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Responsible Investment Annual Briefing

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Responsible Investment Annual Briefing

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Responsible Investment Annual Briefing

  1. 1. Royal Dutch Shell April 11, 2019 Royal Dutch Shell plc April 11, 2019 Responsible Investment Annual Briefing #makethefuture
  2. 2. Royal Dutch Shell April 11, 2019 Definitions and cautionary note This presentation contains data and analysis from Shell’s new Sky scenario. Unlike Shell’s previously published Mountains and Oceans exploratory scenarios, the Sky scenario is based on the assumption that society reaches the Paris Agreement’s goal of holding the rise in global average temperatures this century to well below two degrees Celsius (2°C) above pre-industrial levels. Unlike Shell’s Mountains and Oceans scenarios which unfolded in an open-ended way based upon plausible assumptions and quantifications, the Sky Scenario was specifically designed to reach the Paris Agreement’s goal in a technically possible manner. These scenarios are a part of an ongoing process used in Shell for over 40 years to challenge executives’ perspectives on the future business environment. They are designed to stretch management to consider even events that may only be remotely possible. Scenarios, therefore, are not intended to be predictions of likely future events or outcomes and investors should not rely on them when making an investment decision with regard to Royal Dutch Shell plc securities. Additionally, it is important to note that Shell’s existing portfolio has been decades in development. While we believe our portfolio is resilient under a wide range of outlooks, including the IEA’s 450 scenario (World Energy Outlook 2016), it includes assets across a spectrum of energy intensities including some with above-average intensity. While we seek to enhance our operations’ average energy intensity through both the development of new projects and divestments, we have no immediate plans to move to a net-zero emissions portfolio over our investment horizon of 10-20 years. Although we have no immediate plans to move to a net-zero emissions portfolio, in November of 2017, we announced our ambition to reduce our net carbon footprint in accordance with society’s implementation of the Paris Agreement’s goal of holding global average temperature to well below 2°C above pre-industrial levels. Accordingly, assuming society aligns itself with the Paris Agreement’s goals, we aim to reduce our Net Carbon Footprint, which includes not only our direct and indirect carbon emissions, associated with producing the energy products which we sell, but also our customers’ emissions from their use of the energy products that we sell, by around 20% in 2035 and by around 50% in 2050. Gearing is defined as net debt as a percentage of total capital. With effect from 2018, the net debt calculation includes the fair value of derivative financial instruments used to hedge foreign exchange and interest rate risks relating to debt, and associated collateral balances. Free Cash Flow is defined as the sum of “Cash flow from operating activities” and “Cash flow from investing activities”. Cash flow from operating activities excluding working capital movements is defined as “Cash flow from operating activities” less the sum of the following items in the Consolidated Statement of Cash Flows: (i) (increase)/decrease in inventories, (ii) (increase)/decrease in current receivables, and (iii) increase/(decrease) in current payables. Organic free cash flow is defined as free cash flow excluding inorganic capital investment (acquisitions) and divestment proceeds. ROACE (Return on Average Capital Employed) is defined as the sum of current cost of supplies (CCS) earnings attributable to shareholders excluding identified items for the current and previous three quarters, as a percentage of the average capital employed for the same period. Capital employed consists of total equity, current debt and non-current debt. Capital investment comprises capital expenditure, exploration expense excluding well write-offs, new investments in joint ventures and associates, new finance leases and investments in Integrated Gas, Upstream and Downstream equity securities, all of which on an accruals basis. Divestments comprises proceeds from sale of property, plant and equipment and businesses, joint ventures and associates, and other Integrated Gas, Upstream and Downstream investments, reported in “Cash flow from investing activities (CFFI)”, adjusted onto an accruals basis and for any share consideration received or contingent consideration recognised upon divestment, as well as proceeds from the sale of interests in entities while retaining control (for example, proceeds from sale of interest in Shell Midstream Partners, L.P.). Headline divestments is a non-GAAP metric. Divestment cash proceeds in 2016-2018 were equal to $26.7 billion (in Cash flow from investing activities) and $2.1 billion (“Change in non-controlling interest” in Cash flow from financing activities, primarily related to Shell Midstream Partners, L.P.). Additionally certain contingent payments associated with these divestments are expected to be received in the future. This presentation contains the following forward-looking Non-GAAP measures: Organic Free Cash Flow, Free Cash Flow, Capital Investment, CCS Earnings less identified items, Operating Expenses, ROACE, Capital Employed and Divestments. We are unable to provide a reconciliation of the above forward-looking Non-GAAP measures to the most comparable GAAP financial measures because certain information needed to reconcile the above Non-GAAP measure to the most comparable GAAP financial measure is dependent on future events some which are outside the control of the company, such as oil and gas prices, interest rates and exchange rates. Moreover, estimating such GAAP measures with the required precision necessary to provide a meaningful reconciliation is extremely difficult and could not be accomplished without unreasonable effort. Non-GAAP measures in respect of future periods which cannot be reconciled to the most comparable GAAP financial measure are calculated in a manner which is consistent with the accounting policies applied in Royal Dutch Shell plc’s financial statements. As the projects are expected to be multi- decade producing the per barrel projection will not be reflected either in earnings or cash flow in the next five years. Reserves: Our use of the term “reserves” in this presentation means SEC proved oil and gas reserves. 