SUSTAINABILITY REPORT PLC SUSTAINABILITY REPORT 2012 2 12 30 OUR APPROACH OUR ACTIVITIES OUR PERFORMANCE

3 Introduction from the CEO 13 Sustainable development in action 31 Economic 4 Building a sustainable energy future 14 32 Environmental 5 SD and our business strategy 17 Joint ventures, contractors and suppliers 34 Social 6 Living by our principles 18 Deep water 36 Environmental and social data 7 Safety 20 The Arctic 38 External Review Committee 8 Communities 22 Nigeria 40 About our reporting 9 Environment 25 Iraq 41 About our data 10 Climate change 26 27 Fuels and products 28 Biofuels

Cautionary note

The companies in which Royal Dutch Shell plc and assumptions and involve known and unknown and regions; (l) political risks, including the risks directly and indirectly owns investments are separate risks and uncertainties that could cause actual results, of expropriation and renegotiation of the terms entities. In this publication “Shell”, “Shell group” performance or events to differ materially from those of contracts with governmental entities, delays or and “Royal Dutch Shell” are sometimes used for expressed or implied in these statements. Forward- advancements in the approval of projects and delays convenience where references are made to Royal looking statements include, among other things, in the reimbursement for shared costs; and (m) changes Dutch Shell plc and its subsidiaries in general. statements concerning the potential exposure of Royal in trading conditions. All forward-looking statements Likewise, the words “we”, “us” and “our” are also Dutch Shell to market risks and statements expressing contained in this publication are expressly qualifi ed in used to refer to subsidiaries in general or to those management’s expectations, beliefs, estimates, their entirety by the cautionary statements contained who work for them. These expressions are also used forecasts, projections and assumptions. These or referred to in this section. Readers should not where no useful purpose is served by identifying the forward-looking statements are identifi ed by their use place undue reliance on forward-looking statements. particular company or companies. “Subsidiaries”, of terms and phrases such as “anticipate”, “believe”, Additional risk factors that may affect future results “Shell subsidiaries” and “Shell companies” as used “could”, “estimate”, “expect”, “goals”, “intend”, “may”, are contained in Royal Dutch Shell’s 20-F for the year in this publication refer to companies over which “objectives”, “outlook”, “plan”, “probably”, “project”, ended December 31, 2012 (available at www.shell. Royal Dutch Shell plc either directly or indirectly “risks”, “schedule”, “seek”, “should”, “target”, “will” com/investor and www.sec.gov). These risk factors has control. Companies over which Shell has joint and similar terms and phrases. There are a number also expressly qualify all forward-looking statements control are generally referred to “joint ventures” and of factors that could affect the future operations of contained in this publication and should be considered companies over which Shell has signifi cant infl uence Royal Dutch Shell and could cause those results to by the reader. Each forward-looking statement speaks but neither control nor joint control are referred to differ materially from those expressed in the forward- only as of the date of this publication, April 11, 2013. as “associates”. In this publication, joint ventures looking statements included in this publication, Neither Royal Dutch Shell plc nor any of its subsidiaries and associates may also be referred to as “equity- including (without limitation): (a) price fl uctuations undertake any obligation to publicly update or revise accounted investments”. The term “Shell interest” is in crude oil and natural gas; (b) changes in demand any forward-looking statement as a result of new used for convenience to indicate the direct and/or for Shell’s products; (c) currency fl uctuations; (d) information, future events or other information. In light indirect (for example, through our 23% shareholding drilling and production results; (e) reserves estimates; of these risks, results could differ materially from those in Woodside Ltd.) ownership interest held (f) loss of market share and industry competition; (g) stated, implied or inferred from the forward-looking by Shell in a venture, partnership or company, after environmental and physical risks; (h) risks associated statements contained in this publication. We may exclusion of all third-party interest. This publication with the identifi cation of suitable potential acquisition have used certain terms, such as resources, in this contains forward-looking statements concerning properties and targets, and successful negotiation publication that United States Securities and Exchange the fi nancial condition, results of operations and and completion of such transactions; (i) the risk of Commission (SEC) strictly prohibits us from including businesses of Royal Dutch Shell. All statements other doing business in developing countries and countries in our fi lings with the SEC. U.S. Investors are urged to than statements of historical fact are, or may be subject to international sanctions; (j) legislative, fi scal consider closely the disclosure in our Form 20-F, deemed to be, forward-looking statements. Forward- and regulatory developments including regulatory File No 1-32575, available on the SEC website looking statements are statements of future expectations measures addressing climate change; (k) economic www.sec.gov. You can also obtain these forms that are based on management’s current expectations and fi nancial market conditions in various countries from the SEC by calling 1-800-SEC-0330. reports.shell.com | Shell Sustainability Report 2012 1 Introduction

OUR BUSINESSES

Producing oil Extracting Exploring for oil and gas bitumen and gas Mining Refining oil oil sands into fuels and lubricants

Producing petrochemicals

Supply and Developing distribution fi elds Shipping and trading Converting gas to liquid products (GTL) Producing biofuels Shipping and trading

Liquefying gas by cooling (LNG) Generating wind power B2B sales

CHEMICAL Regasifying PRODUCTS Retail sales LNG for plastics, Retail sales coatings, detergents

B2B sales FUELS AND LUBRICANTS for transport GAS for cooking, heating, electrical power ABOUT SHELL

Shell is a global group of energy and petrochemical companies employing 87,000 people in more than 70 countries. Our aim is to help meet the energy needs of society in ways that are economically, environmentally and socially responsible.

Upstream Upstream consists of two organisations, Upstream International and of feedstocks and products. Retail and Commercial sell a range Upstream Americas. Upstream searches for and recovers crude of products including fuels and lubricants. Chemicals markets oil and natural gas, operates the infrastructure to deliver oil and petrochemicals for industrial consumers. Downstream trades gas to market, liquefi es and transports natural gas, converts gas to hydrocarbons and other energy-related products. It also includes liquid products, and extracts bitumen from oil sands for conversion our activities in biofuels. into synthetic crude oil. It often works in joint ventures, including with national oil companies. Our wind power activities are part of Projects & Technology Upstream. Projects & Technology manages the delivery of Shell’s major projects and drives its research and innovation programme to Downstream create technology solutions. It provides technical services and Downstream manufactures, supplies and markets oil products and technology capability to Upstream and Downstream. chemicals worldwide. Manufacturing and Supply & Distribution includes refi neries, chemical plants, and the supply and distribution www.shell.com/about 2 Shell Sustainability Report 2012 | reports.shell.com Our approach

OUR APPROACH

The world needs to produce enough energy to keep economies growing, while reducing the impact of energy use on a planet threatened by climate change. Shell works to help meet rising energy demand in a responsible way. That means operating safely, minimising our impact on the environment and building trust with the communities who are our neighbours. If we fall short of the standards society expects of us, we learn from our experiences to improve the way we operate. reports.shell.com | Shell Sustainability Report 2012 3 Our approach

INTRODUCTION FROM THE CEO

setting and following responsible guidelines energy and water. These stresses are likely for our tight oil and gas projects. to increase because of climate change. In 2012, I brought together CEOs from a range In 2012, Shell began the drilling of two of industries to identify steps each of us could exploratory wells in the Arctic waters off take to start to mitigate these stresses and Alaska. This was a signifi cant step forward increase our resilience for the future. in our efforts to develop these resources Innovative cross-industry partnerships can in a responsible way. We have worked deepen resilience to stresses and build closely with the people of Alaska’s North sustainability in the years to come. In early Slope, with regulatory authorities and with 2013, we published a new set of scenarios some environmental non-governmental that focus on the challenges of an era of I am pleased to introduce the Shell organisations. At the end of 2012, however, volatility and transition, characterised by Sustainability Report for 2012. Against there were regrettable incidents involving rapid urbanisation and energy-water-food the backdrop of a still-struggling global our drilling ships. We are incorporating the stresses. economy, we continue to operate in lessons learned from these events into our economically, environmentally and socially future plans. Partnerships and principles responsible ways; and to invest for the future. Industry can achieve more when working in Taking action partnership with governments, communities As global demand for energy continues A more sustainable future will require cleaner and others. In Nigeria, 2012 saw a dramatic to rise, we must develop energy resources energy, and more effi cient use of energy. rise in the theft of oil from pipelines. The bulk that exist in increasingly challenging With more people moving into cities, world of this oil is illegally exported overseas, and environments, or that are diffi cult to produce. population rising and living standards the rest turned into low-grade fuel in local Wherever we operate, we never cease in our improving, all forms of energy will be makeshift refi neries, causing environmental efforts to keep everyone safe: whether our needed to meet demand. Renewables such damage. These criminal activities reduce employees or contractors, or the communities as wind and solar will continue to grow, but government income from the energy industry. near our operations. We recognise the fossil fuels will still be meeting around The Nigerian government believes millions special physical and technical challenges two-thirds of energy demand in 2050. of barrels of oil a month are being stolen, of working in some of the world’s toughest amounting to a loss of billions of dollars a conditions, and we are determined to learn We are already taking action to deliver year in revenues. The energy industry cannot from our experiences to continue to improve more energy – and cleaner energy – using tackle this alone. It needs more action from the safety and reliability of our operations. advanced technologies and innovative the Nigerian government and help from local approaches. We are producing almost as communities. The international community Building trust much cleaner-burning natural gas as oil, also needs to step forward. This industrial- Trust between governments, industry and producing low-carbon biofuel, helping to scale crime is harming the Nigerian nation. civil society is all the more essential in an era develop carbon capture and storage (CCS) of economic volatility. Today that trust often technologies, and putting in place steps to Shell was a founding member of the UN appears to have broken down. To remedy improve our energy effi ciency. Global Compact and supports its principles this we need action, including a greater in human rights, labour, environment and

level of collaboration and transparency, and CCS is critical to reducing global CO2 anti-corruption. In this report you can read leadership to develop policies that work. emissions. In 2012, we decided to move about our progress in these areas. ahead with the Quest CCS project that Sustainable development remains fi rmly at will potentially capture and store deep The External Review Committee has again the core of our business strategy. Working underground over 1 million tonnes of provided important contributions to the

with communities, governments, non- CO2 a year from our oil sands operations in development of our Sustainability Report, governmental organisations and others Canada. We are also involved in a number and I thank them. helps us to operate safely and responsibly. of other CCS projects. We are not just We take stringent steps to prevent harm talking about CCS. We are taking action – I invite you to send your comments on the to the environment and to build trust with although without a strong price for carbon, report to: communities close to our operations. For these projects generate no revenue for example, we continue to lead the industry in companies. [email protected]

We are also helping to shape a better “TRUST IS ALL THE MORE understanding of the increasing stresses the ESSENTIAL IN AN world faces as demand grows for the interlinked essentials of energy, water and ERA OF ECONOMIC food. Most forms of energy production need VOLATILITY.” water; energy is needed to move and treat water; and producing food requires both Chief Executive Offi cer 4 Shell Sustainability Report 2012 | reports.shell.com Our approach

innovative ways to move more people and BUILDING A SUSTAINABLE ENERGY FUTURE goods safely, cost effectively and with less environmental impact. The world is at the beginning of a transformation in energy use. Global population is rising, living standards are improving for many and more We are working with governments and people are moving to cities. Demand for energy could rise by up to 80% by authorities in major cities on several around 2050 as it powers rapid economic development. Energy resources continents to better understand how cities and other essentials such as water and food – all interlinked – are expected develop, and their impact on energy supply to come under growing stress with climate change. As we help build a and demand. In China, for example, we more sustainable future, Shell is working to better understand the tensions have worked for two years with the state- between supply and demand in energy, water and food. run Development Research Centre to help analyse and improve the country’s mid- to long-term energy strategy. In 2012, we also The world’s population is heading for avoid the most serious effects of global began working with Singapore’s Centre for more than 9 billion by 2050, from today’s warming and climate change. Liveable Cities with a view to improving city 7 billion. Global energy demand is rising, management in the future. yet in many regions easy-to-reach supplies Vital resources under pressure of oil and natural gas are becoming harder Energy production is linked to both water Acting now for the future to fi nd. To help meet growing demand, use and food production. If the world is The IEA says that unless governments more renewable energy as well as more to build a sustainable energy future, these change policy, the world faces an insecure, fossil fuels will be needed. According three elements must be carefully managed ineffi cient and high-carbon energy future. to Shell’s scenarios, energy from solar, to avoid growing stresses, which are Without clear measures to promote wind, hydro-electricity and biomass could expected to increase with climate change. investment in more effi cient and low-carbon rise to around 30% by 2050, with strong In 2012, we published fi ndings from our technologies, it risks setting itself on a course government support. Nuclear power will work with the World Business Council to potentially catastrophic climate change. also continue to play a part. Fossil fuels for Sustainable Development and the are expected to meet around 65% of University of Utrecht, in the Netherlands, At Shell we advocate publicly and to energy demand by mid-century. At the to develop a new way of assessing more governments that a strong and stable price

same time, carbon dioxide (CO2) emissions accurately the amount of water that energy on CO2 emissions will help drive the right must be cut signifi cantly if the planet is to production needs. We are sharing our data investments in low-carbon technologies. with the wider business community and the But we are not waiting for government policy International Energy Agency (IEA), and to develop. We consider the potential cost have incorporated it into our own scenarios of a project’s CO emissions, which we set Professor 2 modelling. at $40 a tonne, in all our major investment Kevin decisions. We are producing more natural Noone Governments, business and civil society gas, the cleanest-burning fossil fuel, and must work together to overcome the we produce low-carbon biofuel. We are challenges of climate change and the also helping to develop carbon capture energy-water-food stresses. We are and storage technologies, and working encouraging this collaboration. In 2012, to improve the energy effi ciency of our Director of the Swedish Secretariat for for example, we brought together CEOs operations. Environmental Earth System Sciences, of multinational companies from several Stockholm, Sweden industries to identify joint projects that could help to start tackling resource stresses. Shell PROJECTED GLOBAL ENERGY DEMAND TO 2050 Shell uses scenarios to peer into is already working to reduce the amount million barrels of oil equivalent a day the future as an aid to strategic of water we use. For example, a recycling 400 “planning. Major corporate actors like plant makes our gas-to-liquids facility in Shell will be critical in shaping a future self-suffi cient in water, avoiding of resilience. Shell has incorporated the the need to draw on scarce fresh-water 300 Planetary Boundaries concept – resources. meaning that pursuing some of our activities beyond certain limits increases Rapid urbanisation 200 the risk of large-scale changes in the By 2050, around 75% of people will be way the entire earth system behaves – living in cities, up from 50% today. As into its scenarios work. Helping Shell urban population density grows, cities 100 with this process has given me hope that and towns will suffer most from increasing making the transition from an oil and pressure on resources. This creates an gas company to a sustainable energy opportunity to build more effi cient and 0 company will not be an impossible integrated systems, including better 1980 1990 2000 2010 2020 2030 2040 2050 Crude oil Nuclear Solar endeavour. Diffi cult, certainly. transport networks. But closer co-operation Natural gas Biomass Other renewables Impossible, defi nitely not. is needed between urban planners, local Coal Wind ” governments and companies to fi nd Source: Shell analysis, November 2012 reports.shell.com | Shell Sustainability Report 2012 5 Our approach

Technology and innovation SUSTAINABLE DEVELOPMENT Innovation and the development of advanced technologies are central to AND OUR BUSINESS STRATEGY our strategy. Cleaner, more effi cient technologies will be crucial as we explore Energy sustains our daily lives and powers progress around the globe. for and develop resources in ever more Sustainable development for Shell means working with governments, challenging environments. In 2012, partners, communities and others to deliver more energy in economically, we spent $1.3 billion on research and socially and environmentally responsible ways. This approach helps shape development (R&D), more than any other the business decisions we make. international oil and gas company.

Over the last fi ve years we have spent As the world’s population rises and the natural gas for power generation is the $2.2 billion on developing alternative demand for energy grows, we must meet quickest and most affordable route for energies, carbon capture and storage, and the needs of our customers and partners many countries to meet their CO2 reduction on other CO2-related R&D. We produce against a backdrop of economic volatility. targets. In 2012, we produced almost as low-carbon biofuel through our Raízen joint We face increasing competition for access much natural gas as oil, and we continue to venture in Brazil, and we are helping to to energy resources in a world where invest in developing natural gas resources develop advanced biofuels for the future environmental and social pressures are (see chart). Shell expects global demand from non-food sources. mounting. Our approach to sustainable for natural gas to increase by 60% by development underpins the responsible 2030 from its 2010 level, reaching 25% of way we work. the global energy mix. SHELL’S EXPLORATION RESOURCE ADDITIONS In developing energy projects and We will continue to develop oil and billion barrels of oil equivalent operating our facilities, we must balance gas projects to help meet rising energy 2.5 short- and long-term interests. That means demand. We are moving into increasingly integrating economic, environmental and challenging environments, using advanced 2.0 social considerations into our business technologies and fi nding creative ways to decisions from the earliest stage. This access diffi cult resources. approach is crucial to our success. It helps 1.5 us develop projects without delays, and To support our overall growth in delivering minimise the environmental and social energy, we expect to have a net capital 1.0 impacts of our operations. It also enables us investment of around $33 billion in 2013. to better share the benefi ts of our activities, Around 80% of this will go to our oil and 0.5 such as creating new jobs and contracts gas exploration and production activities. that help boost local economies. As new projects start up over the next four to fi ve years, we expect our production to 0.0 Producing more natural gas rise to 4 million barrels of oil equivalent 03 04 05 06 07 08 09 10 11 12 Oil Year Increasing the use of natural gas will help a day. This is an increase of 23% on our Gas build a sustainable future energy system. production in 2012. Replacing coal with cleaner-burning Note: Excludes mergers and acquisitions

OUR GOVERNANCE AND STANDARDS HSSE & SP specialists work with business managers to implement The overall accountability for sustainable development within our standards to help improve our sustainability performance. Shell lies with the Chief Executive Offi cer (CEO) and the Executive We have comprehensive assurance processes in place to monitor Committee. They set priorities and standards in sustainable compliance. development that help shape our business activities. The CEO chairs the Health, Safety, Security, Environment and Social The Corporate and Social Responsibility Committee (CSRC) of the Performance (HSSE & SP) Executive, which reviews and assesses Board of Royal Dutch Shell plc reviews policies and performance how we manage our sustainability performance. with respect to the Shell General Business Principles, Code of Conduct, HSSE & SP standards and issues of public concern All employees and contractors working for Shell, including those on behalf of the Board. Besides its regular meetings, the CSRC at joint ventures we operate, are required to act in accordance visits facilities to become more familiar with our operations. In with our mandatory HSSE & SP Control Framework. This defi nes 2012, the CSRC visited Nigeria and observed the environmental standards and accountabilities at each level of the organisation. damage from illegal refi ning in the Niger Delta. While there, it The accountability for running our projects and facilities also visited facilities and met with government offi cials, community responsibly lies with our business managers. They work with representatives and local non-governmental organisations. During communities, non-governmental organisations, partners and others a visit to Shell’s UK operations in the North Sea, the CSRC saw to better understand and address the impact of our operations. how safety is managed on an oil and gas platform. 6 Shell Sustainability Report 2012 | reports.shell.com Our approach

