shell in nigeria & spdc jv overview
TRANSCRIPT
Copyright of Royal Dutch Shell plc 10 October 2012 1
SHELL IN NIGERIA
PORT HARCOURT, NIGERIAOCTOBER 10, 2012
ROYAL DUTCH SHELL PLC
Copyright of Royal Dutch Shell plc 10 October 2012 2
IAN CRAIGEXECUTIVE VICE PRESIDENTSUB-SAHARAN AFRICA
SHELL IN NIGERIA
Copyright of Royal Dutch Shell plc 10 October 2012 3
Spill volumes, both due to operational and crude theft/sabotage activities, are estimates made during the regulated Joint investigation visits.
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 in which Royal Dutch Shell either directly or indirectly has control, by having either a majority of the voting rights or the right to exercise a controlling influence. The companies in which Shell has significant influence but not control are referred to as “associated companies” or “associates” and companies in which Shell has joint control are referred to as “jointly controlled entities”. In this presentation, associates and jointly controlled entities are also referred to as “equity-accounted investments”. The term “Shell interest” is used for convenience to indicate the direct and/or indirect (for example, through our 23% shareholding in Woodside Petroleum Ltd.) 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’’, ‘‘intend’’, ‘‘may’’, ‘‘plan’’, ‘‘objectives’’, ‘‘outlook’’, ‘‘probably’’, ‘‘project’’, ‘‘will’’, ‘‘seek’’, ‘‘target’’, ‘‘risks’’, ‘‘goals’’, ‘‘should’’ 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 potential litigation and regulatory measures as a result of climate changes; (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 factors that may affect future results are contained in Royal Dutch Shell’s 20-F for the year ended 31 December, 2011 (available at www.shell.com/investor and www.sec.gov ). These factors also should be considered by the reader. Each forward-looking statement speaks only as of the date of this presentation, 10 October 2012. Neither Royal Dutch Shell 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. There can be no assurance that dividend payments will match or exceed those set out in this presentation in the future, or that they will be made at all.
We use certain terms in this presentation, such as resources, that the United States Securities and Exchange Commission (SEC) guidelines strictly prohibit us from including in 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. You can also obtain these forms from the SEC by calling 1-800-SEC-0330.
CAUTIONARY NOTE
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NIGERIA
THE NIGER DELTA
~167 million people
20% of population live in the Niger Delta
Federal Republic
OPEC estimates oil reserves of ~35 billion barrels and ~185 tcf gas reserves*
Produces ~2.5 million barrels of oil per day
NIGERIA
MAJOR OIL AND GAS PROVINCESHELL PRESENCE SINCE 1950s
400 km
*Definition not consistent with SEC proved reserves
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ECONOMIC GROWTH
NIGERIA +3% p.a +9% p.a
1996-1999 2000-2010
BRAZIL +2% p.a +4% p.a
MALAYSIA +4% p.a +5% p.a
WORLDECONOMY +4% p.a +3% p.a
SUB-SAHARANAFRICA +3% p.a +5% p.a
Source: IMF real terms growth, WWM Global Insights
NIGERIA: ONE OF FASTEST GROWING ECONOMIES
GDP per capita ~ $1600-2600 (South Africa $8700 in 2011)
Oil & gas revenue account for 80% of government revenues, ~30% of GDP and 95% of export revenues
Annual inflation 12-14%
High unemployment: >20%
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TOP BUSINESS COMPLAINTS
NIGERIA ECONOMY
0 20 40 60 80 100
Access to land
Tax administration
Crime
Transportation
Corruption
Macro econ
Tax rates
Finance (cost)
Finance (access)
Electricity
Source: WB Investment Climate Assessment 2011
Burkina Faso
