Section 172(1) statement
The Companies (Miscellaneous Reporting) Regulations 2018 (2018 MRR) require Directors to explain how they considered the interests of key stakeholders and the broader matters set out in Section 172(1) (a) to (f) of the Companies Act 2006 (S172) when performing their duty to promote the success of the Company under S172.
This includes considering the interests of other stakeholders which may affect the long-term success of the company. This S172 statement explains how Shell’s Directors:
- have engaged with employees, suppliers, customers and others; and
- have considered employee interests, the need to foster business relationships with suppliers, customers and others, and the effects of those considerations, including on the principal decisions taken during the financial year.
The S172 statement focuses on matters of strategic importance to Shell, and the level of information disclosed is consistent with the size and the complexity of Shell’s businesses.
S172 Statement by Shell’s Directors
After due and careful consideration of the requirements set out in S172, and having regard to long-term consequences and the interests of stakeholders in relation to Board decision-making, the Directors, during the financial year ending December 31, 2022, have acted in a way that they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole.
General confirmation of directors’ duties
Shell’s Board has a clear framework for determining the matters within its remit and has approved Terms of Reference for the matters delegated to its Committees. Certain financial and strategic thresholds have been set, in order to identify matters requiring Board consideration and approval. The Manual of Authority sets out the delegation and approval process across the broader business. More information on Shell’s controls and procedures can be found in “Other regulatory and statutory information”.
All Directors upon joining Shell have participated in induction training and are provided with ongoing guidance covering regulatory requirements of their role, including, but not limited to, S172. For more information on Directors' induction and training, see “Board activities”.
Board decision-making is predicated on the appropriateness of information provided to Directors which is subject to review as part of the wider board evaluation process. The most recent board effectiveness review is detailed in the section “Board review process”. In particular, board materials are assessed as to their suitability in relation to assisting and facilitating Directors' decision-making in accordance with S172.
When making decisions, each Director ensures that (s)he acts in the way he or she considers, in good faith, would most likely promote Shell’s success for the benefit of its members as a whole, and in doing so has regard (among other matters) to the issues set out below.
S172(1) (a) “The likely consequences of any decision in the long term”
The Directors understand the business and both the evolving and challenging environment in which we operate, including the challenges of continuing to navigate through the energy transition and also the geopolitical tensions associated with Russia, which have, amongst other things, resulted in Shell’s withdrawal from Russian oil and gas activities (see Note 6 to the Consolidated Financial Statements). Based on Shell’s established purpose to power progress together by providing more and cleaner energy solutions, the ongoing strategy set by the Board is intended to accelerate the transition of our business to net-zero emissions, purposefully and profitably. We continue to have a strong, resilient business including focus on energy security, by putting customers at the centre of our strategy, innovating the products and solutions customers need on our journey to net zero by 2050.
In 2022, the Board continued with its oversight of Shell’s Powering Progress strategy, which combined our ambitions under four goals: generating shareholder value, achieving net-zero emissions, powering lives and respecting nature. The Board focused on financial strength and discipline with a dynamic approach to our portfolio of assets and products. Our new CEO has confirmed his support for Shell’s strategy set out in the 2021 Annual Report with further strategy updates expected to be provided at the next scheduled Capital Markets Day in June 2023. More information can be found in our “Powering Progress Strategy”.
The Directors recognise there are significant complexities in relation to Board decision-making, given differing societal and stakeholder views about our operations and the intricacies associated with the evolving energy transition. Accordingly, the Directors have considered S172 and made their decisions in good faith relating to Shell’s strategy having regard to the long-term sustainable success of the Company.
S172(1) (b) “The interests of the Company’s employees”
The Directors recognise that Shell employees are fundamental and core to our business model and the safe delivery of our strategic ambitions. The success of our business depends on attracting, retaining, developing and motivating talented employees. The Directors consider and assess the implications of relevant decisions on employees and the wider workforce. The Directors seek to ensure that Shell remains a responsible employer, including with respect to pay and benefits, fairness (including gender pay gap reporting, see section “Powering lives”), diversity (information on Shell’s Diversity, Equity and Inclusion is detailed in the section “Our people”), health and safety issues, and the workplace environment. The Directors regularly engage with employees and the wider workforce (a summary of engagements is provided in the section “Board activities” as well as consider annual employee surveys (the most recent is detailed in the section “Our people”).
