ANNUAL REPORT
Royal Dutch Shell plc
Annual Report and Form 20-F
for the year ended December 31, 2017
118
Financial statements
and supplements
118
Independent Auditors’ Reports related
to the Consolidated and Parent Company
Financial Statements
137 Consolidated Financial Statements
179 Supplementary information – oil and gas
(unaudited)
199 Parent Company Financial Statements
208 Independent Auditors’ Reports related
to the Royal Dutch Shell Dividend Access
Trust Financial Statements
213 Royal Dutch Shell Dividend Access Trust
Financial Statements
217
additional inFormation
217 Shareholder information
224 Section 13(r) of the US Securities
Exchange Act of 1934 disclosure
225 Non-GAAP measures reconciliations
227 Index to the Exhibits
228 Signatures
E1
Exhibits
contents
01
introduction
01 Form 20-F
02 Cross reference to Form 20-F
04 Terms and abbreviations
05 About this Report
06
strategic report
06 Chair’s message
07 Chief Executive Officer’s review
08 Strategy and outlook
10 Business overview
12 Risk factors
17 Market overview
19 Summary of results
22 Performance indicators
24 Integrated Gas
31 Upstream
38 Oil and gas information
46 Downstream
53 Corporate
54 Liquidity and capital resources
58 Environment and society
62 Climate change and energy transition
67 Our people
69
governance
69 The Board of Royal Dutch Shell plc
72 Senior Management
73 Directors’ Report
76 Corporate governance
90 Audit Committee Report
94 Directors’ Remuneration Report
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carbon neutralnatureOffice.com | NL-179-210031print production UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 20-F
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2017
Commission file number 001-32575
Royal Dutch Shell plc
(Exact name of registrant as specified in its charter)
England and Wales
(Jurisdiction of incorporation or organisation)
Carel van Bylandtlaan 30, 2596 HR, The Hague, The Netherlands
Tel. no: 011 31 70 377 9111
royaldutchshell.shareholders@shell.com
(Address of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act
Name of Each Exchange on Which Registered
New York Stock Exchange
New York Stock Exchange
Title of Each Class
American Depositary Shares representing two A ordinary shares
of the issuer with a nominal value of €0.07 each
American Depositary Shares representing two B ordinary shares
of the issuer with a nominal value of €0.07 each
1.625% Guaranteed Notes due 2018
1.9% Guaranteed Notes due 2018
2.0% Guaranteed Notes due 2018
Floating Rate Guaranteed Notes due 2018
1.375% Guaranteed Notes due May 2019
1.375% Guaranteed Notes due September 2019
4.3% Guaranteed Notes due 2019
Floating Rate Guaranteed Notes due 2019
2.125% Guaranteed Notes due 2020
2.25% Guaranteed Notes due 2020
4.375% Guaranteed Notes due 2020
Floating Rate Guaranteed Notes due 2020
1.75% Guaranteed Notes due 2021
1.875% Guaranteed Notes due 2021
2.375% Guaranteed Notes due 2022
2.25% Guaranteed Notes due 2023
3.4% Guaranteed Notes due 2023
3.25% Guaranteed Notes due 2025
2.5% Guaranteed Notes due 2026
2.875% Guaranteed Notes due 2026
4.125% Guaranteed Notes due 2035
6.375% Guaranteed Notes due 2038
5.5% Guaranteed Notes due 2040
3.625% Guaranteed Notes due 2042
4.55% Guaranteed Notes due 2043
4.375% Guaranteed Notes due 2045
3.75% Guaranteed Notes due 2046
4.00% Guaranteed Notes due 2046
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: none
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: none
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
Outstanding as of December 31, 2017:
4,570,138,647 A ordinary shares with a nominal value of €0.07 each.
3,742,624,272 B ordinary shares with a nominal value of €0.07 each.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company.
See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☑ Yes
☐ Yes
☑ Yes
☑ Yes
☐ No
☑ No
☐ No
☐ No
Large accelerated filer ☑ Accelerated filer ☐ Non-accelerated filer ☐
Emerging growth company ☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the
extended transition period for complying with any new or revised nancial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.
† The term “new or revised nancial accounting standards” refers to any update issued by the Financial Accounting Standards Board to its Accounting
Standards Codification after April 5, 2012.
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
International Financial Reporting Standards as issued by the International Accounting Standards Board.
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Copies of notices and communications from the Securities and Exchange Commission should be sent to:
Royal Dutch Shell plc
Carel van Bylandtlaan 30
2596 HR, The Hague, The Netherlands
Attn: Linda M. Szymanski
☐
☑
Item 17 ☐
U.S. GAAP ☐
Other ☐
Item 18 ☐
☐ Yes
☑ No
Shell Annual Report_Master Template.indd 1
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Cross reference to Form 20-F
Cross reference to Form 20-F
Part I
Item 1.
Item 2.
Item 3.
Item 4.
Item 4A.
Item 5.
Item 6.
Item 7.
Item 8.
Item 9.
Item 10.
Item 11.
Selected financial data
Property, plant and equipment
Tabular disclosure of contractual obligations
Reasons for the offer and use of proceeds
Risk factors
Liquidity and capital resources
Research and development, patents and licences, etc.
Trend information
Identity of Directors, Senior Management and Advisers
Offer Statistics and Expected Timetable
Key Information
A.
B. Capitalisation and indebtedness
C.
D.
Information on the Company
A. History and development of the company
B.
Business overview
C. Organisational structure
D.
Unresolved Staff Comments
Operating and Financial Review and Prospects
A. Operating results
B.
C.
D.
E. Off-balance sheet arrangements
F.
G. Safe harbour
Directors, Senior Management and Employees
A. Directors and senior management
B. Compensation
C. Board practices
Employees
D.
Share ownership
E.
Major Shareholders and Related Party Transactions
A. Major shareholders
B.
C.
Financial Information
A. Consolidated Statements and Other Financial Information
B.
The Offer and Listing
A. Offer and listing details
B.
Plan of distribution
C. Markets
D.
E.
F.
Additional Information
A.
B. Memorandum and articles of association
C. Material contracts
Exchange controls
D.
Taxation
E.
F.
Dividends and paying agents
G. Statement by experts
H. Documents on display
I.
Subsidiary information
Quantitative and Qualitative Disclosures About Market Risk
Selling shareholders
Dilution
Expenses of the issue
Related party transactions
Interests of experts and counsel
Significant changes
Share capital
Pages
N/A
N/A
21, 219
N/A
N/A
12-16
08, 10, 19-20, 24-37, 46-49, 55-57, 217, 225-226
08-21, 24-53, 58-61, 179-198, 224
10, E2-E20
08-09, 12-16, 19-20, 24-52, 58-61, 179-198
N/A
12-16, 19-53, 166-172
08-09, 19-21, 24-25, 31-33, 46-48, 53-58, 146-148, 156-159, 163-172
11
08-09, 12-16, 17-23, 24-29, 31-37, 46-49, 53, 62-66
57
57
57
69-72, 77-81
97-108
69-72, 76-83, 90-93, 97, 107-108, 114-116
67, 176
68, 80, 94-117, 172-173, 217
Part I
Part II
Item 13.
Item 14.
Item 15.
Item 16.
Item 12.
Description of Securities Other than Equity Securities
A. Debt Securities
B. Warrants and Rights
C. Other Securities
D. American Depositary Shares
Defaults, Dividend Arrearages and Delinquencies
Material Modifications to the Rights of Security Holders and Use of Proceeds
Controls and Procedures
[Reserved]
Item 16A.
Audit committee financial expert
Item 16B.
Code of Ethics
Item 16C.
Principal Accountant Fees and Services
Item 16D.
Exemptions from the Listing Standards for Audit Committees
Item 16E.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Item 16F.
Change in Registrant’s Certifying Accountant
Item 16G.
Corporate Governance
Item 16H.
Mine Safety Disclosure
Part III
Item 17.
Item 18.
Item 19.
Financial Statements
Financial Statements
Exhibits
82-83, 135, 210-211, E21-E22
Pages
N/A
N/A
N/A
N/A
N/A
217, 221-222
76-78, 90
93, 177, 216
77
77
56, 80
N/A
76-77
N/A
N/A
135-178, 210-216
227, E1-E27
218
74, 145, 155, 177, 216
N/A
54-57, 135-178, 210-216
75
220
N/A
217
N/A
N/A
N/A
N/A
83-89
N/A
222
222-223
N/A
N/A
5
N/A
54, 156, 166-172
INTRODUCTION SHELL ANNUAL REPORT AND FORM 20-F 2017
02
02
introduction SHELL ANNUAL REPORT AND FORM 20-F 2017
INTRODUCTION SHELL ANNUAL REPORT AND FORM 20-F 2017
03
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Part I
Item 12.
Part II
Item 13.
Item 14.
Item 15.
Item 16.
Item 16A.
Item 16B.
Item 16C.
Item 16D.
Item 16E.
Item 16F.
Item 16G.
Item 16H.
Part III
Item 17.
Item 18.
Item 19.
Description of Securities Other than Equity Securities
A. Debt Securities
B. Warrants and Rights
C. Other Securities
D. American Depositary Shares
Defaults, Dividend Arrearages and Delinquencies
Material Modifications to the Rights of Security Holders and Use of Proceeds
Controls and Procedures
[Reserved]
Audit committee financial expert
Code of Ethics
Principal Accountant Fees and Services
Exemptions from the Listing Standards for Audit Committees
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Change in Registrant’s Certifying Accountant
Corporate Governance
Mine Safety Disclosure
Financial Statements
Financial Statements
Exhibits
Pages
N/A
N/A
N/A
217, 221-222
N/A
N/A
82-83, 135, 210-211, E21-E22
76-78, 90
77
93, 177, 216
77
56, 80
N/A
76-77
N/A
N/A
135-178, 210-216
227, E1-E27
Liquidity and capital resources
08-09, 19-21, 24-25, 31-33, 46-48, 53-58, 146-148, 156-159, 163-172
Cross reference to Form 20-F
Part I
Item 1.
Item 2.
Item 3.
Identity of Directors, Senior Management and Advisers
Offer Statistics and Expected Timetable
Key Information
A.
Selected financial data
B. Capitalisation and indebtedness
Reasons for the offer and use of proceeds
C.
D.
Risk factors
Item 4.
Information on the Company
A. History and development of the company
B.
Business overview
C. Organisational structure
D.
Property, plant and equipment
Unresolved Staff Comments
Operating and Financial Review and Prospects
A. Operating results
Item 4A.
Item 5.
Research and development, patents and licences, etc.
Trend information
E. Off-balance sheet arrangements
F.
Tabular disclosure of contractual obligations
G. Safe harbour
Item 6.
Directors, Senior Management and Employees
A. Directors and senior management
B. Compensation
C. Board practices
Employees
Share ownership
Item 7.
Major Shareholders and Related Party Transactions
A. Major shareholders
Related party transactions
Interests of experts and counsel
Item 8.
Financial Information
B.
Significant changes
Item 9.
The Offer and Listing
Item 10.
Additional Information
A.
Share capital
B. Memorandum and articles of association
A. Offer and listing details
B.
Plan of distribution
C. Markets
Selling shareholders
Dilution
Expenses of the issue
C. Material contracts
Exchange controls
Taxation
Dividends and paying agents
G. Statement by experts
H. Documents on display
I.
Subsidiary information
B.
C.
D.
D.
E.
B.
C.
D.
E.
F.
D.
E.
F.
08, 10, 19-20, 24-37, 46-49, 55-57, 217, 225-226
08-21, 24-53, 58-61, 179-198, 224
08-09, 12-16, 19-20, 24-52, 58-61, 179-198
10, E2-E20
N/A
12-16, 19-53, 166-172
08-09, 12-16, 17-23, 24-29, 31-37, 46-49, 53, 62-66
69-72, 76-83, 90-93, 97, 107-108, 114-116
68, 80, 94-117, 172-173, 217
69-72, 77-81
97-108
67, 176
74, 145, 155, 177, 216
Pages
N/A
N/A
21, 219
N/A
N/A
12-16
11
57
57
57
218
N/A
75
220
N/A
217
N/A
N/A
N/A
222-223
N/A
83-89
N/A
222
N/A
N/A
5
N/A
A. Consolidated Statements and Other Financial Information
54-57, 135-178, 210-216
Item 11.
Quantitative and Qualitative Disclosures About Market Risk
54, 156, 166-172
INTRODUCTION SHELL ANNUAL REPORT AND FORM 20-F 2017
02
INTRODUCTION SHELL ANNUAL REPORT AND FORM 20-F 2017
03
SHELL ANNUAL REPORT AND FORM 20-F 2017 introduction
03
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Terms and abbreviations
Terms and abbreviations
About this Report
Currencies
$
€
£
US dollar
euro
sterling
Units of measurement
Miscellaneous
ADS
American Depositary Share
AGM
API
CCS
Annual General Meeting
American Petroleum Institute
carbon capture and storage
approximately 0.004 square kilometres
CCS
earnings
earnings on a current cost of supplies basis
acre
b(/d)
boe(/d)
kboe(/d)
MMBtu
mtpa
per
day
barrels (per day)
barrels of oil equivalent (per day); natural gas volumes are
converted into oil equivalent using a factor of 5,800 scf
per barrel
thousand barrels of oil equivalent (per day); natural gas
volumes are converted into oil equivalent using a factor of
5,800 scf per barrel
million British thermal units
million tonnes per annum
volumes are converted into a daily basis using a
calendar year
scf(/d)
standard cubic feet (per day)
Products
GTL
LNG
LPG
NGL
gas to liquids
liquefied natural gas
liquefied petroleum gas
natural gas liquids
CO2
EMTN
EPS
FCF
GAAP
GHG
HSSE
IAS
IEA
IFRS
IOGP
IPIECA
LTIP
OECD
OML
OPEC
OPL
PSC
PSP
carbon dioxide
Euro medium-term note
earnings per share
free cash flow
generally accepted accounting principles
greenhouse gas
health, safety, security and environment
International Accounting Standard
International Energy Agency
International Financial Reporting Standard(s)
International Association of Oil & Gas Producers
International Petroleum Industry Environmental Conservation
Association (global oil and gas industry association for
environmental and social issues)
Long-term Incentive Plan
Organisation for Economic Co-operation and Development
oil mining lease
Organization of the Petroleum Exporting Countries
oil prospecting licence
production-sharing contract
Performance Share Plan
REMCO
Remuneration Committee
SEC
TRCF
TSR
WTI
US Securities and Exchange Commission
total recordable case frequency
total shareholder return
West Texas Intermediate
The Royal Dutch Shell plc Annual Report and Form 20-F (this Report) serves as
This Report contains forward-looking statements (within the meaning of the
the Annual Report and Accounts in accordance with UK requirements and as
US Private Securities Litigation Reform Act of 1995) concerning the financial
the Annual Report on Form 20-F as filed with the US Securities and Exchange
condition, results of operations and businesses of Shell. All statements other
Commission (SEC) for the year ended December 31, 2017, for Royal Dutch
than statements of historical fact are, or may be deemed to be, forward-
Shell plc (the Company) and its subsidiaries (collectively referred to as Shell).
looking statements. Forward-looking statements are statements of future
This Report presents the Consolidated Financial Statements of Shell
expectations that are based on management’s current expectations and
(pages 137-178), the Parent Company Financial Statements of Shell (pages
assumptions and involve known and unknown risks and uncertainties that
199-207) and the Financial Statements of the Royal Dutch Shell Dividend
could cause actual results, performance or events to differ materially from
Access Trust (pages 213-216). Cross references to Form 20-F are set out on
those expressed or implied in these statements. Forward-looking statements
pages 02-03 of this Report.
Financial reporting terms used in this Report are in accordance with
International Financial Reporting Standards (IFRS). The Consolidated Financial
Statements comprise the financial statements of the Company and its
subsidiaries. “Subsidiaries” and “Shell subsidiaries” refer to those entities over
which the Company has control, either directly or indirectly. Entities and
unincorporated arrangements over which Shell has joint control are generally
referred to as “joint ventures” and “joint operations” respectively, and entities
over which Shell has significant influence but neither control nor joint control
are referred to as “associates”. “Joint ventures” and “joint operations” are
collectively referred to as “joint arrangements”.
In addition to the term “Shell”, in this Report “we”, “us” and “our” are also
used to refer to the Company and its subsidiaries in general or to those who
work for them. These terms are also used where no useful purpose is served
by identifying the particular entity or entities. The term “Shell interest” is used
for convenience to indicate the direct and/or indirect ownership interest held
by Shell in an entity or unincorporated joint arrangement. The companies in
which Royal Dutch Shell plc has a direct or indirect interest are separate legal
entities. Shell subsidiaries’ data include their interests in joint operations.
We also refer to “Shell’s net carbon footprint” in this Report. This includes
Shell’s carbon emissions from the production of our energy products, our
suppliers’ carbon emissions in supplying energy for that production, and our
customers’ carbon emissions associated with their use of the energy products
we sell. Shell only controls its own emissions but, to support society in
achieving the Paris Agreement goals, we aim to help and influence such
suppliers and consumers to likewise lower theirs. The use of the terminology
“Shell’s net carbon footprint” is for convenience only and not intended to
suggest these emissions are those of Shell or its subsidiaries.
Except where indicated, the figures shown in the tables in this Report are in
respect of subsidiaries only, without deduction of any non-controlling interest.
However, the term “Shell share” is used for convenience to refer to the
volumes of hydrocarbons that are produced, processed or sold through
subsidiaries, joint ventures and associates. All of a subsidiary’s production,
processing or sales volumes (including the share of joint operations) are
included in the Shell share, even if Shell owns less than 100% of the
subsidiary. In the case of joint ventures and associates, however, Shell-share
figures are limited only to Shell’s entitlement. In all cases, royalty payments in
kind are deducted from the Shell share.
include, among other things, statements concerning the potential exposure of
Shell to market risks and statements expressing management’s expectations,
beliefs, estimates, forecasts, projections and assumptions. These forward-
looking statements are identified by their use of terms and phrases such as
“aim”, “ambition”, “anticipate”, “believe”, “could”, “estimate”, “expect”,
“goals”, “intend”, “may”, “objectives”, “outlook”, “plan”, “probably”,
“project”, “risks”, “schedule”, “seek”, “should”, “target”, “will” and similar
terms and phrases. There are a number of factors that could affect the future
operations of Shell and could cause those results to differ materially from
those expressed in the forward-looking statements included in this Report,
including (without limitation): (a) price fluctuations in crude oil and natural
gas; (b) changes in demand for Shell’s products; (c) currency fluctuations;
(d) drilling and production results; (e) reserves estimates; (f) loss of market
share and industry competition; (g) environmental and physical risks; (h) risks
associated with the identification of suitable potential acquisition properties
and targets, and successful negotiation and completion of such transactions;
(i) the risk of doing business in developing countries and countries subject to
international sanctions; (j) legislative, fiscal and regulatory developments
including regulatory measures addressing climate change; (k) economic and
financial market conditions in various countries and regions; (l) political risks,
including the risks of expropriation and renegotiation of the terms of contracts
with governmental entities, delays or advancements in the approval of
projects and delays in the reimbursement for shared costs; and (m) changes in
trading conditions. Also see “Risk factors” on pages 12-16 for additional risks
and further discussion. No assurance is provided that future dividend
payments will match or exceed previous dividend payments. All forward-
looking statements contained in this Report are expressly qualified in their
entirety by the cautionary statements contained or referred to in this section.
Readers should not place undue reliance on forward-looking statements. Each
forward-looking statement speaks only as of the date of this Report. Neither
the Company nor any of its subsidiaries undertake any obligation to publicly
update or revise any forward-looking statement as a result of new information,
future events or other information. In light of these risks, results could differ
materially from those stated, implied or inferred from the forward-looking
statements contained in this Report.
This Report contains references to Shell’s website and to the Shell
Sustainability Report. These references are for the readers’ convenience only.
Shell is not incorporating by reference any information posted on
www.shell.com or in the Shell Sustainability Report.
The financial statements contained in this Report have been prepared in
Documents concerning the Company, or its predecessors for reporting
accordance with the provisions of the Companies Act 2006 and with IFRS as
purposes, which are referred to in this Report, have been filed with the SEC
adopted by the European Union. As applied to the financial statements, there
and may be examined and copied at the public reference facility maintained
are no material differences from IFRS as issued by the International
by the SEC at 100 F Street, N.E., Room 1580, Washington, DC 20549,
Accounting Standards Board (IASB); therefore, the financial statements have
USA. For further information on the operation of the public reference room
been prepared in accordance with IFRS as issued by the IASB. IFRS as
and the copy charges, call the SEC at 1-800-SEC-0330. All of the SEC
defined above includes interpretations issued by the IFRS Interpretations
filings made electronically by Shell are available to the public on the SEC
DOCUMENTS ON DISPLAY
Committee.
US currency.
Except where indicated, the figures shown in this Report are stated in
US dollars. As used herein all references to “dollars” or “$” are to the
website at www.sec.gov (commission file number 001-32575). This Report is
also available, free of charge, at www.shell.com/annualreport or at the
offices of Shell in The Hague, the Netherlands and London, United Kingdom.
Copies of this Report also may be obtained, free of charge, by mail.
INTRODUCTION SHELL ANNUAL REPORT AND FORM 20-F 2017
04
introduction SHELL ANNUAL REPORT AND FORM 20-F 2017
04
INTRODUCTION SHELL ANNUAL REPORT AND FORM 20-F 2017
05
Shell Annual Report_Master Template.indd 4
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Terms and abbreviations
About this Report
About this Report
approximately 0.004 square kilometres
CCS
earnings
earnings on a current cost of supplies basis
Currencies
$
€
£
acre
b(/d)
Units of measurement
US dollar
euro
sterling
barrels (per day)
per barrel
boe(/d)
barrels of oil equivalent (per day); natural gas volumes are
converted into oil equivalent using a factor of 5,800 scf
kboe(/d)
thousand barrels of oil equivalent (per day); natural gas
volumes are converted into oil equivalent using a factor of
volumes are converted into a daily basis using a
calendar year
scf(/d)
standard cubic feet (per day)
MMBtu
mtpa
per
day
Products
GTL
LNG
LPG
NGL
5,800 scf per barrel
million British thermal units
million tonnes per annum
gas to liquids
liquefied natural gas
liquefied petroleum gas
natural gas liquids
Miscellaneous
American Depositary Share
Annual General Meeting
American Petroleum Institute
carbon capture and storage
carbon dioxide
Euro medium-term note
earnings per share
free cash flow
generally accepted accounting principles
greenhouse gas
health, safety, security and environment
International Accounting Standard
International Energy Agency
International Financial Reporting Standard(s)
International Association of Oil & Gas Producers
International Petroleum Industry Environmental Conservation
Association (global oil and gas industry association for
environmental and social issues)
Long-term Incentive Plan
Organisation for Economic Co-operation and Development
oil mining lease
Organization of the Petroleum Exporting Countries
oil prospecting licence
production-sharing contract
Performance Share Plan
REMCO
Remuneration Committee
US Securities and Exchange Commission
total recordable case frequency
total shareholder return
West Texas Intermediate
ADS
AGM
API
CCS
CO2
EMTN
EPS
FCF
GAAP
GHG
HSSE
IAS
IEA
IFRS
IOGP
IPIECA
LTIP
OECD
OML
OPEC
OPL
PSC
PSP
SEC
TRCF
TSR
WTI
The Royal Dutch Shell plc Annual Report and Form 20-F (this Report) serves as
the Annual Report and Accounts in accordance with UK requirements and as
the Annual Report on Form 20-F as filed with the US Securities and Exchange
Commission (SEC) for the year ended December 31, 2017, for Royal Dutch
Shell plc (the Company) and its subsidiaries (collectively referred to as Shell).
This Report presents the Consolidated Financial Statements of Shell
(pages 137-178), the Parent Company Financial Statements of Shell (pages
199-207) and the Financial Statements of the Royal Dutch Shell Dividend
Access Trust (pages 213-216). Cross references to Form 20-F are set out on
pages 02-03 of this Report.
Financial reporting terms used in this Report are in accordance with
International Financial Reporting Standards (IFRS). The Consolidated Financial
Statements comprise the financial statements of the Company and its
subsidiaries. “Subsidiaries” and “Shell subsidiaries” refer to those entities over
which the Company has control, either directly or indirectly. Entities and
unincorporated arrangements over which Shell has joint control are generally
referred to as “joint ventures” and “joint operations” respectively, and entities
over which Shell has significant influence but neither control nor joint control
are referred to as “associates”. “Joint ventures” and “joint operations” are
collectively referred to as “joint arrangements”.
In addition to the term “Shell”, in this Report “we”, “us” and “our” are also
used to refer to the Company and its subsidiaries in general or to those who
work for them. These terms are also used where no useful purpose is served
by identifying the particular entity or entities. The term “Shell interest” is used
for convenience to indicate the direct and/or indirect ownership interest held
by Shell in an entity or unincorporated joint arrangement. The companies in
which Royal Dutch Shell plc has a direct or indirect interest are separate legal
entities. Shell subsidiaries’ data include their interests in joint operations.
We also refer to “Shell’s net carbon footprint” in this Report. This includes
Shell’s carbon emissions from the production of our energy products, our
suppliers’ carbon emissions in supplying energy for that production, and our
customers’ carbon emissions associated with their use of the energy products
we sell. Shell only controls its own emissions but, to support society in
achieving the Paris Agreement goals, we aim to help and influence such
suppliers and consumers to likewise lower theirs. The use of the terminology
“Shell’s net carbon footprint” is for convenience only and not intended to
suggest these emissions are those of Shell or its subsidiaries.
Except where indicated, the figures shown in the tables in this Report are in
respect of subsidiaries only, without deduction of any non-controlling interest.
However, the term “Shell share” is used for convenience to refer to the
volumes of hydrocarbons that are produced, processed or sold through
subsidiaries, joint ventures and associates. All of a subsidiary’s production,
processing or sales volumes (including the share of joint operations) are
included in the Shell share, even if Shell owns less than 100% of the
subsidiary. In the case of joint ventures and associates, however, Shell-share
figures are limited only to Shell’s entitlement. In all cases, royalty payments in
kind are deducted from the Shell share.
The financial statements contained in this Report have been prepared in
accordance with the provisions of the Companies Act 2006 and with IFRS as
adopted by the European Union. As applied to the financial statements, there
are no material differences from IFRS as issued by the International
Accounting Standards Board (IASB); therefore, the financial statements have
been prepared in accordance with IFRS as issued by the IASB. IFRS as
defined above includes interpretations issued by the IFRS Interpretations
Committee.
Except where indicated, the figures shown in this Report are stated in
US dollars. As used herein all references to “dollars” or “$” are to the
US currency.
This Report contains forward-looking statements (within the meaning of the
US Private Securities Litigation Reform Act of 1995) concerning the financial
condition, results of operations and businesses of Shell. All statements other
than statements of historical fact are, or may be deemed to be, forward-
looking statements. Forward-looking statements are statements of future
expectations that are based on management’s current expectations and
assumptions and involve known and unknown risks and uncertainties that
could cause actual results, performance or events to differ materially from
those expressed or implied in these statements. Forward-looking statements
include, among other things, statements concerning the potential exposure of
Shell to market risks and statements expressing management’s expectations,
beliefs, estimates, forecasts, projections and assumptions. These forward-
looking statements are identified by their use of terms and phrases such as
“aim”, “ambition”, “anticipate”, “believe”, “could”, “estimate”, “expect”,
“goals”, “intend”, “may”, “objectives”, “outlook”, “plan”, “probably”,
“project”, “risks”, “schedule”, “seek”, “should”, “target”, “will” and similar
terms and phrases. There are a number of factors that could affect the future
operations of Shell and could cause those results to differ materially from
those expressed in the forward-looking statements included in this Report,
including (without limitation): (a) price fluctuations in crude oil and natural
gas; (b) changes in demand for Shell’s products; (c) currency fluctuations;
(d) drilling and production results; (e) reserves estimates; (f) loss of market
share and industry competition; (g) environmental and physical risks; (h) risks
associated with the identification of suitable potential acquisition properties
and targets, and successful negotiation and completion of such transactions;
(i) the risk of doing business in developing countries and countries subject to
international sanctions; (j) legislative, fiscal and regulatory developments
including regulatory measures addressing climate change; (k) economic and
financial market conditions in various countries and regions; (l) political risks,
including the risks of expropriation and renegotiation of the terms of contracts
with governmental entities, delays or advancements in the approval of
projects and delays in the reimbursement for shared costs; and (m) changes in
trading conditions. Also see “Risk factors” on pages 12-16 for additional risks
and further discussion. No assurance is provided that future dividend
payments will match or exceed previous dividend payments. All forward-
looking statements contained in this Report are expressly qualified in their
entirety by the cautionary statements contained or referred to in this section.
Readers should not place undue reliance on forward-looking statements. Each
forward-looking statement speaks only as of the date of this Report. Neither
the Company nor any of its subsidiaries undertake any obligation to publicly
update or revise any forward-looking statement as a result of new information,
future events or other information. In light of these risks, results could differ
materially from those stated, implied or inferred from the forward-looking
statements contained in this Report.
This Report contains references to Shell’s website and to the Shell
Sustainability Report. These references are for the readers’ convenience only.
Shell is not incorporating by reference any information posted on
www.shell.com or in the Shell Sustainability Report.
DOCUMENTS ON DISPLAY
Documents concerning the Company, or its predecessors for reporting
purposes, which are referred to in this Report, have been filed with the SEC
and may be examined and copied at the public reference facility maintained
by the SEC at 100 F Street, N.E., Room 1580, Washington, DC 20549,
USA. For further information on the operation of the public reference room
and the copy charges, call the SEC at 1-800-SEC-0330. All of the SEC
filings made electronically by Shell are available to the public on the SEC
website at www.sec.gov (commission file number 001-32575). This Report is
also available, free of charge, at www.shell.com/annualreport or at the
offices of Shell in The Hague, the Netherlands and London, United Kingdom.
Copies of this Report also may be obtained, free of charge, by mail.
INTRODUCTION SHELL ANNUAL REPORT AND FORM 20-F 2017
04
INTRODUCTION SHELL ANNUAL REPORT AND FORM 20-F 2017
05
SHELL ANNUAL REPORT AND FORM 20-F 2017 introduction
05
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strategic report
Strategic Report
Chair’s message: Powering progress together
Chair’s message: Powering progress together
Chief Executive Officer’s review:
Building a world-class investment case
I would like to take this opportunity to thank everyone who contributed to
Shell’s strong business performance in 2017, including our customers,
partners and staff. The successful integration of BG’s business into our
portfolio during 2016, combined with ongoing efforts to reduce costs and
debt, are helping to reshape Shell into a world-class investment.
In his review, our Chief Executive Officer Ben van Beurden outlines our
performance and how this is creating value for shareholders. I would like to
talk about how we are also working to thrive in the energy transition, while
continuing to contribute to society.
The challenge facing global society is clear: more than 1 billion people in the
developing world today still live without the full benefits that energy can
provide. Many hundreds of millions more will need energy in the future.
Bringing the benefits of energy to everyone on the planet, while managing the
risks of climate change, will require fundamental changes in the way energy
is produced and used around the world.
As Mahatma Gandhi is often quoted as saying, “The future depends on what
you do today.”
policies that reshape several sectors of the economy and enable the
development of lower-carbon and renewable sources of energy, supported by
technologies such as carbon capture and storage.
One of the most effective ways of doing this are government-led carbon
pricing mechanisms. Any such framework for incentivising the multitrillion-
dollar investments that will be needed to combat climate change must have
strong global support. Society will be able to achieve much more once
effective government-led carbon pricing systems are in place.
As the future depends on what we all do today, Shell is already working to
ensure its long-term business relevance by playing an active role in the energy
transition.
The quality and diversity of our people are vital to the success of our
approach. In 2017, we welcomed two more women to the Board. Today,
we agreed to seek shareholder approval for the appointment of Ann
Godbehere at the Annual General Meeting (AGM) to be held in May.
If approved by shareholders, five women and six men will sit on the Board
before this year is over.
Shell is working today to make a better future. In a step that demonstrates our
determination to play our part in a cleaner energy future, we announced an
ambition, pegged to society’s progress, to reduce the net carbon footprint of
our operations and of our customers’ emissions from using our products.
I would like to thank Hans Wijers, who will not be standing for reappointment
at the AGM, for his nine years of outstanding contributions to the Board,
including service as Senior Independent Director, Chair of the Remuneration
Committee and Chair of the Corporate and Social Responsibility Committee.
It is a real honour to serve as Chair of your Board as we continue to work to
make a future that is better for all.
and chemicals industry conditions.
Chad Holliday
Chair
As part of our drive to help power progress with more and cleaner energy
solutions, we will offer customers more low-carbon products and services,
such as lower-carbon fuels for drivers and low-carbon energy for homes and
businesses.
Expanding our power supply business, including investments in electric vehicle
charging systems, will help us to deliver cleaner energy while other parts of
our business work to meet rising global demand for key products such as
natural gas, the cleanest-burning hydrocarbon.
Powering an increasing variety of human activities with electricity can help to
reduce emissions while providing energy to more people. To reduce
emissions, this long-term electrification of the economy will require a
combination of renewables and more natural gas in place of coal.
However, electricity is unlikely to replace oil or natural gas in some key parts
of the economy, such as in heavy road transport, aviation and shipping. This
means the world will need large quantities of oil and natural gas for decades
to come. At the same time, production from many oil and gas fields is
declining and continued investment is needed to develop new resources.
Oil and gas will remain central to our business for many years.
We are increasingly active in wind and solar power. But today, the greatest
contribution Shell can make to providing more and cleaner energy is to
deliver more natural gas. Gas is expected to play an increasingly important
part in global energy supply over the next few decades as more communities
seek cleaner alternatives to coal.
Using natural gas for power generation or as a cleaner fuel for transport, for
example, can play a critical role in tackling climate change. But emissions of
its chief component, methane, a potent greenhouse gas, must be reduced.
Shell and seven other major natural gas producers announced plans in
November to further reduce methane emissions from assets they operate.
But business alone cannot drive the wider and more profound changes
required across global society. Governments around the world need to
accelerate change by establishing policies that encourage businesses to do
more to overcome the challenges ahead. Governments need to introduce
STRATEGIC REPORT SHELL ANNUAL REPORT AND FORM 20-F 2017
06
strategic report SHELL ANNUAL REPORT AND FORM 20-F 2017
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Shell delivered a strong financial performance in 2017. We are making
good progress towards building a world-class investment case.
The progress of our divestments has helped us to reduce net debt, with
gearing standing at 24.8% at the end of 2017, down from 28.0% at the
end of 2016. Debt reduction remains a priority and after this programme is
Higher oil and gas prices, combined with our relentless focus on performance
completed we expect to continue divestments at an average rate of more than
and competitiveness, enabled us to increase our operating cash flow.
$5 billion a year until at least 2020.
We also further reshaped and refined our portfolio through our divestment
programme. These factors helped to reduce debt and strengthen our financial
framework. We continue to closely control costs and investment levels,
working to improve our capital efficiency while improving the quality of our
portfolio through asset sales and new projects.
Capital investment in 2017 was $24 billion. That is lower than the
$25 billion outlook we have given and reflects continued capital discipline
and capital efficiency improvements. We will continue to carefully control our
investment levels. We expect our annual organic capital investment to remain
between $25 billion and $30 billion until 2020. But we see $30 billion as
There was a terrible incident in Pakistan in June when a contractor road tanker
a ceiling, even if oil prices rise, while $25 billion is not a floor – we may go
overturned while transporting fuel from a Shell depot, following which there was
below this.
a spill that subsequently ignited. Tragically, the fire caused more than 200
fatalities. Sadly, a contractor also died in a road accident in Canada and we
had a fatality in Nigeria. These incidents underscore the need for all Shell
contractors, suppliers and employees to adhere to effective health and safety
standards at all times. Any incident is one incident too many and we must reflect
We maintain a “lower forever” approach to our cost management, with an
outlook of less than $38 billion a year for operating expenses until at least
2020, assuming no portfolio impacts or other external effects. This outlook
excludes potential impacts of restructuring and redundancies, as well as
deeply on these events. We must redouble our focus on safety.
certain other provisions.
RESULTS
ENERGY FUTURE
Income for the period was $13.4 billion in 2017 compared with
$4.8 billion in 2016. Earnings on a current cost of supplies basis were
$12.5 billion, compared with $3.7 billion in 2016.
Over the next few decades, we plan to show leadership in the oil and gas
industry, while responding to society’s need for more and cleaner energy as
the world moves to a low-carbon energy system.
A rise in crude oil and natural gas prices supported Upstream and Integrated
Tackling climate change is a multi-generational challenge for society –
Gas earnings. Our Downstream earnings benefited from improved refining
including businesses, governments and consumers. As the global population
grows and living standards rise, it will mean society meeting increasing
energy demand with an ever-lower carbon footprint. We will play our part.
We distributed $15.6 billion to shareholders in dividends in 2017, including
those taken as shares under our Scrip Dividend Programme. The strength of
In November, we announced a net carbon footprint reduction ambition
our balance sheet, coupled with strong cash flows and continuing focus on
covering not just emissions from our own operations but also those produced
capital efficiency, allowed us to cancel the Scrip Dividend Programme with
by customers when they use the energy products we sell. We plan to do this
effect from the fourth quarter 2017 dividend. I am confident that we can do
in step with society’s drive to align with the Paris climate agreement. We aim
this while investing at levels that maintain growth in our portfolio.
to reduce the overall footprint of our energy products by around 20% by
2035 and by around half by 2050. This measure will be reviewed every five
At Management Day in November, we confirmed our intention to undertake a
years to ensure progress is in line with wider society’s progress towards the
share buyback programme of at least $25 billion in the period 2017 to 2020,
reductions required to meet the Paris goals.
subject to progress with debt reduction and a recovery in oil prices. We also
raised our outlook for annual free cash flow to between $30 billion and
$35 billion by 2020, at a Brent crude oil price of $60 a barrel (real terms
2016). This is $5 billion more than the outlook range we gave in June 2016.
This includes the impact of acquisitions and proceeds from divestments, while
excluding free cash flow from assets after planned divestments.
Our delivery of new projects continues and we remain on track to deliver
1 million barrels of oil equivalent a day (boe/d) from new projects between
2014 and 2018. Overall, our production averaged 3.7 million boe/d in
2017, in line with 2016, with production from new fields offsetting the
impact of field declines and divestments.
Our $30 billion divestment programme for 2016-18 made good progress in
2017. Divestments included oil sands interests in Canada, onshore upstream
operations in Gabon, a number of assets in the UK North Sea, and our
shares in Woodside in Australia. Other divestments included our interest in a
petrochemicals joint venture in Saudi Arabia and the separation of assets of
the Motiva joint venture in the USA.
Our New Energies unit, which we created in 2016, invested in commercial
opportunities linked to the energy transition in 2017. We acquired
NewMotion, one of Europe’s largest electric vehicle charging providers,
in October. And, in December, we agreed to buy First Utility, a household
energy provider in the UK.
We expect our capital investment in New Energies to be $1 billion to
$2 billion a year, on average, until 2020. We will continue to target
opportunities in new fuels and power, two areas where we can effectively
apply our Downstream and Integrated Gas expertise.
Such steps, combined with the strategy and strength of our portfolio that
underpins them, will help deepen Shell’s financial resilience and
competitiveness, helping to ensure our long-term business relevance during the
energy transition.
In a changing energy landscape, we will continue our focus on delivering
strong shareholder returns and cash as we progress confidently along the
path to becoming – and remaining – a world-class investment.
This streamlining of our portfolio is part of our ongoing effort to raise
efficiency through reduced costs and concentrating on our most competitive
businesses.
Ben van Beurden
Chief Executive Officer
STRATEGIC REPORT SHELL ANNUAL REPORT AND FORM 20-F 2017
07
Strategic Report
Chair’s message: Powering progress together
Chief Executive Offi cer’s review:
Chief Executive Officer’s review:
Building a world-class investment case
Building a world-class investment case
I would like to take this opportunity to thank everyone who contributed to
Shell’s strong business performance in 2017, including our customers,
partners and staff. The successful integration of BG’s business into our
portfolio during 2016, combined with ongoing efforts to reduce costs and
debt, are helping to reshape Shell into a world-class investment.
In his review, our Chief Executive Officer Ben van Beurden outlines our
performance and how this is creating value for shareholders. I would like to
talk about how we are also working to thrive in the energy transition, while
continuing to contribute to society.
The challenge facing global society is clear: more than 1 billion people in the
developing world today still live without the full benefits that energy can
provide. Many hundreds of millions more will need energy in the future.
Bringing the benefits of energy to everyone on the planet, while managing the
risks of climate change, will require fundamental changes in the way energy
is produced and used around the world.
transition.
policies that reshape several sectors of the economy and enable the
development of lower-carbon and renewable sources of energy, supported by
technologies such as carbon capture and storage.
One of the most effective ways of doing this are government-led carbon
pricing mechanisms. Any such framework for incentivising the multitrillion-
dollar investments that will be needed to combat climate change must have
strong global support. Society will be able to achieve much more once
effective government-led carbon pricing systems are in place.
As the future depends on what we all do today, Shell is already working to
ensure its long-term business relevance by playing an active role in the energy
The quality and diversity of our people are vital to the success of our
approach. In 2017, we welcomed two more women to the Board. Today,
we agreed to seek shareholder approval for the appointment of Ann
Godbehere at the Annual General Meeting (AGM) to be held in May.
As Mahatma Gandhi is often quoted as saying, “The future depends on what
If approved by shareholders, five women and six men will sit on the Board
you do today.”
before this year is over.
Shell is working today to make a better future. In a step that demonstrates our
determination to play our part in a cleaner energy future, we announced an
ambition, pegged to society’s progress, to reduce the net carbon footprint of
our operations and of our customers’ emissions from using our products.
I would like to thank Hans Wijers, who will not be standing for reappointment
at the AGM, for his nine years of outstanding contributions to the Board,
including service as Senior Independent Director, Chair of the Remuneration
Committee and Chair of the Corporate and Social Responsibility Committee.
It is a real honour to serve as Chair of your Board as we continue to work to
make a future that is better for all.
Chad Holliday
Chair
As part of our drive to help power progress with more and cleaner energy
solutions, we will offer customers more low-carbon products and services,
such as lower-carbon fuels for drivers and low-carbon energy for homes and
businesses.
Expanding our power supply business, including investments in electric vehicle
charging systems, will help us to deliver cleaner energy while other parts of
our business work to meet rising global demand for key products such as
natural gas, the cleanest-burning hydrocarbon.
Powering an increasing variety of human activities with electricity can help to
reduce emissions while providing energy to more people. To reduce
emissions, this long-term electrification of the economy will require a
combination of renewables and more natural gas in place of coal.
However, electricity is unlikely to replace oil or natural gas in some key parts
of the economy, such as in heavy road transport, aviation and shipping. This
means the world will need large quantities of oil and natural gas for decades
to come. At the same time, production from many oil and gas fields is
declining and continued investment is needed to develop new resources.
Oil and gas will remain central to our business for many years.
We are increasingly active in wind and solar power. But today, the greatest
contribution Shell can make to providing more and cleaner energy is to
deliver more natural gas. Gas is expected to play an increasingly important
part in global energy supply over the next few decades as more communities
seek cleaner alternatives to coal.
Using natural gas for power generation or as a cleaner fuel for transport, for
example, can play a critical role in tackling climate change. But emissions of
its chief component, methane, a potent greenhouse gas, must be reduced.
Shell and seven other major natural gas producers announced plans in
November to further reduce methane emissions from assets they operate.
But business alone cannot drive the wider and more profound changes
required across global society. Governments around the world need to
accelerate change by establishing policies that encourage businesses to do
more to overcome the challenges ahead. Governments need to introduce
Shell delivered a strong financial performance in 2017. We are making
good progress towards building a world-class investment case.
Higher oil and gas prices, combined with our relentless focus on performance
and competitiveness, enabled us to increase our operating cash flow.
We also further reshaped and refined our portfolio through our divestment
programme. These factors helped to reduce debt and strengthen our financial
framework. We continue to closely control costs and investment levels,
working to improve our capital efficiency while improving the quality of our
portfolio through asset sales and new projects.
There was a terrible incident in Pakistan in June when a contractor road tanker
overturned while transporting fuel from a Shell depot, following which there was
a spill that subsequently ignited. Tragically, the fire caused more than 200
fatalities. Sadly, a contractor also died in a road accident in Canada and we
had a fatality in Nigeria. These incidents underscore the need for all Shell
contractors, suppliers and employees to adhere to effective health and safety
standards at all times. Any incident is one incident too many and we must reflect
deeply on these events. We must redouble our focus on safety.
The progress of our divestments has helped us to reduce net debt, with
gearing standing at 24.8% at the end of 2017, down from 28.0% at the
end of 2016. Debt reduction remains a priority and after this programme is
completed we expect to continue divestments at an average rate of more than
$5 billion a year until at least 2020.
Capital investment in 2017 was $24 billion. That is lower than the
$25 billion outlook we have given and reflects continued capital discipline
and capital efficiency improvements. We will continue to carefully control our
investment levels. We expect our annual organic capital investment to remain
between $25 billion and $30 billion until 2020. But we see $30 billion as
a ceiling, even if oil prices rise, while $25 billion is not a floor – we may go
below this.
We maintain a “lower forever” approach to our cost management, with an
outlook of less than $38 billion a year for operating expenses until at least
2020, assuming no portfolio impacts or other external effects. This outlook
excludes potential impacts of restructuring and redundancies, as well as
certain other provisions.
RESULTS
Income for the period was $13.4 billion in 2017 compared with
$4.8 billion in 2016. Earnings on a current cost of supplies basis were
$12.5 billion, compared with $3.7 billion in 2016.
ENERGY FUTURE
Over the next few decades, we plan to show leadership in the oil and gas
industry, while responding to society’s need for more and cleaner energy as
the world moves to a low-carbon energy system.
A rise in crude oil and natural gas prices supported Upstream and Integrated
Gas earnings. Our Downstream earnings benefited from improved refining
and chemicals industry conditions.
Tackling climate change is a multi-generational challenge for society –
including businesses, governments and consumers. As the global population
grows and living standards rise, it will mean society meeting increasing
energy demand with an ever-lower carbon footprint. We will play our part.
We distributed $15.6 billion to shareholders in dividends in 2017, including
those taken as shares under our Scrip Dividend Programme. The strength of
our balance sheet, coupled with strong cash flows and continuing focus on
capital efficiency, allowed us to cancel the Scrip Dividend Programme with
effect from the fourth quarter 2017 dividend. I am confident that we can do
this while investing at levels that maintain growth in our portfolio.
At Management Day in November, we confirmed our intention to undertake a
share buyback programme of at least $25 billion in the period 2017 to 2020,
subject to progress with debt reduction and a recovery in oil prices. We also
raised our outlook for annual free cash flow to between $30 billion and
$35 billion by 2020, at a Brent crude oil price of $60 a barrel (real terms
2016). This is $5 billion more than the outlook range we gave in June 2016.
This includes the impact of acquisitions and proceeds from divestments, while
excluding free cash flow from assets after planned divestments.
Our delivery of new projects continues and we remain on track to deliver
1 million barrels of oil equivalent a day (boe/d) from new projects between
2014 and 2018. Overall, our production averaged 3.7 million boe/d in
2017, in line with 2016, with production from new fields offsetting the
impact of field declines and divestments.
Our $30 billion divestment programme for 2016-18 made good progress in
2017. Divestments included oil sands interests in Canada, onshore upstream
operations in Gabon, a number of assets in the UK North Sea, and our
shares in Woodside in Australia. Other divestments included our interest in a
petrochemicals joint venture in Saudi Arabia and the separation of assets of
the Motiva joint venture in the USA.
