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1 Copyright of Royal Dutch Shell plc 15 September, 2015
2015 SRI FIELD TRIP TO CANADA
ROYAL DUTCH SHELL September 15, 2015
2 Copyright of Royal Dutch Shell plc 15 September, 2015
DEFINITIONS AND CAUTIONARY NOTE The New Lens Scenarios referred to in this presentation are part of an ongoing process used in Shell for 40 years to challenge executives’ perspectives on the future business environment. We base them on plausible assumptions and quantification, and they are designed to stretch management to consider even events that may be only remotely possible. Scenarios, therefore, are not intended to be predictions of likely future events or outcomes and investors should not rely on them when making an investment decision with regard to Royal Dutch Shell plc securities.
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 2P and 2C definitions. Organic: Our use of the term Organic includes SEC proved oil and gas reserves excluding changes resulting from acquisitions, divestments and year-average pricing impact. Resources plays: our use of the term ‘resources plays’ refers to tight, shale and coal bed methane oil and gas acreage.
The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate 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. Companies over which Shell has joint control are generally referred to as “joint ventures” and companies over which Shell has significant influence but neither control nor joint control are referred to as “associates”. In this presentation, joint ventures and associates may also be referred to as “equity-accounted investments”. 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. 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, 2014 (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, September 15, 2015. 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.
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.
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CARBON CAPTURE AND STORAGE
Angus Gillespie Vice President CO2
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INTERNATIONAL ENERGY AGENCY PERSPECTIVE
Portfolio of decarbonising measures
Emissions reductions (Gt CO2 )
Slide presented by IEA as part of the “Role of CCS Globally: IEA 2013 CCS Roadmap” presentation in Beijing December 5, 2013
According to the IEA, without CCS the cost of tackling climate change could be 40% higher
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CCS PROCESS
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CO2 STORAGE - GEOLOGY
Quest CO2 Storage plan
*Source: Intergovernmental Panel on Climate Change (IPCC) "Likely" is a probability between 66 and 90%, "very likely" is between 90 and 99%
SALT SEALS
Intermediate Casing
Main Injection Casing
Cement
Surface Casing
Tubing
SHALE SEALS
TARGET FORMATION
Packer Assembly
Perforations allow CO2 to penetrate the formation
Peterhead CO2 Storage plan Storage performance depends on a combination of physical and geochemical trapping
Over time, residual CO2 trapping, solubility trapping and mineral trapping increase
Responsibly done CCS is very safe
According to IPCC* fraction retained in appropriately selected and managed geological reservoirs is:
very likely to exceed 99% over 100 years
likely to exceed 99% over 1,000 years
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INTRODUCTION TO CCS
www.youtube.com/watch?v=sqkXYKRFkFc
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SHELL INVOLVEMENT IN CCS PROJECTS
TCM = Technology Centre Mongstad
Quest TCM Peterhead Gorgon Boundary Dam
GORGON
TCM PETERHEAD
QUEST
BOUNDARY DAM
Industrial scale projects in operation
Industrial scale projects in construction
Planned industrial scale project (FEED)
Involvement through shell Consolv Technology
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GLOBAL OVERVIEW OF CCS PROJECTS
Source: http://www.globalccsinstitute.com/projects/large-scale-ccs-projects (as at 27 August 2015)
Projects in operation or under construction
14 large scale projects in operation
8 projects under construction
Capacity 40 million tonnes per annum
Projects in advanced planning phase (concept definition stage)
14 large scale projects advanced stage of development planning
Capacity 20 million tonnes per annum
Projects in early planning stage (evaluate and identify)
15 large scale projects in early planning stage
Capacity 30 million tonnes per annum
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Canada
In June 2015, Alberta's current Specified Gas Emitters Regulation increased in stringency to $30/tonne and 20% reduction by 2017.
Government of Alberta has launched a Climate Change Panel to assess Alberta's pathway to a more stringent climate policy.
Quest and Boundary Dam landmark CCS demo projects supported by government funds.
CHINA
Pilot ETSs established in 2013. National scheme proposed from 2016.