The Directors recognise that our pensioners also remain important stakeholders.
More information on this can be found in “Workforce engagement”.
S172(1) (c) “The need to foster the Company’s business relationships with suppliers, customers and others”
Delivering our strategy requires strong mutually beneficial relationships with suppliers, customers, governments, national oil companies and joint-venture partners. Shell seeks to promote and apply certain general principles in such relationships. The Board continues to review Shell’s approach to suppliers, which is set out in the Shell Supplier Principles. In 2022, the Board reviewed steps taken with suppliers and supply chains to combat modern slavery and human trafficking. For more detail on Shell’s Modern Slavery Act statement, see “Other regulatory and statutory information” . The businesses continually assess the priorities related to customers and those with whom we do business, with the Board engaging with the businesses on these topics, for example, within the context of business strategy updates and investment proposals.
The Directors also receive updates on a variety of topics that indicate how these stakeholders have been engaged. These updates include information provided by the Projects & Technology function on suppliers and joint-venture partners, with respect to items such as project updates and supplier contract management. Businesses also provide information, as relevant, on customers and joint-venture partners in relation to business strategies, projects, and investment or divestment proposals.
The CEO provides a comprehensive update to the Board on material business and external developments at each main Board meeting. These include: i) a report on safety performance; ii) significant operational updates relating to each of the business segments, e.g. partnerships, investments, divestments, flagship projects, commercial highlights and achievements; iii) the development of new technologies and innovation via collaborations with partners, suppliers and others; and iv) political or regulatory developments. The CEO also summarises his own external engagements and any changes of senior executive staff.
S172(1) (d) “The impact of the Company’s operations on the community and the environment”
This aspect continues to be integral to our strategic ambitions. The Board receives information on various topics to help it make decisions. The topics can include, for example, the Net Carbon Footprint target, proposals to invest or divest, and business strategy reviews. The information also goes into Group-level overviews, such as updates on safety and environment performance, reports from the Chief Ethics and Compliance Officer, and reports from the Chief Internal Auditor. In 2022, certain Board committees and Non-executive Directors conducted site visits of various Shell operations and overseas offices and held external stakeholder engagements. In contrast to 2021, visits were made in-person with restrictions relating to the COVID-19 pandemic being largely removed in most countries. This enabled the Board to maintain and strengthen the interface with businesses and staff, with virtual engagements additionally used when appropriate, making the best use of technology available.
More information can be found in “Understanding and engaging with our stakeholders”, and in the reports of each Board committee.
S172(1) (e) “The desirability of the Company maintaining a reputation for high standards of business conduct”
Shell aims to meet the world’s growing need for more and cleaner energy solutions in economically, environmentally, and socially responsible ways. The Board periodically reviews and approves clear frameworks, such as The Shell General Business Principles, Shell’s Code of Conduct, specific Ethics and Compliance manuals, the Ethical Decision-Making Framework, and its Modern Slavery Statement, to ensure that high standards are maintained in Shell businesses and in Shell’s business relationships. Complemented by the ways the Board is informed and monitors ethics and compliance with relevant governance standards, this helps to ensure that Board decisions and the actions of Shell companies both promote and maintain high standards of business conduct.
S172(1) (f) “The need to act fairly as between members of the Company”
After weighing up all relevant factors, the Directors consider which course of action best enables delivery of our strategy in the long-term interests of the Company, taking into consideration the effect on stakeholders. In doing so, our Directors act fairly as between the Company’s members but are not required to balance the Company’s interests with those of other stakeholders. This can sometimes mean that certain stakeholder interests may not be fully aligned.
Culture
The Board plays an important role in establishing, assessing and ongoing monitoring of our desired culture and how it is embedded in our values, attitudes and behaviours, including in our activities and stakeholder relationships. The Board has established honesty, integrity and respect for people as Shell’s core values. The General Business Principles and Code of Conduct help everyone at Shell to act in line with these values and comply with relevant laws and regulations. The Shell Commitment and Policy on Health, Safety, Security, Environment & Social Performance applies across Shell and is designed to help protect people and the environment. Under the industry Life-Saving Rules, we have simplified and standardised our approach and adopted a broader risk scope that focuses on potential for harm to people, creating a greater sense of individual and team responsibility to avoid fatalities and life-changing injuries. The result is a strengthened foundation with an increased and deliberate focus on human performance, the way people work, culture, equipment, work systems and processes interact as a system. Our ambition remains unchanged: achieve Goal Zero, no harm and no leaks across all our operations.
