ROYAL DUTCH SHELL PLC SHELL IN NIGERIA
PORT HARCOURT, NIGERIA OCTOBER 10, 2012 Copyright of Royal Dutch Shell plc
10 October 2012
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SHELL IN NIGERIA IAN CRAIG EXECUTIVE VICE PRESIDENT SUB-SAHARAN AFRICA Copyright of Royal Dutch Shell plc
10 October 2012
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CAUTIONARY NOTE
Spill volumes, both due to operational and crude theft/sabotage activities, are estimates made during the regulated Joint investigation visits. The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate entities. In this presentation “Shell”, “Shell group” and “Royal Dutch Shell” are sometimes used for convenience where references are made to Royal Dutch Shell plc and its subsidiaries in general. Likewise, the words “we”, “us” and “our” are also used to refer to subsidiaries in general or to those who work for them. These expressions are also used where no useful purpose is served by identifying the particular company or companies. ‘‘Subsidiaries’’, “Shell subsidiaries” and “Shell companies” as used in this presentation refer to companies in which Royal Dutch Shell either directly or indirectly has control, by having either a majority of the voting rights or the right to exercise a controlling influence. The companies in which Shell has significant influence but not control are referred to as “associated companies” or “associates” and companies in which Shell has joint control are referred to as “jointly controlled entities”. In this presentation, associates and jointly controlled entities are also referred to as “equity-accounted investments”. The term “Shell interest” is used for convenience to indicate the direct and/or indirect (for example, through our 23% shareholding in Woodside Petroleum Ltd.) ownership interest held by Shell in a venture, partnership or company, after exclusion of all third-party interest. 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 presentation, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for Shell’s products; (c) currency fluctuations; (d) drilling and production results; (e) reserves estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, fiscal and regulatory developments including potential litigation and regulatory measures as a result of climate changes; (k) economic and financial market conditions in various countries and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; and (m) changes in trading conditions. 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. Additional factors that may affect future results are contained in Royal Dutch Shell’s 20-F for the year ended 31 December, 2011 (available at www.shell.com/investor and www.sec.gov ). These factors also should be considered by the reader. Each forward-looking statement speaks only as of the date of this presentation, 10 October 2012. 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 presentation. There can be no assurance that dividend payments will match or exceed those set out in this presentation in the future, or that they will be made at all. We use certain terms in this presentation, such as resources, that the United States Securities and Exchange Commission (SEC) 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, available on the SEC website www.sec.gov. You can also obtain these forms from the SEC by calling 1-800-SEC-0330.
Copyright of Royal Dutch Shell plc
10 October 2012
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NIGERIA
~167 million people
20% of population live in the Niger Delta
Federal Republic
OPEC estimates oil reserves of ~35 billion barrels and ~185 tcf gas reserves*
NIGERIA
THE NIGER DELTA
Produces ~2.5 million barrels of oil per day 400 km
MAJOR OIL AND GAS PROVINCE SHELL PRESENCE SINCE 1950s *Definition not consistent with SEC proved reserves Copyright of Royal Dutch Shell plc
10 October 2012
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ECONOMIC GROWTH
NIGERIA
+3% p.a
+9% p.a
BRAZIL
+2% p.a
+4% p.a
MALAYSIA
+4% p.a
+5% p.a
WORLD ECONOMY
+4% p.a
+3% p.a
SUB-SAHARAN AFRICA
+3% p.a
+5% p.a
1996-1999
2000-2010
NIGERIA: ONE OF FASTEST GROWING ECONOMIES GDP per capita ~ $16002600 (South Africa $8700 in 2011) Oil & gas revenue account for 80% of government revenues, ~30% of GDP and 95% of export revenues Annual inflation 12-14% High unemployment: >20%
Source: IMF real terms growth, WWM Global Insights Copyright of Royal Dutch Shell plc
10 October 2012
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NIGERIA ECONOMY TOP BUSINESS COMPLAINTS