LIVING BY OUR PRINCIPLES ENGAGING OUR INVESTORS During 2012, Shell organised several Our business principles are the foundation for the way we work. They govern events to engage with socially how we behave, the policies and processes we follow, and the decisions we responsible institutional investors make. They also guide the way we manage the impact of our operations on on the sustainability aspects of our the environment and our approach to working with communities. operations worldwide. In London, one event focused on safety, biofuels, climate change, oil sands, tight oil Shell General Business Principles Shell Code of Conduct and gas, Nigeria and the Arctic. We We were one of the fi rst companies to Our Code of Conduct helps employees hosted a visit to Nigeria to review the publish business principles, in 1976. They and contractors to meet the standards and diffi cult operating environment and set the standards for the way we conduct behaviours expected of them as set out the large-scale oil theft occurring in business with integrity, and our respect for in our business principles. Confi dential parts of the Niger Delta. We also held the environment and local communities. channels, including a global telephone sessions on our Alaska offshore drilling They also detail our responsibilities towards helpline and website, are available for programme for investors in the UK and customers, suppliers, partners, employees, anyone to report breaches, anonymously the Netherlands. shareholders, and to broader society. All if they wish. The Code of Conduct covers Shell employees and contractors, and those areas including fi ghting corrupt practices, at joint ventures we operate, are expected national and international trade, and to comply with our business principles. safeguarding information and assets. Shell Shell has long been involved with In joint ventures we do not control, we provides mandatory training in the ethical developments in business and human encourage our partners to apply principles and legal aspects of all these areas. rights. While it is the duty of governments to consistent with our own. Mechanisms exist protect human rights, Shell recognises the to make employees aware of the principles Antitrust responsibility of companies to respect them, and act in accordance with them. The purpose of antitrust laws is to promote in line with the UN Guiding Principles on and safeguard competition, and to punish Business and Human Rights. We also work anti-competitive behaviour. We have with other companies, non-governmental Allan an active antitrust programme in place organisations and other bodies to improve Lerberg to identify and resolve any activity that the way we apply these principles. For Jorgensen fails to meet our standards of compliance example, we are working with the Danish with antitrust laws. It includes mandatory Institute for Human Rights to help shape our measures people working for Shell must take approach (see opinion). to prevent antitrust incidents, and training to help them understand their roles and In 2012, we continued our community responsibilities. Anyone working for Shell feedback pilot projects, based on the UN Department Director, Danish Institute for who does not comply with antitrust laws Guiding Principles, in four countries. What Human Rights, Copenhagen, Denmark faces disciplinary action, up to and including we learn from these pilots will guide our dismissal or termination of their contract. efforts to put new community feedback We work with Shell to implement mechanisms in place, or improve our respect for human rights across Anti-bribery and corruption existing programmes, at our major projects “four areas: community impacts, Our compliance programme supports Shell’s and facilities in the future. We also help employee relations, procurement long-established position against the direct promote a common approach to human and security. Shell has had a public or indirect offering, paying, soliciting or rights across the oil and gas industry commitment to respect human rights accepting of bribes in any form, including through IPIECA, the industry association since 1997. However, implementation facilitation payments. It includes mandatory for social and environmental issues, as has not been consistent across the procedures and training on topics such as co-chair of its working group on community company and therefore progress political payments, gifts and hospitality, and feedback mechanisms. has been uneven. We hope that our confl icts of interest. Anyone working for Shell knowledge can help Shell improve its who does not comply with anti-bribery laws We have requirements to keep employees, approach to human rights, and inspire faces disciplinary action, up to and including contractors and facilities safe, while the same change among its peers. The dismissal or termination of their contract. respecting the human rights and security of human rights challenges faced by the local communities. Since their development oil and gas industry require joined-up Human rights in 2000, we have actively implemented the thinking and joined-up action. We The Shell General Business Principles Voluntary Principles on Security and Human are pleased by Shell’s active role in require our employees and contractors to Rights (VPSHR), which guide companies the human rights task force of IPIECA, respect the human rights of fellow workers in assessing risks when working with and we encourage Shell and its peers and communities where we operate. We public and private security. We train our to address the industry’s human rights focus on four areas across Shell’s activities security staff and contractors in the VPSHR, impacts in relation to climate change where respect for human rights is especially and we incorporate the principles in our and natural resource management. critical to the way we operate: communities, security contracts. ” labour, supply chains and security. reports.shell.com | Shell Sustainability Report 2012 7 Our approach

and take the necessary steps to reduce SAFETY or eliminate them. At the same time, we prepare for, and are ready to respond to, Safety is critical to the responsible delivery of energy. We develop and an incident in the event that one occurs. operate our facilities with the aim of preventing incidents that may harm our employees and contractors or nearby communities, or cause environmental We learn from investigations into major impact. We continue to build a culture where each person understands their industry incidents. Shell has a programme role in making Shell a safer place to work. in place to improve awareness among managers of how they can better create a working culture that prevents safety incidents. Delivering energy and products to our safety rules for its members based on the This includes recognising and responding to customers responsibly depends on operating Shell Life-Saving Rules. Our Safety Day is the smallest signs of a potential problem. It safely. Our goal is to have zero fatalities an important global event. Shell employees also includes asking workers more questions and no leaks or other incidents that harm our and contractors across the world come about their safety concerns. employees, contractors or neighbours, or together in a number of locations – from put our facilities and the environment at risk. deep-sea platforms and desert oil fi elds to We routinely prepare and practise our In 2012, we continued to record low injury refi neries, chemical plants and offi ces – to emergency response to incidents such as an rates. However, any injury or incident, no improve their understanding of safety and oil spill or a fi re. We work closely with local matter how small, serves as a reminder of reinvigorate their goal of staying safe. emergency response crews and government the need to avoid complacency. (For details organisations to regularly test our plans of our safety performance, see page 34.) Process safety and procedures, with the aim of continually We have a stringent approach to process improving our readiness to respond. If We manage safety through rigorous safety to make sure our facilities are an incident does occur, we have multiple processes and by embedding a safety well designed, well operated and well recovery measures in place to minimise the culture in the daily lives of our workforce. maintained, so they can run safely and impact on people and the environment. Everyone working for us and joint ventures without harm to people or the environment. we operate must follow our safety rules, The global safety standards we apply to Andrew intervene in unsafe situations, and respect all the facilities and projects we operate Hopkins our neighbours and the environment. Our meet local regulatory requirements, and HSSE & SP Control Framework, a global set in many cases exceed them. Since 2006, of standards and accountabilities, defi nes Shell has been implementing a $6 billion the operational controls and physical programme to improve the safety of our barriers we require to prevent incidents. oil and gas production facilities, including regular training for those who manage and Our Life-Saving Rules and annual Safety operate them. In 2012, we invested around Emeritus Professor of Sociology at Days continue to improve risk awareness $1 billion in the safety and reliability of our the Australian National University, and foster a culture where everyone takes refi neries, chemical plants and distribution Canberra, Australia responsibility for safety. Road safety is one facilities. area where this approach has achieved I have run numerous process good results in recent years (see box, page Shell takes a dual approach to potential safety workshops for Shell, and 25). The Oil & Gas Producers Association incidents. We identify and assess risks that “I am struck by the way the company (OGP) has drawn up a set of recommended have the potential to become an incident, has tried to learn the process safety lessons that have emerged from previous

Contractors taking part in an exercise on Safety Day at Pulau Bukom manufacturing site, Singapore. disasters. It has identifi ed 11 “process safety basic requirements” (PSBRs). They are summarised on a single card, and the requirements refer to things like safe siting of portable buildings, permit to work and alarm management. Each of these is linked to specifi c industry incidents. This linkage is what breathes life and meaning into the PSBRs. They are not just abstract procedures: they are the result of the hard lessons of previous tragedies. The PSBRs represent organisational learning. The next step is to ensure that people know and can tell the stories of the incidents from which the PSBRs are derived. In this way organisational learning will be translated into individual learning. ” 8 Shell Sustainability Report 2012 | reports.shell.com Our approach

COMMUNITIES WORKING WITH COASTAL COMMUNITIES Working with our neighbours helps us share the benefi ts of our activities. Our Deep-water projects are vital to US Gulf operations help to develop local economies by creating jobs and contracts. Coast communities, providing jobs and We aim to build trust by engaging closely with communities about our plans, helping to sustain a way of life. As we listening to their hopes and concerns, and taking action to address them. develop our B deep-water platform, Shell is investing in a range of projects to help protect coastal Our projects and facilities are a part of of our community liaison staff and trained communities. We have pledged many communities around the world. them to improve their skills in resolving $5 million to community and We aim to have a positive effect in those confl icts and grievances at the community environmental projects, including the communities. Through our operations we level, and developing joint benefi ts. The restoration of wetlands and coastlines create jobs and business opportunities that Consensus Building Institute, a not-for-profi t damaged by hurricanes. help to build or rejuvenate local economies, organisation, developed this programme. and support community development For example, Shell is providing projects. We also work to incorporate the Investing in communities $1 million to support a project that will views of those living close to our operations Sharing the benefi ts of our operations means almost double the size of Pelican Island, when we make decisions that may affect we also invest in community programmes in Louisiana, an important habitat for them. This is a responsible approach that which our expertise can provide a positive nesting wading birds that is threatened builds trust and makes good business and lasting impact. We focus on three global by coastal erosion. We are providing sense: without community support, projects themes: enterprise development, road safety, $500,000 to fund The Nature and facilities can experience delays and and safe and reliable access to energy for Conservancy’s restoration efforts on other challenges. (For details of our social the communities around us. We also have Shamrock Island in Corpus Christi Bay, performance, see page 34.) locally tailored programmes in areas such Texas, another vital nesting habitat for as community development, education, and up to 21 species of birds. We have also Shell has global operating standards biodiversity and conservation. donated $500,000 to the Greater and mandatory requirements that set out Lafourche Port Commission to restore how we work with the communities our In Iraq we support road safety awareness and maintain a 1.6 km section of operations might affect. Each of our major schemes for many people, including storm-damaged beach in Louisiana. projects and facilities must have a social schoolchildren, and we are working to performance plan that frames the way we improve the skills of our drivers (page Shell is working to increase knowledge work to minimise our impacts, engage with 25). We support young entrepreneurs of the local environment. For instance, communities and share benefi ts. in developing their businesses. The we are supporting a scientifi c management training and business documentary by the Gulf of Mexico When we plan a new project or planning advice that the Shell LiveWIRE Foundation, a non-profi t conservation changes to an existing facility, we talk programme delivers can help new organisation. We involved 90 children to local communities and listen to their companies develop and build for the future. from three schools in a community expectations and concerns as early as In 2012, Shell LiveWIRE marked its 30th project to clean debris from 61 km of possible (page 19). Through the life cycle anniversary, and trained almost 9,000 coastline on Matagorda Bay in Texas, of our operations, we engage with local people leading to the creation of around and are producing an educational communities to identify their needs and 2,500 new businesses. Shell runs the video on the project. Our $1 million opportunities for development. We work programme with local partners. donation is helping to fund the with indigenous peoples to preserve their construction of the Bayou Country way of life and culture, and learn from Building local economies Children’s Museum in Thibodaux, their traditional knowledge to improve the In 2012, we spent around $14 billion Louisiana, which started in 2012. way we operate. Our approach includes on goods and services from companies guidelines on how to avoid the involuntary in countries with lower incomes. We resettlement of communities. also organised three workshops for suppliers in partnership with UK Trade & When a natural disaster happens, we We also discuss our business plans with Investment to promote support for local can work to help rebuild local economies advisory panels of local representatives jobs and enterprises. One focused on through support in restoring livelihoods. or at community meetings. Our social Iraqi and Omani contractors, the second In 2012, we supported several countries performance guidelines help our specialists on Nigerian contractors (see opinion, that were affected by natural disasters. to engage respectfully and effectively page 17) and the third on Kazakhstani For example, we jointly developed and during these and other meetings with contractors. ran a programme with the Chaipattana communities. In 2012, we trained 272 Foundation in Thailand to support fl ood social performance specialists. We also Around 400,000 people are contracted relief. We contributed $1 million to the run courses to increase awareness of to work for Shell. We hire local people programme, and provided support and social performance-related topics for wherever possible, and some governments training for local communities to repair and business managers, with 120 attending require this. In 2012, more than 90% of our maintain agricultural equipment that had in 2012. We have increased the number employees were local nationals. been damaged during the fl oods. reports.shell.com | Shell Sustainability Report 2012 9 Our approach

using innovative approaches and advanced ENVIRONMENT technologies in the design and operation of our facilities to reduce our use of fresh As we work to help meet the world’s growing energy needs, we aim to water, and to recycle more water. reduce the environmental impact of our operations. Working with local communities and experts from leading environmental organisations helps At our Groundbirch tight gas project in us better understand and address the challenges we face in running our British Columbia, Canada, for example, we facilities and developing major projects. are reducing the amount of fresh water we use from local sources. We operate a storage and recycling facility for the water used in Working to reduce the environmental impact prevent spills through strict standards and tight gas production. Pipelines transport of our operations takes rigorous planning. by making sure that our facilities are well the water to where it is needed in the fi eld, We focus on key areas including managing designed, safely operated and properly reducing truck movements. We have also carbon dioxide (CO2) emissions, using less maintained. funded the building of a water-recycling energy and water, preventing spills, fl aring plant for the nearby city of Dawson Creek. less gas produced with oil, and conserving The availability of fresh water is a growing The plant will treat water so that it can be biodiversity. (For details of our environmental challenge for the energy industry as reused in our operations and for other performance, see page 32.) developing new resources, such as tight industrial and municipal needs (see opinion). gas, can be water intensive. Operating in

We manage CO2 emissions through using water-scarce areas may bring operational When we plan a major project, or an more energy-effi cient technologies and and commercial challenges as regulations expansion to an existing facility, we conduct processes, and by reducing fl aring in our on water use tighten and the costs of using an environmental impact assessment. As operations. We are developing a capability water increase. Shell is taking steps to part of this we consider the potential effects in carbon capture and storage. We aim to better manage our use of water. We are on local biodiversity, and take steps to address them. Through our partnership with the International Union for Conservation of Nature (IUCN) we have developed eight action plans for major operations in areas of rich biodiversity, and we are developing plans in Iraq, Ireland, Kazakhstan, Nigeria and the UK.

Mike Bernier

Mapping ecosystems with Wetlands International in northern Russia.

WORKING WITH ENVIRONMENTAL PARTNERS Through our partnerships with leading environmental organisations we continue to fi nd Mayor of Dawson Creek City, new ways to manage environmental challenges and improve the way we develop our British Columbia, Canada projects. In 2012, Shell worked with Wetlands International on ecosystem baseline studies of the Timan-Pechora region of northern Russia, where Shell is planning a new After experiencing several years exploration project. of decreased rainfall, in addition “to increased growth of the natural gas Shell was one of several companies and organisations that commissioned an industry in north-east British Columbia, independent study through IUCN on the relationship between extractive industries and the City of Dawson Creek realised that a natural World Heritage sites. The study report proposes practical ways of strengthening new solution would need to be explored the role of the World Heritage Convention in safeguarding these special areas. to sustain our precious water resource. After the City reached out for help, Our partnership with Earthwatch enables Shell employees to work with scientists on Shell came forward and a partnership research projects around the world. This includes our support for its research and learning was formed that resulted in the City of programme in the rainforests of the Sabah region of Borneo, Malaysia. Our employees Dawson Creek reclaimed water plant, are working with scientists to understand the effects of logging and changes in land use, an innovative and successful project and the resilience of these rainforests to the potential effects of climate change. that we can all be proud of. We are now a national model of what can be With The Nature Conservancy we are working to fi nd ways to use artifi cially engineered accomplished when communities and oyster reefs as breakwaters to reduce coastal erosion in Louisiana, USA. This approach business work together with everyone’s can also protect pipelines in the area. best interests in mind.” 10 Shell Sustainability Report 2012 | reports.shell.com Our approach

in Norway, the world’s largest facility to

CLIMATE CHANGE develop and test CO2 capture technology, which opened in 2012. The Gorgon LNG The world faces the critical challenge of how to meet rising demand for project (Shell interest 25%) off the coast of the energy that powers economies, while urgently cutting the emissions of Western Australia will include the world’s

carbon dioxide (CO2) that energy use generates. Shell is taking action in four largest CCS project, once in operation areas: producing more natural gas, the cleanest-burning fossil fuel; helping around the middle of this decade. It is

to develop technologies to capture and store CO2; producing low-carbon expected to store 3 to 4 million tonnes of

biofuel; and working to improve the energy effi ciency of our operations. CO2 a year.

Biofuels

Global population will grow rapidly over today, with the focus on delivering results in Around 17% of global CO2 emissions from the next few decades, and living standards four main areas. fossil fuels come from road transport. Shell are expected to continue improving. Many believes low-carbon biofuels are one of the people in developing countries will rise out Natural gas quickest, most practical routes to reducing

of poverty. Demand for energy is expected More than one-third of CO2 emissions from CO2 emissions from the transport fuel mix in to rise by almost 80% by 2050. the energy system come from electricity the next 20 years. Through our joint venture generation, making it a priority to reduce Raízen, Shell produces low-carbon biofuel: All energy sources will be needed to meet greenhouse gas (GHG) emissions in the ethanol made from sugar cane in Brazil. This

demand in the coming years. Renewables power industry. From production through biofuel can reduce CO2 emissions by around including wind and solar power will to use in generating electricity, natural 70% compared to petrol, from cultivation continue to grow, reaching perhaps 30% gas produces around half the GHG of the sugar cane to using the ethanol as of the world’s energy mix by 2050, with emissions compared to coal. This applies fuel. We continue to work with partners to strong government support. By the same across a range of production, processing develop advanced biofuels for the future from year, fossil fuels are expected to still meet and transportation methods (see chart). non-food sources (page 28). around 65% of energy demand. With the Replacing coal with natural gas in the power

level of CO2 in the atmosphere approaching sector is the quickest, most affordable route Energy efficiency

400 parts per million, the International for many countries to achieve their CO2 Shell has long-term multibillion-dollar Energy Agency (IEA) has made clear that the reduction targets. Our production of natural programmes in place to improve the energy chances of limiting global temperature rise gas is rising: in 2012 it accounted for almost effi ciency of our operations (page 11). These to a relatively safe 2 ºC are slipping away half our production of energy resources. We include our oil and gas production projects, and that urgent steps are needed to reduce are one of the world’s largest distributors of oil refi neries and chemical plants. We also

CO2 emissions. liquefi ed natural gas. offer products and services to help customers use less energy, including advanced fuels Greater energy effi ciency will help. But if Carbon capture and storage and lubricants (page 27). the world is to avoid the effects of serious The IEA estimates that if carbon capture climate change, it needs decisive action now and storage (CCS) moves rapidly from Adaptation by governments, industry and consumers to demonstration phase to widespread use, In addition to our actions in these four areas,

at least halve global CO2 emissions in the it could reduce global CO2 emissions by we are working to understand the potential coming decades. around 20% by 2050. Shell is helping to physical impact of climate change in the advance CCS technologies in a number of future on our facilities and new projects. Putting a price on carbon projects. More government funding and a

A strong, stable price for CO2 within a strong price on CO2 emissions are needed to comprehensive policy framework is needed move forward these projects for use in wider GHG EMISSIONS FROM SOURCE TO POWER GENERATION to achieve signifi cant emissions reductions industry, as CCS projects currently generate indexed to coal in the long term. Governments should allow no revenue for companies. 100 market forces to encourage the use of all technologies to reduce CO emissions, In 2012, we began construction of our 2 80 starting with those that are least costly and Quest CCS project in Canada, which will quickest to implement. In a positive step potentially store over 1 million tonnes of 60 in 2012, Australia linked its developing CO2 a year from our oil sands operations carbon market with that of the European from around 2015 (page 26). Quest is Union. We welcomed the progress made designed to demonstrate a combination of 40 during the 2012 UN Climate Change technologies to capture, transport and store Conference in Doha, Qatar, including the CO deep underground. The knowledge it 2 20 decision to continue the Kyoto Protocol, but will provide is expected to help develop a substantial work will be needed over the wider and more cost-effective use of CCS coming years to reach a global agreement. within the energy industry and other sectors 0 Coal Traditional Tight/Shale .KSWGƂGF in the years to come. gas gas natural gas At Shell, however, we are not waiting for government policies or international Other CCS projects Shell is involved in Source: U.S. Department of Energy, National Energy coalitions to emerge. We are taking action include the Technology Centre Mongstad Technology Laboratory, October 2011 reports.shell.com | Shell Sustainability Report 2012 11 Our approach

IMPROVING ENERGY EFFICIENCY AT PERNIS REFINERY FOCUS

down heavier hydrocarbon molecules into products such as gasoil and kerosene. The technology and operational teams worked together to reduce the amount of steam used. This has delivered a reduction in energy costs of around $1.5 million a year.