To achieve our strategic goals, we need to adapt our mindset and behaviours as we navigate the increasing complexity in the world around us. At Shell we seek to have a culture that encourages the attitudes and behaviour that we believe will help us succeed. We seek to encourage:
- Applying a learner mindset: everyone has the ability to grow, learn from mistakes and successes, and speak up openly in a safe environment. We encourage curiosity, humility, openness, helping each other to make better decisions and create more value;
- Maximising our performance: we collaborate across boundaries and speak up when we see things that can be improved. We enable people to deliver, and we work in an integrated way with discipline, clear focus on priorities, and tangible outcomes in order to reach our full potential;
- Increasing trust in Shell: we aim to be a valued member of the communities in which we operate, and to make a positive contribution to society. We seek to listen carefully and with humility and we have a strong desire to understand, and, where possible, adapt to the changing needs and expectations of society, especially as they relate to the environment. We build strong and trusted relationships with customers and partners which are fundamental to our collective success;
- Living by our values and Goal Zero: we live by our values and do the right things with respect to ethics, safety, and the environment; and
- Inspiring and engaging: we aspire to a situation where everyone feels connected to what we stand for. We build trusting and effective teams where everyone feels ownership and has a voice in how work gets done. We strive to maintain a diverse and inclusive culture.
The Board considers the Shell People Survey to be an important tool for measuring employee engagement, motivation, affiliation, and commitment to Shell. With consistently high response rates, it provides valuable insights into employee views. It also helps the Board understand how the survey’s outcomes are being used to strengthen Shell culture and values.
Stakeholder engagement (including employee engagement)
The Board recognises the important role Shell has in many societies and is deeply committed to public collaboration and stakeholder engagement. The Board strongly believes that Shell will only succeed by working together with customers, governments, business partners, investors, and other stakeholders.
Continuing to work together with stakeholders is critical, particularly at a time when we and society, including businesses, governments, and consumers, face issues as complex and challenging as climate change, energy security and affordability.
We continue to build on our long track record of working with others, such as investors, industry and trade groups, universities, governments, non-governmental organisations (NGOs) and, in some appropriate instances, our competitors through our joint-venture operations or industry bodies. We believe that working together and sharing knowledge and experience with others offers us greater insight into our business. We also appreciate our long-term relationships with our investors and acknowledge the positive impact of ongoing engagement and dialogue.
The guidance on preparing information, proposals or discussion items for the Board asks for these materials to include considerations of the views, interests, and concerns of stakeholders and how management addressed them. This helps to strengthen the Board’s knowledge of how the broader business undertakes significant levels of stakeholder engagement. Board minutes have also reflected key points on stakeholder considerations, where appropriate. The Terms of Reference for our Safety, Environment and Sustainability Committee also include, within the Committee’s remit, the review and consideration of external stakeholder perspectives and how major issues of public concern that could affect Shell’s reputation and licence to operate were or are being addressed.
The Board also engaged with certain stakeholders directly, to understand their views. The Board draws upon Shell’s substantial in-house expertise by periodically receiving input from economics and policy experts on key political and economic themes, with some updates being presented to the Board each quarter.
More on this engagement is provided in “Understanding and engaging with our stakeholders”.
Information on how the Directors have engaged with employees can be found in “Board activities” and in the “Powering lives” section. The tables below include examples of how Directors have considered the interests of Shell employees and the resulting outcomes.
Principal decisions
In the table below, we outline some of the principal decisions made by the Board over the year. We explain how the Directors have engaged with or in relation to key stakeholder groups and how stakeholder interests were considered in decision-making.
To remain concise, we have categorised our key stakeholders into seven groups. Where appropriate, each group is considered to include both current and potential stakeholders. The groups are:
- investor community;
- employees/workforce/pensioners;
- our customers;
- regulators/governments;
- NGOs/civil society stakeholders/academia/think-tanks;
- communities; and
- suppliers/strategic partners.
Board decisions
We define principal decisions taken by the Board as decisions taken in 2022 that are of a strategic nature and significant to any of our key stakeholder groups. As outlined in the UK Financial Reporting Council (FRC) Guidance on the Strategic Report, we include decisions related to capital allocation and dividend policy.