In November, we announced a net carbon footprint reduction ambition
covering not just emissions from our own operations but also those produced
by customers when they use the energy products we sell. We plan to do this
in step with society’s drive to align with the Paris climate agreement. We aim
to reduce the overall footprint of our energy products by around 20% by
2035 and by around half by 2050. This measure will be reviewed every five
years to ensure progress is in line with wider society’s progress towards the
reductions required to meet the Paris goals.
Our New Energies unit, which we created in 2016, invested in commercial
opportunities linked to the energy transition in 2017. We acquired
NewMotion, one of Europe’s largest electric vehicle charging providers,
in October. And, in December, we agreed to buy First Utility, a household
energy provider in the UK.
We expect our capital investment in New Energies to be $1 billion to
$2 billion a year, on average, until 2020. We will continue to target
opportunities in new fuels and power, two areas where we can effectively
apply our Downstream and Integrated Gas expertise.
Such steps, combined with the strategy and strength of our portfolio that
underpins them, will help deepen Shell’s financial resilience and
competitiveness, helping to ensure our long-term business relevance during the
energy transition.
In a changing energy landscape, we will continue our focus on delivering
strong shareholder returns and cash as we progress confidently along the
path to becoming – and remaining – a world-class investment.
This streamlining of our portfolio is part of our ongoing effort to raise
efficiency through reduced costs and concentrating on our most competitive
businesses.
Ben van Beurden
Chief Executive Officer
STRATEGIC REPORT SHELL ANNUAL REPORT AND FORM 20-F 2017
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We fully support the Paris Agreement, and its goal of keeping the rise in global
temperatures to below two degrees Celsius. After having carefully listened to our
critics, supporters and shareholders, in step with society’s drive to align with the
Paris Agreement, we have set a long-term ambition to reduce the net carbon
footprint of our energy products, measured in grams of carbon-dioxide
equivalent per megajoule consumed, by around 20% by 2035 and by around
50% by 2050. This demonstrates leadership in the industry climate change
debate.
The statements in this “Strategy and outlook” section, including those related
to our growth strategies and our expected or potential future cash flow from
operations, free cash flow, operating expenses, capital investment,
divestments, production and net carbon footprint are based on management’s
current expectations and certain material assumptions and, accordingly,
involve risks and uncertainties that could cause actual results, performance or
events to differ materially from those expressed or implied herein. See “About
this Report” on page 05 and “Risk factors” on pages 12-16.
Strategy and outlook
Strategy and outlook
STRATEGY
Shell’s purpose is to power progress together with more and cleaner energy
solutions. Our strategy is to strengthen our position as a leading energy
company by providing oil and gas and low-carbon energy as the world’s
energy system changes. Safety and social responsibility are fundamental to
our business approach. Shell will only succeed by working with customers,
governments, business partners, investors and other stakeholders.
■ Emerging opportunities are strategic themes that are expected to become
growth priorities after further development. These opportunities should
provide us with material growth in free cash flow in the next decade or
beyond. We seek to manage our exposure to these businesses while
establishing scale. Our emerging opportunities currently are Shales in
Upstream and New Energies, which is part of the Integrated Gas and
New Energies organisation.
Our strategy is founded on our outlook for the energy sector and the chance to
grasp the opportunities arising from the substantial changes in the world around
us. The rising standard of living of a growing global population is likely to
continue to drive demand for energy, including oil and gas, for years to come.
At the same time, technology changes and the need to tackle climate change
means there is a transition under way to a lower-carbon, multi-source energy
system with increasing customer choice. We recognise that the pace and
specific path forward is uncertain and so requires agile decision making.
STRATEGIC AMBITIONS
Against this backdrop, we have the following strategic ambitions to guide us
in pursuing our purpose:
■ to provide a world-class investment case. This involves growing free cash
flow and increasing returns, all built upon a strong financial framework and
resilient portfolio;
■ to thrive in the energy transition by responding to society’s desire for more
and cleaner, convenient and competitive energy; and
■ to sustain a strong societal licence to operate and contribute to society
through a shared value approach to our activities.
The execution of our strategy is founded on becoming a more customer-centric
and simpler company, focused on delivering higher and more predictable
returns and growing free cash flow. By investing in competitive projects,
driving down costs and selling non-core businesses, Shell continues to seek to
reshape its portfolio into a more resilient and focused company.
Our ability to achieve our strategic ambitions depends on how we respond to
competitive forces. We continuously assess the external environment – the
markets as well as the underlying economic, political, social and
environmental drivers that shape them – to evaluate changes in competitive
forces and business models. We undertake regular reviews of the markets we
operate in and analyse our traditional and non-traditional competitors’
strengths and weaknesses to understand our competitive position. We
maintain business strategies and plans that focus on actions and capabilities
to create and sustain competitive advantage. We maintain a risk
management framework that regularly assesses our response to, and risk
appetite for, identified risk factors (see “Risk factors” on page 12).
STRATEGIC THEMES
As part of our strategy, we divide our portfolio into strategic themes, each
with distinctive capabilities, growth strategies, risk management, capital
allocation and expected returns:
■ Cash engines are strategic themes that are expected to provide strong and
resilient returns and free cash flow, funding shareholder returns and
strengthening the balance sheet. Shell continues to invest in selective growth
opportunities for cash engines. Our cash engines are Conventional Oil and
Gas in Upstream, Integrated Gas, and Oil Products in Downstream.
■ Growth priorities are the cash engines of the future. Shell seeks to invest in
affordable growth in advantaged positions with a pathway to free cash
flow and returns in the near future. Our growth priorities currently are Deep
water in Upstream and Chemicals in Downstream.
For more details on how the strategic themes are embedded into our
businesses, see “Business Overview” on page 11.
Our intention is to have an advantaged and resilient position in each strategic
theme to drive an optimal free cash flow and returns profile over multiple
timelines. When we set our plans and goals, we do so on the basis of
delivering sustained returns over decades.
We aim to leverage our diverse global business portfolio and customer-focused
businesses, which have been built around the strength of the Shell brand.
Our Executive Directors’ remuneration is linked to the successful delivery of our
strategy, based on performance indicators that are aligned with shareholder
interests. Long-term incentives form the majority of the Executive Directors’
remuneration for above-target performance. Our Long-term Incentive Plan
includes cash generation, capital discipline, and value created for
shareholders. See the “Directors’ Remuneration Report” on page 112.
OUTLOOK FOR 2018 AND BEYOND
We continuously seek to improve our operating performance, with an
emphasis on health, safety, security, environment and asset performance.
In order to maximise sustainable free cash flows, we will also continue to
manage operating expenses, capital investment, divestments and delivery of
new projects.
We maintain a “lower forever” mindset in our cost management, with an
outlook of less than $38 billion a year for operating expenses until 2020,
assuming no portfolio impacts or other external effects. This outlook excludes
potential impacts of restructuring and redundancies, as well as certain other
provisions.
Our organic capital investment outlook remains between $25 billion and
$30 billion a year until 2020. We see $30 billion as a ceiling, even in a
high oil price environment. For 2018, we expect to maintain capital
investment in the lower part of this range.
We will continue delivering our 2016-18 divestment programme of
$30 billion. This is a strategic value-driven, not a time-driven, programme and
an integral element of Shell’s portfolio improvement plan. We believe we
have already significantly high-graded our portfolio and will continue with an
annual average outlook of at least $5 billion of divestments over the period
2019 to 2020.
We remain on track to deliver new projects particularly in Brazil, the USA
and Australia between 2014 and 2018, which we believe will add
1 million barrels of oil equivalent a day, or $10 billion of cash flow from
operations at $60 per barrel by 2018. New project start-ups and ramp-ups
are expected to generate an additional $5 billion cash flow from operations
by 2020, assuming $60 per barrel real terms 2016 and mid-cycle
Downstream industry conditions. We will remain highly selective on new
investment decisions throughout 2018 and beyond.
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We fully support the Paris Agreement, and its goal of keeping the rise in global
temperatures to below two degrees Celsius. After having carefully listened to our
critics, supporters and shareholders, in step with society’s drive to align with the
Paris Agreement, we have set a long-term ambition to reduce the net carbon
footprint of our energy products, measured in grams of carbon-dioxide
equivalent per megajoule consumed, by around 20% by 2035 and by around
50% by 2050. This demonstrates leadership in the industry climate change
debate.
The statements in this “Strategy and outlook” section, including those related
to our growth strategies and our expected or potential future cash flow from
operations, free cash flow, operating expenses, capital investment,
divestments, production and net carbon footprint are based on management’s
current expectations and certain material assumptions and, accordingly,
involve risks and uncertainties that could cause actual results, performance or
events to differ materially from those expressed or implied herein. See “About
this Report” on page 05 and “Risk factors” on pages 12-16.
Strategy and outlook
STRATEGY
Shell’s purpose is to power progress together with more and cleaner energy
solutions. Our strategy is to strengthen our position as a leading energy
company by providing oil and gas and low-carbon energy as the world’s
energy system changes. Safety and social responsibility are fundamental to
our business approach. Shell will only succeed by working with customers,
governments, business partners, investors and other stakeholders.
■ Emerging opportunities are strategic themes that are expected to become
growth priorities after further development. These opportunities should
provide us with material growth in free cash flow in the next decade or
beyond. We seek to manage our exposure to these businesses while
establishing scale. Our emerging opportunities currently are Shales in
Upstream and New Energies, which is part of the Integrated Gas and
New Energies organisation.
Our strategy is founded on our outlook for the energy sector and the chance to
grasp the opportunities arising from the substantial changes in the world around
us. The rising standard of living of a growing global population is likely to
continue to drive demand for energy, including oil and gas, for years to come.
At the same time, technology changes and the need to tackle climate change
means there is a transition under way to a lower-carbon, multi-source energy
system with increasing customer choice. We recognise that the pace and
specific path forward is uncertain and so requires agile decision making.
STRATEGIC AMBITIONS
in pursuing our purpose:
Against this backdrop, we have the following strategic ambitions to guide us
■ to provide a world-class investment case. This involves growing free cash
flow and increasing returns, all built upon a strong financial framework and
resilient portfolio;
■ to thrive in the energy transition by responding to society’s desire for more
and cleaner, convenient and competitive energy; and
■ to sustain a strong societal licence to operate and contribute to society
through a shared value approach to our activities.
The execution of our strategy is founded on becoming a more customer-centric
and simpler company, focused on delivering higher and more predictable
returns and growing free cash flow. By investing in competitive projects,
driving down costs and selling non-core businesses, Shell continues to seek to
reshape its portfolio into a more resilient and focused company.
Our ability to achieve our strategic ambitions depends on how we respond to
competitive forces. We continuously assess the external environment – the
markets as well as the underlying economic, political, social and
environmental drivers that shape them – to evaluate changes in competitive
forces and business models. We undertake regular reviews of the markets we
operate in and analyse our traditional and non-traditional competitors’
strengths and weaknesses to understand our competitive position. We
maintain business strategies and plans that focus on actions and capabilities
to create and sustain competitive advantage. We maintain a risk
management framework that regularly assesses our response to, and risk
appetite for, identified risk factors (see “Risk factors” on page 12).
STRATEGIC THEMES
As part of our strategy, we divide our portfolio into strategic themes, each
with distinctive capabilities, growth strategies, risk management, capital
allocation and expected returns:
2019 to 2020.
■ Cash engines are strategic themes that are expected to provide strong and
resilient returns and free cash flow, funding shareholder returns and
strengthening the balance sheet. Shell continues to invest in selective growth
opportunities for cash engines. Our cash engines are Conventional Oil and
Gas in Upstream, Integrated Gas, and Oil Products in Downstream.
■ Growth priorities are the cash engines of the future. Shell seeks to invest in
affordable growth in advantaged positions with a pathway to free cash
flow and returns in the near future. Our growth priorities currently are Deep
water in Upstream and Chemicals in Downstream.
For more details on how the strategic themes are embedded into our
businesses, see “Business Overview” on page 11.
Our intention is to have an advantaged and resilient position in each strategic
theme to drive an optimal free cash flow and returns profile over multiple
timelines. When we set our plans and goals, we do so on the basis of
delivering sustained returns over decades.
We aim to leverage our diverse global business portfolio and customer-focused
businesses, which have been built around the strength of the Shell brand.
Our Executive Directors’ remuneration is linked to the successful delivery of our
strategy, based on performance indicators that are aligned with shareholder
interests. Long-term incentives form the majority of the Executive Directors’
remuneration for above-target performance. Our Long-term Incentive Plan
includes cash generation, capital discipline, and value created for
shareholders. See the “Directors’ Remuneration Report” on page 112.
OUTLOOK FOR 2018 AND BEYOND
We continuously seek to improve our operating performance, with an
emphasis on health, safety, security, environment and asset performance.
In order to maximise sustainable free cash flows, we will also continue to
manage operating expenses, capital investment, divestments and delivery of
new projects.
We maintain a “lower forever” mindset in our cost management, with an
outlook of less than $38 billion a year for operating expenses until 2020,
assuming no portfolio impacts or other external effects. This outlook excludes
potential impacts of restructuring and redundancies, as well as certain other
provisions.
Our organic capital investment outlook remains between $25 billion and
$30 billion a year until 2020. We see $30 billion as a ceiling, even in a
high oil price environment. For 2018, we expect to maintain capital
investment in the lower part of this range.
We will continue delivering our 2016-18 divestment programme of
$30 billion. This is a strategic value-driven, not a time-driven, programme and
an integral element of Shell’s portfolio improvement plan. We believe we
have already significantly high-graded our portfolio and will continue with an
annual average outlook of at least $5 billion of divestments over the period
We remain on track to deliver new projects particularly in Brazil, the USA
and Australia between 2014 and 2018, which we believe will add
1 million barrels of oil equivalent a day, or $10 billion of cash flow from
operations at $60 per barrel by 2018. New project start-ups and ramp-ups
are expected to generate an additional $5 billion cash flow from operations
by 2020, assuming $60 per barrel real terms 2016 and mid-cycle
Downstream industry conditions. We will remain highly selective on new
investment decisions throughout 2018 and beyond.
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Business overview
Business overview
HISTORY
From 1907 until 2005, Royal Dutch Petroleum Company and The “Shell”
Transport and Trading Company, p.l.c. were the two public parent
companies of a group of companies known collectively as the “Royal
Dutch/Shell Group”. Operating activities were conducted through the
subsidiaries of these parent companies. In 2005, Royal Dutch Shell plc
became the single parent company of Royal Dutch Petroleum Company and
of The “Shell” Transport and Trading Company, p.l.c., now The Shell
Transport and Trading Company Limited.
Royal Dutch Shell plc (the Company) is a public limited company registered in
England and Wales and headquartered in The Hague, the Netherlands.
BUSINESS MODEL
Shell is an international energy company with expertise in the exploration,
development, production, refining and marketing of oil and natural gas, as
well as in the manufacturing and marketing of chemicals. We are one of the
world’s largest independent energy companies in terms of market
capitalisation, cash flow from operating activities, and production levels.
We seek to create shareholder value through the following activities:
■We explore for crude oil and natural gas worldwide, both in conventional
fields and from sources such as tight rock, shale and coal formations. We
work to develop new crude oil and natural gas supplies from major fields.
Also, bitumen extracted from oil sands is converted into synthetic crude oil.
■ We cool natural gas to produce liquefied natural gas (LNG) that can be
safely shipped to markets around the world, and we convert gas to liquids
(GTL).
■We have a portfolio of refineries and chemical plants which enables us to
capture value from oil and gas production, turning them into a range of
refined and petrochemical products which are moved and marketed
around the world for domestic, industrial and transport use. The products
we sell include gasoline, diesel, heating oil, aviation fuel, marine fuel,
LNG for transport, lubricants, bitumen and sulphur. We also produce and
sell ethanol from sugar cane in Brazil, through our Raízen joint venture.
■We invest in low-carbon energy solutions such as biofuels, hydrogen, wind
and solar power, and in other commercial opportunities linked to the
energy transition.
The integration of our businesses is one of our competitive advantages,
allowing for optimisations across our global portfolio. Our key strengths
include the development and application of innovation and technology, the
financial and project management skills that allow us to safely develop large
and complex projects, the management of integrated value chains and the
marketing of energy products. The distinctive Shell pecten, a trademark in use
since the early part of the 20th century, and trademarks in which the word
Shell appears, help raise the profile of our brand globally.
Lubricants
Retail
Exploring for
oil and gas:
offshore
Exploring for
oil and gas:
onshore
Developing
fields
EXPLORATION
Producing oil
and gas
Aviation
Power
Supply and
distribution
Regasifying
(LNG)
SALES AND
MARKETING
CUSTOMERS
B2B & retail
DEVELOPMENT
AND EXTRACTION
TRANSPORT
AND TRADING
MANUFACTURING
AND ENERGY
PRODUCTION
Extracting
bitumen
Upgrading
bitumen
Refining oil
into fuels and
lubricants
Shipping
and trading
Liquefying
gas by
cooling (LNG)
Producing
petrochemicals
Producing
biofuels
Converting
gas into liquid
products (GTL)
Generating
power
ORGANISATION
We describe below how our activities are organised. Integrated Gas,
Upstream and Downstream focus on our seven strategic themes (see “Strategy
and outlook” on page 08). Our Projects & Technology organisation manages
the delivery of Shell’s major projects and drives research and innovation to
develop new technology solutions.
INTEGRATED GAS (INCLUDING NEW ENERGIES)
This organisation covers two strategic themes: Integrated Gas, which is a
cash engine; and New Energies, which is an emerging opportunity.
149-150.
SEGMENTAL REPORTING
Our reporting segments are Integrated Gas, Upstream, Downstream and
Corporate. Upstream combines the operating segments Upstream (managed
by our Upstream organisation) and Oil Sands (managed by our Downstream
organisation), which have similar economic characteristics. Integrated Gas,
Upstream and Downstream include their respective elements of our Projects &
Technology organisation. The Corporate segment comprises our holdings and
treasury organisation, self-insurance activities, and headquarters and central
functions. See Note 4 to the “Consolidated Financial Statements” on pages
Revenue by business segment
(including inter-segment sales)
$ million
2017
2016
2015
32,674
25,282
21,741
3,978
3,908
4,248
36,652
29,190
25,989
7,723
6,412
32,469
26,524
40,192
32,936
6,739
26,824
33,563
264,731
201,823
236,384
4,248
1,727
1,362
268,979
203,550
237,746
51
51
74
74
96
96
$ million
2017
2016
2015
100,609 81,573
95,223
114,683 87,635 [A] 95,892
66,854 44,615 [A] 50,666
23,033 19,768
23,179
305,179 233,591 264,960
around the world for domestic, industrial and transport use. The products we
Asia, Oceania, Africa
Revenue by geographical area
(excluding inter-segment sales)
Integrated Gas
Third parties
Inter-segment
Total
Upstream
Third parties
Inter-segment
Total
Downstream
Third parties
Inter-segment
Total
Corporate
Third parties
Total
Europe
USA
Total
Other Americas
Integrated Gas manages LNG activities and the conversion of natural gas
into GTL fuels and other products. It includes natural gas exploration and
extraction, when contractually linked to the production and transportation of
LNG, and the operation of the upstream and midstream infrastructure
necessary to deliver gas to market. It markets and trades natural gas, LNG,
crude oil, electricity and carbon-emission rights and also markets and sells
LNG as a fuel for heavy-duty vehicles and marine vessels.
In New Energies, we are exploring emerging opportunities and are already
investing in opportunities where we believe sufficient commercial value is
available. We focus on new fuels for transport, such as advanced biofuels,
hydrogen and charging for battery-electric vehicles; and power, including
from low-carbon sources such as wind and solar as well as natural gas.
UPSTREAM
Our Upstream organisation covers three strategic themes: Conventional Oil
and Gas, which is a cash engine; Deep water, which is a growth priority;
and Shales, which is an emerging opportunity.
It manages the exploration for and extraction of crude oil, natural gas and
natural gas liquids. It also markets and transports oil and gas, and operates
the infrastructure necessary to deliver them to market.
DOWNSTREAM
Our Downstream organisation comprises two strategic themes: Oil Products,
which is a cash engine; and Chemicals, which is a growth priority.
It manages different Oil Products and Chemicals activities as part of an
integrated value chain, including trading activities, that turns crude oil and
other feedstocks into a range of products which are moved and marketed
sell include gasoline, diesel, heating oil, aviation fuel, marine fuel, biofuel,
lubricants, bitumen and sulphur. In addition, we produce and sell
petrochemicals for industrial use worldwide. Our Downstream organisation
also manages Oil Sands activities (the extraction of bitumen from mined oil
sands and its conversion into synthetic crude oil).
PROJECTS & TECHNOLOGY
Our Projects & Technology organisation manages the delivery of our major
projects and drives research and innovation to develop new technology solutions.
It provides technical services and technology capability for our Integrated Gas,
Upstream and Downstream activities. It is also responsible for providing functional
leadership across Shell in the areas of safety and environment, contracting and
procurement, wells activities and greenhouse gas management.
Our future hydrocarbon production depends on the delivery of large and
integrated projects (see “Risk factors” on page 12). Systematic management
of lifecycle technical and non-technical risks is in place for each opportunity,
with assurance and control activities embedded throughout the project life
cycle. We focus on the cost-effective delivery of projects through quality
commercial agreements, supply-chain management, and construction and
engineering productivity through effective planning and simplification of
delivery processes. Development of our employees’ project management
competencies is underpinned by project principles, standards and processes.
A dedicated competence framework, training, standards and processes exist
for various technical disciplines. In addition, we provide governance support
for our non-Shell-operated ventures or projects.
[A] As revised, see Note 4 to the “Consolidated Financial Statements” on page 150.
TECHNOLOGY AND INNOVATION
Technology and innovation are essential to our efforts to meet the world’s
energy needs in a competitive way. If we do not develop the right
technology, do not have access to it or do not deploy it effectively, this could
have a material adverse effect on the delivery of our strategy and our licence
to operate (see “Risk factors” on page 14). We continuously look for
technologies and innovations of potential relevance to our business.
Our Chief Technology Officer oversees the development and deployment of
new and differentiating technologies and innovations across Shell, seeking to
align business and technology requirements throughout our technology
maturation process.
In 2017, research and development expenses were $922 million, compared
with $1,014 million in 2016, and $1,093 million in 2015. Our main
technology centres are in India, the Netherlands and the USA, with other
centres in Brazil, China, Germany, Oman and Qatar.
A strong patent portfolio underlies the technology that we employ in our
various businesses. In total, we have around 10,450 granted patents and
pending patent applications.
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Business overview
HISTORY
■ We cool natural gas to produce liquefied natural gas (LNG) that can be
From 1907 until 2005, Royal Dutch Petroleum Company and The “Shell”
safely shipped to markets around the world, and we convert gas to liquids
Transport and Trading Company, p.l.c. were the two public parent
(GTL).
companies of a group of companies known collectively as the “Royal
■We have a portfolio of refineries and chemical plants which enables us to
Dutch/Shell Group”. Operating activities were conducted through the
capture value from oil and gas production, turning them into a range of
subsidiaries of these parent companies. In 2005, Royal Dutch Shell plc
refined and petrochemical products which are moved and marketed
became the single parent company of Royal Dutch Petroleum Company and
around the world for domestic, industrial and transport use. The products
of The “Shell” Transport and Trading Company, p.l.c., now The Shell
we sell include gasoline, diesel, heating oil, aviation fuel, marine fuel,
Transport and Trading Company Limited.
LNG for transport, lubricants, bitumen and sulphur. We also produce and
sell ethanol from sugar cane in Brazil, through our Raízen joint venture.
Royal Dutch Shell plc (the Company) is a public limited company registered in
■We invest in low-carbon energy solutions such as biofuels, hydrogen, wind
England and Wales and headquartered in The Hague, the Netherlands.
and solar power, and in other commercial opportunities linked to the
BUSINESS MODEL
Shell is an international energy company with expertise in the exploration,
development, production, refining and marketing of oil and natural gas, as
well as in the manufacturing and marketing of chemicals. We are one of the
world’s largest independent energy companies in terms of market
capitalisation, cash flow from operating activities, and production levels.
We seek to create shareholder value through the following activities:
■We explore for crude oil and natural gas worldwide, both in conventional
fields and from sources such as tight rock, shale and coal formations. We
work to develop new crude oil and natural gas supplies from major fields.
Also, bitumen extracted from oil sands is converted into synthetic crude oil.
energy transition.
The integration of our businesses is one of our competitive advantages,
allowing for optimisations across our global portfolio. Our key strengths
include the development and application of innovation and technology, the
financial and project management skills that allow us to safely develop large
and complex projects, the management of integrated value chains and the
marketing of energy products. The distinctive Shell pecten, a trademark in use
since the early part of the 20th century, and trademarks in which the word
Shell appears, help raise the profile of our brand globally.
ORGANISATION
We describe below how our activities are organised. Integrated Gas,
Upstream and Downstream focus on our seven strategic themes (see “Strategy
and outlook” on page 08). Our Projects & Technology organisation manages
the delivery of Shell’s major projects and drives research and innovation to
develop new technology solutions.
INTEGRATED GAS (INCLUDING NEW ENERGIES)
This organisation covers two strategic themes: Integrated Gas, which is a
cash engine; and New Energies, which is an emerging opportunity.
Integrated Gas manages LNG activities and the conversion of natural gas
into GTL fuels and other products. It includes natural gas exploration and
extraction, when contractually linked to the production and transportation of
LNG, and the operation of the upstream and midstream infrastructure
necessary to deliver gas to market. It markets and trades natural gas, LNG,
crude oil, electricity and carbon-emission rights and also markets and sells
LNG as a fuel for heavy-duty vehicles and marine vessels.
In New Energies, we are exploring emerging opportunities and are already
investing in opportunities where we believe sufficient commercial value is
available. We focus on new fuels for transport, such as advanced biofuels,
hydrogen and charging for battery-electric vehicles; and power, including
from low-carbon sources such as wind and solar as well as natural gas.
UPSTREAM
Our Upstream organisation covers three strategic themes: Conventional Oil
and Gas, which is a cash engine; Deep water, which is a growth priority;
and Shales, which is an emerging opportunity.
It manages the exploration for and extraction of crude oil, natural gas and
natural gas liquids. It also markets and transports oil and gas, and operates
the infrastructure necessary to deliver them to market.
DOWNSTREAM
Our Downstream organisation comprises two strategic themes: Oil Products,
which is a cash engine; and Chemicals, which is a growth priority.
It manages different Oil Products and Chemicals activities as part of an
integrated value chain, including trading activities, that turns crude oil and
other feedstocks into a range of products which are moved and marketed
around the world for domestic, industrial and transport use. The products we
sell include gasoline, diesel, heating oil, aviation fuel, marine fuel, biofuel,
lubricants, bitumen and sulphur. In addition, we produce and sell
petrochemicals for industrial use worldwide. Our Downstream organisation
also manages Oil Sands activities (the extraction of bitumen from mined oil
sands and its conversion into synthetic crude oil).
PROJECTS & TECHNOLOGY
Our Projects & Technology organisation manages the delivery of our major
projects and drives research and innovation to develop new technology solutions.
It provides technical services and technology capability for our Integrated Gas,
Upstream and Downstream activities. It is also responsible for providing functional
leadership across Shell in the areas of safety and environment, contracting and
procurement, wells activities and greenhouse gas management.
Our future hydrocarbon production depends on the delivery of large and
integrated projects (see “Risk factors” on page 12). Systematic management
of lifecycle technical and non-technical risks is in place for each opportunity,
with assurance and control activities embedded throughout the project life
cycle. We focus on the cost-effective delivery of projects through quality
commercial agreements, supply-chain management, and construction and
engineering productivity through effective planning and simplification of
delivery processes. Development of our employees’ project management
competencies is underpinned by project principles, standards and processes.
A dedicated competence framework, training, standards and processes exist
for various technical disciplines. In addition, we provide governance support
for our non-Shell-operated ventures or projects.
SEGMENTAL REPORTING
Our reporting segments are Integrated Gas, Upstream, Downstream and
Corporate. Upstream combines the operating segments Upstream (managed
by our Upstream organisation) and Oil Sands (managed by our Downstream
organisation), which have similar economic characteristics. Integrated Gas,
Upstream and Downstream include their respective elements of our Projects &
Technology organisation. The Corporate segment comprises our holdings and
treasury organisation, self-insurance activities, and headquarters and central
functions. See Note 4 to the “Consolidated Financial Statements” on pages
149-150.
Revenue by business segment
(including inter-segment sales)
Integrated Gas
Third parties
Inter-segment
Total
Upstream
Third parties
Inter-segment
Total
Downstream
Third parties
Inter-segment
Total
Corporate
Third parties
Total
2017
2016
32,674
3,978
25,282
3,908
36,652
29,190
7,723
32,469
6,412
26,524
40,192
32,936
$ million
2015
21,741
4,248
25,989
6,739
26,824
33,563
264,731
4,248
201,823
1,727
236,384
1,362
268,979
203,550
237,746
51
51
74
74
96
96
Revenue by geographical area
(excluding inter-segment sales)
Europe
Asia, Oceania, Africa
USA
Other Americas
$ million
2015
2017
2016
100,609 81,573
95,223
114,683 87,635 [A] 95,892
66,854 44,615 [A] 50,666
23,179
23,033 19,768
Total
[A] As revised, see Note 4 to the “Consolidated Financial Statements” on page 150.
305,179 233,591 264,960
TECHNOLOGY AND INNOVATION
Technology and innovation are essential to our efforts to meet the world’s
energy needs in a competitive way. If we do not develop the right
technology, do not have access to it or do not deploy it effectively, this could
have a material adverse effect on the delivery of our strategy and our licence
to operate (see “Risk factors” on page 14). We continuously look for
technologies and innovations of potential relevance to our business.
Our Chief Technology Officer oversees the development and deployment of
new and differentiating technologies and innovations across Shell, seeking to
align business and technology requirements throughout our technology
maturation process.
In 2017, research and development expenses were $922 million, compared
with $1,014 million in 2016, and $1,093 million in 2015. Our main
technology centres are in India, the Netherlands and the USA, with other
centres in Brazil, China, Germany, Oman and Qatar.
A strong patent portfolio underlies the technology that we employ in our
various businesses. In total, we have around 10,450 granted patents and
pending patent applications.
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Risk factors
Risk factors
The risks discussed below could have a material adverse effect separately,
or in combination, on our earnings, cash flows and financial condition.
Accordingly, investors should carefully consider these risks.
Measures that we use to manage or mitigate our various risks are set out in the
relevant sections of this Report, indicated by way of cross references under each
risk factor. The Board’s responsibility for identifying, evaluating and managing
our significant risks is discussed in “Corporate governance” on page 82.
We are exposed to fluctuating prices of crude oil, natural gas, oil products
and chemicals.
The prices of crude oil, natural gas, oil products and chemicals are affected
by supply and demand, both globally and regionally. Moreover, prices for oil
and gas can move independently of each other. Factors that influence supply
and demand include operational issues, natural disasters, weather, political
instability, conflicts, economic conditions and actions by major oil and gas
producing countries. Additionally, in a low oil and gas price environment,
we would generate less revenue from our Upstream and Integrated Gas
businesses, and, as a result, parts of those businesses could become less
profitable, or could incur losses. Additionally, low oil and gas prices have
resulted, and could continue to result, in the debooking of proved oil or gas
reserves, if they become uneconomic in this type of price environment.
Prolonged periods of low oil and gas prices, or rising costs, can result in
projects being delayed or cancelled. In addition, assets have been impaired
in the past, and there could be impairments in the future. Low oil and gas
prices could also affect our ability to maintain our long-term capital investment
programme and dividend payments. Prolonged periods of low oil and gas
prices could affect the financial, fiscal, legal, political and social stability of
countries that rely significantly on oil and gas revenue. In a high oil and gas
price environment, we could experience sharp increases in costs, and, under
some production-sharing contracts, our entitlement to proved reserves would
be reduced. Higher prices could also reduce demand for our products, which
could result in lower profitability, particularly in our Downstream business.
Accordingly, price fluctuations could have a material adverse effect on our
earnings, cash flows and financial condition.
See “Market overview” on page 17.
Our ability to deliver competitive returns and pursue commercial
opportunities depends in part on the accuracy of our price assumptions.
We use a range of oil and gas price assumptions, which we review on a
periodic basis, to evaluate projects and commercial opportunities. If our
assumptions prove to be incorrect, it could have a material adverse effect on
our earnings, cash flows and financial condition.
See “Market overview” on page 18.
Our ability to achieve strategic objectives depends on how we react to
competitive forces.
We face competition in each of our businesses. We seek to differentiate our
products; however, many of them are competing in commodity-type markets.
Accordingly, failure to manage our costs as well as our operational
performance could result in a material adverse effect on our earnings, cash
flows and financial condition. We also compete with state-owned oil and gas
entities with vast access to financial resources. State-owned entities could be
motivated by political or other factors in making their business decisions.
Accordingly, when bidding on new leases or projects, we could find ourselves
at a competitive disadvantage as these state-owned entities may not require a
competitive return. If we are unable to obtain competitive returns when bidding
on new leases or projects, it could have a material adverse effect on our
earnings, cash flows and financial condition.
See “Strategy and outlook” on page 08.
We seek to execute divestments in the pursuit of our strategy. We may not
be able to successfully divest these assets in line with our strategy.
We may not be able to successfully divest assets at acceptable prices or
within the timeline envisaged due to market conditions or credit risk, resulting
in increased pressure on our cash position and potential impairments. We
may be held liable for past acts, failures to act or liabilities that are different
from those foreseen. We may also face liabilities if a purchaser fails to
honour all of its commitments. Accordingly, if we are unable to divest assets
at acceptable prices or within our envisaged timeframe, this could have a
material adverse effect on our earnings, cash flows and financial condition.
See “Strategy and outlook” on page 08-09.
Our future hydrocarbon production depends on the delivery of large and
integrated projects, as well as on our ability to replace proved oil and gas
reserves.
We face numerous challenges in developing capital projects, especially
those which are large and integrated. Challenges include uncertain geology,
frontier conditions, the existence and availability of necessary technology and
engineering resources, the availability of skilled labour, the existence of
transportation infrastructure, project delays, the expiration of licences and
potential cost overruns, as well as technical, fiscal, regulatory, political and
other conditions. These challenges are particularly relevant in certain
developing and emerging-market countries, in frontier areas and in deep-
water fields, such as off the coast of Brazil. We may fail to assess or manage
these and other risks properly. Such potential obstacles could impair our
delivery of these projects, our ability to fulfil the value potential at the time of
the project investment approval, and/or our ability to fulfil related contractual
commitments. These could lead to impairments and could have a material
adverse effect on our earnings, cash flows and financial condition.
Future oil and gas production will depend on our access to new proved
reserves through exploration, negotiations with governments and other owners
of proved reserves and acquisitions, as well as on developing and applying
new technologies and recovery processes to existing fields. Failure to replace
proved reserves could result in lower future production, potentially having a
material adverse effect on our earnings, cash flows and financial condition.
See “Business overview” on page 11.
Oil and gas production available for sale Million boe [A]
2015
880
198
Shell subsidiaries
Shell share of joint ventures and associates
1,168 1,158
184
170
2017
2016
Total
[A] Natural gas volumes are converted into oil equivalent using a factor of 5,800 scf per barrel.
1,338 1,342 1,078
Proved developed and undeveloped oil
and gas reserves [A][B] (at December 31)
Shell subsidiaries
Shell share of joint ventures and associates
2017
Million boe [C]
2015
10,177 11,040 9,117
2,056 2,208 2,630
2016
Total
12,233 13,248 11,747
these lawsuits could have a material adverse effect on our earnings, cash
Attributable to non-controlling interest in
Shell subsidiaries
[A] We manage our total proved reserves base without distinguishing between proved reserves from
subsidiaries and those from joint ventures and associates.
[B] Includes proved reserves associated with future production that will be consumed in operations.
[C] Natural gas volumes are converted into oil equivalent using a factor of 5,800 scf per barrel.
325
5
8
The estimation of proved oil and gas reserves involves subjective judgements
based on available information and the application of complex rules;
therefore, subsequent downward adjustments are possible.
The estimation of proved oil and gas reserves involves subjective judgements
and determinations based on available geological, technical, contractual and
economic information. Estimates could change because of new information
from production or drilling activities, or changes in economic factors,
including changes in the price of oil or gas and changes in the regulatory
policies of host governments, or other events. Estimates could also be altered
by acquisitions and divestments, new discoveries, and extensions of existing
fields and mines, as well as the application of improved recovery techniques.
Published proved oil and gas reserves estimates could also be subject to
correction due to errors in the application of published rules and changes in
guidance. Downward adjustments could indicate lower future production
volumes and could also lead to impairment of assets. This could have a
material adverse effect on our earnings, cash flows and financial condition.
See “Supplementary information – oil and gas (unaudited)” on page 179.
Rising climate change concerns have led and could lead to additional legal
and/or regulatory measures which could result in project delays or
cancellations, a decrease in demand for fossil fuels, potential litigation and
additional compliance obligations.
In December 2015, 195 nations adopted the Paris Agreement, which we
fully support. The Paris Agreement aims to limit increases in global
temperatures to well below two degrees Celsius. As a result, we expect
continued and increased attention to climate change from all sectors of
society. This attention has led, and we expect it to continue to lead, to
additional regulations designed to reduce greenhouse gas (GHG) emissions.
If we are unable to find economically viable, as well as publicly acceptable,
solutions that reduce our GHG emissions and/or GHG intensity for new and
existing projects or for the products we sell, we could experience additional
costs or financial penalties, delayed or cancelled projects, and/or reduced
production and reduced demand for hydrocarbons, which could have a
material adverse effect on our earnings, cash flows and financial condition.
See “Climate change and energy transition” on pages 63-64.
Our operations expose us to social instability, criminality, civil unrest,
terrorism, piracy, cyber-disruption, acts of war and risks of pandemic
diseases that could have a material adverse effect on our business.
As seen in recent years in Nigeria, North Africa, the Middle East, South
America and South-East Asia, social and civil unrest, both in the countries in
which we operate and elsewhere, can and do affect us. Such potential
developments that could have a material adverse effect on our earnings, cash
flows and financial condition include: acts of political or economic terrorism;
acts of maritime piracy; cyber-espionage or disruptive cyber-attacks; conflicts
including war and civil unrest (including disruptions by non-governmental and
political organisations); and local security concerns that threaten the safe
operation of our facilities, transport of our products and the well-being of our
people. Pandemic diseases can also affect our operations directly and
indirectly. If such risks materialise, they could result in injuries, loss of life,
environmental harm and disruption to business activities, which in turn could
have a material adverse effect on our earnings, cash flows and financial
condition.
See “Environment and society” on page 61.
We operate in more than 70 countries that have differing degrees of
political, legal and fiscal stability. This exposes us to a wide range of
We expect that a growing share of our GHG emissions will be subject to
regulation, resulting in increased compliance costs and operational
political developments that could result in changes to contractual terms, laws
and regulations. In addition, we and our joint arrangements and associates
restrictions. If our GHG emissions rise alongside our ambitions to increase the
face the risk of litigation and disputes worldwide.
scale of our business, our regulatory burden will increase proportionally. We
Developments in politics, laws and regulations can and do affect our
also expect that GHG regulation will focus more on suppressing demand for
operations. Potential impacts include: forced divestment of assets;
fossil fuels, either through taxes, fees, incentives to promote the sale of electric
expropriation of property; cancellation or forced renegotiation of contract
vehicles or even through the future prohibition of sales of new diesel or
gasoline vehicles. This could result in lower revenue and, in the long term,
potential impairment of certain assets.
Additionally, some groups are pressuring certain investors to divest their
investments in fossil fuel companies. If this were to continue, it could have a
material adverse effect on the price of our securities and our ability to access
equity capital markets. The World Bank has also announced plans to stop
financing upstream oil and gas projects in 2019. Similarly, according to
press reports, other financial institutions also appear to be considering limiting
their exposure to certain fossil fuel projects. Accordingly, our ability to use
financing for future projects may be adversely impacted. This could also
adversely impact our potential partners’ ability to finance their portion of
costs, either through equity or debt.
rights; additional taxes including windfall taxes, restrictions on deductions and
retroactive tax claims; antitrust claims; changes to trade compliance
regulations; price controls; local content requirements; foreign exchange
controls; changes to environmental regulations; changes to regulatory
interpretations and enforcement; and changes to disclosure requirements.
Any of these, individually or in aggregate, could have a material adverse
effect on our earnings, cash flows and financial condition.
From time to time, social and political factors play a role in unprecedented
and unanticipated judicial outcomes that could adversely affect Shell.
Non-compliance with policies and regulations could result in regulatory
investigations, litigation and, ultimately, sanctions. Certain governments and
regulatory bodies have, in Shell’s opinion, exceeded their constitutional
authority by: attempting unilaterally to amend or cancel existing agreements
or arrangements; failing to honour existing contractual commitments; and
Further, in some countries, governments and regulators have filed lawsuits
seeking to adjudicate disputes between private litigants. Additionally, certain
seeking to hold fossil fuel companies liable for costs associated with climate
governments have adopted laws and regulations that could potentially force
change. While we believe these lawsuits to be without merit, losing any of
us to violate other countries’ laws and regulations, therefore potentially
flows and financial condition.
subjecting us to both criminal and civil sanctions. Such developments and
outcomes could have a material adverse effect on our earnings, cash flows
and financial condition.
See “Corporate governance” on page 82.
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Risk factors
The risks discussed below could have a material adverse effect separately,
We seek to execute divestments in the pursuit of our strategy. We may not
or in combination, on our earnings, cash flows and financial condition.
be able to successfully divest these assets in line with our strategy.
Accordingly, investors should carefully consider these risks.
We may not be able to successfully divest assets at acceptable prices or
Measures that we use to manage or mitigate our various risks are set out in the
within the timeline envisaged due to market conditions or credit risk, resulting
relevant sections of this Report, indicated by way of cross references under each
in increased pressure on our cash position and potential impairments. We
risk factor. The Board’s responsibility for identifying, evaluating and managing
may be held liable for past acts, failures to act or liabilities that are different
our significant risks is discussed in “Corporate governance” on page 82.
from those foreseen. We may also face liabilities if a purchaser fails to
We are exposed to fluctuating prices of crude oil, natural gas, oil products
at acceptable prices or within our envisaged timeframe, this could have a
and chemicals.
material adverse effect on our earnings, cash flows and financial condition.
honour all of its commitments. Accordingly, if we are unable to divest assets
The prices of crude oil, natural gas, oil products and chemicals are affected
by supply and demand, both globally and regionally. Moreover, prices for oil
and gas can move independently of each other. Factors that influence supply
and demand include operational issues, natural disasters, weather, political
instability, conflicts, economic conditions and actions by major oil and gas
producing countries. Additionally, in a low oil and gas price environment,
we would generate less revenue from our Upstream and Integrated Gas
businesses, and, as a result, parts of those businesses could become less
profitable, or could incur losses. Additionally, low oil and gas prices have
resulted, and could continue to result, in the debooking of proved oil or gas
reserves, if they become uneconomic in this type of price environment.
Prolonged periods of low oil and gas prices, or rising costs, can result in
projects being delayed or cancelled. In addition, assets have been impaired
in the past, and there could be impairments in the future. Low oil and gas
prices could also affect our ability to maintain our long-term capital investment
programme and dividend payments. Prolonged periods of low oil and gas
prices could affect the financial, fiscal, legal, political and social stability of
countries that rely significantly on oil and gas revenue. In a high oil and gas
price environment, we could experience sharp increases in costs, and, under
some production-sharing contracts, our entitlement to proved reserves would
be reduced. Higher prices could also reduce demand for our products, which
could result in lower profitability, particularly in our Downstream business.
Accordingly, price fluctuations could have a material adverse effect on our
earnings, cash flows and financial condition.
See “Market overview” on page 17.
Our ability to deliver competitive returns and pursue commercial
opportunities depends in part on the accuracy of our price assumptions.
We use a range of oil and gas price assumptions, which we review on a
periodic basis, to evaluate projects and commercial opportunities. If our
assumptions prove to be incorrect, it could have a material adverse effect on
our earnings, cash flows and financial condition.
See “Market overview” on page 18.
Our ability to achieve strategic objectives depends on how we react to
competitive forces.
We face competition in each of our businesses. We seek to differentiate our
products; however, many of them are competing in commodity-type markets.
Accordingly, failure to manage our costs as well as our operational
performance could result in a material adverse effect on our earnings, cash
flows and financial condition. We also compete with state-owned oil and gas
entities with vast access to financial resources. State-owned entities could be
motivated by political or other factors in making their business decisions.
Total
See “Strategy and outlook” on page 08-09.
Our future hydrocarbon production depends on the delivery of large and
integrated projects, as well as on our ability to replace proved oil and gas
reserves.
We face numerous challenges in developing capital projects, especially
those which are large and integrated. Challenges include uncertain geology,
frontier conditions, the existence and availability of necessary technology and
engineering resources, the availability of skilled labour, the existence of
transportation infrastructure, project delays, the expiration of licences and
potential cost overruns, as well as technical, fiscal, regulatory, political and
other conditions. These challenges are particularly relevant in certain
developing and emerging-market countries, in frontier areas and in deep-
water fields, such as off the coast of Brazil. We may fail to assess or manage
these and other risks properly. Such potential obstacles could impair our
delivery of these projects, our ability to fulfil the value potential at the time of
the project investment approval, and/or our ability to fulfil related contractual
commitments. These could lead to impairments and could have a material
adverse effect on our earnings, cash flows and financial condition.
Future oil and gas production will depend on our access to new proved
reserves through exploration, negotiations with governments and other owners
of proved reserves and acquisitions, as well as on developing and applying
new technologies and recovery processes to existing fields. Failure to replace
proved reserves could result in lower future production, potentially having a
material adverse effect on our earnings, cash flows and financial condition.
See “Business overview” on page 11.
Oil and gas production available for sale Million boe [A]
Shell subsidiaries
Shell share of joint ventures and associates
170
184
Total
1,338 1,342 1,078
[A] Natural gas volumes are converted into oil equivalent using a factor of 5,800 scf per barrel.
2017
2016
1,168 1,158
2015
880
198
Proved developed and undeveloped oil
and gas reserves [A][B] (at December 31)
Million boe [C]
Shell subsidiaries
Shell share of joint ventures and associates
2,056 2,208 2,630
2017
2016
2015
10,177 11,040 9,117
12,233 13,248 11,747
325
5
8
Accordingly, when bidding on new leases or projects, we could find ourselves
Attributable to non-controlling interest in
at a competitive disadvantage as these state-owned entities may not require a
competitive return. If we are unable to obtain competitive returns when bidding
Shell subsidiaries
on new leases or projects, it could have a material adverse effect on our
subsidiaries and those from joint ventures and associates.
[A] We manage our total proved reserves base without distinguishing between proved reserves from
[B] Includes proved reserves associated with future production that will be consumed in operations.
[C] Natural gas volumes are converted into oil equivalent using a factor of 5,800 scf per barrel.
earnings, cash flows and financial condition.
See “Strategy and outlook” on page 08.
The estimation of proved oil and gas reserves involves subjective judgements
based on available information and the application of complex rules;
therefore, subsequent downward adjustments are possible.
The estimation of proved oil and gas reserves involves subjective judgements
and determinations based on available geological, technical, contractual and
economic information. Estimates could change because of new information
from production or drilling activities, or changes in economic factors,
including changes in the price of oil or gas and changes in the regulatory
policies of host governments, or other events. Estimates could also be altered
by acquisitions and divestments, new discoveries, and extensions of existing
fields and mines, as well as the application of improved recovery techniques.
Published proved oil and gas reserves estimates could also be subject to
correction due to errors in the application of published rules and changes in
guidance. Downward adjustments could indicate lower future production
volumes and could also lead to impairment of assets. This could have a
material adverse effect on our earnings, cash flows and financial condition.
