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Shell launches LNG Outlook 2018
Royal Dutch Shell plc
SHELL LNG OUTLOOK 2018
DEFINITIONS & CAUTIONARY NOTE
2
Reserves: Our use of the term “reserves” in this presentation means SEC proved oil and gas reserves. Resources: Our use of the term “resources” in this presentation includes quantities of oil and gas not yet classified as SEC proved oil and gas reserves. Resources are consistent with
the Society of Petroleum Engineers (SPE) 2P + 2C definitions.
Operating costs are defined as underlying operating expenses, which are operating expenses less identified items. Organic free cash flow is defined as free cash flow excluding inorganic capital investment and divestment proceeds. Clean CCS ROACE (Return on Average Capital
Employed) is defined as defined as the sum of CCS earnings attributable to shareholders excluding identified items for the current and previous three quarters, as a percentage of the average capital employed for the same period. Capital employed consists of total equity, current
debt and non-current debt. Capital investment comprises capital expenditure, exploration expense excluding well write-offs, new investments in joint ventures and associates, new finance leases and investments in Integrated Gas, Upstream and Downstream securities, all of which on
an accruals basis. In 2016, the capital investment was impacted by the acquisition of BG Group plc. which are included in “Change in non-controlling interest” within “Cash flow from financing (CFFF) activities”. Divestments comprises proceeds from sale of property, plant and
equipment and businesses, joint ventures and associates, and other Integrated Gas, Upstream and Downstream investments, reported in “Cash flow from investing activities (CFFI)”, adjusted onto an accruals basis and for any share consideration received or contingent consideration
recognised upon divestment, as well as proceeds from the sale of interests in entities while retaining control (for example, proceeds from sale of interest in Shell Midstream Partners, L.P.), This presentation contains the following forward-looking Non-GAAP measures: Organic Free
Cash Flow, Free Cash Flow, Capital Investment, CCS Earnings, CCS Earnings less identified items, Gearing, Underlying Operating Expenses, ROACE, Capital Employed and Divestments. We are unable to provide a reconciliation of the above forward-looking Non-GAAP measures
to the most comparable GAAP financial measures because certain information needed to reconcile the above Non-GAAP measure to the most comparable GAAP financial measure is dependent on future events some which are outside the control of the company, such as oil and
gas prices, interest rates and exchange rates. Moreover, estimating such GAAP measures consistent with the company accounting policies and the required precision necessary to provide a meaningful reconciliation is extremely difficult and could not be accomplished without
unreasonable effort. Non-GAAP measures in respect of future periods which cannot be reconciled to the most comparable GAAP financial measure are calculated in a manner which is consistent with the accounting policies applied in Royal Dutch Shell plc’s financial statements. The
financial measures provided by strategic themes represent a notional allocation of ROACE, capital employed, capital investment, free cash flow, organic free cash flow and underlying operating expenses of Shell’s strategic themes. Shell’s segment reporting under IFRS 8 remains
Integrated Gas, Upstream, Downstream and Corporate.
The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate legal entities. In this presentation “Shell”, “Shell group” and “Royal Dutch Shell” are sometimes used for convenience where references are made to Royal Dutch Shell plc and its
subsidiaries in general. Likewise, the words “we”, “us” and “our” are also used to refer to subsidiaries in general or to those who work for them. These expressions are also used where no useful purpose is served by identifying the particular company or companies. ‘‘Subsidiaries’’,
“Shell subsidiaries” and “Shell companies” as used in this presentation refer to companies over which Royal Dutch Shell plc either directly or indirectly has control. Entities and unincorporated arrangements over which Shell has joint control are generally referred to “joint ventures”
and “joint operations” respectively. Entities over which Shell has significant influence but neither control nor joint control are referred to as “associates”. The term “Shell interest” is used for convenience to indicate the direct and/or indirect ownership interest held by Shell in a
venture, partnership or company, after exclusion of all third-party interest.
This presentation contains forward-looking statements concerning the financial condition, results of operations and businesses of Royal Dutch Shell. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking
statements are statements of future expectations that are based on management’s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied
in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of Royal Dutch Shell to market risks and statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions. These
forward-looking statements are identified by their use of terms and phrases such as ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, ‘‘estimate’’, ‘‘expect’’, ‘‘goals’’, ‘‘intend’’, ‘‘may’’, ‘‘objectives’’, ‘‘outlook’’, ‘‘plan’’, ‘‘probably’’, ‘‘project’’, ‘‘risks’’, “schedule”, ‘‘seek’’, ‘‘should’’, ‘‘target’’,
‘‘will’’ and similar terms and phrases. There are a number of factors that could affect the future operations of Royal Dutch Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this presentation, including (without
limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for Shell’s products; (c) currency fluctuations; (d) drilling and production results; (e) reserves estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h)
risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, fiscal and
regulatory developments including regulatory measures addressing climate change; (k) economic and financial market conditions in various countries and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental
entities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; and (m) changes in trading conditions. No assurance is provided that future dividend payments will match or exceed previous dividend payments. All forward-looking
statements contained in this presentation are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-looking statements. Additional risk factors that may affect future results are
contained in Royal Dutch Shell’s 20-F for the year ended December 31, 2016 (available at www.shell.com/investor and www.sec.gov ). These risk factors also expressly qualify all forward looking statements contained in this presentation and should be considered by the reader.
Each forward-looking statement speaks only as of the date of this presentation, February 26, 2018. Neither Royal Dutch Shell plc nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking statement as a result of new information, future
events or other information. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements contained in this presentation. This presentation may contain references to Shell’s website. These references are for the readers’
convenience only. Shell is not incorporating by reference any information posted on www.shell.com. We may have used certain terms, such as resources, in this presentation that United States Securities and Exchange Commission (SEC) strictly prohibits us from including in our
filings with the SEC. U.S. Investors are urged to consider closely the disclosure in our Form 20-F, File No 1-32575, available on the SEC website www.sec.gov.