12th Five Year Plan on Controlling GHG Emissions. Draft National Medium and Long-term Science and
Technology Development Plan Towards 2020 identifies CCS and CCUS as key technologies.
Notification that new coal-chemical projects must be capable of substantially reducing CO2 emissions
Notice on Promoting CCUS Pilot and Demonstration in a range of industries
CCS REGULATION
EUROPE
EU CCS Directive adopted 2009 and transposed into most EU member state national legislation.
CCS is part of the Energy Union Strategy (Feb 2015) and expected to feature prominently in the EU Commission’s Strategic Energy Technologies Plan to be released Sept 2015.
EU level CCS funding continues within the current New Entrant Reserve (NER 300). NER Expansion [NER400] was confirmed by the Commission ”Summer Package” of July 2015, now subject to consultation procedure.
UK CCS funding vehicle the government’s CCS Commercialisation competition [Shell: Peterhead CCS project].
AUSTRALIA
Australian Regulatory Guiding Principles.
The Offshore Petroleum Amendment (GHG Storage) Act 2008.
Australian Greenhouse Geological Sequestration act 2008.
Queensland Greenhouse Gas Storage Act 2009.
The Barrow Island Act of 2003 related to Gorgon.
UNITED STATES
The U.S. government has awarded more than $6 billion for CCS R&D and projects. Congress additionally established an $8 billion federal loan guarantee program for
CCS and other climate technologies. Federal regulations for new/modified coal plants identify partial CCS as a way to
meet the 1,400 pounds/MWh emission standard. 23 states have incentives or regulations in place for CCS.
UNFCCC
Clean Development Mechanism includes CCS as an eligible technology
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WHY CCS WILL BE REQUIRED
CCS provides an essential and significant contribution to emissions reduction in power & industry
CCS on fossil fuels will be cost competitive with low carbon alternatives, maintaining diversity of energy supply and volume
Without CCS, decarbonisation costs are substantially higher
CCS technology components have been proven in Oil & Gas and EOR industry
CCS is a critical component of net zero emissions scenario planning
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RELATIVE COST OF TECHNOLOGY
1 Source: IPCC 2014: Annex III: Technology-specific cost and performance parameters, Mitigation of Climate Change. Contribution of Working Group III to the Fifth Assessment Report IPCC
Levelized cost of electricity 1
US$/MWh
Dispatchable technogies
Non-dispatchable technologies
Pre-commercial technologies
Median cost
CCS is currently pre-commercial technology
Competitive costs with many renewable commercial technologies
Learning curve will bring cost of CCS down
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COST OF ABATEMENT
Source: Global CCS Institute: http://www.globalccsinstitute.com/publications/costs-ccs-and-other-low-carbon-technologies-2015-update
-42 -31
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48 54
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96 101 108
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19 28
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US$ per tonne (2014)
CCS plays an important part in low carbon options
Cost competitive on CO2
abatement basis with offshore wind and solar
Avoided cost of CO2 for US power generation
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CCS COSTS AND REDUCTION POTENTIAL
161
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FID 2013 FID 2028
Cost reduction potential1 £/MWh (Real 2012 money)
Capture 81%
Transport 6%
Storage 13%
Costs of CCS1
Transport and storage scale and utilisation
Improved engineering designs and performance Other costs
Improved financeability for CCS chain
Key Levers to cost reduction
Scale of operations;
Lower cost financing for CCS as technology matures and risk premium comes down;
Emergence of robust CCS supply chain, experienced contractors and a competitive market;
Novel (capture) technology and/or configurations.
