lesser extent ethylene is where the value has been concentrated, while styrene and polystyrene have been squeezed. Benzene outlook However, it is widely anticipated by industry observers that recent and sustained upward benzene pricing pressures will ease in the near future as a tight market is dramatically transformed by a wave of capacity expansions in China.

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Chinese Benzene Outlook1 million tonnes/yr of new capacity…

0

2500

5000

7500

10000

2007 2012

kta

benz

ene

CokePXE co-prod.Toluene trans.Selective TDPToluene disp.PygasReformate

Source: CMAI 2007, Tecnon, APIC 2008

Potentially higher growth in new benzene capacity

Public sources suggest that between 2007 and 2013, as much as 4 million tonnes of additional benzene capacity could come on stream in China. Some recent estimates even suggest an average of 1 million tonnes of new benzene capacity per year, which could raise China’s annual benzene production to over 10 million tonnes before 2013. Little of this new production is on-purpose and includes benzene as by-product of additional refining capacity, by-product from coal used during steel manufacturing and by-product from Para-xylene production. In tandem with other investments driven by rocketing benzene prices between 2002 and 2007 and aimed at the Asia Pacific market, new capacity in China is expected to contribute to regional overcapacity in the next two or three years. Consequently, benzene operating rates are expected to decline and benzene prices over naphtha could potentially weaken significantly. However, the difference between a hard and a soft landing for benzene is likely to be dependent on demand and the actual realisation of capacity expansion plans. It has been pointed out that a sizeable proportion of new capacity plans may be more speculative than real. In the coming years, those regional producers with the most efficient production technologies, economies of scale and upstream integration, with access to advantaged feedstock, are likely to best weather this coming benzene downturn.

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It is also worth mentioning that there are some observers who believe that continued strength in the price of oil over the next few years could cause problems for non-integrated naphtha-based benzene producers who may be unable to compete for and source their naphtha requirements in the face of stiff competition from the fuels market. The challenge facing these non-integrated producers is also likely to compounded by increased production in China and increased competition from more competitive producers Another important feature of China’s market going forward is the country’s export tax on benzene, which is designed to restrict exports and promote investment for downstream domestic use in styrene and derivatives. I will return to this when I look at potential future regional styrene investments. North America & Europe Tough trading conditions have had a significant impact in both the North American and European styrene sectors, which have seen the migration of styrene customers to low cost countries in Asia Pacific, especially China. In Europe and North America, this migration of value has driven industry consolidation, rationalisation and backward integration, while discouraging investments in new styrene capacity. Today, there are 12 major producers in Europe and America, of which only four or five are merchant sellers. The rest consume their output internally in derivatives production. In North America, operating rates were in the low 80s (%) in 2006 and 2007. However, this has improved recently as a result of the combination of a surge in exports to Europe (driven by low-cost and excess production in the US), the closure of some of Sterling Chemicals’ assets, and continuing exports to Asia Pacific, which were around 550 kilo tones (kt) last year. Exports of just over 400kt to Europe in 2007 were atypical: trade flows in and out of Europe are typically minimal, and regional demand has kept assets (including those in Russia and Eastern Europe) up to 86% loaded.

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Industry consolidation

Source: CMAI 2007 buyer of BASF divestment not included

Styrene Industry Consolidation

0

500

1,000

1,500

2,000

2,500

3,000

Shel

l

BASF

Dow

BAS

ELL

-Lyo

ndel

l

NO

VA/In

eos

JV Tota

l

SAB

IC

NO

VA

CPC

/DO

W J

V

CPC

Asah

i St

erlin

g

Sin

opec

LG

Pol

imer

i

FCFC GE

Idem

itsu

Petro

chin

a

Rep

sol

Den

ka

SKC

MC

C

INE

OS

TSM

C

Gra

nd P

acifi

c

Pen

ergi

a

Nip

pon

Ste

el

SM Capacity (including share in JVs)

Owned Derivative Capacity (Styrene equivalent)

Capacity changes (sold/to JVs etc.)

Significant changes (actuals and pending) in the SM industry 2006-2007

Through acquisition, mergers and joint ventures, styrene manufacturers and derivatives producers have sought to integrate their value chains, improve operating efficiencies, optimise potential synergies, lower fixed costs and create a sufficient mass to sustain investment. Consolidation may also have increased producers’ buying leverage with upstream suppliers for feedstocks.

