Energy Volatility The Place of Oil

MALCOLM BRINDED EXECUTIVE DIRECTOR ROYAL DUTCH SHELL PLC

ECONOMIC CRISIS IMPACT ON ENERGY DEMAND & PRICES

Reduced energy demand vs 1 yr ago Oil & gas sector costs, indexed to 2000
250

World: oil demand down 3% World: aviation fuel down 5.5%

200

USA: gasoline down 3.5% Japan: natural gas down 6%

150

100 2003 2004 2005 2006 2007 2008 2009

IHS-CERA Upstream Capital Cost Index (2000=100)

LONG-TERM UNCERTAINTY: ENERGY NEEDS VS CLIMATE ISSUES

Business as usual energy consumption
800 600 400 200
0 0 1975 200 400 600 800

Possible CO2 pathways

Gt

16
Business as usual 1000 PPM 14

6 5 4 550 ppm

1000 ppm

Global Carbon Emissions,

12 10 8

Tough but plausible 550 PPM

exajoule per year

3 - 450
6 Aspirational achievable? 450 PPM 4 2

ppm

2 1 0 - 1990

1975 Heavy industry 2000

Services

2000

2025 Agriculture
Transport Non energy use

2025

2050

2050

2000

2010

2020

2030

2040

2050

Heavy industry Residential Services Source: Shell International BV /OECD-IEA 2006 Residential
2

Agriculture & other industry Transport Source: IPCC Non energy use

HOW MUCH IS LEFT ?

Discovered volumes (20 year avg) Million b/d
100

Billion boe
80 70 60 50 40 30 20 10 0
1920
3

Whens the peak?

New technology; EOR, Seismic, Unconventionals, etc

With exploration

50

Base Decline @ 4.5%/yr

Liquids production

0
1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

DELIVERING PROJECTS IN PARTNERSHIP- 1

PEARL GTL, QATAR

HARWEEL ENHANCED OIL RECOVERY PROJECT, OMAN

DELIVERING PROJECTS IN PARTNERSHIP- 2

SAKHALIN II, RUSSIA

PORT ARTHUR REFINERY EXPANSION, USA

SUMMARY

To reduce short-term volatility, we need: More predictable tax regimes

Clarity over CO2 policy frameworks

Enduring Value-driven NOC-IOC partnerships

AND THE RECESSION RAISES QUESTIONS OVER FUTURE SUPPLIES