We improved the system further in 2011, enabling the software to highlight areas in the process that were operating ahead of effi ciency targets. This helped encourage staff by signalling success, and also allowed them to identify areas where targets might be adjusted to further improve performance.

Stepping up the efficiency drive In 2012, management at Pernis continued to drive improvements in operational Our Pernis refi nery in Rotterdam, the Netherlands, has used performance. Daily meetings took place an innovative approach to improve energy effi ciency. between the technology and operational teams, and management focused even Our Pernis refi nery near Rotterdam in the Operators need to manage temperatures, harder on effi ciency, identifying it as Netherlands is one of the largest in the pressures and also the rates at which liquids a critical way to improve the refi nery’s world. It transforms crude oil into a range and gases are fl owing through pipes. The performance. of important products. These include petrol, challenge to improving energy effi ciency diesel, jet fuel, heating oil and lubricants, as is to keep the different parts of the refi nery The results have been signifi cant, and well as petrochemical raw materials that are working together at optimum levels. achieved without the need for major used to make essential everyday items. spending on new equipment. Since the An innovative approach introduction of the energy management Pernis operates continuously, refi ning In 2009, we introduced a new computer system in 2009, the energy savings and about 20 million tonnes of crude oil a year, software system to help improve energy fewer CO2 emissions are equivalent to equivalent to around 400,000 barrels a effi ciency at Pernis. It allowed operators to around 50,000 less cars on the road day. This means it is processing 750 litres see a visual representation of the refi nery each year. of crude oil a second. The refi nery sits at the process, with colour coding to highlight heart of a major industrial complex, which areas of ineffi ciency. This helped them focus The progress made at Pernis has led to includes a port for the delivery of crude oil in more easily on parts of the refi nery where similar work to improve energy effi ciency at large tankers, and plants to make chemical energy performance could be improved, Shell refi neries and chemical plants around products derived from oil. The whole such as those needing maintenance or the world. Today, all our refi neries use complex covers 550 hectares, equivalent adjustments to function more effi ciently. advanced software tools to help operators to 1,000 football fi elds. Its 160,000 km of tackle areas of ineffi ciency as part of our pipeline, if laid end to end, would circle the However, although the new computer system global CO2 and energy management globe four times. allowed operators to monitor performance, programme. it did not provide key information clearly Refi ning oil requires large amounts of heat, enough. In 2010, Roland Berkhoudt, a Shell is the operator of the Pernis refi nery and therefore energy. At Pernis, the energy Process Control Technologist, took the system with a 90% interest. Statoil owns the comes from natural gas. Most of it is used to the next level. In an innovative move that remaining 10%. to heat the oil directly, with the rest used won praise from senior management, he to power two plants that create steam and created an additional software tool that electricity. In recent years we have been helped our operators prioritise their work working hard at Pernis to improve energy by highlighting the fi ve largest causes of effi ciency, to cut CO2 emissions and reduce ineffi ciency at any given time. To further costs. Given the size of the refi nery, even encourage them, the enhanced system relatively small improvements can have a expressed ineffi ciencies in fi nancial terms, signifi cant impact. the amount in US dollars wasted each day.

Each refi nery has different characteristics For example, one section of the refi nery because of varying size and complexity. uses heat, pressure and catalysts to break 12 Shell Sustainability Report 2012 | reports.shell.com Our activities

OUR ACTIVITIES

We aim to produce energy resources and deliver products in the right way: with respect for people and the environment, and with safety as our fi rst priority. We are producing more natural gas, the cleanest-burning fossil fuel, and fi nding innovative ways to convert it into useful products. We operate in challenging conditions such as deep water, and our plans to develop new energy resources include exploring in the Arctic. We are producing low-carbon biofuel and helping to develop advanced biofuels for the future. reports.shell.com | Shell Sustainability Report 2012 13 Our activities

SUSTAINABLE DEVELOPMENT economies through jobs and business Xianyong IN ACTION opportunities from the outset of a project. Wu This also allows us to avoid delays to our When planning and developing new projects, so makes good business sense. projects, or expanding existing facilities, Through engaging with people during we assess the potential impact on the community meetings, and sometimes environment and consider the views of local in their homes, we learn how to help communities when we make decisions. protect their way of life. We also improve This helps us to operate in a responsible our understanding of how to protect the Assistant Director of Santai County way, delivering energy and products that local wildlife and biodiversity they may People’s Government Offi ce, contribute to the world’s economic progress. rely on for subsistence. For example, we Sichuan Province, China have rerouted pipelines and agreed not When we design a project, we use a to operate during certain periods to limit The collaboration with Shell has systematic approach that includes the disturbance to communities and wildlife. been positive since we set up the steps needed to help reduce the effects “Santai County government-community on the environment and achieve lasting We continue to build a culture where co-ordination offi ce in March 2012. benefi ts for local communities. We consider sustainable development matters to our Shell has been proactively environmental, social and health impact employees across the company. Our annual communicating with the county assessments at every review stage of the CEO awards for health, safety, security, government, and we respect the high process as we decide how, or if, we move environment and social performance international social and environmental forward with the project (see diagram). We recognise the best examples of embedding standards Shell applies. We are often make these assessments available to a sustainable approach in our activities. impressed by Shell’s rigorous the public. road-safety rules, as well as the early Developing projects in China engagement with local communities At each review stage, we also take into Our community liaison offi cers engage with before operations, including account regulatory requirements as well as communities on our plans in order to listen information about the way people the technical and commercial challenges to and address their concerns. In China, for raise grievances. One aspect I believe involved. We capture the goals we set in example, we have tight gas operations at Shell could improve is the time it can the impact assessments in a management Changbei in Shaanxi province, as well as take to address grievances. Most plan. We put this plan into practice and exploration projects in Sichuan province. grievances are dealt with swiftly, but monitor progress through the life cycle of In Sichuan, concerns we are addressing some that are more complex take the project. include noise from our operations that can longer and I’d like to see Shell speed disturb local people and livestock. these up, in order to resolve quickly Working closely with communities any possible confl icts of interest In support of this approach, we employ Staff from Shell and our partner in these between local people and the Jinqiu specialists in environmental and social projects, PetroChina, regularly meet with tight gas project, and to smooth the performance at projects and operations village leaders and work closely with progress of the project. that are particularly complex. They work their communities. Shell works with the with business managers to integrate Environmental Protection Bureau in Sichuan ” environmental, community and regulatory to measure and reduce noise levels. To build aspects of our activities, and to consider relationships, we have helped organise we invested in pumps to take some water these in technical and commercial community events and projects, including from a nearby reservoir and paid for the development plans and decisions. Following the equipping of a care home for the elderly power needed to irrigate the rice crops. the successful use of this approach in North in the Jinqiu area of Sichuan. The farmers had a good autumn harvest America, in 2012 we stepped up this and allowed us to use some of the water for programme by employing more specialists Water is a vital resource for farmers in the our operations. Building trust by working at projects around the world. region. We have designed our operations closely with the local community resulted in to avoid competing for water with local fewer delays to our operations. Working closely with communities where communities. For example, in 2012, as we operate allows us to better share the we prepared for hydraulic fracturing benefi ts of our activities and to reduce operations, nearby paddy fi elds were our environmental impact. Understanding lacking water because of low rainfall. Our and responding to community hopes and project team discussed with local village concerns allows us to help develop local leaders how we could help. As a result,

PROJECT DEVELOPMENT PROCESS – REVIEW STAGES BETWEEN EACH PHASE

IDENTIFY STUDY SELECT DESIGN CONSTRUCT OPERATE OPPORTUNITY FEASIBILITY CONCEPT PROJECT ASSETS FACILITY 14 Shell Sustainability Report 2012 | reports.shell.com Our activities

NATURAL GAS Conventional gas power stations has contributed to a fall

Most of the natural gas we produce comes in the USA’s CO2 emissions. In 2012, we The world needs more energy – and cleaner from conventional fi elds. Our projects produced around 230,000 barrels of oil energy – to power economic progress provide valuable energy resources to equivalent a day of tight gas in North while keeping the planet healthy for future countries worldwide and local employment America from four major projects. generations. Shell is producing more natural to the communities where we work. For gas, the cleanest-burning fossil fuel. example, the Corrib fi eld, off the west coast Tight gas is natural gas trapped in dense of Ireland, has the potential to meet up to rock in pores 100 times thinner than a We expect global demand for natural 60% of Ireland’s gas needs when the project human hair. It is produced with a process gas to increase by 60% by 2030, from its starts production in around 2015. Ireland called hydraulic fracturing, or fracking, 2010 level. Shell is developing a number currently imports almost all of its energy. which uses large amounts of water – mixed of long-term projects that will help meet with sand and small amounts of chemical this demand. We are also using advanced The fi nal stage of the project involves additives – injected under high pressure technologies to convert gas into other building the onshore section of the gas to crack the rock deep underground and products, such as cleaner fuels for transport. pipeline, which includes a 4.9 km tunnel release the gas into the well. Fracking has under Sruwaddacon Bay, an area of been used for many decades. Its increased The tight gas revolution in North America outstanding natural beauty. Tunnelling use in recent years has led to concerns and developments in other regions have work started at the end of 2012, following among some communities about potential transformed the global energy picture. There agreement on the pipeline route with our air and water impacts, and earth tremors. are around 250 years’ worth of natural neighbours and local planning authorities. gas resources available for development Shell uses advanced, proven technologies at today’s rate of consumption. That Completing the Corrib project will and practices to make fracking safe. We signifi cantly increases the potential to sustain nearly 1,500 full-time jobs during have adopted a set of fi ve global operating power economies with the cleanest and construction. Once in production, around principles for our onshore tight oil and most affordable fossil fuel. A natural gas- 175 full-time jobs will be maintained during gas activities. The principles focus on fi red power plant produces around half the the lifespan of the fi eld in an area where safety, environmental safeguards, and carbon-dioxide emissions of a coal-fi red little signifi cant industrial or commercial engagement with nearby communities to plant. It also costs less than half as much employment previously existed. address concerns and help develop local to build. It can be fi red up or stood down economies (see opinion, opposite page). quickly, making it ideal to complement Tight gas We consider each project separately – from intermittent renewable sources, such as Shell produces tight and shale gas at a the geology to the surrounding environment wind or solar energy, to maintain a steady number of projects in the USA, Canada and and communities – and design our activities fl ow of electricity. China, and has started to explore for tight using the latest technology and innovative gas in Ukraine. The abundance of natural approaches best suited to local conditions. Shell is working to reduce the impact of gas in North America today has reduced tight gas production by applying some gas and electricity prices in the region, In 2012, we worked towards making of the world’s most stringent safety and with lower energy costs boosting industry sure that our onshore operations are environmental standards. We are also against competitors in other parts of the consistent with these principles across encouraging government and industry to world. It has also benefi ted the environment: the world. We assessed our projects to adopt better practices. replacing coal with cheaper gas in many identify any gaps and began work to bring

WORKING WITH OUR NEIGHBOURS AT companies, local police and state agencies, we are working to EAGLE FORD raise awareness of road safety and increase support for broader The arid ranching region of southern Texas, USA, was one of safety improvements to public roads. Shell has also funded the poorest parts of the country when energy companies arrived training and equipment for emergency services. In schools, to develop the Eagle Ford shale fi elds. Many of the small rural we are sponsoring programmes to help teachers explain the towns – some with just a church, a post offi ce and a handful of energy industry to students. In 2012, we worked with a regional businesses – welcomed the economic benefi ts. New businesses non-profi t organisation to establish a new after-school facility in sprang up and school numbers swelled as workers and their Eagle Pass. We also helped to set up a family literacy scheme due families arrived. to start in 2013.

When Shell leased 250,000 acres to drill for natural gas near the We are looking at ways to help build sustainable community border between the USA and Mexico, we also set out to help local development. For example, in 2012 we worked with a local communities share the benefi ts of our operations. We applied university to develop two programmes that will start in 2013. our global approach, developed from lessons learned at projects One will provide training and resources to help civic leaders around the world. manage the sudden growth and infl ux of revenue, while planning for the long-term benefi t of their communities. The other will help To improve road safety as industry traffi c increases in the area, local businesses manage the change, including those that are not we have improved access to and from our operations. With other Shell suppliers. reports.shell.com | Shell Sustainability Report 2012 15 Our activities

year – a reduction of over 85% in distances covered by truck and associated vehicle emissions. Shell has also applied advanced technologies to reduce polluting emissions from drilling rig engines and other sources.

We drill multiple wells from a single site to minimise our footprint on the land. In , Canada, we use digital maps of environmental data, with rich ecological detail supplied by local people when we identify land for potential projects. This helps us avoid sensitive areas, such as caribou migration pathways.

Shell operates major tight gas projects in China in partnership with PetroChina (page 13), and we are planning to explore for Staff working at the Changbei tight gas project, Shaanxi province, China. shale gas in South Africa’s Karoo region. Gas could be essential both in meeting them into alignment with our principles. Protecting groundwater is another priority growing energy demand in South Africa and We also continued to seek comment on for Shell in producing tight gas. We publicly by providing a cleaner alternative to coal, our principles from non-governmental disclose the chemicals we use in fracking which currently supplies more than 70% of organisations. operations to the extent allowed by our the country’s energy demand. suppliers, even where it is not locally Shell advocates regulations consistent required. We support state legislation In Australia, the Arrow joint venture (Shell with these principles that are designed to requiring the release of this information. interest 50%) produces natural gas from reduce risks to the environment and keep coal seams. those living near operations safe. In 2012, Shell works with local authorities to secure the International Energy Agency (IEA) enough water for our operations in ways published similar recommendations. Many that minimise impact on communities and Jim US industry organisations, shareholder the environment. For example, we reached Weaver coalitions and government bodies also agreement with communities in the state of proposed or adopted fracking guidelines in New York to supply up to 5.3 million litres 2012, building on progress in this area in of water a day to our Tioga County tight previous years. We support and encourage gas operations in Pennsylvania, USA. The efforts to adopt stronger standards. We water will be transported by rail rather than also support the strong enforcement of road, minimising noise, truck traffi c and existing regulations. vehicle emissions. Tioga County Planner, Wellsboro, Pennsylvania, USA Concerns have been raised about leaks of We work to reduce the need for fresh methane, a greenhouse gas (GHG) around water in our operations, for instance by I have the opportunity to work

20 times more potent than CO2, from tight recycling. Our approach at Groundbirch with representatives of Shell gas production. The IEA has found that in Canada is one example (page 9). At our “in the Appalachian region on a GHG emissions from tight gas operations Marcellus project in the Appalachian region number of fronts – including land slightly exceed those of conventional gas. of the USA, Shell transfers water from one development reviews, assisting the GHG emissions from gas-fi red power operation to another for recycling. In the Tioga County Board of Commissioners stations – whether from conventional or Eagle Ford shale fi eld of southern Texas, with information gathering and tight gas sources – are around half of we set up a water recycling pilot project working with non-profi ts on community those from coal across the lifecycle from within the fi rst year of operations (see development issues. Across all these production to use. Shell has joined with box, opposite page). We are transferring sectors, Shell personnel have been the Environmental Defense Fund and eight technologies and what we learn from our responsive, willing to provide detailed other energy companies in a University experiences to other parts of the world. information and adaptable to the of Texas study that is assessing fugitive rapidly changing conditions in our emissions of methane at gas production We are reducing truck traffi c wherever community. Shell is interested in raising sites to provide objective scientifi c data possible, which improves safety and cuts the bar for performance of all operators and to identify operational best practices. vehicle emissions. At our Pinedale and so far they have exceeded our At Shell, we use proven technologies to operations, for example, we collect all of expectations. The challenge now reduce these emissions. For example, at the water produced with gas from our wells is continued implementation and our Pinedale operations in Wyoming, USA, and pipe it to a central facility for disposal. improvement of the approach Shell is infrared cameras detect any small methane This eliminates an estimated 165,000 truck following. leaks so we can quickly address them. trips and 2 million litres of diesel fuel use a ” 16 Shell Sustainability Report 2012 | reports.shell.com Our activities

Shell’s Gemmata LNG vessel ships natural gas to customers around the world.

