State of the Company Address

Houston, Texas

Marvin Odum

Upstream Americas Director, plc President, October 23, 2014

Marvin Odum on the State of the Company

Marvin E. Odum became Director of the Upstream Americas business in 2009. He continues as President of Shell Oil Company.

Marvin earned a bachelor’s degree in mechanical engineering from The University of Texas at Austin and a master’s degree in business administration from the University of Houston. He began his Shell career as an engineer in 1982, and has since served in a number of management positions of increasing responsibility in both technical and commercial aspects of energy.

Prior to his most recent appointment and in addition to his role as Shell Oil President, he was Executive Vice President for the Americas for Shell Exploration & Production. He was named Shell Oil President in 2008 and had served as Executive Vice President since 2005, with responsibility for Shell exploration and production businesses in the western hemisphere.

Marvin is a member of the Council on Foreign Relations and holds positions of board leadership and participation in the Business Roundtable and the American Petroleum Institute. He is on the executive committee of the World Business Council for Sustainable Development. In addition, he is a member of the Dean’s Council of the John F. Kennedy School of Government at Harvard University and the Advisory Board of the Cockrell School of Engineering at The University of Texas at Austin. He is also involved with several charities in the Houston area.

Marvin, a US citizen, was born in 1958. He is married to Mariloli, and they have three children. Marvin Odum on the State of the Company

In this address, Upstream Americas Director Marvin Odum looks back on the changes made in 2014 and what they mean for the company going forward, examining Shell’s successes and growth opportunities – from deep-water projects to Alaska. Marvin gives Shell alumni an inside look in the company’s priorities, strategy and active role in the debate around our energy future.

Hello everyone. have a strong flow of new projects, many of them here in the Americas. It’s always nice to see you. This continues to be a very important region Loli and I look forward to this every year. for the Royal Dutch Shell group. About It’s such a wonderful opportunity to see the 35% of Shell’s shareholder base is right people who built our company. here in North America.

Before I get into my remarks today, I want We have profitable and growing heavy oil to acknowledge the sudden passing earlier and deep-water oil and gas businesses, this month of Phil Carroll, a former Shell Oil which generate healthy returns and cash “Our dividend Company President. flows, and both of which have growth is up. So are profiles. underlying Phil passed away following a short illness. earnings. He had joined Shell in the early 60’s as an We’ve built a significant position in We’re engineer. After serving in a variety of Unconventionals, or what you’ll often hear roles, he led Shell Oil from 1993 to 1998. referred to as resources plays. And for the expecting longer term, we are developing integrated important buy Phil’s legacy continues at Shell today, gas opportunities, such as liquefied natural backs for this particularly through initiatives he gas, and keeping our options open in year and the spearheaded on improving our business Alaska. next. And we through diversity and development of future have a strong leaders. He’s remembered as a visionary So let’s start there…with Alaska. CEO who was always willing to step up flow of new and do the right thing, even when that Keeping our options open projects, many wasn’t the easiest choice. In August we submitted a revised Chukchi of them here in Sea Exploration Plan to the Bureau of the Americas.” He is survived by his wife of 55 years, Ocean and Energy Management. It’s not Charlene, and their children and a final decision to drill next summer but it grandchildren. I’m sure you will join me in does preserve the option. remembering Phil’s family in your prayers. I know they will appreciate it. We’ve taken a critical look at all of the experiences we’ve had in Alaska over the And I thank you for letting me share that last several years and this latest Exploration with you before moving into the company Plan takes those learnings into account. update. If we drill in 2015, there will be two A better, stronger year drilling rigs working simultaneously in the I’m pleased to be able to stand before you Chukchi Sea. today with our financial performance stronger than when I saw you all at this We’re taking a methodical approach to time last year. this program. We need to see progress on a number of fronts – that includes successful Our dividend is up. So are underlying resolution of the legal challenges to the earnings. We’re expecting important buy government’s studies of the potential backs for this year and the next. And we environmental impacts of the project. Marvin Odum on the State of the Company