Royal Dutch Shell plc
SHELL LNG OUTLOOK 2018
Queensland Curtis LNG Facility, Australia
3
The energy challenge
Growing economies need more and cleaner energy
Policy actions for clean energy support gas and LNG
Gas plays growing role to meet energy challenge
Gas supports renewables
OECD leading the move to gas and renewables for power
generation
Strong China gas demand driven by growth outside power
LNG is the fastest growing gas supply source
LNG provides new form of energy security
Unprecedented LNG capacity expansion 45% complete
Global LNG market continues to defy expectations
29 mt increase in LNG imports in 2017
LNG accommodates China growth and seasonal demand
Spot prices continue to reflect strong demand for LNG
Physical and financial liquidity increases as market
evolves
Fast, flexible FSRUs continue to increase LNG imports
Demand for LNG in transport grows globally
Lack of supply investment risks future global LNG market
growth
LNG buyers and their needs are changing
LNG buyers signing shorter and smaller contracts
Liquefaction investment needed to meet demand growth
01 EXTERNAL ENVIRONMENT CREATING
MORE OPPORTUNITIES FOR GAS AND LNG
02 STRONG LNG FUNDAMENTALS
EXCEEDED EXPECTATIONS IN 2017
03 SUPPLY INVESTMENT REQUIRED TO
MEET LONG-TERM DEMAND GROWTH
CONTENTS
Royal Dutch Shell plc
SHELL LNG OUTLOOK 2018
EXTERNAL
ENVIRONMENT
CREATING MORE
OPPORTUNITIES FOR
GAS AND LNG
4
01
Oman LNG facility
Royal Dutch Shell plc
SHELL LNG OUTLOOK 2018 EXTERNAL ENVIRONMENT CREATING MORE OPPORTUNITIES FOR GAS AND LNG
5
Growing
Population
According to the World
Bank, global population is
expected to increase from
around 7 billion today to
over 9 billion by 2050,
with 66% living in cities.
Rising
Demand
Over a billion people continue
to live without electricity while
another billion struggle with
unreliable supplies of electricity.
According to the International
Energy Agency (IEA) New
Policies Scenario, global
energy demand is expected to
grow by 30% between 2015
and 2040.
Ongoing
Supply
As per IEA, it is expected
that renewable energy could
increase significantly by
2040. However, we will still
need large amounts of oil
and gas to provide the full
range of energy products
that the world needs.
Mitigating
Climate Change
The world currently emits
32 billion tonnes of
energy-related CO2 each
year. To limit the rise in
global temperature to 2°C,
the IEA has calculated that
energy related CO2
emissions need to fall to
around 18 billion tonnes a
year by 2040.
Improving Air
Quality
The World Health
Organization (WHO) has
found that outdoor air
pollution in both cities and
rural areas is estimated to
cause some 3 million
premature deaths a year
worldwide.
THE ENERGY CHALLENGE
Royal Dutch Shell plc
SHELL LNG OUTLOOK 2018 EXTERNAL ENVIRONMENT CREATING MORE OPPORTUNITIES FOR GAS AND LNG
6
Bangladesh
China
India
Myanmar
Pakistan
South Korea
Thailand
Vietnam
0
200,000
400,000
600,000
800,000
0% 25% 50% 75% 100%
Extreme
High
Medium
Asia air quality index
Coal share in electricity mix (2017)
Change in energy demand (2017-2035), KTOE
Energy demand growth vs coal shareAir quality index 2017
GROWING ECONOMIES NEED MORE AND CLEANER ENERGY
Source: Shell interpretation of Wood Mackenzie and Verisk Maplecroft Q4 2017 data
Population size
Royal Dutch Shell plc
SHELL LNG OUTLOOK 2018 EXTERNAL ENVIRONMENT CREATING MORE OPPORTUNITIES FOR GAS AND LNG
POLICY ACTIONS FOR CLEAN ENERGY SUPPORT GAS AND LNG
GLOBAL
G20 endorses the role of
natural gas in energy
transition
IEA credits levelling of global
CO2 emissions to coal
displacement
Increasing recognition of
environmental benefits
REGIONAL
More than 10 countries
announce coal phase-out
ambitions - 25% of coal
power capacity in EU
EU confirms reforms to
strengthen EU Emissions
Trading Scheme
EU policies supporting
coal phase out
NATIONAL
Policies favour gas and
renewables
LOCAL
Berlin closes local coal-fired
power plants to improve air
quality
Beijing meets ambitious
2017 air quality targets,
supported by coal to gas
switching
Policymakers targeting
air quality
7
China reforms gas market to
increase competitiveness of
delivered gas
South Korea’s 8th Basic Plan for
Energy prioritises renewables
and gas, while not sanctioning
new nuclear and coal
Royal Dutch Shell plc
SHELL LNG OUTLOOK 2018 EXTERNAL ENVIRONMENT CREATING MORE OPPORTUNITIES FOR GAS AND LNG
8
Source: Shell interpretation of Wood Mackenzie Q4 2017 data
0
4,000
8,000
12,000
16,000
20,000
46%
18% 14% 10% 7% 6%
0
1,000
2,000
3,000
4,000
5,000
45%
27%
20% 7%
BCM
Global energy demand growth by fuel
BCM
Global gas demand growth by sector Global gas demand growth by region
Energy demand:
1% CAGR
Gas demand:
2% CAGR
0
1,000
2,000
3,000
4,000
5,000
38%
33% 14% 2% 13%
BCM
CAGR - Compound Annual Growth Rate
GAS PLAYS GROWING ROLE TO MEET ENERGY CHALLENGE
Asia gas demand:
3% CAGR
Royal Dutch Shell plc
SHELL LNG OUTLOOK 2018 EXTERNAL ENVIRONMENT CREATING MORE OPPORTUNITIES FOR GAS AND LNG
9
Source: Shell interpretation of Wood Mackenzie Q4 2017, IHS Markit and CAISO data
10,000
15,000
20,000
25,000
30,000
0 4 8 12 16 20 24
Mar-13 Mar-17
Flexible gas generation complements solar to provide
reliable power generation in California
Net load, MWh
Flexible LNG supply balances hydro generation to provide
reliable power in Brazil
Reservoir level BCM/Month
0.00
0.25
0.50
0.75
1.00
0%
25%
50%
75%
100%
North & South hydro reservoir levels (LHS) LNG imports (RHS)
GAS SUPPORTS RENEWABLES
Hour of the day
Net load equals total generation minus solar and wind output; 7 day sample
Royal Dutch Shell plc
SHELL LNG OUTLOOK 2018 EXTERNAL ENVIRONMENT CREATING MORE OPPORTUNITIES FOR GAS AND LNG
10
SHELL LNG OUTLOOK 2018 EXTERNAL ENVIRONMENT CREATING MORE OPPORTUNITIES FOR GAS AND LNG
Source: Shell interpretation of International Energy Agency (IEA) data
OECD electricity output by source
0%
10%
20%
30%
40%
50%
60%
1975 1980 1985 1990 1995 2000 2005 2010 2015