ECONOMIC COST OF POWER OUTAGES
Electricity
Nigeria
Finance (access)
Malawi Uganda
Finance (cost)
Kenya Tax rates
South Africa
Macro econ
Tanzania
Corruption
Madagascar Benin
Transportation
Cabo Verde
Crime
Senegal
Tax administration
Cameroon
Access to land
Burkina Faso 0
20
40
60
% of respondents
Source: WB Investment Climate Assessment 2011 Copyright of Royal Dutch Shell plc
10 October 2012
80
100
0
1
2
3
4
% of GDP
Source: derived from Eberhard and others 2009 6
SAFETY PERSONAL SAFETY INDICATORS
WORKPLACE FATALITIES
per million man hours
# 12
1.0
10 8 6
0.5
Iriama (7 fatalities)
4 2 0
0.0 2008
2009
2010
2008
2011
2012 (end Aug) Shell in Nigeria TRCF (total recordable case frequency)
2009
2010
Motor vehicle incident Worksite hazard
2011
2012
Drowning Security
KIDNAPPINGS #
100
2 fatalities in 2012 to date
50
armed attack on an environmental survey
Kidnapping remains a real threat for staff and families
0 2008
2009
Staff Family
2010 Contractors
2011
2012 (end August)
All data on a Shell operated basis Copyright of Royal Dutch Shell plc
10 October 2012
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SHELL FOOTPRINT IN NIGERIA OFFSHORE AND ONSHORE Divested In Process
40 ERHA/BOSI
OML 4/38/41 42
34
30
Long history of operations in country: >50 years
SPDC JV – Onshore/Shallow water production
SNEPCO – Deepwater production
NLNG – LNG JV
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GBARAN UBIE AFAM POWER STATION
BONGA
OGONILAND
NIGERIA LNG
OPL245
PRODUCTION (SHELL SHARE 2011) kboe per day
mtpa capacity
300 250 200
5
150 100 50 0
0 SPDC
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SNEPCO 10 October 2012
NLNG (RHS) 8
SHELL BUSINESSES IN NIGERIA
EXPLORATION & PRODUCTION Onshore/shallow offshore
People: 3,500 (30,000 contractors) Potential production: ~1 MM boe/d ~1,000 wells, ~8000 km pipelines
SPDC JV
(55% NNPC, 30% SPDC Ltd, 10% Total, 5% Eni)
EXPLORATION & PRODUCTION Deepwater
People: ~600 Bonga & Erha production Operated production capacity: 225,000 boe/d
SNEPCo
People: ~1,000 LNG production capacity: 22 mtpa, Trains 1-6
NLNG
(49% NNPC, 25.6% Shell, 15% Total, 10.4% Eni)
DOMESTIC GAS DISTRIBUTION
People: ~40 Location: Niger Delta Downstream gas supply
SNG
(100% Shell)
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LIQUEFIED NATURAL GAS
(100% Shell) 10 October 2012
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SNEPCO: DEEPWATER OML 118 - Bonga, Shell 55% Discovered 1995, on-stream 2005 FPSO capacity: 200 kbbl/d & 150 MMscf/d SNEPCO operated OML 133 – Erha/Bosi, Shell 44%, non-operated Onstream : 2006 FPSO Capacity: 190 kbbl/d Bonga NW development (OML 118), Shell 55% 45 kboe/d expansion Tie back to Bonga; on-stream 2014/2015
Bonga FPSO ( Shell 55%)
OPL 245 – Zabazaba, Shell 50%, non operated Existing discoveries with development potential Further exploration potential
SHELL PRODUCTION 106 KBOE/D (2011) PSC CONTRACTS; 100% IOC GROWTH POTENTIAL
Erha FPSO (Shell 44%)
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10 October 2012
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NLNG: LNG EXPORT
Shell 25.6%, NNPC 49%, Total 15%, ENI 10.4% 6 LNG trains, 22 mtpa capacity (plus 5 mtpa of NGLs) Train 1 and 2 on-stream 1999 Train 6 on-stream 2007 Expansion potential
NLNG T1 & 2 Construction (Shell 25.6%)
GROWTH TO 6 TRAINS SINCE 1999 INCORPORATED JV; SELFFINANCING
NLNG T6 construction
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10 October 2012
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SPDC JV OVERVIEW MUTIU SUNMONU MANAGING DIRECTOR SPDC Copyright of Royal Dutch Shell plc
10 October 2012
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SPDC JV: ONSHORE/SHALLOW WATER JV
Bonny Terminal
Unincorporated JV structure
Shell 30%, NNPC 55%, Total 10%, ENI 5%
Joint Operating Agreement defines rights & obligations of operator (SPDC Ltd) and non-operating partners
Decisions by unanimous vote of partners
All partners fund in proportion to their share
Sea Eagle platform
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10 October 2012
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SPDC JV: GBARAN UBIE & AFAM VI GBARAN UBIE
Gbaran Ubie Integrated gas project
World class gas project; on-stream 2010 Delivered in height of the security problems 1 bcf/d & 70 kbbl/d liquids capacity $1 billion in local content 95% of construction workforce was Nigerian 4 GMOUs in the area covering 44 local communities 200,000 people benefiting from electrification projects.