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 reserves. Resources are consistent with the Society of Petroleum Engineers (SPE) 2P + 2C definitions. The forward-looking break-even price (BEP) presented is calculated based on all forward-looking costs associated from Final Investment Decision (FID). Accordingly, this typically excludes exploration and appraisal costs, lease bonuses, exploration seismic and exploration team overhead costs. The forward-looking BEP is calculated based on our estimate of resources volumes that are currently classified as 2p and 2c under the Society of Petroleum Engineers’ Resource Classification System. The financial measures provided by strategic themes represent a notional allocation of ROACE, capital employed, capital investment, free cash flow, organic free cash flow and underlying operating expenses of Shell’s strategic themes. Shell’s segment reporting under IFRS 8 remains Integrated Gas, Upstream, Downstream and Corporate. All outlook on financial metrics and/or alternative performance measures excludes the effect of IFRS 16 implementation. Also, in this presentation we may refer to “Shell’s Net Carbon Footprint”, which includes Shell’s carbon emissions from the production of our energy products, our suppliers’ carbon emissions in supplying energy for that production and our customers’ carbon emissions associated with their use of the energy products we sell. Shell only controls its own emissions but, to support society in achieving the Paris Agreement goals, we aim to help and influence such suppliers and consumers to likewise lower their emissions. The use of the terminology “Shell’s Net Carbon Footprint” is for convenience only and not intended to suggest these emissions are those of Shell or its subsidiaries. The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate legal 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 Royal Dutch Shell plc and its subsidiaries in general or to those who work for them. These terms are also used where no useful purpose is served by identifying the particular entity or entities. ‘‘Subsidiaries’’, “Shell subsidiaries” and “Shell companies” as used in this presentation refer to entities over which Royal Dutch Shell plc either directly or indirectly has control. Entities and unincorporated arrangements over which Shell has joint control are generally referred to as “joint ventures” and “joint operations”, respectively. Entities over which Shell has significant influence but neither control nor joint control are referred to as “associates”. The term “Shell interest” is used for convenience to indicate the direct and/or indirect ownership interest held by Shell in an entity or unincorporated joint arrangement, after exclusion of all third-party interest. This presentation contains forward-looking statements (within the meaning of the U.S. Private Securities Litigation Reform Act of 1995) 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 “aim”, “ambition’, ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, ‘‘estimate’’, ‘‘expect’’, ‘‘goals’’, ‘‘intend’’, ‘‘may’’, ‘‘objectives’’, ‘‘outlook’’, ‘‘plan’’, ‘‘probably’’, ‘‘project’’, ‘‘risks’’, “schedule”, ‘‘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. No assurance is provided that future dividend payments will match or exceed previous dividend payments. 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 risk factors that may affect future results are contained in Royal Dutch Shell’s Form 20-F for the year ended December 31, 2018 (available at www.shell.com/investor and www.sec.gov). These risk factors also expressly qualify all forward-looking statements contained in this presentation and should be considered by the reader. Each forward-looking statement speaks only as of the date of this presentation, April 11, 2019. Neither Royal Dutch Shell plc 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, such as resources, in this presentation that the United States Securities and Exchange Commission (SEC) strictly prohibits us from including in our 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. 2
  3. 3. Royal Dutch Shell April 11, 2019 Ben van Beurden Chief Executive Officer Royal Dutch Shell plc
  4. 4. Royal Dutch Shell April 11, 2019 4 Strategic ambitions 1 Methane emissions intensity is for Shell operated oil and gas assets. Focus on delivering strong results Thrive in the energy transition World-class investment case Strong licence to operate 2018 ◼ Portfolio reshaped, positioned for long-term resiliency ◼ Focus on asset resilience and longevity through the energy transition ◼ Growth in areas that will be essential in the energy transition ◼ Strong financial delivery and strengthened financial framework ◼ Simpler organisation with higher returns ◼ ~$31 billion of organic free cash flow ◼ Leading through the energy transition ◼ Shorter-term targets to reduce the Net Carbon Footprint ◼ Maintain emissions intensity below 0.2% by 20251
  5. 5. Royal Dutch Shell April 11, 2019 ESG programme Key events ◼ Responsible Investment Annual Briefing (since 2006) ◼ Board Engagement Day (2018) ◼ Chair roadshows ◼ Remuneration Committee (REMCO) roadshows ◼ Engagements with IIGCC1 (CA100+2) 1 The Institutional Investors Group on Climate Change; 2 Climate Action 100+ (investor initiative). www.shell.com/esg 5 Gerard Kleisterlee, Chair of the REMCO, meeting shareholders in London
  6. 6. Royal Dutch Shell April 11, 2019 Sir Nigel Sheinwald Chair of the CSRC Royal Dutch Shell plc
  7. 7. Royal Dutch Shell April 11, 2019 Linda StuntzCatherine J. Hughes Sir Nigel Sheinwald Chair Responsibilities ◼ Assist and advise Board on: ◼ Safety – HSSE & SP Control Framework ◼ Environment, including climate change and social impact of projects ◼ Ethics: Shell General Business Principles and Code of Conduct ◼ Review other major issues of public concern affecting Shell’s reputation ◼ Input into the Shell Sustainability Report Corporate and Social Responsibility Committee (CSRC) 7 Culture & Conduct
  8. 8. Royal Dutch Shell April 11, 2019 CSRC areas of focus 2018 2019 Safety ◼ Process safety Environment & greenhouse gas ◼ Net Carbon Footprint ◼ Nature-based solutions ◼ Contributions to Sky and Shell Energy Transition report Ethics & compliance ◼ Societal licence to operate Country focus ◼ Pakistan, Nigeria, Netherlands (Groningen) Visits ◼ Nigeria, Moerdijk Safety ◼ Process safety, road transport Environment & greenhouse gas ◼ Net Carbon Footprint ◼ Methane emissions and plastics ◼ Advise REMCO on sustainability and energy transition Ethics & compliance ◼ Conduct & culture Country focus ◼ Nigeria, Brazil, Canada (LNG), Netherlands (Groningen) Visits ◼ Singapore, others 8 The CSRC is active and involved Skyline of SingaporePort Harcourt, Nigeria
  9. 9. Royal Dutch Shell April 11, 2019 9 Industry Associations Climate Review 1 Full review is available here; 2 American Fuel & Petrochemical Manufacturers. Memberships should not undermine Shell’s corporate climate positions Selection Assessment Findings Actions ◼ Selected 19 industry associations because their climate-related policy positions have brought them to the attention of investors and NGOs; ◼ and because they operate in regions or countries with significant Shell business activities ◼ Alignment assessed against public support of 4 policy positions: ◼ The Paris Agreement; ◼ Government-led carbon pricing; ◼ Policy frameworks for low-carbon technologies; and ◼ The role of natural gas ◼ Alignment with 9 industry associations, some misalignment with 9, material misalignment with 1 ◼ Improve internal governance ◼ Developed a set of climate-related principles for participation in industry associations ◼ Published review report on 2 April 20191 ◼ Announced withdrawal from AFPM2 ◼ Implement new principles in 2019 ◼ Track and report material misalignments on Shell website