Natural Gas Coal Nuclear
Hydro Other renewables Biofuels and waste
Oil
Share
Non-OECD electricity output by source
0%
10%
20%
30%
40%
50%
60%
1975 1980 1985 1990 1995 2000 2005 2010 2015
Natural gas Coal Nuclear
Hydro Other renewables Biofuels and waste
Oil
Share
OECD LEADING THE MOVE TO GAS AND RENEWABLES FOR POWER
GENERATION
Royal Dutch Shell plc
SHELL LNG OUTLOOK 2018 EXTERNAL ENVIRONMENT CREATING MORE OPPORTUNITIES FOR GAS AND LNG
11
China demand growth by sector, 2017
0
10
20
30
40
50
0
50
100
150
200
250
2001 2003 2005 2007 2009 2011 2013 2015 2017
Gas demand (LHS) Change YoY (RHS)
China gas demand
BCM
Source: Shell interpretation of IHS Markit, China National Bureau of Statistics and Chinese customs data; latest estimates for 2017
STRONG CHINA GAS DEMAND DRIVEN BY GROWTH OUTSIDE POWER
200
210
220
230
240
250
2016 Electricity Industrial Res, comm
& heat
Transport 2017
BCMA BCM
Royal Dutch Shell plc
SHELL LNG OUTLOOK 2018 EXTERNAL ENVIRONMENT CREATING MORE OPPORTUNITIES FOR GAS AND LNG
Source: Shell interpretation of Wood Mackenzie Q4 2017 data
BCM
LNG imports by region
12
LNG IS THE FASTEST GROWING GAS SUPPLY SOURCE
CAGR - Compound Annual Growth Rate
0
1,000
2,000
3,000
4,000
5,000
2017 Domestic
production
Pipeline
imports
LNG imports 2035
62% 7%
31%
BCM
Global gas supply by source
LNG demand:
4% CAGR
0
200
400
600
800
1,000
2017 Asia Europe Americas Middle East
& Africa
2035
55%
16%
15%
13%
Royal Dutch Shell plc
SHELL LNG OUTLOOK 2018
Royal Dutch Shell plc
EXTERNAL ENVIRONMENT CREATING MORE OPPORTUNITIES FOR GAS AND LNG
13
LNG SOLVES GAS MARKET UNCERTAINTIES:
▪ Declining domestic production
▪ Pipeline disruptions
▪ Falling nuclear utilisation and reliability
▪ Hydroelectric seasonality, renewable intermittency
▪ Weather disruptions
▪ Geopolitics
▪ Timing of new supply
▪ Existing plant output
▪ Changing trade patterns
▪ Gas supply and demand uncertainty
LNG PROVIDES NEW FORM OF ENERGY SECURITY
LNG RESILIENT TO ITS OWN UNCERTAINTIES:
Queensland Curtis LNG Facility, Australia
Royal Dutch Shell plc
SHELL LNG OUTLOOK 2018
STRONG LNG
FUNDAMENTALS
EXCEEDED
EXPECTATIONS
IN 2017
14
02
SHELL LNG OUTLOOK 2018
LNG bunker vessel ‘Cardissa’
Royal Dutch Shell plc
SHELL LNG OUTLOOK 2018 STRONG LNG FUNDAMENTALS EXCEEDED EXPECTATIONS IN 2017
15
Source: Shell interpretation of IHS Markit Q4 2017 data
LNG trade
293
0
100
200
300
400
2005 2007 2009 2011 2013 2015 2017 2019
MTPA (DES)MTPA (FOB)
LNG liquefaction capacity additions
0%
25%
50%
75%
100%
0
10
20
30
40
50
2015 2016 2017 2018 2019 2020
Nameplate capacity additions Share online (nameplate capacity)
UNPRECEDENTED LNG CAPACITY EXPANSION 45% COMPLETE
Royal Dutch Shell plc
SHELL LNG OUTLOOK 2018 STRONG LNG FUNDAMENTALS EXCEEDED EXPECTATIONS IN 2017
16
Source: Shell interpretation of IHS Markit, Wood Mackenzie and Poten & Partners 2016 and Q4 2017 data
-10
0
10
20
30
Total imports North Asia South Europe Rest of world North West
Europe
Previous consensus forecast (as of late 2016) Actuals
Net imports: 2017 YoY
Million tonnes (DES)
-10
0
10
20
30
Total exports Australia US Africa Rest of world
Previous consensus forecast (as of late 2016) Actuals
Million tonnes (DES)
Net exports: 2017 YoY
GLOBAL LNG MARKET CONTINUES TO DEFY EXPECTATIONS
Royal Dutch Shell plc
SHELL LNG OUTLOOK 2018 STRONG LNG FUNDAMENTALS EXCEEDED EXPECTATIONS IN 2017
17
Source: Shell interpretation of IHS Markit, Wood Mackenzie and Poten & Partners data 2016 and Q4 2017
-4
0
4
8
12
16
UK
Egypt
UAE
Indonesia
Argentina
PuertoRico
Lithuania
US
Norway
Colombia
Sweden
Finland
Belgium
Canada
Chile
Japan
Jamaica
Jordan
DomRep
Israel
Singapore
Brazil
Malta
Netherlands
Poland
Malaysia
Kuwait
Greece
Thailand
Mexico
India
Portugal
Italy
Taiwan
Pakistan
France
Spain
Turkey
Korea
China
Previous consensus forecast (as of late 2016) Actuals
Net imports: 2017 YoY
Million tonnes (DES)
29 MT INCREASE IN LNG IMPORTS IN 2017
Royal Dutch Shell plc
SHELL LNG OUTLOOK 2018 STRONG LNG FUNDAMENTALS EXCEEDED EXPECTATIONS IN 2017
18
0
10
20
30
40
2010 2011 2012 2013 2014 2015 2016 2017
LNG imports Contracted LNG supply
China LNG imports
Million tonnes
Source: Shell interpretation of IHS Markit Q4 2017, S&P Global Platts, ICE data and Wood Mackenzie Q4 2017 data
LNG ACCOMMODATES CHINA GROWTH AND SEASONAL DEMAND
0%
20%
40%
60%
80%
100%
Jan-16 Jul-16 Jan-17 Jul-17
China Japan, Korea, Taiwan Rest of World
Other Europe North West Europe
Demand seasonality
Share of cargoes
Royal Dutch Shell plc
SHELL LNG OUTLOOK 2018 STRONG LNG FUNDAMENTALS EXCEEDED EXPECTATIONS IN 2017
19
Source: Japanese customs data (Japan LNG import), S&P Global Platts (JKM), ICE (NBP, Brent, ARA coal), NYMEX (Henry Hub)
JKM as % Brent
Asian spot price
0%
5%
10%
15%
20%
25%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Range 2010-2015 2016 2017
Global energy prices
$/MMBTU
0
5
10
15
20
25
2010 2011 2012 2013 2014 2015 2016 2017 2018
Energy price range Henry Hub Brent
NBP JKM (Platts) Japan LNG Import
Coal (ARA)
SPOT PRICES CONTINUE TO REFLECT STRONG DEMAND FOR LNG
Royal Dutch Shell plc
SHELL LNG OUTLOOK 2018 STRONG LNG FUNDAMENTALS EXCEEDED EXPECTATIONS IN 2017
20
Source: Shell interpretation of IHS Markit Q4 2017, S&P Global Platts and the ICE data
Spot LNG supply
Cargoes
0%
5%
10%
15%
20%
25%
30%
0
200
400
600
800
1000
1200
2010
2011
2012
2013
2014
2015
2016
2017
Australia US Qatar
Other Re-exports % spot (RHS)
Share spot
Spot LNG deliveries
Cargoes
0%
5%
10%
15%
20%
25%
30%
0
200
400
600
800
1000
1200
2010
2011
2012
2013
2014
2015
2016
2017
JKT China South Asia
Middle East Europe Americas
% spot (RHS)
Share spot
ICE JKM LNG (Platts) futures
Cargoes Lots (10,000 MMBTU)
PHYSICAL AND FINANCIAL LIQUIDITY INCREASE AS MARKET EVOLVES
0
9,000
18,000
27,000
36,000
45,000
54,000
0
30
60
90
120
150
180
2010
2011
2012
2013
2014
2015
2016
2017
Royal Dutch Shell plc
SHELL LNG OUTLOOK 2018 STRONG LNG FUNDAMENTALS EXCEEDED EXPECTATIONS IN 2017