See “Supplementary information – oil and gas (unaudited)” on page 179.
Rising climate change concerns have led and could lead to additional legal
and/or regulatory measures which could result in project delays or
cancellations, a decrease in demand for fossil fuels, potential litigation and
additional compliance obligations.
In December 2015, 195 nations adopted the Paris Agreement, which we
fully support. The Paris Agreement aims to limit increases in global
temperatures to well below two degrees Celsius. As a result, we expect
continued and increased attention to climate change from all sectors of
society. This attention has led, and we expect it to continue to lead, to
additional regulations designed to reduce greenhouse gas (GHG) emissions.
We expect that a growing share of our GHG emissions will be subject to
regulation, resulting in increased compliance costs and operational
restrictions. If our GHG emissions rise alongside our ambitions to increase the
scale of our business, our regulatory burden will increase proportionally. We
also expect that GHG regulation will focus more on suppressing demand for
fossil fuels, either through taxes, fees, incentives to promote the sale of electric
vehicles or even through the future prohibition of sales of new diesel or
gasoline vehicles. This could result in lower revenue and, in the long term,
potential impairment of certain assets.
Additionally, some groups are pressuring certain investors to divest their
investments in fossil fuel companies. If this were to continue, it could have a
material adverse effect on the price of our securities and our ability to access
equity capital markets. The World Bank has also announced plans to stop
financing upstream oil and gas projects in 2019. Similarly, according to
press reports, other financial institutions also appear to be considering limiting
their exposure to certain fossil fuel projects. Accordingly, our ability to use
financing for future projects may be adversely impacted. This could also
adversely impact our potential partners’ ability to finance their portion of
costs, either through equity or debt.
Further, in some countries, governments and regulators have filed lawsuits
seeking to hold fossil fuel companies liable for costs associated with climate
change. While we believe these lawsuits to be without merit, losing any of
these lawsuits could have a material adverse effect on our earnings, cash
flows and financial condition.
If we are unable to find economically viable, as well as publicly acceptable,
solutions that reduce our GHG emissions and/or GHG intensity for new and
existing projects or for the products we sell, we could experience additional
costs or financial penalties, delayed or cancelled projects, and/or reduced
production and reduced demand for hydrocarbons, which could have a
material adverse effect on our earnings, cash flows and financial condition.
See “Climate change and energy transition” on pages 63-64.
Our operations expose us to social instability, criminality, civil unrest,
terrorism, piracy, cyber-disruption, acts of war and risks of pandemic
diseases that could have a material adverse effect on our business.
As seen in recent years in Nigeria, North Africa, the Middle East, South
America and South-East Asia, social and civil unrest, both in the countries in
which we operate and elsewhere, can and do affect us. Such potential
developments that could have a material adverse effect on our earnings, cash
flows and financial condition include: acts of political or economic terrorism;
acts of maritime piracy; cyber-espionage or disruptive cyber-attacks; conflicts
including war and civil unrest (including disruptions by non-governmental and
political organisations); and local security concerns that threaten the safe
operation of our facilities, transport of our products and the well-being of our
people. Pandemic diseases can also affect our operations directly and
indirectly. If such risks materialise, they could result in injuries, loss of life,
environmental harm and disruption to business activities, which in turn could
have a material adverse effect on our earnings, cash flows and financial
condition.
See “Environment and society” on page 61.
We operate in more than 70 countries that have differing degrees of
political, legal and fiscal stability. This exposes us to a wide range of
political developments that could result in changes to contractual terms, laws
and regulations. In addition, we and our joint arrangements and associates
face the risk of litigation and disputes worldwide.
Developments in politics, laws and regulations can and do affect our
operations. Potential impacts include: forced divestment of assets;
expropriation of property; cancellation or forced renegotiation of contract
rights; additional taxes including windfall taxes, restrictions on deductions and
retroactive tax claims; antitrust claims; changes to trade compliance
regulations; price controls; local content requirements; foreign exchange
controls; changes to environmental regulations; changes to regulatory
interpretations and enforcement; and changes to disclosure requirements.
Any of these, individually or in aggregate, could have a material adverse
effect on our earnings, cash flows and financial condition.
From time to time, social and political factors play a role in unprecedented
and unanticipated judicial outcomes that could adversely affect Shell.
Non-compliance with policies and regulations could result in regulatory
investigations, litigation and, ultimately, sanctions. Certain governments and
regulatory bodies have, in Shell’s opinion, exceeded their constitutional
authority by: attempting unilaterally to amend or cancel existing agreements
or arrangements; failing to honour existing contractual commitments; and
seeking to adjudicate disputes between private litigants. Additionally, certain
governments have adopted laws and regulations that could potentially force
us to violate other countries’ laws and regulations, therefore potentially
subjecting us to both criminal and civil sanctions. Such developments and
outcomes could have a material adverse effect on our earnings, cash flows
and financial condition.
See “Corporate governance” on page 82.
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risk factors Continued
The nature of our operations exposes us, and the communities in which we
work, to a wide range of health, safety, security and environment risks.
The health, safety, security and environment (HSSE) risks to which we, and the
communities in which we work, are potentially exposed cover a wide
spectrum, given the geographic range, operational diversity and technical
complexity of our operations. These risks include the effects of natural
disasters (including weather events), earthquakes, social unrest, personal
health and safety lapses, and crime. If a major HSSE risk materialises, such
as an explosion or hydrocarbon spill, this could result in injuries, loss of life,
environmental harm, disruption of business activities, and loss or suspension of
our licence to operate or ability to bid on mineral rights. Accordingly, this
would have a material adverse effect on our earnings, cash flows and
financial condition.
Our operations are subject to extensive HSSE regulatory requirements that
often change and are likely to become more stringent over time. Operators
could be asked to adjust their future production plans, as the government of
the Netherlands has done, affecting production and costs. We could incur
significant additional costs in the future due to compliance with HSSE
requirements or as a result of violations of, or liabilities under, laws and
regulations, such as fines, penalties, clean-up costs and third-party claims.
Therefore, HSSE risks, should they materialise, could have a material adverse
effect on our earnings, cash flows and financial condition.
See “Environment and society” on page 58.
A further erosion of the business and operating environment in Nigeria
could have a material adverse effect on us.
In our Nigerian operations, we face various risks and adverse conditions.
These include: security issues surrounding the safety of our people, host
communities and operations; sabotage and theft; our ability to enforce
existing contractual rights; litigation; limited infrastructure; potential legislation
that could increase our taxes or costs of operations; the effect of lower oil and
gas prices on the government budget; and regional instability created by
militant activities. Any of these risks or adverse conditions could have a
material adverse effect on our earnings, cash flows and financial condition.
See “Upstream” on page 35.
Production from the Groningen field in the Netherlands causes earthquakes
that affect local communities.
Shell and ExxonMobil are 50:50 shareholders in Nederlandse Aardolie
Maatschappij B.V. (NAM). An important part of NAM’s gas production
comes from the onshore Groningen gas field, in which EBN, a Dutch
government entity, has a 40% interest and NAM a 60% interest. Since 1995,
production from the Groningen field has caused earthquakes. Some of these
earthquakes have caused damage to houses and other structures in the
region, resulting in complaints and lawsuits from the local community.
Since 2013, the Minister of Economic Affairs has imposed curtailments on
production from the Groningen field in order to mitigate the seismicity risks.
In January 2018, there was another earthquake and a further curtailment of
production is likely. Additional earthquakes, lawsuits and further significant
curtailments of production could have a material adverse effect on NAM and
therefore could impact our earnings, cash flows and financial condition.
See “Upstream” on page 33.
Our future performance depends on the successful development and
deployment of new technologies and new products.
Technology and innovation are essential to our efforts to meet the world’s
energy demands in a competitive way. If we do not develop the right
technology and products, do not have access to such technology and
products or do not deploy these effectively, there could be a material adverse
effect on the delivery of our strategy and our licence to operate. We operate
in environments where advanced technologies are utilised. While we take
measures to ensure that such technologies and products are safe for the
environment and public health based on today’s knowledge, there is always
the possibility of unknown or unforeseeable technological failures or
environmental and health effects that could harm our reputation and licence to
operate or expose us to litigation or sanctions. The associated costs of new
technology are sometimes underestimated or delays occur. If we are unable
to develop the right technologies and products in a timely and cost-effective
manner, or if we develop technologies and products that adversely impact the
environment or health of individuals, there could be a material adverse effect
on our earnings, cash flows and financial condition.
See “Business overview” on page 11.
We are exposed to treasury and trading risks, including liquidity risk,
interest rate risk, foreign exchange risk, commodity price risk and credit risk.
We are affected by the global macroeconomic environment as well as
financial and commodity market conditions.
Our subsidiaries, joint arrangements and associates are subject to differing
economic and financial market conditions around the world. Political or
economic instability affects such markets.
We use debt instruments, such as bonds and commercial paper, to raise
significant amounts of capital. Should our access to debt markets become
more difficult, the potential impact on our liquidity could have a material
adverse effect on our operations. Our financing costs could also be affected
by interest rate fluctuations or any credit rating deterioration.
We are exposed to changes in currency values and to exchange controls as a
result of our substantial international operations. Our reporting currency is the
dollar. However, to a material extent, we hold assets and are exposed to
liabilities in other currencies. Commodity trading is an important component of
our Upstream, Integrated Gas and Downstream businesses and is integrated
with our supply business. While we undertake some foreign exchange and
commodity hedging, we do not do so for all of our activities. Furthermore,
even where hedging is in place, it may not function as expected.
We are exposed to credit risk; our counterparties could fail or could be
unable to meet their payment and/or performance obligations under
contractual arrangements. Although we do not have significant direct
exposure to sovereign debt, it is possible that our partners and customers may
have exposure which could impair their ability to meet their obligations. In
addition, our pension plans may invest in government bonds, and therefore
could be affected by a sovereign debt downgrade or other default.
If any of the risks set out above materialise, they could have a material
adverse effect on our earnings, cash flows and financial condition.
See “Liquidity and capital resources” on page 54 and Note 19 to the
“Consolidated Financial Statements” on pages 167-172.
We have substantial pension commitments, funding of which is subject to
Many of our major projects and operations are conducted in joint
capital market risks.
arrangements or associates. This could reduce our degree of control,
Liabilities associated with defined benefit pension plans can be significant,
as well as our ability to identify and manage risks.
as can the cash funding requirement of such plans; both depend on various
In cases where we are not the operator, we have limited influence over, and
assumptions. Volatility in capital markets or government policies, and the
control of, the behaviour, performance and costs of operation of such joint
resulting consequences for investment performance and interest rates, as well
arrangements or associates. Despite not having control, we could still be
as changes in assumptions for mortality, retirement age or pensionable
exposed to the risks associated with these operations, including reputational,
remuneration at retirement, could result in significant changes to the funding
litigation (where joint and several liability could apply) and government
level of future liabilities. We operate a number of defined benefit pension
sanction risks. For example, our partners or members of a joint arrangement
plans and, in case of a shortfall, we could be required to make substantial
or an associate (particularly local partners in developing countries) may not
cash contributions (depending on the applicable local regulations) resulting in
be able to meet their financial or other obligations to the projects, threatening
a material adverse effect on our earnings, cash flows and financial condition.
the viability of a given project. Where we are the operator of a joint
See “Liquidity and capital resources” on page 54.
arrangement, the other partner(s) could still be able to veto or block certain
decisions, which could be to our overall detriment. Accordingly, where we
have limited influence, we are exposed to operational risks that could have a
We mainly self-insure our risk exposure. We could incur significant losses
material adverse effect on our earnings, cash flows and financial condition.
from different types of risks that are not covered by insurance from third-
party insurers.
See “Corporate governance” on page 82.
Our insurance subsidiaries provide hazard insurance coverage to other Shell
entities and only reinsure a portion of their risk exposures. Such reinsurance
We rely heavily on information technology systems for our operations.
would not provide any material coverage in the event of a large-scale safety
The operation of many of our business processes depends on reliable
and environmental incident. Similarly, in the event of a material safety and
information technology (IT) systems. Our IT systems are increasingly
environmental incident, there would be no material proceeds available from
concentrated in terms of geography, number of systems, and key contractors
third-party insurance companies to meet our obligations. Therefore, we may
supporting the delivery of IT services. Shell, like many other multinational
incur significant losses from different types of risks that are not covered by
companies, is the target of attempts to gain unauthorised access to our IT
insurance from third-party insurers, potentially resulting in a material adverse
systems and our data through various channels, including more sophisticated
effect on our earnings, cash flows and financial condition.
See “Corporate” on page 53.
and coordinated attempts often referred to as advanced persistent threats.
While our IT systems have been breached in the past, we believe that to
date, no significant breach has occurred. Timely detection is becoming
increasingly complex but we seek to detect and investigate all such security
An erosion of our business reputation could have a material adverse effect
incidents, aiming to prevent their recurrence. Disruption of critical IT services,
on our brand, our ability to secure new resources and our licence to
or breaches of information security, could harm our reputation and have a
operate.
material adverse effect on our earnings, cash flows and financial condition.
Our reputation is an important asset. The Shell General Business Principles
(Principles) govern how Shell and its individual companies conduct their
See “Corporate” on page 53.
affairs, and the Shell Code of Conduct instructs employees and contract staff
on how to behave in line with the Principles. Our challenge is to ensure that
Violations of antitrust and competition laws carry fines and expose us
all employees and contract staff, more than 100,000 in total, comply with
and/or our employees to criminal sanctions and civil suits.
the Principles and the Code of Conduct. Real or perceived failures of
Antitrust and competition laws apply to Shell and its joint ventures and
governance or regulatory compliance could harm our reputation. This could
associates in the vast majority of countries in which we do business. Shell and
impact our licence to operate, damage our brand, reduce consumer demand
its joint ventures and associates have been fined for violations of antitrust and
for our branded products, harm our ability to secure new resources and
competition laws. These include a number of fines in the past by the European
contracts, and limit our ability to access capital markets. Many other factors,
Commission Directorate-General for Competition (DG COMP). Due to the DG
including the materialisation of the risks discussed in several of the other risk
COMP’s fining guidelines, any future conviction of Shell or any of its joint
factors, could impact our reputation and could have a material adverse effect
ventures or associates for violation of European Union (EU) competition law
on our earnings, cash flows and financial condition.
See “Corporate governance” on page 77.
could result in significantly larger fines and have a material adverse effect on us.
Violation of antitrust laws is a criminal offence in many countries, and individuals
can be imprisoned or fined. Furthermore, it is now common for persons or
corporations allegedly injured by antitrust violations to sue for damages. Any
violation of these laws or harm to our reputation could have a material adverse
effect on our earnings, cash flows and financial condition.
See “Corporate governance” on page 77.
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The nature of our operations exposes us, and the communities in which we
Our future performance depends on the successful development and
work, to a wide range of health, safety, security and environment risks.
deployment of new technologies and new products.
The health, safety, security and environment (HSSE) risks to which we, and the
Technology and innovation are essential to our efforts to meet the world’s
communities in which we work, are potentially exposed cover a wide
energy demands in a competitive way. If we do not develop the right
spectrum, given the geographic range, operational diversity and technical
technology and products, do not have access to such technology and
complexity of our operations. These risks include the effects of natural
products or do not deploy these effectively, there could be a material adverse
disasters (including weather events), earthquakes, social unrest, personal
effect on the delivery of our strategy and our licence to operate. We operate
health and safety lapses, and crime. If a major HSSE risk materialises, such
in environments where advanced technologies are utilised. While we take
as an explosion or hydrocarbon spill, this could result in injuries, loss of life,
measures to ensure that such technologies and products are safe for the
environmental harm, disruption of business activities, and loss or suspension of
environment and public health based on today’s knowledge, there is always
our licence to operate or ability to bid on mineral rights. Accordingly, this
the possibility of unknown or unforeseeable technological failures or
would have a material adverse effect on our earnings, cash flows and
environmental and health effects that could harm our reputation and licence to
We have substantial pension commitments, funding of which is subject to
capital market risks.
Liabilities associated with defined benefit pension plans can be significant,
as can the cash funding requirement of such plans; both depend on various
assumptions. Volatility in capital markets or government policies, and the
resulting consequences for investment performance and interest rates, as well
as changes in assumptions for mortality, retirement age or pensionable
remuneration at retirement, could result in significant changes to the funding
level of future liabilities. We operate a number of defined benefit pension
plans and, in case of a shortfall, we could be required to make substantial
cash contributions (depending on the applicable local regulations) resulting in
a material adverse effect on our earnings, cash flows and financial condition.
financial condition.
operate or expose us to litigation or sanctions. The associated costs of new
technology are sometimes underestimated or delays occur. If we are unable
See “Liquidity and capital resources” on page 54.
Our operations are subject to extensive HSSE regulatory requirements that
to develop the right technologies and products in a timely and cost-effective
often change and are likely to become more stringent over time. Operators
manner, or if we develop technologies and products that adversely impact the
could be asked to adjust their future production plans, as the government of
environment or health of individuals, there could be a material adverse effect
the Netherlands has done, affecting production and costs. We could incur
on our earnings, cash flows and financial condition.
significant additional costs in the future due to compliance with HSSE
requirements or as a result of violations of, or liabilities under, laws and
regulations, such as fines, penalties, clean-up costs and third-party claims.
Therefore, HSSE risks, should they materialise, could have a material adverse
effect on our earnings, cash flows and financial condition.
See “Environment and society” on page 58.
A further erosion of the business and operating environment in Nigeria
could have a material adverse effect on us.
In our Nigerian operations, we face various risks and adverse conditions.
These include: security issues surrounding the safety of our people, host
communities and operations; sabotage and theft; our ability to enforce
existing contractual rights; litigation; limited infrastructure; potential legislation
that could increase our taxes or costs of operations; the effect of lower oil and
gas prices on the government budget; and regional instability created by
militant activities. Any of these risks or adverse conditions could have a
material adverse effect on our earnings, cash flows and financial condition.
See “Upstream” on page 35.
Production from the Groningen field in the Netherlands causes earthquakes
that affect local communities.
Shell and ExxonMobil are 50:50 shareholders in Nederlandse Aardolie
Maatschappij B.V. (NAM). An important part of NAM’s gas production
comes from the onshore Groningen gas field, in which EBN, a Dutch
government entity, has a 40% interest and NAM a 60% interest. Since 1995,
production from the Groningen field has caused earthquakes. Some of these
earthquakes have caused damage to houses and other structures in the
region, resulting in complaints and lawsuits from the local community.
Since 2013, the Minister of Economic Affairs has imposed curtailments on
production from the Groningen field in order to mitigate the seismicity risks.
In January 2018, there was another earthquake and a further curtailment of
production is likely. Additional earthquakes, lawsuits and further significant
curtailments of production could have a material adverse effect on NAM and
therefore could impact our earnings, cash flows and financial condition.
See “Upstream” on page 33.
See “Business overview” on page 11.
We are exposed to treasury and trading risks, including liquidity risk,
interest rate risk, foreign exchange risk, commodity price risk and credit risk.
We are affected by the global macroeconomic environment as well as
financial and commodity market conditions.
Our subsidiaries, joint arrangements and associates are subject to differing
economic and financial market conditions around the world. Political or
economic instability affects such markets.
We use debt instruments, such as bonds and commercial paper, to raise
significant amounts of capital. Should our access to debt markets become
more difficult, the potential impact on our liquidity could have a material
adverse effect on our operations. Our financing costs could also be affected
by interest rate fluctuations or any credit rating deterioration.
We are exposed to changes in currency values and to exchange controls as a
result of our substantial international operations. Our reporting currency is the
dollar. However, to a material extent, we hold assets and are exposed to
liabilities in other currencies. Commodity trading is an important component of
our Upstream, Integrated Gas and Downstream businesses and is integrated
with our supply business. While we undertake some foreign exchange and
commodity hedging, we do not do so for all of our activities. Furthermore,
even where hedging is in place, it may not function as expected.
We are exposed to credit risk; our counterparties could fail or could be
unable to meet their payment and/or performance obligations under
contractual arrangements. Although we do not have significant direct
exposure to sovereign debt, it is possible that our partners and customers may
have exposure which could impair their ability to meet their obligations. In
addition, our pension plans may invest in government bonds, and therefore
could be affected by a sovereign debt downgrade or other default.
If any of the risks set out above materialise, they could have a material
adverse effect on our earnings, cash flows and financial condition.
See “Liquidity and capital resources” on page 54 and Note 19 to the
“Consolidated Financial Statements” on pages 167-172.
We mainly self-insure our risk exposure. We could incur significant losses
from different types of risks that are not covered by insurance from third-
party insurers.
Our insurance subsidiaries provide hazard insurance coverage to other Shell
entities and only reinsure a portion of their risk exposures. Such reinsurance
would not provide any material coverage in the event of a large-scale safety
and environmental incident. Similarly, in the event of a material safety and
environmental incident, there would be no material proceeds available from
third-party insurance companies to meet our obligations. Therefore, we may
incur significant losses from different types of risks that are not covered by
insurance from third-party insurers, potentially resulting in a material adverse
effect on our earnings, cash flows and financial condition.
See “Corporate” on page 53.
An erosion of our business reputation could have a material adverse effect
on our brand, our ability to secure new resources and our licence to
operate.
Our reputation is an important asset. The Shell General Business Principles
(Principles) govern how Shell and its individual companies conduct their
affairs, and the Shell Code of Conduct instructs employees and contract staff
on how to behave in line with the Principles. Our challenge is to ensure that
all employees and contract staff, more than 100,000 in total, comply with
the Principles and the Code of Conduct. Real or perceived failures of
governance or regulatory compliance could harm our reputation. This could
impact our licence to operate, damage our brand, reduce consumer demand
for our branded products, harm our ability to secure new resources and
contracts, and limit our ability to access capital markets. Many other factors,
including the materialisation of the risks discussed in several of the other risk
factors, could impact our reputation and could have a material adverse effect
on our earnings, cash flows and financial condition.
See “Corporate governance” on page 77.
Many of our major projects and operations are conducted in joint
arrangements or associates. This could reduce our degree of control,
as well as our ability to identify and manage risks.
In cases where we are not the operator, we have limited influence over, and
control of, the behaviour, performance and costs of operation of such joint
arrangements or associates. Despite not having control, we could still be
exposed to the risks associated with these operations, including reputational,
litigation (where joint and several liability could apply) and government
sanction risks. For example, our partners or members of a joint arrangement
or an associate (particularly local partners in developing countries) may not
be able to meet their financial or other obligations to the projects, threatening
the viability of a given project. Where we are the operator of a joint
arrangement, the other partner(s) could still be able to veto or block certain
decisions, which could be to our overall detriment. Accordingly, where we
have limited influence, we are exposed to operational risks that could have a
material adverse effect on our earnings, cash flows and financial condition.
See “Corporate governance” on page 82.
We rely heavily on information technology systems for our operations.
The operation of many of our business processes depends on reliable
information technology (IT) systems. Our IT systems are increasingly
concentrated in terms of geography, number of systems, and key contractors
supporting the delivery of IT services. Shell, like many other multinational
companies, is the target of attempts to gain unauthorised access to our IT
systems and our data through various channels, including more sophisticated
and coordinated attempts often referred to as advanced persistent threats.
While our IT systems have been breached in the past, we believe that to
date, no significant breach has occurred. Timely detection is becoming
increasingly complex but we seek to detect and investigate all such security
incidents, aiming to prevent their recurrence. Disruption of critical IT services,
or breaches of information security, could harm our reputation and have a
material adverse effect on our earnings, cash flows and financial condition.
See “Corporate” on page 53.
Violations of antitrust and competition laws carry fines and expose us
and/or our employees to criminal sanctions and civil suits.
Antitrust and competition laws apply to Shell and its joint ventures and
associates in the vast majority of countries in which we do business. Shell and
its joint ventures and associates have been fined for violations of antitrust and
competition laws. These include a number of fines in the past by the European
Commission Directorate-General for Competition (DG COMP). Due to the DG
COMP’s fining guidelines, any future conviction of Shell or any of its joint
ventures or associates for violation of European Union (EU) competition law
could result in significantly larger fines and have a material adverse effect on us.
Violation of antitrust laws is a criminal offence in many countries, and individuals
can be imprisoned or fined. Furthermore, it is now common for persons or
corporations allegedly injured by antitrust violations to sue for damages. Any
violation of these laws or harm to our reputation could have a material adverse
effect on our earnings, cash flows and financial condition.
See “Corporate governance” on page 77.
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risk factors Continued
Market overview
Investors should also consider the following, which could limit shareholder
remedies.
The Company’s Articles of Association determine the jurisdiction for
shareholder disputes. This could limit shareholder remedies.
Our Articles of Association generally require that all disputes between our
shareholders in such capacity and the Company or our subsidiaries (or our
Directors or former Directors), or between the Company and our Directors or
former Directors, be exclusively resolved by arbitration in The Hague, the
Netherlands, under the Rules of Arbitration of the International Chamber of
Commerce. Our Articles of Association also provide that, if this provision is to
be determined invalid or unenforceable for any reason, the dispute could only
be brought before the courts of England and Wales. Accordingly, the ability
of shareholders to obtain monetary or other relief, including in respect of
securities law claims, could be determined in accordance with these
provisions.
Violations of anti-bribery, anti-corruption and anti-money laundering laws
carry fines and expose us and/or our employees to criminal sanctions, civil
suits and ancillary consequences (such as debarment and the revocation of
licences).
Anti-bribery, anti-corruption and anti-money laundering laws apply to Shell, its
joint ventures and associates in all countries in which we do business. Shell
and its joint ventures and associates in the past have been fined for violations
of the US Foreign Corrupt Practices Act. Any future violation of anti-bribery,
anti-corruption or anti-money laundering laws could have a material adverse
effect on our earnings, cash flows and financial condition.
See “Our people” on pages 67-68, “Corporate governance” on page 77
and Note 25 to the “Consolidated Financial Statements” on pages 175-176.
Violations of data protection laws carry fines and expose us and/or our
employees to criminal sanctions and civil suits.
Data protection laws apply to Shell and its joint ventures and associates in the
vast majority of countries in which we do business. Over 100 countries have
data protection laws and regulations. Additionally, the EU General Data
Protection Regulation (GDPR), which will be applicable from May 2018,
increases penalties up to a maximum of 4% of global annual turnover for
breach of the regulation. The GDPR requires mandatory breach notification,
the standard for which is also followed outside the EU (particularly in Asia).
Non-compliance with data protection laws could expose us to regulatory
investigations, which could result in fines and penalties. In addition to
imposing fines, regulators may also issue orders to stop processing personal
data, which could disrupt operations. We could also be subject to litigation
from persons or corporations allegedly affected by data protection violations.
Violation of data protection laws is a criminal offence in some countries, and
individuals can be imprisoned or fined. Any violation of these laws or harm to
our reputation could have a material adverse effect on our earnings, cash
flows and financial condition.
See “Corporate governance” on page 77.
Violations of trade compliance laws and regulations, including sanctions,
carry fines and expose us and our employees to criminal sanctions and civil
suits.
We use “trade compliance” as an umbrella term for various national and
international laws designed to regulate the movement of items across national
boundaries and restrict or prohibit trade and other dealings with certain
parties. The number and breadth of such laws continue to expand. For
example, the EU and the USA continue to impose restrictions and prohibitions
on certain transactions involving Syria. In addition, the USA continues to have
comprehensive sanctions in place against Iran, while the EU and other
nations continue to maintain targeted sanctions. Additional restrictions and
controls directed at defined oil and gas activities in Russia, which were
imposed by the EU and the USA in 2014, are still in force. Further restrictions
regarding Russia were introduced by the USA in 2017. The USA also
introduced sectorial sanctions against Venezuela in 2017 targeting the
government of Venezuela and the oil industry. In addition to the significant
trade-control programmes administered by the EU and the USA, many other
nations are also adopting such programmes. This expansion of sanctions,
including the frequent additions of prohibited parties, combined with the
number of markets in which we operate and the large number of transactions
we process, makes ensuring compliance with all sanctions complex and at
times challenging. Any violation of one or more of these regimes could lead
to loss of import or export privileges, significant penalties on or prosecution of
Shell or its employees, and could harm our reputation and have a material
adverse effect on our earnings, cash flows and financial condition.
See “Corporate governance” on page 77.
We maintain a large business portfolio across an integrated value chain and
are exposed to crude oil, natural gas, oil product and chemical prices (see
“Risk factors” on page 12). This diversified portfolio helps us mitigate the
impact of price volatility. Our annual planning cycle and periodic portfolio
reviews aim to ensure that our levels of capital investment and operating
expenses are affordable in the context of a volatile price environment. We
test the resilience of our projects and other opportunities against a range of
crude oil, natural gas, oil product and chemical prices and costs. We also
aim to maintain a strong balance sheet to provide resilience against weak
market prices.
GLOBAL ECONOMIC GROWTH
One of the key drivers of oil, natural gas and oil product demand is
economic activity. According to the World Economic Outlook released by the
emerging economies, where demand grew by 1.2 million b/d. In advanced
economies demand grew by 0.3 million b/d. Oil demand growth in 2017
was 0.2 million b/d higher than in 2016, when it rose by 1.3 million b/d.
Oil supply in 2017 is estimated in the Oil Market Report at 97.3 million
b/d, an increase of 0.4 million b/d compared with 2016. Because growth
in oil demand outpaced growth in supply, global crude oil and oil products
inventory levels decreased during the year but remained well above the
average of the last five years. Average commercial and government-
controlled inventory levels for OECD countries in November 2017 were
estimated at 2,910 million barrels in the Oil Market Report, some 125 million
barrels less than in November 2016, but still about 200 million barrels
above the year average levels seen in 2014, before the Brent price started to
fall. This partial oil market rebalancing supported oil prices, particularly in the
International Monetary Fund (IMF) in January 2018, global economic growth
second half of the year.
increased from 3.2% in 2016 to 3.7% in 2017. Economic activity has
picked up momentum in most countries and regions reflecting firmer domestic
demand growth in advanced economies on the back of supportive monetary
policies and benign financing conditions, and improved performance in
several large emerging-market economies.
According to the IMF’s latest estimate, growth accelerated in the USA from
1.5% in 2016 to 2.3% in 2017. Growth in the eurozone increased to 2.4%
from 1.8% in 2016. Growth in most other advanced economies also
increased. In China, growth was 6.8% in 2017, up from 6.7% in 2016.
In contrast, growth slowed in India, in part due to uncertainty around new
policies (such as the introduction of a goods and services tax). Recovering
export and domestic demand supported recoveries in Brazil, Russia and
Turkey. For 2018 and 2019, the IMF expects global economic growth to
increase marginally, reaching 3.9% in each year.
GLOBAL PRICES, DEMAND AND SUPPLY
The following table provides an overview of the main crude oil and natural
gas price markers that we are exposed to:
Oil and gas average industry prices [A]
Brent ($/b)
West Texas Intermediate ($/b)
Henry Hub ($/MMBtu)
UK National Balancing Point
(pence/therm)
Japan Customs-cleared Crude ($/b)
2017
2016
2015
54
51
44
43
3.0
2.5
45
54
35
42
52
49
2.6
43
55
[A] Yearly average prices are based on daily spot prices. The 2017 average price for Japan Customs-
cleared Crude excludes December data.
CRUDE OIL
Brent crude oil, an international benchmark, traded between $45 per barrel
(/b) and $67/b in 2017, ending the year at $66/b. It averaged $54/b
for the year, $10/b higher than in 2016 when the price was at its lowest
average level since 2004.
On a yearly average basis, West Texas Intermediate crude oil traded at a
$3/b discount to Brent in 2017, compared with $0.4/b in 2016.
The discount widened in the second half of the year as crude oil demand
from refineries on the US Gulf Coast slowed due to shutdowns related to the
hurricane season. Increasing US oil exports helped to limit further widening of
the price differential.
Reflecting the economic conditions described above, global oil demand grew
by 1.5 million barrels per day (b/d), or 1.6%, to 97.8 million b/d,
according to the International Energy Agency’s (IEA) Oil Market Report
published in January 2018 (Oil Market Report). This growth was driven by
On the non-OPEC supply side, the US Energy Information Administration
reported a continuation of supply growth that began in the third quarter of
2016. US production averaged 9.3 million b/d in 2017, 0.5 million b/d
higher than in 2016. Higher oil prices in 2017 reflected an attractive
environment for US production to grow and for drilling activity to increase,
as indicated by a higher onshore oil rig count for the year. Production from
other non-OPEC countries increased by 0.4 million b/d and averaged
55.7 million b/d.
In order to support oil prices, OPEC members agreed in November 2016 to
reduce their overall production by 1.2 million b/d, compared with October
2016, during the first half of 2017. In May 2017, they extended their
agreement to early 2018. In November 2017, they extended it to the end of
2018. OPEC production averaged 32.3 million b/d in 2017, about
0.5 million b/d less than in 2016. Other, non-OPEC, resource holders,
most notably Russia, continued to partner with OPEC in the attempt to limit
oversupply – reducing their output by a total of 0.6 million b/d.
Looking ahead, higher global economic activity as indicated by the IMF’s
global economic outlook and moderate oil price levels at the beginning of
2018 could create around 1.3 million b/d of additional demand growth in
2018, according to the IEA. If OPEC members and co-operating non-OPEC
resource holders continue to limit production to 2017 levels, demand growth
would have to be balanced by production growth from non-OPEC countries,
mostly from the USA, and withdrawals from storage. A continuation of market
rebalancing, as indicated by storage withdrawals, would support prices.
Postponements and cancellations of new supply projects over the last few
years could lead to further market tightening in the next few years. In such a
scenario, we believe that the average Brent crude oil price may be 10% to
50% higher in 2021 than the 2017 average.
On the other hand, we believe that the price environment could weaken if
OPEC and the non-OPEC resource holders abandon their production cuts,
the global economy accelerates less quickly, or if other non-OPEC producers,
such as US shale producers, effectively manage costs and deliver cheaper oil
to the market.
NATURAL GAS
Global gas demand grew by about 2.4% in 2017, which is higher than the
average annual growth of 2.3% in the past decade. A combination of
weather conditions and increased global economic growth led to an increase
in demand growth in most regions.
The global liquefied natural gas (LNG) market grew by 29 million tonnes
(11.2%) year on year. Supply growth was primarily driven by the start-up of
new projects in Australia and the USA. The majority of additional LNG supply
was absorbed by North Asia and Southern Europe, offsetting a decline in
imports by the Middle East and North Africa. LNG demand growth was
supported by policy developments (China, South Korea and Taiwan), warmer
weather (Southern Europe) and delays in nuclear power station restarts (Japan).
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Market overview
Market overview
We maintain a large business portfolio across an integrated value chain and
are exposed to crude oil, natural gas, oil product and chemical prices (see
“Risk factors” on page 12). This diversified portfolio helps us mitigate the
impact of price volatility. Our annual planning cycle and periodic portfolio
reviews aim to ensure that our levels of capital investment and operating
expenses are affordable in the context of a volatile price environment. We
test the resilience of our projects and other opportunities against a range of
crude oil, natural gas, oil product and chemical prices and costs. We also
aim to maintain a strong balance sheet to provide resilience against weak
market prices.
GLOBAL ECONOMIC GROWTH
One of the key drivers of oil, natural gas and oil product demand is
economic activity. According to the World Economic Outlook released by the
International Monetary Fund (IMF) in January 2018, global economic growth
increased from 3.2% in 2016 to 3.7% in 2017. Economic activity has
picked up momentum in most countries and regions reflecting firmer domestic
demand growth in advanced economies on the back of supportive monetary
policies and benign financing conditions, and improved performance in
several large emerging-market economies.
According to the IMF’s latest estimate, growth accelerated in the USA from
1.5% in 2016 to 2.3% in 2017. Growth in the eurozone increased to 2.4%
from 1.8% in 2016. Growth in most other advanced economies also
increased. In China, growth was 6.8% in 2017, up from 6.7% in 2016.
In contrast, growth slowed in India, in part due to uncertainty around new
policies (such as the introduction of a goods and services tax). Recovering
export and domestic demand supported recoveries in Brazil, Russia and
Turkey. For 2018 and 2019, the IMF expects global economic growth to
increase marginally, reaching 3.9% in each year.
GLOBAL PRICES, DEMAND AND SUPPLY
The following table provides an overview of the main crude oil and natural
gas price markers that we are exposed to:
Oil and gas average industry prices [A]
2017
2016
2015
Brent ($/b)
West Texas Intermediate ($/b)
Henry Hub ($/MMBtu)
UK National Balancing Point
(pence/therm)
43
Japan Customs-cleared Crude ($/b)
55
[A] Yearly average prices are based on daily spot prices. The 2017 average price for Japan Customs-
cleared Crude excludes December data.
54
51
3.0
44
43
2.5
52
49
2.6
45
54
35
42
CRUDE OIL
Brent crude oil, an international benchmark, traded between $45 per barrel
(/b) and $67/b in 2017, ending the year at $66/b. It averaged $54/b
for the year, $10/b higher than in 2016 when the price was at its lowest
average level since 2004.
On a yearly average basis, West Texas Intermediate crude oil traded at a
$3/b discount to Brent in 2017, compared with $0.4/b in 2016.
The discount widened in the second half of the year as crude oil demand
from refineries on the US Gulf Coast slowed due to shutdowns related to the
hurricane season. Increasing US oil exports helped to limit further widening of
the price differential.
Reflecting the economic conditions described above, global oil demand grew
by 1.5 million barrels per day (b/d), or 1.6%, to 97.8 million b/d,
according to the International Energy Agency’s (IEA) Oil Market Report
published in January 2018 (Oil Market Report). This growth was driven by
STRATEGIC REPORT SHELL ANNUAL REPORT AND FORM 20-F 2017
16
STRATEGIC REPORT SHELL ANNUAL REPORT AND FORM 20-F 2017
17
Violations of anti-bribery, anti-corruption and anti-money laundering laws
Investors should also consider the following, which could limit shareholder
carry fines and expose us and/or our employees to criminal sanctions, civil
remedies.
suits and ancillary consequences (such as debarment and the revocation of
licences).
The Company’s Articles of Association determine the jurisdiction for
Anti-bribery, anti-corruption and anti-money laundering laws apply to Shell, its
shareholder disputes. This could limit shareholder remedies.
joint ventures and associates in all countries in which we do business. Shell
Our Articles of Association generally require that all disputes between our
and its joint ventures and associates in the past have been fined for violations
shareholders in such capacity and the Company or our subsidiaries (or our
of the US Foreign Corrupt Practices Act. Any future violation of anti-bribery,
Directors or former Directors), or between the Company and our Directors or
anti-corruption or anti-money laundering laws could have a material adverse
former Directors, be exclusively resolved by arbitration in The Hague, the
effect on our earnings, cash flows and financial condition.
Netherlands, under the Rules of Arbitration of the International Chamber of
See “Our people” on pages 67-68, “Corporate governance” on page 77
be determined invalid or unenforceable for any reason, the dispute could only
and Note 25 to the “Consolidated Financial Statements” on pages 175-176.
be brought before the courts of England and Wales. Accordingly, the ability
Commerce. Our Articles of Association also provide that, if this provision is to
Violations of data protection laws carry fines and expose us and/or our
securities law claims, could be determined in accordance with these
employees to criminal sanctions and civil suits.
provisions.
of shareholders to obtain monetary or other relief, including in respect of
Data protection laws apply to Shell and its joint ventures and associates in the
vast majority of countries in which we do business. Over 100 countries have
data protection laws and regulations. Additionally, the EU General Data
Protection Regulation (GDPR), which will be applicable from May 2018,
increases penalties up to a maximum of 4% of global annual turnover for
breach of the regulation. The GDPR requires mandatory breach notification,
the standard for which is also followed outside the EU (particularly in Asia).
Non-compliance with data protection laws could expose us to regulatory
investigations, which could result in fines and penalties. In addition to
imposing fines, regulators may also issue orders to stop processing personal
data, which could disrupt operations. We could also be subject to litigation
from persons or corporations allegedly affected by data protection violations.
Violation of data protection laws is a criminal offence in some countries, and
individuals can be imprisoned or fined. Any violation of these laws or harm to
our reputation could have a material adverse effect on our earnings, cash
flows and financial condition.
See “Corporate governance” on page 77.
Violations of trade compliance laws and regulations, including sanctions,
carry fines and expose us and our employees to criminal sanctions and civil
suits.
We use “trade compliance” as an umbrella term for various national and
international laws designed to regulate the movement of items across national
boundaries and restrict or prohibit trade and other dealings with certain
parties. The number and breadth of such laws continue to expand. For
example, the EU and the USA continue to impose restrictions and prohibitions
on certain transactions involving Syria. In addition, the USA continues to have
comprehensive sanctions in place against Iran, while the EU and other
nations continue to maintain targeted sanctions. Additional restrictions and
controls directed at defined oil and gas activities in Russia, which were
imposed by the EU and the USA in 2014, are still in force. Further restrictions
regarding Russia were introduced by the USA in 2017. The USA also
introduced sectorial sanctions against Venezuela in 2017 targeting the
government of Venezuela and the oil industry. In addition to the significant
trade-control programmes administered by the EU and the USA, many other
nations are also adopting such programmes. This expansion of sanctions,
including the frequent additions of prohibited parties, combined with the
number of markets in which we operate and the large number of transactions
we process, makes ensuring compliance with all sanctions complex and at
times challenging. Any violation of one or more of these regimes could lead
to loss of import or export privileges, significant penalties on or prosecution of
Shell or its employees, and could harm our reputation and have a material
adverse effect on our earnings, cash flows and financial condition.
See “Corporate governance” on page 77.
emerging economies, where demand grew by 1.2 million b/d. In advanced
economies demand grew by 0.3 million b/d. Oil demand growth in 2017
was 0.2 million b/d higher than in 2016, when it rose by 1.3 million b/d.
Oil supply in 2017 is estimated in the Oil Market Report at 97.3 million
b/d, an increase of 0.4 million b/d compared with 2016. Because growth
in oil demand outpaced growth in supply, global crude oil and oil products
inventory levels decreased during the year but remained well above the
average of the last five years. Average commercial and government-
controlled inventory levels for OECD countries in November 2017 were
estimated at 2,910 million barrels in the Oil Market Report, some 125 million
barrels less than in November 2016, but still about 200 million barrels
above the year average levels seen in 2014, before the Brent price started to
fall. This partial oil market rebalancing supported oil prices, particularly in the
second half of the year.
On the non-OPEC supply side, the US Energy Information Administration
reported a continuation of supply growth that began in the third quarter of
2016. US production averaged 9.3 million b/d in 2017, 0.5 million b/d
higher than in 2016. Higher oil prices in 2017 reflected an attractive
environment for US production to grow and for drilling activity to increase,
as indicated by a higher onshore oil rig count for the year. Production from
other non-OPEC countries increased by 0.4 million b/d and averaged
55.7 million b/d.
In order to support oil prices, OPEC members agreed in November 2016 to
reduce their overall production by 1.2 million b/d, compared with October
2016, during the first half of 2017. In May 2017, they extended their
agreement to early 2018. In November 2017, they extended it to the end of
2018. OPEC production averaged 32.3 million b/d in 2017, about
0.5 million b/d less than in 2016. Other, non-OPEC, resource holders,
most notably Russia, continued to partner with OPEC in the attempt to limit
oversupply – reducing their output by a total of 0.6 million b/d.
Looking ahead, higher global economic activity as indicated by the IMF’s
global economic outlook and moderate oil price levels at the beginning of
2018 could create around 1.3 million b/d of additional demand growth in
2018, according to the IEA. If OPEC members and co-operating non-OPEC
resource holders continue to limit production to 2017 levels, demand growth
would have to be balanced by production growth from non-OPEC countries,
mostly from the USA, and withdrawals from storage. A continuation of market
rebalancing, as indicated by storage withdrawals, would support prices.
Postponements and cancellations of new supply projects over the last few
years could lead to further market tightening in the next few years. In such a
scenario, we believe that the average Brent crude oil price may be 10% to
50% higher in 2021 than the 2017 average.
On the other hand, we believe that the price environment could weaken if
OPEC and the non-OPEC resource holders abandon their production cuts,
the global economy accelerates less quickly, or if other non-OPEC producers,
such as US shale producers, effectively manage costs and deliver cheaper oil
to the market.
NATURAL GAS
Global gas demand grew by about 2.4% in 2017, which is higher than the
average annual growth of 2.3% in the past decade. A combination of
weather conditions and increased global economic growth led to an increase
in demand growth in most regions.
The global liquefied natural gas (LNG) market grew by 29 million tonnes
(11.2%) year on year. Supply growth was primarily driven by the start-up of
new projects in Australia and the USA. The majority of additional LNG supply
was absorbed by North Asia and Southern Europe, offsetting a decline in
imports by the Middle East and North Africa. LNG demand growth was
supported by policy developments (China, South Korea and Taiwan), warmer
weather (Southern Europe) and delays in nuclear power station restarts (Japan).
SHELL ANNUAL REPORT AND FORM 20-F 2017 strategic report
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Market overview Continued
Summary of results
Unlike crude oil pricing, which is global in nature, natural gas prices can vary
from region to region.
In the USA, the natural gas price at the Henry Hub averaged $3.0 per million
British thermal units (MMBtu) in 2017, 20% higher than in 2016, and traded
in a range of $2.4-3.4/MMBtu. One important factor is how much natural
gas is available in storage during the winter. At the end of March 2017,
prices were supported by a tighter than normal balance between supply and
demand, which led to around 0.5 trillion cubic feet less gas being held in
storage compared with the year-ago level. Mild weather and higher prices
led to lower than normal demand for gas from US power generation. But
both LNG exports and pipeline exports to Mexico increased substantially as
new liquefaction terminals and cross-border pipelines came online. Higher oil
and gas prices compared with 2016, combined with new gas pipeline
capacity, helped to increase overall gas production, which met demand but
led to around 0.3 trillion cubic feet less gas held in storage in November
2017, compared with the year-ago level.
In Europe, natural gas prices were higher than in 2016. The average price at
the UK National Balancing Point (NBP) was 28% higher in 2017. At the main
continental European gas trading hubs – in the Netherlands, Belgium and
Germany – prices were also stronger, as reflected by stronger Dutch Title
Transfer Facility (TTF) prices. The closure of the Rough gas storage facility in the
UK created a winter premium and summer discount for NBP prices relative to
TTF prices. This reduction in storage space increased winter supply concerns in
the UK, while removing an important source of demand in summer, when
suppliers have typically restocked the facility in preparation for the following
winter. Higher prices reflected the combined effect of reduced domestic
production, lower nuclear power generation, increased coal prices, and growth
in demand from power generation and other industrial sectors.
We also produce and sell natural gas in regions where supply, demand and
regulatory circumstances differ markedly from those in the USA or Europe.
Long-term contracted LNG prices in the Asia-Pacific region generally
increased in 2017 as they are predominantly indexed to the price of Japan
Customs-cleared Crude, which has increased in line with global oil prices.
North Asia spot prices (reflected by the Japan Korea Marker) also increased
due to relatively strong demand, particularly from China.
as are analyses of market fundamentals such as possible future economic
conditions, geopolitics, actions by OPEC and other major resource holders,
production costs and the balance of supply and demand. Sensitivity analyses
are used to test the impact of low-price drivers, such as economic weakness,
and high-price drivers, such as strong economic growth and low investment in
new production capacity. Short-term events, such as relatively warm winters or
cool summers, affect demand. Supply disruptions, due to weather or political
instability, contribute to price volatility.
REFINING MARGINS
Refining marker average industry gross margins
2016
2017
$/b
2015
US West Coast
US Gulf Coast Coking
Rotterdam Complex
Singapore
14.0 12.9 19.4
9.1 10.6
4.7
2.5
4.7
2.8
9.9
4.3
3.6
Industry gross refining margins were higher on average in 2017 than in 2016 in
each of the key refining hubs of Europe, Singapore and the USA. Oil products
demand growth was stronger globally, with an increase of 1.5 million b/d
compared with 2016 according to the Oil Market Report, driven in part by a
continued low-price crude oil environment and industrial demand growth. Demand
growth and refinery outages, notably in Latin America, reduced overcapacity
despite new refinery capacity additions in 2017 in China.