  10. 10. Royal Dutch Shell April 11, 2019 10 GHG metrics in remuneration ◼ CSRC advises REMCO on sustainable development-related measures ◼ Greenhouse gas (GHG) metrics in the 2018 and 2019 scorecard cover close to 90% of the operated direct and indirect emissions ◼ The Group annual bonus scorecard is aligned for Directors and staff 1 Solomon’s utilised equivalent distillation capacity. ◼ Strategy drives change ◼ Remuneration follows and supports strategy Cash flow from operating activities Operational excellence Sustainable development 30% 50% 20% 12.5% LNG liquefaction 12.5% Production 12.5% Downstream availability 12.5% Project delivery 5% Personal safety 5% Process safety 10% GHG management 10% Environment 10% Safety 2018 Annual Bonus Scorecard 10% GHG management ◼ Refining GHG intensity in tonne CO2-equivalent per UEDCTM 1 ◼ Chemicals GHG intensity in tonne CO2-equivalent per tonne of steam cracker high-value chemicals production ◼ Upstream and Integrated Gas GHG intensity in tonnes CO2-equivalent per tonne production
  11. 11. Royal Dutch Shell April 11, 2019 11 Remuneration developments – energy transition 1 Long-Term Incentive Plan. Evolution of GHG and energy transition-related metrics ◼ Measures are evolving ◼ Introduction of energy transition metric in LTIP in 2019 2020 Policy Review ◼ GHG management in Group annual bonus scorecard: ◼ ~60% of operated direct and indirect emissions ◼ Applies to ~55,000 people ◼ Evolved GHG management in Group annual bonus scorecard (intensities) ◼ Close to 90% of operated direct and indirect emissions ◼ Energy transition in LTIP1: ◼ 3-year NCF target (energy products sold) ◼ Measures promoting NCF reduction in the long term ◼ GHG management in Group annual bonus scorecard 2017 2018 2019
  12. 12. Royal Dutch Shell April 11, 2019 25% 25%25% 25% 75% Comparative measures 25% Absolute measures 12 Remuneration developments – energy transition Energy transition LTIP metrics 1 For the 2019 award, the target is a 2-3% reduction in NCF from the 2016 baseline NCF, disclosed in the “Climate change and energy transition” section on page 77 of Shell’s 2018 Annual Report. ◼ 10% weighting, expected to increase over time ◼ Applies to 150 senior executives ◼ Key collaboration with CA100+ and major shareholders 2018 LTIP structure 2019 LTIP structure TSR ROACE CFFO FCF TSR ROACE 22.5% 22.5% 22.5% 22.5% 10.0% Energy transition 32.5% Absolute measures 67.5% Comparative measures CFFO FCF ◼ The energy transition condition will contain a mix of measures that set the foundation to contribute to Shell’s strategic ambitions in the longer run: ◼ NCF: a target for reducing the NCF of the energy products Shell sells1 ◼ Growth of our power business ◼ Advanced biofuels technology ◼ Development of systems to capture and absorb carbon
  13. 13. Royal Dutch Shell April 11, 2019 Ben van Beurden Chief Executive Officer Royal Dutch Shell plc
  14. 14. Royal Dutch Shell April 11, 2019 14 Shell cares Enabling better business outcomes Care Care for communities and deepening our societal licence to operate A diverse and inclusive work environment Enable people to be at their best through engagement and care Setting the standards on worker welfare No harm, no leaks #Iamgoalzero Safety leadership Worker welfare Engagement and performance Diversity and inclusion Care for communities
  15. 15. Royal Dutch Shell April 11, 2019 No harm Good products Trusted company 15 Strong societal licence to operate Shell has a long history of caring
  16. 16. Royal Dutch Shell April 11, 2019 Donny Ching Legal Director Royal Dutch Shell plc
  17. 17. Royal Dutch Shell April 11, 2019 2018 Shell’s ethics and compliance programme Ethics and Compliance (E&C) staff ◼ 148 staff, reporting to Chief E&C Officer ◼ Chief E&C Officer reports to Legal Director ◼ Regular updates to RDS plc Board Training ◼ Around 146,750 online courses taken ◼ Around 12,925 face-to- face courses taken ◼ 143 Senior Executives participated in ethical leadership expectations sessions Based on core values: honesty, integrity and respect for people Knowing our counterparties Speaking up ~10 million 7,759 Counterparties, existing and potential business partners screened on anti-bribery, anti-money laundering and trade compliance requirements Enhanced pre-screenings for higher-risk contracts 1,584 370 266 92 Reports to Shell Global Helpline (76% online) Substantiated Code of Conduct allegations Employees or contractor staff subject to disciplinary action Contract terminations and dismissals 17
  18. 18. Royal Dutch Shell April 11, 2019 External Environment Board oversight ◼ Audit Committee ◼ Corporate and Social Responsibility Committee (CSRC) ◼ Nigeria Special Litigation Committee ◼ Business Integrity Committee Link to E&C Manual Shell General Business Principles Board of RDS plc, CEO and Executive Committee Businesses and Functions Legal Entities Code of Conduct Strategy, Planning and Appraisal Statement on Risk Management Standards and Manuals Controls and Assurance 18
  19. 19. Royal Dutch Shell April 11, 2019 Year Event1 1998 Malabu awarded licence for OPL 245 2001 Shell Nigeria Ultra Deep (“SNUD”) farms in 2001 Federal Government of Nigeria (“FGN”) revokes the Malabu Licence 2002 SNUD bids for and is awarded OPL 245 by FGN and later signs a PSC with Nigerian National Petroleum Corporation (“NNPC”) 2002 Various litigations follow 2006 FGN settles litigation with Malabu and reallocates licence to Malabu Malabu and SNUD now have competing legal rights to the Block 2007 Shell (SNUD) commences Bilateral Investment Treaty arbitration against the FGN for wrongful expropriation 2008 FGN seeks resolution, negotiations commence 2010 Negotiations now include ENI Settlement with FGN negotiated with Attorney General of FGN, Minister of Petroleum Resources, Minister of Finance and senior NNPC officials 2011 Settlement of all outstanding disputes achieved. FGN receives $1.3 bln: Shell releases signature bonus in return for the licence and pays $110.04 mln to ENI (NAE); ENI (NAE) pays FGN $1,092.04 mln for rights to the block; Malabu relinquished all claims on OPL 245 in exchange for payment from FGN of $1,092.04 mln 2017 Court of Milan decided that Shell and its four former employees should be remanded for trial 2018 Italian trial proceedings started 2019 Italian trial ongoing 2019 RDS plc informed of DPP preparing to prosecute 19 OPL 245 1 Further information can be found in Note 25 of the Consolidated Financial Statements of RDS filed in the 2018 Annual Report and Form 20-F.