How were stakeholders considered
We describe how regard was given to the likely long-term consequences of the decision, including how stakeholders were considered during the decision-making process.
What was the outcome
We describe which accommodations or mitigations were made, if any, and how Directors have considered different interests, and what factors they took into account.
Strategic updates
Powering Progress strategy
Shell’s Powering Progress strategy was launched in 2021, and is outlined within this Annual Report. As part of the Board’s continuing oversight of strategy, the Directors receive and discuss regular strategy updates including feedback from stakeholder engagements by management, investors, the media, climate activists and internal staff.
How stakeholders were considered
Energy Transition Progress Report
In 2021, Shell produced a report (the Shell Energy Transition Strategy (ETS)) with the aim of helping investors and society obtain a better understanding of how Shell is addressing the risks and opportunities of the energy transition. The ETS was put to shareholders for approval at the 2021 Annual General Meeting (AGM) for an advisory vote, and the Board committed to provide an advisory vote on the progress against this strategy in 2022 and 2023, with the ETS itself coming back to shareholders in 2024. The ETS is outlined within this report, as is the progress against that strategy. During the year the Board have been provided with updates on Shell’s energy transition commitments.
At the 2022 AGM, almost 80% of shareholders that voted supported our progress in this strategy, and shareholders will be asked again with the same resolution being put to the 2023 AGM.
Both before and after the 2022 AGM, the Chair, CEO and some members of the Executive Committee engaged with key stakeholders to understand their views and opinions on Shell’s progress on its ETS. Differing views were shared by these groups and were later shared with the Board.
In 2024, our ETS will come back to shareholders for an advisory vote and we will be engaging on this strategy through the latter part of 2023.
Board Strategy Days
In June 2022, the Board held in-person strategy meetings over the course of three days in Singapore, providing for a number of engaging and interactive events with both internal and external stakeholders. For a summary of the event, see “Board activities and evaluation”. The key areas of focus related to accelerating the energy transition.
Staff engagements
Virtual and in-person staff engagements were held with Directors which enabled them to speak directly with staff on themes including the benefits of working in Upstream. For further information on the engagement with our workforce see “Board activities and evaluation” and “workforce engagement”.
What was the outcome
Energy Transition Progress Report
There are differing societal views about Shell’s energy transition ambitions, targets and strategy and the Board recognise that some decisions taken today may not align with all stakeholder interests. The Board continues to listen, learn and adapt as it frames delivery against its strategy on the long-term success of the Company.
Feedback from the stakeholder discussions is considered during the drafting and formal approval stages of the energy transition progress report. We strive to provide clear information on Shell’s progress, along with the clarifications our stakeholders are seeking. The feedback received from when the ETS was first published, along with that from our progress reports will be later utilised as the business moves to focus on updating its ETS ahead of putting it to a shareholder vote in 2024.
More information on the results of the AGM vote is provided on the page “Additional remuneration disclosures”.
Board Strategy Days
Through multiple engagements with stakeholders the Board:
- considered geopolitical contexts on accelerating the energy transition and engaged with Shell leaders from across the Asian region;
- considered feedback from a cross-section of Shell’s staff on the energy transition;
- discussed core elements of the Powering Progress strategy with key customers, government officials, and other stakeholders in the region.
The stakeholder engagements were considered as part of driving Shell’s energy transition in Asia, and framing discussions on both Shell’s Operating Plan and Financial Framework.
Financial strength, cash allocation including shareholder distributions
The Board considered cash flow, the macro environment and business performance in 2022 compared with 2021. The Board also considered management’s view of the outlook for the Group’s performance, and reviewed the Financial Framework with specific focus on shareholder distributions. Directors approved several proposals with the aim of delivering value to shareholders and increasing shareholder distributions through a combination of progressive dividends and share buybacks.
How stakeholders were considered
A number of considerations underpinned each proposal, with proposals discussed and reviewed at certain points throughout the year. These considerations took account of the macro environment, robust business performance and outlook, the strength of the balance sheet, capital discipline, feedback from advisers and feedback from other stakeholders. The Financial Framework was reviewed as part of the Board’s strategy event held in June 2022 in Singapore.
What was the outcome
In relation to the decisions to increase distributions to shareholders, the Board and management considered the views of stakeholders, the strength of the Company’s balance sheet and the need to continue to invest for the future of energy. The form and timing for distributing funds to shareholders were announced throughout 2022.