In May of this year, for example, the US-based companies Dow Chemical and Chevron Phillips Chemical Company received approval to selectively merge their styrene and polystyrene assets into a joint venture. Separately, Ineos and Nova extended their existing European styrene and styrenic polymers joint venture to their North American assets.

Although Shell has not been involved in any industry consolidation, we already operate significant styrene and SMPO manufacturing joint ventures around the world, with BASF in Europe and Singapore, CNOOC in China, and SABIC in Saudi Arabia where our investments are competitively integrated for site synergies and/or advantaged feedstocks.

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We also believe the close integration of Shell’s upstream and petrochemicals operations deliver significant synergies and cost advantages that underpin our long-term commitment to styrene and our future ambitions.

Asia Pacific developments In Asia Pacific, there are currently around 25 styrene producers, a very sizeable and highly competitive merchant market, and a plethora of consumers in the derivatives business. Only about one third of Asia Pacific styrene production is integrated, and most new capacities are non-integrated.

Despite significant regional overcapacity in the styrene, polystyrene and expandable polystyrene sectors, to date we have seen little drive for consolidation in Asia Pacific. While some older production units and those located far from the markets have been under pressure, operators prefer to idle capacity or operate at low loading rates when production economics are poor rather than close plants, divest or form joint venture businesses. This may change in the future but we are not seeing any sign of a change in this direction in the near future.

Derivatives outlook Let’s look at the outlook for some of the key styrene value chains.

Source: ICIS

Competitiveness of Polystyrene (PS) vsPolypropylene (PP) and Polyethylene (PE)

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-100

0

100

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2001 2002 2003 2004 2005 2006 2007 2008

USD/

MT

PS Price - PP Price

PS Price - PE Price

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• Polystyrene Substitution by polyethylene and polypropylene has had a significant impact on polystyrene demand growth, particularly in packaging, which accounts for just over 40% of styrene consumption. Between 2004 and 2008, the sharp rises in benzene prices drove polystyrene prices to between $140-$200/tonne higher than polyethylene and polypropylene.

However, the era of significant price differentials between polystyrene and the polyolefins may be over. Currently, polystyrene is slightly cheaper than both polyethylene and polypropylene. This is a result of tighter supply/demand balances for naphtha, which have impacted the polyolefins more than polystyrene, and the improved availability of benzene, which is reducing benzene prices over naphtha. Assuming these trends continue, we can expect to see a much smaller differential between polystyrene and its main competitors in future.

However, lower price differentials offer little cause for rejoicing among polystyrene producers. The recent history of poor profitability has cut spending on R&D (research and development), stifling new application developments that could potentially stimulate demand. This cannot be easily reversed overnight. In other products, a greater emphasis on differentiation and innovation has helped revive sales by extending or developing new applications. But currently it seems only one or two of the big derivatives manufacturers are committed to pursuing this route to reinvigorate polystyrene growth. However, we should not lose sight of the fact that polystyrene demand continues to grow and the material is still displacing more traditional materials including paper and glass.

• Expanded polystyrene & acrylonitrile butadiene styrene Happily, the growth prospects for both expanded polystyrene (EPS) and acrylonitrile butadiene styrene (ABS), which together account for around 30% of styrene demand, are expected to remain strong at around 4.4% from now through to 2011.

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2002-07 % AAGR Western-EU Central-EU N.America N.E.AsiaDemandPackaging -3.5 9.2 0 4.1Construction 5.5 16.5 6.9 8.9Exports 4 1.6 1.6 21SupplyCapacity 0.9 1.4 -0.1 9.7Imports 31.6 25.5 6.2 -7.3

Demand from construction was the main driver for EPS demand growth across the world. In North-East Asia 50% increase in 5 years.

Growth of Expandable Polystyrene (EPS) in Construction

EPS exports from China strongly rising: 100% increase over last 3 years.

