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Presentations

Mark Williams, Bernstein Strategic Decisions Conference, 15 September 2009

Downstream Update

Mark Williams, Director Downstream, presented an update of Royal Dutch Shell's plc ("Shell") Downstream business at the Bernstein Strategic Decisions Conference.

Mr. Williams started with an overview of Shell’s priorities in the current challenging market conditions. He highlighted that Shell is sharpening its focus on delivery and affordability and is constructing a large growth programme that will add ~1 million boe/d of new production, leading to growth in Upstream in 2011-12. He also emphasized that Shell has introduced a restructuring programme, called Transition 2009, that puts in place a simpler, delivery-oriented organisation, which will lead to cost and staff reductions. Transition 2009, combined with previously-initiated self-help programmes reduced Shell’s costs by $0.7bn in the first half of 2009, compared to first half 2008.

Mr. Williams then provided an overview of the Downstream landscape which is characterised by narrowing spreads, increasing inventory levels, and a widening gap between refining capacity and demand, placing significant pressure on the refining margins. Shell has always recognised the cyclicality of the refining and chemicals businesses, so the current downturn is not unexpected, but is more severe than supply-demand analysis implied before the credit crisis. He pointed out that during the peak of the refining cycle Shell reduced its refining portfolio, selling some 18% of its capacity since 2002, whilst realising some $15 billion of divestment proceeds. The average refining size and complexity has increased. A further 15% of refining capacity is under review, and could be sold, closed or converted into oil terminals.

Mr. Williams confirmed that actions to reduce costs are continuing in the Downstream. The implementation of a global business structure has been instrumental to drive out costs, with simplified business models, processes and systems, and a standardised and lower cost back-office.
Shell’s marketing businesses have seen strong and steady earnings performance in the last years. In the fuel retail business Shell has the largest sales of differentiated fuels and has a leading brand. Shell’s lubricants business has been reconfirmed for the 3rd consecutive year as the no. 1 global lubricants supplier with a 13% finished lubricants market share.

Mr Williams gave an overview of Shell’s selective Downstream growth investments in both refining and chemicals capacity. These include the Port Arthur refinery expansion, which recently concluded a cost review, leading to renegotiated contracts. When complete in 2012, the expanded refinery will have capacity of some 600 kbbl/d making it one of the largest in the United States. The Singapore Chemicals plant, which is fully integrated with Shell’s Bukom refinery, is well placed in the Asia Pacific growth market. Some 13,000 people on site are working towards a phased start-up, with first ethylene production expected in 2010.

Mr Williams summarised that Shell’s Downstream’s strategic focus consists of strong cost control and a continuous drive for operational excellence, supported by a global organisation. The refining and chemicals business continue to focus on large and integrated sites. Shell’s strong marketing businesses build on developing superior customer value propositions, underpinned by a strong brand.

Enquiries

For enquiries please contact the Investor relations department: 

Europe
Royal Dutch Shell plc
Investor Relations
2501 AN, The Hague
The Netherlands
+31 (0)70 377 4540 / +44 207 934 3856
Fax: +31 (0)70 377 3115
e-mail: ir-hague@shell.com 

Europe
Royal Dutch Shell plc
Investor Relations
2501 AN, The Hague
The Netherlands
+31 (0)70 377 4540 / +44 207 934 3856
Fax: +31 (0)70 377 3115
e-mail: ir-hague@shell.com 

USA
Shell Oil Company
Investor Relations
630 Fifth Avenue, Suite 3166, New York
NY 10111, USA
+1 212 218 3113
Fax: +1 212 218 3114
e-mail: ir-newyork@shell.com 
 

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