AFAM VI CCGT
gas fired power plant First Power 2008, construction began 2005 650 MW capacity 14%-20% of the power contribution to the national grid Gas provided by SPDC Okoloma facility (240 mmscf/d capacity)
Afam VI power plant SPDC = 30% Shell, 55% NNPC, 10% Total, 5% Agip; all data on 100% basis Copyright of Royal Dutch Shell plc
10 October 2012
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SPDC JV: FOOTPRINT MANAGEMENT
SPDC JV
6.5
•Deg N •6.5
non-producing producing
Recent divestments help SPDC to manage its footprint
~2,200 km oil pipelines
~850 km gas pipelines
~4,600 km of flow lines
•non-producing •producing
WARRI
5.5
Largest and most diverse of the IOC footprints onshore
•Mobil Exxon Mobil
SPDC
Deg N
•WARRI
•5.5 PHC
•PHC
4.5
•4.5
3.5 4
5
6
Deg E
7
8
9
Agip (ENI)
•3.5 •4
•5
6.5
•9
Chevron
Deg N 6.5
non-producing producing
WARRI
5.5
•8
Chevron
Agip
Deg N
•6 •Deg E•7
non-producing producing
WARRI
5.5
PHC
PHC 4.5
4.5
3.5
3.5 4
5
6
Deg E
7
8
Copyright of Royal Dutch Shell plc
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4
10 October 2012
5
6
Deg E
7
8
9
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SPDC JV – MAJOR CHALLENGES ONGOING CHALLENGES CRUDE THEFT AND ILLEGAL REFINING
FLARE REDUCTION - PROGRESS BEING MADE
Large and small scale theft
Illegal refining of stolen crude
Copyright of Royal Dutch Shell plc
10 October 2012
Flare site in the Niger Delta
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CRUDE THEFT CAUSES
Estimates of 150,000 bbl/d and upwards $ 6.1 bln revenue loss (2011 prices) Stolen crude exported
Imports & subsidy 445,000 bbl/d refining capacity; underutilized in practice Imports of oil products + $ 8 bln subsidies (2011) Stolen crude refined for local and regional market
Fuel queue during January 2012 national strike
Crude Theft, Okololunch, Sept 2012 Copyright of Royal Dutch Shell plc
10 October 2012
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SPDC: LARGE SCALE CRUDE THEFT kbbl per day 150 Niger Delta wide theft estimate of 150,000 bbl/d or ~55,000,000 bbl/year
75
2011 Spills due to sabotage on SPDC rights of way or from SPDC facilities 11,806 bbl
Measured as stolen from SPDC trunk lines: ~40,000 bbl/d or ~15,000,000 bbl/year
2011 Operational Spills 3,595 bbl
0 72% recovery during cleanup in 2011
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10 October 2012
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NIGERIA: SPDC JV ENVIRONMENT: SPILLS
PIPELINE REPLACEMENT
oil spills, thousand tonnes
# 200
15
Nembe Creek trunk line: complete 2010 150
10
97 km; $1.1 billion
Trans Niger Pipeline loop project 100
5
Around Ogoniland; major area of crude theft
Pending approval by government partner
50
0
0 2006
2007
2008
volume of spills: number of spills (RHS):
2009
2010
2011
Sabotage Operational Operational Sabotage
2011 SPILL AND REMEDIATION PERFORMANCE
30% drop in operational spill volume
351 sites remediated (272 in 2010)
Reduction in remediation backlog from 400 end 2010 to 274 sites end 2011
SPDC = 30% Shell, 55% NNPC, 10% Total, 5% Agip; all data on 100% basis Copyright of Royal Dutch Shell plc
10 October 2012
Nembe Creek trunk line replacement 19
SPDC: PROGRESS ON FLARING PERFORMANCE
ASSESSING NEW INVESTMENT FOR GAS UTILIZATION
boe gas flared per barrel produced (2010 data) Onshore
Offshore
0.1
0.0 Nigeria industry
SPDC JV
Nigeria industry
Forcados Yokri & Southern Swamp AGG/Dom gas
Completion in 2014/2015; ~ $4 billion investment
Gas gathering, facility upgrades and new oil production
After completion, SPDC flaring intensity is expected to be below the current worldwide industry average
SNEPCO
ENVIRONMENT: FLARING mtpa CO2e flaring
SPDC JV production kboe/d
1000
15
800 10
600 400
5
200 0
0 2005
2006
2007 2008 Gas Flared
2009 2010 2011 Production
SPDC = 30% Shell, 55% NNPC, 10% Total, 5% Agip; all data on 100% basis Copyright of Royal Dutch Shell plc
10 October 2012
Forcados Yokri - South bank 20
SHELL IN NIGERIA OVERVIEW IAN CRAIG EXECUTIVE VICE PRESIDENT SUB-SAHARAN AFRICA Copyright of Royal Dutch Shell plc
10 October 2012
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SHELL IN NIGERIA
Shell’s portfolio & track record
Funding; security; PIB; organisational capability
2012 Progress:
2 FIDs of onshore associated gas projects
Deepwater appraisal planning
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10 October 2012
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NIGERIA FIELD TRIP QUESTIONS & ANSWERS
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10 October 2012
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