Subject to Board approval, Shell aims to grow the dividend per share by around 4% every year, and Shell will target the distribution of a minimum of 20% and, subject to Board approval, and prevailing market conditions, potentially more than 30% of its cash flow from operations to shareholders.
Approval of Shell’s detailed Operating Plan 2023-2025 (OP22)
The approval of OP22 followed an in-depth review by the Board of proposals on capital allocation, capital investment outlook, competitive outlook, operating expenses, return on average capital employed and shareholder distributions. This included reviews in numerous Board meetings leading up to the December 2022 Board meeting in which OP22 was approved.
How stakeholders were considered
OP22 discussions included a full review against Shell’s Powering Progress strategy, the macroeconomic environment, and the financial strength of the organisation. The Directors and Executive Committee balanced the priorities in the financial framework including capital and operating expenditure commitments towards the energy transition alongside increased shareholder distributions, maintaining balance sheet strength, aspired credit ratings and greenhouse gas target tracking. The plan was discussed extensively and reviewed thoroughly. Responses from investors and discussions with equity and debt market analysts were also presented to the Board for consideration. The Board asked questions of management on the flexibility of OP22 to be as agile as feasible in the event of various energy transition scenarios.
What was the outcome
Following extensive review and discussion, the overall outcome of this decision was an Operating Plan that the Board believes is robust against various scenarios and features strong optionality if needed. In particular, the Board assured itself that, as decisions are taken by the Board over the Plan period, OP22 flexibly demonstrates pathways to enable delivery of Shell’s absolute Greenhouse Gas (GHG) emissions and GHG intensity targets by 2030.
While stakeholder opinions differ on Shell’s approach, OP22 is based on society’s demand for products and services. OP22 also supports Shell in maintaining a reputation for high standards on business conduct and health, safety, security, and environment issues. It maintained the approach to employee remuneration and benefits to pensioners. OP22 also seeks to reward our investors with returns and maintain the long-term financial strength of the Company to invest in more and cleaner forms of energy and meet the current and future needs of society.
Investing in new business, acquisitions and divestments, and closures
Over the course of the year, the Board considered and approved new opportunities and projects and proposed divestments or closures. The Board also considered and approved Shell’s exit from Russia, with more details in this section relating to particular divestments in Russia.
How stakeholders were considered
The Board considered the impact of decisions related to new business opportunities and divesting from existing opportunities in the context of sustainability, supply, regulations, and carbon intensity. Critically, the Board reviewed the various proposals’ alignment with Shell’s strategy. Particular focus was given to potential benefits of certain divestments, including their potential to: create returns for shareholders; further strengthen the balance sheet; de-risk future cash flow; and avoid significant additional capital investment. As part of the discussions, the Board considered the strategic drivers for the intended divestments, including the Scope 1 emissions of each asset, anticipated regulatory changes expected to lead to value erosion, and any value opportunities afforded by the macro environment.
As part of each proposal, the respective business unit will undertake effective due diligence on prospective purchasers from a financial, reputational as well as operating philosophy standpoint to ensure future obligations are met or suitable mitigating measures are in place to protect Shell and its people.
Within each divestment proposal, the Board considered if the Company was being a responsible seller of its assets and if the purchasers have the capability to manage our assets/people appropriately. Staff matters are explicitly considered during negotiations and the due diligence process for acquisitions and divestments. Comprehensive engagement plans are developed as appropriate in parallel to the negotiations.
As part of Shell's intercompany approval process, the following investments / divestments were discussed and supported by the Board.
Purchase of renewables platform in India
The acquisition of Sprng Energy group and the associated solar and wind assets triples Shell’s present renewables capacity in operation and helps deliver on Shell’s Powering Progress strategy.
Purchase of fuel and convenience retail sites in the USA
The Landmark group of companies.
Production-sharing contract in Brazil
This acquisition consisted of a 25% stake of the Atapu field, Brazil, facilitating the delivery of Shell’s Powering Progress strategy.
Investment in Jackdaw gas field in the UK North Sea
The investment in Jackdaw gas field in the UK North Sea, following regulatory approval.
Investment in Rosmari-Marjoram fields in Malaysia
The development of the Rosmari-Marjoram gas project, together with PETRONAS Carigali Sdn Bhd (20%).
