Charles O. Holliday
In just a few minutes, Ben will describe our 2016 performance and the path forward of our company. He will hit the highlights that we think are critical for you to know as a shareholder. I am pleased to tell you today that the Board is very proud of the accomplishments of 2016, including the BG Group acquisition. Ben will also take you through some of the issues and the opportunities facing our company. What we know for a successful strategy is that Board and management must be fully aligned, and I can assure you today, they are fully aligned on the strategy.
We now turn to the next slide, the cautionary note. You have had plenty of time to read that but do take note that it is important, and please consider all of our public information as you are making decisions about our company.
“Energy is the golden thread that connects economic growth, social equity and environmental sustainability.”
That is a beautiful statement by the former Secretary General of the United Nations, which could have been written by an outstanding speech-writer but, knowing the Secretary General, who grew up in Korea without access to electricity like we have in this room, and hearing him personally tell the stories of studying at night by candlelight – and he wouldn’t have a candle every night but only when there were exams the next day was he sure to have a candle. This was a statement written by someone who knows the importance of energy to a developing world. As we are here today, with 1.1 billion people without access to electricity as we know it, and 2.4 billion cooking on a stove that will probably reduce the quality of their life, we are in a very different age. It is in the context of this statement that we must navigate our strategy at Shell.
To be successful in that environment, you must have the ability to question.
As Ben described , we must not cling to our old beliefs but be willing to question to tackle the energy challenge ahead. Ben made this statement and he has made similar statements many times, but this was particularly at our ‘Powering Progress Together’ session in June of last year in London. This is what is necessary if a company is going to tackle the challenge that the Secretary General gave to all of us, about being willing to challenge old beliefs. If you come away with nothing else from this meeting, I hope you come away with the conclusion that Shell is open to challenging old beliefs, because we know that it is critical.
The energy challenge: four points are described here, that speak to what we must do to create that golden thread that the Secretary General described. Let me make it very simple for you. Between now and 2060, we have to increase the energy supply by about 60% in the world and that is because the population will go from 7.4 billion to over 10 billion, but also each one of us will be requiring more energy. A 60% increase, while at the same time we need drastically to reduce our greenhouse gas emissions toward net zero, if we are to meet the goals that the nations of the world set forward in Paris. That does not mean that we will have no greenhouse gases but it means that we will find ways to capture and store or sequester them in nature as we go forward. That is one of the major challenges that the world has ever face, to somehow meet the increasing needs of everyone for energy, while we significantly reduce the greenhouse effect.
With that background outstanding, let’s move to the next slide about Shell’s strategy.
The big hexagon on this chart says “World-class investment case”. Ben and his team described to the world at Investor Day last year, and it is the hallmark of what we must do. You say, well why is that the biggest? If we aren’t financially stable, if we aren’t vibrant, we will not have the resources to meet the other things we think are so critical as a company. We must have the returns on investment in order to be to return a dividend to you. We are not a full world-class investment yet, but that is the goal, which Ben will talk more about this morning. It is critical that we get there in the near future, to accomplish everything we must have to lead this energy challenge.
We will be a leader externally, moving to the other hexagons, not only in the value that we create for society, but in influence. You must conduct yourself in the right way to have the right to have influence, and we must have that financial stability to be considered in the world. And yet we can’t only say what others should do, but we have to improve our own carbon intensity. We are very much focused on that as one of the four pillars of our strategy. So, for energy unit produced, we have to find ways to reduce our carbon intensity totally. Share value with society: if you recall back to what the Secretary General said, there must be social equity. If we can’t find ways to share value with society broadly as we accomplish the objectives, we will not be the world-class company we plan to be.
We communicate extensively about what we are doing in the company. I point to these two reports in particular. One is our Sustainability Report, which we have now issued for 20 consecutive years – as long as any company we track, in having a Sustainability Report. We urge you to look at that report, because it is very easy to follow, it is online and it is simple. I think it will tell you a great deal about what we are doing as a company. If you see things which you think we should add to that report, then tell us, because it is constantly changing and improving to meet your needs. The other report is available outside. I’m holding a copy up here. These are examples of what we are doing for a cleaner energy world we are doing today. This is one example. We will have many to come out but I think it’s important to look at the concrete examples of things we are doing as we move forward to make the world a better place.