  20. 20. Royal Dutch Shell April 11, 2019 20 OPL 245 Shell media statement: “Based on our review of the Prosecutor of Milan's file and all of the information and facts available to us from that file, we do not believe that there is a basis to convict Shell or any of its former employees in Italy. If the evidence ultimately proves that improper payments were made by Malabu or others to then current government officials in exchange for improper conduct relating to the 2011 settlement of the long standing legal disputes, it is Shell’s position that none of those payments were made with its knowledge, authorisation or on its behalf.” “We believe the courts in Italy will conclude that there is no case against Shell or its former employees.” “Shell attaches the greatest importance to business integrity. It’s one of our core values and is a central tenet of the Business Principles that govern the way we do business. Shell has clear rules on anti-bribery and corruption and these are included in our Code of Conduct for all staff. There is no place for bribery or corruption in our company.”
  21. 21. Royal Dutch Shell April 11, 2019 Harry Brekelmans Director Projects & Technology Royal Dutch Shell plc
  22. 22. Royal Dutch Shell April 11, 2019 2018 HSSE performance Injuries – TRCF1 (per million working hours) Goal Zero on safety Million tonnes CO2-equivalent Upstream flaring Thousand tonnes Operational spills Number of incidents Process safety Goal Zero No harm, no leaks million working hours # Working hours (RHS2)TRCF Volume of spills Number of spills (RHS) Tier 1 incidents Tier 2 incidents 22 1 Total Recordable Case Frequency; 2 Right-hand side.
  23. 23. Royal Dutch Shell April 11, 2019 23 Case studies Upstream / Projects & Technology Bonga, offshore Nigeria SSAGS Project, onshore Nigeria Goal Zero No harm, no leaks A Bonga ‘family unit’ on the deck of Bonga, Nigeria Key to performance ◼ Impactful dialogues: staff welfare & worksite safety ◼ Care for people – family units Key project facts ◼ Major maintenance project ◼ 1 million exposure hours, 0 recordable incidents ◼ GHG intensity nearly half of that in 2017 Key project facts ◼ Facility scope completed in 2018, start-up in 2019 ◼ Target 100 million scf/d gas to domestic market ◼ 13 million exposure hours, no Lost-Time-Injury (LTI) Key to performance ◼ Focused intervention on marine logistics ◼ Care for people – ‘Aunties and Uncles’ Southern Swamp Associated Gas Solution Project (SSAGS), Nigeria
  24. 24. Royal Dutch Shell April 11, 2019 24 Case studies Downstream / Projects & Technology 1The data included here is from commissioning through to startup, 2015-2019; 2 International Maritime Organisation. Solvent de-asphalter (SDA) Pernis, the Netherlands Key to performance ◼ Respected neighbour with impact beyond Pernis: residual heat project, support CO2 storage, IMO 20202-compliant diesel Goal Zero No harm, no leaks Key project facts ◼ SDA unit in largest integrated refinery in Europe ◼ ~3.5 million exposure hours of which ~3.2 million hours by contractors, 2 LTIs1 Geismar A04, US Gulf Coast Pernis refinery, The Netherlands Geismar chemical plant, USA Key project facts ◼ Expansion to become largest alpha olefins producer in the world ◼ 6 million exposure hours without LTIs Key to performance ◼ Focused intervention on dropped object prevention: high-potential reduction from 1 to 0 per month ◼ AO4 ‘project of choice’ for craft workers
  25. 25. Royal Dutch Shell April 11, 2019 Ben van Beurden Chief Executive Officer Royal Dutch Shell plc
  26. 26. Royal Dutch Shell April 11, 2019 Shell’s Sky scenario – a pathway to keep in pace with Paris Source: Shell Sky scenario; 1 Massachusetts Institute of Technology; 2 Net Carbon Footprint (CO2 intensity of fuel mix); 3 Carbon Capture and Storage. Gigatonne CO2 / year Components of CO2 reduction to meet the goals of the Paris Agreement Exajoule/year World primary energy by source ◼ Assessed by MIT1 as limiting temperature increase to 1.75 °C ◼ Link to Sky scenario 26 0 200 400 600 800 1,000 1,200 2015 2030 2040 2050 2060 2070 Oil Biofuels Natural Gas Biomass Coal Nuclear Solar Wind Other Renewables
  27. 27. Royal Dutch Shell April 11, 2019 Scope of our Net Carbon Footprint ambition 27 ◼ Full lifecycle of energy products, including consumption ◼ Link to NCF ambition The Net Carbon Footprint is not a mathematical derivation of total emissions divided by total energy, neither is it an inventory of absolute emissions. It is a weighted average of the lifecycle CO2 intensities of different energy products normalising them to the same point relative to their final end-use. This graphic is only intended to give an indication of the scope of the emissions included within Shell’s Net Carbon Footprint.
  28. 28. Royal Dutch Shell April 11, 2019 28 Net Carbon Footprint ambition Ambitions: ◼ Reduce Net Carbon Footprint of our energy products by ~20% by 2035 ◼ Be in line with society Net Carbon Footprint by 2050
  29. 29. Royal Dutch Shell April 11, 2019 Shorter-term targets within a longer- term framework ensures resilience and customer focus ◼ Shell cannot predict society and government future actions, nor customer demand ◼ In step with society’s drive to align with the goals of the Paris Agreement ◼ Reassess progress every five years linked to Nationally Determined Contributions process Shell’s industry-leading approach is more progressive ◼ The NCF ambition includes a much wider scope of emissions ◼ Committed to setting shorter-term 3- or 5-year NCF targets, linked to remuneration starting from 20191 ◼ The NCF ambition is consistent with the Paris agreement Shareholder resolution – response 1 The 2019 LTIP energy transition metric includes the first 3-year target. The new Remuneration Policy is subject to a shareholder vote at the 2020 AGM. ◼ Welcome Follow This intent to withdraw resolution ◼ Shareholders still requested to vote ◼ Board unanimously recommends to vote against 29 Shell welcomes the announcement on April 7, 2019 by the Dutch shareholder group Follow This of its intention to withdraw the shareholder resolution which had been requisitioned by a group of shareholders coordinated by Follow This and which is set out in Resolution 22 (R22) of the 2019 Notice of Annual General Meeting (AGM). Shell understands that Follow This is now in the process of collecting the requisite support to request withdrawal of the shareholder resolution. Shell will ensure that due procedure is followed ahead of any decision by Shell to propose the withdrawal of R22 from the 2019 AGM. At present R22 remains on the agenda and shareholders are requested to vote. The Directors of Royal Dutch Shell plc maintain that R22 is not in the best interests of Royal Dutch Shell plc and its shareholders as a whole and unanimously recommend that shareholders vote against R22 for the reasons set out on page 7 of the 2019 Notice of AGM.