Source: CMAI 2007

EPS continues to enjoy strong demand in both protective and thermal packaging applications, with additional usages ranging from water treatment systems to safety headgear. But the biggest growth area for EPS is in insulation applications for the construction sector, where the product is used in walls and moulded panels to keep heat both in and out of buildings. Given the increasing pressures on energy supply and concerns about the impact of CO2 on Climate Change, the ability of EPS to reduce energy requirements for heating and cooling is key to its demand growth and growing position in the styrene value chain. Currently, Asia - primarily China - accounts for nearly 60% of global EPS demand, which is mainly export driven. Regional demand for EPS in construction has grown 50% in the last 5 years, and exports have grown 100% in just three years. ABS also has good growth prospects. Widely used in applications ranging from domestic appliances to telecommunications equipment, ABS is valued for its toughness, temperature resistance and high quality finish. Use of ABS in automotive manufacture continues to expand and - as with EPS - the material offers weight and fuel saving advantages over metal components.

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However, ABS has been impacted by high butadiene prices and - like polystyrene - is susceptible to some substitution. On the plus side, investment in R&D continues to expand the ABS application envelope.

I have already covered so far a number of challenges that the styrene industry is facing. Before moving onto a discussion of investment opportunities, I want to touch on three other factors that could influence developments in the styrene and derivatives sector - and, indeed, the whole petrochemical sector.

Value chain migration Looking longer term, the migration patterns for styrene value chains could have some interesting outcomes. Growth in Europe or North America is at a standstill as most new customers are in Asia Pacific, primarily China. With costs for China producers rising, we are seeing the start of another migration, for example to Vietnam and other low-cost countries. Will the migration of these value chains continue, and will the growth in North America remain the same or shrink, and will all growth be concentrated in Asia? I’m not sure any of us can answer these questions today, but they are likely to attract our attention in the future. Rising EPC costs We should also consider the impact of recent significant increases in engineering, procurement and construction costs, which have raised investment levels required to implement large petrochemicals projects. Another related issue is a shortage of contractors and rising costs and shortage of labour. Together, all these factors can influence decisions regarding both investments and their locations. Oil price impacts Another ongoing uncertainty relates to the impact of high oil prices. Few of us are able to make predictions about future oil price levels and consistently get it right, although I suspect most of us expect them to remain high. So far, petrochemicals and plastics have managed to maintain their competitiveness against alternatives such as wood, paper, glass and aluminium foils. But would further oil price rises trigger a wave of substitution? We also worry about the impact of high oil prices on economic growth, and in turn, on the growth in petrochemicals demand. US demand has remained relatively strong despite the combined pressures of a credit crunch, housing downturn and soaring oil. But to what extent would a serious US downturn or recession impact global chemicals growth? I don’t have answers to these questions, but they are clearly of concern.

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Despite these uncertainties, over the medium to long term Shell remains confident about its prospects for styrenics in this region given its strong competitive position. Opportunities for styrene investments Everyone expects future styrene capacity additions to be either in Asia Pacific or the Middle East. By 2010, Asia Pacific asset loading is expected to remain high but some imports will still be required. Loading rates for European and North American producers are forecast to dip slightly, as the former are likely to see increased Middle Eastern imports and North American exports to Asia Pacific are likely to continue to slow. Through to 2010, industry estimates suggest production and demand in Europe and the Americas will remain basically static, while combined Asia Pacific and Middle East production and demand will be roughly balanced. Between 2007 and 2015, assuming global demand growth of 3% - 4% a year, an additional 7 million -9.5 million tonnes per annum of styrene capacity will be needed, mostly to meet Asia Pacific demand, which is still rising at over 5% a year.

Source: CMAI 2007

0

2000

4000

6000

8000

2002 2004 2006 2008 2010 2012

SM (k

ta)

SM imports SM supply: total benzene SM supply: 42% benzeneSM supply Firm SM supply Speculative

Total SM demand

Forecast assuming Styrene continues to consume 42% of Benzene production

Chinese Wave of Styrene InvestmentsForecast assuming Styrene consumes all new Benzene production