In 2018, we expect demand for products such as gasoline and middle
distillates to continue to grow and support margins, driven by a further increase
in economic activity as well as demand from freight and passenger transport.
However, ample refining capacity and potentially strengthening feedstock prices
could narrow margins. Overall, we believe margins could be similar to 2017,
but demand and supply-side uncertainty may drive significant volatility.
PETROCHEMICAL MARGINS
Cracker industry margins
Looking ahead, we expect gas markets in North America, Europe and Asia
Pacific to be well supplied over the next few years, despite our expectation of
LNG demand growth in the Middle East and Asia. Price developments are
very uncertain and dependent on many factors.
North East/South East Asia naphtha
Western Europe naphtha
US ethane
2017
2016
$/tonne
2015
688
727
471
672
598
450
463
617
498
In the USA, Henry Hub gas prices may increase over the next few years due to
increasing demand from LNG exports, pipeline exports to Mexico and the US
residential/industrial sectors. On the other hand, increasing availability of low-
cost natural gas and oil, combined with technological improvements, could
continue to place pressure on natural gas prices. We believe that Henry Hub
gas prices could average up to 30% higher by 2021 than in 2017. In Europe,
we believe gas prices will be increasingly driven by the volume of LNG imports
from the USA. In the Asia Pacific region, gas prices are expected to continue to
be strongly influenced by oil prices, but also increasingly by Henry Hub gas
prices. We believe that the price at the UK NBP by 2021 could average as
much as 30% higher than in 2017. By 2021, we believe that the average
price of LNG delivered under contract to the Asia-Pacific market could be up to
30% higher than in 2017.
CRUDE OIL AND NATURAL GAS PRICE ASSUMPTIONS
Our ability to deliver competitive returns and pursue commercial opportunities
ultimately depends on the accuracy of our price assumptions (see “Risk
factors” on page 12). The range of possible future crude oil and natural gas
prices used in project and portfolio evaluations is determined after a rigorous
assessment of short-, medium- and long-term market drivers. Historical
analyses, trends and statistical volatility are considered in this assessment,
Asian naphtha cracker margins rose for the third consecutive year, although
only slightly in 2017, driven by continued strong demand, periods of
reduced cracker capacity availability and higher naphtha cracker
utilisation. European naphtha cracker margins increased, supported by tight
ethylene markets and high global utilisation. US ethane cracker margins
increased slightly but remained lower than margins in Asia and Europe as
continued low crude oil prices reduced the margin available in the ethane
to polyethylene value chain.
The outlook for petrochemical margins in 2018 depends on supply and demand
balances and feedstock costs. Demand for petrochemicals is closely linked to
economic growth as well as product prices. Product prices reflect prices of raw
materials, which are closely linked to crude oil and natural gas prices. The
balance of these factors will drive margins.
The statements in this “Market overview” section, including those related to our
price forecasts, are forward-looking statements based on management’s current
expectations and certain material assumptions and, accordingly, involve risks
and uncertainties that could cause actual results, performance or events to differ
materially from those expressed or implied herein. See “About this Report” on
page 05 and “Risk factors” on pages 12-16.
STRATEGIC REPORT SHELL ANNUAL REPORT AND FORM 20-F 2017
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strategic report SHELL ANNUAL REPORT AND FORM 20-F 2017
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Key statistics
Income for the period
Current cost of supplies adjustment
Total segment earnings [A][B], of which:
Integrated Gas
Upstream
Downstream
Corporate
Capital investment [B]
Divestments [B]
Operating expenses [B]
Return on average capital employed [B]
Gearing at December 31 [C]
Oil and gas production (thousand boe/d)
Proved oil and gas reserves at December 31 (million boe)
[B] See “Non-GAAP measures reconciliations” on pages 225-226.
[C] See Note 14 to the “Consolidated Financial Statements” on page 158.
2017
13,435
(964 )
12,471
5,078
1,551
8,258
(2,416 )
24,006
17,340
38,083
5.8%
24.8%
3,664
12,233
$ million, except where indicated
2016
4,777
(1,085 )
3,692
2,529
(3,674 )
6,588
(1,751 )
79,877
4,984
41,549
3.0%
28.0%
3,668
13,248
2015
2,200
1,955
4,155
3,170
(8,833 )
10,243
(425 )
28,861
5,540
41,144
1.9%
14.0%
2,954
11,747
[A] Segment earnings are presented on a current cost of supplies basis. See Note 4 to the “Consolidated Financial Statements” on pages 149-150.
EARNINGS 2017-2016
Downstream earnings in 2017 were $8,258 million, compared with
Income for the period was $13,435 million in 2017, compared with
$6,588 million in 2016. The increase was mainly driven by improved
$4,777 million in 2016. After current cost of supplies adjustment, total
refining and chemicals industry conditions, the impact of fair value accounting
segment earnings were $12,471 million in 2017, compared with
of commodity derivatives, and lower taxation, redundancy and impairment
$3,692 million in 2016.
charges. This was partly offset by lower gains on divestments and higher
depreciation charges. See “Downstream” on pages 46-47.
Earnings on a current cost of supplies basis (CCS earnings) exclude the effect
of changes in the oil price on inventory carrying amounts, after making
Corporate earnings in 2017 were a loss of $2,416 million, compared with
allowance for the tax effect. The purchase price of volumes sold in the period
a loss of $1,751 million in 2016. The higher loss was mainly driven by
is based on the current cost of supplies during the same period, rather than
higher interest expense and net foreign exchange losses, partly offset by
on the historic cost calculated on a first-in, first-out (FIFO) basis. Therefore,
lower operating expenses. There was also a charge in 2017 as a result of
when oil prices are decreasing, CCS earnings are likely to be higher than
US tax reform legislation. See “Corporate” on page 53.
earnings calculated on a FIFO basis and, when prices are increasing, CCS
earnings are likely to be lower than earnings calculated on a FIFO basis.
EARNINGS 2016-2015
Income for the period was $4,777 million in 2016, compared with
Integrated Gas earnings in 2017 were $5,078 million, compared with
$2,200 million in 2015. After current cost of supplies adjustment, total
$2,529 million in 2016. The increase was mainly driven by higher realised
segment earnings were $3,692 million in 2016, compared with
oil, gas, and liquefied natural gas (LNG) prices, as well as the impact of the
$4,155 million in 2015. BG Group plc (BG) was consolidated within Shell’s
strengthening Australian dollar on a deferred tax position, and lower
results with effect from February 2016 following its acquisition.
impairment charges. These effects were partly offset by the impacts in 2017
of a charge for fair value accounting of commodity derivatives, a charge as a
Integrated Gas earnings in 2016 were $2,529 million, compared with
result of US tax reform legislation, and by lower liquids production partially
$3,170 million in 2015. The decrease was mainly driven by higher
offset by higher LNG liquefaction volumes. See “Integrated Gas” on
operating expenses and depreciation, lower oil and LNG prices, and higher
pages 24-25.
taxation. These impacts were partly offset by higher production and LNG
liquefaction volumes, lower impairment charges and well write-offs.
Upstream earnings in 2017 were $1,551 million, compared with a loss of
$3,674 million in 2016. The improvement was mainly driven by higher
Upstream earnings in 2016 were a loss of $3,674 million, compared with a
realised oil and gas prices. Higher gains on divestments and lower
depreciation charges were partly offset by higher impairment charges.
Overall, there were higher taxation charges. Beneficial movements in
deferred tax positions were more than offset by a charge in 2017 as a result
of US tax reform legislation and the absence of a gain related to the impact
of a strengthening Brazilian real on a deferred tax position in 2016.
See “Upstream” on pages 31-32.
loss of $8,833 million in 2015. The lower loss in 2016 was partly
explained by the significant charges in 2015 associated with the decision to
cease Alaska drilling activities and the Carmon Creek project in Canada and
other impairments. In addition, earnings in 2016 benefited from higher
production volumes and lower operating expenses, partly offset by lower oil
and gas prices, higher depreciation, and lower gains on divestments.
Downstream earnings in 2016 were $6,588 million, compared with
$10,243 million in 2015. The decrease was mainly due to lower realised
refining and trading margins and a higher effective tax rate. There was a
partial offset from stronger marketing margins, in turn partly offset by the
impact of divestments and unfavourable exchange rate effects and fair value
accounting of commodity derivatives.
Unlike crude oil pricing, which is global in nature, natural gas prices can vary
as are analyses of market fundamentals such as possible future economic
from region to region.
In the USA, the natural gas price at the Henry Hub averaged $3.0 per million
British thermal units (MMBtu) in 2017, 20% higher than in 2016, and traded
in a range of $2.4-3.4/MMBtu. One important factor is how much natural
gas is available in storage during the winter. At the end of March 2017,
prices were supported by a tighter than normal balance between supply and
demand, which led to around 0.5 trillion cubic feet less gas being held in
storage compared with the year-ago level. Mild weather and higher prices
led to lower than normal demand for gas from US power generation. But
both LNG exports and pipeline exports to Mexico increased substantially as
new liquefaction terminals and cross-border pipelines came online. Higher oil
and gas prices compared with 2016, combined with new gas pipeline
capacity, helped to increase overall gas production, which met demand but
led to around 0.3 trillion cubic feet less gas held in storage in November
2017, compared with the year-ago level.
In Europe, natural gas prices were higher than in 2016. The average price at
the UK National Balancing Point (NBP) was 28% higher in 2017. At the main
continental European gas trading hubs – in the Netherlands, Belgium and
Germany – prices were also stronger, as reflected by stronger Dutch Title
Transfer Facility (TTF) prices. The closure of the Rough gas storage facility in the
UK created a winter premium and summer discount for NBP prices relative to
TTF prices. This reduction in storage space increased winter supply concerns in
the UK, while removing an important source of demand in summer, when
suppliers have typically restocked the facility in preparation for the following
conditions, geopolitics, actions by OPEC and other major resource holders,
production costs and the balance of supply and demand. Sensitivity analyses
are used to test the impact of low-price drivers, such as economic weakness,
and high-price drivers, such as strong economic growth and low investment in
new production capacity. Short-term events, such as relatively warm winters or
cool summers, affect demand. Supply disruptions, due to weather or political
instability, contribute to price volatility.
REFINING MARGINS
Refining marker average industry gross margins
US West Coast
US Gulf Coast Coking
Rotterdam Complex
Singapore
2017
2016
14.0 12.9 19.4
$/b
2015
9.9
4.3
3.6
9.1 10.6
2.5
2.8
4.7
4.7
Industry gross refining margins were higher on average in 2017 than in 2016 in
each of the key refining hubs of Europe, Singapore and the USA. Oil products
demand growth was stronger globally, with an increase of 1.5 million b/d
compared with 2016 according to the Oil Market Report, driven in part by a
continued low-price crude oil environment and industrial demand growth. Demand
growth and refinery outages, notably in Latin America, reduced overcapacity
despite new refinery capacity additions in 2017 in China.
winter. Higher prices reflected the combined effect of reduced domestic
In 2018, we expect demand for products such as gasoline and middle
production, lower nuclear power generation, increased coal prices, and growth
distillates to continue to grow and support margins, driven by a further increase
in demand from power generation and other industrial sectors.
in economic activity as well as demand from freight and passenger transport.
However, ample refining capacity and potentially strengthening feedstock prices
could narrow margins. Overall, we believe margins could be similar to 2017,
but demand and supply-side uncertainty may drive significant volatility.
We also produce and sell natural gas in regions where supply, demand and
regulatory circumstances differ markedly from those in the USA or Europe.
Long-term contracted LNG prices in the Asia-Pacific region generally
increased in 2017 as they are predominantly indexed to the price of Japan
Customs-cleared Crude, which has increased in line with global oil prices.
North Asia spot prices (reflected by the Japan Korea Marker) also increased
due to relatively strong demand, particularly from China.
PETROCHEMICAL MARGINS
Cracker industry margins
Looking ahead, we expect gas markets in North America, Europe and Asia
Pacific to be well supplied over the next few years, despite our expectation of
LNG demand growth in the Middle East and Asia. Price developments are
very uncertain and dependent on many factors.
North East/South East Asia naphtha
Western Europe naphtha
US ethane
$/tonne
2017
2016
688
672
727
598
471
450
2015
463
617
498
In the USA, Henry Hub gas prices may increase over the next few years due to
increasing demand from LNG exports, pipeline exports to Mexico and the US
residential/industrial sectors. On the other hand, increasing availability of low-
cost natural gas and oil, combined with technological improvements, could
continue to place pressure on natural gas prices. We believe that Henry Hub
gas prices could average up to 30% higher by 2021 than in 2017. In Europe,
we believe gas prices will be increasingly driven by the volume of LNG imports
from the USA. In the Asia Pacific region, gas prices are expected to continue to
be strongly influenced by oil prices, but also increasingly by Henry Hub gas
prices. We believe that the price at the UK NBP by 2021 could average as
much as 30% higher than in 2017. By 2021, we believe that the average
price of LNG delivered under contract to the Asia-Pacific market could be up to
30% higher than in 2017.
CRUDE OIL AND NATURAL GAS PRICE ASSUMPTIONS
Our ability to deliver competitive returns and pursue commercial opportunities
ultimately depends on the accuracy of our price assumptions (see “Risk
factors” on page 12). The range of possible future crude oil and natural gas
prices used in project and portfolio evaluations is determined after a rigorous
assessment of short-, medium- and long-term market drivers. Historical
analyses, trends and statistical volatility are considered in this assessment,
Asian naphtha cracker margins rose for the third consecutive year, although
only slightly in 2017, driven by continued strong demand, periods of
reduced cracker capacity availability and higher naphtha cracker
utilisation. European naphtha cracker margins increased, supported by tight
ethylene markets and high global utilisation. US ethane cracker margins
increased slightly but remained lower than margins in Asia and Europe as
continued low crude oil prices reduced the margin available in the ethane
to polyethylene value chain.
The outlook for petrochemical margins in 2018 depends on supply and demand
balances and feedstock costs. Demand for petrochemicals is closely linked to
economic growth as well as product prices. Product prices reflect prices of raw
materials, which are closely linked to crude oil and natural gas prices. The
balance of these factors will drive margins.
The statements in this “Market overview” section, including those related to our
price forecasts, are forward-looking statements based on management’s current
expectations and certain material assumptions and, accordingly, involve risks
and uncertainties that could cause actual results, performance or events to differ
materially from those expressed or implied herein. See “About this Report” on
page 05 and “Risk factors” on pages 12-16.
Summary of results
Summary of results
Key statistics
Income for the period
Current cost of supplies adjustment
Total segment earnings [A][B], of which:
Integrated Gas
Upstream
Downstream
Corporate
Capital investment [B]
Divestments [B]
Operating expenses [B]
Return on average capital employed [B]
Gearing at December 31 [C]
2017
13,435
(964 )
12,471
5,078
1,551
8,258
(2,416 )
24,006
17,340
38,083
5.8%
24.8%
Oil and gas production (thousand boe/d)
Proved oil and gas reserves at December 31 (million boe)
[A] Segment earnings are presented on a current cost of supplies basis. See Note 4 to the “Consolidated Financial Statements” on pages 149-150.
[B] See “Non-GAAP measures reconciliations” on pages 225-226.
[C] See Note 14 to the “Consolidated Financial Statements” on page 158.
3,664
12,233
$ million, except where indicated
2015
2016
4,777
(1,085 )
3,692
2,529
(3,674 )
6,588
(1,751 )
79,877
4,984
41,549
3.0%
28.0%
3,668
13,248
2,200
1,955
4,155
3,170
(8,833 )
10,243
(425 )
28,861
5,540
41,144
1.9%
14.0%
2,954
11,747
EARNINGS 2017-2016
Income for the period was $13,435 million in 2017, compared with
$4,777 million in 2016. After current cost of supplies adjustment, total
segment earnings were $12,471 million in 2017, compared with
$3,692 million in 2016.
Earnings on a current cost of supplies basis (CCS earnings) exclude the effect
of changes in the oil price on inventory carrying amounts, after making
allowance for the tax effect. The purchase price of volumes sold in the period
is based on the current cost of supplies during the same period, rather than
on the historic cost calculated on a first-in, first-out (FIFO) basis. Therefore,
when oil prices are decreasing, CCS earnings are likely to be higher than
earnings calculated on a FIFO basis and, when prices are increasing, CCS
earnings are likely to be lower than earnings calculated on a FIFO basis.
Integrated Gas earnings in 2017 were $5,078 million, compared with
$2,529 million in 2016. The increase was mainly driven by higher realised
oil, gas, and liquefied natural gas (LNG) prices, as well as the impact of the
strengthening Australian dollar on a deferred tax position, and lower
impairment charges. These effects were partly offset by the impacts in 2017
of a charge for fair value accounting of commodity derivatives, a charge as a
result of US tax reform legislation, and by lower liquids production partially
offset by higher LNG liquefaction volumes. See “Integrated Gas” on
pages 24-25.
Upstream earnings in 2017 were $1,551 million, compared with a loss of
$3,674 million in 2016. The improvement was mainly driven by higher
realised oil and gas prices. Higher gains on divestments and lower
depreciation charges were partly offset by higher impairment charges.
Overall, there were higher taxation charges. Beneficial movements in
deferred tax positions were more than offset by a charge in 2017 as a result
of US tax reform legislation and the absence of a gain related to the impact
of a strengthening Brazilian real on a deferred tax position in 2016.
See “Upstream” on pages 31-32.
Downstream earnings in 2017 were $8,258 million, compared with
$6,588 million in 2016. The increase was mainly driven by improved
refining and chemicals industry conditions, the impact of fair value accounting
of commodity derivatives, and lower taxation, redundancy and impairment
charges. This was partly offset by lower gains on divestments and higher
depreciation charges. See “Downstream” on pages 46-47.
Corporate earnings in 2017 were a loss of $2,416 million, compared with
a loss of $1,751 million in 2016. The higher loss was mainly driven by
higher interest expense and net foreign exchange losses, partly offset by
lower operating expenses. There was also a charge in 2017 as a result of
US tax reform legislation. See “Corporate” on page 53.
EARNINGS 2016-2015
Income for the period was $4,777 million in 2016, compared with
$2,200 million in 2015. After current cost of supplies adjustment, total
segment earnings were $3,692 million in 2016, compared with
$4,155 million in 2015. BG Group plc (BG) was consolidated within Shell’s
results with effect from February 2016 following its acquisition.
Integrated Gas earnings in 2016 were $2,529 million, compared with
$3,170 million in 2015. The decrease was mainly driven by higher
operating expenses and depreciation, lower oil and LNG prices, and higher
taxation. These impacts were partly offset by higher production and LNG
liquefaction volumes, lower impairment charges and well write-offs.
Upstream earnings in 2016 were a loss of $3,674 million, compared with a
loss of $8,833 million in 2015. The lower loss in 2016 was partly
explained by the significant charges in 2015 associated with the decision to
cease Alaska drilling activities and the Carmon Creek project in Canada and
other impairments. In addition, earnings in 2016 benefited from higher
production volumes and lower operating expenses, partly offset by lower oil
and gas prices, higher depreciation, and lower gains on divestments.
Downstream earnings in 2016 were $6,588 million, compared with
$10,243 million in 2015. The decrease was mainly due to lower realised
refining and trading margins and a higher effective tax rate. There was a
partial offset from stronger marketing margins, in turn partly offset by the
impact of divestments and unfavourable exchange rate effects and fair value
accounting of commodity derivatives.
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2017
2016
2015
2014
2013
305,179 233,591 264,960 421,105 451,235
13,435
4,777
2,200 14,730
16,526
458
202
261
(144)
155
12,977
4,575
1,939 14,874
16,371
2017
2016
2015
2014
2013
407,097 411,275 340,157 353,116 357,512
85,665
92,476 58,379 45,540
44,562
696
683
546
540
542
$ million
3,456
1,865
1,245
820
1,101
2017
1.58
1.56
2016
0.58
0.58
2015
0.31
0.30
2014
2.36
2.36
$
2013
2.60
2.60
Million
2013
2017
2016
2015
2014
8,223.4 7,833.7 6,320.3 6,311.5 6,291.1
8,299.0 7,891.7 6,393.8 6,311.6 6,293.4
Total assets
Total debt
Share capital
Non-controlling interest
Earnings per share
Basic earnings per €0.07 ordinary share
Diluted earnings per €0.07 ordinary share
Shares
Basic weighted average number of A and B shares
Diluted weighted average number of A and B shares
summary of results Continued
Corporate earnings in 2016 were a loss of $1,751 million, compared with
a loss of $425 million in 2015. Interest expense was significantly higher in
2016, due to additional debt for the BG acquisition and debt assumed on
the acquisition, partly offset by lower foreign exchange losses. There were
also BG acquisition costs and lower tax credits in 2016, and a gain in
2015 on the sale of an office building.
Operating expenses decreased by $3 billion in 2017, to $38 billion.
In 2016, operating expenses included redundancy and restructuring charges
of $2 billion.
Our return on average capital employed (ROACE) increased to 5.8%,
compared with 3.0% in 2016, mainly driven by a higher income in 2017.
SELECTED FINANCIAL DATA
The selected financial data set out below are derived, in part, from the “Consolidated Financial Statements”. This data should be read in conjunction with the
“Consolidated Financial Statements” and related Notes, as well as with this Strategic Report.
Consolidated Statement of Income and of Comprehensive Income data
$ million
PRODUCTION AVAILABLE FOR SALE
Oil and gas production available for sale in 2017 was 1,338 million barrels
of oil equivalent (boe), or 3,664 thousand boe per day (boe/d), compared
with 1,342 million boe, or 3,668 thousand boe/d, in 2016. In 2017,
production from new fields offset the impact of field declines and divestments.
Gearing was 24.8% at the end of 2017, compared with 28.0% at the end
of 2016, driven by debt repayments in 2017.
Revenue
Income for the period
SIGNIFICANT ACCOUNTING ESTIMATES AND
JUDGEMENTS
See Note 2 to the “Consolidated Financial Statements” on pages 142-148.
Income/(loss) attributable to non-controlling interest
Income attributable to Royal Dutch Shell plc shareholders
Comprehensive income/(loss) attributable to Royal Dutch Shell plc shareholders
18,828
(1,374 )
(811 )
2,692
18,243
Oil and gas production
available for sale [A]
Crude oil and natural gas liquids
Synthetic crude oil
Bitumen
Natural gas [B]
Total
Of which:
Integrated Gas
Upstream
Thousand boe/d
LEGAL PROCEEDINGS
See Note 25 to the “Consolidated Financial Statements” on pages 175-176.
Consolidated Balance Sheet data
2017
1,730
91
4
1,839
2016
1,679
146
13
1,830
3,664
3,668
2015
1,358
137
14
1,445
2,954
887
2,777
884
2,784
631
2,323
Equity attributable to Royal Dutch Shell plc shareholders
194,356 186,646 162,876 171,966 180,047
[A] See “Oil and gas information” on pages 42-43.
[B] Natural gas volumes are converted into oil equivalent using a factor of 5,800 scf per barrel.
PROVED RESERVES
The proved oil and gas reserves of Shell subsidiaries and the Shell share of
the proved oil and gas reserves of joint ventures and associates are
summarised in “Oil and gas information” on pages 38-40 and set out in
more detail in “Supplementary information – oil and gas (unaudited)” on
pages 179-188.
Before taking production into account, our proved reserves increased by
368 million boe in 2017. This comprised increases of 343 million boe from
Shell subsidiaries and 25 million boe from the Shell share of joint ventures
and associates. The increase from Shell subsidiaries included 927 million boe
from revisions and reclassifications, 706 million boe from extensions and
discoveries, and 97 million boe from improved recovery, partly offset by net
sales of minerals in place of 1,387 million boe mainly related to synthetic
crude oil in Canada.
In 2017, total oil and gas production was 1,383 million boe, of which
1,338 million boe was available for sale and 45 million boe was consumed
in operations. Production available for sale from subsidiaries was
1,168 million boe and 38 million boe was consumed in operations.
The Shell share of the production available for sale of joint ventures and
associates was 170 million boe and 7 million boe was consumed
in operations.
Accordingly, after taking production into account, our proved reserves
decreased by 1,015 million boe in 2017, to 12,233 million boe at
December 31, 2017, with a decrease of 863 million boe from subsidiaries
and a decrease of 152 million boe from the Shell share of joint ventures and
associates.
CAPITAL INVESTMENT AND OTHER INFORMATION
Capital investment was $24.0 billion in 2017, compared with $79.9 billion
in 2016, which included $52.9 billion related to the BG acquisition.
Divestments were $17.3 billion in 2017, compared with $5.0 billion
in 2016.
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Corporate earnings in 2016 were a loss of $1,751 million, compared with
Operating expenses decreased by $3 billion in 2017, to $38 billion.
a loss of $425 million in 2015. Interest expense was significantly higher in
In 2016, operating expenses included redundancy and restructuring charges
2016, due to additional debt for the BG acquisition and debt assumed on
of $2 billion.
the acquisition, partly offset by lower foreign exchange losses. There were
also BG acquisition costs and lower tax credits in 2016, and a gain in
Our return on average capital employed (ROACE) increased to 5.8%,
2015 on the sale of an office building.
compared with 3.0% in 2016, mainly driven by a higher income in 2017.
PRODUCTION AVAILABLE FOR SALE
Gearing was 24.8% at the end of 2017, compared with 28.0% at the end
Oil and gas production available for sale in 2017 was 1,338 million barrels
of 2016, driven by debt repayments in 2017.
of oil equivalent (boe), or 3,664 thousand boe per day (boe/d), compared
with 1,342 million boe, or 3,668 thousand boe/d, in 2016. In 2017,
SIGNIFICANT ACCOUNTING ESTIMATES AND
production from new fields offset the impact of field declines and divestments.
JUDGEMENTS
Oil and gas production
available for sale [A]
Thousand boe/d
LEGAL PROCEEDINGS
See Note 25 to the “Consolidated Financial Statements” on pages 175-176.
Crude oil and natural gas liquids
1,730
1,679
1,358
2017
2016
2015
Synthetic crude oil
Bitumen
Natural gas [B]
Total
Of which:
Integrated Gas
Upstream
91
4
146
13
137
14
1,839
1,830
1,445
3,664
3,668
2,954
887
884
631
2,777
2,784
2,323
[A] See “Oil and gas information” on pages 42-43.
[B] Natural gas volumes are converted into oil equivalent using a factor of 5,800 scf per barrel.
PROVED RESERVES
The proved oil and gas reserves of Shell subsidiaries and the Shell share of
the proved oil and gas reserves of joint ventures and associates are
summarised in “Oil and gas information” on pages 38-40 and set out in
more detail in “Supplementary information – oil and gas (unaudited)” on
pages 179-188.
Before taking production into account, our proved reserves increased by
368 million boe in 2017. This comprised increases of 343 million boe from
Shell subsidiaries and 25 million boe from the Shell share of joint ventures
and associates. The increase from Shell subsidiaries included 927 million boe
from revisions and reclassifications, 706 million boe from extensions and
discoveries, and 97 million boe from improved recovery, partly offset by net
sales of minerals in place of 1,387 million boe mainly related to synthetic
crude oil in Canada.
In 2017, total oil and gas production was 1,383 million boe, of which
1,338 million boe was available for sale and 45 million boe was consumed
in operations. Production available for sale from subsidiaries was
1,168 million boe and 38 million boe was consumed in operations.
The Shell share of the production available for sale of joint ventures and
associates was 170 million boe and 7 million boe was consumed
in operations.
Accordingly, after taking production into account, our proved reserves
decreased by 1,015 million boe in 2017, to 12,233 million boe at
December 31, 2017, with a decrease of 863 million boe from subsidiaries
and a decrease of 152 million boe from the Shell share of joint ventures and
associates.
CAPITAL INVESTMENT AND OTHER INFORMATION
Capital investment was $24.0 billion in 2017, compared with $79.9 billion
in 2016, which included $52.9 billion related to the BG acquisition.
Divestments were $17.3 billion in 2017, compared with $5.0 billion
in 2016.
SELECTED FINANCIAL DATA
The selected financial data set out below are derived, in part, from the “Consolidated Financial Statements”. This data should be read in conjunction with the
“Consolidated Financial Statements” and related Notes, as well as with this Strategic Report.
Consolidated Statement of Income and of Comprehensive Income data
2017
2016
2015
2014
$ million
2013
Revenue
Income for the period
Income/(loss) attributable to non-controlling interest
305,179 233,591 264,960 421,105 451,235
16,526
155
2,200 14,730
(144)
13,435
458
4,777
202
261
See Note 2 to the “Consolidated Financial Statements” on pages 142-148.
Comprehensive income/(loss) attributable to Royal Dutch Shell plc shareholders
18,828
(1,374 )
(811 )
2,692
18,243
Income attributable to Royal Dutch Shell plc shareholders
12,977
4,575
1,939 14,874
16,371
Consolidated Balance Sheet data
Total assets
Total debt
Share capital
Equity attributable to Royal Dutch Shell plc shareholders
Non-controlling interest
Earnings per share
Basic earnings per €0.07 ordinary share
Diluted earnings per €0.07 ordinary share
Shares
2017
2016
2015
2014
$ million
2013
85,665
696
407,097 411,275 340,157 353,116 357,512
44,562
542
194,356 186,646 162,876 171,966 180,047
1,101
92,476 58,379 45,540
540
1,245
1,865
3,456
546
683
820
2017
1.58
1.56
2016
0.58
0.58
2015
0.31
0.30
2014
2.36
2.36
2017
2016
2015
2014
$
2013
2.60
2.60
Million
2013
Basic weighted average number of A and B shares
Diluted weighted average number of A and B shares
8,223.4 7,833.7 6,320.3 6,311.5 6,291.1
8,299.0 7,891.7 6,393.8 6,311.6 6,293.4
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Performance indicators
Performance indicators
These indicators enable management to evaluate Shell’s performance against
its strategy and operating plans. Those which are used in the determination of
Executive Directors’ remuneration are asterisked below and on the following
page. See “Directors’ Remuneration Report” on pages 94-117.
FINANCIAL PERFORMANCE INDICATORS
*
2016 32.5%
Total shareholder return
2017 30.0%
Total shareholder return (TSR) is the difference between the share price at the
beginning of the year and the share price at the end of the year (each
averaged over 90 days), plus gross dividends delivered during the calendar
year (reinvested quarterly), expressed as a percentage of the share price at
the beginning of the year (averaged over 90 days). The 2016 return has
been restated to reflect the change in average days (from 30 to 90 days)
used in this indicator. The data used are a weighted average in dollars for
A and B shares. The TSRs of major publicly-traded oil and gas companies
can be compared directly, providing a way to determine how we are
performing in relation to our industry peers.
2016 20,615
Cash flow from operating activities ($ million)
2017 35,650
Cash flow from operating activities is the total of all cash receipts and
payments associated with our sales of oil, gas, chemicals and other products.
The components that provide a reconciliation from income for the period are
listed in the “Consolidated Statement of Cash Flows”. This indicator reflects
our ability to generate cash to service and reduce our debt and for
distributions to shareholders and investments. See “Liquidity and capital
resources” on page 55.
*
2016 (10,348)
Free cash flow ($ million)
2017 27,621
Free cash flow is the sum of “Cash flow from operating activities” and “Cash
flow from investing activities”, which are listed in the “Consolidated Statement
of Cash Flows”. This indicator has been added because of the need to
optimise the portfolio following the acquisition of BG. It recognises the
importance of generating cash for financing activities, including distributions
to shareholders. See “Non-GAAP measures reconciliations” on page 226.
*
2016 3.0%
Return on average capital employed
2017 5.8%
Return on average capital employed (ROACE) is defined as annual income,
adjusted for after-tax interest expense, as a percentage of average capital
employed during the year. Capital employed is the sum of total equity and
total debt. ROACE measures the efficiency of our utilisation of the capital that
we employ and is a common measure of business performance. See
“Summary of results” on page 20 and “Non-GAAP measures reconciliations”
on page 226.
*
Earnings on a current cost of supplies basis ($ million)
2017 12,471
2016 3,692
2016 0.45
Earnings per share on a current cost of supplies basis ($)
2017 1.46
Earnings on a current cost of supplies basis (CCS earnings) is the income for
the period, adjusted for the after-tax effect of oil-price changes on inventory.
Segment earnings presented on a current cost of supplies basis is the earnings
measure used by the Chief Executive Officer for the purposes of making
decisions about allocating resources and assessing performance. See
“Summary of results” on page 19 and “Non-GAAP measures reconciliations”
on page 225.
CCS earnings per share, which is on a diluted basis above, is calculated by
dividing CCS earnings attributable to shareholders (see “Non-GAAP
measures reconciliations” on page 225) by the average number of shares
outstanding over the year, increased by the average number of dilutive shares
related to share-based compensation plans.
2016 79,877
Capital investment ($ million)
2017 24,006
Capital investment is defined as capital expenditure and investments in joint
ventures and associates, as reported in the “Consolidated Statement of Cash
Flows”, plus exploration expense, excluding exploration wells written off, new
finance leases and investments in securities, adjusted to an accruals basis.
Capital investment is a measure used to make decisions about allocating
resources and assessing performance. In 2016, capital investment also
included the respective amount for the acquisition of BG. See “Liquidity and
capital resources” on page 55 and “Non-GAAP measures reconciliations” on
page 225.
Gearing
2017 24.8%
Gearing is defined as net debt (total debt less cash and cash equivalents) as
a percentage of total capital (net debt plus total equity) at December 31. It is
a measure of the degree to which our operations are financed by debt. See
“Liquidity and capital resources” on page 54.
2016 28.0%
Production is the sum of all average daily volumes of unrefined oil and natural
lesser consequence. See “Environment and society” on page 59.
OTHER PERFORMANCE INDICATORS
A number of changes have been made in 2017, including adding new
indicators for greenhouse gas (GHG) emissions and incorporating Tier 2
process safety events, in order to provide more focus on Shell’s performance
in these areas.
Production available for sale (thousand boe/d)
*
2017 3,664
2016 3,668
gas produced for sale by Shell subsidiaries and Shell’s share of those
produced for sale by joint ventures and associates. The unrefined oil
comprises crude oil, natural gas liquids, synthetic crude oil and bitumen. The
gas volume is converted into equivalent barrels of oil to make the summation
possible. Changes in production have a significant impact on our cash flow.
See “Summary of results” on page 20.
LNG liquefaction volumes (million tonnes)
2017 33.2
2016 30.9
Number of operational Tier 1 and 2 process safety events *
2017 166
2016 146
A Tier 1 process safety event is an unplanned or uncontrolled release of any
material, including non-toxic and non-flammable materials, from a process
with the greatest actual consequence resulting in harm to employees and
contract staff, or a neighbouring community, damage to equipment, or
exceeding a threshold quantity as defined by the API Recommended Practice
754 and IOGP Standard 456. A Tier 2 process safety event is a release of
Refining greenhouse gas intensity
(tonnes of CO2 equivalent/UEDCTM)
2017 1.14
2016 1.18
*
Refining greenhouse gas (GHG) intensity is a measure of GHG emissions (direct
and indirect GHG emissions associated with imported energy, excluding
emissions from exported energy), expressed in metric tonnes of carbon dioxide
(CO2) equivalent, emitted to the atmosphere per unit of Utilized Equivalent
Distillation Capacity (UEDCTM). UEDCTM is a proprietary metric of Solomon
Liquefied natural gas (LNG) liquefaction volumes is a measure of the
Associates. It is a complexity-weighted normalisation parameter that reflects the
operational performance of our Integrated Gas business and LNG market
operating cost intensity of a refinery based on size and configuration of its
demand. See “Integrated Gas” on page 24.
particular mix of process and non-process facilities. See “Climate change and
Refinery and chemical plant availability
2017 90.7%
2016 90.3%
energy transition” on page 66.
Chemicals greenhouse gas intensity
Refinery and chemical plant availability is the weighted average of the actual
(tonnes of CO2 equivalent/tonne petrochemicals produced) *
uptime of plants as a percentage of their maximum possible uptime. The
2017 0.46
2016 0.44
weighting is based on the capital employed, adjusted for cash and non-
Chemicals greenhouse gas intensity is a measure of GHG emissions (direct and
current liabilities. This indicator is a measure of the operational excellence of
indirect GHG emissions associated with imported energy, excluding emissions
our Downstream manufacturing facilities. See “Downstream” on page 46.
from exported energy), expressed in metric tonnes of CO2 equivalent, emitted to
Project delivery on schedule
2017 86%
2016 88%
Project delivery on budget
2017 93%
2016 92%
Project delivery reflects our capability to complete major projects on time and
within budget on the basis of targets set in our annual Business Plan. Project
delivery on schedule measures the percentage of projects delivered on
schedule. Project delivery on budget reflects the aggregate cost against the
aggregate budget for those projects. From 2017, each measure is shown
separately. In 2016, the indicators covered at least 20 Shell-operated capital
projects in the execution phase (post final investment decision). In 2017, we
also included non-Shell-operated projects, expanding coverage to at least
35 projects.
Total recordable case frequency
(injuries per million workin hours)
g
2017 0.8
2016 1.0
Total recordable case frequency (TRCF) is the number of employees and
contract staff injuries requiring medical treatment or time off for every million
hours worked. It is a standard measure of occupational safety. See
“Environment and society” on page 59.
the atmosphere per metric tonne of petrochemicals production. See “Climate
change and energy transition” on page 66.
Proved oil and gas reserves (million boe)
2017 12,233
2016 13,248
Proved oil and gas reserves are the total estimated quantities of oil and gas from
Shell subsidiaries and Shell’s share from joint ventures and associates that
geoscience and engineering data demonstrate, with reasonable certainty, to be
recoverable in future years from known reservoirs, at December 31, under
existing economic conditions, operating methods and government regulations.
Gas volumes are converted into barrels of oil equivalent (boe) using a factor of
5,800 standard cubic feet per barrel. Reserves are crucial to an oil and gas
company, since they constitute the source of future production. Reserves
estimates are subject to change due to a wide variety of factors, some of which
are unpredictable. See “Risk factors” on pages 12-13, “Summary of results” on
page 20, “Oil and gas information” on pages 38-41 and “Supplementary
information – oil and gas (unaudited)” on pages 179-188.
Number of operational spills of more than 100 kilograms
2017 99
2016 72
The operational spills indicator is the number of incidents in respect of
activities where we are the operator in which 100 kilograms or more of oil or
oil products were spilled as a result of those activities and reached the
environment. The 2016 number has been revised. See “Environment and
society” on page 59.
Direct greenhouse gas emissions
(million tonnes of CO2 equivalent)
2017 73
2016 70
Direct GHG emissions from facilities operated by Shell, expressed in CO2
equivalent. See “Climate change and energy transition” on page 66.
*
*
*
*
*
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Performance indicators
These indicators enable management to evaluate Shell’s performance against
its strategy and operating plans. Those which are used in the determination of
Executive Directors’ remuneration are asterisked below and on the following
Earnings on a current cost of supplies basis ($ million)
2017 12,471
2016 3,692
page. See “Directors’ Remuneration Report” on pages 94-117.
Earnings per share on a current cost of supplies basis ($)
FINANCIAL PERFORMANCE INDICATORS
Total shareholder return
2017 30.0%
2016 32.5%
Total shareholder return (TSR) is the difference between the share price at the
beginning of the year and the share price at the end of the year (each
averaged over 90 days), plus gross dividends delivered during the calendar
year (reinvested quarterly), expressed as a percentage of the share price at
the beginning of the year (averaged over 90 days). The 2016 return has
been restated to reflect the change in average days (from 30 to 90 days)
used in this indicator. The data used are a weighted average in dollars for
A and B shares. The TSRs of major publicly-traded oil and gas companies
can be compared directly, providing a way to determine how we are
performing in relation to our industry peers.
2017 1.46
2016 0.45
Earnings on a current cost of supplies basis (CCS earnings) is the income for
the period, adjusted for the after-tax effect of oil-price changes on inventory.
*
Segment earnings presented on a current cost of supplies basis is the earnings
measure used by the Chief Executive Officer for the purposes of making
decisions about allocating resources and assessing performance. See
“Summary of results” on page 19 and “Non-GAAP measures reconciliations”
on page 225.
CCS earnings per share, which is on a diluted basis above, is calculated by
dividing CCS earnings attributable to shareholders (see “Non-GAAP
measures reconciliations” on page 225) by the average number of shares
outstanding over the year, increased by the average number of dilutive shares
related to share-based compensation plans.
Cash flow from operating activities ($ million)
2017 35,650
2016 20,615
Cash flow from operating activities is the total of all cash receipts and
payments associated with our sales of oil, gas, chemicals and other products.
The components that provide a reconciliation from income for the period are
listed in the “Consolidated Statement of Cash Flows”. This indicator reflects
our ability to generate cash to service and reduce our debt and for
distributions to shareholders and investments. See “Liquidity and capital
resources” on page 55.
Capital investment ($ million)
*
2017 24,006
2016 79,877
Capital investment is defined as capital expenditure and investments in joint
ventures and associates, as reported in the “Consolidated Statement of Cash
Flows”, plus exploration expense, excluding exploration wells written off, new
finance leases and investments in securities, adjusted to an accruals basis.
Capital investment is a measure used to make decisions about allocating
resources and assessing performance. In 2016, capital investment also
included the respective amount for the acquisition of BG. See “Liquidity and
capital resources” on page 55 and “Non-GAAP measures reconciliations” on
page 225.
Gearing
2017 24.8%
2016 28.0%
Gearing is defined as net debt (total debt less cash and cash equivalents) as
a percentage of total capital (net debt plus total equity) at December 31. It is
a measure of the degree to which our operations are financed by debt. See
“Liquidity and capital resources” on page 54.
Free cash flow ($ million)
2017 27,621
2016 (10,348)
Free cash flow is the sum of “Cash flow from operating activities” and “Cash
flow from investing activities”, which are listed in the “Consolidated Statement
of Cash Flows”. This indicator has been added because of the need to
optimise the portfolio following the acquisition of BG. It recognises the
importance of generating cash for financing activities, including distributions
to shareholders. See “Non-GAAP measures reconciliations” on page 226.
Return on average capital employed
2017 5.8%
2016 3.0%
Return on average capital employed (ROACE) is defined as annual income,
adjusted for after-tax interest expense, as a percentage of average capital
employed during the year. Capital employed is the sum of total equity and
total debt. ROACE measures the efficiency of our utilisation of the capital that
we employ and is a common measure of business performance. See
“Summary of results” on page 20 and “Non-GAAP measures reconciliations”
on page 226.
*
*
OTHER PERFORMANCE INDICATORS
A number of changes have been made in 2017, including adding new
indicators for greenhouse gas (GHG) emissions and incorporating Tier 2
process safety events, in order to provide more focus on Shell’s performance
in these areas.
2016 3,668
Production available for sale (thousand boe/d)
2017 3,664
Production is the sum of all average daily volumes of unrefined oil and natural
gas produced for sale by Shell subsidiaries and Shell’s share of those
produced for sale by joint ventures and associates. The unrefined oil
comprises crude oil, natural gas liquids, synthetic crude oil and bitumen. The
gas volume is converted into equivalent barrels of oil to make the summation
possible. Changes in production have a significant impact on our cash flow.
See “Summary of results” on page 20.
*
LNG liquefaction volumes (million tonnes)
2017 33.2
2016 30.9
Liquefied natural gas (LNG) liquefaction volumes is a measure of the
operational performance of our Integrated Gas business and LNG market
demand. See “Integrated Gas” on page 24.
*
Refinery and chemical plant availability
2017 90.7%
Refinery and chemical plant availability is the weighted average of the actual
uptime of plants as a percentage of their maximum possible uptime. The
weighting is based on the capital employed, adjusted for cash and non-
current liabilities. This indicator is a measure of the operational excellence of
our Downstream manufacturing facilities. See “Downstream” on page 46.
2016 90.3%
*
Project delivery on schedule
2017 86%
2016 88%
*
*
2016 92%
Project delivery on budget
2017 93%
Project delivery reflects our capability to complete major projects on time and
within budget on the basis of targets set in our annual Business Plan. Project
delivery on schedule measures the percentage of projects delivered on
schedule. Project delivery on budget reflects the aggregate cost against the
aggregate budget for those projects. From 2017, each measure is shown
separately. In 2016, the indicators covered at least 20 Shell-operated capital
projects in the execution phase (post final investment decision). In 2017, we
also included non-Shell-operated projects, expanding coverage to at least
35 projects.
g
Total recordable case frequency
(injuries per million workin hours)
2017 0.8
Total recordable case frequency (TRCF) is the number of employees and
contract staff injuries requiring medical treatment or time off for every million
hours worked. It is a standard measure of occupational safety. See
“Environment and society” on page 59.
2016 1.0
*
2016 146
Number of operational Tier 1 and 2 process safety events *
2017 166
A Tier 1 process safety event is an unplanned or uncontrolled release of any
material, including non-toxic and non-flammable materials, from a process
with the greatest actual consequence resulting in harm to employees and
contract staff, or a neighbouring community, damage to equipment, or
exceeding a threshold quantity as defined by the API Recommended Practice
754 and IOGP Standard 456. A Tier 2 process safety event is a release of
lesser consequence. See “Environment and society” on page 59.
*
2016 1.18
Refining greenhouse gas intensity
(tonnes of CO2 equivalent/UEDCTM)
2017 1.14
Refining greenhouse gas (GHG) intensity is a measure of GHG emissions (direct
and indirect GHG emissions associated with imported energy, excluding
emissions from exported energy), expressed in metric tonnes of carbon dioxide
(CO2) equivalent, emitted to the atmosphere per unit of Utilized Equivalent
Distillation Capacity (UEDCTM). UEDCTM is a proprietary metric of Solomon
Associates. It is a complexity-weighted normalisation parameter that reflects the
operating cost intensity of a refinery based on size and configuration of its
particular mix of process and non-process facilities. See “Climate change and
energy transition” on page 66.
Chemicals greenhouse gas intensity
(tonnes of CO2 equivalent/tonne petrochemicals produced) *
2017 0.46
Chemicals greenhouse gas intensity is a measure of GHG emissions (direct and
indirect GHG emissions associated with imported energy, excluding emissions
from exported energy), expressed in metric tonnes of CO2 equivalent, emitted to
the atmosphere per metric tonne of petrochemicals production. See “Climate
change and energy transition” on page 66.
2016 0.44
2016 13,248
Proved oil and gas reserves (million boe)
2017 12,233
Proved oil and gas reserves are the total estimated quantities of oil and gas from
Shell subsidiaries and Shell’s share from joint ventures and associates that
geoscience and engineering data demonstrate, with reasonable certainty, to be
recoverable in future years from known reservoirs, at December 31, under
existing economic conditions, operating methods and government regulations.
Gas volumes are converted into barrels of oil equivalent (boe) using a factor of
5,800 standard cubic feet per barrel. Reserves are crucial to an oil and gas
company, since they constitute the source of future production. Reserves
estimates are subject to change due to a wide variety of factors, some of which
are unpredictable. See “Risk factors” on pages 12-13, “Summary of results” on
page 20, “Oil and gas information” on pages 38-41 and “Supplementary
information – oil and gas (unaudited)” on pages 179-188.
Number of operational spills of more than 100 kilograms
2017 99
The operational spills indicator is the number of incidents in respect of
activities where we are the operator in which 100 kilograms or more of oil or
oil products were spilled as a result of those activities and reached the
environment. The 2016 number has been revised. See “Environment and
society” on page 59.
2016 72
Direct greenhouse gas emissions
(million tonnes of CO2 equivalent)
2017 73
Direct GHG emissions from facilities operated by Shell, expressed in CO2
equivalent. See “Climate change and energy transition” on page 66.
