Growth in the East Opening Remarks

Specifically, I want to talk about our lubricants businesses in China, Indonesia, Thailand, Malaysia, Singapore and the Philippines.

I've chosen to focus on these countries today as, together, they illustrate how we are successfully delivering our Grow East strategy in both developing and established markets.

Growth is key to helping Shell Lubricants maintain our current position as the global leader in branded lubricants and this region continues to be the growth engine for the business.  Yet, while the East represents a promise for many companies, for Shell it is already a reality for our lubricants business.
Uniquely we have maintained a leading position in the world’s more established markets, at the same time as rapidly building growth in emerging markets. We achieved excellent year-on-year growth in Asia last year achieving double digits in some markets.

We are already the largest international oil major in Asia by sales volume according to industry analysts with annual sales of around 1.2 Mln tonnes.  This equates to over 9% of the Asia Pacific market, following our acquisition of Tongyi.source: PFC).   We are the third largest lubricants player overall behind Petrochina and Sinopec.

In the last year or so, we've seen outstanding growth in the region - particularly in China.

China
China remains at the core of our Asian growth strategy. It is the fastest-growing lubricants market in the world, and is forecast to grow by around 6% year on year through to 2010 (source: Kline 2007). The number of passenger cars on the road in China has increased from 11.5 million in 2000 to 31.2 million in 2005 (source: PFC). And among industrial sectors for example, nearly two new power stations come on stream each week in China.

Shell became the leading international energy business in China's lubricants market in 2006 following the acquisition of a 75 per cent share of Beijing Tongyi which produces and markets China's leading independent lubricant brand, Tongyi. We have also entered into a joint venture to build a branded network of car servicing facilities across China.

The result is that China is already our second largest lubricants business by volume after the US and the world's biggest market for our passenger car motor oil brand, Shell Helix.
 
Today, I am delighted to announce that we are deepening our commitment to China still further with the proposal to build a world-scale lubricants blending plant in Zhuhai, Guangdong Province, South China. Upon completion, this – our sixth plant in China – will help position us to meet the massive growth expectations of the Chinese lubricants market.

Production capacity at the new plant is expected to be 200 million litres per year initially, increasing to an ultimate capacity of 400 million litres per year. This means it will be one of Shell's top three lubricants blending plants in terms of size and importance out of a network of around 70 worldwide. The official groundbreaking ceremony for the plant is taking place today and commercial operation is expected to begin in 2009.

The location means the plant will be ideally placed to supply lubricants demand in South China, one of the major growth regions in the country. It will produce consumer, transport, industrial and marine lubricants, and will blend both Shell and Tongyi branded lubricants, each accounting for around 50% of production.

In addition to the new blending plant in Guangdong, we are also expanding some of our existing plants in the region. Most significantly, we are doubling capacity at our Tsing Yi lubricants blending plant in Hong Kong to 120 million litres per year. This means the plant will move to 24-hour operation, and employee numbers will double.

The successful growth of our brands in China means we will also be increasing capacity at our Tianjin (Beijing) and Zhapu (Shanghai) blending plants by up to 20%. And over the next 12-18 months we will also enhance capacity at our grease plants in Thailand, the Philippines and Singapore. These expansions will allow us to meet the growing demand for specialist industrial products in the region.

Indonesia
Let me turn now to Indonesia, which - outside China - offers one of the most significant growth opportunities for Shell in Asia.

There are already nearly 50 million vehicles on the road in Indonesia (source: PFC 2005). Motorbike growth is expected to be 10% per year until 2010 and passenger car growth at 6%. Indonesia is also seeing sustained industrial growth - for example, it's a growing market for global car manufacturers to build and export products.

This means we see opportunities in both the consumer and industrial markets and have set ourselves an aggressive target to double our lubricants presence in Indonesia within four years. This goal requires that we grow by almost 20% per annum, but is consistent with our track record as we have doubled the business since 2003 and are growing above this rate so far in 2007.

We have the advantage of superior lubricants technology, well-respected global brands and years of experience in the region.

Our lubricants growth will also be supported by the expansion of our service station network: Shell was the first international oil company to open fuel retail outlets in Indonesia and recently opened its tenth station in Greater Jakarta.

And we have a determined and talented team who have predominantly been recruited and developed in-country. In fact, 49 of our 50-strong lubricants team are Indonesian and earlier this month we announced the appointment of the company’s first Indonesian Country Chairman and CEO.
 