21
0%
2%
4%
6%
8%
10%
12%
14%
0
5
10
15
20
25
30
35
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Americas Europe ME & Africa
Asia FSRU share
Deliveries to FSRUs
MTPA FSRU share
FSRU importing markets
 Argentina
 Brazil
 China
 Colombia
 Egypt
 Indonesia
 Israel
 Italy
 Jamaica
 Jordan
 Kuwait
 Lithuania
 Malta
 Pakistan
 Turkey
 UAE
Existing
 Croatia
 Cyprus
 El Salvador
 Hong Kong
 Ivory Coast
 South Africa
 Sri Lanka
Proposed
Source: Shell interpretation of IHS Markit Q4 2017 data
FAST, FLEXIBLE FSRUs CONTINUE TO INCREASE LNG IMPORTS
FSRU picture to be added
Under Construction & Development
 Bahrain
 Bangladesh
 Chile
 Ghana
 Russia
 Panama
FSRU moored off the port of Aqaba in Jordan
Royal Dutch Shell plc
SHELL LNG OUTLOOK 2018 STRONG LNG FUNDAMENTALS EXCEEDED EXPECTATIONS IN 2017
22
 Diverse marine
segments choosing LNG
 LNG bunkering network
developing globally
 LNG road fuelling network
developing in China (2000+ stations)
and EU (100+ stations)
DEMAND FOR LNG IN TRANSPORT GROWS GLOBALLY
Barge Car Carrier Ferry LNG Heavy Duty Truck
truck
Container Ship Cruise Ship Tanker LNG Fuel Station
Royal Dutch Shell plc
SHELL LNG OUTLOOK 2018
SUPPLY
INVESTMENT
REQUIRED TO
MEET LONG-TERM
DEMAND
GROWTH
23
03
SHELL LNG OUTLOOK 2018
Royal Dutch Shell plc
SHELL LNG OUTLOOK 2018 SUPPLY INVESTMENT REQUIRED TO MEET LONG-TERM DEMAND GROWTH
24
Source: Shell interpretation of IHS Markit, Wood Mackenzie, FGE, BNEF and Poten & Partners Q4 2017 data
Investment in liquefaction capacity
0
10
20
30
40
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
MTPA (FOB)
LACK OF SUPPLY INVESTMENT RISKS FUTURE GLOBAL LNG MARKET
GROWTH
Year of investment decision
Emerging LNG supply-demand gap
MTPA (DES)
0
100
200
300
400
500
600
2000 2005 2010 2015 2020 2025 2030 2035
LNG supply in operation LNG supply under construction Demand forecasts
Royal Dutch Shell plc
SHELL LNG OUTLOOK 2018 SUPPLY INVESTMENT REQUIRED TO MEET LONG-TERM DEMAND GROWTH
25
Source: Shell interpretation of Wood Mackenzie Q4 2017 data
Drivers of LNG demand
MTPA (DES)
0
100
200
300
400
500
600
2000 2005 2010 2015 2020 2025 2030 2035
Other market drivers Declining domestic gas production
0%
20%
40%
60%
80%
100%
2010 2017
Traditional markets Liquid or liberalising markets
LNG buyers’ domestic gas competition
Share of LNG deliveries
LNG BUYERS AND THEIR NEEDS ARE CHANGING
Royal Dutch Shell plc
SHELL LNG OUTLOOK 2018 SUPPLY INVESTMENT REQUIRED TO MEET LONG-TERM DEMAND GROWTH
26
Source: Shell interpretation of IHS Markit Q4 2017, Moody’s and Fitch data
0
4
8
12
16
20
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Average contract length
Years
0.0
0.5
1.0
1.5
2.0
2.5
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Average contract volume
MTPA
New long-term contract credit rating
0%
20%
40%
60%
80%
100%
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
A-rated B-rated Non-investment grade
Investment grade
LNG BUYERS SIGNING SHORTER AND SMALLER CONTRACTS
Share of contract volume
Royal Dutch Shell plc
SHELL LNG OUTLOOK 2018 SUPPLY INVESTMENT REQUIRED TO MEET LONG-TERM DEMAND GROWTH
Term sales to importers by supplier type
0%
20%
40%
60%
80%
100%
2008-2010 2015-2017
Supply project Portfolio Trader
Intermediaries
27
LIQUEFACTION INVESTMENT NEEDED TO MEET DEMAND GROWTH
Source: Shell interpretation of IHS Markit Q4 2017 data
Share of total contract volume
STALEMATE CONSTRAINING GROWTH OF LNG SUPPLY
FINANCIERS
Look to ensure
revenue
certainty
END-USERS
Look to avoid
long-term
contracts that
are not in line
with their
competitive
position
LNG BUYERS
Seek smaller,
more flexible
purchases to
remain
competitive in
downstream
market
LNG PRODUCERS
Seek long-term
LNG sales to
secure financing
MISMATCH
BETWEEN
BUYER
AND
SELLER
NEEDS
Royal Dutch Shell plc
SHELL LNG OUTLOOK 2018
28
SUMMARY
SHELL LNG OUTLOOK 2018
Methane Shirley Elisabeth
External environment creating more opportunities for gas and LNG
▪ Multiple levels of policy support gas and LNG demand
▪ Gas supports renewable power generation and provides cleaner
non-power energy supply
Strong LNG fundamentals exceeded expectations in 2017
▪ 11 % increase in LNG imports
▪ Physical and financial liquidity increases as market evolves
Supply investment required to meet long-term demand growth
Shell launches LNG Outlook 2018

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Shell launches LNG Outlook 2018

  • 2. Royal Dutch Shell plc SHELL LNG OUTLOOK 2018 DEFINITIONS & CAUTIONARY NOTE 2 Reserves: Our use of the term “reserves” in this presentation means SEC proved oil and gas reserves. Resources: Our use of the term “resources” in this presentation includes quantities of oil and gas not yet classified as SEC proved oil and gas reserves. Resources are consistent with the Society of Petroleum Engineers (SPE) 2P + 2C definitions. Operating costs are defined as underlying operating expenses, which are operating expenses less identified items. Organic free cash flow is defined as free cash flow excluding inorganic capital investment and divestment proceeds. Clean CCS ROACE (Return on Average Capital Employed) is defined as defined as the sum of CCS earnings attributable to shareholders excluding identified items for the current and previous three quarters, as a percentage of the average capital employed for the same period. Capital employed consists of total equity, current debt and non-current debt. Capital investment comprises capital expenditure, exploration expense excluding well write-offs, new investments in joint ventures and associates, new finance leases and investments in Integrated Gas, Upstream and Downstream securities, all of which on an accruals basis. In 2016, the capital investment was impacted by the acquisition of BG Group plc. which are included in “Change in non-controlling interest” within “Cash flow from financing (CFFF) activities”. Divestments