Liquefied natural gas FLNG allows access to offshore gas fi elds early 2013, we announced plans to build Shell pioneered liquefi ed natural gas (LNG) that would otherwise be too costly or diffi cult two more small-scale plants to produce LNG more than four decades ago as a way to to develop. Our facility will enable the for road transport in the US Great Lakes and transport natural gas from remote areas to development of the remote Prelude gas fi eld Gulf Coast regions. We have further plans distant markets. Cooling the gas to -162 ºC off the coast of Western Australia. When to provide LNG to power marine transport in turns it into liquid and shrinks its volume by built it will be the largest offshore fl oating the Gulf of Mexico in the future. 600 times, allowing us to ship it around the facility in the world, stretching the length world. At its destination, the LNG is turned of four football fi elds. The project will use back into gas for our customers. Today, we signifi cantly less material, take up less land The world’s largest gas-to-liquids (GTL) plant, are one of the largest LNG suppliers, with and disturb a smaller area of seabed than an our Pearl project in Qatar, can produce facilities worldwide. With the abundance of onshore facility. FLNG avoids the need for 140,000 barrels of oil equivalent (boe) a natural gas in North America, the industry is shoreline pipe crossings, dredging and jetty day of synthetic oil products. The plant can exploring new opportunities to export LNG works, so developing the gas at the location also produce 120,000 boe a day of natural to countries where it is needed. of the gas fi eld offshore will reduce impact gas liquids and ethane for industrial use. The on coastal habitats. plant uses heat from the processes to convert The Gorgon LNG project (Shell interest 25%) water into steam that drives its compressors is under construction on Barrow Island, LNG in transport and generates electricity. It also has the around 50 km off the north-west coast of LNG has been used as a fuel for LNG ocean largest water-recycling system of its kind Western Australia. The Greater Gorgon tankers for several decades, but it is now that reuses water in steam production and fi elds are the largest gas discoveries in emerging as a cleaner fuel for other forms cooling. It can process 45,000 cubic metres Australia to date and are expected to be in of shipping and for road transport. Shell is of water a day, without discharging liquids production for over 40 years. The project developing an LNG-for-shipping business. In from the plant. will include the world’s largest operation to 2012, we acquired Gasnor, a Norwegian

capture CO2 produced with natural gas and fi rm that supplies LNG as a fuel to shipping Wind power store it safely underground. It is expected companies and industrial customers. We Wind remains an important part of the to capture and store 3 to 4 million tonnes also chartered the fi rst two LNG-powered current and future global energy mix. Shell

of CO2 a year, over 2 km beneath Barrow barges for carrying goods on Europe’s has been developing wind power for more Island. inland waterways, which started operations than a decade and is involved in 10 wind in early 2013. projects in North America and Europe. Our Floating LNG share of the energy capacity from these Shell is developing an innovative approach In 2012, we began constructing a small- projects is 507 megawatts. Most of this to producing more natural gas from remote scale production plant at the Jumping Pound comes from around 720 turbines at eight offshore locations. Our giant fl oating complex in Alberta, Canada, to produce wind projects in the USA. We are also liquefi ed natural gas (FLNG) facility, under LNG for transport fuel. This will be sold at assessing other potential projects, all in construction in South Korea, will combine truck stops along a busy route in northern North America. production, processing and storage capacity Alberta, Canada. The fi rst station opened without the need to build an onshore plant or in early 2013. Until our plant is completed, lay a pipeline on the sea fl oor. other suppliers will deliver the fuel. Also in reports.shell.com | Shell Sustainability Report 2012 17 Our activities

JOINT VENTURES, CONTRACTORS we spent over $65 billion on goods and with the supplier to support this through AND SUPPLIERS services. Shell works with contractors and training and the development of local suppliers who comply with applicable facilities. Another joint venture, Brunei LNG Contractors and suppliers play an important laws and regulations, and behave towards (Shell interest 25%), has helped to develop role in Shell’s activities. In 2012, around employees, local communities and the local seafaring skills. In Nigeria, the Shell 400,000 contractor staff worked for Shell. environment in line with the Shell General Petroleum Development Company (SPDC) Contractors often employ a large number Business Principles and Code of Conduct. agreed with six international suppliers of workers, particularly in the construction in 2012 to develop local operations to phase of projects. This creates local Our Supplier Principles provide a mandatory manufacture equipment for oil production. opportunities for jobs and developing set of requirements for all suppliers and In the Middle East we signed new contracts skills. The increased demand for goods and contractors. We assess suppliers who want with international suppliers to set up local services also helps build local businesses. to do business with Shell based on the level facilities for making chemicals used in the However, this can also bring challenges of potential risk, especially in the areas production of oil. such as pressure on local facilities, increased of anti-bribery and corruption, human traffi c and higher living costs. We identify rights, safety and the environment. We In early 2013, we joined a UN Development such potential impacts and put measures in also work with suppliers to help them meet Programme initiative to create jobs and place to minimise them. our standards in these areas. In 2012, we build skills in Somalia. The collaboration conducted assessments of our suppliers and between Shell, BP and several shipping Joint ventures contractors on their level of compliance with companies is aimed at helping to rebuild Shell often works in joint ventures with the principles (page 34). Somalia’s economy with the long-term national and international energy goal of reducing the risk of piracy in the companies. When we operate the venture Building local opportunities Indian Ocean. we apply the Shell Control Framework, Shell works to share the benefi ts of our which includes the Shell General Business activities by creating jobs and helping local Principles, Code of Conduct and our economies to develop. During the design of Joe standards in areas such as health, a project we consider how we can increase Udofi a safety, security, environment and social the use of local suppliers. We also train performance. Where we are not the local companies so that they can tender operator, we encourage our partners to for contracts, and build skills to develop apply materially equivalent standards. sustainable businesses for the long term (see opinion). Working with our suppliers Shell buys large amounts of goods and For example, one international supplier Managing Director/CEO, Vandrezzer services from around 120,000 suppliers has agreed to provide locally some of Energy Services Limited, Lagos, Nigeria across the world. We are working to make the equipment and services needed for sure these suppliers and our contractors operations off the coast of Brunei, with Vandrezzer has been a direct operate in environmentally and socially eventually 90% of staff employed being benefi ciary of Shell Petroleum responsible ways. We place about local. The joint venture Brunei Shell “Development Company’s strategy to 1 million purchase orders a year. In 2012, Petroleum (Shell interest 50%) is working promote the use of Nigerian service companies in production operations,

Staff working together on a drilling rig off the coast of Qatar. projects and well engineering. We were invited to attend a Shell-supported UK trade initiative forum in London soon after becoming a contractor to SPDC in 2008, and I was able to make a speech. We have attended subsequent forums in Aberdeen, Abuja and London. This exposure has not only served to redefi ne our business concept, but paved the way for the formation of strategic alliances and relationships that have helped us grow and attain a size and standard that enables us to handle turnkey projects in the oil and gas industry. I am grateful to SPDC for the opportunity. The baby Shell nurtured has matured into an indigenous company, with fully developed construction capabilities, which is able to supply a wide range of services for the industry.” 18 Shell Sustainability Report 2012 | reports.shell.com Our activities

DEEP WATER RECOVERING MORE OIL FROM DEVELOPED FIELDS Only around a third of the oil in a fi eld, on average, can be recovered economically using conventional methods. One way to help meet increasing energy demand is to boost oil recovery with the aid of steam, gas or detergent-like chemicals. Enhanced oil recovery (EOR) usually raises the amount of oil recovered by 5 to 20%, and in some cases by signifi cantly more.

Working with partners, Shell applies EOR techniques in projects around the world. In 2012, we signed agreements for potential chemical EOR projects in offshore fi elds with Petronas, the The hull of the new platform for the Mars B project being moved to the Gulf of Mexico, USA. Malaysian national oil company. Petroleum Development Oman (PDO, Shell is a pioneer in developing energy USA Shell interest 34%) operates several resources in deep waters. We introduced Shell has been operating in the Gulf of EOR projects. Some rely on steam to many of the advanced technologies, Mexico (GoM) for more than 30 years. As heat the oil. PDO is fi nding energy- processes and safety procedures in use fi elds age, new wells need to be drilled effi cient ways of boiling water to by the industry today. In 2012, Shell’s and older facilities upgraded to maintain produce this steam. At Qarn Alam it is share of global deep-water production was effi cient production. Shell is continually capturing waste heat from neighbouring 330,000 barrels of oil equivalent (boe) a searching for ways to do this with reduced power plants. At Amal it plans to use day. We continued to reach into ever- impact on the environment. mirrors to capture energy from the deeper, more challenging environments desert sun. off the shores of Malaysia, the USA, For example, advanced technology has Brazil, Nigeria and French Guyana. We allowed us to extend the lifespan of the Advanced technology also helps us to also worked to develop these resources Mars fi eld, one of Shell’s most productive manage our resources more effi ciently. responsibly by reducing our impact on the projects since it started operations in 1996. Our Smart Fields® technologies allow environment and being a good neighbour The Mars B project (Shell interest 72.5%) is engineers to monitor and control to the coastal communities closest to our the fi rst major redevelopment of an existing production remotely using a network of operations. project in the region and will include a new sensors, valves and other instruments. platform to deliver oil and gas to shore from Malaysia depths of around 1,000 metres. The Gumusut-Kakap project (Shell interest 33%), located around 120 km off the In developing the Cardamom Deep The SWRP intervention system is designed coast of Sabah and set in water more than reservoir, which Shell discovered in 2010 to be adaptable to various situations and 1,200 metres deep, began producing in with advanced seismic technology, we locations. During 2013, the equipment will late 2012. The start of production was will minimise our environmental impact be moved to bases in four locations around made possible by the innovative approach by using the nearby Auger platform. We the world to improve speed of deployment. of connecting the project’s wells to the are installing underwater equipment and nearby Kikeh production facility. To avoid pipelines to deliver Cardamom production to Shell has also joined with other companies fl aring and to help us recover more of the Auger, expected to be 50,000 boe a day. that operate in the GoM to form the Marine resources, the gas produced with the Containment Company (MWCC). is being injected back into the reservoir to Operating safely With over $1 billion of funding, the maintain pressure. The Subsea Well Response Project 10 member companies have set up a (SWRP), a consortium founded by nine rapid-response system that is designed to Gumusut-Kakap is a major project for leading companies, has designed and cap and shut in the well, or capture and Malaysia. It is seen as a catalyst in bringing built a comprehensive capping system contain the oil, in the event of a future signifi cant foreign investment and transfer for use at depths of up to 3,000 metres. underwater well blowout in the GoM. In of technology to the country, while helping The project was set up, with Shell as the 2012, MWCC lowered a seven-metre tall to build Malaysia’s self-suffi ciency. Shell operator, to make vital equipment ready capping stack more than 2,000 metres onto is playing a key role in developing a for deployment worldwide following the a well to demonstrate its capability. Shell deep-water service industry in Malaysia BP Deepwater Horizon tragedy in the volunteered to perform the drill, working through our technology and expertise, GoM in 2010. It seeks to improve drilling closely with federal regulators, including in support of the government’s economic safety and to minimise environmental the US Coast Guard and the US Bureau of transformation programme. impact in the event of a serious incident. Safety and Environmental Enforcement. reports.shell.com | Shell Sustainability Report 2012 19 Our activities

WORKING WITH COMMUNITIES IN THE PHILIPPINES FOCUS

of those who developed new skills through a Shell training course. He is now also a carpenter and repairs houses and boats for additional income. “Instead of simply relying on fi shing, these new skills have opened up livelihood opportunities for us,” he said. Another fi sherman, Esteridio Gonzaga, has been able to create a small business: ”I learned how to cultivate and export sea cucumbers,” he said.

Learning from experience In the early days, we made some mistakes. For example, initially we failed to understand the Palawan community’s concerns over malaria. We believed people wanted schools and hospitals. But we learned that what the community Esteridio Gonzaga shows some of his sea cucumber harvest in Palawan, the Philippines. wanted most of all was to eliminate malaria in the villages. This led to the launch of a The Shell-operated Malampaya deep-water Listening to our neighbours successful anti-malaria programme, which project signalled the beginning of the Before we built the pipeline, many local has now been replicated in four more natural gas industry in the Philippines when people expressed fears that it would harm provinces and has signifi cantly reduced it started operations in 2001. It continues to the environment, create health and safety deaths from malaria. produce cleaner, safe and reliable energy problems, or cause economic hardship. to meet rising demand in the country. Local fi shermen who would be unable to Today, training programmes to develop The natural gas it supplies for electricity work near the drilling area complained skills are helping to equip local people to generation powers nearly half of the about losing their livelihoods. In Mindoro, work on the latest phase of the Malampaya homes, cities and industries of Luzon, the with its rich biodiversity, there were some project, which will create more than 1,000 Philippines’ largest island and the site of the protests. Other residents were concerned jobs during construction. capital, Manila. The project helps reduce that they would receive no direct benefi ts if the country’s dependence on imported fuel the pipeline did not pass through Mindoro. Shell’s approach to working with and provides billions of dollars in revenue The indigenous Tagbanua tribe were communities in the Philippines has attracted for the government. worried that our pipeline route would cross praise. A paper published in 2007 by the sacred ancestral waters where they had World Resources Institute in Washington The Malampaya pipeline, one of the buried their dead. DC said: “The Malampaya project world’s longest, begins off the coast of illustrates how a potentially controversial, Palawan Island and runs for over 500 km, We held public meetings to listen to high-impact infrastructure project can passing the island of Mindoro. It ends at a and develop plans to address these and avoid costly community opposition through processing plant in Batangas province on other concerns. In Mindoro we provided ongoing efforts to secure and maintain Luzon, where the gas is used to generate extensive information about our project on community consent throughout the project electricity at three power plants. radio and in an exhibition. We rerouted cycle.” our pipeline around Mindoro to conserve its Production has started to decline, however, biodiversity, and we made sure it avoided At the Asian Institute of Management in the as the fi eld ages. To remedy this we plan Tagbanua ancestral waters. We also Philippines, Professor Jacinto Gavino uses to drill more wells and install compressors provided funds to a micro-fi nance scheme the project as a case study in the classroom. on a new platform that will boost the fl ow to help local people start businesses and to “We focus on the process of collaborative of gas and extend the life of the fi eld. As support livelihoods. engagement with stakeholders,” he said. we developed our plans in 2012, we continued to work closely with the diverse We worked to address concerns over Malampaya is held up to Shell employees communities who live on the islands in unemployment. But we found a shortage as an example of how we can build the region. They include coastal villages of people with vital construction skills, such community trust and goodwill, and serves inhabited mostly by fi shermen, some of as welding. Over time, we have helped as a guide for future projects elsewhere. whom belong to indigenous tribes. Our build job skills and business expertise approach draws on the lessons we have among local people through a number of Shell has a 45% interest in Malampaya. learned in the many years we have been training programmes. Edgardo Artizuela, Partners are Chevron (45%) and the operating Malampaya. a fi sherman in northern Palawan, is one Philippines National Oil Company (10%). 20 Shell Sustainability Report 2012 | reports.shell.com Our activities

THE ARCTIC INTERVIEW

improve our operations in the future. We Shell says it has unprecedented have fully participated in and supported plans in place to deal with an oil the US Coast Guard investigation into spill, including a large offshore the causes of the incident. This was a fl eet to respond in case of an marine transit issue that occurred after incident. But are your plans robust completion of our exploration programme enough to reassure the public? and well outside our theatre of operations. Shell’s oil-spill response plans are very It did not involve drilling operations. We robust and have been approved by the worked with the Coast Guard to bring the US Federal Government Agencies, with incident to a safe conclusion. There were input from Alaska state agencies. Shell has no signifi cant injuries and there was no indeed invested in an unprecedented oil spill Q&A with Marvin Odum, environmental damage. response plan in Alaska. No other company Upstream Americas Director has ever deployed the immediate, onsite Even before the Kulluk incident, response resources that we have. Shell has Shell’s Alaska exploration incorporated lessons from the BP Deepwater programme had suffered Horizon tragedy into its response plans. During 2012, we made progress with several operational setbacks in It is very important, however, for people our long-term plans to explore for energy 2012. What did Shell learn from to realise that drilling wells in the shallow resources off the coast of Alaska, although these events? waters off Alaska, where reservoirs are at we were not able to complete as much Our goal is always to have fl awless relatively low pressure, is very different from drilling as we had expected. operations and some of the events we working in the deep-water Gulf of Mexico. experienced in 2012 fell far short of our For an energy company the Arctic expectations. That is not acceptable. Some people think the risks of poses many challenges. It’s an However, we showed again that we are drilling for oil in the Arctic are too expensive and diffi cult place to well prepared to do this kind of work. One high. Can you credibly argue that operate. Many people feel that reason for not getting as much done as we the industry can manage the risks of it should be left alone. Why does had hoped was our determination to get operating in Arctic waters? Shell want to explore off the coast things right and to work so closely with Yes we can. We must not forget that the of Alaska? regulators at every stage. The people and industry has been conducting safe operations The world’s population is increasing, most of the equipment we put in place, in the Arctic for decades – proof that the living standards are rising and economies in fact, performed very well. As with any industry can manage the risks. Effective risk need energy to grow. Yet in many regions, major project, you identify some effi ciencies management is about improving safety by easy-to-access energy resources are and better ways of doing things. All aspects analysing what could go wrong, minimising scarce. To meet growing demand we of our operations are subjected to close the possibility of it occurring, and reducing need a mix of strategies, and we must internal and external scrutiny, which leads the potential consequences. At Shell we develop all forms of energy, traditional to learning and improvement. We are have embedded this approach within our and renewable. To make up for the decline always working to improve our operational management system, and work continuously in conventional oil and gas resources, we performance. to enhance safety. Safe well operations have to develop resources in new, more demand highly competent people, strict challenging locations. The nations of the Do you view the attention safety procedures, and rigorous design, Arctic have taken the decision to open of Greenpeace and other construction and maintenance standards up the region for offshore development environmental organisations for all equipment. Our number one priority and trust companies such as Shell to do merely as a distraction, or should is safety. Our entire approach to offshore it responsibly. Shell be considering some of their drilling is based on preventing any incident arguments? that could lead to marine pollution and this In late 2012, the Kulluk drilling While at times diffi cult, the intense means operating at the highest standards, ship ran aground while it was scrutiny from every quarter is to with an intense focus and commitment to under tow. How could this be expected. We listen carefully to safety and the environment. happen? comments from all angles, including We undertake signifi cant planning and environmental NGOs. Close scrutiny What has Shell done to engage preparation in an effort to ensure these of our industry helps raise broader effectively with local communities types of incidents do not occur. So I’m public awareness of the energy and in Alaska? Do they support your very sorry and disappointed that this environmental dilemmas the world plans for exploration and potential happened, and we take it very seriously. faces. It can help shape government development? Certainly we will identify and understand policies for the better, and it can help We have worked hard to earn the trust the “how” and “why” of all aspects of the raise operational standards across the and respect of the people who live in the incident, and use the lessons learned to board. areas where we plan to operate. It’s critical reports.shell.com | Shell Sustainability Report 2012 21 Our activities

to work effectively with communities, governments, regulators, industry partners and non-governmental organisations to establish high standards and address any concerns about our operations. It’s vital to establish shared views and standard practices both in the way that we approach environmental and social challenges, and in the way we use science as a basis for decision-making. We held more than 450 meetings with people in the communities of Alaska’s North Slope and others who had an interest in our plans. This early and effective engagement, ensuring greater public involvement, has been a hallmark of our approach to operations in Alaska. Of course, not everyone supports the project, but we have come a long way in establishing trust and understanding. We have demonstrated signifi cant involvement of local communities in our decision- A specially trained team from the local area assist in an Arctic oil-spill response drill, Alaska, USA. making. We have also developed capacity and skills that can be readily transferable. Alaska’s North Slope to ensure that we did and people. We are reviewing our Providing jobs and skills for workforce not put a strain on the limited local housing future plans, and we continue to work development has been something that the market. We also brought our own medical closely with the US Coast Guard and people of the region have supported. personnel. Our presence can help local US Department of the Interior. We have services. For example, our helicopters were conducted an internal review of the Do you feel that Shell can provide available to help with local search and events of 2012, as part of our normal suffi cient benefi ts to local people rescue efforts. One of Shell’s core values is business preparations, to learn from our from the development of energy respect for people. We want our presence experiences and improve our plans. Shell, resources off Alaska? For example, in a community to result in tangible benefi ts working closely with US regulators, will how do you plan to help local for local residents. Creating jobs and continue to build an Alaska exploration residents acquire the skills contracts that can build local economies is programme that instils confi dence in necessary for the jobs you will one way we do this. Another is to invest in all concerned, and that meets the high offer? areas such as education, health facilities standards the company applies to its Shell is determined to make sure that we and cultural activities. We work very operations around the world. share the benefi ts of our activities in the closely with the communities themselves to Arctic waters off Alaska with the people identify their needs and preferences. who live near to them in the north of the Charlotte state. We direct a large proportion of our What can Shell do to reassure Brower contracting work to local native fi rms. In people about development in the turn, the benefi ts of these contracts feed Arctic? through to local residents in the form of The continuous focus on safety and incident shareholder dividends from local co- prevention that Shell demonstrates is operatives. Shell follows a workforce essential. It is the responsibility of industry, development strategy that includes support the governments and people of the region, for internships, vocational education, and and other key stakeholders to make sure Mayor of North Slope Borough, funding the regional community college in development is carried out in a sustainable Alaska, USA Barrow. and transparent way. Industry and governments working together need to set The North Slope Borough Shell’s presence in small coastal and meet rigorous safety and environmental was encouraged by the communities could overload operating standards to ensure responsible “responsible and measured approach the limited infrastructure that development. undertaken by Shell during the 2012 currently exists for housing, drilling season in Arctic Alaska. hospitals, water and transport. What are Shell’s plans for future Most importantly, Shell’s willingness What are Shell’s plans to make exploration off Alaska? to refrain from drilling during the sure that local communities are not Our Alaska exploration plans are a fall subsistence bowhead whale overwhelmed? multi-year programme. In February hunt by Inupiat Eskimos testifi es to We are very aware of this potential impact 2013, we decided not to pursue drilling Shell’s commitment to work with our and have taken steps to reduce it. In 2012, operations off Alaska in the summer of subsistence whalers and communities we provided a 75-bed accommodation 2013. This decision will give us time to across the North Slope of Alaska. block for our employees in Barrow on ensure the readiness of all our equipment ” 22 Shell Sustainability Report 2012 | reports.shell.com Our activities