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Currently, styrene demand in China alone is around 5 million tonnes per annum. Domestic production is just 2.1 million tonnes per annum and demand is growing steadily, with a potential supply deficit of almost 4 millio tonnes per annum forecast by 2012. This will present an opportunity for investments in new styrene capacities. Where will this new capacity be built, using which technologies, and which producers will be advantaged in terms of feedstock and/or integration? It is highly unlikely that there will be any investment in new styrene capacity in North America or Europe. While has there has been some expansion of styrene production in the Middle East, which today accounts for about 4.5% of global output, this has been limited by the focus on ethane-based petrochemicals production. In future, as the Middle East increases reliance on heavier feeds, this may increase. But competitiveness and benzene availability are likely to constrain growth to around or slightly above 10% of global output by 2015. We certainly don’t see Middle East styrene output emulating the global contribution of the region’s polyethylene or MEG (mono ethylene glycol) production, which account for a quarter of global output. A major expansion of styrene capacity is expected in China. This will include both non-advantaged EBSM facilities as well as one or more SMPO plants, driven by styrene and propylene oxide demand growth, local benzene availability and the Government’s efforts to close the import gap. These investments will be supported by China’s continuing tax on benzene exports, which I mentioned earlier. Virtually all of China’s styrene capacity increases will be directed into domestic derivatives production. The chart above - using CMAI data - looks at the potential wave of styrene investment in China in the context of domestic supply and demand. As you can see, the pink area is the potential increase in China’s styrene output based on the assumption that the conversion ratio of benzene to styrene remains around 42%. The black line indicates announced capacity increases that are likely to happen. But even if we add in the more speculative announcements, represented by the black line, or even more: assume that all domestic benzene will be converted into styrene, China will continue to require a significant level of styrene imports through 2012 and beyond. Having talked about opportunities for styrene investments, I want to look specifically at the potential for further SMPO production.

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Opportunities for SMPO investments While growth in styrene demand has largely been limited to Asia Pacific, PO demand growth has been strong globally. This has certainly driven the development of new PO-only process technology and implementation of this technology in Europe - where styrene production growth is currently at a standstill. Around 60% of PO is used in urethane and polyurethane applications, which are growing due to increased demand for furniture, bedding, automotive seating, construction and appliances. Other major uses for derivatives of PO include solvents for coatings, ink and the electronics industry, de-icers for the air transport industry, polyester resins, cosmetics and surfactants. With a wide suite of smaller applications such as pharmaceuticals, butanediol elastomers, fuel additives and oil demulsifiers, PO is often named the most versatile building block in the Chemical Industry, showing healthy growth in all regions.

Source: CMAI, Technon

Opportunities for SMPO Investments in Asia Pacific

PO AM & EUAF

Styrene market (Million Tons/annum) PO market (Millions Tons/annum)

StyreneAM & EUAF

PO AP

0

10

20

1998 2002 2006 20100.0

2.5

5.0

Styrene AP

Shell believes the strong growth in Asia Pacific demand for both styrene and propylene oxide will continue to create attractive opportunities for new SMPO investments. SMPO remains highly competitive due to the strong propylene oxide value chain and a production technology that offers integrated producers

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both cost and environmental advantages - including lower CO2 emissions, better energy efficiency and wastewater recycling - which are significantly better than alternative technologies for separate styrene and propylene oxide production. Given the continued alignment in the growth of both styrene and PO demand in Asia Pacific, Shell is actively working on further investment opportunities in SMPO capacity in the coming years. Shell’s strategy for growth in Asia Pacific/Middle East

Shell Global Styrene/EB Assets

= EB plant

= SMPO plant

= SM plant

= Joint Venture

Scotford (Canada)SM 460

Scotford (Canada)SM 460

Stanlow (UK)EB 230

Stanlow (UK)EB 230

Moerdijk (NL)SMPO 460

SMPO 275

Moerdijk (NL)SMPO 460

SMPO 275

Saudi ArabiaSM 270

SM 125

Saudi ArabiaSM 270

SM 125 SingaporeSMPO 320

SMPO 275

SingaporeSMPO 320

SMPO 275

Nanhai (China)SMPO 280 Nanhai (China)

SMPO 280

Total Shell Styrene capacity 2.5 mta vs 26 mta globalSource: CMAI 2007

Having looked at industry prospects both regionally and globally, I want to give you a quick review of Shell’s strategy for growth in Asia Pacific/Middle East. Petrochemicals are a natural extension of the hydrocarbon value chain, and within the Shell Group our chemicals business is recognised as a major source of strategic strength and value. Shell also believes that a broad portfolio, including chemicals, is a major factor in the selection of international companies as partners. Aromatics have a significant place in the Shell chemicals portfolio. We are among the world’s leading benzene producers and, as I mentioned earlier,