2016 70
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Integrated Gas
Integrated Gas
Key statistics
Segment earnings
Including:
Revenue (including inter-segment sales)
Share of profit of joint ventures and associates
Interest and other income
Operating expenses [A]
Exploration
Depreciation, depletion and amortisation
Taxation charge
Capital investment [A]
Divestments [A]
Oil and gas production available for sale (thousand boe/d)
LNG liquefaction volumes (million tonnes)
[A] See “Non-GAAP measures reconciliations” on pages 225-226.
2017
$ million, except where indicated
2015
2016
5,078
2,529
3,170
36,652
1,714
687
5,471
141
4,965
790
3,827
3,077
887
33.2
29,190
1,116
765
6,479
494
4,509
1,254
26,214
352
884
30.9
25,989
1,471
537
4,088
1,290
2,597
937
5,178
269
631
22.6
OVERVIEW
Our Integrated Gas and New Energies business manages liquefied natural
gas (LNG) activities and the conversion of natural gas into gas-to-liquids (GTL)
fuels and other products, as well as our New Energies portfolio. It includes
natural gas exploration and extraction, when contractually linked to the
production and transportation of LNG, and the operation of the upstream and
midstream infrastructure necessary to deliver gas to market. It markets and
trades natural gas, LNG, crude oil, electricity and carbon-emission rights and
also markets and sells LNG as a fuel for heavy-duty vehicles and marine
vessels.
BUSINESS CONDITIONS
Global oil demand grew by 1.6% in 2017, according to the International
Energy Agency’s Oil Market Report published in January 2018, with the Brent
crude oil price averaging $54 per barrel (/b), up $10/b from 2016.
Global gas demand grew by about 2.4% in 2017. A combination of
weather conditions and increased global economic growth led to an increase
in demand in most regions.
The global LNG market grew by 29 million tonnes (11.2%) year on year.
Supply growth was primarily driven by the start-up of new projects in Australia
and the USA. The majority of additional LNG supply was absorbed by North
Asia and Southern Europe, offsetting a decline in imports by the Middle East
and North Africa. LNG demand growth was supported by policy
developments (China, South Korea and Taiwan), warmer weather in the
summer months (Southern Europe) and delays in nuclear power station restarts
(Japan).
Unlike crude oil pricing, which is global in nature, natural gas prices can vary
from region to region.
In the USA, the natural gas price at the Henry Hub averaged $3.0 per
million British thermal units (MMBtu) in 2017, 20% higher than in 2016,
and traded in a range of $2.4-3.4/MMBtu.
In Europe, natural gas prices were higher than in 2016. The average price at
the UK National Balancing Point (NBP) was $5.8/MMBtu, compared with
$4.3/MMBtu in 2016. At the main continental European gas trading hubs –
in the Netherlands, Belgium and Germany – prices were also stronger, as
reflected by stronger Dutch Title Transfer Facility prices.
Long-term contracted LNG prices in the Asia-Pacific region generally
increased in 2017 as they are predominantly indexed to the price of Japan
Customs-cleared Crude, which has increased in line with global oil prices.
North Asia spot prices (reflected by the Japan Korea Marker) also increased
due to relatively strong demand, particularly from China.
See “Market overview” on pages 17-18.
PRODUCTION AVAILABLE FOR SALE
In 2017, production was 324 million barrels of oil equivalent (boe), or
887 thousand boe per day (boe/d), compared with 323 million boe, or
884 thousand boe/d in 2016. Liquids production decreased by 9%, mainly
due to a shutdown at our Pearl GTL plant in Qatar. Natural gas production
increased by 4% compared with 2016, mainly due to the start-up of Gorgon
train 3 in Australia, partly offset by lower gas production at Pearl.
LNG LIQUEFACTION VOLUMES
LNG liquefaction volumes of 33.2 million tonnes in 2017 were 7% higher
than in 2016, mainly reflecting the additional month’s contribution of assets
acquired with BG and our strong operational performance. There were also
incremental volumes from the start-up of Gorgon train 3. These impacts were
partly offset by a higher level of unplanned maintenance activity and lower
feedgas availability at Queensland Curtis LNG (QCLNG) in Australia and
Atlantic LNG in Trinidad and Tobago.
LNG sales volumes of 66.0 million tonnes in 2017 were 16% higher than in
2016, mainly reflecting higher purchased volumes from third parties and
higher offtake from Gorgon, Nigeria LNG and Brunei LNG.
EARNINGS 2017-2016
Segment earnings in 2017 were $5,078 million, which included a net
charge of $190 million. The net charge mainly reflected a charge of
$445 million on fair value accounting of commodity derivatives and a charge
of $412 million as a result of US tax reform legislation, partly offset by a gain
of $636 million from the strengthening Australian dollar on a deferred tax
position.
Segment earnings in 2016 were $2,529 million, which included a net
■ In May, we acquired Centrica’s interest in the North Coast Marine Area
charge of $1,171 million. The net charge included impairments of
(NCMA) block offshore Trinidad and Tobago, increasing our interest from
$451 million, reported mainly in share of profit of joint ventures and
45.88% to 63.19%. In August, we acquired Chevron’s interests in Trinidad
associates, the reassessment of a deferred tax asset in Australia of
and Tobago, which included increasing our interest in the Shell-operated
$533 million, onerous contract provisions in Europe and the USA of
East Coast Marine Area (ECMA) block from 50% to 100%.
$390 million, and redundancy and restructuring charges of $245 million,
■ In July, Shell Energy Australia began selling gas in the Australian domestic
partly offset by gains on divestments of $212 million and on the accounting
market.
reclassification of Shell’s interest in Woodside Petroleum Limited (Woodside)
■ In September, we acquired MP2 Energy LLC (MP2), which provides
in Australia of $479 million (both reported in interest and other income).
market-based solutions to commercial and industrial customers for
managing energy supply, load, and generation throughout the eastern
Excluding the net charges described above, segment earnings were
USA.
$5,268 million in 2017 compared with $3,700 million in 2016. Earnings
■ In October, we acquired NewMotion, one of Europe’s largest electric
were positively impacted by higher realised oil, gas and LNG prices (around
vehicle (EV) charging providers.
$1,620 million), lower operating expenses (around $110 million), lower
■ In December, we signed an agreement to buy First Utility, a leading
exploration charges (around $170 million), and lower well write-offs (around
independent UK household energy and broadband provider. The
$100 million). Earnings were negatively impacted by a total of around
transaction was completed in February 2018.
$230 million from lower liquids production, mainly as a result of the
■ In December, we signed a gas sales agreement between Arrow Energy
shutdown at Pearl, partially offset by higher LNG liquefaction volumes across
Holdings Pty Limited (Arrow) and QCLNG, both joint ventures in Australia
the portfolio. Other items, which included lower contributions from trading
in which we participate. Under the agreement, uncontracted gas from
and higher taxation, had a net negative impact of around $200 million.
Arrow’s Surat Basin fields would flow to the QCLNG venture, which would
then both sell gas to local customers and export it through its gas plant on
As a result of the change in the fiscal functional currency of a number of Shell
Curtis Island.
entities in Australia to the US dollar, the impact of exchange rate movements
of the Australian dollar on deferred tax balances will be significantly reduced
In January 2018, we announced an agreement to acquire a 43.83% interest
in Silicon Ranch Corporation, a leading US developer, owner, and operator
of solar assets. The transaction was completed in March 2018.
BG was consolidated within Shell’s results with effect from February 2016,
The following major operational milestones were reached in 2017:
in 2018.
EARNINGS 2016-2015
following its acquisition.
■ In March, Gorgon train 3 started up.
Segment earnings in 2016 were $2,529 million, which included a net
■ In June, our Prelude floating liquefied natural gas (FLNG) facility left the
charge of $1,171 million as described above. Segment earnings in 2015
Samsung Heavy Industries shipyard in South Korea, marking a significant
were $3,170 million, which included a net charge of $1,887 million,
milestone for the project. Prelude FLNG arrived in Australian waters in July.
including impairments of $1,109 million and the impact of the weakening of
the Australian dollar on deferred tax positions of $560 million.
The Pearl GTL plant (Shell interest 100%) operated at a reduced rate of
Excluding the net charges described above, segment earnings were
on the gasifier units, until a controlled shutdown in February 2017. The plant
$3,700 million in 2016 compared with $5,057 million in 2015. Earnings
resumed full production in July after repairs to the gasifier units were
production from December 2016, due to unforeseen maintenance required
were impacted by higher operating expenses and depreciation mainly due to
completed.
the consolidation of BG (around $1,860 million), lower oil and LNG prices
(around $1,730 million), higher taxation (around $570 million), and other
We continued to divest selected assets during 2017, including:
net negative impacts of around $120 million. These impacts were partly
offset by higher oil and gas production and LNG liquefaction volumes
■ In Australia, we sold our 13.3% interest in Woodside.
(around $2,260 million), mainly as a result of the BG acquisition, and lower
■ In New Zealand, we sold our 50% interest in the Kapuni gas field.
well write-offs (around $660 million).
■ In Brazil, we executed an existing put option agreement to sell our 16.8%
interest in Companhia de Gas de São Paulo (Comgás) to Cosan S.A.
Indústria e Comércio (Cosan). We exchanged our common shares in
CAPITAL INVESTMENT AND DIVESTMENTS
Capital investment in 2017 was $3.8 billion, compared with $26.2 billion
Comgás for Cosan shares plus cash.
in 2016, of which $21.8 billion related to the acquisition of BG.
Divestments in 2017 were $3.1 billion, compared with $0.4 billion in
purchase agreement for the sale of our 22.2% interest in the Bongkot field
2016, mainly due to the divestment of our interest in Woodside.
and adjoining acreage offshore Thailand. Subsequently, in January 2018,
In September, Shell and KUFPEC agreed to cancel the January sale and
PORTFOLIO AND BUSINESS DEVELOPMENT
Key portfolio events in 2017 included the following:
we agreed to sell our interest to PTT Exploration & Production Public Company
Limited (PTTEP). The transaction is pending regulatory and other approvals,
and expected to close in the second quarter of 2018.
■ In April, we signed an agreement with Nord Stream 2 AG to provide a
In January 2018, Partners Group signed an agreement to join the Borssele III
long-term funding facility of €285 million and funds of up to €665 million
and IV offshore wind farm projects in the Netherlands, diluting our interest in
to cover a combination of short- and long-term funding and guarantees for
the consortium from 40% to 20%.
a pipeline project to run from Russia to Germany.
STRATEGIC REPORT SHELL ANNUAL REPORT AND FORM 20-F 2017
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Integrated Gas
Key statistics
Segment earnings
Including:
Revenue (including inter-segment sales)
Share of profit of joint ventures and associates
Interest and other income
Operating expenses [A]
Exploration
Depreciation, depletion and amortisation
Taxation charge
Capital investment [A]
Divestments [A]
Oil and gas production available for sale (thousand boe/d)
LNG liquefaction volumes (million tonnes)
[A] See “Non-GAAP measures reconciliations” on pages 225-226.
$ million, except where indicated
2017
2016
5,078
2,529
2015
3,170
36,652
29,190
25,989
1,714
687
5,471
141
4,965
790
3,827
3,077
887
33.2
1,116
765
6,479
494
4,509
1,254
26,214
352
884
30.9
1,471
537
4,088
1,290
2,597
937
5,178
269
631
22.6
OVERVIEW
Our Integrated Gas and New Energies business manages liquefied natural
gas (LNG) activities and the conversion of natural gas into gas-to-liquids (GTL)
fuels and other products, as well as our New Energies portfolio. It includes
natural gas exploration and extraction, when contractually linked to the
production and transportation of LNG, and the operation of the upstream and
midstream infrastructure necessary to deliver gas to market. It markets and
trades natural gas, LNG, crude oil, electricity and carbon-emission rights and
also markets and sells LNG as a fuel for heavy-duty vehicles and marine
vessels.
BUSINESS CONDITIONS
Global oil demand grew by 1.6% in 2017, according to the International
Energy Agency’s Oil Market Report published in January 2018, with the Brent
crude oil price averaging $54 per barrel (/b), up $10/b from 2016.
Global gas demand grew by about 2.4% in 2017. A combination of
weather conditions and increased global economic growth led to an increase
in demand in most regions.
The global LNG market grew by 29 million tonnes (11.2%) year on year.
Supply growth was primarily driven by the start-up of new projects in Australia
and the USA. The majority of additional LNG supply was absorbed by North
Asia and Southern Europe, offsetting a decline in imports by the Middle East
and North Africa. LNG demand growth was supported by policy
developments (China, South Korea and Taiwan), warmer weather in the
summer months (Southern Europe) and delays in nuclear power station restarts
(Japan).
Long-term contracted LNG prices in the Asia-Pacific region generally
increased in 2017 as they are predominantly indexed to the price of Japan
Customs-cleared Crude, which has increased in line with global oil prices.
North Asia spot prices (reflected by the Japan Korea Marker) also increased
due to relatively strong demand, particularly from China.
See “Market overview” on pages 17-18.
PRODUCTION AVAILABLE FOR SALE
In 2017, production was 324 million barrels of oil equivalent (boe), or
887 thousand boe per day (boe/d), compared with 323 million boe, or
884 thousand boe/d in 2016. Liquids production decreased by 9%, mainly
due to a shutdown at our Pearl GTL plant in Qatar. Natural gas production
increased by 4% compared with 2016, mainly due to the start-up of Gorgon
train 3 in Australia, partly offset by lower gas production at Pearl.
LNG LIQUEFACTION VOLUMES
LNG liquefaction volumes of 33.2 million tonnes in 2017 were 7% higher
than in 2016, mainly reflecting the additional month’s contribution of assets
acquired with BG and our strong operational performance. There were also
incremental volumes from the start-up of Gorgon train 3. These impacts were
partly offset by a higher level of unplanned maintenance activity and lower
feedgas availability at Queensland Curtis LNG (QCLNG) in Australia and
Atlantic LNG in Trinidad and Tobago.
LNG sales volumes of 66.0 million tonnes in 2017 were 16% higher than in
2016, mainly reflecting higher purchased volumes from third parties and
higher offtake from Gorgon, Nigeria LNG and Brunei LNG.
Unlike crude oil pricing, which is global in nature, natural gas prices can vary
EARNINGS 2017-2016
from region to region.
Segment earnings in 2017 were $5,078 million, which included a net
charge of $190 million. The net charge mainly reflected a charge of
$445 million on fair value accounting of commodity derivatives and a charge
of $412 million as a result of US tax reform legislation, partly offset by a gain
of $636 million from the strengthening Australian dollar on a deferred tax
position.
In the USA, the natural gas price at the Henry Hub averaged $3.0 per
million British thermal units (MMBtu) in 2017, 20% higher than in 2016,
and traded in a range of $2.4-3.4/MMBtu.
In Europe, natural gas prices were higher than in 2016. The average price at
the UK National Balancing Point (NBP) was $5.8/MMBtu, compared with
$4.3/MMBtu in 2016. At the main continental European gas trading hubs –
in the Netherlands, Belgium and Germany – prices were also stronger, as
reflected by stronger Dutch Title Transfer Facility prices.
STRATEGIC REPORT SHELL ANNUAL REPORT AND FORM 20-F 2017
24
Segment earnings in 2016 were $2,529 million, which included a net
charge of $1,171 million. The net charge included impairments of
$451 million, reported mainly in share of profit of joint ventures and
associates, the reassessment of a deferred tax asset in Australia of
$533 million, onerous contract provisions in Europe and the USA of
$390 million, and redundancy and restructuring charges of $245 million,
partly offset by gains on divestments of $212 million and on the accounting
reclassification of Shell’s interest in Woodside Petroleum Limited (Woodside)
in Australia of $479 million (both reported in interest and other income).
Excluding the net charges described above, segment earnings were
$5,268 million in 2017 compared with $3,700 million in 2016. Earnings
were positively impacted by higher realised oil, gas and LNG prices (around
$1,620 million), lower operating expenses (around $110 million), lower
exploration charges (around $170 million), and lower well write-offs (around
$100 million). Earnings were negatively impacted by a total of around
$230 million from lower liquids production, mainly as a result of the
shutdown at Pearl, partially offset by higher LNG liquefaction volumes across
the portfolio. Other items, which included lower contributions from trading
and higher taxation, had a net negative impact of around $200 million.
As a result of the change in the fiscal functional currency of a number of Shell
entities in Australia to the US dollar, the impact of exchange rate movements
of the Australian dollar on deferred tax balances will be significantly reduced
in 2018.
EARNINGS 2016-2015
BG was consolidated within Shell’s results with effect from February 2016,
following its acquisition.
Segment earnings in 2016 were $2,529 million, which included a net
charge of $1,171 million as described above. Segment earnings in 2015
were $3,170 million, which included a net charge of $1,887 million,
including impairments of $1,109 million and the impact of the weakening of
the Australian dollar on deferred tax positions of $560 million.
Excluding the net charges described above, segment earnings were
$3,700 million in 2016 compared with $5,057 million in 2015. Earnings
were impacted by higher operating expenses and depreciation mainly due to
the consolidation of BG (around $1,860 million), lower oil and LNG prices
(around $1,730 million), higher taxation (around $570 million), and other
net negative impacts of around $120 million. These impacts were partly
offset by higher oil and gas production and LNG liquefaction volumes
(around $2,260 million), mainly as a result of the BG acquisition, and lower
well write-offs (around $660 million).
CAPITAL INVESTMENT AND DIVESTMENTS
Capital investment in 2017 was $3.8 billion, compared with $26.2 billion
in 2016, of which $21.8 billion related to the acquisition of BG.
Divestments in 2017 were $3.1 billion, compared with $0.4 billion in
2016, mainly due to the divestment of our interest in Woodside.
PORTFOLIO AND BUSINESS DEVELOPMENT
Key portfolio events in 2017 included the following:
■ In May, we acquired Centrica’s interest in the North Coast Marine Area
(NCMA) block offshore Trinidad and Tobago, increasing our interest from
45.88% to 63.19%. In August, we acquired Chevron’s interests in Trinidad
and Tobago, which included increasing our interest in the Shell-operated
East Coast Marine Area (ECMA) block from 50% to 100%.
■ In July, Shell Energy Australia began selling gas in the Australian domestic
market.
■ In September, we acquired MP2 Energy LLC (MP2), which provides
market-based solutions to commercial and industrial customers for
managing energy supply, load, and generation throughout the eastern
USA.
■ In October, we acquired NewMotion, one of Europe’s largest electric
vehicle (EV) charging providers.
■ In December, we signed an agreement to buy First Utility, a leading
independent UK household energy and broadband provider. The
transaction was completed in February 2018.
■ In December, we signed a gas sales agreement between Arrow Energy
Holdings Pty Limited (Arrow) and QCLNG, both joint ventures in Australia
in which we participate. Under the agreement, uncontracted gas from
Arrow’s Surat Basin fields would flow to the QCLNG venture, which would
then both sell gas to local customers and export it through its gas plant on
Curtis Island.
In January 2018, we announced an agreement to acquire a 43.83% interest
in Silicon Ranch Corporation, a leading US developer, owner, and operator
of solar assets. The transaction was completed in March 2018.
The following major operational milestones were reached in 2017:
■ In March, Gorgon train 3 started up.
■ In June, our Prelude floating liquefied natural gas (FLNG) facility left the
Samsung Heavy Industries shipyard in South Korea, marking a significant
milestone for the project. Prelude FLNG arrived in Australian waters in July.
The Pearl GTL plant (Shell interest 100%) operated at a reduced rate of
production from December 2016, due to unforeseen maintenance required
on the gasifier units, until a controlled shutdown in February 2017. The plant
resumed full production in July after repairs to the gasifier units were
completed.
We continued to divest selected assets during 2017, including:
■ In Australia, we sold our 13.3% interest in Woodside.
■ In New Zealand, we sold our 50% interest in the Kapuni gas field.
■ In Brazil, we executed an existing put option agreement to sell our 16.8%
interest in Companhia de Gas de São Paulo (Comgás) to Cosan S.A.
Indústria e Comércio (Cosan). We exchanged our common shares in
Comgás for Cosan shares plus cash.
In September, Shell and KUFPEC agreed to cancel the January sale and
purchase agreement for the sale of our 22.2% interest in the Bongkot field
and adjoining acreage offshore Thailand. Subsequently, in January 2018,
we agreed to sell our interest to PTT Exploration & Production Public Company
Limited (PTTEP). The transaction is pending regulatory and other approvals,
and expected to close in the second quarter of 2018.
■ In April, we signed an agreement with Nord Stream 2 AG to provide a
long-term funding facility of €285 million and funds of up to €665 million
to cover a combination of short- and long-term funding and guarantees for
a pipeline project to run from Russia to Germany.
In January 2018, Partners Group signed an agreement to join the Borssele III
and IV offshore wind farm projects in the Netherlands, diluting our interest in
the consortium from 40% to 20%.
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integrated gas Continued
BUSINESS AND PROPERTY
Our Integrated Gas business is described below by country.
EUROPE
Greece
In January 2017, Attiki Gas Supply Company S.A. was unbundled into
separate supply and distribution companies, in line with Greek legislation.
As a result, we have a 49% interest in both Attiki Gas Supply Company S.A.
and Attiki Natural Gas Distribution Company S.A.
Netherlands
We have access to import and storage capacity at the GATE LNG terminal in
the Netherlands (Shell capacity rights 1.4 million tonnes per annum, mtpa),
enabling us to supply LNG to marine and road transport customers in
northwest Europe. We are also using the terminal to supply LNG to our
growing truck-refuelling network in the Netherlands. In August 2017, we took
delivery of the Cardissa LNG bunker vessel, a purpose-built vessel which
supplies LNG to marine and industrial customers.
Norway
Gasnor AS (Shell interest 100%) provides LNG fuel for ships and industrial
customers and has a natural gas pipeline network.
UK
We have a 50% interest in the Dragon LNG regasification terminal,
with long-term arrangements in place governing the use of capacity rights.
ASIA (INCLUDING THE MIDDLE EAST AND RUSSIA)
Brunei
We have a 25% interest in Brunei LNG Sendirian Berhad, which sells most of
its LNG on long-term contracts to customers in Asia.
China
We jointly develop and produce from the onshore Changbei tight-gas field
under a production-sharing contract (PSC) with China National Petroleum
Corporation (CNPC). In 2016, we completed the Changbei I development
programme under the PSC and subsequently handed over the production
operatorship to CNPC. In December 2017, we took the final investment
decision on the Changbei II Phase 1 project, and project execution began
that month. Shell remains the operator of Changbei II.
In 2016, we handed back the Zitong and Fushun blocks in Sichuan to
CNPC, and expect to complete the handover of the Jinqiu block to CNPC
in 2018.
India
We have a 30% interest in the producing oil and gas field Panna/Mukta.
We also have a 30% interest in the Mid Tapti and South Tapti fields, which
ceased production in the first quarter of 2016.
We have a 32.5% interest in MGL, a natural gas distribution company in
Mumbai.
We have a 74% interest in the Hazira regasification terminal in the state of
Gujarat on the west coast.
Indonesia
We have a 35% interest in the INPEX Masela Ltd joint venture which owns
and operates the offshore Masela block. In April 2016, the joint venture
received a notification from the Indonesian government authorities instructing it
to re-propose a plan for the Abadi gas field based on an onshore LNG
project. The partners are committed to working together with the Indonesian
government to move the project forward.
Iran
Shell transactions with Iran are disclosed separately. See “Section 13(r) of the
US Securities Exchange Act of 1934 Disclosure” on page 224.
Malaysia
We have a 15% interest in Malaysia LNG Tiga located in Bintulu. We also
operate a GTL plant, Shell MDS (Shell interest 72%), adjacent to the
Malaysia LNG facilities. Using Shell technology, the plant converts gas into
high-quality middle distillates, drilling fluids, waxes and specialty products.
Oman
We have a 30% interest in Oman LNG LLC, which mainly supplies Asian
markets under long-term contracts. We also have an 11% interest in Qalhat
LNG, which is part of the Oman LNG complex.
Qatar
We operate the Pearl GTL plant (Shell interest 100%) in Qatar under a
development and production-sharing contract with the government. The fully-
integrated facility has capacity for production, processing and transportation
of 1.6 billion standard cubic feet per day (scf/d) of gas from Qatar’s North
Field. It has an installed capacity of about 140 thousand boe/d of high-
quality liquid hydrocarbon products and 120 thousand boe/d of natural gas
liquids (NGL) and ethane.
Due to unforeseen maintenance required on the gasifier units, Pearl GTL
operated at a reduced rate of production from December 2016 until a
controlled shutdown in February 2017. The plant resumed full production in
July 2017 after the gasifier unit repairs were completed. In 2017, Pearl GTL
produced around 3.5 million tonnes of GTL products.
We have a 30% interest in Qatargas 4, which comprises integrated facilities
to produce about 1.4 billion scf/d of gas from Qatar’s North Field, an
onshore gas-processing facility and one LNG train with a collective
production capacity of 7.8 mtpa of LNG and 70 thousand boe/d of
condensate and NGL.
Russia
We have a 27.5% interest in Sakhalin-2, an integrated oil and gas project
located in a subarctic environment.
We have a 50% interest in the Salym fields in western Siberia,
Khanty Mansiysk Autonomous District, where production was approximately
120 thousand boe/d in 2017.
We have a 50% interest in Khanty-Mansiysk Petroleum Alliance.
We have a 100% interest in the North Vorkutinsky 1, North Vorkutinsky 2
and Syriaga exploration and production licences in Komi Republic (Timan
Pechora).
As a result of European Union and US sanctions prohibiting certain defined
oil and gas activities in Russia, we suspended our support to Salym and
Khanty-Mansiysk Petroleum Alliance in relation to shale oil activities in 2014.
Salym and Khanty-Mansiysk Petroleum Alliance also suspended any shale oil
related activities in 2014.
Singapore
We have a 50% interest in a joint venture with KS Investments (the investment
arm of Keppel Group) that holds a licence to supply LNG fuel for vessels in
the Port of Singapore. We currently have the first aggregator licence to import
LNG into Singapore. The exclusivity period has ended with the issuance of
the second import licence in October 2017 to both Shell Eastern Trading (Pte)
Ltd (Shell interest 100%) and Pavilion Gas Pte Ltd.
We have a 22.2% interest in the Bongkot and G12/48 fields in the Gulf of
Our interests include the Maui (83.75%) and Pohokura (48%) natural gas
Thailand and a 66.7% interest in exploration Blocks 7 and 8 where activity is
fields. We are an operator with an approximate 61% interest in an
currently suspended due to overlapping claims by Thailand and Cambodia.
exploration licence in the Great South Basin.
New Zealand
We have an agreement over Block 9a under which we receive royalties.
Production from the Bongkot field supplies around 20% of the country’s gas
The business is under strategic review. During 2017, we sold our 50%
interest in the Kapuni gas field. We are currently in discussions to sell our
remaining interests.
In September, Shell and KUFPEC agreed to cancel the January sale and
purchase agreement for the sale of our 22.2% interest in the Bongkot field
and adjoining acreage offshore Thailand. Subsequently, in January 2018,
we agreed to sell our interest to PTTEP. The transaction is pending regulatory
and other approvals, and is expected to close in the second quarter of
AFRICA
Egypt
Thailand
demand.
2018.
OCEANIA
Australia
We have interests in offshore production and exploration licences in the
North West Shelf (NWS) and Greater Gorgon areas of the Carnarvon Basin,
as well as in the Browse Basin and Timor Sea. Woodside (of which Shell’s
13.3% interest was sold in 2017) is the operator on behalf of the NWS joint
venture, which produced more than 450 thousand boe/d of gas and
condensates in 2017.
We have a 25% interest in the Gorgon LNG project, which involves the
development of some of the largest gas discoveries to date in Australia,
beginning with the offshore Gorgon and Jansz-lo fields. Gorgon LNG began
production in March 2016. The third and final train began operation in
March 2017.
We are the operator of a permit in the Browse Basin in which two separate
gas fields were found: Prelude and Concerto (Shell interest 67.5% in each).
Our development concept for these fields is based on our FLNG technology.
The Prelude FLNG project is expected to produce about 110 thousand
boe/d of gas and NGL, 3.6 mtpa of LNG, 1.3 mtpa of condensate and
0.4 mtpa of liquefied petroleum gas. Major milestones during 2017 were the
sail away of the facility from the construction yard in South Korea and the start
of hook-up and commissioning activities on site. Our other interests in the
basin include a joint arrangement, with Shell as the operator, for the
undeveloped Crux gas and condensate field (Shell interest 82%).
We are also a partner in the Browse joint arrangement (Shell interest 27%)
covering the Brecknock, Calliance and Torosa gas fields, and the
undeveloped Sunrise gas field in the Timor Sea (Shell interest 26.6%), both of
which are operated by Woodside. We are a partner in both Shell-operated
and other exploration joint arrangements in multiple basins, including
Bonaparte, Browse, Exmouth Plateau, Greater Gorgon and Outer Canning.
We have a 50% interest in Arrow, a Queensland-based joint venture with
CNPC. Arrow owns coal-bed methane assets and a domestic power
business.
We have a 50% interest in train one and a 97.5% interest in train two of the
Shell-operated QCLNG venture. The two-train liquefaction plant has an
installed capacity of 8.5 mtpa. Our production of onshore natural gas from
USA
the Surat Basin supplies both this plant and the domestic market.
In December 2017, we signed a gas sales agreement between Arrow and
QCLNG, under which uncontracted gas from Arrow’s Surat Basin fields
would flow to the QCLNG venture, that would then both sell gas to local
customers and export it through its gas plant on Curtis Island.
We have interests of 35.5% and 38%, respectively, in trains one and two of
the Egyptian LNG (ELNG) plant. In January 2014, force majeure notices
were issued under the LNG agreements as a result of domestic gas diversions
severely restricting volumes available to ELNG. These notices remain in place.
See “Oil and gas information” on page 39.
Mozambique
In 2014, we signed a memorandum of understanding (MOU) with
Mozambique national oil and gas company Empresa Nacional de
Hidrocarbonetos to formalise a partnership to conduct a full feasibility study
for a potential GTL project. Following the outcome of the Mozambique
domestic gas allocation public tender process in January 2017, where we
were announced as one of three winners, we signed a MOU with the
government for the project development work programme.
We have a 25.6% interest in Nigeria LNG Ltd, which operates six LNG
Nigeria
trains.
Tanzania
We have a 60% interest in, and are the operator of, Blocks 1 and 4 offshore
southern Tanzania. The blocks cover approximately 4,000 square kilometres
of the Mafia Deep Offshore Basin and the northern part of the Rovuma Basin.
In 2016, we completed drilling on all remaining wells. We continue to
develop a potential LNG project with partners in Block 2 in line with the
Block 1 and 4 appraisal programme agreed with the Tanzanian government.
This includes discussion between the government and the partners in Blocks 1,
2 and 4 to agree the investment framework for the potential project. To
enable the agreed appraisal programme to be carried out and progress the
development of the project, the Block 1 licence was extended and we are
engaging with the government to extend the Block 4 licence. The government
has confirmed that the Block 4 licence, due to initially expire on October 31,
2017, remains in full force pending the grant of the licence extension.
We have a 17.9% share in the West African Gas Pipeline Company.
Rest of Africa
NORTH AMERICA
Canada
In 2014, we entered into a joint venture (Shell interest 50%) to evaluate an
investment in an LNG export facility in Kitimat on the west coast of Canada.
Together with our partners, our evaluation continues to progress.
We have offtake rights to 100% of the capacity (2.5 mtpa) of the Kinder
Morgan-owned Elba Island liquefaction plant, which is under construction.
Elba Island also has a regasification terminal in which we have contracted
capacity of 11.6 mtpa.
We have 13.1 mtpa of contracted capacity in the Lake Charles
regasification terminal in Louisiana. We are also evaluating a project to
convert the existing regasification facility owned by Energy Transfer into a
liquefaction plant in which we would have capacity rights.
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EUROPE
Greece
Norway
UK
Brunei
China
in 2018.
India
Mumbai.
Iran
Malaysia
Oman
Qatar
BUSINESS AND PROPERTY
Our Integrated Gas business is described below by country.
Shell transactions with Iran are disclosed separately. See “Section 13(r) of the
US Securities Exchange Act of 1934 Disclosure” on page 224.
In January 2017, Attiki Gas Supply Company S.A. was unbundled into
separate supply and distribution companies, in line with Greek legislation.
As a result, we have a 49% interest in both Attiki Gas Supply Company S.A.
and Attiki Natural Gas Distribution Company S.A.
We have a 15% interest in Malaysia LNG Tiga located in Bintulu. We also
operate a GTL plant, Shell MDS (Shell interest 72%), adjacent to the
Malaysia LNG facilities. Using Shell technology, the plant converts gas into
high-quality middle distillates, drilling fluids, waxes and specialty products.
Netherlands
We have access to import and storage capacity at the GATE LNG terminal in
the Netherlands (Shell capacity rights 1.4 million tonnes per annum, mtpa),
enabling us to supply LNG to marine and road transport customers in
northwest Europe. We are also using the terminal to supply LNG to our
growing truck-refuelling network in the Netherlands. In August 2017, we took
delivery of the Cardissa LNG bunker vessel, a purpose-built vessel which
supplies LNG to marine and industrial customers.
Gasnor AS (Shell interest 100%) provides LNG fuel for ships and industrial
customers and has a natural gas pipeline network.
We have a 50% interest in the Dragon LNG regasification terminal,
with long-term arrangements in place governing the use of capacity rights.
ASIA (INCLUDING THE MIDDLE EAST AND RUSSIA)
We have a 25% interest in Brunei LNG Sendirian Berhad, which sells most of
its LNG on long-term contracts to customers in Asia.
We have a 30% interest in Oman LNG LLC, which mainly supplies Asian
markets under long-term contracts. We also have an 11% interest in Qalhat
LNG, which is part of the Oman LNG complex.
We operate the Pearl GTL plant (Shell interest 100%) in Qatar under a
development and production-sharing contract with the government. The fully-
integrated facility has capacity for production, processing and transportation
of 1.6 billion standard cubic feet per day (scf/d) of gas from Qatar’s North
Field. It has an installed capacity of about 140 thousand boe/d of high-
quality liquid hydrocarbon products and 120 thousand boe/d of natural gas
liquids (NGL) and ethane.
Due to unforeseen maintenance required on the gasifier units, Pearl GTL
operated at a reduced rate of production from December 2016 until a
controlled shutdown in February 2017. The plant resumed full production in
July 2017 after the gasifier unit repairs were completed. In 2017, Pearl GTL
produced around 3.5 million tonnes of GTL products.
We have a 30% interest in Qatargas 4, which comprises integrated facilities
to produce about 1.4 billion scf/d of gas from Qatar’s North Field, an
onshore gas-processing facility and one LNG train with a collective
production capacity of 7.8 mtpa of LNG and 70 thousand boe/d of
We jointly develop and produce from the onshore Changbei tight-gas field
under a production-sharing contract (PSC) with China National Petroleum
Corporation (CNPC). In 2016, we completed the Changbei I development
programme under the PSC and subsequently handed over the production
operatorship to CNPC. In December 2017, we took the final investment
decision on the Changbei II Phase 1 project, and project execution began
that month. Shell remains the operator of Changbei II.
condensate and NGL.
Russia
We have a 27.5% interest in Sakhalin-2, an integrated oil and gas project
located in a subarctic environment.
We have a 50% interest in the Salym fields in western Siberia,
Khanty Mansiysk Autonomous District, where production was approximately
In 2016, we handed back the Zitong and Fushun blocks in Sichuan to
CNPC, and expect to complete the handover of the Jinqiu block to CNPC
120 thousand boe/d in 2017.
We have a 30% interest in the producing oil and gas field Panna/Mukta.
We also have a 30% interest in the Mid Tapti and South Tapti fields, which
Pechora).
ceased production in the first quarter of 2016.
We have a 32.5% interest in MGL, a natural gas distribution company in
We have a 50% interest in Khanty-Mansiysk Petroleum Alliance.
We have a 100% interest in the North Vorkutinsky 1, North Vorkutinsky 2
and Syriaga exploration and production licences in Komi Republic (Timan
As a result of European Union and US sanctions prohibiting certain defined
oil and gas activities in Russia, we suspended our support to Salym and
Khanty-Mansiysk Petroleum Alliance in relation to shale oil activities in 2014.
Salym and Khanty-Mansiysk Petroleum Alliance also suspended any shale oil
We have a 74% interest in the Hazira regasification terminal in the state of
related activities in 2014.
Gujarat on the west coast.
Indonesia
We have a 35% interest in the INPEX Masela Ltd joint venture which owns
and operates the offshore Masela block. In April 2016, the joint venture
received a notification from the Indonesian government authorities instructing it
to re-propose a plan for the Abadi gas field based on an onshore LNG
project. The partners are committed to working together with the Indonesian
government to move the project forward.
Singapore
We have a 50% interest in a joint venture with KS Investments (the investment
arm of Keppel Group) that holds a licence to supply LNG fuel for vessels in
the Port of Singapore. We currently have the first aggregator licence to import
LNG into Singapore. The exclusivity period has ended with the issuance of
the second import licence in October 2017 to both Shell Eastern Trading (Pte)
Ltd (Shell interest 100%) and Pavilion Gas Pte Ltd.
Thailand
We have a 22.2% interest in the Bongkot and G12/48 fields in the Gulf of
Thailand and a 66.7% interest in exploration Blocks 7 and 8 where activity is
currently suspended due to overlapping claims by Thailand and Cambodia.
We have an agreement over Block 9a under which we receive royalties.
Production from the Bongkot field supplies around 20% of the country’s gas
demand.
New Zealand
Our interests include the Maui (83.75%) and Pohokura (48%) natural gas
fields. We are an operator with an approximate 61% interest in an
exploration licence in the Great South Basin.
The business is under strategic review. During 2017, we sold our 50%
interest in the Kapuni gas field. We are currently in discussions to sell our
remaining interests.
In September, Shell and KUFPEC agreed to cancel the January sale and
purchase agreement for the sale of our 22.2% interest in the Bongkot field
and adjoining acreage offshore Thailand. Subsequently, in January 2018,
we agreed to sell our interest to PTTEP. The transaction is pending regulatory
and other approvals, and is expected to close in the second quarter of
2018.
OCEANIA
Australia
We have interests in offshore production and exploration licences in the
North West Shelf (NWS) and Greater Gorgon areas of the Carnarvon Basin,
as well as in the Browse Basin and Timor Sea. Woodside (of which Shell’s
13.3% interest was sold in 2017) is the operator on behalf of the NWS joint
venture, which produced more than 450 thousand boe/d of gas and
condensates in 2017.
We have a 25% interest in the Gorgon LNG project, which involves the
development of some of the largest gas discoveries to date in Australia,
beginning with the offshore Gorgon and Jansz-lo fields. Gorgon LNG began
production in March 2016. The third and final train began operation in
March 2017.
We are the operator of a permit in the Browse Basin in which two separate
gas fields were found: Prelude and Concerto (Shell interest 67.5% in each).
Our development concept for these fields is based on our FLNG technology.
The Prelude FLNG project is expected to produce about 110 thousand
boe/d of gas and NGL, 3.6 mtpa of LNG, 1.3 mtpa of condensate and
0.4 mtpa of liquefied petroleum gas. Major milestones during 2017 were the
sail away of the facility from the construction yard in South Korea and the start
of hook-up and commissioning activities on site. Our other interests in the
basin include a joint arrangement, with Shell as the operator, for the
undeveloped Crux gas and condensate field (Shell interest 82%).
We are also a partner in the Browse joint arrangement (Shell interest 27%)
covering the Brecknock, Calliance and Torosa gas fields, and the
undeveloped Sunrise gas field in the Timor Sea (Shell interest 26.6%), both of
which are operated by Woodside. We are a partner in both Shell-operated
and other exploration joint arrangements in multiple basins, including
Bonaparte, Browse, Exmouth Plateau, Greater Gorgon and Outer Canning.
We have a 50% interest in Arrow, a Queensland-based joint venture with
CNPC. Arrow owns coal-bed methane assets and a domestic power
business.
We have a 50% interest in train one and a 97.5% interest in train two of the
Shell-operated QCLNG venture. The two-train liquefaction plant has an
installed capacity of 8.5 mtpa. Our production of onshore natural gas from
the Surat Basin supplies both this plant and the domestic market.
In December 2017, we signed a gas sales agreement between Arrow and
QCLNG, under which uncontracted gas from Arrow’s Surat Basin fields
would flow to the QCLNG venture, that would then both sell gas to local
customers and export it through its gas plant on Curtis Island.
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AFRICA
Egypt
We have interests of 35.5% and 38%, respectively, in trains one and two of
the Egyptian LNG (ELNG) plant. In January 2014, force majeure notices
were issued under the LNG agreements as a result of domestic gas diversions
severely restricting volumes available to ELNG. These notices remain in place.
See “Oil and gas information” on page 39.
Mozambique
In 2014, we signed a memorandum of understanding (MOU) with
Mozambique national oil and gas company Empresa Nacional de
Hidrocarbonetos to formalise a partnership to conduct a full feasibility study
for a potential GTL project. Following the outcome of the Mozambique
domestic gas allocation public tender process in January 2017, where we
were announced as one of three winners, we signed a MOU with the
government for the project development work programme.
Nigeria
We have a 25.6% interest in Nigeria LNG Ltd, which operates six LNG
trains.
Tanzania
We have a 60% interest in, and are the operator of, Blocks 1 and 4 offshore
southern Tanzania. The blocks cover approximately 4,000 square kilometres
of the Mafia Deep Offshore Basin and the northern part of the Rovuma Basin.
In 2016, we completed drilling on all remaining wells. We continue to
develop a potential LNG project with partners in Block 2 in line with the
Block 1 and 4 appraisal programme agreed with the Tanzanian government.
This includes discussion between the government and the partners in Blocks 1,
2 and 4 to agree the investment framework for the potential project. To
enable the agreed appraisal programme to be carried out and progress the
development of the project, the Block 1 licence was extended and we are
engaging with the government to extend the Block 4 licence. The government
has confirmed that the Block 4 licence, due to initially expire on October 31,
2017, remains in full force pending the grant of the licence extension.
Rest of Africa
We have a 17.9% share in the West African Gas Pipeline Company.
NORTH AMERICA
Canada
In 2014, we entered into a joint venture (Shell interest 50%) to evaluate an
investment in an LNG export facility in Kitimat on the west coast of Canada.
Together with our partners, our evaluation continues to progress.
USA
We have offtake rights to 100% of the capacity (2.5 mtpa) of the Kinder
Morgan-owned Elba Island liquefaction plant, which is under construction.
Elba Island also has a regasification terminal in which we have contracted
capacity of 11.6 mtpa.
We have 13.1 mtpa of contracted capacity in the Lake Charles
regasification terminal in Louisiana. We are also evaluating a project to
convert the existing regasification facility owned by Energy Transfer into a
liquefaction plant in which we would have capacity rights.
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integrated gas Continued
SOUTH AMERICA
Bolivia
We have a 100% interest in the La Vertiente, Los Suris and Tarija XX East
blocks and the La Vertiente gas processing plant. We have a 37.5% interest
in the Caipipendi block where we mainly produce from the Margarita field
and we are also drilling an exploration well. We also have a 25% interest in
the Tarija XX West block where we produce from the Itaú field. We have the
rights to explore and further develop the onshore Huacareta block (Shell
interest 100%), and plan to drill an exploration well in 2018.
Peru
We have a 20% interest in an LNG liquefaction plant.
Trinidad and Tobago
We are the largest shareholder in all four trains at Atlantic LNG. We also
have an interest in three concessions with producing fields – Central Block,
ECMA and NCMA blocks. In May 2017, we acquired Centrica’s interest in
the NCMA block, increasing our interest from 45.88% to 63.19% and in
August, we acquired Chevron’s interests in Trinidad and Tobago, which
included increasing our interest in the Shell-operated ECMA block from 50%
to 100%. We also have interests ranging from 35% to 100% in exploration
activities in blocks 5(c), 5(d), 6(d), and Atlantic Area blocks 3, 5, 6 and 7.
Rest of South America
We have interests in a gas pipeline connecting Uruguay to Argentina.
In December 2017, we sold our interest in Comgás, a natural gas
distribution company in Brazil, to Cosan. We exchanged our common shares
in Comgás for Cosan shares plus cash.
TRADING AND SUPPLY
Through our Shell Energy organisation, we market a portion of our share of
equity production of LNG and trade LNG volumes around the world through
our hubs in the UK, Dubai and Singapore. It also markets and trades natural
gas, power and carbon-emission rights mainly in North America and Europe,
of which a portion includes equity volumes from our upstream operations.
In September 2017, we acquired MP2, which provides market-based
solutions to commercial and industrial customers for managing energy supply,
load, and generation throughout the eastern USA.
During 2017, we started marketing gas in Australia and Mexico, and power
in Brazil.
NEW ENERGIES
In 2016, we formed a New Energies business. We pursue two main areas
of opportunities: new fuels for transport, such as advanced biofuels,
hydrogen, and charging for battery-electric vehicles; and power, including
from low-carbon sources such as wind and solar as well as natural gas.
Digital technologies complement our activities in both new fuels and power.
The New Energies portfolio is largely being built through acquiring
established companies or through start-up companies. Most of these
opportunities are in business sectors that are different from Shell’s existing oil
and gas businesses, but have some similarities and/or adjacencies to our
Downstream and gas and power trading businesses. New Energies
companies are subject to Shell’s control framework. However, some of the
more recently acquired, smaller companies are not yet in compliance. We
are working to bring them into compliance with Shell’s control framework in a
fit-for-purpose manner.
New fuels
Biofuels
We continue to invest in new ways to produce biofuels from sustainable
feedstocks such as waste and cellulosic biomass from non-food plants. In
2017, we completed construction of a demonstration plant at the Shell
Technology Centre Bangalore, India. This plant will demonstrate a technology
called IH2 (a trademark of the Gas Technology Institute) that turns waste into
transport fuel. In addition, we continue to look for opportunities to invest in
third-party technologies and to collaborate in scaling these up for
commercialisation.
Hydrogen electric
Shell is taking part in several initiatives to encourage the adoption of
hydrogen-electric energy as a transport fuel. In Germany, the government is
supporting the deployment of a national network of hydrogen-electric fuelling
stations across the country by 2023. We are working on this project with our
joint-venture partners in H2 Mobility Germany – Air Liquide, Daimler, Linde,
OMV and Total. At the end of 2017, Shell already had nine hydrogen filling
stations at its retail sites in Germany.
In the UK, we are partnering with ITM Power to make hydrogen fuel available
at three retail sites in the south east of the country. The first station was
inaugurated in February 2017 at our Cobham retail site. In the USA, we also
have two hydrogen stations in Los Angeles, California. In 2017, we began
working with Honda and Toyota, and with the support of the California state
government, to build seven new stations in Northern California. We are
assessing the potential for similar projects in Austria, Belgium, France,
Luxembourg, the Netherlands, Switzerland and the USA.
Charging for battery-electric vehicles
In 2017, we acquired Netherlands-based NewMotion, a company with one
of Europe’s biggest networks of EV charging points. It operates more than
30,000 private electric charge points in the Netherlands, Germany, France
and the UK. It also provides 100,000 registered charge-card users access to
over 50,000 public charge points in 25 European countries.
In 2017, we also signed an agreement with charging operator IONITY to
offer high-powered charging points in 10 European countries, starting with
80 of its biggest highway stations, which will allow EV drivers to travel long
distances. IONITY is a joint venture between BMW, Daimler, Ford and
Volkswagen, which was formed to create a network of 350-kilowatt chargers
next to major highways in Europe.
Power
Our share of capacity from wind power projects in the USA is more than
400 megawatts (MW).
