Protecting the Environment & Managing Resources

Shell recognises the importance of protecting and enhancing the environment through responsible operational procedures and preservation initiatives.

The design and operation of our assets are intended to eliminate as much as possible any negative impact on the environment. Where environmental emissions cannot be avoided, we take appropriate actions to mitigate them. We also support organisations throughout New Zealand dedicated to working on environmental issues.

In 2005 environmental projects included:

• The Auckland waterfront: Shell continues to be actively involved in Auckland City and the Auckland Regional Council’s “Auckland Waterfront 2040” project, providing a long-term vision for the CBD waterfront and ensuring the bulk liquids industry can continue to contribute to Auckland’s prosperity.
• The Herekawe Stream Walkway Project: Shell sponsors this project which involves establishing a walkway along the stream to link inland residential areas with New Plymouth’s coastal walkway.

The natural resources required by Shell’s exploration and production operations in Taranaki are water, energy and land access. All of our activities are governed by the conditions, or resource consents, which specify permissible use of local resources. We are careful to maintain compliance with all consent conditions in recognition of both our responsibility to regional authorities and a wider obligation to be good stewards of the environment.

Shell holds a total of 45 resource consents issued by the Taranaki Regional Council (TRC) and the New Plymouth District Council (NPDC) that govern our activities at our Maui, Kapuni production stations and the Pohokura development.

The TRC carries out tests throughout the year to monitor our use of fresh water from rivers and streams, as well as measuring our emissions into the air, ensuring that we are upholding the conditions of our resource consents. The TRC’s monitoring programme for 2005 included facility inspections, ambient gas surveys, water sampling and biological surveys of watercourses receiving discharges from our production facilities.

Meanwhile, to get the best value from available resources, we have been able to use innovation and technology to produce more from what we have already discovered. This solution has immediate impact upon supply: even a small  incremental increase in the overall recovery from a fi eld such as Maui can have a substantive short-term impact.

Also, we have been able to apply new technologies used in global operations to local situations in New Zealand.

For instance, STOS recently achieved a number of national and world records at our operations in Pohokura, including world fi rsts for the 91⁄2” and 131⁄2” size of the rotary steerable tools used, and drilling New Zealand’s longest well. That saved the cost of as many as three offshore gas wells, and will also lower the ongoing cost of running the field.

Meeting New Zealand’s current and future energy needs remains a key challenge to our business, and by working to maximise the recovery of reserves from our existing assets as well as bringing Pohokura onstream on time and on budget, we can provide assurance to all our key stakeholders and customers. The current drilling campaign off the Maui A platform of the AD Ihi and East of Ihi wells
are part of Shell’s commitment to meet customer’s needs.

Shell owns 83% of the Maui gas field operated by Maui Development Limited. We will be offering signifi cant additional gas to market as a result of the annual review of reserves conducted by the Maui operator.

This review takes account of the latest year’s production data and ongoing reservoir engineering studies, which continually refi ne the view of gas recoverable from the field. It also takes into account new activities that have a high likelihood of proceeding, such as drilling wells.

Shell undertakes a rigorous service station and commercial asset assessment programme to effectively manage the environmental impact of our network.  Routine inspections check the condition and operational performance of storage tanks, underground storage facilities, and pipelines, with replacements or maintenance measures following if necessary. Where fuel storage tanks are considered to pose an undue risk to the environment if they remain in the ground, they are removed and replaced.

We are committed to identifying ways of improving the environmental performance of day-to-day operations, either by changing processes or finding appropriate ways to deal with bi-products.

Shell is a shareholder in the New Zealand Refining Company (NZRC), which produces 50-60% of New Zealand’s fuel needs. NZRC completed a $180 million Future Fuels project at Marsden Point in September 2005. This project added several new process units to the existing refinery as well as the new technology required to deliver the Government’s mandated fuel specifi cation changes. These changes included lowering the benzene content of petrol and a significant reduction of sulphur in diesel. Shell successfully implemented the new specifications across its nationwide network in time for the 1 January 2006 deadline.

Managing Resources

Total energy used in production/energy efficiency	2004	2005
Total Energy used in Production	3,229,397	3,028,016
Energy Efficiency (GJ/tonnes of hydrocarbons produced)	0.845	0.866

GJ = Gigajoule

Note: The energy consumed includes consumption at STOS assets of fuel gas, diesel, purchased electricity but excludes flaring and venting of gas.

Protecting the Environment

Number of spills, total CO2 emissions and emissions / unit of production	2004	2005
Number of Spills over 10kg	0	1*
Total Global Warming Emissons (Tonnes of CO2 equivalent)	263,366	255,904
Total Hydrocarbons Produced (Millions of tonnes)	3.821298	3.49461
Emissions per unit of Production (Tonnes of CO2 equivalent/tonnes hydrocarbons produced)	0.0715	0.0646

Note: STOS - 100% operational figures derived from total productivity and emissions data.

CO2 = Carbonn Dioxide.

* The one spill was at a production station. Spill was contained on land and disposed of appropriately.