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Exane BNP Paribas – 12th European conference
Simon Henry - CFO
Shell is focusing on continuous improvements in operating performance, including firm plans for $1 billion of cost savings in 2010, and staff reduction of some 2,000 positions by end-2011. New initiatives are underway to improve on Shell’s industry-leading Downstream by focusing on the most profitable positions and growth potential. Shell has plans to exit from 15% of its world-wide refining capacity, 35% of the company’s current retail markets.
Mr Henry then updated on Shell’s production growth outlook, driven by 12 new start-ups in the 2010-11 time frame. Recent key start-ups were Ormen Lange in Norway, Sakhalin in Russia and in Deepwater Brazil (BC-10) and the Gulf of Mexico (Perdido). These will be followed by a further suite of new projects, including Pearl GTL and the Qatargas 4 LNG in Qatar, the Athabasca Oils Sands expansion in Canada and the onshore gas project Gbaran Ubie in Nigeria. Oil & gas production is expected to average 3.5 million boe/d in 2012, compared to 3.15 million boe/d in 2009, an increase of 11%.
Mr. Henry pointed to the substantial portfolio of options in Shell that underpin the next wave of growth in the company. Exploration performance in the last years has been a strong contributor.
In North America, Shell has made great progress with tight gas. Earlier this year Shell projected that its North America tight gas production could reach more than 400,000 boe/d (>2.3 bcfe/d) by 2020 compared to some 140,000 boe/d in 2009, subject to annual investment rates. The recent acquisitions of the East Resources, Inc and the Eagle Ford acreage will enhance this growth outlook, and these new positions have the potential to hold some 16tcfe of resources. Australia should underpin Shell’s next tranche of LNG developments, within a world-wide options set for a possible further 10 million tonnes per year (mtpa) of capacity by 2020, which could take Shell’s total capacity to ~35 mtpa. In total, Shell’s pre-FID option set can sustain upstream growth to 2020, subject to the timing of investment decisions. In Downstream, selective growth investment continues, with the recently announced MOU for a $12 billion joint venture in Brazil with Cosan, which will major on Biofuels, and the on-going expansion project at the Port Arthur refinery in the USA.
Mr. Henry then highlighted the substantial cash flow growth expected, underpinned by these investments, with an increase of some 50% in 2012 at $60 per barrel oil prices, and by over 80% in an $80 oil price world, assuming a more normalized environment in downstream and natural gas. The group should be generating surplus cash flow above $60 oil prices in 2012 with this framework, and this will keep balance sheet gearing below the 30% ceiling that Shell sees as prudent.
Mr. Henry summarised that Shell is working towards more competitive performance. Shell is investing in profitable growth, with a strong focus on sharper delivery of the strategy, and a more commercial focus, that will be essential for Shell’s growth plans.
For enquiries please contact the Investor Relations department:
Royal Dutch Shell plc
2501 AN, The Hague
Tel: +31 (0)70 377 4540/+44 207 934 3856
Fax: +31 (0)70 377 3115
Shell Oil Company
P.O. Box 2463
Houston, TX 77252, USA
Tel: +1 713 241 1042
Fax: +1 713 241 0176