Cameroon
Senegal
Cabo Verde
Benin
Madagascar
Tanzania
South Africa
Kenya
Uganda
Malawi
Nigeria
43210% of GDP
Source: derived from Eberhard and others 2009
ECONOMIC COST OF POWER OUTAGES
% of respondents
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0.0
0.5
1.0
2008 2009 2010 2011 2012 (end Aug)
PERSONAL SAFETY INDICATORSper million man hours
Shell in Nigeria TRCF (total recordable case frequency)
KIDNAPPINGS#
WORKPLACE FATALITIES#
All data on a Shell operated basis
0
2
46
8
10
12
2008 2009 2010 2011 2012
SAFETY
Motor vehicle incidentWorksite hazard
DrowningSecurity
0
50
100
2008 2009 2010 2011 2012 (end August)
StaffFamily
Contractors
2 fatalities in 2012 to datearmed attack on an environmental survey
Kidnapping remains a real threat for staff and families
Iriama (7 fatalities)
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OFFSHORE AND ONSHORE
Long history of operations in country: >50 years
SPDC JV – Onshore/Shallow water production
SNEPCO – Deepwater production
NLNG – LNG JV
SHELL FOOTPRINT IN NIGERIA
Divested
In Process
ERHA/BOSI
GBARAN UBIE
OPL245
BONGA AFAM POWER STATION
NIGERIA LNG
OGONILAND
OML 4/38/41
2642 34
40
30
0
5
0
50
100
150
200
250
300
SPDC SNEPCO NLNG (RHS)
kboe per day mtpa capacity
PRODUCTION (SHELL SHARE 2011)
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SHELL BUSINESSES IN NIGERIA
DOMESTIC GAS DISTRIBUTION
People: ~40Location: Niger DeltaDownstream gas supply
SPDC JV (55% NNPC, 30% SPDC Ltd, 10% Total, 5% Eni)
SNEPCo(100% Shell)
SNG(100% Shell)
NLNG(49% NNPC, 25.6% Shell, 15% Total, 10.4% Eni)
EXPLORATION & PRODUCTIONDeepwater
People: ~600Bonga & Erha productionOperated production capacity: 225,000 boe/d
LIQUEFIED NATURAL GAS
People: ~1,000LNG production capacity: 22 mtpa, Trains 1-6
EXPLORATION & PRODUCTIONOnshore/shallow offshore
People: 3,500 (30,000 contractors)Potential production: ~1 MM boe/d~1,000 wells, ~8000 km pipelines
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OML 118 - Bonga, Shell 55%Discovered 1995, on-stream 2005FPSO capacity: 200 kbbl/d & 150 MMscf/dSNEPCO operated
OML 133 – Erha/Bosi, Shell 44%, non-operatedOnstream : 2006FPSO Capacity: 190 kbbl/d
Bonga NW development (OML 118), Shell 55%45 kboe/d expansionTie back to Bonga; on-stream 2014/2015
OPL 245 – Zabazaba, Shell 50%, non operatedExisting discoveries with development potentialFurther exploration potential
SNEPCO: DEEPWATER
Erha FPSO (Shell 44%)
Bonga FPSO ( Shell 55%)
SHELL PRODUCTION 106 KBOE/D (2011)PSC CONTRACTS; 100% IOCGROWTH POTENTIAL
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Shell 25.6%, NNPC 49%, Total 15%, ENI 10.4%6 LNG trains, 22 mtpa capacity (plus 5 mtpa of NGLs)Train 1 and 2 on-stream 1999Train 6 on-stream 2007Expansion potential
NLNG: LNG EXPORT
NLNG T1 & 2 Construction (Shell 25.6%)
NLNG T6 construction
GROWTH TO 6 TRAINS SINCE 1999INCORPORATED JV; SELF-FINANCING
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MUTIU SUNMONUMANAGING DIRECTOR SPDC
SPDC JV OVERVIEW
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Unincorporated JV structure
Shell 30%, NNPC 55%, Total 10%, ENI 5%
Joint Operating Agreement defines rights & obligations of operator (SPDC Ltd) and non-operating partners
Decisions by unanimous vote of partners
All partners fund in proportion to their share
SPDC JV: ONSHORE/SHALLOW WATER JV
Sea Eagle platform
Bonny Terminal
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GBARAN UBIE
World class gas project; on-stream 2010Delivered in height of the security problems1 bcf/d & 70 kbbl/d liquids capacity$1 billion in local content 95% of construction workforce was Nigerian4 GMOUs in the area covering 44 local communities200,000 people benefiting from electrification projects.