  30. 30. Royal Dutch Shell April 11, 2019 Maarten Wetselaar Director Integrated Gas & New Energies Royal Dutch Shell plc
  31. 31. Royal Dutch Shell April 11, 2019 31 Potential tools to achieve our Net Carbon Footprint ambition Shell is active in all of these areas Existing examples Wind power Quest CCSRaízen biofuels Shell Recharge & New Motion Flare reduction Increased LNG Nature-based offsets
  32. 32. Royal Dutch Shell April 11, 2019 ◼ Adjacencies to existing businesses ◼ Value chain integrator ◼ Demand-driven development Power value chain CUSTOMERS OPTIMISATION SUPPLY AND GENERATION Leverage portfolio flexibility and arbitrage opportunities Multiple parties are active on the demand side Not all products are supplied by Shell, some are purchased from third parties ◼ New Motion ◼ MP2 Energy LLC ◼ First Utility ◼ GI Energy ◼ sonnen ◼ Shell Energy North America ◼ Shell Energy Europe ◼ Shell Energy Australia ◼ Shell Energy Brazil ◼ Carbon emissions rights trading ◼ US onshore wind portfolio ◼ NoordzeeWind ◼ Borssele 3 and 4 offshore wind ◼ Silicon Ranch ◼ Moerdijk solar ◼ Cleantech Solar 32
  33. 33. Royal Dutch Shell April 11, 2019 33 Gas and biofuels ◼ Cleanest-burning hydrocarbon ◼ Critical component of energy transition-demand from hard-to-decarbonise sectors ◼ Coal-to-gas switching leads to 78% improvement in Beijing winter air quality ◼ Readily available source of energy, easily transported via pipelines and ships ◼ Support peaks and valleys in renewable availability Gas ◼ We are one of the largest biofuels blenders and distributors ◼ Raízen JV some of the lowest-CO2 conventional biofuels ◼ Investment in advanced biofuels using alternative feedstocks such as forestry, agricultural and sorted municipal waste ◼ Waste-to-chemicals Rotterdam consortium could be first commercial project in Europe Biofuels Providing energy for everyone, while reducing impact to the planet and the air we breathe Skyline of Beijing, China Harvesting of sugarcane, Brazil
  34. 34. Royal Dutch Shell April 11, 2019 34 NBS and CCS ◼ Creation of carbon sinks, like forests and wetlands ◼ Short-term potential to deliver over one-third of greenhouse gas reductions needed1 ◼ Invest in nature offsets in support of low-carbon future ◼ Encourage regulatory frameworks that support and facilitate private sector investment ◼ Create commercial business models to help customers decarbonise Nature-Based Solutions (NBS) ◼ CCS is a critical technology to help reduce CO2 emissions ◼ IPCC2 Global Warming Report identified significant role for CCS in limiting temperature increase ◼ Shell is developing and participating in many CCS projects ◼ Industry-group membership for further development and commercialisation of CCS technology Carbon Capture & Storage (CCS) Essential to deliver required emission reductions in timescale to match global climate ambitions 1 Source: WBCSD; 2 Intergovernmental Panel on Climate Change. Quest at the Scotford Upgrader, Alberta, CanadaRanger looking out over Kashigau corridor, Kenya
  35. 35. Royal Dutch Shell April 11, 2019 Ben van Beurden Chief Executive Officer Royal Dutch Shell plc
  36. 36. Royal Dutch Shell April 11, 2019 Access to energy Aim to provide reliable electricity supply to 100 million people in the developing world by 2030 36 ◼ Mini-grid company ◼ Hybrid solar and biomass gasification technology ◼ Reliable electricity on a pay-as-you-go basis ◼ Operations in India and Tanzania ◼ Off-grid solar home systems company ◼ Customised and modular systems ◼ Operations in Uganda and Kenya ◼ Technology company ◼ Universal smart metering platform for mini grids and other utilities ◼ Focused in Africa and Asia ◼ Solar debt finance company ◼ Provides financing for solar assets in emerging economies, including inventory, working capital, construction and structured finance loans
  37. 37. Royal Dutch Shell April 11, 2019 37 Strong societal licence to operate Shell has a long history of caring No harm Good products Trusted company
  38. 38. Royal Dutch Shell April 11, 2019 Questions and Answers Royal Dutch Shell April 11, 2019 Ben van Beurden Chief Executive Officer Sir Nigel Sheinwald Chair of the CSRC Harry Brekelmans Projects & Technology Director Donny Ching Legal Director Maarten Wetselaar Integrated Gas & New Energies Director
  39. 39. Royal Dutch Shell April 11, 2019 Additional information
  40. 40. Royal Dutch Shell April 11, 2019 Health, Safety, Security & Environment ◼ We focus on the three areas of safety with the highest risks associated with our activities: personal, process, and transport ◼ Process safety is central in achieving Shell’s goal of zero harm to people and the environment ◼ Managed by combining asset integrity principles with a risk management approach, supported by visible safety leadership 40 Asset integrity principles Risk management approach Process safety performance Threats Consequences CONTROLS, BARRIERS RECOVERY MEASURES TOP EVENT Design Integrity Technical Integrity Operating Integrity Integrity Leadership GOAL ZERO NO HARM NO LEAKS NO HARM TO PEOPLE NO LEAKS FROM OUR OPERATIONS
  41. 41. Royal Dutch Shell April 11, 2019 Thrive in the energy transition Driving to resilience and ambition 1 Task Force on Climate-related Financial Disclosures. TIME HORIZON SHORT TERM GHG management ◼ Focussed on operational action ◼ Included in Group annual bonus scorecard MEDIUM TERM Strategic positioning and portfolio resilience ◼ Disclosures aligned to TCFD1 recommendations ◼ Demonstrate financial resilience of portfolio to energy transition and climate change actions LONG TERM Net Carbon Footprint ◼ Covers full range of emissions from our energy products through to consumption ◼ Specific NCF targets for 3- or 5-year periods until 2050 ◼ 2019 Long-Term Incentive Plan (LTIP) energy transition condition includes our first 3-year target towards achieving our NCF ambition 1-3 YEARS 5-10 YEARS >10 YEARS 5% Process safety 5% Personal safety 10% GHG management Sustainable development 41 Demonstrating Shell’s approach across multiple time horizons
  42. 42. Royal Dutch Shell April 11, 2019 42 Leading through the energy transition 1 The 2019 LTIP energy transition metric includes the first 3-year target; 2 The new Remuneration Policy is subject to a shareholder vote at the 2020 AGM; 3 Methane emissions intensity is for Shell-operated oil and gas assets. 2018 Highlights Proof points Innovating to meet changing society and customer preferences ◼ Net Carbon Footprint – long-term ambition operationalised with shorter-term targets; linked to executive remuneration1,2 ◼ Methane – maintain emissions intensity below 0.2% by 20253 ◼ Task force on Climate-related Financial Disclosures (TCFD) – driving effective climate change disclosures as a member of Oil & Gas Preparer Forum ◼ Thought leadership – Shell Energy Transition report and Sky scenario publication Nigeria Decrease in flaring intensity by ~70% over the last 10 years Brent Delta platform (UK) Decommissioning >97% of material to be recycled Quest CCS (Canada) >3.5 million tonnes CO2 captured and stored Solar Investments in Asia and North America Bonny, Nigeria Brent Delta, UK Quest, Canada Silicon Ranch, USA