In the Netherlands, we have an interest in the consortium that was awarded
the concession by the Dutch government in December 2016 to develop the
Borssele III and IV offshore wind farm projects, which are to be located 20
kilometres off the Dutch coast. In January 2018, Partners Group signed an
agreement to join the projects, diluting our interest in the consortium from 40%
to 20%.
Also in the Netherlands, we have a 50% interest in the Noordzeewind joint
venture with Nuon, which has been set up for the development, construction
and management of the Egmond aan Zee offshore wind farm. The farm
comprises 36 wind turbines, each with a capacity of 3 MW.
We are exploring ways to deploy solar technologies to lower the carbon
intensity of our operations.
We are also looking at how best to combine wind and solar power with our
existing business and capabilities.
We are developing a solar power plant at our Moerdijk chemicals site in the
Netherlands, with construction planned to begin in 2018. The plant is
expected to provide an approximate peak capacity of 20 MW of renewable
power. The power produced will be used by the Shell Moerdijk site.
In December 2017, we signed an agreement to buy First Utility, a leading
independent UK household energy and broadband provider. The transaction
was completed in February 2018.
In January 2018, we announced an agreement to acquire a 43.83% interest
in Silicon Ranch Corporation, a leading US developer, owner, and operator
of solar assets. The transaction was completed in March 2018.
Digital technologies
Digital technologies complement our activities in new fuels and power.
In the Netherlands, we have developed a fill-up-and-go system which allows
drivers to pay online for fuel from their vehicles. This secure payment system
saves drivers time.
In the USA, the Fitcar™ app transforms a regular car into a “connected car”
and provides maintenance alerts and information on the engine, the location
of nearby services and tracks users’ driving style, helping drivers save money,
stay safe and take care of their vehicle.
We have developed an app, called Farepilot, that helps self-employed
drivers to identify high demand areas to swiftly find their next fare and
potentially save them fuel. We have invested through Shell Technology
Ventures in tiramizoo, a German start-up whose online technology connects
retailers with customers. We are collaborating on an online tool that efficiently
schedules local deliveries in over 150 towns and cities in Germany and
Austria. This approach improves customer service, lowers costs and, if widely
adopted, could reduce urban traffic and, in turn, help improve local air
quality.
Going forward, we are exploring services we could offer to home energy
users. We have already developed a digital programme which helps
customers in the UK bring all their energy bills together in one place and finds
ways for them to save money.
Our approach to digital ventures involves exploring a range of options, and
moving on swiftly if we conclude that a venture is not commercially viable.
INTEGRATED GAS DATA TABLE
LNG liquefaction volumes
Australia
Brunei
Egypt
Malaysia
Nigeria
Norway
Oman
Peru
Qatar
Russia
Total
Trinidad and Tobago
Million tonnes
2017
2016
2015
11.1
1.6
0.2
1.3
5.2
0.1
2.0
0.9
2.4
3.1
5.3
9.5
1.6
0.2
1.3
4.5
0.1
2.0
0.9
2.4
3.0
5.4
3.4
1.6
—
1.8
5.0
—
1.9
0.7
2.4
2.9
2.9
33.2 30.9
22.6
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SOUTH AMERICA
Bolivia
New fuels
Biofuels
We have a 100% interest in the La Vertiente, Los Suris and Tarija XX East
blocks and the La Vertiente gas processing plant. We have a 37.5% interest
in the Caipipendi block where we mainly produce from the Margarita field
and we are also drilling an exploration well. We also have a 25% interest in
the Tarija XX West block where we produce from the Itaú field. We have the
rights to explore and further develop the onshore Huacareta block (Shell
interest 100%), and plan to drill an exploration well in 2018.
We continue to invest in new ways to produce biofuels from sustainable
feedstocks such as waste and cellulosic biomass from non-food plants. In
2017, we completed construction of a demonstration plant at the Shell
Technology Centre Bangalore, India. This plant will demonstrate a technology
called IH2 (a trademark of the Gas Technology Institute) that turns waste into
transport fuel. In addition, we continue to look for opportunities to invest in
third-party technologies and to collaborate in scaling these up for
Peru
We have a 20% interest in an LNG liquefaction plant.
Trinidad and Tobago
We are the largest shareholder in all four trains at Atlantic LNG. We also
have an interest in three concessions with producing fields – Central Block,
ECMA and NCMA blocks. In May 2017, we acquired Centrica’s interest in
the NCMA block, increasing our interest from 45.88% to 63.19% and in
August, we acquired Chevron’s interests in Trinidad and Tobago, which
included increasing our interest in the Shell-operated ECMA block from 50%
to 100%. We also have interests ranging from 35% to 100% in exploration
activities in blocks 5(c), 5(d), 6(d), and Atlantic Area blocks 3, 5, 6 and 7.
Rest of South America
We have interests in a gas pipeline connecting Uruguay to Argentina.
In December 2017, we sold our interest in Comgás, a natural gas
distribution company in Brazil, to Cosan. We exchanged our common shares
in Comgás for Cosan shares plus cash.
TRADING AND SUPPLY
Through our Shell Energy organisation, we market a portion of our share of
equity production of LNG and trade LNG volumes around the world through
our hubs in the UK, Dubai and Singapore. It also markets and trades natural
gas, power and carbon-emission rights mainly in North America and Europe,
of which a portion includes equity volumes from our upstream operations.
In September 2017, we acquired MP2, which provides market-based
solutions to commercial and industrial customers for managing energy supply,
load, and generation throughout the eastern USA.
of opportunities: new fuels for transport, such as advanced biofuels,
hydrogen, and charging for battery-electric vehicles; and power, including
from low-carbon sources such as wind and solar as well as natural gas.
Digital technologies complement our activities in both new fuels and power.
The New Energies portfolio is largely being built through acquiring
established companies or through start-up companies. Most of these
opportunities are in business sectors that are different from Shell’s existing oil
and gas businesses, but have some similarities and/or adjacencies to our
Downstream and gas and power trading businesses. New Energies
companies are subject to Shell’s control framework. However, some of the
more recently acquired, smaller companies are not yet in compliance. We
are working to bring them into compliance with Shell’s control framework in a
fit-for-purpose manner.
commercialisation.
Hydrogen electric
Shell is taking part in several initiatives to encourage the adoption of
hydrogen-electric energy as a transport fuel. In Germany, the government is
supporting the deployment of a national network of hydrogen-electric fuelling
stations across the country by 2023. We are working on this project with our
joint-venture partners in H2 Mobility Germany – Air Liquide, Daimler, Linde,
OMV and Total. At the end of 2017, Shell already had nine hydrogen filling
stations at its retail sites in Germany.
In the UK, we are partnering with ITM Power to make hydrogen fuel available
at three retail sites in the south east of the country. The first station was
inaugurated in February 2017 at our Cobham retail site. In the USA, we also
have two hydrogen stations in Los Angeles, California. In 2017, we began
working with Honda and Toyota, and with the support of the California state
government, to build seven new stations in Northern California. We are
assessing the potential for similar projects in Austria, Belgium, France,
Luxembourg, the Netherlands, Switzerland and the USA.
Charging for battery-electric vehicles
In 2017, we acquired Netherlands-based NewMotion, a company with one
of Europe’s biggest networks of EV charging points. It operates more than
30,000 private electric charge points in the Netherlands, Germany, France
and the UK. It also provides 100,000 registered charge-card users access to
over 50,000 public charge points in 25 European countries.
In 2017, we also signed an agreement with charging operator IONITY to
offer high-powered charging points in 10 European countries, starting with
80 of its biggest highway stations, which will allow EV drivers to travel long
distances. IONITY is a joint venture between BMW, Daimler, Ford and
Volkswagen, which was formed to create a network of 350-kilowatt chargers
Power
Our share of capacity from wind power projects in the USA is more than
In the Netherlands, we have an interest in the consortium that was awarded
the concession by the Dutch government in December 2016 to develop the
Borssele III and IV offshore wind farm projects, which are to be located 20
kilometres off the Dutch coast. In January 2018, Partners Group signed an
agreement to join the projects, diluting our interest in the consortium from 40%
to 20%.
Also in the Netherlands, we have a 50% interest in the Noordzeewind joint
venture with Nuon, which has been set up for the development, construction
and management of the Egmond aan Zee offshore wind farm. The farm
comprises 36 wind turbines, each with a capacity of 3 MW.
We are exploring ways to deploy solar technologies to lower the carbon
intensity of our operations.
We are also looking at how best to combine wind and solar power with our
existing business and capabilities.
During 2017, we started marketing gas in Australia and Mexico, and power
next to major highways in Europe.
in Brazil.
NEW ENERGIES
In 2016, we formed a New Energies business. We pursue two main areas
400 megawatts (MW).
We are developing a solar power plant at our Moerdijk chemicals site in the
Netherlands, with construction planned to begin in 2018. The plant is
expected to provide an approximate peak capacity of 20 MW of renewable
power. The power produced will be used by the Shell Moerdijk site.
In December 2017, we signed an agreement to buy First Utility, a leading
independent UK household energy and broadband provider. The transaction
was completed in February 2018.
In January 2018, we announced an agreement to acquire a 43.83% interest
in Silicon Ranch Corporation, a leading US developer, owner, and operator
of solar assets. The transaction was completed in March 2018.
Digital technologies
Digital technologies complement our activities in new fuels and power.
In the Netherlands, we have developed a fill-up-and-go system which allows
drivers to pay online for fuel from their vehicles. This secure payment system
saves drivers time.
In the USA, the Fitcar™ app transforms a regular car into a “connected car”
and provides maintenance alerts and information on the engine, the location
of nearby services and tracks users’ driving style, helping drivers save money,
stay safe and take care of their vehicle.
We have developed an app, called Farepilot, that helps self-employed
drivers to identify high demand areas to swiftly find their next fare and
potentially save them fuel. We have invested through Shell Technology
Ventures in tiramizoo, a German start-up whose online technology connects
retailers with customers. We are collaborating on an online tool that efficiently
schedules local deliveries in over 150 towns and cities in Germany and
Austria. This approach improves customer service, lowers costs and, if widely
adopted, could reduce urban traffic and, in turn, help improve local air
quality.
Going forward, we are exploring services we could offer to home energy
users. We have already developed a digital programme which helps
customers in the UK bring all their energy bills together in one place and finds
ways for them to save money.
Our approach to digital ventures involves exploring a range of options, and
moving on swiftly if we conclude that a venture is not commercially viable.
INTEGRATED GAS DATA TABLE
LNG liquefaction volumes
Australia
Brunei
Egypt
Malaysia
Nigeria
Norway
Oman
Peru
Qatar
Russia
Trinidad and Tobago
Total
2017
11.1
1.6
0.2
1.3
5.2
0.1
2.0
0.9
2.4
3.1
5.3
Million tonnes
2015
2016
9.5
1.6
0.2
1.3
4.5
0.1
2.0
0.9
2.4
3.0
5.4
3.4
1.6
—
1.8
5.0
—
1.9
0.7
2.4
2.9
2.9
33.2 30.9
22.6
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integrated gas Continued
LNG AND GTL PLANTS AT DECEMBER 31, 2017
LNG liquefaction plants in operation
Europe
Norway
Asia
Brunei
Malaysia
Oman
Qatar
Russia
Oceania
Australia
Africa
Egypt
Nigeria
South America
Peru
Trinidad and Tobago
Asset
Gasnor
Brunei LNG
Malaysia LNG Tiga
Oman LNG
Qalhat LNG
Qatargas 4
Sakhalin LNG
Australia North West Shelf
Gorgon LNG T1
Gorgon LNG T2
Gorgon LNG T3
Queensland Curtis LNG T1
Queensland Curtis LNG T2
Egyptian LNG T1
Egyptian LNG T2
Nigeria LNG
Peru LNG
Atlantic LNG T1
Atlantic LNG T2/T3
Atlantic LNG T4
[A] As reported by the operator.
[B] Interest, or part of the interest, is held via indirect shareholding.
LNG liquefaction plants under construction
Oceania
Australia
GTL plants in operation
Asia
Malaysia
Qatar
Asset
Prelude
Asset
Shell MDS
Pearl
Location
Bergen
Lumut
Bintulu
Sur
Sur
Ras Laffan
Prigorodnoye
Karratha
Barrow Island
Barrow Island
Barrow Island
Curtis Island
Curtis Island
Idku
Idku
Bonny
Pampa Melchorita
Point Fortin
Point Fortin
Point Fortin
Shell interest (%)
100% capacity (mtpa)[A]
100.0
25.0
15.0
30.0
11.0 [B]
30.0
27.5
16.7
25.0
25.0
25.0
50.0
97.5
35.5
38.0
25.6
20.0
46.0
57.5
51.1
0.3
7.8
7.7
7.1
3.7
7.8
9.6
16.9
5.2
5.2
5.2
4.3
4.3
3.6
3.6
22.0
4.5
3.1
6.6
5.2
Location
Shell interest (%)
100% capacity (mtpa)
the price differential.
Browse Basin
67.5
3.6
Location
Bintulu
Ras Laffan
Shell interest (%)
100% capacity (b/d)
72.0
100.0
14,700
140,000
Upstream
Key statistics
Segment earnings
Including:
Revenue (including inter-segment sales)
Share of profit of joint ventures and associates
Interest and other income
Operating expenses [A]
Exploration
Taxation charge/(credit)
Capital investment [A]
Divestments [A]
Depreciation, depletion and amortisation
Oil and gas production available for sale (thousand boe/d)
[A] See “Non-GAAP measures reconciliations” on pages 225-226.
$ million, except where indicated
2017
2016
1,551
(3,674 )
40,192
32,936
623
1,188
12,656
1,804
17,303
2,409
13,648
11,542
2,777
222
839
14,501
1,614
16,779
(938 )
47,507
1,726
2,784
2015
(8,833 )
33,563
491
1,819
15,740
4,429
20,404
(927 )
18,349
2,478
2,323
OVERVIEW
In Europe, natural gas prices were higher than in 2016. The average price at
Our Upstream business explores for and extracts crude oil, natural gas and
the UK National Balancing Point (NBP) was 28% higher in 2017. At the
natural gas liquids. It also markets and transports oil and gas, and operates
main continental European gas trading hubs – in the Netherlands, Belgium
the infrastructure necessary to deliver them to market. We are also involved
and Germany – prices were also stronger, as reflected by stronger Dutch Title
in the extraction of bitumen from mined oil sands and its conversion into
Transfer Facility prices. Higher prices reflected the combined effect of reduced
domestic production, lower nuclear power generation, increased coal prices,
and growth in demand from power generation and other industrial sectors.
synthetic crude oil.
BUSINESS CONDITIONS
Global oil demand grew by 1.5 million barrels per day (b/d), or 1.6%, to
See “Market overview” on pages 17-18.
97.8 million b/d in 2017, according to the International Energy Agency’s
Oil Market Report published in January 2018. The Brent crude oil price, an
PRODUCTION AVAILABLE FOR SALE
international benchmark, averaged $54/b, $10/b higher than in 2016
In 2017, production was 1,014 million barrels of oil equivalent (boe), or
when the price was at its lowest average level since 2004. It traded between
2,777 thousand boe per day (boe/d), compared with 1,019 million boe, or
$45/b and $67/b in 2017, ending the year at $66/b.
2,784 thousand boe/d in 2016. Liquids production was flat and natural gas
On a yearly average basis, West Texas Intermediate crude oil traded at a
$3/b discount to Brent in 2017, compared with $0.4/b in 2016. The
Production in 2017 decreased slightly compared with 2016. Decreases
discount widened in the second half of the year as crude oil demand from
were mainly due to divestments (around 135 thousand boe/d) and field
refineries on the US Gulf Coast slowed due to shutdowns related to the
declines (around 80 thousand boe/d). Increases were mainly from new field
hurricane season. Increasing US oil exports helped to limit further widening of
start-ups and the continuing ramp-up of existing fields (around 195 thousand
production decreased by 1% compared with 2016.
boe/d), in particular Lula Central, Lula Alto, Lula South and Lapa in the
Santos Basin in Brazil, Kashagan in Kazakhstan, Kebabangan and Malikai in
Global gas demand grew by about 2.4% in 2017, which is higher than the
Malaysia and Stones in the US Gulf of Mexico and stronger operational
average annual growth of 2.3% in the past decade. A combination of
performance and acquisitions, which contributed additional volumes of
weather conditions and increased global economic growth led to an increase
around 105 thousand boe/d. Other items had a net negative impact of
in demand growth in most regions.
around 90 thousand boe/d.
In the USA, the natural gas price at the Henry Hub averaged $3.0 per
EARNINGS 2017-2016
million British thermal units (MMBtu) in 2017, 20% higher than in 2016, and
Segment earnings in 2017 were $1,551 million, which included a net
traded in a range of $2.4-3.4/MMBtu. One important factor is how much
charge of $1,540 million. The net charge included impairment charges of
natural gas is available in storage during the winter. At the end of March
$2,557 million (reported in depreciation), mainly related to divestments of
2017, prices were supported by a tighter than normal balance between
our oil sands interests in Canada, onshore assets in Gabon and our interest in
supply and demand, which led to around 0.5 trillion cubic feet less gas
the Corrib gas project in Ireland, a charge of $1,089 million related to US
being held in storage compared with the year-ago level. Mild weather and
tax reform legislation, and redundancy and restructuring charges of
higher prices led to lower than normal demand for gas from US power
$163 million. These charges were partly offset by gains on divestments of
generation. But both LNG exports and pipeline exports to Mexico increased
$1,463 million, reported in interest and other income, mainly related to a
substantially as new liquefaction terminals and cross-border pipelines came
package of assets in the UK North Sea, a credit of $772 million mainly
online. Higher oil and gas prices compared with 2016, combined with new
reflecting the release of tax liabilities, and other items with a net positive
gas pipeline capacity, helped to increase overall gas production, which met
impact of $34 million.
demand but led to around 0.3 trillion cubic feet less gas held in storage
in November 2017, compared with the year-ago level.
Segment earnings in 2016 were a loss of $3,674 million, which included a
net charge of $970 million. The net charge included impairment charges of
$1,147 million (reported in depreciation), primarily related to shale and
deep-water properties in North and South America; redundancy and
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LNG AND GTL PLANTS AT DECEMBER 31, 2017
LNG liquefaction plants in operation
Shell interest (%)
100% capacity (mtpa)[A]
Europe
Norway
Asia
Brunei
Malaysia
Oman
Qatar
Russia
Oceania
Australia
Africa
Egypt
Nigeria
South America
Peru
Asset
Gasnor
Brunei LNG
Malaysia LNG Tiga
Oman LNG
Qalhat LNG
Qatargas 4
Sakhalin LNG
Australia North West Shelf
Gorgon LNG T1
Gorgon LNG T2
Gorgon LNG T3
Queensland Curtis LNG T1
Queensland Curtis LNG T2
Egyptian LNG T1
Egyptian LNG T2
Nigeria LNG
Location
Bergen
Lumut
Bintulu
Sur
Sur
Ras Laffan
Prigorodnoye
Karratha
Barrow Island
Barrow Island
Barrow Island
Curtis Island
Curtis Island
Idku
Idku
Bonny
Point Fortin
Point Fortin
Point Fortin
Peru LNG
Pampa Melchorita
Trinidad and Tobago
Atlantic LNG T1
Atlantic LNG T2/T3
Atlantic LNG T4
[A] As reported by the operator.
[B] Interest, or part of the interest, is held via indirect shareholding.
LNG liquefaction plants under construction
GTL plants in operation
Oceania
Australia
Asia
Malaysia
Qatar
Asset
Prelude
Asset
Shell MDS
Pearl
11.0 [B]
100.0
25.0
15.0
30.0
30.0
27.5
16.7
25.0
25.0
25.0
50.0
97.5
35.5
38.0
25.6
20.0
46.0
57.5
51.1
0.3
7.8
7.7
7.1
3.7
7.8
9.6
16.9
5.2
5.2
5.2
4.3
4.3
3.6
3.6
22.0
4.5
3.1
6.6
5.2
Location
Shell interest (%)
100% capacity (mtpa)
Browse Basin
67.5
3.6
Location
Bintulu
Ras Laffan
Shell interest (%)
100% capacity (b/d)
72.0
100.0
14,700
140,000
Upstream
Upstream
Key statistics
Segment earnings
Including:
Revenue (including inter-segment sales)
Share of profit of joint ventures and associates
Interest and other income
Operating expenses [A]
Exploration
Depreciation, depletion and amortisation
Taxation charge/(credit)
Capital investment [A]
Divestments [A]
Oil and gas production available for sale (thousand boe/d)
[A] See “Non-GAAP measures reconciliations” on pages 225-226.
OVERVIEW
Our Upstream business explores for and extracts crude oil, natural gas and
natural gas liquids. It also markets and transports oil and gas, and operates
the infrastructure necessary to deliver them to market. We are also involved
in the extraction of bitumen from mined oil sands and its conversion into
synthetic crude oil.
BUSINESS CONDITIONS
Global oil demand grew by 1.5 million barrels per day (b/d), or 1.6%, to
97.8 million b/d in 2017, according to the International Energy Agency’s
Oil Market Report published in January 2018. The Brent crude oil price, an
international benchmark, averaged $54/b, $10/b higher than in 2016
when the price was at its lowest average level since 2004. It traded between
$45/b and $67/b in 2017, ending the year at $66/b.
On a yearly average basis, West Texas Intermediate crude oil traded at a
$3/b discount to Brent in 2017, compared with $0.4/b in 2016. The
discount widened in the second half of the year as crude oil demand from
refineries on the US Gulf Coast slowed due to shutdowns related to the
hurricane season. Increasing US oil exports helped to limit further widening of
the price differential.
Global gas demand grew by about 2.4% in 2017, which is higher than the
average annual growth of 2.3% in the past decade. A combination of
weather conditions and increased global economic growth led to an increase
in demand growth in most regions.
In the USA, the natural gas price at the Henry Hub averaged $3.0 per
million British thermal units (MMBtu) in 2017, 20% higher than in 2016, and
traded in a range of $2.4-3.4/MMBtu. One important factor is how much
natural gas is available in storage during the winter. At the end of March
2017, prices were supported by a tighter than normal balance between
supply and demand, which led to around 0.5 trillion cubic feet less gas
being held in storage compared with the year-ago level. Mild weather and
higher prices led to lower than normal demand for gas from US power
generation. But both LNG exports and pipeline exports to Mexico increased
substantially as new liquefaction terminals and cross-border pipelines came
online. Higher oil and gas prices compared with 2016, combined with new
gas pipeline capacity, helped to increase overall gas production, which met
demand but led to around 0.3 trillion cubic feet less gas held in storage
in November 2017, compared with the year-ago level.
2017
$ million, except where indicated
2015
2016
1,551
(3,674 )
(8,833 )
40,192
623
1,188
12,656
1,804
17,303
2,409
13,648
11,542
2,777
32,936
222
839
14,501
1,614
16,779
(938 )
47,507
1,726
2,784
33,563
491
1,819
15,740
4,429
20,404
(927 )
18,349
2,478
2,323
In Europe, natural gas prices were higher than in 2016. The average price at
the UK National Balancing Point (NBP) was 28% higher in 2017. At the
main continental European gas trading hubs – in the Netherlands, Belgium
and Germany – prices were also stronger, as reflected by stronger Dutch Title
Transfer Facility prices. Higher prices reflected the combined effect of reduced
domestic production, lower nuclear power generation, increased coal prices,
and growth in demand from power generation and other industrial sectors.
See “Market overview” on pages 17-18.
PRODUCTION AVAILABLE FOR SALE
In 2017, production was 1,014 million barrels of oil equivalent (boe), or
2,777 thousand boe per day (boe/d), compared with 1,019 million boe, or
2,784 thousand boe/d in 2016. Liquids production was flat and natural gas
production decreased by 1% compared with 2016.
Production in 2017 decreased slightly compared with 2016. Decreases
were mainly due to divestments (around 135 thousand boe/d) and field
declines (around 80 thousand boe/d). Increases were mainly from new field
start-ups and the continuing ramp-up of existing fields (around 195 thousand
boe/d), in particular Lula Central, Lula Alto, Lula South and Lapa in the
Santos Basin in Brazil, Kashagan in Kazakhstan, Kebabangan and Malikai in
Malaysia and Stones in the US Gulf of Mexico and stronger operational
performance and acquisitions, which contributed additional volumes of
around 105 thousand boe/d. Other items had a net negative impact of
around 90 thousand boe/d.
EARNINGS 2017-2016
Segment earnings in 2017 were $1,551 million, which included a net
charge of $1,540 million. The net charge included impairment charges of
$2,557 million (reported in depreciation), mainly related to divestments of
our oil sands interests in Canada, onshore assets in Gabon and our interest in
the Corrib gas project in Ireland, a charge of $1,089 million related to US
tax reform legislation, and redundancy and restructuring charges of
$163 million. These charges were partly offset by gains on divestments of
$1,463 million, reported in interest and other income, mainly related to a
package of assets in the UK North Sea, a credit of $772 million mainly
reflecting the release of tax liabilities, and other items with a net positive
impact of $34 million.
Segment earnings in 2016 were a loss of $3,674 million, which included a
net charge of $970 million. The net charge included impairment charges of
$1,147 million (reported in depreciation), primarily related to shale and
deep-water properties in North and South America; redundancy and
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upstream Continued
restructuring charges of $654 million; a $235 million provision for onerous
drilling rig contracts; $198 million related to the reassessment of deferred tax
positions in Malaysia; and a net charge on fair value accounting of certain
commodity derivatives and gas contracts of $145 million. These charges
were partly offset by a gain of $661 million related to the impact of a
strengthening Brazilian real on a deferred tax position, divestment gains of
$645 million, reported in interest and other income, and a credit of
$103 million reflecting a statutory tax rate reduction in the UK.
Excluding the net charges described above, segment earnings in 2017 were
$3,091 million compared with a loss of $2,704 million in 2016. Earnings
benefited from higher realised oil and gas prices (around $3,700 million),
lower taxes (around $1,480 million), mainly related to the movements in
various deferred tax positions, and lower depreciation (around $800 million),
mainly related to assets classified as held for sale and divestments. These
impacts were partly offset by lower production volumes mainly due to
divestments (around $140 million) and higher well write-offs (around
$100 million).
EARNINGS 2016-2015
BG was consolidated within Shell’s results with effect from February 2016,
following its acquisition.
Segment earnings in 2016 were a loss of $3,674 million, which included a
net charge of $970 million as described on page 31 and above.
Segment earnings in 2015 were a loss of $8,833 million, which included a
net charge of $6,578 million. The net charge included $4,616 million
related to impairments, redundancy and restructuring, and other items
associated with the decision to cease Alaska drilling activities and the
Carmon Creek project in Canada. The net charge also reflected other
impairment charges of $3,466 million and a charge of $463 million related
to the impact of a weakening Brazilian real on a deferred tax position. These
charges were partly offset by gains on divestments of $1,603 million and a
credit of $604 million, reflecting a statutory tax rate reduction in the UK.
Excluding these net charges, segment earnings in 2016 were a loss of
$2,704 million compared with a loss of $2,255 million in 2015, principally
as a result of lower oil and gas prices, and higher depreciation partly offset
by higher production volumes, mainly due to the acquisition of BG.
CAPITAL INVESTMENT
Capital investment in 2017 was $13.6 billion, compared with $47.5 billion
in 2016. Capital investment in 2017 included $1.5 billion related to the
acquisition of a 50% interest in Marathon Oil Canada Corporation (MOCC),
while 2016 included $31.1 billion related to the acquisition of BG. Organic
capital investment was $4.1 billion lower than in 2016, reflecting our
continuing efforts to curtail spending by reducing the number of new
investment decisions and pursuing lower-cost development solutions.
DIVESTMENTS
Divestments in 2017 were $11.5 billion, compared with $1.7 billion in
2016. Divestments in 2017 were mainly the sale of our oil sands and in-situ
interests in Canada, a package of UK North Sea assets, our onshore assets
in Gabon, and assets in the Delaware Permian Basin in the USA.
PORTFOLIO AND BUSINESS DEVELOPMENT
We took the following key portfolio decisions:
■ In February 2017, we took the final investment decision (FID) to execute
Phase 1 of the Kaikias deep-water project in the USA, and Phase 2 was
approved in April 2017. Kaikias (Shell interest 80%) is a subsea tie-back
to the Shell-operated Ursa platform. Phase 1 will include three wells and
Phase 2 will add an additional well, which collectively are expected to
reach a peak production of approximately 40 thousand boe/d. First oil is
expected in June 2018 for both Kaikias Phase 1 and Phase 2.
■ In December, Maersk Oil, as operator, announced FID for the
redevelopment of the Tyra gas field (Shell interest 36.8%) in Denmark.
When completed in 2022, peak production is expected to be around
60 thousand boe/d.
■ In January 2018, we announced the FID for the redevelopment of the
Penguins oil and gas field (Shell interest 50%) in the UK North Sea. The
decision authorises the construction of a floating production, storage and
offloading (FPSO) vessel, which is expected to have a peak production
(100%) of around 45 thousand boe/d.
We achieved the following operational milestones in 2017:
■ In Brazil, we announced first production at the Lula South deep-water
development (Shell interest 100%) via FPSO P66 in the Brazilian pre-salt
block of the Santos Basin.
■ Also in Brazil, together with our partners, we won 35-year production-sharing
contracts for three pre-salt exploration blocks in the Santos Basin. Two blocks
are adjacent to the Gato do Mato field (Shell interest 80% as operator) and
the non-Shell-operated Sapinhoá field (Shell interest 30%), where Shell is
already present, and the third is Alto Cabo Frio West (Shell interest 55%
as operator).
■ Also in Brazil, together with our partners, we announced the start of
production testing at the Libra field FPSO in the Santos Basin. Petrobras,
the operator, announced that the Libra consortium (Shell interest 20%) had
submitted the declaration of commerciality and signed a contract to charter
the first production FPSO of the north-west block of Libra, now called Mero.
The FPSO is expected to have a capacity of 180 thousand boe/d and
production is scheduled to start in 2021.
■ In Nigeria, we announced first production at Phase 2 of the Gbaran-Ubie
integrated oil and gas development (Shell interest 30%) in the Niger Delta
region. Expected peak production is around 175 thousand boe/d.
■ In the UK, the non-Shell-operated Schiehallion redevelopment (Shell interest
approximately 45%) reached first production.
■ In the USA, we purchased the Turritella FPSO for the Stones deep-water
development in the Gulf of Mexico. The FPSO has a daily production
capacity of approximately 60 thousand barrels of oil and 15 million
standard cubic feet of natural gas.
In January 2018, we won nine exploration blocks in the deep-water bid
round in Mexico; four blocks on our own, four with our partner Qatar
Petroleum International Limited, and one with our partner Pemex Exploración y
Producción. The total area of these nine blocks is 18,996 square kilometres.
We will be the operator of all nine blocks.
Also in January 2018, we announced one of our largest US Gulf of Mexico
exploration finds in the past decade from the Whale deep-water well. Whale
is operated by Shell (60%) and co-owned by Chevron U.S.A. Inc. (40%).
It was discovered in the Alaminos Canyon Block 772, adjacent to the Shell-
operated Silvertip field and approximately 16 kilometres from the Shell-
operated Perdido platform. Evaluation of the discovery is ongoing.
We continued to divest selected assets during 2017, including:
■ In Canada, we sold all of our in-situ and undeveloped oil sands interests
and our 60% interest in the Athabasca Oil Sands Project (AOSP).
Separately we acquired a 50% interest in MOCC, which holds a 20%
interest in the AOSP.
■ In the UK, we sold a package of North Sea assets in November. This
consisted of our interests in the Buzzard, Beryl, Bressay, Elgin-Franklin, J-
Area, Everest, Lomond and Erskine fields and the Greater Armada cluster,
and a 10% interest in the Schiehallion field.
■ In Gabon, we sold all of our onshore oil and gas operations and related
infrastructure: five Shell-operated fields (Rabi, Toucan/Robin,
EUROPE
Denmark
Gamba/Ivinga, Koula/Damier, and Bende/M’Bassou/Totou), non-Shell-
We have a non-operating interest in a producing concession in Denmark
operated interests in the Atora, Avocette, Coucal, and Tsiengui West
(Shell interest 36.8%), which was granted in 1962 and expires in 2042.
fields, and the associated infrastructure of the onshore pipeline system from
The Danish government is one of our partners with a 20% interest.
Rabi to Gamba and the Gamba Southern export terminal.
■ In the USA, we sold approximately 5,300 acres and associated producing
In December 2017, the FID for the Tyra redevelopment project was taken to
assets in the East Haley area of the Delaware Permian Basin in West
ensure continued production from Denmark’s largest gas field.
In Ireland, we reached an agreement with CPP Investment Board Europe
S.A.R.L., a subsidiary of Canada Pension Plan Investment Board, to sell our
45% interest in the Corrib gas project. The transaction, which represents
Shell’s exit from the upstream business in Ireland, is subject to partner and
regulatory approval and is expected to conclude in the second quarter of
Ireland
Italy
Texas.
2018.
BUSINESS AND PROPERTY
Our subsidiaries, joint ventures and associates are involved in all aspects of
upstream activities, including matters such as land tenure, entitlement to
produced hydrocarbons, production rates, royalties, pricing, environmental
protection, social impact, exports, taxes and foreign exchange.
in 2018.
Netherlands
In July 2017, we agreed to sell our 45% interest in the Corrib gas project.
The transaction is expected to be completed in the second quarter of 2018.
We have a 39.23% interest in the Val d’Agri producing concession,
operated by ENI.
We also have a 25% interest in the Tempa Rossa concession operated by
Total. The Tempa Rossa field is under development and first oil is expected
The conditions of the leases, licences and contracts under which oil and gas
interests are held vary from country to country. In almost all cases outside
government entity, has a 40% interest and NAM a 60% interest.
North America, the legal agreements are generally granted by, or entered
into with, a government, state-owned company or government-run oil and gas
Production from the Groningen field induces earthquakes that cause damage
company, and the exploration risk usually rests with the independent oil and
to houses and other structures in the region leading to complaints from the
gas company. In North America, these agreements may also be with private
local community. NAM is working with the Dutch government and
parties that own mineral rights. Of these agreements, the following are most
stakeholders to fulfil its commitments to the residents of the area, including the
Shell and ExxonMobil are 50:50 shareholders in Nederlandse Aardolie
Maatschappij B.V. (NAM). An important part of NAM’s gas production
comes from the onshore Groningen gas field, in which EBN, a Dutch
relevant to our interests:
■ Licences (or concessions), which entitle the holder to explore for
hydrocarbons and exploit any commercial discoveries. Under a licence,
interests, including that of the safety of the residents, the security of supply of
the holder bears the risk of exploration, development and production
the domestic gas market and the supply commitments to offtakers in EU
activities, and is responsible for financing these activities. In principle, the
member states. Production is capped at 21.6 billion cubic metres for the
licence holder is entitled to the totality of production less any royalties in
current gas year ending September 2018.
payment of all earthquake related cost. In addition, since 2013, the Dutch
Minister of Economic Affairs and Climate Policy (the Minister) has set an
annual production level for the Groningen field taking into account all
kind. The government, state-owned company or government-run oil and gas
company may sometimes enter into a joint arrangement as a participant
sharing the rights and obligations of the licence but usually without sharing
the exploration risk. In a few cases, the state-owned company, government-
run oil and gas company or agency has an option to purchase a certain
share of production.
■ Lease agreements, which are typically used in North America and are usually
governed by terms similar to licences. Participants may include governments
or private entities, and royalties are either paid in cash or in kind.
■ Production-sharing contracts (PSCs) entered into with a government, state-
owned company or government-run oil and gas company. PSCs generally
oblige the independent oil and gas company, as contractor, to provide all
the financing and bear the risk of exploration, development and production
activities in exchange for a share of the production. Usually, this share
consists of a fixed or variable part that is reserved for the recovery of the
contractor’s cost (cost oil). The remaining production is split with the
government, state-owned company or government-run oil and gas
company on a fixed or volume/revenue-dependent basis. In some cases,
In January 2018, an earthquake occurred that triggered the need for
additional measures. The Dutch Mining Regulator has advised the Minister to
further reduce the annual production from the Groningen field to a level of
approximately 12 billion cubic metres. Before the end of September 2018,
the Minister will take a decision on the production level for the next gas year
based on all interests at stake. The level for the gas year ending September
2019 is expected to be lower than the current level.
Apart from production reductions, a variety of measures have been taken by
NAM, the Minister and the government, including an in-depth study and
measuring programme (both sub-surface and above surface), the issuance of
specific building regulations and the establishment of a damage claims
handling process under government supervision.
The Dutch government and the shareholders in NAM are in discussions
regarding the future of their cooperation in production from the Groningen
field. See “Risk factors” on page 14.
the government, state-owned company or government-run oil and gas
NAM also has a 60% interest in the Schoonebeek oil field, and operates a
company will participate in the rights and obligations of the contractor and
significant number of other onshore gas fields and offshore gas fields in the
will share in the costs of development and production. Such participation
North Sea.
can be across the venture or on a field-by-field basis. Additionally, as the
price of oil or gas increases above certain predetermined levels, the
independent oil and gas company’s entitlement share of production
normally decreases, and vice versa. Accordingly, its interest in a project
may not be the same as its entitlement.
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restructuring charges of $654 million; a $235 million provision for onerous
reach a peak production of approximately 40 thousand boe/d. First oil is
■ In Gabon, we sold all of our onshore oil and gas operations and related
drilling rig contracts; $198 million related to the reassessment of deferred tax
expected in June 2018 for both Kaikias Phase 1 and Phase 2.
positions in Malaysia; and a net charge on fair value accounting of certain
■ In December, Maersk Oil, as operator, announced FID for the
commodity derivatives and gas contracts of $145 million. These charges
redevelopment of the Tyra gas field (Shell interest 36.8%) in Denmark.
were partly offset by a gain of $661 million related to the impact of a
When completed in 2022, peak production is expected to be around
strengthening Brazilian real on a deferred tax position, divestment gains of
60 thousand boe/d.
infrastructure: five Shell-operated fields (Rabi, Toucan/Robin,
Gamba/Ivinga, Koula/Damier, and Bende/M’Bassou/Totou), non-Shell-
operated interests in the Atora, Avocette, Coucal, and Tsiengui West
fields, and the associated infrastructure of the onshore pipeline system from
Rabi to Gamba and the Gamba Southern export terminal.
$645 million, reported in interest and other income, and a credit of
■ In January 2018, we announced the FID for the redevelopment of the
■ In the USA, we sold approximately 5,300 acres and associated producing
$103 million reflecting a statutory tax rate reduction in the UK.
Excluding the net charges described above, segment earnings in 2017 were
$3,091 million compared with a loss of $2,704 million in 2016. Earnings
benefited from higher realised oil and gas prices (around $3,700 million),
lower taxes (around $1,480 million), mainly related to the movements in
various deferred tax positions, and lower depreciation (around $800 million),
mainly related to assets classified as held for sale and divestments. These
impacts were partly offset by lower production volumes mainly due to
divestments (around $140 million) and higher well write-offs (around
$100 million).
EARNINGS 2016-2015
following its acquisition.
BG was consolidated within Shell’s results with effect from February 2016,
Segment earnings in 2016 were a loss of $3,674 million, which included a
net charge of $970 million as described on page 31 and above.
Segment earnings in 2015 were a loss of $8,833 million, which included a
net charge of $6,578 million. The net charge included $4,616 million
related to impairments, redundancy and restructuring, and other items
associated with the decision to cease Alaska drilling activities and the
Carmon Creek project in Canada. The net charge also reflected other
impairment charges of $3,466 million and a charge of $463 million related
to the impact of a weakening Brazilian real on a deferred tax position. These
charges were partly offset by gains on divestments of $1,603 million and a
credit of $604 million, reflecting a statutory tax rate reduction in the UK.
Excluding these net charges, segment earnings in 2016 were a loss of
$2,704 million compared with a loss of $2,255 million in 2015, principally
as a result of lower oil and gas prices, and higher depreciation partly offset
by higher production volumes, mainly due to the acquisition of BG.
CAPITAL INVESTMENT
Capital investment in 2017 was $13.6 billion, compared with $47.5 billion
in 2016. Capital investment in 2017 included $1.5 billion related to the
acquisition of a 50% interest in Marathon Oil Canada Corporation (MOCC),
while 2016 included $31.1 billion related to the acquisition of BG. Organic
capital investment was $4.1 billion lower than in 2016, reflecting our
continuing efforts to curtail spending by reducing the number of new
investment decisions and pursuing lower-cost development solutions.
DIVESTMENTS
Divestments in 2017 were $11.5 billion, compared with $1.7 billion in
2016. Divestments in 2017 were mainly the sale of our oil sands and in-situ
interests in Canada, a package of UK North Sea assets, our onshore assets
in Gabon, and assets in the Delaware Permian Basin in the USA.
PORTFOLIO AND BUSINESS DEVELOPMENT
We took the following key portfolio decisions:
■ In February 2017, we took the final investment decision (FID) to execute
Phase 1 of the Kaikias deep-water project in the USA, and Phase 2 was
approved in April 2017. Kaikias (Shell interest 80%) is a subsea tie-back
to the Shell-operated Ursa platform. Phase 1 will include three wells and
Phase 2 will add an additional well, which collectively are expected to
Penguins oil and gas field (Shell interest 50%) in the UK North Sea. The
decision authorises the construction of a floating production, storage and
offloading (FPSO) vessel, which is expected to have a peak production
(100%) of around 45 thousand boe/d.
We achieved the following operational milestones in 2017:
■ In Brazil, we announced first production at the Lula South deep-water
development (Shell interest 100%) via FPSO P66 in the Brazilian pre-salt
block of the Santos Basin.
■ Also in Brazil, together with our partners, we won 35-year production-sharing
contracts for three pre-salt exploration blocks in the Santos Basin. Two blocks
are adjacent to the Gato do Mato field (Shell interest 80% as operator) and
the non-Shell-operated Sapinhoá field (Shell interest 30%), where Shell is
already present, and the third is Alto Cabo Frio West (Shell interest 55%
as operator).
■ Also in Brazil, together with our partners, we announced the start of
production testing at the Libra field FPSO in the Santos Basin. Petrobras,
the operator, announced that the Libra consortium (Shell interest 20%) had
submitted the declaration of commerciality and signed a contract to charter
the first production FPSO of the north-west block of Libra, now called Mero.
The FPSO is expected to have a capacity of 180 thousand boe/d and
production is scheduled to start in 2021.
■ In Nigeria, we announced first production at Phase 2 of the Gbaran-Ubie
integrated oil and gas development (Shell interest 30%) in the Niger Delta
region. Expected peak production is around 175 thousand boe/d.
■ In the UK, the non-Shell-operated Schiehallion redevelopment (Shell interest
approximately 45%) reached first production.
■ In the USA, we purchased the Turritella FPSO for the Stones deep-water
development in the Gulf of Mexico. The FPSO has a daily production
capacity of approximately 60 thousand barrels of oil and 15 million
standard cubic feet of natural gas.
In January 2018, we won nine exploration blocks in the deep-water bid
round in Mexico; four blocks on our own, four with our partner Qatar
Petroleum International Limited, and one with our partner Pemex Exploración y
Producción. The total area of these nine blocks is 18,996 square kilometres.
We will be the operator of all nine blocks.
Also in January 2018, we announced one of our largest US Gulf of Mexico
exploration finds in the past decade from the Whale deep-water well. Whale
is operated by Shell (60%) and co-owned by Chevron U.S.A. Inc. (40%).
It was discovered in the Alaminos Canyon Block 772, adjacent to the Shell-
operated Silvertip field and approximately 16 kilometres from the Shell-
operated Perdido platform. Evaluation of the discovery is ongoing.
We continued to divest selected assets during 2017, including:
■ In Canada, we sold all of our in-situ and undeveloped oil sands interests
and our 60% interest in the Athabasca Oil Sands Project (AOSP).
Separately we acquired a 50% interest in MOCC, which holds a 20%
interest in the AOSP.
■ In the UK, we sold a package of North Sea assets in November. This
consisted of our interests in the Buzzard, Beryl, Bressay, Elgin-Franklin, J-
Area, Everest, Lomond and Erskine fields and the Greater Armada cluster,
and a 10% interest in the Schiehallion field.
assets in the East Haley area of the Delaware Permian Basin in West
Texas.
In Ireland, we reached an agreement with CPP Investment Board Europe
S.A.R.L., a subsidiary of Canada Pension Plan Investment Board, to sell our
45% interest in the Corrib gas project. The transaction, which represents
Shell’s exit from the upstream business in Ireland, is subject to partner and
regulatory approval and is expected to conclude in the second quarter of
2018.
BUSINESS AND PROPERTY
Our subsidiaries, joint ventures and associates are involved in all aspects of
upstream activities, including matters such as land tenure, entitlement to
produced hydrocarbons, production rates, royalties, pricing, environmental
protection, social impact, exports, taxes and foreign exchange.
The conditions of the leases, licences and contracts under which oil and gas
interests are held vary from country to country. In almost all cases outside
North America, the legal agreements are generally granted by, or entered
into with, a government, state-owned company or government-run oil and gas
company, and the exploration risk usually rests with the independent oil and
gas company. In North America, these agreements may also be with private
parties that own mineral rights. Of these agreements, the following are most
relevant to our interests:
■ Licences (or concessions), which entitle the holder to explore for
hydrocarbons and exploit any commercial discoveries. Under a licence,
the holder bears the risk of exploration, development and production
activities, and is responsible for financing these activities. In principle, the
licence holder is entitled to the totality of production less any royalties in
kind. The government, state-owned company or government-run oil and gas
company may sometimes enter into a joint arrangement as a participant
sharing the rights and obligations of the licence but usually without sharing
the exploration risk. In a few cases, the state-owned company, government-
run oil and gas company or agency has an option to purchase a certain
share of production.
■ Lease agreements, which are typically used in North America and are usually
governed by terms similar to licences. Participants may include governments
or private entities, and royalties are either paid in cash or in kind.
■ Production-sharing contracts (PSCs) entered into with a government, state-
owned company or government-run oil and gas company. PSCs generally
oblige the independent oil and gas company, as contractor, to provide all
the financing and bear the risk of exploration, development and production
activities in exchange for a share of the production. Usually, this share
consists of a fixed or variable part that is reserved for the recovery of the
contractor’s cost (cost oil). The remaining production is split with the
government, state-owned company or government-run oil and gas
company on a fixed or volume/revenue-dependent basis. In some cases,
the government, state-owned company or government-run oil and gas
company will participate in the rights and obligations of the contractor and
will share in the costs of development and production. Such participation
can be across the venture or on a field-by-field basis. Additionally, as the
price of oil or gas increases above certain predetermined levels, the
independent oil and gas company’s entitlement share of production
normally decreases, and vice versa. Accordingly, its interest in a project
may not be the same as its entitlement.
EUROPE
Denmark
We have a non-operating interest in a producing concession in Denmark
(Shell interest 36.8%), which was granted in 1962 and expires in 2042.
The Danish government is one of our partners with a 20% interest.
In December 2017, the FID for the Tyra redevelopment project was taken to
ensure continued production from Denmark’s largest gas field.
Ireland
In July 2017, we agreed to sell our 45% interest in the Corrib gas project.
The transaction is expected to be completed in the second quarter of 2018.
Italy
We have a 39.23% interest in the Val d’Agri producing concession,
operated by ENI.
We also have a 25% interest in the Tempa Rossa concession operated by
Total. The Tempa Rossa field is under development and first oil is expected
in 2018.
Netherlands
Shell and ExxonMobil are 50:50 shareholders in Nederlandse Aardolie
Maatschappij B.V. (NAM). An important part of NAM’s gas production
comes from the onshore Groningen gas field, in which EBN, a Dutch
government entity, has a 40% interest and NAM a 60% interest.