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following major investments in the 1990s, Shell chemicals companies are the leading global manufacturers and suppliers of styrene monomer. Shell has a very long and strong commitment to the global styrenics business, and today our regional focus is to strengthen our product and service offerings in Asia Pacific. Today, we operate a portfolio mix of traditional styrene monomer and SMPO plants worldwide. In Asia Pacific, we supply customers from world-scale manufacturing facilities - some joint ventures and wholly owned - in Singapore, China and the Middle East. One of Shell’s key strengths in chemicals is that our manufacturing facilities are strongly integrated in refinery and petrochemicals complexes. This provides feedstock flexibility and access to raw materials - such as ethylene, benzene and propylene - and advantaged manufacturing economics. In Asia Pacific, these attributes combine with proximity to market and reliability of supply to make Shell’s SMPO operations highly competitive. Being part of a major integrated energy company also offers opportunities for Shell Chemicals to leverage strategic advantages in terms of inherent manufacturing synergies, and the ability to benefit from the Group’s focus and investment in innovation and technology. As the challenging dynamics of the energy markets impact the price and availability of chemical feedstocks, those players that are closely integrated with oil processing - and have the ability to optimise process streams and adapt to different feedstocks - are clearly best placed to succeed.

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Jurong island

Singapore main Island

PCS/TPCSerayaEGS

ShellBukom

Existing & new undersea pipelines

SEPC Cracker site

1. 800 kta Ethylene Cracker 2. Integration with Shell Bukom Refinery3. Integration with Derivative Plants on Jurong Island

• New 750 kta Mono Ethylene Glycol (MEG) plant to off-take ethylene.• Balance of olefins will go to affiliates and other customers.• Existing and new undersea pipelines.

SEPC MEG site

Shell Singapore Project (SEPC)

We are actively pursuing a number of projects designed to further strengthen the integration between refinery and chemical operations, the largest of which is the recently announced Shell Eastern Petrochemicals Complex (SEPC) project in Singapore. SEPC includes modifications and additions to the Shell Bukom refinery, a new world-scale 800,000 tonnes per annum ethylene cracker and a 155,000 tonnes per annum butadiene extraction unit on Bukom Island, plus a 750,000 tonnes per annum MEG plant on Jurong Island. The MEG plant will be one of the largest in the world and will utilise Shell proprietary technology. Singapore is already Shell’s largest petrochemical production and export centre in the Asia Pacific region. SEPC will be strategically located to take advantage of existing infrastructure and to ensure maximum benefits are achieved by integrating the petrochemical site including SMPO JV, Ellba Eastern Pte Ltd, with the Bukom refinery. This will deliver advantaged feedstocks, operating benefits and valuable by-products. Close proximity to markets and customers will ensure that cost efficiency and competitiveness are passed down the value-chain. Conclusion Overall, Shell sees a long term future for styrene monomer and derivatives in Asia Pacific. There is no doubt that it is a very challenging and competitive

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market. However, growth remains robust, and if - as we expect - benzene prices weaken as supply increases, we will likely see a shift in value towards styrene and its derivatives. We also see China remaining the major global growth engine for styrenics for the foreseeable future. While significant investment in new capacity is set to continue in China, we believe feedstock constraints will mean the country will remain heavily dependent on very significant levels of imports in the long term. Given strong regional demand growth for both styrene and propylene oxide, Shell remains convinced there is room for investment in new world-scale SMPO capacity to meet Asia Pacific’s needs. In Europe and North America, however, investment in PO-only capacity will be the key to meet demand growth as styrene demand stagnates. As I mentioned earlier, Shell is a committed and dedicated player in both the SM and PO markets, and our strategy is to invest in world-scale, integrated SMPO assets with new projects under development targeted for start up in the coming years to grow with our customers. Many of our regional investments so far have been in joint ventures, and we certainly see significant advantages and further opportunities to leverage our track record for successful partnerships. In closing, I would like to leave you with this thought: Shell believes styrene has a good future in Asia Pacific. But fortune will not favour the brave. It will favour the advantaged! Thank you.