As always, it means receiving all of the Still in the Gulf, front-end engineering and necessary permits. We need the full design is moving forward with the support of the U.S. Government. Appomattox project. Stones, which will host the deepest production facility in the And, of course, we have to have total world, is under construction. confidence that we can execute a program safely. We need to be certain we can A new frontier operate in this region exceptionally well, This is a new frontier in oil and gas deep both technically and environmentally. water. More people have walked on the moon than have been at the depths we’re If we’re not convinced, we won’t do it. exploring. The Stones field is estimated to contain more than 2 billion barrels. We believe offshore Alaska is home to some of the most prolific, undeveloped And we’ve had a series of discoveries hydrocarbon basins in the world. If that since we last spoke: turns out to be true, it could mean billions in tax revenue for the US Treasury and further - Another in the basin – Kaikias -- tip the energy trade balance in favor of the that’s still being appraised. US. It also means the creation of tens of - A third major discovery in the thousands of jobs – careers that would be Norphlet play called Rydberg. We’re measured in decades. completing the full evaluation of the “More well results, but expect the resource people have Talking about decades…some of you may base to be around 100 million walked on recall or may even have been involved with barrels. Rydberg is within 10 miles of the moon Shell’s first entry into the deep water. Appomattox and Vicksburg, bringing the total potential Norphlet discoveries than have Deep water to more than 700 million barrels of oil been at the Auger, our oldest tension-leg platform, equivalent. depths we’re celebrates its 20th anniversary this year. exploring.” It’s a legend, really, in the world of deep Cardamom, Mars B, Appomattox, Stones, water. Rydberg, Kaikias…All landmark moments for Shell’s deep-water activities this Production from its fields started to slow in year…All of them in the Gulf. recent years, but in 2010, its fate took a turn. Using a new breed of seismic In 2014, we also made important technology, our engineers discovered a discoveries in Malaysia, started oil whole untapped field hidden behind a vast production from a deep-water development salt deposit four miles below the sea floor. off the coast of Nigeria, and just drilled the first exploratory wells at Libra, in Brazil, one We drilled one of the world’s longest wells of the largest deep-water fields ever and in September of this year, we began discovered in the world. The recoverable production from that field, which we call resources are estimated between 8 and 12 Cardamom. It’s a fantastic example of billion barrels. using existing infrastructure to increase oil and gas production in a less capital- A long-term outlook intensive way. I don’t want to make it sound like any of this was easy. Last time I saw you, Olympus had just made its way to the Mars field – another In 2013, the world had one of its lowest legend of the deep water. We achieved years on record for proven oil discoveries. first oil at Olympus in January of this year We discovered only half as much oil as we and we expect that production to continue consumed. to at least 2050. Marvin Odum on the State of the Company

And of course, I stand in front of you today growth priority for Shell, and an area with oil prices dipping into the low $80- where we have a leadership position in the range after sticking routinely in the $100+ industry. band for a couple of years now. I’ll focus on liquefied natural gas – a fast- We continue to evaluate Shell projects at a growing business. So fast, in fact, that conservative oil price and have a trading global LNG trade has outpaced the gas strategy designed to buffer us from the market as a whole. swings. It’s not an understatement to call this a The oil price situation is always complex, revolution, which started with Shell in 1964 but we continue to believe in the massive when we brought the world’s first global population growth projections that commercial LNG cargo from Algeria to the will bring 9 million people into the world UK. with ever increasing levels of prosperity. Old regasification facilities are left unused, Given that it’s harder to find oil and more while brand new natural gas terminals are difficult to develop it, our long-term outlook being converted to export from import. is still very robust. That’s happening right here in Texas.

I believe the recent successes I’ve The direction has changed, a real U-turn, described here show (and reinforce) Shell’s making the Americas a region of major leadership position in deep water, where opportunity in integrated gas. And with we have a healthy flow of new projects global demand expected to double in the and a successful exploration program that next decade, Shell has taken some should generate shareholder value for important steps to play an active role in this “Old decades to come. market. regasification Mexico A growth priority for Shell facilities are You’ve likely noticed Mexico is looking to That’s why we’re part of a joint venture left unused, get into the mix as well. agreement to develop a liquefied natural while brand gas export project in Kitimat, British new natural We’re watching this very closely. Columbia. LNG Canada is an exciting gas terminals opportunity. We’re looking at 12 million are being As a bit of background, in December of ton per year of liquefied natural gas in the last year, the Mexican Congress voted to first phase, which is about 1.7 billion cubic converted to change the constitution to open up the feet per day. Front-end engineering and export from country’s oil and gas sector to domestic design began in June. Expect a final import.” and foreign private investment. investment decision in about two years.