  43. 43. Royal Dutch Shell April 11, 2019 43 Resilience Financial framework All information on this slide from the 2018 Shell Energy Transitions Report which is based on 2017 data. 1 Cash flow from operations; 2 Significant variations in oil and/or gas prices will potentially impact certain operating costs, or result in foreign exchange movements, the effect of which are not reflected in the $10 price sensitivity; 3 Assuming oil price fell from around $65 per barrel today to $40 per barrel money of the day; 4 Assuming oil price rose from around $65 per barrel today to $100 per barrel money of the day. $ billion CFFO1 excluding working capital Capital investment flexibility ◼ Growing free cash flow ◼ Capital discipline and flexibility ◼ Strong balance sheet ◼ $10 per barrel movement in Brent prices, around $6 billion cash flow impact indicative estimate2 ◼ At $40/bbl impact of -$15 billion on CFFO3 ◼ At $100/bbl impact of +$21 billion on CFFO4 ◼ $10 per tonne CO2 movement in global CO2 price, around $1 billion pre-tax impact on cash flow ◼ Applying more resiliency criteria to capital allocation ◼ Lower break-even prices ◼ Shorter payback periods ◼ Improving project delivery Average Brent oil price ($/bbl) $ billion (per annum) 2018 – 2020 Oil products 4-5 Conventional oil + gas 4-5 Integrated gas 4-5 Deep water 5-6 Chemicals 3-4 Shales 2-3 New energies 1-2 Total 25-30 $# 0 10 20 30 40 1 2 3 4 5 $99 $52 $44 $54 $50
  44. 44. Royal Dutch Shell April 11, 2019 44 Resilience Portfolio All information on this slide from the 2018 Shell Energy Transitions Report which is based on 2017 data. The forward-looking breakeven price for pre-FID projects is calculated based on all forward-looking costs associated with pre-FID projects in our development portfolio. Accordingly, this typically excludes exploration & appraisal costs, lease bonuses, exploration seismic and exploration team overhead costs. The forward-looking breakeven price for pre-FID projects is calculated based on our estimate of resources volumes that are currently classified as 2C under the Society of Petroleum Engineers’ Resource Classification System. As these pre-FID projects are expected to be multidecade producing projects, the less than $30 per barrel projection will not be reflected either in earnings or cash flow in the next five years. Diverse business segments Geographic diversity Active portfolio management ◼ Resilience from diverse and actively managed portfolio ◼ Assessed risk of stranded assets as low Marketing earnings Chemicals earnings Americas Asia EU + Africa ◼ Operations across energy system ◼ Strength of integrated model ◼ Global business in more than 70 countries ◼ In 2017, 19 countries accounted for 80% of CFFO ◼ Focus on cost reduction ◼ Improving CO2 performance DEEP WATER Projects waiting FID: average break-even <$30 SHALES Permian direct field expenses -33% in 2017 INTEGRATED GAS Since BG, underlying operating expenses -11% CHEMICALS Pennsylvania ethylene cracker expected top quartile CO2 intensity OIL PRODUCTS INTEGRATED GAS CHEMICALS SHALESNEW ENERGIES Cash engines Growth priorities Emerging opportunities DEEP WATER CONVENTIONAL OIL + GAS
  45. 45. Royal Dutch Shell April 11, 2019 45 Nigeria environmental performance 1 United Nations Environment Programme; 2 SPDC JV = 30% Shell, 55% NNPC, 10% Total, 5% Agip; all data on 100% basis unless otherwise stated; Clean-up Bodo & UNEP1 progress ◼ Bodo spill cleanup first phase completed (free-phase oil removal), contracting for remediation nearly finalised (target starting date Q2 2019) ◼ July 2018: SPDC JV2 completed its first-year contribution to HYPREP3 of $180 million Oil spill prevention & remediation ◼ Long-term trend improving ◼ Alternative livelihood initiatives to address oil theft and sabotage (Livewire programmes) ◼ Deployed wellhead cages: 171 in place, 0 breaches; drone trial to help enable faster response ◼ Remediation and certification efforts ongoing (116 sites out of 202 remediated in 2018) ◼ Further increase in theft volumes and sabotage spills; multi-disciplinary initiative to help curve trend ◼ IUCN4 collaboration on remediation standards and practices 90% of spills related to sabotage Link to Nigeria Briefing Notes 3 Hydrocarbon Pollution Restoration Project – this body was established under the Nigerian Ministry of Environment, aimed at the sustainable clean-up of Ogoniland; 4 International Union for Conservation of Nature. Thousand tonnes SPDC JV spills SPDC JV Production and theft 0 200 400 600 800 0 20 40 60 80 2012 2013 2014 2015 2016 2017 2018 Production (RHS) Thousand barrels per day Thousand boe/day Theft # 0 100 200 300 0 5 10 15 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Volume of sabotage spills Volume of operational spills Operational spills >100kg (RHS) Sabotage spills >100kg (RHS)
  46. 46. Royal Dutch Shell April 11, 2019 50:50 joint venture between Shell and ExxonMobil NAM January Earthquake Zeerijp with a force of 3.4 on the Richter scale 46 January Minister Wiebes announces new damage protocol Source: www.nam.nl, 1 Ministry of Economic Affairs and Climate. February Gas production locations Loppersum shut down on behalf of Minister Wiebes March Temporary commission for mining damage (RVO) opens counter and starts handling outstanding damage claims March Minister announces proposal: gas production level and completion plan Groningen June Heads of Agreement MEAC1, ExxonMobil, Shell; signed September Final report on 6000 outstanding damage claims to MEAC October Presentation ‘Nationaal Programma Groningen’ October Change in ‘Gaswet/ Mijnbouwwet’ came into effect December Start new ‘National Coordinator Groningen’ December Announced extension to the new-build arrangement by NAM (at the request of MEAC) until 1 July 2019 2018
  47. 47. Royal Dutch Shell April 11, 2019 Tax and revenue transparency 47 One of the founders of the Extractive Industries Transparency Initiative (EITI) 2003 2012 2016 2017 2018 Publication of Shell’s Approach to Tax First voluntary publication of tax payments (covering 2011) Shift from voluntary to mandatory reporting in line with EU regulations; first publication of Payments to Governments Report (covering 2015), includes payments per country and project for extractive activities Country-by-Country Report submitted to tax authorities Publication UK Tax Strategy and Statement on Tax Evasion Publication taxes paid NAM, Canada, Germany, Australia Shell commits to the B-Team Responsible Tax Principles Pilot International Compliance and Assurance Programme In 2018 Shell paid $64.1 billion to governments ◼ $10.1 billion income taxes ◼ $5.8 billion government royalties ◼ $48.2 billion levies on fuel and other products Shell is transparent on its tax payments ◼ Total tax contribution publication and filing of Payments to Government Report with UK Companies House ◼ Provides information on taxes paid per country and per project for Upstream activities Shell is actively involved in responsible tax discussions ◼ Working with industry, governments and civil society ◼ Founder of B-Team Responsible Tax Principles ◼ Includes providing regular information to stakeholders about approach to tax and taxes paid Active advocacy and transparent tax reporting
