Russ Ford – Tight gas overview

ROYAL DUTCH SHELL PLCINVESTING FOR SUSTAINABLE GROWTH

1 Copyright of Royal Dutch Shell plc 29 November 2011

HOUSTON/SHREVEPORT

November 2011

RUSS FORDEXECUTIVE VICE PRESIDENT ONSHORE GAS

DEFINITIONS AND CAUTIONARY NOTE

Resources: Our use of the term “resources” in this presentation includes quantities of oil and gas not yet classified as SEC proved oil and gas. Resources are consistent with the Society of Petroleum Engineers 2P and 2C definitions.

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 24% 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


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’’, “scheduled”, ‘‘estimate’’, ‘‘expect’’, ‘‘goals’’, ‘‘intend’’, ‘‘may’’, ‘‘objectives’’, ‘‘outlook’’, ‘‘plan’’, ‘‘probably’’, ‘‘project’’, ‘‘risks’’, ‘‘seek’’, ‘‘should’’, ‘‘target’’, ‘‘will’’ 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 regulatory measures addressing climate change; (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 Annual Presentation / Form 20-F for the year ended December 31, 2010 (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, 29 November 2011. 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.

We may have used certain terms in this presentation that United States Securities and Exchange Commission (SEC) strictly prohibits us from including in our filings with the SEC, such as resources and oil in place. 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.

200

300

400

Mln Boe/d

GLOBAL ENERGY MIX

ENERGY OUTLOOK

Industry outlook

� Hydrocarbons dominate outlook

� Growth required in all sectors of energy mix

� Energy policy + sustained investment

Shell


0

100

200

1980 1990 2000 2010 2020 2030 2050

SHELL ESTIMATES

Shell

� Crude oil & oil products

� Natural gas & LNG

� Biofuels, wind, carbon capture + storage

� Petrochemicals

OIL

GAS

COALBIOMASS

WINDSOLAR

OTHER RENEWABLES

NUCLEAR

SHELL ACTIVITIES

2,000

2,500

3,000

1990 2000 2010

NATURAL GAS DEMAND

NATURAL GAS OUTLOOK

IEA: WORLD ENERGY OUTLOOK 2011, GAS GROWTHBCM

SOURCE: IEA

0

5

10

15

20

25

30

North America

Europe Asia Pacific

Middle East

+189%

+89%

+29%

+23%

Other

+86%

2008

2035

Mln Boe/d


CCGT: COMBINED CYCLE GAS TURBINE

� Abundant, Affordable, Acceptable

� Global gas resources ~250 years reserves at current production

� CCGT: gas-fired power compared to coal:

• 40% more energy efficient

• 50-70% less CO2

• Better complements with renewables

SOURCE: IEA

ATTRACTIVE ECONOMICS FOR ELECTRICITY PRODUCERS

SOURCE: SHELL ANALYSIS BASED ON EU DATA

GALLINA LNG SHIP - SINGAPORE

CAPITAL COST

NATURAL GAS ADVANTAGE: EXAMPLE CCGT

$/MW hour

LONG-RUN MARGINAL COST

0 50 100 150 200

CCGT

Coal

Nuclear

Wind

Solar Thermal

America Pacific East

Upstream

� Profitable growth; price upside

� >80% of total capital spending

� Sustained exploration investment

Downstream

� Stable capital employed

STRATEGY CAPITAL INVESTMENT

STRATEGY & CAPITAL ALLOCATION

UP-STREAM

50%

100%

EXPLORATION

HEAVY OIL & EOR

TIGHT GAS

DEEPWATER

TRADITIONAL

SOUR


� Stable capital employed

� Fewer refineries; upgrade chemicals assets

� More concentrated marketing positions

Financial outlook

� Generating surplus cashflow through cycle

� Investing for growth; competitive payout

� Substantial cashflow growth

GROWTH INVESTMENT – THROUGH CYCLE RETURNS

STREAM

DOWN-STREAM0%

2007-10 2011-14

INTEGRATED GAS

TRADITIONAL

MARKETING

REFINING

CHEMICALSDown-stream

ORGANISATION PRODUCTION AND CAPITAL INVESTMENT

SHELL UPSTREAM AMERICAS OVERVIEW

PRODUCTION2010/2014

CAPITAL INVESTMENT 2011-2014

Heavy Oil

Deep-water/Oil

On-shoreGas

Explo-ration

0%

25%

50%

75%

100%


UPSTREAM INTERNATIONAL UPSTREAM AMERICAS� On-shore tight gas and shale gas operations