comprises proceeds from sale of property, plant and equipment and businesses, joint ventures and associates, and other Integrated Gas, Upstream and Downstream investments, reported in “Cash flow from investing activities (CFFI)”, adjusted onto an accruals basis and for any share consideration received or contingent consideration recognised upon divestment, as well as proceeds from the sale of interests in entities while retaining control (for example, proceeds from sale of interest in Shell Midstream Partners, L.P.), This presentation contains the following forward-looking Non-GAAP measures: Organic Free Cash Flow, Free Cash Flow, Capital Investment, CCS Earnings, CCS Earnings less identified items, Gearing, Underlying Operating Expenses, ROACE, Capital Employed and Divestments. We are unable to provide a reconciliation of the above forward-looking Non-GAAP measures to the most comparable GAAP financial measures because certain information needed to reconcile the above Non-GAAP measure to the most comparable GAAP financial measure is dependent on future events some which are outside the control of the company, such as oil and gas prices, interest rates and exchange rates. Moreover, estimating such GAAP measures consistent with the company accounting policies and the required precision necessary to provide a meaningful reconciliation is extremely difficult and could not be accomplished without unreasonable effort. Non-GAAP measures in respect of future periods which cannot be reconciled to the most comparable GAAP financial measure are calculated in a manner which is consistent with the accounting policies applied in Royal Dutch Shell plc’s financial statements. The financial measures provided by strategic themes represent a notional allocation of ROACE, capital employed, capital investment, free cash flow, organic free cash flow and underlying operating expenses of Shell’s strategic themes. Shell’s segment reporting under IFRS 8 remains Integrated Gas, Upstream, Downstream and Corporate. The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate legal entities. In this presentation “Shell”, “Shell group” and “Royal Dutch Shell” are sometimes used for convenience where references are made to Royal Dutch Shell plc and its subsidiaries in general. Likewise, the words “we”, “us” and “our” are also used to refer to subsidiaries in general or to those who work for them. These expressions are also used where no useful purpose is served by identifying the particular company or companies. ‘‘Subsidiaries’’, “Shell subsidiaries” and “Shell companies” as used in this presentation refer to companies over which Royal Dutch Shell plc either directly or indirectly has control. Entities and unincorporated arrangements over which Shell has joint control are generally referred to “joint ventures” and “joint operations” respectively. Entities over which Shell has significant influence but neither control nor joint control are referred to as “associates”. The term “Shell interest” is used for convenience to indicate the direct and/or indirect ownership interest held by Shell in a venture, partnership or company, after exclusion of all third-party interest. This presentation contains forward-looking statements concerning the financial condition, results of operations and businesses of Royal Dutch Shell. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management’s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of Royal Dutch Shell to market risks and statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions. These forward-looking statements are identified by their use of terms and phrases such as ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, ‘‘estimate’’, ‘‘expect’’, ‘‘goals’’, ‘‘intend’’, ‘‘may’’, ‘‘objectives’’, ‘‘outlook’’, ‘‘plan’’, ‘‘probably’’, ‘‘project’’, ‘‘risks’’, “schedule”, ‘‘seek’’, ‘‘should’’, ‘‘target’’, ‘‘will’’ and similar terms and phrases. There are a number of factors that could affect the future operations of Royal Dutch Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this presentation, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for Shell’s products; (c) currency fluctuations; (d) drilling and production results; (e) reserves estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, fiscal and regulatory developments including regulatory measures addressing climate change; (k) economic and financial market conditions in various countries and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; and (m) changes in trading conditions. No assurance is provided that future dividend payments will match or exceed previous dividend payments. All forward-looking statements contained in this presentation are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-looking statements. Additional risk factors that may affect future results are contained in Royal Dutch Shell’s 20-F for the year ended December 31, 2016 (available at www.shell.com/investor and www.sec.gov ). These risk factors also expressly qualify all forward looking statements contained in this presentation and should be considered by the reader. Each forward-looking statement speaks only as of the date of this presentation, February 26, 2018. Neither Royal Dutch Shell plc nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements contained in this presentation. This presentation may contain references to Shell’s website. These references are for the readers’ convenience only. Shell is not incorporating by reference any information posted on www.shell.com. We may have used certain terms, such as resources, in this presentation that United States Securities and Exchange Commission (SEC) strictly prohibits us from including in our filings with the SEC. U.S. Investors are urged to consider closely the disclosure in our Form 20-F, File No 1-32575, available on the SEC website www.sec.gov.