Thailand
The story in Thailand and Malaysia is different. For Shell, these are established, mature markets and our challenge is to continually refresh our brand and local relevance to maintain and grow market share.

Shell has been in Thailand for more than 100 years and has been number one in the lubricants market for some years. We opened Thailand's first lubricants blending plant almost 40 years ago and have established networks of fuel retail sites and Shell autoServ locations across the country.

Thai motorists value premium grade lubricants and the Shell Helix brand is particularly strong with 32% of consumers expressing a preference for the Shell brand. To help keep us number one, Thailand will be one of the first countries in the lubricants business to run the new global TV advert for Shell Helix.

Malaysia
We have also been in Malaysia for more than a century. Our continued success here stems from our strong brand presence. Independent market research shows that in the passenger car motor oil sector alone, brand share preference for our products has grown over the past year from 35% to 41%: this is double that of the number two company. This preference translates into hard results with our 2007 passenger car lubricants volumes up over 35% on 2006.

A big part of this success is due to strong long-term relationships with customers and business partners - such as BMW and Mercedes Benz in the automotive sector - that have enabled us to carry on growing.

And in terms of our Retail business, Shell recently acquired what was previously the ProJet network in Malaysia.

Singapore
Turning now to Singapore - which is an important hub for all the Shell Group’s businesses – not least for Lubricants.

Our 500,000 barrels-per-day Bukom refinery is the largest Shell refinery in the world in terms of crude distillation capacity, making Singapore a key regional supply and trading centre for the Shell Group in the East. And our base oil manufacturing plant at Bukom is one of the largest in the Shell network.

Singapore’s Woodlands North Blending Plant is a strategic site within the Shell lubricants and grease global network. It produces around 200 million litres of finished products and delivers to more than 50 countries. Over the next 12-18 months, grease plant capacity will be increased at the plant to help us meet the growing demand for specialist industrial products in the region.

Singapore is one of the world’s largest shipping hubs and the largest fuels bunkering port. The thousands of ships visiting Singapore are also large consumers of marine lubricants, with Shell supplying over 70kt per annum to its global shipping customers in the port of Singapore. The shipping industry is growing and Shell is a leading supplier of marine lubricants with significant barge delivery capability in Singapore.

In addition, a great deal of third party base oil and refining capacity is coming on stream in Asia Pacific in 2008. This presents substantial opportunities for the base oil trading desk in Singapore. One of Shell’s key strengths is to have an integrated base oil supply and trading position centre in Singapore – which positions us well for our continued growth journey in the East.

The Philippines
Let me finish with the Philippines. Just as in Thailand, Malaysia & Singapore, Shell has been present in the Philippines for over 100 years. Again, we are the leading lubricants operator and enjoy the number one position in brand preference as well, with one third of passenger car owners using Shell.

I'll illustrate our success with an example of a recent customer win of one of the largest competitive tenders that the Philippines has ever seen. Shell secured a three-year contract to supply 70% of the fuels and lubricants for the National Power Corporation. Previously Shell had a smaller market share than our state rival. Partly as a result of this win, our industrial products volumes this year have grown more than 26% above 2006 levels. We attribute this success to our superior product quality and range, customer excellence and the benefits afforded by being part of an efficient, global organisation.

Conclusion
A sustained push to the East is part of Shell Downstream’s strategy for growth and Shell Lubricants are at the vanguard of that push.

In all six markets I have highlighted today, we are either number one in terms of market share or brand preference, and we are seeing strong sales growth. Our brands are preferred by more people in Asia than those of any other international lubricants supplier. And we're still growing.

We have developed long-term strategic investments in China and South-East Asia, and have been ahead of the field in becoming a preferred partner for customers and JV partners in the region. I believe our appeal is linked to the four key features of Shell Lubricants: our global reach and capability, trusted brands and cutting-edge lubricants technology, our closeness to our customers’ businesses and the ease of doing business with us.

But we will not rest on our laurels. Today's announcements - that we are planning to build a new, world-scale lubricants blending plant in China and expanding capacity at our existing assets in China and South East Asia - represent delivery of Shell’s strategy of more upstream and a profitable downstream business by investing in growth markets. They re-inforce our industry leadership and put us in a stronger position to capitalise on China's robust volume growth and the potential across the region. In short, taking our lubricants business in the region to a new level.

ENDS