  48. 48. Royal Dutch Shell April 11, 2019 48 Chemicals and plastics The problem is not with plastics, but what happens after people use them Chemicals ◼ Chemicals demand is growing faster than GDP ◼ Growth priority for Shell ◼ Chemicals are a component in medicines, detergents, textiles and plastics Plastics ◼ Many plastics have long-term use that use fewer resources and have a lower-carbon footprint than glass, paper and metal ◼ Plastics provide important health, safety and sustainability benefits ◼ Plastics don’t belong in our oceans, rivers or landscapes Shell plastic waste management ◼ Investments in conversion of waste materials into valuable chemicals and biofuels ◼ Reduce, reuse and repurpose waste across operations ◼ Lubricants business exploring sustainable packing solutions Alliance to End Plastic Waste ◼ Shell a leading member1 ◼ Alliance goal to invest $1.5 billion over the next 5 years to help eliminate plastic waste ◼ Members include companies that make, use, sell, process, collect and recycle plastics Four strategic pillars: INFRASTRUCTURE INNOVATION EDUCATION CLEAN-UP 1 Alliance website.
  49. 49. Royal Dutch Shell April 11, 2019 Oversight of climate change risk management Climate change is managed as a significant risk factor 49 (1) Oversight of climate change risk management. (2) Non-executive Directors appointed by Board to review and advise on sustainability policies and practices including climate change. (3) Non-executive Directors appointed by the Board to oversee the effectiveness of the systems of risk management and internal control. (4) Non-executive Directors appointed by the Board to set the remuneration policy in alignment with strategy. (5) Responsible for implementing Shell’s GHG strategy. They are represented in Safety and Environment Leadership Team Corporate and Social Responsibility Committee (CSRC) (2) Audit Committee (AC) (3) Remuneration Committee (REMCO) (4) Board of Royal Dutch Shell plc (1) CEO and Executive Committee Executive Vice President, Safety & Environment Vice President, Group Carbon EVP Steering Team Group strategic steer Most senior individuals with accountability for climate change risk management Businesses and Functions (5) Safety and Environment Leadership Team Operational implementation steer
  50. 50. Royal Dutch Shell April 11, 2019 Joint statement – updates 1 Full review is available here. Joint statement developed with institutional investors on behalf of Climate Action 100+ 50 Public short-term Net Carbon Footprint targets Targets linked to remuneration Review of progress Alignment with the TCFD recommendations Corporate climate lobbying ◼ 3- or 5-year targets to operationalise the long-term NCF ambition ◼ Update: first target set in 2019 (2019-2021) ◼ Update: link between energy transition and long-term remuneration in 2019 ◼ Full Remuneration Policy subject to a shareholder vote at the 2020 AGM ◼ Annual update on the progress towards the NCF ambition ◼ Initial disclosures in Sustainability Report, but with a commitment, to integrate this into the Annual Report/Form 20-F as appropriate ◼ Disclosure of metrics and targets used to assess and manage relevant climate-related risks and opportunities, where material, at relevant intervals ◼ Review of industry associations memberships to assess alignment with the company’s stated positions ◼ Update: results of this review1 were made public on April 2, 2019
  51. 51. Royal Dutch Shell April 11, 2019 Shareholder resolution – response Follow This resolution Shell response Shareholders request the company to set and publish targets that are aligned with the goal of the Paris Climate Agreement to limit global warming to well below 2°C. ◼ Shell already set the Net Carbon Footprint1 (NCF) ambition (November 2017): ◼ Around 50% reduction of Net Carbon Footprint of our energy products by 2050, around 20% by 2035 (gCO2e/MJ), in step with society’s progress toward the goal of the Paris Agreement ◼ Shell’s NCF ambition is consistent with the emission reductions needed to meet the Paris Agreement. ◼ Reassess every five-years aligned to Nationally Determined Contribution (NDC) process ◼ The 2019 LTIP energy transition condition includes our first three-year target towards achieving our NCF ambition These targets need at least to cover the greenhouse gas (GHG) emissions of the company’s operations and the use of its energy products (Scope 1, 2, and 3), and to be intermediate and long- term. ◼ Shell’s Net Carbon Footprint Ambition goes well beyond Scope 1, 2 and 3 emissions of our energy products ◼ Includes customers’ emissions produced when they use the energy products we sell ◼ Includes emissions from elements of energy products life-cycle not owned by Shell, such as: ◼ Oil and gas processed - but not produced - by Shell ◼ Oil products and electricity marketed by Shell not processed or generated at a Shell facility ◼ GHG metrics in executive bonus scorecard (since 2017) ◼ The 2019 LTIP energy transition condition includes our first three-year target towards achieving our NCF ambition 1 Net Carbon Footprint measured on an aggregate “well to wheel” or “well to wire” basis, from production through to consumption, on grams of CO2-equivalent per megajoule of energy products consumed; chemicals and lubricants products are excluded. Carbon Footprint of the energy system is modelled using Shell methodology aggregating lifecycle emissions of energy products on a fossil-equivalence basis. The methodology will be further reviewed and validated in collaboration with external experts. The Board recommends voting against the Follow This resolution 51 Shell welcomes the announcement on April 7, 2019 by the Dutch shareholder group Follow This of its intention to withdraw the shareholder resolution which had been requisitioned by a group of shareholders coordinated by Follow This and which is set out in Resolution 22 (R22) of the 2019 Notice of Annual General Meeting (AGM). Shell understands that Follow This is now in the process of collecting the requisite support to request withdrawal of the shareholder resolution. Shell will ensure that due procedure is followed ahead of any decision by Shell to propose the withdrawal of R22 from the 2019 AGM. At present R22 remains on the agenda and shareholders are requested to vote. The Directors of Royal Dutch Shell plc maintain that R22 is not in the best interests of Royal Dutch Shell plc and its shareholders as a whole and unanimously recommend that shareholders vote against R22 for the reasons set out on page 7 of the 2019 Notice of AGM.
