About Shell
Royal Dutch Shell plc is an international energy company with expertise in the production, refining and marketing of oil and natural gas.
Shell is one of the world’s largest independent energy companies in terms of market capitalisation, operating cash flow and production. The company explores for oil and gas worldwide, both from conventional fields and from sources such as shales and deep water. We work to develop new oil and gas supplies, and have a global network of refineries and chemical plants. Shell transports and trades oil, gas and other energy-related products, such as carbon-emission rights, and continues to invest in new business models in renewable energy enabled by digital technology. We serve around 30 million customers every day through our global network of 43,000 Shell-branded retail stations.
In 2016, Shell
- produced 3,668 thousand barrels of oil equivalent per day in 2016
- sold 57.1 million tonnes of LNG
- used around 9.5 billion litres of biofuels in petrol and diesel we sold in 2016
- produced 1,232 gigawatt-hours of energy from its wind business; mainly in the USA and the Netherlands
- invested $26.9 billion in capital projects around the world
Our business strategy
Our strategy seeks to create a world-class investment case for shareholders. This strategy is underpinned by Shell’s outlook for the energy sector and the need to adapt to substantial changes in the world around us. Rising global population and standards of living should continue to drive demand growth for oil and gas for decades to come. At the same time, there is a transition under way to: a lower-carbon energy system, a world with increased customer choice, and continued energy price volatility. Safety and environmental and social responsibility are at the heart of our activities and continue to be a driver for our strategic ambitions.
In February 2016, Shell completed the acquisition of BG, adding significantly to our activities in liquefied natural gas (LNG) worldwide and deep-water oil and gas production in Brazil.
At the end of 2016, the underlying operating cost of the combined group was below $40 billion, lower than that used to run Shell previously, and 2017 is expected to be lower again. After the acquisition, three-quarters of BG employees have moved to a role in Shell.
Shell has four strategic ambitions:
- create a world-class investment case, by reshaping Shell to grow free cash flow per share and increase our returns, all underpinned by a conservative financial framework;
- reduce our carbon intensity as part of the energy transition by shaping our portfolio and business strategy to ensure Shell’s resilience for the future; looking at cost-effective ways to manage greenhouse gas emissions (GHG) and the commercial opportunities these solutions bring; and linking remuneration for all employees to the management of GHG emissions;
- maintain a position of leadership and influence in our industry and have the largest value share among our competitors; and
- create shared value by working with communities, countries and global organisations. We invest in communities living close to our operations, develop local supply chains, create jobs and train local people.
BG and reshaping Shell
Delivering the BG deal required swift and effective integration in 2016, while learning from their best working practices.
A team made up of employees from both companies identified more than 100 different practices, for example, engineering standards and contractor requirements, that were incorporated into Shell’s operating model.
Staff at all former BG facilities, which are now operated by Shell, have reviewed their health, safety, security, environment and social performance (HSSE&SP) plans against Shell’s HSSE&SP Control Framework, and now comply with the Shell framework or have plans to close any gaps.
Brazil growth
Brazil has been key to Shell for over a century and, since the BG-Shell combination, is now a bigger part of our portfolio.
Shell has a diverse operated and non-operated portfolio in Upstream in Brazil - including exploration and production equity in several deep-water fields. Our Downstream footprint includes Shell’s largest investments in biofuels globally through its Raízen joint venture; a lubricants blending plant and a 17% stake in Comgás, one of Latin America’s largest natural gas distributors.
After the acquisition our average daily production in Brazil grew tenfold in 2016, from 30,000 to more than 300,000 barrels of oil equivalent (boe). Today, Shell is Brazil’s second largest oil and gas producer, with production expected to grow over the next decade. Shell’s current position in Brazilian deep-water includes Petrobras-operated facilities and Shell-operated facilities.
In 2016, we continued to fund social investment projects coming from both Shell and BG in Brazil and launched the first Shell Eco-marathon Brazil. Shell LiveWIRE has helped develop more than 600 new businesses in Brazil over the past 15 years.
Our business
Shell’s business is divided into three areas: Upstream, Integrated Gas and Downstream:
- Upstream is responsible for Shell’s conventional oil and gas businesses around the world, including deep water as well as shale oil and gas. It explores for and recovers crude oil and natural gas, and develops major new projects.
- Integrated Gas manages Shell’s manufacturing and distribution of liquefied natural gas (LNG) and gas-to-liquids products. It includes natural gas exploration and extraction and the operation of the upstream and midstream infrastructure necessary to deliver gas to market. It also includes the New Energies business, created in 2016, which invests in low-carbon energy solutions such as biofuels, hydrogen, wind and solar power.
- Downstream manages Shell’s refining and marketing activities for oil products which are sold around the world for domestic, industrial and transport use. It also produces and sells chemicals for industrial customers. Shell’s oil sands mining activities in Canada are also part of the Downstream business.
Strategic themes
As part of its refreshed strategy, Shell manages its portfolio around three time horizons: cash engines for today, growth priorities for the medium term and future opportunities for the longer term:
- Cash engines: conventional oil and gas, integrated gas and oil products are the activities that we expect to provide strong returns and free cash flow. They will fund distributions to shareholders and reduce debt, as well as investments in our growth priorities and future opportunities. In March 2017, Shell announced our agreement to sell the majority of our interests in oil sands in Canada. As a result, oil sands mining no longer features as a strategic theme.
- Growth priorities: deep-water oil and gas and chemicals are Shell’s growth priorities. They are our future cash engines, with expected improved returns and cash flow from around 2020. We are developing deep-water fields in Brazil and the Gulf of Mexico, and chemicals projects in the USA and China; and
- Future opportunities: We see shale oil and gas and our New Energies business as future opportunities. Our current shale portfolio is centred on the USA, Canada and Argentina. In the New Energies business, we are building our portfolio around our existing activities in low-carbon biofuels and hydrogen, and exploring investments in solar and wind energy. Future opportunities should provide us with material growth in free cash flow in the next decade or beyond.