  • 3. Royal Dutch Shell plc SHELL LNG OUTLOOK 2018 Queensland Curtis LNG Facility, Australia 3 The energy challenge Growing economies need more and cleaner energy Policy actions for clean energy support gas and LNG Gas plays growing role to meet energy challenge Gas supports renewables OECD leading the move to gas and renewables for power generation Strong China gas demand driven by growth outside power LNG is the fastest growing gas supply source LNG provides new form of energy security Unprecedented LNG capacity expansion 45% complete Global LNG market continues to defy expectations 29 mt increase in LNG imports in 2017 LNG accommodates China growth and seasonal demand Spot prices continue to reflect strong demand for LNG Physical and financial liquidity increases as market evolves Fast, flexible FSRUs continue to increase LNG imports Demand for LNG in transport grows globally Lack of supply investment risks future global LNG market growth LNG buyers and their needs are changing LNG buyers signing shorter and smaller contracts Liquefaction investment needed to meet demand growth 01 EXTERNAL ENVIRONMENT CREATING MORE OPPORTUNITIES FOR GAS AND LNG 02 STRONG LNG FUNDAMENTALS EXCEEDED EXPECTATIONS IN 2017 03 SUPPLY INVESTMENT REQUIRED TO MEET LONG-TERM DEMAND GROWTH CONTENTS
  • 4. Royal Dutch Shell plc SHELL LNG OUTLOOK 2018 EXTERNAL ENVIRONMENT CREATING MORE OPPORTUNITIES FOR GAS AND LNG 4 01 Oman LNG facility
  • 5. Royal Dutch Shell plc SHELL LNG OUTLOOK 2018 EXTERNAL ENVIRONMENT CREATING MORE OPPORTUNITIES FOR GAS AND LNG 5 Growing Population According to the World Bank, global population is expected to increase from around 7 billion today to over 9 billion by 2050, with 66% living in cities. Rising Demand Over a billion people continue to live without electricity while another billion struggle with unreliable supplies of electricity. According to the International Energy Agency (IEA) New Policies Scenario, global energy demand is expected to grow by 30% between 2015 and 2040. Ongoing Supply As per IEA, it is expected that renewable energy could increase significantly by 2040. However, we will still need large amounts of oil and gas to provide the full range of energy products that the world needs. Mitigating Climate Change The world currently emits 32 billion tonnes of energy-related CO2 each year. To limit the rise in global temperature to 2°C, the IEA has calculated that energy related CO2 emissions need to fall to around 18 billion tonnes a year by 2040. Improving Air Quality The World Health Organization (WHO) has found that outdoor air pollution in both cities and rural areas is estimated to cause some 3 million premature deaths a year worldwide. THE ENERGY CHALLENGE
  • 6. Royal Dutch Shell plc SHELL LNG OUTLOOK 2018 EXTERNAL ENVIRONMENT CREATING MORE OPPORTUNITIES FOR GAS AND LNG 6 Bangladesh China India Myanmar Pakistan South Korea Thailand Vietnam 0 200,000 400,000 600,000 800,000 0% 25% 50% 75% 100% Extreme High Medium Asia air quality index Coal share in electricity mix (2017) Change in energy demand (2017-2035), KTOE Energy demand growth vs coal shareAir quality index 2017 GROWING ECONOMIES NEED MORE AND CLEANER ENERGY Source: Shell interpretation of Wood Mackenzie and Verisk Maplecroft Q4 2017 data Population size
  • 7. Royal Dutch Shell plc SHELL LNG OUTLOOK 2018 EXTERNAL ENVIRONMENT CREATING MORE OPPORTUNITIES FOR GAS AND LNG POLICY ACTIONS FOR CLEAN ENERGY SUPPORT GAS AND LNG GLOBAL G20 endorses the role of natural gas in energy transition IEA credits levelling of global CO2 emissions to coal displacement Increasing recognition of environmental benefits REGIONAL More than 10 countries announce coal phase-out ambitions - 25% of coal power capacity in EU EU confirms reforms to strengthen EU Emissions Trading Scheme EU policies supporting coal phase out NATIONAL Policies favour gas and renewables LOCAL Berlin closes local coal-fired power plants to improve air quality Beijing meets ambitious 2017 air quality targets, supported by coal to gas switching Policymakers targeting air quality 7 China reforms gas market to increase competitiveness of delivered gas South Korea’s 8th Basic Plan for Energy prioritises renewables and gas, while not sanctioning new nuclear and coal
  • 8. Royal Dutch Shell plc SHELL LNG OUTLOOK 2018 EXTERNAL ENVIRONMENT CREATING MORE OPPORTUNITIES FOR GAS AND LNG 8 Source: Shell interpretation of Wood Mackenzie Q4 2017 data 0 4,000 8,000 12,000 16,000 20,000 46% 18% 14% 10% 7% 6% 0 1,000 2,000 3,000 4,000 5,000 45% 27% 20% 7% BCM Global energy demand growth by fuel BCM Global gas demand growth by sector Global gas demand growth by region Energy demand: 1% CAGR Gas demand: 2% CAGR 0 1,000 2,000 3,000 4,000 5,000 38% 33% 14% 2% 13% BCM CAGR - Compound Annual Growth Rate GAS PLAYS GROWING ROLE TO MEET ENERGY CHALLENGE Asia gas demand: 3% CAGR
  • 9. Royal Dutch Shell plc SHELL LNG OUTLOOK 2018 EXTERNAL ENVIRONMENT CREATING MORE OPPORTUNITIES FOR GAS AND LNG 9 Source: Shell interpretation of Wood Mackenzie Q4 2017, IHS Markit and CAISO data 10,000 15,000 20,000 25,000 30,000 0 4 8 12 16 20 24 Mar-13 Mar-17 Flexible gas generation complements solar to provide reliable power generation in California Net load, MWh Flexible LNG supply balances hydro generation to provide reliable power in Brazil Reservoir level BCM/Month 0.00 0.25 0.50 0.75 1.00 0% 25% 50% 75% 100% North & South hydro reservoir levels (LHS) LNG imports (RHS) GAS SUPPORTS RENEWABLES Hour of the day Net load equals total generation minus solar and wind output; 7 day sample