Sale of interest in Aera Energy in the USA
The divestment of Shell’s interest in In Aera Energy LLC.
What was the outcome
Purchase of renewables platform in India
This acquisition was considered by the Board as an important part of Shell’s Powering Progress strategy to develop an integrated power business, which will help Shell reach its target of becoming a profitable net-zero emissions energy business by 2050 to the benefit of all our key stakeholders.
Purchase of fuel and convenience retail sites in the USA
The Board considers that this acquisition advances Shell’s Powering Progress strategy in three ways: by growing its retail footprint in a core market, by providing opportunities to offer customers expanded fuelling options (including electric vehicle charging, hydrogen, biofuels and lower-carbon premium fuels) and by allowing for the growth of non-fuel sales through an enhanced convenience offering.
Production-sharing contract in Brazil
The Board considers this acquisition supports our Powering Progress strategy to deliver the stable, secure energy resources the world needs today while investing in the energy of the future. Shell’s Powering Progress strategy includes increasing investment in lower-carbon energy solutions, while continuing to pursue the most resilient, competitive, and highest-return Upstream investments to sustain material cash delivery into the 2030s, to support our dividend and fund Shell’s transformation.
Investment in Jackdaw gas field in the UK North Sea
Jackdaw is part of Shell UK’s broader intent to invest £20-£25 billion in the UK energy system in the next decade, subject to Board approval and stable fiscal policy, with the aim of investing 75% in the development of low- and zero-carbon products and services. Hundreds of millions of pounds are expected to be spent in the UK supply chain during Jackdaw’s construction, which is a significant boost to companies, jobs and the prosperity of communities.
The Board considers that projects like Jackdaw will help ensure that the overall decline in UK North Sea production is gradual rather than too steep, matching a gradual drop in hydrocarbon demand as the energy transition takes place. Gas from the Jackdaw field will come ashore at St Fergus, where Shell is involved in the development of the Acorn Carbon Capture and Storage project, which could sequester carbon dioxide (CO2) from industrial clusters in Scotland, the UK and northern Europe. The Acorn project could also reform natural gas into low-carbon hydrogen, by capturing and storing the CO2.
Investment in Rosmari-Marjoram fields in Malaysia
The Board considers that this investment will help to deliver a secure and reliable supply of energy, responsibly and efficiently. This demonstrates our Powering Progress strategy – powering lives, generating value, and reducing emissions by using renewable energy to power Rosmari-Marjoram.
Sale of interest in Aera Energy in the USA
This Board considers that this divestment supports Shell’s strategy to create a resilient and competitive Upstream portfolio by focusing on positions with high growth potential and a strong integrated value chain.
Investing in new business, acquisitions and divestments, and closures
Exiting equity partnerships held with Gazprom entities in Russia
In February 2022, the Board announced its intention to exit its joint ventures with Gazprom and related entities, including its 27.5% stake in the Sakhalin-II liquefied natural gas facility, its 50 percent stake in the Salym Petroleum Development; and also the Gydan Energy venture. In addition, the Board also announced its intention to end its involvement in the Nord Stream 2 pipeline project.
Sale of retail and lubricants business in Russia
On March 8, 2022, Shell announced its intent to withdraw from its involvement in all Russian hydrocarbons, including crude oil, petroleum products, gas and liquefied natural gas (LNG) in a phased manner. Following this announcement, the Board approved as part of our internal approval process, the sale of Shell Neft LLC, Shell’s retail stations and lubricants business in Russia, to PJSC LUKOIL. The sale included 411 retail stations, mainly located in the Central and Northwestern regions of Russia, and the Torzhok lubricants blending plant, around 200 kilometres north-west of Moscow.
In relation to Russian divestments, the Board received regular updates and engaged with both internal and external stakeholders throughout the year to ensure a controlled and measured exit from Russia.
Sale of interest in Shell Philippines Exploration B.V (SPEX) to Malampaya Energy XP Pte Ltd (MEXP)
Following consent from the joint venture partners and regulatory approval, Shell sold its 100% shareholding in Shell Philippines Exploration B.V
What was the outcome
Exiting equity partnerships held with Gazprom entities in Russia
The divestments were considered by the Board with an immediate focus on the safety, security and well-being of Shell personnel. The Board considered discussions with governments around the world, working through the detailed business implications, including the importance of secure energy supplies to Europe and other markets, in compliance with relevant sanctions.