AFAM VI
CCGT gas fired power plantFirst Power 2008, construction began 2005650 MW capacity14%-20% of the power contribution to the national gridGas provided by SPDC Okoloma facility (240 mmscf/d capacity)
SPDC JV: GBARAN UBIE & AFAM VI
Afam VI power plant
Gbaran Ubie Integrated gas project
SPDC = 30% Shell, 55% NNPC, 10% Total, 5% Agip; all data on 100% basis
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Largest and most diverse of the IOC footprints onshore
Recent divestments help SPDC to manage its footprint
~2,200 km oil pipelines
~850 km gas pipelines
~4,600 km of flow lines
SPDC JV: FOOTPRINT MANAGEMENT
SPDC
3.5
4.5
5.5
6.5
4 5 6 7 8 9
WARRI
PHC
Deg E
Deg N
non-producingproducing
•Mobil
•3.5
•4.5
•5.5
•6.5
•4 •5 •6 •7 •8 •9
•WARRI
•PHC
•Deg E
•Deg N
•non-producing•producing
Chevron
3.5
4.5
5.5
6.5
4 5 6 7 8 9
WARRI
PHC
Deg E
Deg N
non-producingproducing
Agip
3.5
4.5
5.5
6.5
4 5 6 7 8 9
WARRI
PHC
Deg E
Deg N
non-producingproducing
SPDC JV Exxon Mobil
Agip (ENI) Chevron
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ONGOING CHALLENGES CRUDE THEFT AND ILLEGAL REFINING
SPDC JV – MAJOR CHALLENGES
FLARE REDUCTION - PROGRESS BEING MADE
Illegal refining of stolen crude
Large and small scale theft
Flare site in the Niger Delta
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Estimates of 150,000 bbl/d and upwards$ 6.1 bln revenue loss (2011 prices)Stolen crude exported
Imports & subsidy445,000 bbl/d refining capacity; underutilized in practiceImports of oil products + $ 8 blnsubsidies (2011)Stolen crude refined for local and regional market
CRUDE THEFT CAUSES
Fuel queue during January 2012 national strike
Crude Theft, Okololunch, Sept 2012
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SPDC: LARGE SCALE CRUDE THEFT
Niger Delta wide theft estimate of 150,000 bbl/d or~55,000,000 bbl/year
2011 Spills due to sabotage on SPDC rights of way or from SPDC facilities
11,806 bbl
2011 Operational Spills
3,595 bbl
0
75
150
kbbl per day
Measured as stolen from SPDC trunk lines:~40,000 bbl/d or ~15,000,000 bbl/year
72% recovery during cleanup in 2011
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NIGERIA: SPDC JV
2011 SPILL AND REMEDIATION PERFORMANCE
30% drop in operational spill volume
351 sites remediated (272 in 2010)
Reduction in remediation backlog from 400 end 2010to 274 sites end 2011
PIPELINE REPLACEMENT
Nembe Creek trunk line: complete 2010
97 km; $1.1 billion
Trans Niger Pipeline loop project
Around Ogoniland; major area of crude theft
Pending approval by government partner
0
50
100
150
200
0
5
10
15
2006 2007 2008 2009 2010 2011
SabotageOperationalOperationalSabotage
oil spills, thousand tonnesENVIRONMENT: SPILLS
volume of spills:
number of spills (RHS):
Nembe Creek trunk line replacement
#
SPDC = 30% Shell, 55% NNPC, 10% Total, 5% Agip; all data on 100% basis
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SPDC: PROGRESS ON FLARING
ASSESSING NEW INVESTMENT FOR GAS UTILIZATION
Forcados Yokri & Southern Swamp AGG/Dom gas
Completion in 2014/2015; ~ $4 billion investment
Gas gathering, facility upgrades and new oil production
After completion, SPDC flaring intensity is expected to be below the current worldwide industry average
Forcados Yokri - South bank
boe gas flared per barrel produced (2010 data)
0.0
0.1
Nigeria industry
SPDC JV Nigeria industry
SNEPCO
ENVIRONMENT: FLARINGmtpa CO2e flaring SPDC JV production kboe/d
0
200
400
600
800
1000
0
5
10
15
2005 2006 2007 2008 2009 2010 2011Gas Flared Production
PERFORMANCE
OffshoreOnshore
SPDC = 30% Shell, 55% NNPC, 10% Total, 5% Agip; all data on 100% basis
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IAN CRAIGEXECUTIVE VICE PRESIDENT SUB-SAHARAN AFRICA
SHELL IN NIGERIA OVERVIEW
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Shell’s portfolio & track record
Funding; security; PIB; organisational capability
2012 Progress:
2 FIDs of onshore associated gas projects
Deepwater appraisal planning
SHELL IN NIGERIA