  • 10. Royal Dutch Shell plc SHELL LNG OUTLOOK 2018 EXTERNAL ENVIRONMENT CREATING MORE OPPORTUNITIES FOR GAS AND LNG 10 SHELL LNG OUTLOOK 2018 EXTERNAL ENVIRONMENT CREATING MORE OPPORTUNITIES FOR GAS AND LNG Source: Shell interpretation of International Energy Agency (IEA) data OECD electricity output by source 0% 10% 20% 30% 40% 50% 60% 1975 1980 1985 1990 1995 2000 2005 2010 2015 Natural Gas Coal Nuclear Hydro Other renewables Biofuels and waste Oil Share Non-OECD electricity output by source 0% 10% 20% 30% 40% 50% 60% 1975 1980 1985 1990 1995 2000 2005 2010 2015 Natural gas Coal Nuclear Hydro Other renewables Biofuels and waste Oil Share OECD LEADING THE MOVE TO GAS AND RENEWABLES FOR POWER GENERATION
  • 11. Royal Dutch Shell plc SHELL LNG OUTLOOK 2018 EXTERNAL ENVIRONMENT CREATING MORE OPPORTUNITIES FOR GAS AND LNG 11 China demand growth by sector, 2017 0 10 20 30 40 50 0 50 100 150 200 250 2001 2003 2005 2007 2009 2011 2013 2015 2017 Gas demand (LHS) Change YoY (RHS) China gas demand BCM Source: Shell interpretation of IHS Markit, China National Bureau of Statistics and Chinese customs data; latest estimates for 2017 STRONG CHINA GAS DEMAND DRIVEN BY GROWTH OUTSIDE POWER 200 210 220 230 240 250 2016 Electricity Industrial Res, comm & heat Transport 2017 BCMA BCM
  • 12. Royal Dutch Shell plc SHELL LNG OUTLOOK 2018 EXTERNAL ENVIRONMENT CREATING MORE OPPORTUNITIES FOR GAS AND LNG Source: Shell interpretation of Wood Mackenzie Q4 2017 data BCM LNG imports by region 12 LNG IS THE FASTEST GROWING GAS SUPPLY SOURCE CAGR - Compound Annual Growth Rate 0 1,000 2,000 3,000 4,000 5,000 2017 Domestic production Pipeline imports LNG imports 2035 62% 7% 31% BCM Global gas supply by source LNG demand: 4% CAGR 0 200 400 600 800 1,000 2017 Asia Europe Americas Middle East & Africa 2035 55% 16% 15% 13%
  • 13. Royal Dutch Shell plc SHELL LNG OUTLOOK 2018 Royal Dutch Shell plc EXTERNAL ENVIRONMENT CREATING MORE OPPORTUNITIES FOR GAS AND LNG 13 LNG SOLVES GAS MARKET UNCERTAINTIES: ▪ Declining domestic production ▪ Pipeline disruptions ▪ Falling nuclear utilisation and reliability ▪ Hydroelectric seasonality, renewable intermittency ▪ Weather disruptions ▪ Geopolitics ▪ Timing of new supply ▪ Existing plant output ▪ Changing trade patterns ▪ Gas supply and demand uncertainty LNG PROVIDES NEW FORM OF ENERGY SECURITY LNG RESILIENT TO ITS OWN UNCERTAINTIES: Queensland Curtis LNG Facility, Australia
  • 14. Royal Dutch Shell plc SHELL LNG OUTLOOK 2018 STRONG LNG FUNDAMENTALS EXCEEDED EXPECTATIONS IN 2017 14 02 SHELL LNG OUTLOOK 2018 LNG bunker vessel ‘Cardissa’
  • 15. Royal Dutch Shell plc SHELL LNG OUTLOOK 2018 STRONG LNG FUNDAMENTALS EXCEEDED EXPECTATIONS IN 2017 15 Source: Shell interpretation of IHS Markit Q4 2017 data LNG trade 293 0 100 200 300 400 2005 2007 2009 2011 2013 2015 2017 2019 MTPA (DES)MTPA (FOB) LNG liquefaction capacity additions 0% 25% 50% 75% 100% 0 10 20 30 40 50 2015 2016 2017 2018 2019 2020 Nameplate capacity additions Share online (nameplate capacity) UNPRECEDENTED LNG CAPACITY EXPANSION 45% COMPLETE
  • 16. Royal Dutch Shell plc SHELL LNG OUTLOOK 2018 STRONG LNG FUNDAMENTALS EXCEEDED EXPECTATIONS IN 2017 16 Source: Shell interpretation of IHS Markit, Wood Mackenzie and Poten & Partners 2016 and Q4 2017 data -10 0 10 20 30 Total imports North Asia South Europe Rest of world North West Europe Previous consensus forecast (as of late 2016) Actuals Net imports: 2017 YoY Million tonnes (DES) -10 0 10 20 30 Total exports Australia US Africa Rest of world Previous consensus forecast (as of late 2016) Actuals Million tonnes (DES) Net exports: 2017 YoY GLOBAL LNG MARKET CONTINUES TO DEFY EXPECTATIONS
  • 17. Royal Dutch Shell plc SHELL LNG OUTLOOK 2018 STRONG LNG FUNDAMENTALS EXCEEDED EXPECTATIONS IN 2017 17 Source: Shell interpretation of IHS Markit, Wood Mackenzie and Poten & Partners data 2016 and Q4 2017 -4 0 4 8 12 16 UK Egypt UAE Indonesia Argentina PuertoRico Lithuania US Norway Colombia Sweden Finland Belgium Canada Chile Japan Jamaica Jordan DomRep Israel Singapore Brazil Malta Netherlands Poland Malaysia Kuwait Greece Thailand Mexico India Portugal Italy Taiwan Pakistan France Spain Turkey Korea China Previous consensus forecast (as of late 2016) Actuals Net imports: 2017 YoY Million tonnes (DES) 29 MT INCREASE IN LNG IMPORTS IN 2017
  • 18. Royal Dutch Shell plc SHELL LNG OUTLOOK 2018 STRONG LNG FUNDAMENTALS EXCEEDED EXPECTATIONS IN 2017 18 0 10 20 30 40 2010 2011 2012 2013 2014 2015 2016 2017 LNG imports Contracted LNG supply China LNG imports Million tonnes Source: Shell interpretation of IHS Markit Q4 2017, S&P Global Platts, ICE data and Wood Mackenzie Q4 2017 data LNG ACCOMMODATES CHINA GROWTH AND SEASONAL DEMAND 0% 20% 40% 60% 80% 100% Jan-16 Jul-16 Jan-17 Jul-17 China Japan, Korea, Taiwan Rest of World Other Europe North West Europe Demand seasonality Share of cargoes
  • 19. Royal Dutch Shell plc SHELL LNG OUTLOOK 2018 STRONG LNG FUNDAMENTALS EXCEEDED EXPECTATIONS IN 2017 19 Source: Japanese customs data (Japan LNG import), S&P Global Platts (JKM), ICE (NBP, Brent, ARA coal), NYMEX (Henry Hub) JKM as % Brent Asian spot price 0% 5% 10% 15% 20% 25% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Range 2010-2015 2016 2017 Global energy prices $/MMBTU 0 5 10 15 20 25 2010 2011 2012 2013 2014 2015 2016 2017 2018 Energy price range Henry Hub Brent NBP JKM (Platts) Japan LNG Import Coal (ARA) SPOT PRICES CONTINUE TO REFLECT STRONG DEMAND FOR LNG