Given our leadership in Deep Water, and In the nearer term, we’re making good our 60-year history of Downstream progress with Elba LNG, our liquefaction operations in Mexico, clearly we will plant near Savannah, Georgia. Shell has review any strategic opportunities that may LNG off-take rights for 100% of the project. result. Front-end engineering and design is now almost complete, and we hope to make a But there’s still a long way to go and much final investment decision next year. work to be done before we know where that might lead. Integrated gas is a fast-growing business, yes. But more important, it’s a business that Integrated gas builds on our strengths in exploration and Let’s now turn to integrated gas, another production, our downstream expertise in creating and marketing high-value products, Marvin Odum on the State of the Company

and our know-how in managing huge Speaking of integration, I wanted to share projects. with you one of my favorite examples.

I’ll give you some examples. Breakthrough products You may have seen our latest lubricant Prelude product on the shelves – Ultra with Last year I told you about Prelude, the Pure Plus Technology. world’s largest floating offshore facility, which we will operate off the coast of This is a truly breakthrough product. Australia. Because it uses base oil made from natural Prelude will produce enough LNG to easily gas, rather than oil, it’s been called the satisfy the annual natural gas needs of a most significant development in the industry city like Hong Kong. With its cargo tanks for 40 years. full, it will weigh roughly six times as much as the largest aircraft carrier. We manufacture it at our Pearl GTL plant – the largest gas-to-liquids plant in the world. “A project Since I’m talking to a room full of retirees like Prelude with a beautiful golf course view just From Qatar, the base oil enters our global will produce outside these doors, let me try to bring in a network of 50 blending plants, where it’s real world example…Prelude is as long as mixed with high-performance additives. gas at sea, a par 5! The finished product has already hit the hundreds of shelves in 27 markets worldwide. miles off the That’s what I meant by huge projects. nearest While I’m on the topic of Downstream… coast, turn it Prelude is on budget – and on schedule. directly into Making no excuses We’re currently in the process of installing We’ve had better results here recently. stable topsides and the LNG modules in South And here, too, there’s a lot more to do, liquefied Korea, constructing the turret mooring especially in Oil Products. natural gas, system in Dubai, assembling the subsea and finally system in Malaysia, and drilling the This is due, in part, to legacy asset transfer it development wells offshore Australia. positions. onto ships to A project like Prelude will produce gas at But we make no excuses. be sea, hundreds of miles off the nearest transported coast, turn it directly into stable liquefied We’ve left money on the table in our value directly to natural gas, and finally transfer it onto ships chains, and in some cases we’ve overspent markets.” to be transported directly to markets. on operating costs and capital projects, which, of course, depresses overall returns It’s a world’s first, and the first of multiple and the competitive picture. FLNG projects for Shell. It’s a revolutionary technology, one that will allow our Our goal is clear: we must deliver a more company to access offshore gas fields that competitive financial performance, and that would otherwise be too costly or difficult to involves selling non-core portfolio assets develop. It simply changes the way we do with low returns and low growth potential – business. a strategy we also applied to resources plays. I believe integrated gas will be one of the main drivers of our earnings and cash flow I’ll get to that in a minute. in the coming decades. But there’s more to it. Marvin Odum on the State of the Company

You all know Port Arthur. biggest changes we’ve experienced since I saw you here last year. And it’s good When we expanded this refinery a couple change. of years ago, we ran into a series of technical problems. This wasn’t a good Divestments get a lot of attention – and experience. rightly so. But major divestments of non- core positions are now essentially But I’m pleased to say that today, Port complete. Arthur is fully on line, and made a substantial positive contribution to the Restructuring our portfolio bottom line in the first half of 2014. We’ve had to restructure our portfolio, divesting large natural gas assets in some And that’s exactly what we need from the plays, while adding assets in others with largest refinery in the U.S. specific scale and economic characteristics. MLPs Less expected, but no less important is Pinedale and Haynesville are a perfect Shell’s move into the master limited example. partnership market last June. In those recent separate transactions, we MLPs (as they’re known) are partnerships exited two mature dry gas positions in publicly traded on a securities exchange. exchange for approximately $2.1 billion, plus additional highly attractive exploration As the partnership doesn’t pay taxes from acreage in the Marcellus and Utica Shale the profit, but only at the time of areas in Pennsylvania. distributions, it has obvious tax benefits. And it’s already paid off – we made a Congress intended MLPs as a way to sizable discovery in the Utica formation expand the pool of capital for investments shortly after concluding the deal. in exploration and production, midstream and other energy sectors. Now that our portfolio is stabilizing, the majority of near-term investments will be directed at shale assets rich in oil and We announced we would divert some of “Divestments our midstream U.S. assets to an MLP and natural gas liquids, with a focus in Western the initial public offering was launched Canada and the Permian. get a lot of earlier this week. attention – We want to be competitive at the bottom and rightly The initial fundraising is expected to be line in this business. The key to that is so. But accessing the best geology, advantaged $750 million. major evacuation routes, and taking out cost. divestments This MLP is part of Shell’s drive to enhance We’re not there today, but we are making our capital efficiency – a small part of a good progress. of non-core bigger plan to balance growth and returns. positions are Groundbirch now That’s what our CEO means when he says And we can count on some of the best essentially people in the business. that he wants to see more competitive complete.” results right across the company, and particularly from North America resources I think of the Groundbirch Wells team in plays. Canada, for example, who successfully drilled the longest lateral well ever in the Unconventionals Upstream Americas Unconventionals The Unconventionals business is one of the business last May. Marvin Odum on the State of the Company