Production from the Groningen field induces earthquakes that cause damage
to houses and other structures in the region leading to complaints from the
local community. NAM is working with the Dutch government and
stakeholders to fulfil its commitments to the residents of the area, including the
payment of all earthquake related cost. In addition, since 2013, the Dutch
Minister of Economic Affairs and Climate Policy (the Minister) has set an
annual production level for the Groningen field taking into account all
interests, including that of the safety of the residents, the security of supply of
the domestic gas market and the supply commitments to offtakers in EU
member states. Production is capped at 21.6 billion cubic metres for the
current gas year ending September 2018.
In January 2018, an earthquake occurred that triggered the need for
additional measures. The Dutch Mining Regulator has advised the Minister to
further reduce the annual production from the Groningen field to a level of
approximately 12 billion cubic metres. Before the end of September 2018,
the Minister will take a decision on the production level for the next gas year
based on all interests at stake. The level for the gas year ending September
2019 is expected to be lower than the current level.
Apart from production reductions, a variety of measures have been taken by
NAM, the Minister and the government, including an in-depth study and
measuring programme (both sub-surface and above surface), the issuance of
specific building regulations and the establishment of a damage claims
handling process under government supervision.
The Dutch government and the shareholders in NAM are in discussions
regarding the future of their cooperation in production from the Groningen
field. See “Risk factors” on page 14.
NAM also has a 60% interest in the Schoonebeek oil field, and operates a
significant number of other onshore gas fields and offshore gas fields in the
North Sea.
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upstream Continued
Norway
We are a partner in 38 production licences on the Norwegian continental
shelf. We are the operator in 17 of these, of which four are producing: the
Draugen oil field (Shell interest 44.6%), the Gaupe field (Shell interest 60%),
the Knarr field (Shell interest 45%), and the Ormen Lange gas field (Shell
interest 17.8%). We have interests in the producing fields Troll, Gjøa,
Kvitebjørn, Sindre and Valemon, where we are not the operator.
UK
We operate a significant number of our interests on the UK continental shelf
on behalf of a 50:50 joint arrangement with ExxonMobil. In addition to our
oil and gas production from North Sea fields, we have various interests in the
Atlantic Margin area where we are not the operator, principally in the West
of Shetland area (Clair, Shell interest approximately 28%, and Schiehallion,
Shell interest approximately 45%).
In November 2017, we sold our interests in the UK North Sea assets
Buzzard, Beryl, Bressay, Elgin-Franklin, J-Area, Everest, Lomond and Erskine
fields and the Greater Armada cluster, as well as a 10% interest in
Schiehallion.
In January 2018, we announced the FID for the redevelopment of the
Penguins oil and gas field (Shell interest 50%) in the UK North Sea.
Discovered in 1974, the field was first developed in 2002. The decision
authorises the construction of an FPSO, the first new manned installation for
Shell in the northern North Sea in almost 30 years. The FPSO is expected to
have a peak production (100%) of around 45 thousand boe/d. The field is
in 165 metres of water, approximately 240 kilometres north east of the
Shetland Islands.
Rest of Europe
We also have interests in Albania, Bulgaria, Cyprus, Germany
and Greenland.
ASIA (INCLUDING THE MIDDLE EAST AND RUSSIA)
Brunei
Shell and the Brunei government are 50:50 shareholders in Brunei Shell
Petroleum Company Sendirian Berhad (BSP). BSP has long-term oil and gas
concession rights onshore and offshore Brunei, and sells most of its gas
production to Brunei LNG Sendirian Berhad (see “Integrated Gas” on
page 26), with the remainder (approximately 13% in 2017) sold in the
domestic market.
In April 2017, BSP and the government of Brunei announced an exploration
success in the Lumut area, with the Layang-Layang well discovery.
In addition to our interest in BSP, we are the operator of the Block A
concession (Shell interest 53.9%), which is under exploration and
development, and the operator of exploration Block Q (Shell interest 50%).
We have a 35% non-operating interest in the Block B concession, where gas
and condensate are produced from the Maharaja Lela field.
We also have non-operating interests in deep-water exploration Block CA-2
(Shell interest 12.5%) and in exploration Block N (Shell interest 50%), both
under PSCs.
We also have a 44% interest in the Basrah Gas Company, which gathers,
treats and processes associated gas produced from the Rumaila, West Qurna
1 and Zubair fields that was previously being flared. The processed gas and
associated products, such as condensate and liquefied petroleum gas (LPG),
are sold mainly to the domestic market and surplus condensate and LPG are
exported. In 2017, Basrah Gas processed on average around 700 million
standard cubic feet per day of associated gas into dry gas, condensate
and LPG.
We have a 45% interest in the Majnoon oil field that we operate under a
development and production services contract. In September 2017, the Iraqi
government and Shell announced that we will exit the Majnoon development
and production services contract and hand over the operations to the Iraqi
government or its nominee.
Kazakhstan
We are the joint operator of the onshore Karachaganak oil and condensate
field (Shell interest 29.25%), where we have a licence to the end of 2037.
Karachaganak produced around 393 thousand boe/d, on a 100% basis,
in 2017.
We have a 16.8% interest in the North Caspian Sea Production Sharing
Agreement which covers, among others, the Kashagan field in the Kazakh
sector of the Caspian Sea. The North Caspian Operating Company is the
operator. This shallow-water field covers an area of approximately
3,400 square kilometres. Phase 1 development of the field is expected to
lead to plateau oil production capacity of about 370 thousand b/d by
2019, on a 100% basis, with the possibility of increases with additional
phases of development. Production started in 2016.
We also have an interest of 55% in the Pearls PSC in the Kazakh sector of
the Caspian Sea. It includes two oil discoveries, Auezov and Khazar. The
Pearls PSC acreage decreased from around 900 square kilometres to around
520 in 2017, due to relinquishment of the Naryn and Tulpar licences, which
were no longer deemed economically viable.
We also have a 7.43% interest in Caspian Pipeline Consortium, which owns
and operates an oil pipeline running from the Caspian Sea to the Black Sea
across parts of Kazakhstan and Russia.
Malaysia
We explore for and produce oil and gas offshore Sabah and Sarawak under
17 PSCs, in which our interests range from 20% to 75%. This includes the
SK319 PSC which expired at the end of 2017 and for which we have
applied for an extension of the exploration period.
Offshore Sabah, we operate five producing oil fields (Shell interests ranging
from 29% to 50%). These include the Gumusut-Kakap deep-water field (Shell
interest 29%), where production is via a dedicated floating production
system, and the Malikai deep-water field (Shell interest 35%). We also have
a 21% interest in the Siakap North-Petai deep-water field and a 30% interest
in the Kebabangan field, both operated by third parties.
In 2017, we acquired a 25.1% non-operating interest in Block N.
Iran
Shell transactions with Iran are disclosed separately. See “Section 13(r) of the
US Securities Exchange Act of 1934 Disclosure” on page 224.
In 2016, we agreed to sell our 50% interest in the 2011 North Sabah EOR
Production Sharing Contract. This transaction is expected to complete by the
end of March 2018.
Iraq
We have a 20% interest in the development and production services contract
for the West Qurna 1 field, which is operated by ExxonMobil. This interest is
subject to an ongoing sales process.
Offshore Sarawak, we are the operator of 12 producing gas fields (Shell
Onshore
interests ranging from 37.5% to 50%). The M3S field (Shell interest 70%) has
The Shell Petroleum Development Company of Nigeria Limited (SPDC) is the
reached the end of its life and will be abandoned. Nearly all of the gas
operator of a joint arrangement (Shell interest 30%) that has 17 Niger Delta
produced offshore Sarawak is supplied to Malaysia LNG in Bintulu and to
onshore oil mining leases (OML), which expire in 2019; the renewal
our gas-to-liquids plant in Bintulu. See “Integrated Gas” on page 26.
application process has commenced. Of the Nigeria onshore proved
reserves, 89 million boe are expected to be produced before the expiry of
We also have a 40% interest in the 2011 Baram Delta EOR PSC and a 50%
the current licences, and 450 million boe beyond. To provide funding,
interest in Block SK-307. Additionally, we have interests in four exploration
modified carry agreements and alternative funding arrangements are in place
and development PSCs: SK318, SK319, SK320 and SK408.
for certain key projects and are being successfully implemented.
Oman
In 2017, we announced first production at Phase 2 of the Gbaran-Ubie
We have a 34% interest in Petroleum Development Oman (PDO); the Omani
integrated oil and gas development (Shell interest 30%) in the Niger Delta
government has a 60% interest. PDO is the operator of more than 160 oil
region. Expected peak production is around 175 thousand boe/d.
fields, mainly located in central and southern Oman, over an area of
85,823 square kilometres. The concession expires in 2044.
SPDC supplies gas to Nigeria LNG Ltd (see “Integrated Gas” on page 27)
We also have a 17% interest in the Mukhaizna oil field.
mainly through its Gbaran-Ubie and Soku projects.
Offshore
United Arab Emirates
Our main offshore deep-water activities are carried out by Shell Nigeria
In Abu Dhabi, we have a 15% interest in the licence of ADNOC Gas
Exploration and Production Company Limited (SNEPCO, Shell interest 100%),
Processing (previously named Abu Dhabi Gas Industries Limited, or GASCO),
which has interests in four deep-water blocks, under PSC terms, in which
which expires in 2028. ADNOC Gas Processing exports propane, butane
production is via two FPSOs – Bonga and Erha. SNEPCO operates OMLs
and heavier-liquid hydrocarbons, which it extracts from the wet gas
118 (including the Bonga field FPSO, Shell interest 55%) and 135 (Bolia and
associated with the oil produced by ADNOC Onshore (previously named
Doro, Shell interest 55%) and has a 43.75% non-operating interest in OML
Abu Dhabi Company for Onshore Oil Operations, or ADCO).
133 (including the Erha FPSO) and a 50% non-operating interest in oil
prospecting licence (OPL) 245 (Zabazaba, Etan).
Rest of Asia
AFRICA
Egypt
We also have interests in Jordan, Kuwait, Mongolia, Myanmar,
Authorities in various countries are investigating our investment in Nigerian oil
the Philippines, State of Palestine and Turkey.
block OPL 245 and the 2011 settlement of litigation pertaining to that block.
See Note 25 to the “Consolidated Financial Statements” on pages 175-176.
SNEPCO also has an approximate 43% interest in the Bonga South
We have a 50% interest in the Badr Petroleum Company (BAPETCO), a self-
operated joint venture between Shell and the Egyptian General Petroleum
Corporation (EGPC). BAPETCO onshore operations are in the Western Desert
West/Aparo development via its 55% interest in OML 118. Following the
decision to delay the Bonga South West/Aparo project, a reframing exercise
is under way to make this project economically viable in the current business
where we have an interest in nine oil and gas producing development leases,
environment. FID is not expected before 2019.
as well as four exploration concessions (North East Obaiyed, North Matrouh,
North East Alam El Shawish and North Umbaraka).
We have interests in two gas-producing areas offshore the Nile Delta. We
have a 40% interest in the Rashid Petroleum Company, a self-operated joint
venture between Shell, EGPC and Edison, which operates the Rosetta
concession (Shell interest 80%).
We also have a 25% interest in the Burullus Gas Company (Burullus), a self-
operated joint venture between Shell, EGPC and PETRONAS. Burullus
operates the West Delta Deep Marine concession (Shell interest 50%), which
supplies gas to both the domestic market and the Egyptian LNG plant (see
“Integrated Gas” on page 27).
We also have a 60% interest in the development rights over the Harmattan
Deep discovery and in the Notus discovery offshore the Nile Delta.
In October 2017, we sold our interests in eight onshore mining concessions
and related infrastructure. We continue to hold 75% interests in Shell-operated
Gabon deep-water exploration licences.
Gabon
Nigeria
Our share of production, onshore and offshore, in Nigeria was
266 thousand boe/d in 2017, compared with 258 thousand boe/d in
2016. Security issues, sabotage and crude oil theft in the Niger Delta
continued to be significant challenges in 2017.
SPDC also has three shallow-water licences (OMLs 74, 77 and 79) and a
40% interest in the non-Shell-operated Sunlink joint venture that has one
shallow-water licence (OML 144); all four OMLs expire in 2034.
In our Nigerian operations, we face various risks and adverse conditions
which could have a material adverse effect on our operational performance,
earnings, cash flows and financial condition (see “Risk factors” on page 14).
There are limitations to the extent to which we can mitigate these risks. We
carry out regular portfolio assessments to remain a competitive player in
Nigeria for the long term. We support the Nigerian government’s efforts to
improve the efficiency, functionality and domestic benefits of Nigeria’s oil and
gas industry, and we monitor legislative developments. We monitor the
security situation and liaise with host communities, governmental and non-
governmental organisations to help promote peace and safe operations. We
continue to provide transparency of spills management and reporting, along
with our deployment of oil-spill response capability and technology. We
execute a maintenance strategy to support sustainable equipment reliability,
and have implemented a multi-year programme to reduce routine flaring of
associated gas. See “Climate change and energy transition” on page 66.
Rest of Africa
and Tunisia.
We also have interests in Algeria, Kenya, Namibia, South Africa, Tanzania
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Norway
We also have a 44% interest in the Basrah Gas Company, which gathers,
We are a partner in 38 production licences on the Norwegian continental
treats and processes associated gas produced from the Rumaila, West Qurna
shelf. We are the operator in 17 of these, of which four are producing: the
1 and Zubair fields that was previously being flared. The processed gas and
Draugen oil field (Shell interest 44.6%), the Gaupe field (Shell interest 60%),
associated products, such as condensate and liquefied petroleum gas (LPG),
the Knarr field (Shell interest 45%), and the Ormen Lange gas field (Shell
interest 17.8%). We have interests in the producing fields Troll, Gjøa,
Kvitebjørn, Sindre and Valemon, where we are not the operator.
are sold mainly to the domestic market and surplus condensate and LPG are
exported. In 2017, Basrah Gas processed on average around 700 million
standard cubic feet per day of associated gas into dry gas, condensate
UK
We operate a significant number of our interests on the UK continental shelf
on behalf of a 50:50 joint arrangement with ExxonMobil. In addition to our
oil and gas production from North Sea fields, we have various interests in the
Atlantic Margin area where we are not the operator, principally in the West
of Shetland area (Clair, Shell interest approximately 28%, and Schiehallion,
Shell interest approximately 45%).
We have a 45% interest in the Majnoon oil field that we operate under a
development and production services contract. In September 2017, the Iraqi
government and Shell announced that we will exit the Majnoon development
and production services contract and hand over the operations to the Iraqi
government or its nominee.
In November 2017, we sold our interests in the UK North Sea assets
Buzzard, Beryl, Bressay, Elgin-Franklin, J-Area, Everest, Lomond and Erskine
fields and the Greater Armada cluster, as well as a 10% interest in
Schiehallion.
We are the joint operator of the onshore Karachaganak oil and condensate
field (Shell interest 29.25%), where we have a licence to the end of 2037.
Karachaganak produced around 393 thousand boe/d, on a 100% basis,
and LPG.
Kazakhstan
in 2017.
In January 2018, we announced the FID for the redevelopment of the
Penguins oil and gas field (Shell interest 50%) in the UK North Sea.
Discovered in 1974, the field was first developed in 2002. The decision
authorises the construction of an FPSO, the first new manned installation for
Shell in the northern North Sea in almost 30 years. The FPSO is expected to
have a peak production (100%) of around 45 thousand boe/d. The field is
in 165 metres of water, approximately 240 kilometres north east of the
Shetland Islands.
Rest of Europe
and Greenland.
Brunei
We also have interests in Albania, Bulgaria, Cyprus, Germany
ASIA (INCLUDING THE MIDDLE EAST AND RUSSIA)
Shell and the Brunei government are 50:50 shareholders in Brunei Shell
Petroleum Company Sendirian Berhad (BSP). BSP has long-term oil and gas
concession rights onshore and offshore Brunei, and sells most of its gas
production to Brunei LNG Sendirian Berhad (see “Integrated Gas” on
page 26), with the remainder (approximately 13% in 2017) sold in the
domestic market.
In April 2017, BSP and the government of Brunei announced an exploration
success in the Lumut area, with the Layang-Layang well discovery.
In addition to our interest in BSP, we are the operator of the Block A
concession (Shell interest 53.9%), which is under exploration and
development, and the operator of exploration Block Q (Shell interest 50%).
We have a 35% non-operating interest in the Block B concession, where gas
and condensate are produced from the Maharaja Lela field.
We also have non-operating interests in deep-water exploration Block CA-2
(Shell interest 12.5%) and in exploration Block N (Shell interest 50%), both
We have a 16.8% interest in the North Caspian Sea Production Sharing
Agreement which covers, among others, the Kashagan field in the Kazakh
sector of the Caspian Sea. The North Caspian Operating Company is the
operator. This shallow-water field covers an area of approximately
3,400 square kilometres. Phase 1 development of the field is expected to
lead to plateau oil production capacity of about 370 thousand b/d by
2019, on a 100% basis, with the possibility of increases with additional
phases of development. Production started in 2016.
We also have an interest of 55% in the Pearls PSC in the Kazakh sector of
the Caspian Sea. It includes two oil discoveries, Auezov and Khazar. The
Pearls PSC acreage decreased from around 900 square kilometres to around
520 in 2017, due to relinquishment of the Naryn and Tulpar licences, which
were no longer deemed economically viable.
We also have a 7.43% interest in Caspian Pipeline Consortium, which owns
and operates an oil pipeline running from the Caspian Sea to the Black Sea
across parts of Kazakhstan and Russia.
Malaysia
We explore for and produce oil and gas offshore Sabah and Sarawak under
17 PSCs, in which our interests range from 20% to 75%. This includes the
SK319 PSC which expired at the end of 2017 and for which we have
applied for an extension of the exploration period.
Offshore Sabah, we operate five producing oil fields (Shell interests ranging
from 29% to 50%). These include the Gumusut-Kakap deep-water field (Shell
interest 29%), where production is via a dedicated floating production
system, and the Malikai deep-water field (Shell interest 35%). We also have
a 21% interest in the Siakap North-Petai deep-water field and a 30% interest
in the Kebabangan field, both operated by third parties.
In 2017, we acquired a 25.1% non-operating interest in Block N.
In 2016, we agreed to sell our 50% interest in the 2011 North Sabah EOR
Production Sharing Contract. This transaction is expected to complete by the
under PSCs.
Iran
Iraq
Shell transactions with Iran are disclosed separately. See “Section 13(r) of the
US Securities Exchange Act of 1934 Disclosure” on page 224.
end of March 2018.
We have a 20% interest in the development and production services contract
for the West Qurna 1 field, which is operated by ExxonMobil. This interest is
subject to an ongoing sales process.
Offshore Sarawak, we are the operator of 12 producing gas fields (Shell
interests ranging from 37.5% to 50%). The M3S field (Shell interest 70%) has
reached the end of its life and will be abandoned. Nearly all of the gas
produced offshore Sarawak is supplied to Malaysia LNG in Bintulu and to
our gas-to-liquids plant in Bintulu. See “Integrated Gas” on page 26.
We also have a 40% interest in the 2011 Baram Delta EOR PSC and a 50%
interest in Block SK-307. Additionally, we have interests in four exploration
and development PSCs: SK318, SK319, SK320 and SK408.
Oman
We have a 34% interest in Petroleum Development Oman (PDO); the Omani
government has a 60% interest. PDO is the operator of more than 160 oil
fields, mainly located in central and southern Oman, over an area of
85,823 square kilometres. The concession expires in 2044.
We also have a 17% interest in the Mukhaizna oil field.
United Arab Emirates
In Abu Dhabi, we have a 15% interest in the licence of ADNOC Gas
Processing (previously named Abu Dhabi Gas Industries Limited, or GASCO),
which expires in 2028. ADNOC Gas Processing exports propane, butane
and heavier-liquid hydrocarbons, which it extracts from the wet gas
associated with the oil produced by ADNOC Onshore (previously named
Abu Dhabi Company for Onshore Oil Operations, or ADCO).
Rest of Asia
We also have interests in Jordan, Kuwait, Mongolia, Myanmar,
the Philippines, State of Palestine and Turkey.
AFRICA
Egypt
We have a 50% interest in the Badr Petroleum Company (BAPETCO), a self-
operated joint venture between Shell and the Egyptian General Petroleum
Corporation (EGPC). BAPETCO onshore operations are in the Western Desert
where we have an interest in nine oil and gas producing development leases,
as well as four exploration concessions (North East Obaiyed, North Matrouh,
North East Alam El Shawish and North Umbaraka).
We have interests in two gas-producing areas offshore the Nile Delta. We
have a 40% interest in the Rashid Petroleum Company, a self-operated joint
venture between Shell, EGPC and Edison, which operates the Rosetta
concession (Shell interest 80%).
We also have a 25% interest in the Burullus Gas Company (Burullus), a self-
operated joint venture between Shell, EGPC and PETRONAS. Burullus
operates the West Delta Deep Marine concession (Shell interest 50%), which
supplies gas to both the domestic market and the Egyptian LNG plant (see
“Integrated Gas” on page 27).
We also have a 60% interest in the development rights over the Harmattan
Deep discovery and in the Notus discovery offshore the Nile Delta.
Gabon
In October 2017, we sold our interests in eight onshore mining concessions
and related infrastructure. We continue to hold 75% interests in Shell-operated
Gabon deep-water exploration licences.
Nigeria
Our share of production, onshore and offshore, in Nigeria was
266 thousand boe/d in 2017, compared with 258 thousand boe/d in
2016. Security issues, sabotage and crude oil theft in the Niger Delta
continued to be significant challenges in 2017.
Onshore
The Shell Petroleum Development Company of Nigeria Limited (SPDC) is the
operator of a joint arrangement (Shell interest 30%) that has 17 Niger Delta
onshore oil mining leases (OML), which expire in 2019; the renewal
application process has commenced. Of the Nigeria onshore proved
reserves, 89 million boe are expected to be produced before the expiry of
the current licences, and 450 million boe beyond. To provide funding,
modified carry agreements and alternative funding arrangements are in place
for certain key projects and are being successfully implemented.
In 2017, we announced first production at Phase 2 of the Gbaran-Ubie
integrated oil and gas development (Shell interest 30%) in the Niger Delta
region. Expected peak production is around 175 thousand boe/d.
SPDC supplies gas to Nigeria LNG Ltd (see “Integrated Gas” on page 27)
mainly through its Gbaran-Ubie and Soku projects.
Offshore
Our main offshore deep-water activities are carried out by Shell Nigeria
Exploration and Production Company Limited (SNEPCO, Shell interest 100%),
which has interests in four deep-water blocks, under PSC terms, in which
production is via two FPSOs – Bonga and Erha. SNEPCO operates OMLs
118 (including the Bonga field FPSO, Shell interest 55%) and 135 (Bolia and
Doro, Shell interest 55%) and has a 43.75% non-operating interest in OML
133 (including the Erha FPSO) and a 50% non-operating interest in oil
prospecting licence (OPL) 245 (Zabazaba, Etan).
Authorities in various countries are investigating our investment in Nigerian oil
block OPL 245 and the 2011 settlement of litigation pertaining to that block.
See Note 25 to the “Consolidated Financial Statements” on pages 175-176.
SNEPCO also has an approximate 43% interest in the Bonga South
West/Aparo development via its 55% interest in OML 118. Following the
decision to delay the Bonga South West/Aparo project, a reframing exercise
is under way to make this project economically viable in the current business
environment. FID is not expected before 2019.
SPDC also has three shallow-water licences (OMLs 74, 77 and 79) and a
40% interest in the non-Shell-operated Sunlink joint venture that has one
shallow-water licence (OML 144); all four OMLs expire in 2034.
In our Nigerian operations, we face various risks and adverse conditions
which could have a material adverse effect on our operational performance,
earnings, cash flows and financial condition (see “Risk factors” on page 14).
There are limitations to the extent to which we can mitigate these risks. We
carry out regular portfolio assessments to remain a competitive player in
Nigeria for the long term. We support the Nigerian government’s efforts to
improve the efficiency, functionality and domestic benefits of Nigeria’s oil and
gas industry, and we monitor legislative developments. We monitor the
security situation and liaise with host communities, governmental and non-
governmental organisations to help promote peace and safe operations. We
continue to provide transparency of spills management and reporting, along
with our deployment of oil-spill response capability and technology. We
execute a maintenance strategy to support sustainable equipment reliability,
and have implemented a multi-year programme to reduce routine flaring of
associated gas. See “Climate change and energy transition” on page 66.
Rest of Africa
We also have interests in Algeria, Kenya, Namibia, South Africa, Tanzania
and Tunisia.
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upstream Continued
NORTH AMERICA
Canada
We have approximately 1,500 mineral leases in Canada, mainly in Alberta
and British Columbia. We produce and market natural gas, natural gas
liquids, synthetic crude oil and bitumen. In addition, we have significant
exploration acreage offshore.
We are the operator of eight production hubs – Mars A, Mars B, Auger,
Perdido, Ursa, Enchilada/Salsa, Ram Powell and Stones – as well as the
West Delta 143 Processing Facilities (Shell interests ranging from 38% to
100%). We also have non-operating interests in Nakika (Shell interest 50%)
and Caesar Tonga (Shell interest 22.5%). Our operated interest in Coulomb
(Shell interest 100%) is tied into Nakika.
Shales
We have approximately 1,200 mineral leases with over 2.6 million net mineral
acres. Our position is primarily in the Duvernay play in Alberta and the Montney
play in British Columbia. Activity includes drill-to-fill of our existing infrastructure
and an investment focus on our liquid-rich shale acreage. As part of our shales
focus, we sold all of our in-situ assets in May 2017. Our share of shales
production averaged 129 thousand boe/d in 2017.
In 2017, we drilled 86 wells. We have interests in 882 productive wells.
We operate four natural gas processing and sulphur-extraction plants in
Alberta and four natural gas processing plants in British Columbia.
Bitumen and synthetic crude oil
Synthetic crude oil is produced by mining bitumen-saturated sands, extracting
the bitumen from the sands and transporting it to a processing facility where
hydrogen is added to produce a wide range of feedstocks for refineries. In May
2017, we sold all of our in-situ and undeveloped oil sands interests and our
share in the Athabasca Oil Sands Project (AOSP). Separately we acquired a
50% interest in MOCC, which holds a 20% interest in the AOSP.
Carbon capture and storage (CCS)
We operate the Quest CCS project, which captured and safely stored more
than 1 million tonnes of carbon dioxide in 2017.
Offshore
We have a 31.3% interest in the Sable Offshore Energy project, a natural-
gas complex off the east coast of Canada, and other acreages in deep-water
offshore Nova Scotia and Newfoundland. We have relinquished all licences
for the Shelburne exploration project offshore Nova Scotia. We have a
number of exploration licences off the west coast of British Columbia and in
the Mackenzie Delta in the Northwest Territories.
USA
We have nearly 32,000 mineral leases in the USA. We produce oil and
gas in deep water in the Gulf of Mexico, heavy oil in California and oil and
gas from shale in Pennsylvania, Texas and Louisiana. The majority of our oil
and gas production interests are acquired under leases granted by the owner
of the minerals underlying the relevant acreage, including many leases for
federal onshore and offshore tracts. Such leases usually run on an initial fixed
term that is automatically extended by the establishment of production for as
long as production continues, subject to compliance with the terms of the
lease (including, in the case of federal leases, extensive regulations imposed
by federal law).
Gulf of Mexico
The Gulf of Mexico is our major production area in the USA and accounts for
around 57% of our oil and gas production in North America. We have an
interest in approximately 180 federal offshore production leases and our
share of production averaged 247 thousand boe/d in 2017.
In January 2018, we announced one of our largest US Gulf of Mexico
exploration finds in the past decade from the Whale deep-water well. Whale
is operated by Shell (60%) and co-owned by Chevron U.S.A. Inc. (40%).
It was discovered in the Alaminos Canyon Block 772, adjacent to the Shell-
operated Silvertip field and approximately 16 kilometres from the Shell-
operated Perdido platform. Evaluation of the discovery is ongoing.
We continue with development of the Appomattox project, with first oil
expected in 2019. We purchased the Turritella FPSO for the Stones deep-
water development. The FPSO has a daily production capacity of
approximately 60 thousand barrels of oil and 15 million standard cubic feet
of natural gas.
Kaikias (Shell interest 80%) is a subsea tie-back to the Shell-operated Ursa
platform. In 2016, we commenced the drilling campaign for Kaikias Phase
1. In February 2017, we fully sanctioned Phase 1 of the Kaikias deep-water
project and Phase 2 was approved in April 2017. Phase 1 will include three
wells and Phase 2 will add an additional well, which collectively will be
system constrained at the peak production of approximately 40 thousand
boe/d. First oil is expected in June 2018 for both Kaikias Phase 1
and Phase 2.
Shales
We have approximately 30,000 mineral leases with nearly 1.5 million net
mineral acres. Our activity is focused in the Permian Basin in West Texas and
the Marcellus and Utica plays in Pennsylvania. We also have a non-Shell-
operated interest in the Haynesville shale gas formation in Northern Louisiana.
In 2017, we drilled 153 wells. We have interests in more than 2,300
productive wells and operate four central processing facilities. The USA
represents nearly 70% of our shales proved reserves and 88% of our shales
liquids proved reserves. Our share of shales production averaged
137 thousand boe/d in 2017.
California
We have a 51.8% interest in Aera Energy LLC which operates approximately
15,000 wells in the San Joaquin Valley in California, mostly producing heavy
oil and associated gas.
Alaska
In 2017, we relinquished our last remaining federal lease in the Chukchi Sea
and have no further plans for frontier exploration offshore Alaska. With the
exception of two remaining positions in the long-established North Slope
area, we have exited all other leases. We retain a non-operating interest in
13 federal leases, operated by ENI, which was increased from 40% to 50%
at zero cost. An exploratory drilling operation for this joint venture was
permitted by ENI and is under way. We continue to evaluate our 18 state
leases at nearby Western Harrison Bay, which have geologic affinity with
recent discoveries announced by other North Slope operators.
Rest of North America
We also have interests in Honduras and Mexico.
SOUTH AMERICA
Argentina
Shales
We have more than 260,000 net mineral acres in the Vaca Muerta basin, a
liquids and gas rich play located in the Neuquén Province. We have interests
in 29 productive wells. We drilled 10 wells in 2017 in our core operated
acreage. We have 90% ownership in our operated Sierras Blancas/Cruz de
Lorena central processing facility.
Brazil
We operate several producing fields in the Campos Basin, offshore Brazil.
They consist of the Bijupirá and Salema fields (Shell interest 80%) and the
BC-10 field (Shell interest 50%).
In the Santos Basin, we have a 30% interest in the BM-S-9 concession that
operates in the Sapinhoa and Lapa fields, as well as 25% interests in the BM-
S-11 concession that operates in the Lula, Iracema, Berbigão, Sururu and
Atapú West fields. The Lula, Sapinhoa, Berbigão, Sururu and Atapú West
field accumulations are subject to unitisation agreements. Within these fields
we have 10 producing FPSOs, of which the tenth (P66) reached first oil in
2017 and is expected to ramp up to full production capacity in 2018. Four
FPSOs are expected to be brought online over the period 2018-2020 (Lula
North, Lula Extreme South, Berbigão and Atapú). A 15th FPSO has been
sanctioned, potential options for its deployment are being matured and
discussed with the operator.
We have further development and exploration leases in the Santos Basin
within the Libra (Shell interest 20%) and Gato-do-Mato BM-S-54 (Shell interest
80%) fields and have a further 20% non-Shell-operated interest in the
Sagitario BM-S-50 offshore exploration block also in the Santos Basin.
In 2017, together with our partners, we announced the start of production
testing at the Libra field FPSO. A contract was signed to charter the first
production FPSO, which is expected to have a capacity of 180 thousand
boe/d and is scheduled to start production in 2021.
We operate 10 offshore exploration blocks in the Barreirinhas Basin
(Shell interests ranging from 50% to 100%).
Together with our partners, we won three 35-year production-sharing
contracts for pre-salt blocks located in the Santos Basin. Two blocks are
adjacent to the Gato do Mato field (Shell interest 80% as operator) and the
non-Shell-operated Sapinhoá field (Shell interest 30%), where Shell is already
present, and the third is Alto Cabo Frio West (Shell interest 55% as operator).
Rest of South America
We also have interests in Colombia and Uruguay.
TRADING AND SUPPLY
We market and trade crude oil from some of our Upstream operations.
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Brazil
We operate several producing fields in the Campos Basin, offshore Brazil.
They consist of the Bijupirá and Salema fields (Shell interest 80%) and the
BC-10 field (Shell interest 50%).
In the Santos Basin, we have a 30% interest in the BM-S-9 concession that
operates in the Sapinhoa and Lapa fields, as well as 25% interests in the BM-
S-11 concession that operates in the Lula, Iracema, Berbigão, Sururu and
Atapú West fields. The Lula, Sapinhoa, Berbigão, Sururu and Atapú West
field accumulations are subject to unitisation agreements. Within these fields
we have 10 producing FPSOs, of which the tenth (P66) reached first oil in
2017 and is expected to ramp up to full production capacity in 2018. Four
FPSOs are expected to be brought online over the period 2018-2020 (Lula
North, Lula Extreme South, Berbigão and Atapú). A 15th FPSO has been
sanctioned, potential options for its deployment are being matured and
discussed with the operator.
We have further development and exploration leases in the Santos Basin
within the Libra (Shell interest 20%) and Gato-do-Mato BM-S-54 (Shell interest
80%) fields and have a further 20% non-Shell-operated interest in the
Sagitario BM-S-50 offshore exploration block also in the Santos Basin.
In 2017, together with our partners, we announced the start of production
testing at the Libra field FPSO. A contract was signed to charter the first
production FPSO, which is expected to have a capacity of 180 thousand
boe/d and is scheduled to start production in 2021.
We operate 10 offshore exploration blocks in the Barreirinhas Basin
(Shell interests ranging from 50% to 100%).
Together with our partners, we won three 35-year production-sharing
contracts for pre-salt blocks located in the Santos Basin. Two blocks are
adjacent to the Gato do Mato field (Shell interest 80% as operator) and the
non-Shell-operated Sapinhoá field (Shell interest 30%), where Shell is already
present, and the third is Alto Cabo Frio West (Shell interest 55% as operator).
We have a 51.8% interest in Aera Energy LLC which operates approximately
15,000 wells in the San Joaquin Valley in California, mostly producing heavy
Rest of South America
We also have interests in Colombia and Uruguay.
TRADING AND SUPPLY
We market and trade crude oil from some of our Upstream operations.
NORTH AMERICA
Canada
We are the operator of eight production hubs – Mars A, Mars B, Auger,
Perdido, Ursa, Enchilada/Salsa, Ram Powell and Stones – as well as the
We have approximately 1,500 mineral leases in Canada, mainly in Alberta
West Delta 143 Processing Facilities (Shell interests ranging from 38% to
and British Columbia. We produce and market natural gas, natural gas
100%). We also have non-operating interests in Nakika (Shell interest 50%)
liquids, synthetic crude oil and bitumen. In addition, we have significant
and Caesar Tonga (Shell interest 22.5%). Our operated interest in Coulomb
exploration acreage offshore.
(Shell interest 100%) is tied into Nakika.
Shales
We continue with development of the Appomattox project, with first oil
We have approximately 1,200 mineral leases with over 2.6 million net mineral
expected in 2019. We purchased the Turritella FPSO for the Stones deep-
acres. Our position is primarily in the Duvernay play in Alberta and the Montney
water development. The FPSO has a daily production capacity of
play in British Columbia. Activity includes drill-to-fill of our existing infrastructure
approximately 60 thousand barrels of oil and 15 million standard cubic feet
and an investment focus on our liquid-rich shale acreage. As part of our shales
of natural gas.
focus, we sold all of our in-situ assets in May 2017. Our share of shales
production averaged 129 thousand boe/d in 2017.
In 2017, we drilled 86 wells. We have interests in 882 productive wells.
We operate four natural gas processing and sulphur-extraction plants in
Alberta and four natural gas processing plants in British Columbia.
Bitumen and synthetic crude oil
Synthetic crude oil is produced by mining bitumen-saturated sands, extracting
the bitumen from the sands and transporting it to a processing facility where
and Phase 2.
hydrogen is added to produce a wide range of feedstocks for refineries. In May
Shales
2017, we sold all of our in-situ and undeveloped oil sands interests and our
share in the Athabasca Oil Sands Project (AOSP). Separately we acquired a
50% interest in MOCC, which holds a 20% interest in the AOSP.
Carbon capture and storage (CCS)
We operate the Quest CCS project, which captured and safely stored more
than 1 million tonnes of carbon dioxide in 2017.
Offshore
We have a 31.3% interest in the Sable Offshore Energy project, a natural-
gas complex off the east coast of Canada, and other acreages in deep-water
offshore Nova Scotia and Newfoundland. We have relinquished all licences
for the Shelburne exploration project offshore Nova Scotia. We have a
number of exploration licences off the west coast of British Columbia and in
the Mackenzie Delta in the Northwest Territories.
USA
California
oil and associated gas.
Alaska
Kaikias (Shell interest 80%) is a subsea tie-back to the Shell-operated Ursa
platform. In 2016, we commenced the drilling campaign for Kaikias Phase
1. In February 2017, we fully sanctioned Phase 1 of the Kaikias deep-water
project and Phase 2 was approved in April 2017. Phase 1 will include three
wells and Phase 2 will add an additional well, which collectively will be
system constrained at the peak production of approximately 40 thousand
boe/d. First oil is expected in June 2018 for both Kaikias Phase 1
We have approximately 30,000 mineral leases with nearly 1.5 million net
mineral acres. Our activity is focused in the Permian Basin in West Texas and
the Marcellus and Utica plays in Pennsylvania. We also have a non-Shell-
operated interest in the Haynesville shale gas formation in Northern Louisiana.
In 2017, we drilled 153 wells. We have interests in more than 2,300
productive wells and operate four central processing facilities. The USA
represents nearly 70% of our shales proved reserves and 88% of our shales
liquids proved reserves. Our share of shales production averaged
137 thousand boe/d in 2017.
We have nearly 32,000 mineral leases in the USA. We produce oil and
gas in deep water in the Gulf of Mexico, heavy oil in California and oil and
gas from shale in Pennsylvania, Texas and Louisiana. The majority of our oil
and gas production interests are acquired under leases granted by the owner
of the minerals underlying the relevant acreage, including many leases for
federal onshore and offshore tracts. Such leases usually run on an initial fixed
term that is automatically extended by the establishment of production for as
long as production continues, subject to compliance with the terms of the
lease (including, in the case of federal leases, extensive regulations imposed
In 2017, we relinquished our last remaining federal lease in the Chukchi Sea
and have no further plans for frontier exploration offshore Alaska. With the
exception of two remaining positions in the long-established North Slope
area, we have exited all other leases. We retain a non-operating interest in
13 federal leases, operated by ENI, which was increased from 40% to 50%
at zero cost. An exploratory drilling operation for this joint venture was
permitted by ENI and is under way. We continue to evaluate our 18 state
leases at nearby Western Harrison Bay, which have geologic affinity with
recent discoveries announced by other North Slope operators.
by federal law).
Gulf of Mexico
The Gulf of Mexico is our major production area in the USA and accounts for
around 57% of our oil and gas production in North America. We have an
interest in approximately 180 federal offshore production leases and our
share of production averaged 247 thousand boe/d in 2017.
SOUTH AMERICA
Argentina
Shales
Rest of North America
We also have interests in Honduras and Mexico.
In January 2018, we announced one of our largest US Gulf of Mexico
exploration finds in the past decade from the Whale deep-water well. Whale
is operated by Shell (60%) and co-owned by Chevron U.S.A. Inc. (40%).
It was discovered in the Alaminos Canyon Block 772, adjacent to the Shell-
operated Silvertip field and approximately 16 kilometres from the Shell-
operated Perdido platform. Evaluation of the discovery is ongoing.
We have more than 260,000 net mineral acres in the Vaca Muerta basin, a
liquids and gas rich play located in the Neuquén Province. We have interests
in 29 productive wells. We drilled 10 wells in 2017 in our core operated
acreage. We have 90% ownership in our operated Sierras Blancas/Cruz de
Lorena central processing facility.
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Oil and gas information
Oil and gas information
Proved developed and undeveloped reserves of Shell subsidiaries and Shell share of joint ventures and associates
Crude oil and
natural gas liquids
(million barrels)
Natural gas
(thousand million scf)
Synthetic crude oil
(million barrels)
Bitumen
(million barrels)
Total
(million boe)[A]
Shell subsidiaries
Increase/(decrease) in 2017:
Revisions and reclassifications
Improved recovery
Extensions and discoveries
Purchases and sales of minerals in place
Total before taking production into account
Production [B]
Total
At January 1, 2017
At December 31, 2017
Shell share of joint ventures and associates
Increase/(decrease) in 2017:
Revisions and reclassifications
Improved recovery
Extensions and discoveries
Total before taking production into account
Production [C]
Total
At January 1, 2017
At December 31, 2017
Total
Increase/(decrease) before taking production into account
Production
Increase/(decrease)
At January 1, 2017
At December 31, 2017
531
73
374
(62)
916
(595)
321
3,979
4,300
82
3
1
86
(36)
50
263
313
1,002
(631)
371
4,242
4,613
2,304
140
1,925
29
4,398
(3,333 )
1,065
29,259
30,324
(366 )
1
11
(354 )
(820 )
(1,174 )
11,282
10,108
4,044
(4,153 )
(109 )
40,541
40,432
(3 )
—
—
(1,328 )
(1,331 )
(34 )
(1,365 )
2,014
649
—
—
—
—
—
—
—
—
(1,331 )
(34 )
(1,365 )
2,014
649
Reserves attributable to non-controlling interest in
Shell subsidiaries at December 31, 2017
[A] Natural gas volumes are converted into oil equivalent using a factor of 5,800 standard cubic feet (scf) per barrel.
[B] Included 38 million barrels of oil equivalent (boe) consumed in operations (natural gas: 215 thousand million scf; synthetic crude oil: 1 million barrels).
[C] Included 7 million boe consumed in operations (natural gas: 41 thousand million scf).
—
2
325
2
—
—
(2 )
—
(2 )
(2 )
2
—
—
—
—
—
—
—
—
—
—
(2 )
(2 )
2
—
—
927
97
706
(1,387)
343
(1,206 )
(863)
11,040
10,177
19
3
3
25
(177)
(152)
2,208
2,056
368
(1,383)
(1,015 )
13,248
12,233
325
PROVED RESERVES
The proved oil and gas reserves of Shell subsidiaries and the Shell share of
the proved oil and gas reserves of joint ventures and associates are set out in
more detail in “Supplementary information – oil and gas (unaudited)”
on pages 179-188.
Before taking production into account, our proved reserves increased by
368 million boe in 2017. This comprised increases of 343 million boe from
Shell subsidiaries and 25 million boe from the Shell share of joint ventures and
associates.
After taking production into account, our proved reserves decreased by
1,015 million boe in 2017 to 12,233 million boe at December 31, 2017.
In order to illustrate the potential impact of increasing commodity prices on
our 2016 proved reserves base, we replaced the 2016 yearly average price
with the 2017 yearly average price in the analysis below, holding all other
variables, such as 2016 costs estimates, constant. Applying this
methodology, 487 million boe of proved reserves would have been included
in our SEC proved reserves at December 31, 2016, if the 2017 yearly
average price had been used. This positive price effect of 487 million boe
was the combined effect of an increase of 404 million boe due to a later
economic cut-off, an increase of 212 million boe due to proved undeveloped
STRATEGIC REPORT SHELL ANNUAL REPORT AND FORM 20-F 2017
38
strategic report SHELL ANNUAL REPORT AND FORM 20-F 2017
38
reserves (PUD) becoming economic, and a decrease of 129 million boe due
to a lower entitlement share as a result of the higher yearly average price.
SHELL SUBSIDIARIES
Before taking production into account, Shell subsidiaries’ proved reserves
increased by 343 million boe in 2017. This comprised increases of
916 million barrels of oil and natural gas liquids and 758 million boe of
natural gas, partly offset by a decrease of 1,331 million barrels of synthetic
crude oil. The 343 million boe increase is the net effect of a net increase of
927 million boe from revisions and reclassifications (which included a
decrease of 170 million boe from a decreased entitlement share in
production-sharing and tax/variable royalty contracts due to the higher yearly
average price); an increase of 97 million boe from improved recovery; an
increase of 706 million boe from extensions and discoveries; and a net
decrease of 1,387 million boe related to purchases and sales.
After taking into account production of 1,206 million boe (of which 38 million
boe were consumed in operations), Shell subsidiaries’ proved reserves decreased
by 863 million boe in 2017 to 10,177 million boe. Shell subsidiaries’ proved
developed reserves (PD) increased by 103 million boe to 8,180 million boe,
and PUD decreased by 966 million boe to 1,997 million boe.
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Synthetic crude oil
DELIVERY COMMITMENTS
The 343 million boe increase in Shell subsidiaries’ proved reserves before
taking production into account in 2017 included a decrease of
1,331 million barrels of synthetic crude oil. This was mainly due to sales and
purchases of minerals in place. In 2017, synthetic crude oil production was
We sell crude oil and natural gas from our producing operations under a
variety of contractual obligations. Most contracts generally commit us to sell
quantities based on production from specified properties, although some
natural gas sales contracts specify delivery of fixed and determinable
34 million barrels, of which 1 million barrels were consumed in operations.
quantities, as discussed below.
At December 31, 2017, synthetic crude oil proved reserves were
649 million barrels, all of which were PD.
Bitumen
In the past three years, we met our contractual delivery commitments, with the
notable exceptions of Brunei, Egypt and Trinidad and Tobago. In the period
2018-2020, we are contractually committed to deliver to third parties and
Bitumen activities were sold in 2017. Prior to sale, bitumen crude oil production
joint ventures and associates a total of approximately 7,250 thousand million
was 2 million barrels with minimal volumes consumed in operations.
SHELL SHARE OF JOINT VENTURES AND ASSOCIATES
scf of natural gas from our subsidiaries, joint ventures and associates. The
sales contracts contain a mixture of fixed and variable pricing formulae that
are generally referenced to the prevailing market price for crude oil, natural
Before taking production into account, the Shell share of joint ventures and
gas or other petroleum products at the time of delivery.
associates’ proved reserves increased by 25 million boe in 2017. This
comprised an increase of 86 million barrels of crude oil and natural gas liquids
In the period 2018-2020, we expect to meet our delivery commitments for
and a decrease of 61 million boe (354 thousand million scf) of natural gas.
almost all of our companies in the different countries in which we operate,
The 25 million boe increase comprises a net increase of 19 million boe from
with an estimated 80% coming from PD, 8% through the delivery of gas that
revisions and reclassifications (which included a decrease of 2 million boe from
comes available to us from paying royalties in cash, and 12% from the
a decreased entitlement share in production sharing and tax/variable royalty
development of PUD as well as other new projects and purchases.
contracts due to the higher yearly average price), and increases of 3 million
boe from improved recovery and 3 million boe from extensions and discoveries.
The key exceptions are:
After taking into account production of 177 million boe (of which 7 million
■ Egypt (with a shortfall of 445 thousand million scf of natural gas), where
boe were consumed in operations), the Shell share of joint ventures and
the diversion of gas from the offshore West Delta Deep Marine fields to
associates’ proved reserves decreased by 152 million boe to 2,056 million
domestic use is expected to continue in the near future, leaving our
boe at December 31, 2017.
commitment to deliver liquefied natural gas under force majeure; and
■ Trinidad and Tobago where PD for most fields fail the economic test at the
yearly average price for natural gas at the end of 2017. However, we
expect to cover 77% of our delivery commitments from existing developed
resource volumes, resulting in an expected true shortfall of some 130
thousand million scf.
The Shell share of joint ventures and associates’ PD increased by 40 million boe to
1,876 million boe, and PUD decreased by 192 million boe to 180 million boe.