  • 20. Royal Dutch Shell plc SHELL LNG OUTLOOK 2018 STRONG LNG FUNDAMENTALS EXCEEDED EXPECTATIONS IN 2017 20 Source: Shell interpretation of IHS Markit Q4 2017, S&P Global Platts and the ICE data Spot LNG supply Cargoes 0% 5% 10% 15% 20% 25% 30% 0 200 400 600 800 1000 1200 2010 2011 2012 2013 2014 2015 2016 2017 Australia US Qatar Other Re-exports % spot (RHS) Share spot Spot LNG deliveries Cargoes 0% 5% 10% 15% 20% 25% 30% 0 200 400 600 800 1000 1200 2010 2011 2012 2013 2014 2015 2016 2017 JKT China South Asia Middle East Europe Americas % spot (RHS) Share spot ICE JKM LNG (Platts) futures Cargoes Lots (10,000 MMBTU) PHYSICAL AND FINANCIAL LIQUIDITY INCREASE AS MARKET EVOLVES 0 9,000 18,000 27,000 36,000 45,000 54,000 0 30 60 90 120 150 180 2010 2011 2012 2013 2014 2015 2016 2017
  • 21. Royal Dutch Shell plc SHELL LNG OUTLOOK 2018 STRONG LNG FUNDAMENTALS EXCEEDED EXPECTATIONS IN 2017 21 0% 2% 4% 6% 8% 10% 12% 14% 0 5 10 15 20 25 30 35 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Americas Europe ME & Africa Asia FSRU share Deliveries to FSRUs MTPA FSRU share FSRU importing markets  Argentina  Brazil  China  Colombia  Egypt  Indonesia  Israel  Italy  Jamaica  Jordan  Kuwait  Lithuania  Malta  Pakistan  Turkey  UAE Existing  Croatia  Cyprus  El Salvador  Hong Kong  Ivory Coast  South Africa  Sri Lanka Proposed Source: Shell interpretation of IHS Markit Q4 2017 data FAST, FLEXIBLE FSRUs CONTINUE TO INCREASE LNG IMPORTS FSRU picture to be added Under Construction & Development  Bahrain  Bangladesh  Chile  Ghana  Russia  Panama FSRU moored off the port of Aqaba in Jordan
  • 22. Royal Dutch Shell plc SHELL LNG OUTLOOK 2018 STRONG LNG FUNDAMENTALS EXCEEDED EXPECTATIONS IN 2017 22  Diverse marine segments choosing LNG  LNG bunkering network developing globally  LNG road fuelling network developing in China (2000+ stations) and EU (100+ stations) DEMAND FOR LNG IN TRANSPORT GROWS GLOBALLY Barge Car Carrier Ferry LNG Heavy Duty Truck truck Container Ship Cruise Ship Tanker LNG Fuel Station
  • 23. Royal Dutch Shell plc SHELL LNG OUTLOOK 2018 SUPPLY INVESTMENT REQUIRED TO MEET LONG-TERM DEMAND GROWTH 23 03 SHELL LNG OUTLOOK 2018
  • 24. Royal Dutch Shell plc SHELL LNG OUTLOOK 2018 SUPPLY INVESTMENT REQUIRED TO MEET LONG-TERM DEMAND GROWTH 24 Source: Shell interpretation of IHS Markit, Wood Mackenzie, FGE, BNEF and Poten & Partners Q4 2017 data Investment in liquefaction capacity 0 10 20 30 40 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 MTPA (FOB) LACK OF SUPPLY INVESTMENT RISKS FUTURE GLOBAL LNG MARKET GROWTH Year of investment decision Emerging LNG supply-demand gap MTPA (DES) 0 100 200 300 400 500 600 2000 2005 2010 2015 2020 2025 2030 2035 LNG supply in operation LNG supply under construction Demand forecasts
  • 25. Royal Dutch Shell plc SHELL LNG OUTLOOK 2018 SUPPLY INVESTMENT REQUIRED TO MEET LONG-TERM DEMAND GROWTH 25 Source: Shell interpretation of Wood Mackenzie Q4 2017 data Drivers of LNG demand MTPA (DES) 0 100 200 300 400 500 600 2000 2005 2010 2015 2020 2025 2030 2035 Other market drivers Declining domestic gas production 0% 20% 40% 60% 80% 100% 2010 2017 Traditional markets Liquid or liberalising markets LNG buyers’ domestic gas competition Share of LNG deliveries LNG BUYERS AND THEIR NEEDS ARE CHANGING
  • 26. Royal Dutch Shell plc SHELL LNG OUTLOOK 2018 SUPPLY INVESTMENT REQUIRED TO MEET LONG-TERM DEMAND GROWTH 26 Source: Shell interpretation of IHS Markit Q4 2017, Moody’s and Fitch data 0 4 8 12 16 20 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Average contract length Years 0.0 0.5 1.0 1.5 2.0 2.5 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Average contract volume MTPA New long-term contract credit rating 0% 20% 40% 60% 80% 100% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 A-rated B-rated Non-investment grade Investment grade LNG BUYERS SIGNING SHORTER AND SMALLER CONTRACTS Share of contract volume
  • 27. Royal Dutch Shell plc SHELL LNG OUTLOOK 2018 SUPPLY INVESTMENT REQUIRED TO MEET LONG-TERM DEMAND GROWTH Term sales to importers by supplier type 0% 20% 40% 60% 80% 100% 2008-2010 2015-2017 Supply project Portfolio Trader Intermediaries 27 LIQUEFACTION INVESTMENT NEEDED TO MEET DEMAND GROWTH Source: Shell interpretation of IHS Markit Q4 2017 data Share of total contract volume STALEMATE CONSTRAINING GROWTH OF LNG SUPPLY FINANCIERS Look to ensure revenue certainty END-USERS Look to avoid long-term contracts that are not in line with their competitive position LNG BUYERS Seek smaller, more flexible purchases to remain competitive in downstream market LNG PRODUCERS Seek long-term LNG sales to secure financing MISMATCH BETWEEN BUYER AND SELLER NEEDS
  • 28. Royal Dutch Shell plc SHELL LNG OUTLOOK 2018 28 SUMMARY SHELL LNG OUTLOOK 2018 Methane Shirley Elisabeth External environment creating more opportunities for gas and LNG ▪ Multiple levels of policy support gas and LNG demand ▪ Gas supports renewable power generation and provides cleaner non-power energy supply Strong LNG fundamentals exceeded expectations in 2017 ▪ 11 % increase in LNG imports ▪ Physical and financial liquidity increases as market evolves Supply investment required to meet long-term demand growth