NIGERIA OPEN LETTER

This year I want to focus on just one topic: time and resources to tackle the environmental consequences. It can the massive and growing problem of also place our staff in danger. Two contractors working for SPDC oil theft and illegal refi ning in the Niger were tragically killed in 2012 in an armed attack while assessing Delta. These activities are not new, so the remediation of an oil-spill site. why single them out now? Because the scale of these activities has reached Where possible, we are taking steps to make it more diffi cult for the unprecedented levels. In 2009, the UN thieves to tap into and steal oil from our pipelines. But preventing estimated that thieves were stealing theft still depends on the prompt response of government security An open letter from around 150,000 barrels of crude oil a agencies. Over the last year, SPDC has shut down production on a Mutiu Sunmonu, day from pipelines in the Niger Delta. number of occasions to make repairs to damaged pipelines. But no Chairman of Shell In 2012, the Nigerian government said sooner do we work on one area, than the thieves shift their focus Companies in it believed that a signifi cantly greater elsewhere. Nigeria amount of oil was being stolen each day. This is costing the nation many billions of Stemming and reversing this menace requires co-ordinated dollars a year in lost revenue. action, both at the national and local level inside Nigeria, and at a regional and international level outside Nigeria. We urgently It may never be possible to assess the exact fi gures, but it’s clear need more assistance from the Nigerian government and its that a well fi nanced and highly organised criminal enterprise security forces, other governments and other organisations. Better exists on a phenomenal scale – a parallel industry with a supply security, collection of evidence and law enforcement are required chain to export crude oil overseas that includes loading and on the ground; as well as international action to trace, track and shipping operations. Most of the stolen oil ends up in ocean-going apprehend the international networks trading in stolen crude. tankers that transport it to refi neries in other parts of West Africa, Europe and beyond. Those involved – both in Nigeria and outside The government’s security forces have stepped up their efforts, – mastermind this multibillion-dollar business using infl uence, but they need more dedicated resources and logistical support corruption and violence to protect their interests. to combat oil theft now that it has assumed such an international dimension. Greater efforts are required to boost economic There are also small-scale, makeshift refi neries producing low-grade development in the Delta to provide alternative livelihoods for fuel for local use. These primitive operations cannot use the heavier those involved. And Nigeria needs to do more to encourage parts of the crude, which is dumped, destroying the mangroves and investment in the power sector to ensure reliable electricity riverside areas where these activities take place. supplies to reduce demand for illegally refi ned local diesel.

It’s also impossible to know how much of the stolen oil is spilled SPDC has made great efforts to raise awareness of the issue with the once it is taken from SPDC facilities. But we can estimate that government of Nigeria, international bodies like the UN, with civil 26,000 barrels of oil were spilled in the area immediately society and with the media. Tackling oil theft and its causes is in the surrounding our pipelines and other facilities in 2012, of which interests of the industry, the government, the environment and – most around 95% was the result of sabotage and oil theft. Over the last importantly – the people of the Niger Delta. We will continue to be three years, we estimate that these criminal acts accounted for at the forefront of discussions to fi nd lasting solutions. around 85% of the volume of oil spilled from SPDC facilities. The scale of the problem puts enormous strain on our staff, diverting Mutiu Sunmonu

SHELL’S ECONOMIC CONTRIBUTION Nigerian government in 2012 (SPDC $3.4 billion, SNEPCo The Shell Petroleum Development Company of Nigeria Ltd (SPDC) $1.8 billion). is the operator of a joint venture between the government-owned .95%: Share of revenue after costs that goes to the Nigerian Nigerian National Petroleum Corporation (NNPC, 55%), Shell government from each barrel of oil SPDC produces. (30%), Total (10%) and Agip (5%). Exploration & .$2.4 billion: value of SPDC and SNEPCo contracts awarded to Production Company (SNEPCo, 100% Shell-owned) operates and Nigerian companies in 2012. has a 55% interest in the offshore Bonga fi eld, Nigeria’s fi rst deep- .4,000/30,000: estimated direct and indirect jobs created by water project. Shell also has a 26% interest in Nigeria Liquefi ed SPDC and SNEPCo in Nigeria. Natural Gas (NLNG), which exports LNG around the world. .Over 90%: proportion of employees who are Nigerian. .$178.3 million: SPDC and SNEPCo funds to the Niger Delta .$42 billion: revenues from SPDC to Nigerian government from Development Commission in 2012 (Shell share $68.2 million). 2008 to 2012. .$103.2 million: 2012 contribution from SPDC and SNEPCo to .$5.2 billion: Shell share of royalties and taxes paid to the community development projects (Shell share $31.4 million). reports.shell.com | Shell Sustainability Report 2012 23 Our activities

Illegal makeshift refi neries contribute to environmental damage in parts of the Niger Delta.

Operations in 2012 over 50% from the previous year. The number For SPDC operations in Nigeria, 2012 was of operational spills also improved, falling to Dr Uzo a year of contrasts. Oil theft, a long-term 36 in 2012, a decrease of over 40%. There Egbuche problem, escalated (see letter, opposite were 137 spills caused by sabotage and page). As a result, production was around theft in the area immediately surrounding 20% below capacity in SPDC onshore SPDC pipelines and other facilities in 2012, facilities due to pipeline shutdowns resulting totalling 3.3 thousand tonnes. Operational from crude oil theft. Yet signifi cant progress spills accounted for around 5% of the total was made. Improved security – helped by volume spilled from SPDC facilities in 2012. the government amnesty for militants – and Of 316 sites in need of remediation at the Chair of the IUCN Independent stable co-funding from its partners enabled start of 2012, SPDC had cleaned almost Advisory Panel on Remediation and SPDC to continue its multi-year programme 80% by the end of the year. Rehabilitation of Biodiversity and to install new gas-gathering facilities and Habitats of Oil Spill Sites, Niger Delta, repair existing ones damaged by militants. SPDC’s goal is to have no operational Nigeria As a result, SPDC’s fl aring fell in 2012 by spills. It continues to focus on reducing around 25% from the previous year, while spills further and responding to them more In interacting with SPDC, I production fell by 8%. effectively. In the past three years, SPDC have observed a keen desire has replaced almost 500 km of pipeline, “to see change. However, there are SPDC’s fl aring intensity – hydrocarbons and work continues to replace further challenges. The key to success is fl ared per tonne of production – fell by pipelines. In 2012, SPDC began working strengthening the oil-spill remediation around 20% in 2012 compared to the with Bureau Veritas, an international strategy so that it will ensure the previous year, to the lowest level SPDC verifi cation organisation that is contracted affected sites are not only cleaned has recorded. In 2012, SPDC announced to independently review SPDC oil-spill up and clean drinking water sources planned additional investments of around management practices. At SPDC’s invitation, restored, but that biodiversity – $4 billion on projects to develop new oil the International Union for Conservation of such as fi sh, crabs, and shrimp on and gas fi elds that will include gas-gathering Nature (IUCN) also set up an independent which communities depend and facilities. These facilities will also help reduce scientifi c panel to advise the company on its the mangroves where these species fl aring further by processing gas from other spill clean-up and remediation practices, and breed – thrives again. The IUCN- SPDC fi elds that is currently fl ared. Once to recommend possible improvements. Niger Delta Panel will endeavour to these projects are completed, SPDC’s fl aring provide practical recommendations intensity is expected to be below the current SPDC continued its drive to help more that will improve this situation. The global industry average. Nigerian companies play a key role in its Panel hopes that SPDC will support supply chain – boosting the economic impact these recommendations and make the The volume of operational spills onshore from of its business operations at national, local necessary changes that will have a SPDC facilities improved again in 2012, and community levels. Thanks to these efforts, positive impact in the fi eld. falling to 0.2 thousand tonnes, a drop of SCC Nigeria Ltd manufactured the country’s ” 24 Shell Sustainability Report 2012 | reports.shell.com Our activities

fi rst carbon steel pipes under a $37 million the year. The Global Memorandum of withdrew in 1993 following many years of contract with SPDC for use in construction of Understanding (GMoU) model enables attacks on staff and facilities. The setting the Trans Niger Pipeline. SPDC helped train communities to manage funds provided by up of HYPREP is an essential fi rst step, contractor staff and build their skills to deliver SPDC and its joint-venture partners, and which SPDC has welcomed and pledged the pipes. Building Nigeria’s domestic implement the projects they themselves to support. While awaiting government capacity to produce carbon steel pipes helps decide upon. A number of community leadership on the UNEP report, in 2012 reduce the need to import such equipment development boards set up under the SPDC undertook a range of activities related from abroad. Shell companies in Nigeria GMoU scheme have achieved independent to the report in Ogoniland, where it was are also supporting the Nigerian Institute foundation status, enabling them to obtain able to do so. These included helping to fund of Welding to establish a testing centre in funds from third parties. This reinforces the the provision of emergency water supplies Benin, Edo State, with the aim of training GMoU approach, which seeks to build the and installing permanent water facilities in welders needed by the industry. capacity of communities to take charge of one affected area, launching a programme their own development. across Ogoniland that delivered primary A key obstacle blocking growth for Nigerian health-care services to more than 50,000 companies is lack of access to capital. In UN Environment Programme people, and cleaning up a number of sites September 2012, SPDC announced the In 2012, the Nigerian government set where SPDC was granted access. But as launch of a $27 million trade loan-guarantee up the Hydrocarbon Pollution Restoration the UNEP report described, before clean-up facility with some of the country’s leading Project (HYPREP) to lead and co-ordinate activities can be effective, it is crucial to put banks. This gives companies with SPDC the activities needed to implement the an end to the widespread theft and illegal contracts immediate and affordable access recommendations of a United Nations refi ning of crude oil which continues to cause to credit to enable them to start work. Environment Programme (UNEP) report on environmental damage in Ogoniland and the SPDC’s community-led social investment oil contamination in Ogoniland. This is an wider Niger Delta (see letter, page 22). activities also grew in strength during area of the Niger Delta from which SPDC

SHELL FOUNDATION CLEANER COOKSTOVES is an independent charity that applies business thinking to tackle global Prolonged exposure to smoke from development challenges. It focuses on job creation by small enterprises, making supply cooking with open fi res leads to around chains more sustainable, enabling access to energy services and products, and improving 2 million deaths a year worldwide. urban design and transport systems. Shell is providing $6 million to the Global Alliance for Clean Cookstoves, Many major cities in developing countries have deprived neighbourhoods on their outskirts a public-private partnership led by the with no access to public transport, and central districts brought to a halt by traffi c gridlock. United Nations Foundation, to help In 2002, Shell Foundation and the World Resources Institute co-founded EMBARQ, a achieve the goal of providing clean global network of transport specialists that help cities address such challenges. cookstoves to 100 million homes by 2020. These stoves burn fuel more EMBARQ has worked with 58 cities on a range of solutions including creating bus rapid effi ciently, reducing cooking time and transit systems, cycling routes, improved auto-rickshaw services and better urban planning, lowering harmful emissions. benefi ting nearly 4 million people each day in countries including Brazil, India, Mexico, Peru and Turkey. Shell is providing business expertise, including a secondee, to help develop Access to energy global standards and make sure that Around 1.3 billion people lack access to reliable, affordable energy – a critical customers can obtain good-quality requirement for improving health, education and livelihoods. In 2008, Shell Foundation cookstoves, approved and tested formed a partnership with Husk Power Systems (HPS), a small business in Bihar, India, in each local market. We work to that generates affordable electricity by converting rice husks – a plentiful agricultural encourage more involvement in the waste product in rural villages – to gas for power. HPS now runs 90 power plants that campaign from corporate and public provide around 150,000 people with electricity, many for the fi rst time. HPS has secured organisations, and raise awareness of funding to expand in Asia and Africa. the risks of using ineffi cient cookstoves. Our support builds on the work of Shell Foundation also supported a collaboration between two of its partners, M-Kopa Shell Foundation, which has been and D.light Design, to launch their fi rst product in 2012 – a solar lighting system working to build an international which low-income consumers can pay for in instalments using their mobile phones. market for affordable clean cookstoves Around 20,000 people in Nairobi, Kenya, have benefi ted from using this system. since 2002. This work has benefi ted 4 million people and created a global Shell Foundation was set up in 2000 with Shell providing a $250 million endowment business with long-term partner Envirofi t and further contributions of $176 million over time. International to supply effi cient biomass- burning stoves to homes across Asia, www.shellfoundation.org Africa and Latin America. reports.shell.com | Shell Sustainability Report 2012 25 Our activities

IRAQ checks and medicines, using three mobile clinics that regularly travel to the poorest SAFETY ON THE ROAD A rejuvenated energy industry continues to communities. Our staff and contractors drove around help Iraq rebuild. The country is now the 1.1 billion km in 2012 to deliver world’s third-largest oil exporter, according Lack of education reduces job opportunities products and run our operations, to the International Energy Agency. But huge for local people. In 2012, we launched a equivalent to 75 times around the world challenges remain, including a need for literacy campaign to help women learn to every day. Many of these journeys investment to improve ageing infrastructure read and write. This programme has helped took place in countries with some of the in the oil and gas industry, which accounts some of the most vulnerable people in the world’s most hazardous roads. We work for more than 90% of government revenues. Majnoon communities gain basic skills that to improve the safety of our drivers and The lack of reliable power for homes and can lead to future opportunities. We also to help build more awareness of road businesses also hinders economic progress. continued to focus on helping to improve safety in countries where we operate. road safety in Iraq (see box). We enforce our global road safety The Shell-operated Majnoon project is standards, minimise journeys, and hold developing one of the largest oil fi elds in the In the fi eld training and awareness programmes. world, estimated by the Iraqi government to After a programme at Majnoon to clear In 2012, the number of road safety hold around 38 billion barrels of oil. Shell unexploded ordnance left from years of incidents involving fatality, injury or a has a 45% interest, with partners Petronas confl ict, we built new infrastructure and vehicle rolling over was down by more holding 30% and the Iraqi state, through improved existing equipment. In September than 30% on the year before. the Missan Oil Company, holding 25%. The 2012, we shut down production to allow aim in the project’s fi rst phase is to reach work to upgrade other facilities, which is Our Life-Saving Rules include key steps production of 175,000 barrels of oil a day. expected to last until mid-2013. to improve road safety: drivers must follow an agreed journey plan, wear Developing local skills The amount of fl aring of natural gas seat belts, not use mobile phones and In 2012, Shell continued to help create jobs, produced with oil at Majnoon fell in 2012, stay within speed limits. build skills, improve health programmes as a result of this shut-down, to around and offer educational opportunities. 0.2 million tonnes of CO2 equivalent. Shell In Iraq, road traffi c accidents are a Unemployment, especially among the and our partners are working on a long-term leading cause of fatalities. Drivers young, remains a major challenge for the approach to capturing the gas fl ared during working on the Shell-operated country. By the end of the year, we had operations for use in power generation. Majnoon project have been trained in employed around 2,500 local people to techniques to stay safe. These include work on the Shell-operated Majnoon project In the south of Iraq, a total of some checking whether cars are roadworthy, in southern Iraq. Shell has also started 700 million standard cubic feet of natural planning journeys properly, and courses for well engineers and built a centre gas produced with oil is fl ared every day, driving defensively to avoid danger, for training in technical and other skills. amounting to emissions of around 20 million for example by staying a safe distance

tonnes of CO2 equivalent a year. We are a from other vehicles. Around 1,300 local Many people are too poor or are otherwise partner in the Basrah Gas Company (Shell drivers had taken this training by the unable to travel to hospitals for medical interest 44%), which is capturing natural gas end of 2012. care. With the AMAR International produced with oil at other fi elds for use in Charitable Foundation and the Basrah generating electricity for the national grid. We have been installing in-vehicle Health Directorate, Shell set up a South Gas Company (51%) and Mitsubishi monitoring systems in our trucks programme in 2012 to provide health (5%) are our partners. since 2005. These systems record information about a driver’s behaviour

Mobile clinics provide health checks and medicines in Iraq. including speeding, harsh braking and acceleration, which is then used to improve safe driving skills. Our global training includes defensive driving and how to secure loads, avoid tiredness and prevent vehicles rolling over.

To help reduce the number of road incidents globally we work with business, governments and partnerships to support community programmes. We also work with international agencies and are a sponsor of the UN Decade of Action for Road Safety. We chair and partly fund the Global Road Safety Initiative, a long-term programme to improve road safety in Brazil, China and countries in south-east Asia. 26 Shell Sustainability Report 2012 | reports.shell.com Our activities

OIL SANDS

Canada’s oil sands can provide an important source of energy in the decades ahead, but they must be developed responsibly. At over 170 billion barrels of crude oil, they are one of the most signifi cant energy resources remaining.

Oil sands consist of bitumen – a heavy oil – mixed with sand, water and clay. Some of the oil sands lie close to the surface, where they can be mined. Conventional wells are used to produce deeper-lying resources, often with steam injected into the reservoir to ease the fl ow of bitumen.

The Project (AOSP, Shell interest 60%) uses giant trucks and mechanical shovels to extract the oil sands mixture at its Muskeg River and Jackpine The Scotford refi nery in Alberta, Canada, processes oil produced from bitumen. mines. Once separated, the bitumen is diluted with solvent for piping to the a transport fuel, according to Cambridge Tailings Scotford , where it is converted Energy Research Associates (CERA). Shell’s Oil sands mining generates tailings, a into synthetic crude oil for refi ning into operations are at the lower end of that range mixture of water, sand, clay and residual products. as a result of steps to reduce emissions hydrocarbons that remain after the bitumen already in place, such as methods that use is extracted. They contain concentrated In 2012, AOSP produced around less energy to process the oil sands mix. naturally occurring chemicals that are toxic. 212,000 barrels of oil equivalent (boe) We store them either in tailings ponds or a day. Production from deeper-lying, or In 2012, we decided to go ahead with in mined-out pits. Once the sand and clay in situ, oil sands operations was around our Quest carbon capture and storage have settled, the water is recycled, reducing 20,000 boe a day (Shell share). Production (CCS) project, the fi rst in an oil sands the need for river water. Around 82% of the from oil sands accounted for 4.4% of Shell’s development. From around 2015, Quest is water used in Shell’s operations in 2012 global oil and gas production in 2012. expected to capture and safely store deep was recycled from the tailings ponds at our underground over 1 million tonnes of two mines. Tailings ponds at the Muskeg 2 Some opposition exists to the development CO2 a year from the . River and Jackpine mines covered 24 km of oil sands. For these resources to play The governments of Alberta and Canada at the end of 2012. an acceptable role in the energy mix, are providing C$865 million in funding for the industry needs to continue to reduce Quest over its construction period and fi rst Shell has invested over C$200 million since its environmental impact. With other 10 years of operation. By demonstrating 2005 in developing technologies to speed companies, we are working on ways to CCS on a large scale, Quest could help up the tailings drying process, and shares improve the management of carbon dioxide accelerate its use as a way to tackle global this research with other companies.

