Shells Energy Strategy 2013

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SHELLS ENERGY STRATEGY


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OUR ASPIRATION IS TO GROW OUR POSITION AS ACOMPETITIVE AND INNOVATIVE ENERGY COMPANY.WHY?

A To invest in sae, low cost and reliable energysources or our customers, and create at tractivereturns or our shareholders.

B To win business in a very competitive landscape,and to be resilient in the ace o a volatile uture,with population growth, rising wealth levels andincreased environmental stresses as key drivers.

C So we can help design and develop a uture

energy system that drives economic progressin a sustainable way.

We want to maintainour companys licenseto operate and createspace or urther growth.That requires us to becompetitive, innovative andresponsible all at once.


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1 2 3The world needs more energy tospur development and sustaina growing and wealthier worldpopulation. This is an urgent challenge.

n The world has entered an era ounprecedented progress and prosperity.Average wealth, health and lieexpectancy are increasing. Higherstandards o living are giving more

people access to hospitals, publictransportation and reliable electricity.

n By 2050, there will be 9 billionpeople on the planet compared to7 billion today. That is equivalent toadding another China and India.Urbanisation will continue as 70 millionpeople move into cities each year orthe next 25 years.

n We estimate that global energydemand will grow by 15-20% betweennow and 2020, with nearly all growth

coming rom non-OECD nations.Adding 20% extra demand to thesystem is like adding another China in less than a decade.

n Over the rst hal o this century,global energy demand could doublerom 200 mboe per day in 2000 tosome 400 mboe per day by 2050.

To meet the worlds energy needs in thecoming years and decades, society willhave to mobilise all orms o energy.By 2035, additional supplies equalto twice the size o todays US energysystem will be needed to help meetdemand. That is a ormidable challenge.

n This could mean spending some$37 trillion on the global supply

infrastructure by 2035, according tothe IEAs 2012 World Energy Outlook.Thats more than $30 billion every weekfor a period of more than twenty years.

Rising living standards are increasingdemand or energy, water and ood,against the backdrop o climatechange. For continued prosperityand development, government, industryand society must work to address thisstress nexus in an integrated way.

n By 2030, global demand or waterwill increase by 30% and ood by

50% compared to today, accordingto the UN. The worlds water, energyand ood systems are closely linked:water is needed or energy production;energy is needed to produce, treat andtransport water; and both water andenergy are needed to grow ood.

n Policies that address CO2

emissionsalso help mitigate water and oodstresses, so governments are well-advised to put a price on CO

2as

a means to promote low-carbon

technology, energy eciency, and thereplacement o coal by natural gas inthe power sector.


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To make Shell more resilient in the aceo a volatile uture, we need a strongstrategic ocus. A ocus on where wehave room to grow and win. We willtake a thematic approach when wemake and implement our investmentdecisions.

n We have identied a series o strategicthemes. Each o these themes shares

common key characteristics that infuenceeverything rom how we make investmentdecisions to how we replicate and scalesuccess.

n This approach will allow us toreduce complexity and take advantageo standardisation and the resultingeconomies o scale. It also gives us moreclarity on the organisational skills neededor success, putting talent at the centre oour strategic ocus.

n Our two Engines are the upstreamengine and the downstream engine.These Engines deliver the bulk o ourcash, and we expect them to be ournancial oundation at least through thisdecade. We need to continue to investin them to remain strong.

n There are three main GrowthPriorities: integrated gas, deep-water andresources plays. These will provide ourmedium-term growth and we expect themto become engines in the uture.

n Future Opportunities in Iraq/Kazakhstan/Nigeria, heavy oil andArctic will provide further growth potentialto 2020 and beyond. These could turninto major growth pipelines and enginesdown the road, subject to market andoperating conditions. Some are well ontheir way already.

54Our advocacy o natural gas in theenergy mix refects our belie thatnatural gas occupies the sweet spot inthe stress /opportunity nexus.

n Electricity demand growth willoutpace that o overall energy demand.By 2020, we expect electricityconsumption to have increased bybetween 25% and 35% as compared

to 2012.n As a source o electricity, natural gashas a considerably lower CO

2ootprint

and a lower water ootprint - thancoal, and is a more fexible partner orenewable electricity.

n Were condent about the supplypicture over the long term. Across theworld, there are vast reserves o gas,enough to last 250 years at todaysconsumption levels.

n Shells leadership role in natural

gas provides a strong platorm or ourcompany to play a key role in growingthe share o natural gas in the mix,at the expense o coal.

Our main ocus in renewablescontinues to be biouels, which sit inthe Downstream Engine.

n Shell has been involved indistributing biouels or over 30 years.In 2011 we started producing biouels.With Brazilian company, Cosan,we ormed a new company calledRazen. With annual production

capacity o about 2.2 billion litres,the JV is one o the worlds largestethanol producers. Brazilian sugar caneethanol is one o the most sustainableBiouels available on the market today.It also produces around 70% lowerCO

2than conventional gasoline.

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DOWNSTREAM ENGINE

UPSTREAM ENGINE

INTEGRATED GAS

RESOURCES PLAYS (UNCONVENTIONALS)

DEEPWATER

HEAVY OILIRAQ, KAZAKHSTAN, NIGERIA ARCTIC

FUTURE OPPORTUNITIES

FUTURE OPPORTUNITIESGROWTH PRIORITIESENGINES

STRATEGIC THEMES


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As we intend to increase energyproduction over the coming years,Shell maintains a sharp focus onmanaging the footprint of our operations,particularly with regards to CO2emissions and water use, while workingclosely with local communities.

n Global CO2

and water governanceplans are mandatory or each o the

strategic themes.n We continue to invest in CarbonCapture and Storage, as we aredoing with Quest in Canada andGorgon in Australia. An operationlike Groundbirch in Canada oersevidence we are making progresson the ground with regard to watereciency and recycling.

We strongly believe in partnerships,especially non-traditional, cross-sectoralones, as part o our strategy to bethe worlds most innovative energycompany.

n Our inventions over the years haveentitled us to more than 21,500 patentsthat are still in orce.

n We believe we can become even

more successul at innovation byworking with partners.

n We work closely with a wide rangeo companies, NGOs, academia andthe public sector to spark new ideas,share knowledge or minimise ouroperational ootprint. Such opennesshelps speed up developments inbiouels, solar power, energy eciency,water treatment and CO

2management,

but also helps improve ourunderstanding o the energy-water-ood

nexus and resilience.

In short, this strategy is about makingShell resilient in the ace o a volatileenergy uture, and at the same timehelping to design that uture.

n Shell continues to take a deepinterest in understanding long-termglobal trends and we continue to havesome o the best people in the world,capable o driving innovation.

n We continue to invest in ourcompanys resilience and position it towin in a competitive landscape througha stronger ocus on the best growthopportunities in our portolio.

n We invest in CO2 and watergovernance in our own operations andwe invest in collaborative partnershipsto address challenges that go beyondour own value chains.

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Shells Energy Strategy 2013