� DW operations

� Other Oil operations

� Oil Sands mining + In-situ

� Explora-tion strategy

� Growing resource base

0%2010 2014

GLOBAL GAS OPPORTUNITY

GroundbirchDeep Basin Germany Ukraine

Foothills


Conventional

Tight

Shale

CBM

GLOBAL GAS RESOURCES

~12,000 TCF

GRAND ANIVA

SHALE GASTIGHT GAS

CBM

Key Shell positions

Marcellus

HaynesvilleEagle Ford

Arrow - CBM

Changbei

Fushun (JAA) study

Jinqui

South Africa (JAA) Study

Sao Francisco

North ShilouPinedale

2011 tight gas investment: ~$3.5 billion

Deep Basin

Foothills

Groundbirch

Pinedale

Haynesville

Marcellus

Eagle Ford0

500

1,000

1,500

2,000

2,500

0

100

200

300

400

500

2006 2007 2008 2009 2010 H1 2011 2012

Asset sales

PRODUCTION GROWTH

NORTH AMERICA TIGHT GAS

Mmscf/dKboe/d

Canada

USA


2006 2007 2008 2009 2010 H1 2011 2012

Haynesville JV

Pinedale

Groundbirch

Eagle Ford

Marcellus

Deep BasinFoothills

� Tight gas break-even price of $3-$5/mcf

� Drive for competitive performance

� 2011 ~ 300 Wells

COMPETITIVE POSITIONING

0

1

2

Petrohawk Ultra Shell EnCana EOG XTO Chesapeake Talisman

Other Direct Operating Cost

� Built significant, contiguous positions in resource plays across North America

� Acreage growth (+ 1.3 million net acres in 2010)

� Resource growth: East Resources Inc. + Eagle Ford acquisition 2010

� High value positions: exploration running room, low break even prices

Lifting costs $/mcfe

COMPETITIVE LIFTING COSTS


0

20

40

60

80

100

120

0 1 2 3 4 5 6 7 8 9 10

Pinedale - 2002Early Deep Basin - 2006Deep Basin - 2008*Haynesville - 2008Groundbirch - 2008

Petrohawk Ultra Shell EnCana EOG XTO Chesapeake Talisman

LEARNING CURVE ACCELERATION

Indexed Well Delivery Time per year since first production

SHELL ASSET BREAK EVEN PRICE

Years* DEEP BASIN EAST ONLY

0

2

4

6

8

Mature plays Emerging plays Total

BREAKEVEN PRICE ENTRY COST

$/mcfe – End 2010

DRILLING TECHNOLOGY UNLOCKS NEW GROWTH

CHINA + AUSTRALIA JVs WITH PETROCHINA

Changbei tight gas

Daning CBM

North Shilou CBM

Jinqiu tight gas


ACREAGE

TIGHT GAS

Arrow Energy LNG

COAL BED METHANE

China: Changbei drilling rig

Fushun tight gasChina: Fushun driling rig

20%

40%

60%

80%

100%

OtherWells

AUTOMATED TRUCK MOUNTED RIGS

WELLS MANUFACTURING JV

WELL COSTS

Increasingshare in wells

Reducing share in facilities

Major projects – capex components as % of total spend


0%2010 2012 2014 2016 2018 2020

WellsFacilities

50/50 JV with CNPC

� Tight gas development requires ‘000’s of wells � Sourcing rigs, services and drilling equipment

from China� Integrated plan to drill and complete repeatable,

low cost wells

CENTRALISED SUPPLY FACILITY FOR KEY LOGISTICS

ECONOMIC BENEFITS & SUSTAINABLE DEVELOPMENT

NORTH AMERICA TIGHT GAS

� Gas – the cleanest fossil fuel

� Abundant resources

� Jobs + energy security

SUSTAINABLE DEVELOPMENT:


� Safety: Shell and Contractor

� Water Management + Air emissions

� Good neighbour in community

� Support state regulation

� Hydraulic fracturing

TECHNOLOGY & SUSTAINABLE DEVELOPMENT

HYDRAULIC FRACTURING

SCHEMATIC OVERVIEW

Technology

� Increases access to new reserves

� Increases well productivity & ultimate recovery

� Recent advances in technology:

• Multi-stage fracing, horizontal wells

BOP

Conduct casing

Water treatment

Fracing fluid injectionWater

delivered

Recycling pit

Water table

Ground-water


Sustainable development

� Well design to avoid ground water contamination

� Requires 1 to 5 million gallons of water per well

� Water typically treated & re-used

� Support chemical disclosure

Fractures caused by the pressure of fluids pumped from surface

Sand keeps fracture open

Gas flowing into well

Surface casing

SHELL & TIGHT GAS: 5 CORE PRINCIPLES

Safety & Well IntegrityShell designs, constructs and operates wells and facilities in a safe and responsible way.

WaterShell conducts its operations to

FootprintShell works to reduce its operational footprint.

Community


Shell conducts its operations to protect groundwater and reduce water use as reasonably practicable.

AirShell conducts its operations in order to protect air quality and control its fugitive emissions.

Shell engages with local communities regarding socio-economic impacts that may arise from our operations.

GREEN CORRIDOR - CANADA

LNG FOR TRANSPORT

� Shell’s 1st large scale LNG for transport

project• Ft. McMurray - Calgary – Vancouver

• 1st phase: 0.3 mtpa LNG plant

Ft. McMurray

Edmonton

Calgary

Jumping PoundVancouver


Canada: Jumping Pound Gas Plant

High res picture coming

LNG powered truck

COMMITMENT

SHELL

Customer and partner focus

Profitability & performance

“As part of the Shell Business Principles, we commit

to contribute to sustainable development. This

requires balancing short and long term interests,

integrating economic, environmental and social

considerations into business decision-making.”


Sustainability & growth

Value added technology

Shell General Business Principles

ROYAL DUTCH SHELL PLC

Q&A


HOUSTON/SHREVEPORT

NOVEMBER 2011

Russ Ford – Tight gas overview

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