(CO2) emissions, water and land. CO2 emissions that contribute to climate change (page 10). Land and reclamation We continue to work with local aboriginal Reclamation involves refi lling the mined-out communities to reduce the impact of oil Water use and recycling areas with dried tailings and restoring the sands development on traditional land use Shell uses one to two barrels of fresh water contours of disturbed land, then placing and culture. We incorporate their traditional from the Athabasca River, supplemented by topsoil and planting suitable vegetation. knowledge into our management of land recycled water, for every barrel of bitumen We aim to reclaim land used in our oil and reclamation. We also help develop extracted from our mining operations. sands mining to a condition that matches local skills and enterprises among these No water from our mining and extraction its state before mining, as required by communities. By the end of 2012, AOSP had operations is returned to the river. Most of the Alberta government. The land will be invested over C$1.25 billion since 2005 the waste water from bitumen processing able to support local plants and animals, with more than 70 aboriginal businesses and is treated and reused in operations, although it will not be the same as the contractors that provide a broad range of and we return effl uent water from steam previous landscape. Reclamation work is products and services to our operations. production to the river after testing to meet under way and will proceed in stages as environmental standards. While Shell has we complete mining operations.

Managing CO2 emissions permits to withdraw 0.6% of the Athabasca Fuels produced from oil sands typically River’s average annual fl ow, we used less

emit 4 to 18% more CO2 than those from than 0.07 % in 2012. Shell also monitors the average crude oil consumed in the groundwater by checking that water USA, from production through to use as samples meet regulatory requirements. reports.shell.com | Shell Sustainability Report 2012 27 Our activities

FUELS AND PRODUCTS

Cars allow many people to go about their daily lives. Trucks, ships and aircraft help economies to thrive. But as the number of vehicles on the roads rises and global trade increases, the need to fi nd ways to reduce the environmental impact of transport becomes more critical. Shell works to develop more effi cient fuels and lubricants that can help move the world’s growing number of people and goods by road, sea and air.

Fuel efficiency for transport Shell supplies fuel to millions of drivers every day. Shell FuelSave petrol and diesel are our most effi cient fuels to date. They are designed to help motorists save fuel by improving combustion in the engine and reducing energy loss. In 2012, these fuels became available in three more countries: Bulgaria, Mauritius and Poland. This brought to 18 the number of countries where Shell FuelSave was available at the end of the year.

Shell works directly with consumers to help Students compete to go further using less energy at the Shell Eco-marathon in Malaysia. them save energy. From 2009 to 2011, we trained more than 200,000 people SHELL ECO-MARATHON across the globe on fuel effi ciency through The Shell Eco-marathon challenges student teams from around the world to design, face-to-face training, driving simulators, build and test innovative, ultra-energy effi cient vehicles. With annual events in the online tutorials and Shell FuelSave driving Americas, Europe and Asia, the winners are the teams that go the farthest using the challenges. least amount of energy. The events spark debate about the future of energy and road transport, and inspire young engineers to push the boundaries of fuel effi ciency. In 2012, we started a programme to help an additional million people worldwide Teams set out to show how far they can travel on the equivalent of one litre of fuel or learn how to save fuel and reduce their one kilowatt-hour of energy. The competition is split into two classes. The Prototype fuel costs. Through the Shell FuelSave class focuses on maximum effi ciency, with passenger comfort taking a back seat. The Target One Million campaign, consumers UrbanConcept class encourages more practical designs. The cars compete in one can access a series of online mini-games of seven fuel categories: petrol, diesel, biofuels, fuel made from natural gas (GTL), designed to improve their skills in saving hydrogen, solar or electricity. Off-track awards are given for other achievements fuel, such as using gears more effectively, including safety, teamwork, design, and technical innovation. conserving the car’s momentum and protecting the engine with the right motor In 2012, Shell Eco-marathon events were held in Rotterdam in the Netherlands, oil. In 2012, around 250,000 drivers took Houston in the USA and Kuala Lumpur in Malaysia. More than 40,000 people part in Target One Million. attended the Rotterdam event, which included a range of activities including public debates on the future of energy. Many records were broken in 2012. For example, We also help road transport companies to students from Thailand set a new record for the event in Asia of 2,903 km a litre, the save fuel. Shell FuelSave Partner is a fuel equivalent of driving from Kuala Lumpur to Hanoi on just one litre of fuel. management system for fl eet operators that electronically monitors fuel use. It recommends different speeds, routes and more effi cient driving habits to optimise fuel who work to improve our lubricants. We For the shipping industry, Shell launched a economy. also work with partners, including major new lubricant in 2012 called Shell Alexia engine manufacturers. Shell Helix lubricant, S4 that helps marine vessels reduce fuel More efficient lubricants for example, was developed through our consumption. Shell Alexia S4 has been Shell develops advanced lubricants for cars technical partnership with Ferrari. The tested successfully across a wide range of and trucks that can improve the effi ciency Shell Rimula range of heavy-duty engine operating conditions, and has shown that it of engines and help save fuel. We invest oils includes products that can help truck, works effectively at a range of speeds. in research and development, and employ bus and coach drivers improve their fuel more than 200 scientists and engineers economy while protecting their engines. 28 Shell Sustainability Report 2012 | reports.shell.com Our activities

BIOFUELS from raw materials cultivated in areas of per hectare of corn in the USA and 2,500 rich biodiversity. By the end of 2012, more litres per hectare of wheat in Europe. We produce low-carbon biofuel, distribute than 97% of the volume of biofuels we biofuels worldwide and continue to develop purchased were covered by these clauses. Raízen is continuously working to make its advanced biofuels for the future. production processes more effi cient and We also aim to increase the percentage sustainable. It recycles by-products from cane Road vehicles today account for around of certifi ed volumes of biofuels we buy crushing and ethanol distillation for use as

17% of global carbon dioxide (CO2) that meet standards developed by the natural fertilisers. It also uses waste sugar- emissions from fossil fuels. The number Roundtable for Sustainable Palm Oil, the cane fi bres as fuel to generate electricity for of cars on the road is expected to rise to Roundtable for Responsible Soy, Bonsucro the mills and delivers a surplus to the national 2 billion by 2050, with the amount of (for sugar-cane ethanol) and the Roundtable power grid. Raízen works to continually freight carried by trucks doubling. With this for Sustainable Biofuels. These standards improve crop yields so that more cane can expected rapid growth in vehicles, Shell include comprehensive requirements to be produced from the same area of land. believes low-carbon biofuels, coupled with manage environmental and social impacts. gains in engine effi ciency, are one of the Sugar cane needs little artifi cial irrigation quickest and most practical ways to reduce Raízen in Brazil because of high annual rainfall.

CO2 emissions from road transport in the Our responsible approach to the Around 90% of the water used to convert next 20 years. sustainability challenges of biofuels can sugar cane into ethanol in Raízen’s 24 mills be seen through our work with Raízen in is recycled. In advance of requirements Today, biofuels make up 3% of the global Brazil. Raízen’s annual production capacity of São Paulo state, where most of the road transport fuel mix. This fi gure could is enough to meet around 9% of Brazil’s company’s mills are located, Raízen is rise to over 10% by 2050, according to our current ethanol demand. By 2030, biofuels phasing out most of its manual harvesting. scenarios. are expected to make up over 30% of By the end of 2012, 90% of Raízen’s Brazil’s transport fuel mix. harvesting was mechanised. To help lessen Shell is one of the world’s largest distributors the impact on local cane cutters, Raízen of biofuels. In 2012, we used around 7.7 The process Raízen uses to convert sugar is helping them acquire new roles, skills billion litres in our petrol and diesel blends cane into ethanol is highly effi cient in and trades. These include jobs to operate worldwide. Raízen (Shell interest 50%) turning biomass into fuel. Brazilian sugar and maintain the sowing and harvesting produces low-carbon biofuel – ethanol cane yields 7,000 litres of ethanol per machines, and training to become made from sugar cane in Brazil. This biofuel hectare of cane, compared to 3,800 litres electricians or mechanics.

can reduce CO2 emissions by around 70% compared to petrol, from cultivation of the sugar cane to using the ethanol as fuel. With an annual production capacity of FUELS FOR THE FUTURE around 2.2 billion litres, Raízen is one of Shell was one of the fi rst companies to invest in developing advanced biofuels, using the world’s largest ethanol producers. crop waste or inedible plants and new conversion processes. These can potentially produce more effi cient, low-carbon biofuels for blending at higher concentrations Meeting sustainability standards with petrol and diesel. Our biofuels research teams work with leading biotechnology The environmental benefi ts of biofuels vary. companies and academic institutions.

Overall CO2 emissions can differ widely, depending on the raw materials used, as In 2012, we completed a pilot plant at our Westhollow Technology Center in Houston, well as the production and distribution USA, to produce biofuels that do not need to be blended with petrol or diesel. The methods. Other challenges that need to be plant uses a process that converts plant sugars and inedible biomass into a range of managed are competition for land, impact fuels. Biofuels produced by this process have the same performance properties as on biodiversity and local communities, and conventional fuels. They can be used in existing supply chains, which eliminates the use of water. need for blending and storage infrastructure.

Shell has been working to improve Whether an advanced biofuel achieves commercial scale depends on overcoming a sustainability standards in our biofuels range of technical and economic challenges. In 2012, for example, we decided not to supply chain for many years. Our internal pursue a project with Iogen Energy (Shell interest 50%) to build a large-scale cellulosic systems and purchasing policy help us ethanol facility in Canada. This has allowed us to focus our approach on processes and to assess potential sustainability risks technologies that are more likely to achieve commercial scale. throughout the supply chain. This has allowed us to implement controls and Hydrogen for road transport continues to face signifi cant challenges to achieving monitor progress. Since 2007, we have commercial scale. Shell operates hydrogen fi lling stations in China, Germany, Japan introduced environmental and social and the USA. These stations allow us to evaluate a range of different technologies. sustainability clauses into new and renewed

contracts for the biofuels that we buy for Electric vehicles will become increasingly common in the coming years. The CO2 blending with our petrol and diesel. These savings of electric vehicles and plug-in hybrids depend on how the electricity is

clauses are designed to make sure that the produced and delivered – for example, whether it comes from a CO2-intensive, coal- biofuels we buy are not knowingly linked to fi red plant or a cleaner-burning natural gas plant. the violation of human rights, nor produced reports.shell.com | Shell Sustainability Report 2012 29 Our activities

Bonsucro has developed the world’s fi rst certifi cation standard for the sustainable production of biofuels from sugar cane. Bonsucro separately certifi es the mills where the sugar cane is processed, including the supply chain, and the ethanol produced. It requires companies to fulfi l criteria such as legal compliance, active management of biodiversity and ecosystems, compliance with human rights, sustainable production and processing, and continuous improvement.

In 2011, Raízen was the fi rst company to achieve certifi cation of a mill from Bonsucro. By the end of 2012, seven of Raízen’s mills had been certifi ed. As a result, 23% of Raízen’s ethanol is now produced in line with the Bonsucro standard. To achieve certifi cation, a mill has to comply with a large number of regulations from a range of government agencies and establish an awareness of Bonsucro requirements throughout its operation.

Raízen supports the work of the Brazilian government to implement effective land- use policies and to address concerns over sugar-cane production displacing other crops to areas with rich biodiversity. Raízen is also working with the International Union Raízen produces low-carbon biofuel from sugar cane in Brazil. for Conservation of Nature to assess how achieving Bonsucro certifi cation helps to CERTIFYING THE SUPPLY CHAIN protect local biodiversity. Land used to Raízen’s mills are located in São Paulo, Mato Grosso do Sul and Goiás states, Brazil. grow sugar cane for Raízen lies hundreds More than 4,000 local farmers supply the mills with sugar cane. Raízen is working with of kilometres from the Amazon rainforest. the international foundation Solidaridad Network to help these farmers achieve the sustainability standards needed for Bonsucro certifi cation. In 2012, Raízen started a Raízen also supports government efforts pilot project with 256 suppliers to identify and address the challenges they face. to protect the land rights of indigenous peoples in Brazil. Following extensive These suppliers include landowners and tenants, with farms ranging in size from less consultations to understand the complexities than 20 hectares to more than 1,000 hectares. Some perform all activities – planting, of a confl ict over land involving one of growing, cutting, loading and transporting – while others outsource some of these its suppliers and the Guaraní indigenous tasks. One of the aims of certifi cation is to ensure that all farmers in the Raízen supply people, Raízen signed an agreement in chain earn a fair living. 2012 with FUNAI, the National Indian Foundation, confi rming it would not buy Each farmer uses a self-assessment tool and performance analysis management system sugar cane grown on the land in question. developed by Raízen and Solidaridad. Farmers complete a detailed questionnaire Raízen has also pledged to invest in social about their production activities in more than 30 areas, including working conditions programmes that support and protect the and forest protection. The results are entered into the management system, which welfare of communities. This approach will analyses them and generates recommendations where improvements need to be made. involve regular meetings to understand and address community concerns. It could “This is a pioneering project aimed at delivering sustainability improvements on the also include minimising the impact of ground in a practical, step-by-step way,” said Pieter Sijbrandij, Solidaridad’s manager sugar plantations on communities by, for for Brazil. “We see potential for other companies to adopt a similar approach if they example, restoring vegetation and areas want to improve the sustainability of their supply chain.” In 2013, Raízen will start communities want to conserve. introducing this programme to all of its suppliers. 30 Shell Sustainability Report 2012 | reports.shell.com Our performance

OUR PERFORMANCE

In 2012, we continued to operate in ways that balance economic, environmental and social considerations in a responsible way. We maintained our strong investment in projects that will deliver energy resources for decades to come. We worked to maintain improvements in our safety record. We also continued to work to reduce our impact on the environment, to respond transparently to the views of our neighbours and to generate jobs and business opportunities for local economies. reports.shell.com | Shell Sustainability Report 2012 31 Our performance

ECONOMIC capacity of around 320,000 barrels a day Jonas (Shell interest 50%). The Pluto LNG plant in Moberg Our income in 2012 was around Australia (Shell indirect interest 21%) also $27 billion and we announced started production. dividends of more than $11 billion for our shareholders. Our net capital We took the fi nal investment decision investment of around $30 billion will help in 2012 on two natural gas projects in to build and sustain our business for the Nigeria that will help to reduce fl aring. future. We also spent $1.3 billion on our We also decided to go ahead with the Head of Secretariat, Extractive research and development programme. Quest CCS project in Canada that will Industries Transparency Initiative,

reduce CO2 emissions from our oil sands Oslo, Norway Shell generated $46 billion of cash fl ow operations. Other projects we decided to from our operating activities in 2012. move forward with were the Tempa Rossa Shell was one of the very fi rst This cash is used to fund our capital project (Shell interest 25%) in Italy and companies to support the investment and research and development the Malakai project (Shell interest 35%) “EITI when it began as an idea 10 programme. It also funds our dividend in the deep waters off Malaysia, which is years ago. Today, Shell is an active payments to shareholders. Our average expected to produce around 60,000 boe participant in the EITI countries where reserve replacement ratio, which a day at peak production. it operates. Iraq is an important case. represents our ability to grow and maintain With one-tenth of the proven oil production, was around 125% over the last Shell’s oil and gas production in 2012 reserves in the world and a history fi ve years. was 3.3 million boe a day, up slightly of confl ict and mismanagement, from 2011. We increased our sales of governance of the extractives sector In 2012, the Pearl GTL (gas-to-liquids) plant liquefi ed natural gas (LNG) by 7% to has been as challenging there as (Shell interest 100%) in Qatar completed around 20 million tonnes. Exploration and anywhere. It is particularly heartening its ramp-up to full production. Pearl can commercial activities continued to add that in December 2012, Iraq became produce 140,000 barrels of oil equivalent potential resources, underpinning Shell’s compliant with the EITI standard. (boe) a day of synthetic oil products and long-term growth plan. Shell has played an important role 120,000 boe a day of natural gas liquids as one of three companies serving and ethane for industrial use. Shell scorecard on the EITI multi-stakeholder council In 2012, sustainable development overseeing the process in the country. With joint-venture partners we started continued to account for 20% of the I hope that Shell will continue to play production at the Caesar Tonga deep-water company scorecard, which helps a role to embed, deepen and widen project in the USA (Shell interest 22.5%) determine the annual bonus levels for all that process to ensure that Iraq’s and the Harweel enhanced oil recovery our employees, including members of the complex governance issues in the project in Oman (Shell interest 34%). Also Shell Executive Committee (EC). For the sector are addressed in a constructive with partners, we started producing oil from EC in 2012, sustainable development environment. our deep-water Gumusut-Kakap project measures were split evenly between Shell’s (Shell interest 33%) in Malaysia. The Port safety performance and targeted measures ” Arthur refi nery expansion project in Texas, covering operational spills, energy USA, came on-stream and will add a effi ciency and use of fresh water.

REVENUE TRANSPARENCY transparency on revenues to governments ahead of any Our operations generate revenue through taxes and royalties for mandatory requirements taking effect. governments around the world. These funds can help support a country’s economy and contribute to local development. To help improve accountability, we support a mandatory global reporting rule for extractive industries, in line with EITI goals to We believe greater transparency in payments to governments, achieve greater transparency (see opinion). We are engaging and how they are used, is important for building trust between actively with others to fi nd a workable and common global businesses such as ours and the communities we work alongside. standard in relation to current US and planned EU regulations.

We work openly with governments on matters of taxes and In 2012, Shell paid globally $21.0 billion in corporate taxes, royalties. We are a founder and board member of the Extractive and $3.6 billion in royalties. We collected $85.1 billion in excise Industries Transparency Initiative (EITI). This initiative requires duties and sales taxes on our fuel and other products on behalf of both governments and companies to disclose revenues received governments. from oil and mineral activities. For a breakdown of payments made to governments by country, In 2012, Shell for the fi rst time published details of the payments see link below: we make to governments of some of the main countries where we operate. We took this step to reinforce efforts to increase www.shell.com/payments 32 Shell Sustainability Report 2012 | reports.shell.com Our performance

ENVIRONMENTAL Flaring capture the gas produced with oil. Most of The fl aring of natural gas in our Upstream the continuous fl aring in 2012 took place Greenhouse gas emissions business decreased in 2012 to 7.7 million in Nigeria.