1 Source: CCS Cost reduction task force
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CO2 TRANSPORTATION
Pipelines prevalent across the US and Europe
Pipeline capacity ~50 million tonnes per annum
Pipelines in operation for ~40 years
CO2 ships can operate for smaller volumes
CO2 Enhanced Oil Recovery industry operating in the US for decades
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CCS REQUIRES COLLABORATION
Communication Communication Education Education
Demonstration Demonstration Driving the agenda Driving the agenda
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CARBON STORAGE TECHNOLOGY EXPERIENCE
Storage (and retrieval) of industrial gas in depleted gas fields
Balancing N.W Europe gas market
Tertiary oil recovery using CO2 in Texas, USA, pioneered by Shell in 1970
Large scale CO2 compression, transport & injection
Exploring, appraising, producing reservoirs
Reservoir simulation
Seismic imaging
Underground gas storage CO2-EOR operations Sub-surface imaging & operations
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SHELL CCS: COMPETENCE BASED PROGRAM
Shell operated Non operated
Gorgon Quest TCM
Onshore storage Offshore storage Saline aquifer storage Depleted reservoir storage Pre-combustion capture Post-combustion capture Contaminated gas Heavy oil Refining Gas fired power
In FEED
Peterhead
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CCS POLICY NEEDS
CCS will require:
An effective government imposed CO2 pricing mechanism;
A level playing field with alternative low carbon technologies; and
Short term demonstration support to drive down costs
FIRST OF A KIND Nth OF A KIND
DEVELOPMENT DEMONSTRATION DEPLOYMENT
CAPITAL GRANTS (SUPPORT BUILD)
EFFECTIVE CO₂ PRICING MECHANISM
NON-FINANCIAL MEASURES (ENABLING REGULATIONS, LIABILITY AGREEMENTS, ETC)
OPEX SUPPORT (ENSURE PLANT OPERATES)
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BACKUP
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QUEST CCS – UNDER CONSTRUCTION
Location: Scotford Upgrader Complex, Alberta, Canada
Type: Fully integrated CCS
Size: One million tonnes CO2 per year capacity for 25 years
Partners: Shell (60%); Chevron (20%); and Marathon (20%)
Funding: Government of Alberta, C$745m; Government of Canada C$120m
Status: Construction expected to complete 2015; Project FID taken September 2012
Emissions reduction: 35% reduction of Upgrader CO2 emissions - equivalent to emissions from 250,000 cars
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GORGON CO2 STORAGE – UNDER CONSTRUCTION
Location: North West Shelf, Australia
Type: Industrial scale CO2 storage project, potentially largest in the world, driven by regulatory compliance
Size: 3 – 4 million tonnes per year of CO2
Scope: Store CO2 separated from LNG feed gas into saline aquifer underneath class A nature reserve
Partners: Chevron (47% - operator), Shell (25%) and XOM (25%)
Status: Investment decision made. Operation expected from 2016 onwards
CO2 Injection Barrow Island
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CO2 TECHNOLOGY CENTRE MONGSTAD (TCM) NORWAY
Location: Mongstad, Norway
Type: The world’s most advanced test centre for CO2 capture
Size: Capture of up to 100,000 tonnes of CO2 a year from 2012
Partners: Gassnova SF (Norwegian State), Statoil, Shell and Sasol
Status: Plant has operated for two years, learnings being gained and shared. The newest vendor to test will be Cansolv
Technology: test Amine and Chilled Ammonia on two CO2 sources; gas power plant (3.5%) and refinery cracker (13.5%)
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PETERHEAD CCS – IN FEED
Location: Peterhead, UK with storage in Goldeneye reservoir offshore in the North Sea
Type: Fully integrated CCS
Size: Ten million tonnes CO2 capacity
Owner: Shell (100%)
Status: Project FEED – February 2014
Technology: Shell Cansolv technology
Emissions reduction: 90% of the CO2 from one turbine at the Peterhead Power Station to be captured
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SASKPOWER BOUNDARY DAM CCS PROJECT
Location: Estevan, Saskatchewan, Canada
Type: The world’s first large-scale CO2 capture plant for coal fired power
Size: Capture of 1 million tonnes CO2 per year; use of CO2 for EOR (Cenovus Weyburn field)
Owner: SaskPower (Shell has no equity)
Status: Plant opened early October 2014
Technology: Shell Cansolv SO2 and CO2 capture technologies
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2015 SRI FIELD TRIP TO CANADA
ROYAL DUTCH SHELL September 15, 2015