The total length of the well was about 3.8 But we know one thing: energy demand is miles, with a lateral leg of about 2 and ¼ on the rise -- everywhere. miles. Prior to that, the longest lateral you could find was roughly a mile shorter than I wanted to tell you about one example that that. really blew me away when I saw it.

It was a watershed moment for Shell There’s this picture of Pope Benedict’s drilling, and we haven’t looked back. inauguration ceremony back in 2005. You may have seen it. Tens of thousands of This new technology could reduce Shell’s people gathered in St. Peter’s Square for environmental footprint, as well as lower the chance to get a glimpse of the Pope. “We’re not costs. It also fits with our aggressive Nothing particular. And then, the same commercial focus to consistently deliver well scene 8 years later at the ceremony for only focused costs that beat our competition. Pope Francis, with this time a ‘sea’ litterally on immediate of cell phones pointed at the new Pope. returns. We Delivering on our promises also spend a I told you last year that 2014 would be a The contrast between these two pictures is lot of time critical phase for Shell – a period where striking, speaking volumes about the working what we have a fantastic opportunity to prove to changes the world is experiencing today. the market we can deliver on our promises our energy and sustain growth in our cash generation. I could barely believe this picture when I picture will saw it. And this is true at many events look like far We’re on the right track -- our latest results around the world. In just 8 years the into the are very encouraging. prevalence of technology…in all future.” demographics…in all areas of the There were some changes in 2014. globe…is truly remarkable.

We’ve moderated our spending and A clear message to policy makers growth plans, increased our divestments, Where Shell is concerned, it’s not just and are in the process of restructuring some about the energy we produce to parts of the company. manufacture or power the kinds of products you see in the hands of the people in that We’ve communicated clear priorities to the picture…it’s indicative of the rising middle market. And yes, that means investing in class we’ve been talking about for many the projects that generate the best returns years and the effects that will have on the and cash flow, and getting out of plays energy demand picture. where we can’t add value for our shareholders. So we continue to take a very clear message to policy makers: embrace As an executive team, we’re not only cleaner burning natural gas as a fuel for focused on immediate returns. We also power generation, increase the support for spend a lot of time working what our the potentially game-changing technology energy picture will look like far into the of carbon capture and storage, and widen future. the use of carbon pricing systems.

A ‘reboot’ Shell is a company you’ve been proud to Our CEO Ben van Beurden has called for be part of for a long time. And I feel a renewed debate around our energy confident we’re doing the right things to future – a ‘reboot.’ ensure you continue to feel that way for many years to come. Shell doesn’t have all the answers to reducing CO2 emissions. Thank you for your attention. I look forward to your questions. Marvin Odum on the State of the Company

Recent speeches by Shell’s senior leadership

Working together to build a lower carbon, higher energy future, Ben van Beurden

A century of ideas, Ben van Beurden

Taking geoscience beyond the conventional, Matthias Bichsel

Asia’s energy future, Peter Voser

The power of innovation in collaboration, Matthias Bichsel

Keynote speech to the Royal Dutch Gas Association (KVGN), Peter Voser

Investing in the future, Peter Voser

Shell’s recommendations for a more competitive EU energy policy by 2020, Peter Voser

For information about Shell, including downloadable versions of these speeches and other publications, please visit www.shell.com.

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