The direct greenhouse gas (GHG) emissions tonnes of CO2 equivalent, from 10.0

from facilities we operate were 72 million million tonnes of CO2 equivalent in 2011. We expect that fl aring from the Majnoon

tonnes on a CO2-equivalent basis in 2012, We made progress in reducing fl aring in fi eld in Iraq will rise in future years as

a decrease from 74 million tonnes of CO2 Nigeria in 2012. Flaring emissions were production increases and before equipment equivalent in 2011. The main reasons for down by around 25% in Nigeria from the to gather the associated gas can be

this drop were reduced fl aring in Nigeria previous year, to 4.6 million tonnes of CO2 installed. When we acquire or become and divestments in our Downstream equivalent. This was mainly because more the operator of an existing facility that is business. These were partly offset by the investments in gas-gathering equipment already fl aring or venting (releasing gas to ramp-up of production at the Pearl GTL were brought on-stream and tighter fl aring the atmosphere), it takes time before these plant in Qatar. controls were applied. Flaring also dropped activities can be stopped. due to reduced production at the Majnoon Around 55% of our GHG emissions came fi eld in Iraq to allow the upgrade of some Outside Nigeria and Iraq, the few facilities from the refi neries and chemical plants in facilities, and the completion of start-up of that continuously fl are accounted for less our Downstream business. The production the Pearl GTL plant in Qatar. than 1% of our total direct GHG emissions of oil and gas in our Upstream business in 2012. Some of these facilities are at accounted for over 40% of our GHG Overall, fl aring made up around 10% of ageing oil fi elds where the associated emissions, and our shipping activities for the total direct GHG emissions in 2012. gas pressure is too low to power the less than 5%. We continue to work on Nigeria accounted for around 65% of this compressors used to gather the gas and improving operational performance and fl aring in 2012, with the remainder mainly avoid fl aring. In 2012, the venting of energy effi ciency to reduce GHG emissions. from the Pearl GTL plant in Qatar, Majnoon hydrocarbons amounted to less than 1% in Iraq and operations in Malaysia. In of our total direct GHG emissions. The indirect GHG emissions from the 2012, we further reduced the fl aring energy we purchased (electricity, heat intensity – hydrocarbons fl ared per tonne Our HSSE & SP Control Framework requires and steam) were 9 million tonnes on a of production – to the lowest level we have our new facilities to be designed so as not

CO2-equivalent basis in 2012, a decrease recorded for our Upstream business. to fl are or vent continuously.

from 2011. We estimate that the CO2 emissions from the use of our refi nery Operational fl aring occurs for safety Energy efficiency and natural gas products were around reasons, or during the start-up of Upstream One of the ways we can manage our direct 580 million tonnes in 2012. Further facilities. We aim to minimise this GHG emissions is to work on improving information on GHG emissions is available operational fl aring. Continuous fl aring the energy effi ciency of the facilities on our corporate website. takes place due to a lack of equipment to we operate.

DIRECT GREENHOUSE GAS EMISSIONS FLARING – UPSTREAM ENERGY INTENSITY – UPSTREAM (EXCL. OIL SANDS AND GTL)

million tonnes CO2 equivalent million tonnes CO2 equivalent gigajoules/tonne production 120 30 0.9

90

60 15 0.7

30

0 0 0.5 03 04 05 06 07 08 09 10 11 12 03 04 05 06 07 08 09 10 11 12 03 04 05 06 07 08 09 10 11 12

ENERGY INTENSITY – OIL SANDS ENERGY INTENSITY – REFINERIES ENERGY INTENSITY – CHEMICAL PLANTS gigajoules/tonne production [A] 4GƂPGT['PGTI[+PFGZ=$? Chemicals Energy Index 10 110 105

5 100 95

0 90 85 03 04 05 06 07 08 09 10 11 12 03 04 05 06 07 08 09 10 11 12 03 04 05 06 07 08 09 10 11 12 [A] Includes mining and upgrading operations [B] Indexed to 2002, based on 2006 Solomon EIITM methodology reports.shell.com | Shell Sustainability Report 2012 33 Our performance

In 2012, the overall energy effi ciency Our refi neries and chemical plants amounting to 3.3 thousand tonnes from for the production of oil and gas in our continue to implement the CO2 and energy 137 spills. This was an increase in both Upstream business (excluding oil sands management programme (page 11) to volume and numbers from 2011, as and GTL) worsened compared to 2011, improve their energy effi ciency performance. the scale of oil theft in Nigeria reached with rising production of hydrocarbons that unprecedented levels. See pages 22 and need more energy to access and increased Spills 23 for more information on spills in Nigeria. drilling activity. All our major facilities have Shell has clear requirements and energy management plans in place to make procedures to prevent operational spills, Water the best use of those facilities, including and multibillion-dollar programmes in The way we manage our use of fresh the use of improved fi eld management place to maintain and improve our facilities water is especially important in areas of techniques. We expect that maintaining and pipelines. However, spills still occur the world where the availability of water the energy effi ciency levels of recent years for reasons such as operational failure, is constrained due to limited supplies or will be more diffi cult in the future as existing accidents or unusual corrosion. extensive use. We assess the availability of fi elds age and production comes from more water where we operate, and design and energy-intensive sources. In 2012, our operational spills of oil and run our facilities in ways that help reduce oil products amounted to 2.1 thousand their water use. In our oil sands operations, energy intensity tonnes, down from 6.0 thousand tonnes in in 2012 worsened slightly compared to 2011. This was the second-lowest level we In 2012, the amount of fresh water we used 2011, but was around the same level as in have recorded. We continue to investigate decreased to 203 million cubic metres, earlier years. and learn from all spills to improve our down from 209 million cubic metres in performance. 2011, mainly due to less river water In 2012, the overall energy effi ciency withdrawn for our oil sands operations. for the manufacture of oil products at The number of operational oil spills also Our Downstream business accounted for our refi neries improved compared to decreased in 2012 to 206, down from around 75% of our fresh-water use for the 2011, helped by continued progress 211 in 2011. This was the second-lowest manufacture of oil products and chemicals; with our CO2 and energy management level we have recorded. We are working to our Upstream operations used around 25%. programme, as well as good reliability extend the signifi cant improvements made in At our major facilities in water-scarce areas, performance and increased use of previous years in the number of operational we are developing water management refi nery capacity. spills through our continued investment in plans that include how our operations will improving the reliability and maintenance of minimise water use and increase water The overall energy effi ciency of our our facilities. recycling. We expect that our fresh-water chemical plants worsened in 2012 use will change over time in line with compared to 2011, as some of our larger In 2012, sabotage and theft in Nigeria our portfolio and our efforts to use water plants operated less effi ciently. remained a signifi cant cause of spills, more effi ciently.

SPILLS – OPERATIONAL [C] SPILLS – SABOTAGE [D] FRESH WATER WITHDRAWN volume in thousand tonnes volume in thousand tonnes million cubic metres number of spills number of spills 20 800 20 800 300

10 400 10 400 200

0 0 0 0 100 03 04 05 06 07 08 09 10 11 12 03 04 05 06 07 08 09 10 11 12 03 04 05 06 07 08 09 10 11 12 [C] Over 100 kilograms [D] Over 100 kilograms

TOTAL RECORDABLE CASE FREQUENCY (TRCF) LOST TIME INJURY FREQUENCY (LTIF) FATAL ACCIDENT RATE (FAR) injuries per million working hours injuries per million working hours fatalities per 100 million working hours 3.0 1.50 8

6

1.5 0.75 4

2

0 0 0 03 04 05 06 07 08 09 10 11 12 03 04 05 06 07 08 09 10 11 12 03 04 05 06 07 08 09 10 11 12 34 Shell Sustainability Report 2012 | reports.shell.com Our performance

SOCIAL contractors and suppliers, have processes VOLUNTARY SOCIAL INVESTMENT IN 2012 in place to prevent violations of human proportion of spend Personal safety rights – for example, the use of child or Following steady improvements in our forced labour. We continued to strengthen Enterprise development safety performance in recent years, in our capability in social performance in Road safety 2012 we remained close to our lowest- 2012 by standardising processes and Energy access ever number of injuries per million working through more training. In 2012, we Community development Education hours, the total recordable case frequency invested further in building the competency Biodiversity (TRCF). We achieved our lowest-ever rate of our staff, training 272 more employees Other of injuries that led to time off work in 2012, in our social performance requirements. the lost-time injury frequency (LTIF). We also worked towards implementing new measures of our social performance. Sadly, however, eight people lost their lives while working for Shell in 2012. Social investment compliance in areas such as human rights, This was two more than in 2011. Three We aim to make our social investment labour practices and business integrity. fatalities were industrial accidents during projects benefi cial to society in measurable construction and operations, two were ways and to be sustainable beyond External voluntary codes armed attacks in Nigeria, two were road Shell’s involvement. In 2012, we spent The Shell General Business Principles transport incidents, and one was an around $149 million on voluntary social and Code of Conduct guide the business occupational illness related to air travel. investments worldwide, compared to activities of Shell companies. But we Our fatal accident rate (FAR) – the number $125 million in 2011. This rise was mainly also support a number of external of fatalities per 100 million hours worked – due to increased spending in Nigeria and voluntary codes. These include the UN worsened in 2012 compared to 2011, countries in the Middle East and North Declaration on Human Rights, the UN when we achieved the lowest FAR that Africa. We spent $34 million on our Global Compact, the Organisation for Shell has recorded. three global strategic themes of enterprise Economic Co-operation and Development development, road safety and energy Guidelines for Multinational Enterprises, Process safety access, and $115 million on our locally and the International Labour Organization At Shell, we place great emphasis on tailored programmes that cover community Declaration on Fundamental Principles and process safety management. This development, education and biodiversity. Rights at Work. means making sure our facilities are We estimate that $67 million of our spend well designed, well operated and well in 2012, compared to $45 million in Our people maintained, so that they can run safely, 2011, was in countries that according The quality of our people is essential without harm to people or the environment. to the UNDP Human Development Index to our business strategy. In 2012, we We have rigorous controls in place and 2010 have a gross domestic product of recruited around 1,200 graduates and monitor indicators that focus on the strength less than $15,000 a year per person. Our 3,500 experienced professionals. Most of of these controls to prevent incidents. fi gures do not include investments that are these new employees came from technical part of contractual agreements with host disciplines. Our salaries refl ect market We follow industry standards for measuring governments. We also provide signifi cant conditions in the country where employees process safety performance. In 2012, we support through voluntary work by Shell are based and the high level of skill and recorded 91 Tier 1 process safety incidents employees and donations of equipment. experience needed. We regularly review (as defi ned in line with oil and gas industry comparative remuneration for men and guidelines) related to our operations, an Local procurement women across the company. We provide improvement compared to 2011. We Wherever possible, we buy goods and fl exible working practices wherever investigate and learn from these incidents services from local businesses. In 2012, we necessary and possible. Our employees in order to improve our performance. spent over $65 billion on contracting and are encouraged to take part in social procurement worldwide. Around half of responsibility projects and employee Social performance this was spent in the USA, the UK, Canada, interest groups. Social performance involves working with the Netherlands and Nigeria. We estimate communities to share the benefi ts of our around $14 billion was spent in countries Employee communication activities and to reduce the impact of our that, according to the UNDP Human and involvement operations. It includes helping to build local Development Index 2010, have a gross Two-way dialogue between management economies through the creation of jobs domestic product of less than $15,000 and staff is embedded in our work and business opportunities. In 2012, we a year per person. In these countries, practices. It takes place directly and, created new opportunities for communities Shell companies spent over 90% of this where appropriate, via staff councils or and local companies in a number of $14 billion with local companies. We recognised trade unions. Staff have the countries where we operate, including check that our suppliers are complying with opportunity to understand Shell’s quarterly Iraq and Nigeria. key sustainability criteria, including good operational and fi nancial results through working conditions. In 2012, we conducted various channels, including face-to-face We continued to implement our standards 50 rigorous assessments of suppliers gatherings with senior managers, a for social performance across the company in Africa and the Middle East, 110 in personal email from the Chief Executive in 2012. Each year we review the extent the Americas, 240 in the Asia-Pacifi c Offi cer, webcasts and online publications. to which our operations, as well as our region and 152 in Europe, to check their We have multiple channels in place for staff reports.shell.com | Shell Sustainability Report 2012 35 Our performance

to report, confi dentially and anonymously, positions – up 8% from 2011, and up 6% In 2012, we provided more than breaches of the Shell General Business from 2010. In 2012, more than 90% of our 750,000 training days for employees Principles or our Code of Conduct, or employees worldwide were local nationals. and some of our joint-venture partners. This other concerns. These include a global included training more than 8,500 people telephone helpline and a dedicated Our annual Shell People Survey measures in leadership skills. More than 150 senior website. employees’ views on a range of topics, project engineers completed our externally including the inclusiveness of their accredited Project Academy programme Diversity and inclusion workplace. In 2012, 69% felt positive that helps to improve the delivery of our We have a culture that embraces about this, up 1% from 2011 and up 3% major energy projects. diversity and fosters an inclusive work from 2010; 12% felt negatively about environment with equal opportunities. We inclusion in the workplace, the same as Code of Conduct violations measure diversity and inclusion in part 2011 and down 1% from 2010. Shell employees, and contractors working by the representation of women and local for Shell, must abide by our Code of nationals in senior leadership positions. Training and development Conduct. In 2012, 209 violations of the By the end of 2012, the proportion of We continue to invest in developing the Code of Conduct were reported (226 women in senior leadership positions skills of our employees and joint-venture in 2011; 205 in 2010). As a result, we at Shell was 16.2%, down 0.4% from staff. In 2012, we invested over $280 million dismissed or terminated the contracts of 2011 and up 0.9% from 2010. In 42% of in training and development. Our focus 93 employees and contractors (78 in countries where we operate, local nationals is on building technical capability and 2011; 77 in 2010). fi lled more than half the senior leadership safety-critical competencies and skills.

2% 3% 3.3 OUR SHARE OF OUR SHARE OF MILLION

THE WORLD’S OIL THE WORLD’S GAS OUR EQUITY PRODUCTION PRODUCTION PRODUCTION IN BARRELS OF OIL EQUIVALENT A DAY 50% 20.2 8.4% 44 SHARE OF OUR MILLION OUR SHARE OF NUMBER OF VESSELS IN WHICH

PRODUCTION THE WORLD’S WE DELIVERED LNG – ONE OF TONNES EQUITY THAT WAS LNG SOLD THE WORLD’S LARGEST FLEETS SHARE OF LNG NATURAL GAS SOLD $27 $30 $46 BILLION BILLION BILLION

INCOME NET CAPITAL CASH FLOW FROM INVESTMENT OPERATING ACTIVITIES $1.3 $2.2 7. 7 BILLION BILLION BILLION

SPENT ON R&D SPENT ON ALTERNATIVE ENERGY, LITRES OF BIOFUEL

CCS, AND CO2-RELATED R&D DISTRIBUTED IN THE LAST 5 YEARS 87,000 70+ $14 AVERAGE NUMBER OF NUMBER OF BILLION

PEOPLE EMPLOYED COUNTRIES SPENT IN IN WHICH WE LOWER-INCOME OPERATED COUNTRIES 36 Shell Sustainability Report 2012 | reports.shell.com Our performance

ENVIRONMENTAL AND SOCIAL DATA

ENVIRONMENTAL DATA 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 Greenhouse gas emissions (GHGs)

Direct total GHGs (million tonnes CO2 equivalent) [A] 72 74 76 69 75 82 88 93 101 102

Carbon dioxide (CO2) (million tonnes) 69 71 72 66 72 79 85 89 96 97

Methane (CH4) (thousand tonnes) 93 133 128 127 126 119 124 173 192 187

Nitrous oxide (N2O) (thousand tonnes) 1 1 2 2 2 2 2 2 2 3 Hydrofl uorocarbons (HFCs) (tonnes) 23 22 23 25 23 28 24 20 13 9

Indirect total GHGs (million tonnes CO2 equivalent) 9 10 9 9 n/c n/c n/c n/c n/c n/c Flaring

Flaring (Upstream) (million tonnes CO2 equivalent) 7.7 10.0 10.4 7.8 8.8 9.7 14.3 20.8 24.6 24.1 Flaring (Upstream) (million tonnes hydrocarbon fl ared) 2.3 3.4 3.6 2.6 2.8 3.4 4.8 7.0 8.1 8.1 Nigeria [B] 1.5 2.0 2.4 1.9 2.3 2.5 3.7 5.8 6.6 6.4 Rest of world [C] 0.8 1.4 1.2 0.7 0.5 0.9 1.1 1.2 1.5 1.7 Energy intensity Upstream excl. oil sands and GTL (gigajoules per tonne production) [D] 0.78 0.75 0.74 0.76 0.74 0.78 0.78 0.71 0.69 0.69 Oil sands (gigajoules per tonne production) [E] 6.6 6.4 6.8 6.6 6.4 5.7 5.3 5.2 5.8 10.0 Refi neries: Refi nery Energy Index [F] 98.4 100.8 101.8 102.2 98.9 98.6 98.4 98.0 96.7 97.8 Chemical plants: Chemicals Energy Index 91.7 90.8 89.3 92.0 93.0 92.6 92.5 95.8 93.3 98.3 Acid gases and VOCs

Sulphur oxides (SOx) (thousand tonnes SO2) 113 136 139 141 175 212 233 226 247 257

Nitrogen oxides (NOx) (thousand tonnes NO2) 147 146 159 142 150 145 154 157 172 193 Volatile organic compounds (VOCs) (thousand tonnes) [G] 89 129 147 126 130 148 185 199 213 226 Ozone-depleting emissions CFCs/halons/trichloroethane (tonnes) 0.0 0.0 0.0 0.4 1.4 0.6 0.3 0.8 2.3 3.0 Hydrochlorofl uorocarbons (HCFCs) (tonnes) 8 11 21 24 26 27 35 35 42 44 Spills and discharges [H] [I] Sabotage spills – volume (thousand tonnes) [J] 3.3 1.6 3.0 14.0 6.5 3.4 1.9 1.5 1.1 0.9 Sabotage spills – number [J] 137 118 112 95 115 197 123 111 101 105 Operational spills – volume (thousand tonnes) [K] 2.1 6.0 2.9 1.4 8.8 3.5 3.9 3.4 3.4 5.0 Nigeria 0.2 5.3 0.7 0.3 7.1 1.6 1.4 0.1 0.0 0.4 Rest of world 1.9 0.7 2.2 1.1 1.7 1.9 2.5 3.3 3.4 4.6 Operational spills – number [L] 206 211 195 275 275 392 465 560 711 678 Nigeria [M] 36 64 32 37 42 52 41 63 48 48 Rest of world 170 147 163 238 233 340 424 497 663 630 Hurricane spills – volume (thousand tonnes) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.9 1.0 0.0 Oil in effl uents to surface environment (thousand tonnes) 1.0 1.3 1.6 1.5 1.7 1.6 1.8 2.3 2.1 2.3 Water Fresh water withdrawn (million cubic metres) 203 209 202 198 224 235 n/c n/c n/c n/c Waste disposal Hazardous (thousand tonnes) 820 740 1,048 962 688 907 716 631 714 675 Non-hazardous (thousand tonnes) 2,295 1,850 1,079 1,139 996 1,899 1,154 632 421 443 Total waste (thousand tonnes) [G] [N] 3,115 2,590 2,127 2,101 1,684 2,806 1,870 1,263 1,135 1,118 [A] Oil and gas industry guidelines (IPIECA/API/OGP) indicate that a number of sources of uncertainty can contribute to the overall uncertainty of a corporate emissions

inventory. CO2 equivalent is a term used to express the total emissions of the major greenhouse gases, including CO2, methane, nitrous oxide and hydrofl uorocarbons. [B] Nigeria includes SPDC onshore operations (1.4 million tonnes fl ared in 2012) and SNEPCo offshore operations (0.1 million tonnes fl ared in 2012). [C] Flaring from the Pearl GTL plant in Qatar and the Majnoon fi eld in Iraq amounted to 0.2 and 0.1 million tonnes of hydrocarbon respectively in 2012. [D] 2012 data reported on a consistent basis with previous years in accordance with IPIECA/API/OGP guidance 2005. [E] The data includes mining and upgrading operations. It does not include in situ production. We have updated our fi gures following recalculation of the data. [F] Data is indexed to 2002, based on Solomon Associates Energy Intensity Index 2006 methodology. [G] We have updated our 2011 and 2010 fi gures following review of the data. [H] All spill volumes and numbers are for spills over 100 kilograms. [I] As of the end of March 2013, there were three spills under investigation in Nigeria that may result in adjustments to the 2012 data. [J] All sabotage- and theft-related spills have occurred in Nigeria except in 2007 (0.7 thousand tonnes outside Nigeria) and 2006 (0.6 thousand tonnes outside Nigeria). [K] Nigeria includes SPDC onshore operations and SNEPCo offshore operations. A single spill at the Bonga fi eld offshore Nigeria amounted to 4.8 thousand tonnes in 2011. [L] We have updated our 2011 fi gure following review of the data. The numbers of operational spills reported for 2004 and 2005 contain a small number of hurricane spills. [M] Nigeria includes SPDC onshore operations (36 operational spills in 2012) and SNEPCo offshore operations (0 operational spills in 2012). [N] In 2012 we recycled, reused or sold over 300 thousand tonnes of material that would otherwise have been disposed of as waste.

n/c Not calculated. reports.shell.com | Shell Sustainability Report 2012 37 Our performance

www.shell.com/performancedata

See page 41 for more information about our data.

