Royal Dutch Shell plc

The growing importance of U.S. petroleum and LNG 

exports

2018 EIA ENERGY CONFERENCE

Ryan Hickman

Senior Market Analyst

June 2018 1
Royal Dutch Shell plc

2018 EIA ENERGY CONFERENCE

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, June 4, 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

2018 EIA ENERGY CONFERENCE

3

OVERVIEW

EXTERNAL ENVIRONMENT 

CREATING MORE OPPORTUNITIES 

FOR GAS AND LNG

STRONG LNG 

FUNDAMENTALS EXCEEDED 

EXPECTATIONS IN 2017

SUPPLY INVESTMENT 

REQUIRED TO MEET LONGTERM DEMAND GROWTH

01 02 03

2018 EIA ENERGY CONFERENCE

Queensland Curtis LNG Facility, Australia
Royal Dutch Shell plc

2018 EIA ENERGY CONFERENCE EXTERNAL ENVIRONMENT CREATING MORE OPPORTUNITIES FOR GAS AND LNG

4

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

2018 EIA ENERGY CONFERENCE EXTERNAL ENVIRONMENT CREATING MORE OPPORTUNITIES FOR GAS AND LNG

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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

Air quality index 2017 Energy demand growth vs coal share 

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

2018 EIA ENERGY CONFERENCE 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

China reforms gas market to 

increase competitiveness of 

delivered gas

South Korea’s 8th Basic Plan for 

Energy prioritizes renewables 

and gas, while not sanctioning 

new nuclear and coal

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

6
Royal Dutch Shell plc

2018 EIA ENERGY CONFERENCE EXTERNAL ENVIRONMENT CREATING MORE OPPORTUNITIES FOR GAS AND LNG

7

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

2018 EIA ENERGY CONFERENCE EXTERNAL ENVIRONMENT CREATING MORE OPPORTUNITIES FOR GAS AND LNG

Source: Shell interpretation of Wood Mackenzie Q4 2017 data

BCM

LNG imports by region

8

LNG IS THE FASTEST GROWING GAS SUPPLY SOURCE GLOBALLY

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

2018 EIA ENERGY CONFERENCE STRONG LNG FUNDAMENTALS EXCEEDED EXPECTATIONS IN 2017

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Source: Shell interpretation of U.S. Department of Energy, ICE, IHS Markit, Wood Mackenzie and Poten & Partners 2016 and Q4 2017 data

GLOBAL LNG MARKET CONTINUES TO DEFY EXPECTATIONS

U.S. LNG deliveries by region

Cargos $/MMBtu

-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 LNG imports: 2017 YoY

Million tonnes (DES)

0

1

2

3

4

5

6

7

0

5

10

15

20

25

South America Middle East

Europe Europe

Asia JKM-Henry Hub Spread (RHS)
Royal Dutch Shell plc

2018 EIA ENERGY CONFERENCE SUPPLY INVESTMENT REQUIRED TO MEET LONG-TERM DEMAND GROWTH

10

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

2018 EIA ENERGY CONFERENCE SUPPLY INVESTMENT REQUIRED TO MEET LONG-TERM DEMAND GROWTH

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HOW MUCH OF THE SUPPLY GAP WILL BE FILLED BY U.S. LNG?

North 

America

E Africa

Iran

Russia

Australia

Qatar

Indonesia

W Africa

PNG

Cyprus

Iraq

700+ MTPA of potential new 

supply already identified

LNG cost curve is longer and flatter Key insights

▪ >700 MTPA potential supply 

investment

▪ North American supply sets a 

clear benchmark for future costs 

given transparent pricing 

structure

▪ Advancements outside North 

America, including Qatar 

expansion, have shifted cost 

curve further out and down over 

the last year 0

5

10

15

20

0 200 400 600

FOB breakeven, $/mmbtu

Cumulative capacity

Latest 

estimate

2016 

estimate

Source: Shell interpretation of Wood Mackenzie data