September 27, 2015 - a Sunday - New York City, the United Nations building, 193 countries coming together to agree on 17 Sustainable Development goals for the next 15 years. It is very difficult to get 193 countries to agree on anything. This was a very important step. If you will scan across those, it describes part of the challenge we in Shell and all of us face together as collective society to move forward together. The goal is to complete each one of these issues or make substantial progress by 2030 and that’s what we must work on as a company.
If you look at our Sustainability Report we will give you progress on most of these that we’ve had across the company, but let me turn to the next slide and give you an update on just four.
Number 7 – affordable and clean energy for all. Of course many, many people in Shell work on this every day of the week but I would like to talk about one new programme we just started this year. It is kick-starter innovation programme and we now have people making submissions from 12 different countries where they have ideas to get access to energy to that 1.1 billion people that don’t have it today. We are sorting through those and we are finding the best way Shell could help – not to be a part of Shell, but to provide investment, to provide coaching by counselling, to provide mentors to make it a success. It’s a very new programme with us and we will have the first up and running before the end of the year.
Number 8 – decent work and economic growth. It is so important for social equity, it’s so important for the backbone of the world. For over 35 years Shell has had what we call a LiveWire programme where we have facilities, we help people develop businesses and last year alone over 3,000 people were impacted by something from this 35-year-old programme inside Shell.
Number 11 – sustainable cities. By 2050, two-thirds of us in the world will be living in cities. If we don’t get the cities right we will not achieve the sustainable development goals we need as a world. Shell shares our planning expertise with many cities around the world. The particular example on this chart, a city in India, where we are helping them convert from coal facilities to power the textile industry in that city to a combination of solar and gas-fired in a mini grid. This is just one example of what we are doing today to move the energy effort forward.
And finally Number 13, climate change. Shell fully supports the Paris Accord and we will do our part to support its implementation. One example of our part is our carbon capture and sequestration facility in Canada where last year we captured one million tonnes in our first year of operation. We are still developing our role in the energy transition, but I want to stress to you we are not waiting to move down that path. Twenty years ago if you had looked at this first picture and said ‘Shell LNG out to fuel trucks on the roads here in the Netherlands’, you probably would have thought it was impossible, but now through a terminal in Rotterdam we are filling trucks throughout North West Europe and we are also serving the marine industry. Next year the very first oil tanker in the world will be powered by LNG from Shell and the following year, two ships from Carnival Cruise Lines will be powered by LNG in the largest carrier of pleasure craft in the world. These are steps people thought would not happen. They are happening today and Shell gas, Shell LNG is an important part of those steps forward.
The middle picture is from Wuppertal in Germany where we are rolling out a fleet of filling stations with our partners in Germany over the next several years so hydrogen can fuel the cars. As I saw this it brought back a real clear memory, 20 years ago on the streets of Washington DC I had the honour to drive Toyota’s experimental hydrogen fuel cell car. I will never forget. I was very nervous as I was doing it. There was a police car in front and a police car in back just to make sure I was okay and as I looked at that vehicle at that point in time and all the technical hurdles it would have to come over, I would not have guessed now 20 years later that car would be sitting outside this building and I have also now driven one in the State of California and I didn’t have to have police cars around me.
Another way to power your electric car is through hydrogen and Shell is starting with experiments here in the Netherlands and also in California, and obviously, Japan is making big steps in that direction. The important thing is that we start down this road; we are not predicting that hydrogen will take over, but it is one alternative that we must consider as we move forward.
Last, biofuels, and R&D in general. In our Raízen facility in Brazil, we are now using the waste from the sugar cane to make fuel for automobiles. We have two prototype facilities in the United States around using waste products there that don’t have other practical uses, and particularly in this example on the picture, is a biofuels facility prototype in India, in Bangalore, where we take garbage and run it through our plant and put it directly into your fuel tank. These are prototypes, but they are steps in the right direction to move us forward.
Let me wrap up on the next chart.
Picture yourself a student; she is in her early 20s, she has just graduated from university and we make a proposition for you: think about where you want to spend your career. What about in a company that is dedicated to energy solutions, in a world that has to have a 60% increase in energy, while at the same time we must make drastic reductions in greenhouse gases? Can you think about a more exciting career starting here today, to be a part of that journey with a company that will question old beliefs and find the right solutions? As well as we in Shell can sell that story to these new graduates and we attract them and they decide to invest their career with Shell, we plan to deliver on what we described for you today. Thank you very much.
Ben, over to you.