SOCIAL DATA 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 Fatalities Total number 8 6 12 20 26 21 37 34 31 45 Employees 3 1 01212325 Contractors 5 5 12 19 24 20 35 31 29 40 Fatal accident rate (FAR) 1.32 0.96 1.56 2.3 3.4 3.1 5.6 5.0 4.6 6.1 Fatalities per 100 million working hours (employees and contractors) Injuries Total recordable case frequency (TRCF) 1.26 1.24 1.23 1.4 1.8 1.9 2.1 2.5 2.6 2.6 Injuries per million working hours (employees and contractors) Lost time injury frequency (LTIF) 0.34 0.36 0.35 0.4 0.6 0.7 0.8 1.0 1.1 1.1 Lost time injuries per million working hours (employees and contractors) Illnesses Total recordable occupational illness frequency (TROIF) 0.51 0.66 0.76 0.6 1.2 1.5 1.8 2.0 2.1 2.0 Illnesses per million working hours (employees only) Security Using armed security (% of countries) 17 14 9 17 17 16 15 19 18 22 Using armed company security (% of countries) 0 1 1 1122222 Using armed contractor security (% of countries) 10 9 6 10 9 12 9 11 11 22 Gender diversity [O] In supervisory/professional positions (% women) 28.1 27.3 26.3 26.4 24.7 24.6 23.2 21.8 20.7 19.5 In management positions (% women) 18.2 17.6 17.0 16.1 15.3 17.7 16.2 12.9 12.2 11.3 In senior leadership positions (% women) 16.2 16.6 15.3 14.0 13.6 12.9 11.6 9.9 9.6 9.6 Regional diversity [O] % countries with majority of local nationals in senior leadership positions 42 34 36 37 32 33 25 36 n/c n/c Staff forums and grievance procedures % countries with staff access to staff forum, grievance procedure or other support system 100 99 100 99 100 100 99 100 100 100 Child labour (% countries with specifi c procedures in place) Own operations 100 100 99 98 100 99 95 88 83 78 Contractors 98 89 69 61 57 100 97 96 97 99 Suppliers 96 82 62 63 50 Forced labour (% countries with specifi c procedures in place) Own operations 100 100 99 98 n/c n/c n/c n/c n/c n/c Contractors and suppliers 100 97 95 89 n/c n/c n/c n/c n/c n/c Integrity Code of Conduct violations [P] 209 226 205 165 204 361 n/c n/c n/c n/c Contracts cancelled due to incompatibility with Business Principles 14 11 40 24 49 35 41 63 64 49 Joint ventures divested due to incompatibility with Business Principles 0 0 0 0 0 0 0 0 0 1 Contracting and procurement Estimated expenditure on goods and services from locally owned companies in lower-income countries ($ billion) [Q] 14 12 13 12 12 13 10 9 6 5 Social investment [R] Estimated voluntary social investment (equity share) ($ million) 149 125 121 132 148 170 140 127 106 102 Estimated social investment spend (equity share) in lower-income countries ($ million) [S] 67 45 61 54 61 65 n/c n/c n/c n/c [O] Diversity data obtained from our human resources system. [P] Code of Conduct violations reported to our global telephone helpline and dedicated website, and through internal channels. [Q] Estimated expenditure in countries where gross domestic product amounts to less than $15,000 a year per person (source: UNDP Human Development Index 2010). [R] Social investment spending varies from year to year depending on business climate, locations, and type of activities under way. This is voluntary social investment and does not include social investments made through contractual agreements with host governments, voluntary work by Shell employees and donations of equipment. [S] Estimated voluntary social investment spending in countries where gross domestic product amounts to less than $15,000 a year per person (source: UNDP Human Development Index 2010).

Social investment as well as contracting and procurement data collected via our fi nancial system since 2007. Data obtained from an internal survey completed by the senior Shell representative in each country. n/c Not calculated. 38 Shell Sustainability Report 2012 | reports.shell.com Our performance

EXTERNAL REVIEW COMMITTEE

Shell, for the eighth successive year, has invited an External Review Motoko Aizawa (Chair) Committee to assess its sustainability reporting. This letter provides our Advisor to the Sustainable Development assessment of Shell’s 2012 Sustainability Report. We express our views Network, World Bank, Japan as individuals, not on behalf of our organisations.

The External Review Committee (ERC or social performance information in a the Committee) is pleased to comment manner consistent with this responsibility on Shell’s 2012 Sustainability Report. theme, though the Committee would have The ERC’s engagement with Shell in this liked more commentary on performance Tom Burke CBE reporting cycle began in October 2012 data throughout the report. The ERC notes Environmental Policy Advisor, with multiple face-to-face meetings with that the report uses external opinions Rio Tinto Plc, UK members of Shell’s senior management and effectively to illustrate both progress and the Shell Board of Directors, including Chief challenges. The 2012 report incorporates a Executive Offi cer Peter Voser and Chad number of new features, some in response Holliday, Chair of the Corporate and Social to feedback from the ERC. Responsibility Committee of the Board. The ERC and Shell management next met in Sustainable development strategy January 2013, when the ERC had a chance and climate change James Hoggan to provide its reaction to the fi rst draft of the The ERC understands the core of Shell’s President, James Hoggan & Associates, report. strategy on sustainable development is to Canada use innovation and technology to deliver As with previous years, the engagement cleaner energy – through natural gas, process was well designed, and Shell carbon capture and storage (CCS), biofuels managers were open and informative. and energy effi ciency. The ERC thanks the Shell reporting team and senior management for a The ERC commends the action Shell took unique opportunity to understand Shell’s in 2012 toward CCS and appreciates Clarissa Lins sustainable development activities, the expanded explanation of Shell’s Executive Director, Foundation for challenges and outlook. approaches to operational energy Sustainable Development, Brazil effi ciency in this year’s report. Shell’s The purpose of the ERC’s extensive position on climate change would engagement with Shell management is to command greater public confi dence if enable us to understand Shell’s operational Shell could more fully explain how it context suffi ciently so that we can provide applies its $40 a tonne carbon shadow informed comments on Shell’s Sustainability price. Shell could also clarify how it Report and the company’s sustainability reconciles the differences between the Ndidi Nwuneli performance. We do not act as verifi ers of clear public positions it adopts on climate Founder, LEAP Africa and Co-Founder, information presented in this Report. (See change, for example by advocating AACE Foods, Nigeria box on page 39 for more detail on the for market mechanisms and a price on ERC’s role and relationship with Shell.) carbon, with the positions adopted by some industry organisations to which it This letter contains our opinions on Shell’s belongs. Beyond these observations, the 2012 report. We will meet with Shell’s ERC continues to feel that Shell’s activities Executive Committee in June 2013 to share in these areas should be presented as part our views on the company’s sustainability of a more coherent long-term strategy to Charles Secrett performance. address climate change, believing this Founder Member, The Robertsbridge would provide necessary context for its Group, UK Overall report quality stakeholders to understand Shell’s overall The ERC is of the view that the 2012 sustainable development strategy. report presents the material environmental and social challenges that affect Shell’s This year, the ERC had an opportunity business performance and are of interest to better appreciate Shell’s approach to to its key stakeholders. The report technology and innovation, and how provides a thorough account of Shell’s they connect to its long-term view on Dan Sperling PhD business activities, with focus on safety climate change and future challenges. Director, Institute of Transportation Studies, and responsibility. It presents Shell’s Given the central role they play in Shell’s University of California, Davis, USA environmental footprint data and some approach to sustainable development, reports.shell.com | Shell Sustainability Report 2012 39 Our performance

the Committee looks forward to additional to the ever-increasing attention on how material on technology and innovation in extractive companies manage governance ERC OVERVIEW future reports. risks, the explanation of how the Shell During the annual cycle, the Committee Control Framework applies to ventures met in person three times in The Hague, Risk and complexity with Shell’s involvement is very welcome, the Netherlands, and on other occasions The Committee recognises that Shell’s need and the ERC encourages Shell to generate by teleconference. We held meetings to replenish its reserves means that it is additional materials on this theme in future with key Shell senior management seeking them in increasingly challenging reporting. and other personnel to discuss in areas, such as deep oceans and the Arctic, detail Shell’s approach to sustainable and from sources such as oil sands. In Social performance and investment development and its sustainability the 2011 report, the ERC identifi ed some In the last report cycle, we understood reporting. tensions between Shell’s desire to develop that new social performance metrics were reserves in environmentally and socially being developed in 2011 and would be In reviewing Shell’s 2012 Sustainability sensitive locations and its ability to manage implemented in 2012, and that a new Report, the Committee concentrated on risks from these operations. The ERC in turn social performance strategy would be three main questions: asked for a more robust treatment of the forthcoming. The Committee also looked . Has Shell selected the most important operational challenges and Shell’s approach forward to learning about the progress topics for the report? to anticipate, identify and manage risks. in establishing additional grievance . How well has the report dealt with mechanisms for new projects. These items these topics and responded to The 2012 report describes these tensions, were not included in the 2012 report. stakeholder interest? risks and complexities more fully through . Did Shell provide suffi cient its use of case studies and “Focus” stories. Shell acknowledges that its operations information and access for us to do The report offers a sobering account of are potentially more vulnerable to above- our job effectively? the serious challenges that Shell faces the-ground or non-technical risks than in Nigeria. The detailed treatment below-the-ground or technical risks, and Our review did not include verifi cation of the Arctic, the Kulluk incident and that social performance is key to managing of performance data underlying the Shell’s acknowledgement of operational above-the-ground risks. Considering the report, or the information on which the shortcomings in Alaska in 2012 provide a materiality of such risks, the ERC hopes case studies in the report were based. balanced account of the situation, and the that Shell will move forward on social Committee anticipates further analysis and performance and include more information In addition to our comments on the refl ection in next year’s report. Given the about this in future sustainability reports. company’s sustainability reporting, concerns about these and other operations the Committee will meet with Shell’s in sensitive locations or challenging For the fi rst time, this year’s report includes Executive Committee in mid-2013 circumstances, future reports might be a breakdown of Shell’s social investments, (as we did in 2012), to discuss our more specifi c about lessons learned, and which helps readers understand the types observations on the company’s strategy how they are translated into actions and of investments made. It would be important and sustainability performance. systematically implemented and monitored for Shell and its stakeholders to know that across the company. the investments are having the desired In recognition of our time and impacts on communities. Shell could benefi t expertise, an honorarium was offered, The 2012 report provides detailed coverage from completion, publication and proactive payable either to us individually, to our on tight/shale gas and oil, which is helpful application of its social investment organisation, or to a charity of our for stakeholders. Shell has pushed for strategy, which would not only guide the choosing. We were also offered transparency of information on the chemicals prioritisation of its social investments at reimbursement for the expense of our used in fracking, which sets Shell apart local and global levels, but would also help travel and accommodation. from others. Nonetheless, the ERC wonders articulate the impacts, as well as enhance whether the report suffi ciently acknowledges the sustainability, effectiveness and communities’ concerns about fracking, effi ciency of these investments. particularly with regard to potential impacts its management and reporting team can on air and water. Shell is working to better Conclusion take the company’s sustainability reporting understand these impacts and has published While acknowledging the high quality to a new level of excellence. a set of operating principles designed to of Shell’s sustainability reports, which raise industry standards. Considering the distinguishes Shell among its peers, there The ERC now looks forward to engaging uncertainties around cumulative impacts is a growing desire on the part of the ERC with the Executive Committee to continue and fugitive emissions of methane, however, to see more strategic context and content its dialogue on Shell’s sustainability Shell’s assertions that its technologies in these reports. The Committee would like performance. are safe are not likely to fully address to see a more comprehensive presentation communities’ concerns without further of Shell’s vision, strategy and metrics research, monitoring and reporting. for sustainable development in a world facing climate change, growing energy This year’s report contains a section on demand, and continuing concern about how Shell works with its joint venture environmental and social impacts. It is partners, contractors and suppliers. Due clear from our engagement with Shell that 40 Shell Sustainability Report 2012 | reports.shell.com Our performance

ABOUT OUR CONTENT SELECTION DIAGRAM SIGNIFICANCE TO REPORTING STAKEHOLDERS INCLUDED IN - External Review Committee’s previous SUSTAINABILITY We began reporting voluntarily on our opinion letter REPORT environmental and social performance - Civil society dialogues with the fi rst Shell Report that covered - Stakeholder relations review 1997. Our reporting focuses on the - Global media review environmental and social challenges that - Investor feedback and indexes INCLUDED IF HIGH most affect business performance and - Reader feedback and social media SUSTAINABILITY CONTEXT OR COVERED - Reputation tracker survey matter most to our key stakeholders. ON THE WEB We use a thorough process to select - Website visits content for our reporting (see diagram). NOT REPORTED We provide regular information to the Carbon Disclosure Project, Dow Jones Sustainability Index, FTSE4Good Index and other organisations that assess the economic, environmental and social SIGNIFICANCE IN SIGNIFICANCE TO performance of companies. SUSTAINABILITY CONTEXT SHELL STRATEGY

Resulting topics are considered in their - Financial risks Internal controls such as audit trails and broader sustainability context based on: - Reputation risks

statistical checks help assure the accuracy - Sustainability priorities - UN Millennium Development Goals of the Shell Sustainability Report. The - Key projects - External Review Committee of independent Planetary boundaries research - WBCSD Vision 2050 report experts helps make sure our reporting - Shell business environment outlook is balanced, relevant and responsive to stakeholders’ interests. Lloyd’s Register Quality Assurance Ltd has provided limited assurance of our direct and indirect greenhouse gas emissions data Content selection process environmental and social topics published for 2012. Our reporting focuses on the environmental by public institutions and governmental and social challenges that matter most to organisations. We report in accordance with the our key stakeholders. These include local Global Reporting Initiative (GRI) and communities, partners, governments, non- Step 4 We include all the highest priority in line with the oil and gas industry governmental organisations, customers, topics in our report (see diagram). Those at guidelines developed by the International shareholders, investors, employees, media, the next level of importance are included if Petroleum Industry Environmental academics, contractors and suppliers. they have a higher weight in “sustainability Conservation Association (IPIECA), the context”; otherwise, they are covered on American Petroleum Institute (API) and We use a thorough process to select content the Shell corporate website. the International Association of Oil & for our reporting based on information from Gas Producers (OGP). GRI confi rmed external and internal sources. This process Step 5 Our External Review Committee our A+ reporting level for the information includes: reviews the content selection to ensure contained in this Sustainability Report, the that coverage is complete, relevant and Royal Dutch Shell plc Annual Report and Step 1 Identify and understand topics of balanced. Form 20-F for 2012, and on our corporate signifi cance to our stakeholders through website. The GRI content index is available a range of stakeholder engagements and on our corporate website. reviews.

Shell supports the UN Global Compact and Step 2 Identify topics of signifi cance its 10 principles covering human rights, to Shell’s business strategy through our Share your opinion labour, environment and anti-corruption. established internal processes. If you have any views on issues Sections of this Sustainability Report cover described in this report, or on the Shell’s progress in 2012 in these areas. Step 3 Combine the results into a matrix report itself, please email us at: and assess each topic in terms of its wider This report is supported on our corporate economic, environmental and social [email protected] website by more detailed information impact. Each topic is then assigned a on Shell’s approach to sustainable weighting according to its signifi cance Report ordering development. in “sustainability context”. To determine [email protected] “sustainability context” we review +31 (0)72 567 10 01 www.shell.com/sustainability authoritative research and forecasts on reports.shell.com | Shell Sustainability Report 2012 41 Our performance

ABOUT OUR DATA

There are inherent limitations to the accuracy of environmental and social data. We recognise that our environmental and social data will be affected by these limitations and continue to improve the integrity of our data by strengthening our Staatement internal controls.

All non-fi nancial data in this report are reported on a 100% basis for companies and joint ventures where we are the GRI hereby states that Royal Duutchh Shell plc has preseennted itsts report “Shell Sustainabilityainabili Reporepo t” to operator. Environmental data are for our direct emissions unless otherwise stated. We report in this way, in line with industry practice, because these are the data we can directly manage and affect through operational improvements.

Operations acquired or divested during the year are included only for the period of our ownership. Other data are collected from external sources, staff surveys and other internal sources as indicated. 2013 2013 2013 2013 AAmsterdamd , 22 March 20133 2013 2013 2013 2013 2013 2013 2013 2013 2013 2013 2013 2013 We only include data in this report that 2013 2013 2013 2013 have been confi rmed by the end of March 2013 2013 2013 2013 2013 2013 2013 2013 2013. If incidents are reclassifi ed or Nelmara Arbex 2013 2013 2013 2013 confi rmed, or if signifi cant data changes occur after preparation of this report, they will be updated in the following year’s publication. Data marked in the social Royal Dutch Shell plc data table come from an internal survey of) this report for external assurance. GRI accepts the reporter’s own criteria for choosing the relevant assurance provider. completed by the senior Shell representative in each country. The accuracy of environmental and social data may be lower than that of data obtained through Disclaimer: our fi nancial systems. later changes to such material. Data provided are subject to internal controls. Lloyd’s Register Quality Assurance Ltd has provided limited assurance of our REPORT SPECIFICATIONS direct and indirect greenhouse gas (GHG) The paper used for this report is Satimat Green, a Forest Stewardship Council (FSC) emissions data for 2012. Limited assurance certifi ed paper, produced from 60% FSC-certifi ed recycled fi bre and 40% FSC- means nothing has come to the auditor’s certifi ed virgin fi bre. All virgin fi bres are Elemental Chlorine Free bleached, without attention that would indicate that the using chlorine gas. The inks used are vegetable oil-based. The laminate used for the data are not correct. For GHG emissions cover is eco-friendly and allows the report to be fully recycled. we provide more detailed data on our corporate website. The printing of this document was carbon neutral: certifi ed carbon-offset projects

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