  52. 52. Royal Dutch Shell April 11, 2019 Chronology of events (1) OPL 245 Phase 1 ◼ 1998 – Malabu awarded licence for OPL 245 ◼ March 2001 – Shell Nigeria Ultra Deep (“SNUD”) farms in ◼ Representations and warranties were provided on ownership of Malabu ◼ Federal Government Nigeria (“FGN”) consented Phase 2 ◼ July 2001 – FGN revokes the Malabu Licence ◼ May 2002: ◼ SNUD bids for and is awarded OPL 245 by FGN and later signs a PSC with Nigerian National Petroleum Corporation (“NNPC”) ◼ Signature bonus ($209 million) is placed in escrow pending outstanding disputes with Malabu ◼ SNUD conducts exploration and appraisal work programme 52
  53. 53. Royal Dutch Shell April 11, 2019 Chronology of events (2) OPL 245 Phase 2 (continued) ◼ Various litigations follow: ◼ May 2002 – SNUD commenced International Chamber of Commerce arbitration proceedings against Malabu ◼ August 2002 – Malabu commenced proceedings against FGN, Shell Nigeria Exploration and Production Company (“SNEPCO”), SNUD and other Shell parties in New York federal court ◼ May 2003 – (following a petition by Malabu), the Nigerian House of Representatives issued a report concluding: (i) OPL 245 was legally awarded to Malabu, (ii) the revocation of Malabu’s licence should be set aside, (iii) SNUD should pay $550 million compensation to Malabu. SNUD appeals ◼ September 2003 – Malabu commenced proceedings in Nigeria against FGN, NNPC and SNUD for a declaration that the award of OPL 245 to Malabu was valid, a declaration that the award to SNUD was invalid, and damages of $100 million 53
  54. 54. Royal Dutch Shell April 11, 2019 Chronology of events (3) OPL 245 Phase 3 ◼ December 2006 – FGN settles litigation with Malabu and reallocates the licence to Malabu ◼ Malabu and SNUD now have competing legal rights to the Block ◼ April 2007 – SNUD commences Bilateral Investment Treaty arbitration against the FGN for wrongful expropriation ◼ 2008 – FGN seeks resolution, negotiations commence 54
  55. 55. Royal Dutch Shell April 11, 2019 Chronology of events (4) OPL 245 Phase 4 ◼ 2010 – negotiations now include ENI ◼ Settlement with FGN – negotiations are conducted with Attorney General of FGN, the Minister of Petroleum Resources, the Minister of Finance and senior NNPC officials ◼ April 2011 – settlement is achieved. FGN receives $1.3bln: ◼ Signature bonus is released by SNUD to FGN from 2003 escrow funds in return for the licence ◼ SNEPCO pays $110.40 million to ENI (Nigerian Agip Exploration (“NAE”)) ($25.40 million interest on the escrow, plus $85 million) ◼ NAE pays $1,092.04 million to FGN for settling all outstanding claims on the Block ◼ FGN agrees to indemnify SNEPCO and NAE from any other claims on the Block ◼ SNEPCO and NAE hold the licence 50/50. NAE is operator 55
  56. 56. Royal Dutch Shell April 11, 2019 Agreements of April 2011 OPL 245 ◼ Heads of Agreement between NAE and SNUD and SNEPCO: allocation of the payments due to FGN ◼ Block 245 Resolution Agreement: FGN, NNPC, SNUD, SNEPCO and NAE ◼ Payments to FGN and award of the licence ◼ FGN indemnifies SNEPCO and NAE against competing claims ◼ Key fiscal terms of future PSC ◼ Block 245 Resolution Agreement: FGN and Malabu. Payment to Malabu; settlement of claims ◼ Block 245 Resolution Agreement: FGN and SNUD. Settlement of claims ◼ Settlement submission to Court of Appeal, Abuja: SNUD, SNEPCO, Malabu and Nigerian House of Representatives (“NHR”). Withdrawing SNUD and SNEPCO appeals against a 2003 NHR report in favour of Malabu 56
  57. 57. Royal Dutch Shell April 11, 2019 Shell review OPL 245 ◼ Debevoise & Plimpton LLP, an international law firm, was retained by the Shell Group ◼ Debevoise conducted and led an investigation which included staff from the law firm and Shell’s Business Integrity Department ◼ Periodic updates to senior management, Audit Committee and RDS Board, as well as the Nigeria Special Litigation Committee, an ad hoc committee of the Board that assists in monitoring and providing oversight of matters related to the investigations by various authorities into OPL 245 ◼ Final report to RDS Board in July 2016 ◼ Findings shared with authorities during 2016 57
  58. 58. Royal Dutch Shell April 11, 2019

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