At the end of 2021, Shell had around $3 billion in non-current assets in these ventures in Russia. The Board expected that the decision to start the process of exiting joint ventures with Gazprom and related entities would impact the book value of Shell’s Russia assets and lead to impairments. Subsequently, these impairments were reflected in the first quarter 2022 results statement.
Further to the divestments, Shell’s Powering Progress strategy and financial framework remain unchanged, with the Board reiterating Shell’s progressive dividend policy and intent to distribute 20-30 of CFFO to shareholders in the form of dividends and share buybacks while targeting a strong balance sheet with long-term AA credit metrics.
Sale of retail and lubricants business in Russia
The Board prioritised the well-being of Shell employees, with more than 350 people being transferred to the new owner of the business. The agreement with LUKOIL follows Shell’s announcement in early March of its intention to withdraw from all Russian hydrocarbons in a phased manner, with all divestments being carried out in full compliance with applicable laws and regulations.
Sale of interest in Shell Philippines Exploration B.V (SPEX) to Malampaya Energy XP Pte Ltd (MEXP)
The Board considers the Philippines as an important country for Shell after over a century of successful operations Shell will continue to pursue opportunities in the Philippines where it can leverage its global expertise in line with its Powering Progress strategy.
Investing in new business, acquisitions and divestments, and closures
Building Europe’s largest renewable hydrogen plant in the Netherlands
Shareholder approval to build Holland Hydrogen I, which will be Europe’s largest renewable hydrogen plant once operational from 2025.
Investment in Crux project in Western Australia
Shareholder approval for the development of the Crux natural gas field, off the coast of Western Australia. Crux will provide further supplies of natural gas to the existing Prelude floating liquefied natural gas (FLNG) facility.
Partnering in the North Field South LNG project in Qatar
Shareholder approval for participation in the next wave of Qatar’s LNG expansions. – the North Field South project (NFS). Shell obtains a 9.375% participating interest in the 16 Mtpa NFS project – out of a total 25% interest available for international partners.
Investment in offshore wind farm at Hollandse Kust (west) in the Netherlands
Shareholder approval to build and operate a joint venture offshore wind farm with a capacity of 750 MW to be completed in 2026.
Shell acquired renewable natural gas producer Nature Energy
Shareholder approval for the acquisition of 100% shareholding of Nature Energy Biogas A/S (Nature Energy) with the acquisition completing in February 2023. The acquisition will be absorbed within Shell’s current capital range, which remains unchanged.
What was the outcome
Europe’s largest renewable hydrogen plant in the Netherlands
The Board considers that this investment demonstrates how new energy solutions can work together to meet society’s need for cleaner energy. This investment additionally contributes to Shell’s efforts and commitment to become a net-zero emissions business by 2050 with renewable hydrogen playing a pivotal role in the energy system of the future and this project being an important step in helping hydrogen fulfil that potential.
Investment in Crux project in Western Australia
This project is considered by the Board to be an important part of Shell’s integrated gas portfolio. Natural gas from Crux will play a key role in helping Asian customers move from coal to gas as a cleaner-burning fuel. The project will help Shell to meet the increasing demand for liquefied natural gas (LNG) as the energy market transitions to a lower carbon future.
The project will also boost Shell’s customers’ security of supply, which is becoming a significant consideration for global consumers.
Developing the Crux project reinforces Shell’s commitment to Australia, including boosting the regional economy, creating jobs and providing training opportunities.
Partnering in the North Field South LNG project
The Board considers that LNG has a key role in ensuring energy system reliability and this investment will support the energy transition and energy security.
Investment in offshore wind farm at Hollandse Kust (west) in the Netherlands
The Board considers that this investment will grow Shell’s offshore wind portfolio while making a positive contribution to biodiversity. This project accelerates the large-scale wider roll-out of offshore wind and fits well with Shell’s Powering Progress strategy to deliver more and cleaner energy to our customers, at home, on the road and at work.
Shell to acquire renewable natural gas producer Nature Energy
The Board considers that this acquisition fits with the Powering Progress strategy to accelerate its energy transition and supports Shell’s ambition to profitably grow its low carbon offerings to customers across multiple sectors.
Strategic Report signed on behalf of the Board
/s/ Caroline J. M. Omloo
Caroline J. M. Omloo
Company Secretary
March 8, 2023