PROVED UNDEVELOPED RESERVES
In 2017, Shell subsidiaries and the Shell share of joint ventures and
associates PUD decreased by 1,158 million boe to 2,177 million boe.
There were decreases of 627 million boe in Muskeg River Mine (Canada)
mainly due to divestment, 519 million boe across Gorgon (Australia), Lula
(Brazil) and Kashagan (Kazakhstan) mainly due to maturation to PD, and
201 million boe in Groningen (the Netherlands) mainly due to a negative
revision of compression volumes. These were partly offset by an increase of
117 million boe in the Permian (USA) mainly due to extensions and
discoveries and a net increase of 72 million boe spread across other fields.
1,566 million boe PUD volumes were matured to PD. This included
297 million boe that were matured to PD from contingent resources through
PUD as a result of project execution during the year.
PUD held for five years or more (PUD5+) at December 31, 2017, amounted
to 552 million boe, a decrease of 942 million boe compared with the end of
2016. These PUD5+ remain undeveloped because development either:
requires the installation of compression equipment and the drilling of
additional wells, which will be executed when required to support existing
gas delivery commitments (Russia), or will take longer than five years because
of the complexity and scale of the project (Australia and Kazakhstan).
The decrease in PUD5+ during 2017 was driven mainly by changes in Muskeg
River Mine, Gorgon, Groningen, and Kashagan as mentioned above.
The fields with the largest PUD5+ at December 31, 2017, were Prelude,
Gorgon and Jansz-Io (Australia), Clair (UK) and Lunskoye (Russia).
During 2017, we spent $8.8 billion on development activities related to
PUD maturation.
STRATEGIC REPORT SHELL ANNUAL REPORT AND FORM 20-F 2017
39
Oil and gas information
Proved developed and undeveloped reserves of Shell subsidiaries and Shell share of joint ventures and associates
Crude oil and
natural gas liquids
(million barrels)
(thousand million scf)
Natural gas
Synthetic crude oil
(million barrels)
Bitumen
(million barrels)
Total
(million boe)[A]
Shell subsidiaries
Increase/(decrease) in 2017:
Revisions and reclassifications
Improved recovery
Extensions and discoveries
Purchases and sales of minerals in place
Total before taking production into account
Production [B]
Total
At January 1, 2017
At December 31, 2017
Shell share of joint ventures and associates
Increase/(decrease) in 2017:
Revisions and reclassifications
Improved recovery
Extensions and discoveries
Total before taking production into account
Production [C]
Total
At January 1, 2017
At December 31, 2017
Total
Production
Increase/(decrease)
At January 1, 2017
At December 31, 2017
Increase/(decrease) before taking production into account
531
73
374
(62)
916
(595)
321
3,979
4,300
82
3
1
86
(36)
50
263
313
1,002
(631)
371
4,242
4,613
—
2,304
140
1,925
29
4,398
(3,333 )
1,065
29,259
30,324
(366 )
1
11
(354 )
(820 )
(1,174 )
11,282
10,108
4,044
(4,153 )
(109 )
40,541
40,432
(3 )
—
—
(1,328 )
(1,331 )
(34 )
(1,365 )
2,014
649
—
—
—
—
—
—
—
—
(1,331 )
(34 )
(1,365 )
2,014
649
2
—
—
(2 )
—
(2 )
(2 )
2
—
—
—
—
—
—
—
—
—
—
(2 )
(2 )
2
—
—
927
97
706
(1,387)
343
(1,206 )
(863)
11,040
10,177
19
3
3
25
(177)
(152)
2,208
2,056
368
(1,383)
(1,015 )
13,248
12,233
325
Reserves attributable to non-controlling interest in
Shell subsidiaries at December 31, 2017
2
325
[A] Natural gas volumes are converted into oil equivalent using a factor of 5,800 standard cubic feet (scf) per barrel.
[B] Included 38 million barrels of oil equivalent (boe) consumed in operations (natural gas: 215 thousand million scf; synthetic crude oil: 1 million barrels).
[C] Included 7 million boe consumed in operations (natural gas: 41 thousand million scf).
PROVED RESERVES
reserves (PUD) becoming economic, and a decrease of 129 million boe due
The proved oil and gas reserves of Shell subsidiaries and the Shell share of
to a lower entitlement share as a result of the higher yearly average price.
the proved oil and gas reserves of joint ventures and associates are set out in
more detail in “Supplementary information – oil and gas (unaudited)”
SHELL SUBSIDIARIES
on pages 179-188.
After taking production into account, our proved reserves decreased by
production-sharing and tax/variable royalty contracts due to the higher yearly
1,015 million boe in 2017 to 12,233 million boe at December 31, 2017.
average price); an increase of 97 million boe from improved recovery; an
Before taking production into account, our proved reserves increased by
368 million boe in 2017. This comprised increases of 343 million boe from
Shell subsidiaries and 25 million boe from the Shell share of joint ventures and
associates.
In order to illustrate the potential impact of increasing commodity prices on
our 2016 proved reserves base, we replaced the 2016 yearly average price
with the 2017 yearly average price in the analysis below, holding all other
variables, such as 2016 costs estimates, constant. Applying this
methodology, 487 million boe of proved reserves would have been included
in our SEC proved reserves at December 31, 2016, if the 2017 yearly
average price had been used. This positive price effect of 487 million boe
was the combined effect of an increase of 404 million boe due to a later
economic cut-off, an increase of 212 million boe due to proved undeveloped
Before taking production into account, Shell subsidiaries’ proved reserves
increased by 343 million boe in 2017. This comprised increases of
916 million barrels of oil and natural gas liquids and 758 million boe of
natural gas, partly offset by a decrease of 1,331 million barrels of synthetic
crude oil. The 343 million boe increase is the net effect of a net increase of
927 million boe from revisions and reclassifications (which included a
decrease of 170 million boe from a decreased entitlement share in
increase of 706 million boe from extensions and discoveries; and a net
decrease of 1,387 million boe related to purchases and sales.
After taking into account production of 1,206 million boe (of which 38 million
boe were consumed in operations), Shell subsidiaries’ proved reserves decreased
by 863 million boe in 2017 to 10,177 million boe. Shell subsidiaries’ proved
developed reserves (PD) increased by 103 million boe to 8,180 million boe,
and PUD decreased by 966 million boe to 1,997 million boe.
DELIVERY COMMITMENTS
We sell crude oil and natural gas from our producing operations under a
variety of contractual obligations. Most contracts generally commit us to sell
quantities based on production from specified properties, although some
natural gas sales contracts specify delivery of fixed and determinable
quantities, as discussed below.
In the past three years, we met our contractual delivery commitments, with the
notable exceptions of Brunei, Egypt and Trinidad and Tobago. In the period
2018-2020, we are contractually committed to deliver to third parties and
joint ventures and associates a total of approximately 7,250 thousand million
scf of natural gas from our subsidiaries, joint ventures and associates. The
sales contracts contain a mixture of fixed and variable pricing formulae that
are generally referenced to the prevailing market price for crude oil, natural
gas or other petroleum products at the time of delivery.
In the period 2018-2020, we expect to meet our delivery commitments for
almost all of our companies in the different countries in which we operate,
with an estimated 80% coming from PD, 8% through the delivery of gas that
comes available to us from paying royalties in cash, and 12% from the
development of PUD as well as other new projects and purchases.
The key exceptions are:
■ Egypt (with a shortfall of 445 thousand million scf of natural gas), where
the diversion of gas from the offshore West Delta Deep Marine fields to
domestic use is expected to continue in the near future, leaving our
commitment to deliver liquefied natural gas under force majeure; and
■ Trinidad and Tobago where PD for most fields fail the economic test at the
yearly average price for natural gas at the end of 2017. However, we
expect to cover 77% of our delivery commitments from existing developed
resource volumes, resulting in an expected true shortfall of some 130
thousand million scf.
Synthetic crude oil
The 343 million boe increase in Shell subsidiaries’ proved reserves before
taking production into account in 2017 included a decrease of
1,331 million barrels of synthetic crude oil. This was mainly due to sales and
purchases of minerals in place. In 2017, synthetic crude oil production was
34 million barrels, of which 1 million barrels were consumed in operations.
At December 31, 2017, synthetic crude oil proved reserves were
649 million barrels, all of which were PD.
Bitumen
Bitumen activities were sold in 2017. Prior to sale, bitumen crude oil production
was 2 million barrels with minimal volumes consumed in operations.
SHELL SHARE OF JOINT VENTURES AND ASSOCIATES
Before taking production into account, the Shell share of joint ventures and
associates’ proved reserves increased by 25 million boe in 2017. This
comprised an increase of 86 million barrels of crude oil and natural gas liquids
and a decrease of 61 million boe (354 thousand million scf) of natural gas.
The 25 million boe increase comprises a net increase of 19 million boe from
revisions and reclassifications (which included a decrease of 2 million boe from
a decreased entitlement share in production sharing and tax/variable royalty
contracts due to the higher yearly average price), and increases of 3 million
boe from improved recovery and 3 million boe from extensions and discoveries.
After taking into account production of 177 million boe (of which 7 million
boe were consumed in operations), the Shell share of joint ventures and
associates’ proved reserves decreased by 152 million boe to 2,056 million
boe at December 31, 2017.
The Shell share of joint ventures and associates’ PD increased by 40 million boe to
1,876 million boe, and PUD decreased by 192 million boe to 180 million boe.
PROVED UNDEVELOPED RESERVES
In 2017, Shell subsidiaries and the Shell share of joint ventures and
associates PUD decreased by 1,158 million boe to 2,177 million boe.
There were decreases of 627 million boe in Muskeg River Mine (Canada)
mainly due to divestment, 519 million boe across Gorgon (Australia), Lula
(Brazil) and Kashagan (Kazakhstan) mainly due to maturation to PD, and
201 million boe in Groningen (the Netherlands) mainly due to a negative
revision of compression volumes. These were partly offset by an increase of
117 million boe in the Permian (USA) mainly due to extensions and
discoveries and a net increase of 72 million boe spread across other fields.
1,566 million boe PUD volumes were matured to PD. This included
297 million boe that were matured to PD from contingent resources through
PUD as a result of project execution during the year.
PUD held for five years or more (PUD5+) at December 31, 2017, amounted
to 552 million boe, a decrease of 942 million boe compared with the end of
2016. These PUD5+ remain undeveloped because development either:
requires the installation of compression equipment and the drilling of
additional wells, which will be executed when required to support existing
gas delivery commitments (Russia), or will take longer than five years because
of the complexity and scale of the project (Australia and Kazakhstan).
The decrease in PUD5+ during 2017 was driven mainly by changes in Muskeg
River Mine, Gorgon, Groningen, and Kashagan as mentioned above.
The fields with the largest PUD5+ at December 31, 2017, were Prelude,
Gorgon and Jansz-Io (Australia), Clair (UK) and Lunskoye (Russia).
During 2017, we spent $8.8 billion on development activities related to
PUD maturation.
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oil and gas information Continued
Summary of proved oil and gas reserves of Shell subsidiaries and Shell share of joint ventures and associates
(at December 31, 2017)
LOCATION OF OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES
Location of oil and gas exploration and production activities [A] (at December 31, 2017)
Crude oil and
natural gas liquids
(million barrels)
Natural gas
(thousand million scf)
Synthetic crude oil
(million barrels)
Total
(million boe)[A]
Europe
Based on average prices for 2017
Exploration
Shell operator[B]
Development
and/or
production
Proved developed
Europe
Asia
Oceania
Africa
North America
USA
Canada
South America
Total proved developed
Proved undeveloped
Europe
Asia
Oceania
Africa
North America
USA
Canada
South America
Total proved undeveloped
Total proved developed and undeveloped
Europe
Asia
Oceania
Africa
North America
USA
Canada
South America
Total
Reserves attributable to non-controlling interest in Shell subsidiaries
[A] Natural gas volumes are converted into oil equivalent using a factor of 5,800 scf per barrel.
EXPLORATION
In 2017, we made a notable discovery in the US Gulf of Mexico, which is
being evaluated further in order to establish the extent of commercially
producible volumes (see “Upstream” on page 32). In Brazil, together with our
partners we won 35-year production-sharing contracts for three pre-salt
exploration blocks in the Santos Basin, including the new exploration block
Alto Cabo Frio West (Shell interest 55% as operator). Brunei Shell Petroleum
Company and the government of Brunei also announced exploration success
with the Layang-Layang well discovery in the Lumut area.
In 2017, we participated in 67 productive exploratory wells with proved
reserves allocated (Shell share: 52 wells). For further information, see
“Supplementary Information – oil and gas (unaudited)” on page 197.
261
1,617
46
373
569
21
651
3,538
107
166
86
90
330
1
295
1,075
368
1,783
132
463
899
22
946
4,613
—
8,033
15,735
5,045
1,493
1,652
859
1,225
34,042
192
1,051
2,952
589
917
413
276
6,390
8,225
16,786
7,997
2,082
2,569
1,272
1,501
40,432
2
—
—
—
—
—
649
—
649
—
—
—
—
—
—
—
—
—
—
—
—
—
649
—
649
325
1,646
4,330
916
630
854
818
862
10,056
140
347
595
192
488
72
343
2,177
1,786
4,677
1,511
822
1,342
890
1,205
12,233
325
In total, the net undeveloped acreage in our exploration portfolio decreased
by around 54 million acres in 2017. The largest contributions were acreage
divestments in Mongolia and South Africa.
In January 2018, we won nine exploration blocks in the deep-water bid
round in Mexico. The total area of these nine blocks (all of which we will
operate) is 18,996 square kilometres.
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Trinidad and Tobago
[A] Includes joint ventures and associates. Where a joint venture or an associate has properties outside its base country, those properties are not shown in this table.
[B] In several countries where “Shell operator” is indicated, Shell is the operator of some but not all exploration and/or production ventures.
■
UK
Asia
Albania
Bulgaria
Cyprus
Denmark
Germany
Greenland
Ireland
Italy
Netherlands
Norway
Brunei
China
India
Indonesia
Iraq
Jordan
Kazakhstan
Malaysia
Myanmar
Oman
Philippines
Qatar
Russia
State of Palestine
Thailand
Turkey
Oceania
Australia
New Zealand
Africa
Algeria
Egypt
Gabon
Kenya
Namibia
Nigeria
Tanzania
Tunisia
Canada
Mexico
USA
North America
South America
Argentina
Bolivia
Brazil
Colombia
Uruguay
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
(at December 31, 2017)
Proved developed
Total proved developed
Proved undeveloped
Europe
Asia
Oceania
Africa
North America
USA
Canada
South America
Europe
Asia
Oceania
Africa
North America
USA
Canada
South America
Europe
Asia
Oceania
Africa
North America
USA
Canada
South America
Total
Total proved undeveloped
Total proved developed and undeveloped
Crude oil and
natural gas liquids
(million barrels)
(thousand million scf)
Natural gas
Synthetic crude oil
(million barrels)
Total
(million boe)[A]
Based on average prices for 2017
261
1,617
46
373
569
21
651
3,538
107
166
86
90
330
1
295
1,075
368
1,783
132
463
899
22
946
4,613
—
8,033
15,735
5,045
1,493
1,652
859
1,225
34,042
192
1,051
2,952
589
917
413
276
6,390
8,225
16,786
7,997
2,082
2,569
1,272
1,501
40,432
2
—
—
—
—
—
649
—
649
—
—
—
—
—
—
—
—
—
—
—
—
—
649
—
649
325
10,056
1,646
4,330
916
630
854
818
862
140
347
595
192
488
72
343
2,177
1,786
4,677
1,511
822
1,342
890
1,205
12,233
325
Reserves attributable to non-controlling interest in Shell subsidiaries
[A] Natural gas volumes are converted into oil equivalent using a factor of 5,800 scf per barrel.
EXPLORATION
In total, the net undeveloped acreage in our exploration portfolio decreased
In 2017, we made a notable discovery in the US Gulf of Mexico, which is
by around 54 million acres in 2017. The largest contributions were acreage
being evaluated further in order to establish the extent of commercially
divestments in Mongolia and South Africa.
producible volumes (see “Upstream” on page 32). In Brazil, together with our
partners we won 35-year production-sharing contracts for three pre-salt
In January 2018, we won nine exploration blocks in the deep-water bid
exploration blocks in the Santos Basin, including the new exploration block
round in Mexico. The total area of these nine blocks (all of which we will
Alto Cabo Frio West (Shell interest 55% as operator). Brunei Shell Petroleum
operate) is 18,996 square kilometres.
Company and the government of Brunei also announced exploration success
with the Layang-Layang well discovery in the Lumut area.
In 2017, we participated in 67 productive exploratory wells with proved
reserves allocated (Shell share: 52 wells). For further information, see
“Supplementary Information – oil and gas (unaudited)” on page 197.
Summary of proved oil and gas reserves of Shell subsidiaries and Shell share of joint ventures and associates
LOCATION OF OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES
Location of oil and gas exploration and production activities [A] (at December 31, 2017)
Europe
Albania
Bulgaria
Cyprus
Denmark
Germany
Greenland
Ireland
Italy
Netherlands
Norway
UK
Asia
Brunei
China
India
Indonesia
Iraq
Jordan
Kazakhstan
Malaysia
Myanmar
Oman
Philippines
Qatar
Russia
State of Palestine
Thailand
Turkey
Oceania
Australia
New Zealand
Africa
Algeria
Egypt
Gabon
Kenya
Namibia
Nigeria
Tanzania
Tunisia
North America
Canada
Mexico
USA
South America
Argentina
Bolivia
Brazil
Colombia
Trinidad and Tobago
Uruguay
Exploration
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
Development
and/or
production
Shell operator[B]
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■
STRATEGIC REPORT SHELL ANNUAL REPORT AND FORM 20-F 2017
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SHELL ANNUAL REPORT AND FORM 20-F 2017 strategic report
41
[A] Includes joint ventures and associates. Where a joint venture or an associate has properties outside its base country, those properties are not shown in this table.
[B] In several countries where “Shell operator” is indicated, Shell is the operator of some but not all exploration and/or production ventures.
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oil and gas information Continued
OIL AND GAS PRODUCTION AVAILABLE FOR SALE
Crude oil and natural gas liquids [A]
2017
Shell share of
joint ventures
and associates
Shell
subsidiaries
2016
Shell share of
joint ventures
and associates
Shell
subsidiaries
Thousand barrels
2015
Shell
subsidiaries
Shell share of
joint ventures
and associates
Europe
Denmark
Italy
Norway
UK
Other [B]
Total Europe
Asia
Brunei
Kazakhstan
Malaysia
Oman
Russia
Other [B]
Total Asia
Total Oceania [B]
Africa
Gabon
Nigeria
Other [B]
Total Africa
North America
USA
Canada
Total North America
South America
Brazil
Other [B]
Total South America
15,467
8,733
19,529
45,020
860
89,609
1,138
29,491
26,574
77,687
22,049
30,180
187,119
9,098
9,750
56,337
9,003
75,090
109,430
10,775
120,205
111,093
3,325
114,418
—
—
—
—
1,272
1,272
15,831
—
—
—
10,899
7,859
34,589
—
—
—
—
—
—
—
—
15,423
6,818
21,656
41,426
877
86,200
952
21,330
27,241
80,567
22,134
49,128
— 17,396
— 11,179
— 14,337
— 20,762
874
872
872 64,548
823
17,402
—
—
— 22,980
— 78,404
10,966 22,016
7,850 44,489
—
—
—
—
1,311
1,311
18,663
—
—
—
10,273
7,923
201,352
36,218 168,712
36,859
8,524
1,268
7,858
3,050
12,838
62,739
9,427
85,004
— 12,472
— 67,832
—
6,159
— 86,463
102,795
10,883
113,678
— 104,263
—
8,599
— 112,862
—
—
—
—
—
—
—
—
—
—
35,861
78,477
2,935
81,412
— 13,307
—
576
— 13,883
38,358 454,326
—
—
—
41,220
Total
[A] Reflects 100% of production of subsidiaries except in respect of production-sharing contracts (PSCs), where the figures shown represent the entitlement of the subsidiaries concerned under those contracts.
595,539
576,170
[B] Comprises countries where 2017 production was lower than 7,300 thousand barrels or where specific disclosures are prohibited.
Synthetic crude oil
North America – Canada
Bitumen
North America – Canada
2017
Shell
subsidiaries
33,183
2017
Shell
subsidiaries
1,681
2016
Shell
subsidiaries
53,603
2016
Shell
subsidiaries
4,606
Thousand barrels
2015
Shell
subsidiaries
49,891
Thousand barrels
2015
Shell
subsidiaries
5,258
[A] Reflects 100% of production of subsidiaries except in respect of PSCs, where the figures shown represent the entitlement of the subsidiaries concerned under those contracts.
[B] Comprises countries where 2017 production was lower than 41,795 million scf or where specific disclosures are prohibited.
STRATEGIC REPORT SHELL ANNUAL REPORT AND FORM 20-F 2017
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Natural gas [A]
Europe
Total Europe
Asia
Denmark
Germany
Ireland
Netherlands
Norway
UK
Other [B]
Brunei
China
Kazakhstan
Malaysia
Philippines
Russia
Thailand
Other [B]
Total Asia
Oceania
Australia
New Zealand
Total Oceania
Africa
Egypt
Nigeria
Other [B]
Total Africa
North America
USA
Canada
Total North America
South America
Bolivia
Brazil
Trinidad and Tobago
Other [B]
Total South America
Total
Shell
Shell
Shell
subsidiaries
and associates
subsidiaries
subsidiaries
and associates
Million standard cubic feet
2015
Shell share of
joint ventures
2016
Shell share of
joint ventures
and associates
2017
Shell share of
joint ventures
52,105
48,002
52,515
—
—
—
47,143
51,483
44,660
—
—
—
48,211
58,230
27
— 343,126
— 402,759
— 429,626
243,352
174,478
13,125
— 242,736
— 190,185
—
10,076
— 253,108
— 101,276
—
15,865
583,577 343,126 586,283 402,759 476,717 429,626
29,880 158,877
26,918 155,881
21,337 162,862
43,899
80,623
221,590
42,958
—
—
43,699
77,122
— 221,661
—
45,070
—
—
46,481
—
— 254,523
—
41,430
4,052 137,890
4,141 133,396
3,887 131,697
60,742
—
59,774
—
288,728 118,352 383,763 118,366 345,020 118,421
772,472 415,119 862,148 407,643 712,678 412,980
591,860
18,708 418,793
36,704 132,209
67,382
51,943
—
58,239
—
55,906
—
643,803
18,708 477,032
36,704 188,115
67,382
122,439
236,370
36,187
394,996
286,529
224,529
511,058
— 145,198
— 184,188
—
34,901
— 364,287
—
65,002
— 195,064
—
—
— 260,066
— 309,298
— 253,509
— 562,807
— 264,351
— 234,055
— 498,406
59,673
70,100
73,000
8,370
—
—
—
—
67,191
31,020
78,433
7,960
211,143
— 184,604
—
—
—
—
—
—
3,029
—
9,824
12,853
3,117,049 776,953 3,037,161 847,106 2,148,835 909,988
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
OIL AND GAS PRODUCTION AVAILABLE FOR SALE
Crude oil and natural gas liquids [A]
Europe
Denmark
Italy
Norway
UK
Other [B]
Total Europe
Asia
Brunei
Kazakhstan
Malaysia
Oman
Russia
Other [B]
Total Asia
Total Oceania [B]
Africa
Gabon
Nigeria
Other [B]
Total Africa
North America
USA
Canada
Total North America
South America
Brazil
Other [B]
Total South America
Total
Synthetic crude oil
North America – Canada
Bitumen
North America – Canada
2017
Shell share of
joint ventures
2016
Shell share of
joint ventures
and associates
Shell
Shell
Shell
subsidiaries
and associates
subsidiaries
subsidiaries
and associates
Thousand barrels
2015
Shell share of
joint ventures
15,423
6,818
21,656
41,426
— 17,396
— 11,179
— 14,337
— 20,762
1,272
1,272
877
872
874
86,200
872 64,548
1,311
1,311
1,138
15,831
952
17,402
823
18,663
21,330
27,241
80,567
—
—
— 22,980
— 78,404
22,049
10,899
22,134
10,966 22,016
10,273
30,180
7,859
49,128
7,850 44,489
7,923
187,119
34,589
201,352
36,218 168,712
36,859
9,098
8,524
1,268
7,858
3,050
15,467
8,733
19,529
45,020
860
89,609
29,491
26,574
77,687
9,750
56,337
9,003
75,090
109,430
10,775
120,205
111,093
3,325
114,418
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
12,838
62,739
9,427
85,004
— 12,472
— 67,832
—
6,159
— 86,463
102,795
10,883
113,678
— 104,263
—
8,599
— 112,862
78,477
2,935
81,412
— 13,307
—
576
— 13,883
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2017
Shell
subsidiaries
33,183
2017
Shell
subsidiaries
1,681
2016
Shell
subsidiaries
53,603
2016
Shell
subsidiaries
4,606
Thousand barrels
2015
Shell
subsidiaries
49,891
2015
Shell
subsidiaries
5,258
Thousand barrels
[A] Reflects 100% of production of subsidiaries except in respect of production-sharing contracts (PSCs), where the figures shown represent the entitlement of the subsidiaries concerned under those contracts.
[B] Comprises countries where 2017 production was lower than 7,300 thousand barrels or where specific disclosures are prohibited.
595,539
35,861
576,170
38,358 454,326
41,220
Natural gas [A]
Europe
Denmark
Germany
Ireland
Netherlands
Norway
UK
Other [B]
Total Europe
Asia
Brunei
China
Kazakhstan
Malaysia
Philippines
Russia
Thailand
Other [B]
Total Asia
Oceania
Australia
New Zealand
Total Oceania
Africa
Egypt
Nigeria
Other [B]
Total Africa
North America
USA
Canada
Total North America
South America
Bolivia
Brazil
Trinidad and Tobago
Other [B]
Total South America
2017
Shell share of
joint ventures
and associates
Shell
subsidiaries
Shell
subsidiaries
2016
Shell share of
joint ventures
and associates
Million standard cubic feet
2015
Shell share of
joint ventures
and associates
Shell
subsidiaries
52,105
48,002
52,515
47,143
51,483
44,660
—
—
—
— 343,126
—
48,211
—
58,230
—
27
— 429,626
—
—
—
583,577 343,126 586,283 402,759 476,717 429,626
—
—
—
— 402,759
— 253,108
— 101,276
—
15,865
— 242,736
— 190,185
—
10,076
243,352
174,478
13,125
29,880 158,877
26,918 155,881
21,337 162,862
—
—
—
43,899
43,699
46,481
—
—
—
—
77,122
80,623
— 254,523
—
— 221,661
221,590
—
—
—
41,430
45,070
42,958
4,141 133,396
4,052 137,890
3,887 131,697
—
—
59,774
60,742
288,728 118,352 383,763 118,366 345,020 118,421
772,472 415,119 862,148 407,643 712,678 412,980
591,860
51,943
18,708 418,793
58,239
—
36,704 132,209
55,906
—
643,803
18,708 477,032
36,704 188,115
67,382
—
67,382
122,439
236,370
36,187
394,996
286,529
224,529
511,058
— 145,198
— 184,188
—
34,901
— 364,287
—
65,002
— 195,064
—
—
— 260,066
— 309,298
— 253,509
— 562,807
— 264,351
— 234,055
— 498,406
—
—
—
—
—
—
—
59,673
70,100
73,000
8,370
—
—
—
—
—
3,117,049 776,953 3,037,161 847,106 2,148,835 909,988
—
67,191
—
31,020
—
78,433
—
7,960
— 184,604
—
3,029
—
9,824
—
—
—
—
—
211,143
12,853
Total
[A] Reflects 100% of production of subsidiaries except in respect of PSCs, where the figures shown represent the entitlement of the subsidiaries concerned under those contracts.
[B] Comprises countries where 2017 production was lower than 41,795 million scf or where specific disclosures are prohibited.
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oil and gas information Continued
AVERAGE REALISED PRICE BY GEOGRAPHICAL AREA
AVERAGE PRODUCTION COST BY GEOGRAPHICAL AREA
Crude oil, natural gas liquids and natural gas [A]
$/barrel
2015
Shell share of
joint ventures
and associates
45.97
52.21
50.01[A]
[A] Natural gas volumes are converted into oil equivalent using a factor of 5,800 scf per barrel.
[B] As revised following a reassessment.
[C] Included Shell’s 14% share of Woodside from January 2015 to April 2016. Woodside is a publicly listed company on the Australian Securities Exchange for which we have limited access to data;
accordingly, the numbers are estimated. The accounting classification of Woodside was changed from an associate to an investment in securities in April 2016.
Europe
Asia
Oceania
Africa
North America – USA
North America – Canada
South America
Total
Synthetic crude oil
North America – Canada
Bitumen
North America – Canada
subsidiaries
and associates
subsidiaries
subsidiaries
and associates
2017
Shell share of
joint ventures
5.58
6.87
28.83
—
—
—
—
6.82
Shell
13.19
7.71
9.24
9.53
16.11
14.53
8.08
10.55
2016
Shell share of
joint ventures
and associates
5.45 [B]
6.62
16.19 [C]
—
—
—
—
Shell
13.70
6.32
8.87
9.93
21.44
13.59
7.64
10.92
$/boe
2015
Shell share of
joint ventures
Shell
16.97
7.42
13.43
11.96
20.28
18.85
21.31
13.42
5.49[B]
6.89
14.66[C]
—
—
—
—
6.57 [B]
6.93[B]
2017
Shell
subsidiaries
23.77
2017
Shell
subsidiaries
16.19
2016
Shell
subsidiaries
26.14
2016
Shell
subsidiaries
14.19
$/barrel
2015
Shell
subsidiaries
31.50
$/barrel
2015
Shell
subsidiaries
18.58
Crude oil and natural gas liquids
2017
Shell share of
joint ventures
and associates
Shell
subsidiaries
Shell
subsidiaries
38.62
38.11
36.64
42.73
2016
Shell share of
joint ventures
and associates
40.75
43.95
33.76 [A]
—
—
—
—
43.58
Shell
subsidiaries
49.77
47.73
43.39
51.80
50.52
49.08
45.64
53.39
46.88
53.44
—
—
—
—
—
53.23
North America – Canada
—
—
—
—
51.82
Total
[A] Included Shell’s 14% share of Woodside Petroleum Limited (Woodside) from January 2015 to April 2016. Woodside is a publicly listed company on the Australian Securities Exchange for which we have
36.00
48.10
25.76
38.58
25.45
42.38
limited access to data; accordingly, the numbers are estimated. The accounting classification of Woodside was changed from an associate to an investment in securities in April 2016.
South America
49.00
38.60
47.23
37.50
47.52
44.99
2017
Shell
subsidiaries
45.90
2017
Shell
subsidiaries
34.46
2016
Shell
subsidiaries
37.61
2016
Shell
subsidiaries
25.74
$/barrel
2015
Shell
subsidiaries
40.87
$/barrel
2015
Shell
subsidiaries
30.25
2017
Shell share of
joint ventures
and associates
Shell
subsidiaries
Shell
subsidiaries
5.48
2.84
6.21
2.44
3.00
1.85
2.29
4.77
5.45
3.11
—
—
—
—
5.11
2016
Shell share of
joint ventures
and associates
4.19
4.63
4.33 [A]
—
—
—
—
4.75
2.32
5.31
2.33
2.21
1.71
1.83
$/thousand scf
2015
Shell share of
joint ventures
and associates
Shell
subsidiaries
7.10
3.02
6.80
2.10
2.39
2.29
2.46
6.46
7.06
6.73[A]
—
—
—
—
6.77
Total
3.83
[A] Included Shell’s 14% share of Woodside from January 2015 to April 2016. Woodside is a publicly listed company on the Australian Securities Exchange for which we have limited access to data;
accordingly, the numbers are estimated. The accounting classification of Woodside was changed from an associate to an investment in securities in April 2016.
3.16
4.07
4.41
Europe
Asia
Oceania
Africa
North America – USA
Synthetic crude oil
North America – Canada
Bitumen
North America – Canada
Natural gas
Europe
Asia
Oceania
Africa
North America – USA
North America – Canada
South America
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13.42
10.92
10.55
—
—
—
—
6.93[B]
13.70
6.32
8.87
9.93
21.44
13.59
7.64
5.58
6.87
28.83
—
—
—
—
6.82
5.45 [B]
6.62
16.19 [C]
—
—
—
—
6.57 [B]
Shell
subsidiaries
16.97
7.42
13.43
11.96
20.28
18.85
21.31
$/boe
2015
Shell share of
joint ventures
and associates
5.49[B]
6.89
14.66[C]
Total
[A] Natural gas volumes are converted into oil equivalent using a factor of 5,800 scf per barrel.
[B] As revised following a reassessment.
[C] Included Shell’s 14% share of Woodside from January 2015 to April 2016. Woodside is a publicly listed company on the Australian Securities Exchange for which we have limited access to data;
accordingly, the numbers are estimated. The accounting classification of Woodside was changed from an associate to an investment in securities in April 2016.
Europe
Asia
Oceania
Africa
North America – USA
North America – Canada
South America
13.19
7.71
9.24
9.53
16.11
14.53
8.08
AVERAGE REALISED PRICE BY GEOGRAPHICAL AREA
AVERAGE PRODUCTION COST BY GEOGRAPHICAL AREA
Crude oil and natural gas liquids
Crude oil, natural gas liquids and natural gas [A]
2017
Shell share of
joint ventures
and associates
Shell
subsidiaries
2016
Shell share of
joint ventures
and associates
Shell
subsidiaries
[A] Included Shell’s 14% share of Woodside Petroleum Limited (Woodside) from January 2015 to April 2016. Woodside is a publicly listed company on the Australian Securities Exchange for which we have
limited access to data; accordingly, the numbers are estimated. The accounting classification of Woodside was changed from an associate to an investment in securities in April 2016.
53.23
43.58
51.82
Europe
Asia
Oceania
Africa
North America – USA
North America – Canada
South America
Total
Synthetic crude oil
North America – Canada
Bitumen
North America – Canada
Natural gas
Europe
Asia
Oceania
Africa
North America – USA
North America – Canada
South America
Total
subsidiaries
and associates
subsidiaries
subsidiaries
and associates
2017
Shell share of
joint ventures
46.88
53.44
—
—
—
—
—
Shell
50.52
49.08
45.64
53.39
47.23
36.00
48.10
49.00
2016
Shell share of
joint ventures
and associates
40.75
43.95
33.76 [A]
—
—
—
—
Shell
38.62
38.11
36.64
42.73
37.50
25.76
38.58
38.60
$/barrel
2015
Shell share of
joint ventures
45.97
52.21
50.01[A]
—
—
—
—
Shell
49.77
47.73
43.39
51.80
44.99
25.45
42.38
47.52
2017
Shell
subsidiaries
45.90
2017
Shell
subsidiaries
34.46
2016
Shell
subsidiaries
37.61
2016
Shell
subsidiaries
25.74
$/barrel
2015
Shell
subsidiaries
40.87
$/barrel
2015
Shell
subsidiaries
30.25
2017
Shell share of
joint ventures
2016
Shell share of
joint ventures
and associates
subsidiaries
and associates
subsidiaries
subsidiaries
and associates
$/thousand scf
2015
Shell share of
joint ventures
Shell
5.48
2.84
6.21
2.44
3.00
1.85
2.29
3.83
Shell
4.75
2.32
5.31
2.33
2.21
1.71
1.83
3.16
Shell
7.10
3.02
6.80
2.10
2.39
2.29
2.46
4.07
4.19
4.63
4.33 [A]
—
—
—
—
4.41
4.77
5.45
3.11
—
—
—
—
5.11
6.46
7.06
6.73[A]
—
—
—
—
6.77
[A] Included Shell’s 14% share of Woodside from January 2015 to April 2016. Woodside is a publicly listed company on the Australian Securities Exchange for which we have limited access to data;
accordingly, the numbers are estimated. The accounting classification of Woodside was changed from an associate to an investment in securities in April 2016.
Synthetic crude oil
North America – Canada
Bitumen
North America – Canada
2017
Shell
subsidiaries
23.77
2017
Shell
subsidiaries
16.19
2016
Shell
subsidiaries
26.14
2016
Shell
subsidiaries
14.19
$/barrel
2015
Shell
subsidiaries
31.50
$/barrel
2015
Shell
subsidiaries
18.58
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Downstream
Downstream
Key statistics
Segment earnings [A]
Including:
Revenue (including inter-segment sales)
Share of profit of joint ventures and associates [A]
Interest and other income
Operating expenses [B]
Depreciation, depletion and amortisation
Taxation charge [A]
Capital investment [B]
Divestments [B]
2017
$ million, except where indicated
2015
2016
8,258
6,588
10,243
268,979
1,956
154
19,583
3,877
1,783
6,416
2,703
203,550
2,244
851
19,681
3,681
1,008
6,057
2,889
237,746
2,215
1,156
20,816
3,667
1,639
5,119
2,282
Refinery availability (%) [C]
Chemical plant availability (%) [C]
Refinery processing intake (thousand b/d)
Oil products sales volumes (thousand b/d)
Chemicals sales volumes (thousand tonnes)
[A] See Note 4 to the “Consolidated Financial Statements” on pages 149-150. Segment earnings are presented on a current cost of supplies basis.
[B] See “Non-GAAP measures reconciliations” on pages 225-226.
[C] The basis of calculation differs from that used for the “Refinery and chemical plant availability” measure in “Performance indicators” on page 23, which excludes downtime due to uncontrollable factors and,
in 2017, excludes assets which were not part of Shell’s operational performance metrics because of portfolio activity (Fredericia and former Motiva sites).
90
90
2,701
6,483
17,292
91
92
2,572
6,599
18,239
90
85
2,805
6,432
17,148
OVERVIEW
Our Downstream business is made up of a number of different Oil Products
and Chemicals activities, part of an integrated value chain, including trading
activities, that turns crude oil and other feedstocks into a range of products
which are moved and marketed around the world for domestic, industrial and
transport use. The products we sell include gasoline, diesel, heating oil,
aviation fuel, marine fuel, biofuel, lubricants, bitumen and sulphur. In addition,
we produce and sell petrochemicals for industrial use worldwide.
Our Oil Products activities comprise Refining and Trading, and Marketing,
referred to as classes of business. Marketing includes Retail, Lubricants,
Business to Business (B2B), Pipelines and Biofuels. Chemicals has major
manufacturing plants, located close to refineries, and its own marketing
network. In Trading and Supply, we trade crude oil, oil products and
petrochemicals, to optimise feedstocks for Refining and Chemicals, to supply
our Marketing businesses and third parties, and for our own profit.
BUSINESS CONDITIONS
Industry gross refining margins were higher on average in 2017 than in
2016 in each of the key refining hubs of Europe, Singapore and the USA.
Oil products demand growth was stronger globally, with an increase of
1.5 million b/d compared with 2016, according to the International Energy
Agency’s Oil Market Report published in January 2018, driven in part by a
continued low-price crude oil environment and industrial demand growth.
Demand growth and refinery outages, notably in Latin America, reduced
overcapacity despite new refinery capacity additions in 2017 in China.
Asian naphtha cracker margins rose for the third consecutive year, although
only slightly in 2017, driven by continued strong demand, periods of
reduced cracker capacity availability and higher naphtha cracker utilisation.
European naphtha cracker margins increased, supported by tight ethylene
markets and high global utilisation. US ethane cracker margins increased
slightly but remained lower than margins in Asia and Europe as continued
low crude oil prices reduced the margin available in the ethane to
polyethylene value chain.
See “Market overview” on page 18.
REFINERY AND CHEMICAL PLANT AVAILABILITY
Refinery availability was 91% in 2017, compared with 90% in 2016.
Chemicals plant availability was 92% in 2017, compared with 90% in
2016, mainly reflecting recovery at the Bukom site in Singapore, which
suffered unit shutdowns in 2016.
OIL PRODUCTS AND CHEMICALS SALES
Oil products sales volumes increased by 2% in 2017 compared with 2016,
reflecting higher trading volumes partly offset by lower marketing volumes
mainly as a result of the Motiva transaction (see “Portfolio and business
developments” on page 47).
Chemicals sales volumes increased by 5% in 2017 compared with 2016,
principally due to improved asset availability and utilisation. In 2016, sales
volumes were negatively impacted by outages at Bukom.
EARNINGS 2017-2016
Segment earnings are presented on a current cost of supplies basis (see
“Summary of results” on page 19), which were $964 million lower in 2017
than on a first-in, first-out basis (2016: $1,085 million lower), as shown in
“Non-GAAP measures reconciliations” on page 225.
Segment earnings in 2017 of $8,258 million were 25% higher than in
2016. Earnings in 2017 included a net charge of $824 million, compared
with a net charge in 2016 of $655 million, described at the end of this
section.
Excluding the impact of these items, earnings in 2017 were $9,082 million,
compared with $7,243 million in 2016. Refining and Trading accounted for
27% of these 2017 earnings, Marketing for 44% and Chemicals for 29%.
The Motiva transaction, described in “Portfolio and business developments”
on page 47, impacted Shell’s ongoing reporting and therefore the
comparison with 2016. With effect from May 2017, Shell reports revenue
and costs from assets which were previously part of the Motiva joint venture,
instead of reporting a share of joint venture profit.
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The increase in Downstream earnings, excluding the net charges, of
on divestments of $772 million (mainly in respect of Showa Shell in Japan
$1,839 million (25%) compared with 2016 was driven by higher realised
and our Marketing business in Denmark) reported in interest and other
refining and trading margins (around $1,230 million), improved chemical
income.
margins (around $870 million), a lower effective tax rate (around
$380 million) and other net negative impacts (around $640 million). Refining
EARNINGS 2016-2015
and trading margins were higher in part following the Motiva transaction.
Segment earnings were presented on a current cost of supplies basis, which
Chemicals margins were helped by improved operating performance and the
were $1,085 million lower in 2016 than on a first-in, first-out basis (2015:
lower effective tax rate resulted from one-off impacts and a change in the
$1,955 million higher).
geographical split of earnings. The other net negative impacts included
higher depreciation charges and costs, following the Motiva transaction,
and lower marketing margins, impacted by a shortage of feedstock from our
Pearl gas-to-liquids (GTL) plant in Qatar to our Lubricants business.
The increase in earnings of $1,839 million analysed by class of business
was as follows:
■ Refining and Trading earnings were $993 million higher than in 2016.
Segment earnings in 2016 of $6,588 million were 36% lower than in
2015. Earnings in 2016 included a net charge of $655 million described
above. Earnings in 2015 included a net gain of $495 million, reflecting net
gains on divestments of $1,095 million (primarily in China, France and
Norway), partly offset by impairment charges of $505 million (mainly related
to the Westward Ho pipeline in the USA and to expenditure at the Bukom
refinery) and other net charges of $95 million.
Realised refining margins were higher, reflecting improving global
Excluding the impact of these items, earnings in 2016 were $7,243 million,
economic activity, and improved operational efficiency globally, most
compared with $9,748 million in 2015. Refining and Trading accounted for
notably at our Bukom refinery. In the USA, the integration of the Convent
20% of these 2016 earnings, Marketing for 57% and Chemicals for 23%.
and Norco refineries, following the Motiva transaction, enabled us to
capitalise on improved market margins although Deer Park suffered
The decrease in these earnings of $2,505 million (26%) compared with
continuing operational issues on top of industry shutdowns due to Hurricane
2015 was mainly driven by lower realised refining and trading margins
Harvey. In Canada, there were significantly higher margins at Scotford,
(around $2,710 million); a higher effective tax rate (around $540 million),
following a major turnaround in 2016. In Europe, we benefited from a
mainly due to one-off impacts and the geographical split of earnings; and
stronger margin environment. However, operations at the Pernis refinery in
other net negative impacts (around $250 million). There was a partial offset
the Netherlands were impacted by a shutdown lasting almost a month due
from lower operating expenses and stronger marketing margins (around
to a substation fire. In Asia, earnings benefited from improved operations
$500 million each) excluding the effect of divestments and exchange rates.
at Bukom and a higher margin environment. Trading margins were lower
than in 2016 mainly due to lower market volatility and challenging market
CAPITAL INVESTMENT
conditions.
■ Marketing earnings were $93 million lower than in 2016. Lubricants
margins were negatively impacted by a shortage of feedstock from our
Pearl GTL plant. Earnings from our Raízen joint venture (Shell interest 50%)
in Brazil decreased, impacted by lower sugar prices, lower demand and
weather-related delays to sugar cane crushing. Partly offsetting these
impacts were improved results from our Retail business, with a strong
performance from our joint ventures in China.
■ Chemicals earnings were $939 million higher than in 2016. Earnings in
2017 benefited from shorter unit shutdowns at Bukom than during 2016,
improved market conditions and strong asset performance in Europe, and
improved margins in the Americas, mainly due to higher demand for
glycols.
Segment earnings in 2017 included a net charge of $824 million, reflecting
impairment charges of $315 million reported in depreciation (mainly
expenditure at Bukom and charges in relation to the Phenol 3 unit at the
Chemicals cracker at Deer Park), redundancy and restructuring charges of
$200 million, charges of $142 million related to US tax reform legislation
and a tax rate change in France and other net charges of $231 million
(mainly onerous contract provisions in Refining and Trading and a legal
provision in Chemicals). Partly offsetting these impacts were divestment gains
of $39 million (including a $546 million net charge from the Motiva
transaction, mainly related to tax, which were more than offset by gains on
the sale of assets in Saudi Arabia, Africa, Australia, Hong Kong and Macau)
and a net gain from fair value accounting of commodity derivatives of
$25 million.
Segment earnings in 2016 included a net charge of $655 million, reflecting
redundancy and restructuring charges of $523 million, impairments of
$506 million (mainly in respect of the Port Dickson refinery in Malaysia, the
Fredericia refinery in Denmark and expenditure at the Bukom refinery), a net
charge from fair value accounting of commodity derivatives of $373 million
and other net charges of $25 million. These were partly offset by net gains
Capital investment was $6.4 billion in 2017, compared with $6.1 billion in
2016. Capital investment related to our former Motiva assets was
$0.6 billion (2016: $nil, when Motiva was a joint venture). Excluding this,
capital investment in Refining decreased by $0.4 billion to $1.8 billion, in
Marketing it increased by $0.1 billion to $1.5 billion and Chemicals capital
investment was in line with 2016 at $2.5 billion.
DIVESTMENTS
Divestments were $2.7 billion in 2017, compared with $2.9 billion in
2016. The principal divestments in 2017 were the Motiva transaction in the
USA, the sale of our interest in the SADAF joint venture in Saudi Arabia, our
interest in Vivo Energy in Africa, our aviation business in Australia, our LPG
marketing businesses in Hong Kong and Macau (first phase) and the sale of
an interest in Shell Midstream Partners, L.P. in the USA.
PORTFOLIO AND BUSINESS DEVELOPMENTS
We continued to divest selected assets and restructure parts of our portfolio.
In 2017, this included:
■ In the USA, the separation of assets, liabilities and businesses of the Motiva
Enterprises LLC (Motiva) joint venture, in which Shell held a 50% interest,
took place (Motiva transaction). Shell assumed sole ownership of the
Norco and Convent refineries in Louisiana, 11 distribution terminals and
Shell-branded markets in Alabama, Mississippi, Tennessee, Louisiana, a
portion of the Florida panhandle, and the north-eastern region of the USA,
and received cash which was reported in divestments. See Note 29 to the
“Consolidated Financial Statements” on page 178.
■ In the USA, we issued 10.46 million new common units in Shell Midstream
Partners, L.P., bringing the total common units issued and outstanding to
187.78 million.
■ In Saudi Arabia, we sold our 50% share in the SADAF petrochemicals joint
venture located in Al Jubail. The joint venture encompassed six
petrochemical plants with a total output of more than 4 million tonnes per
year. The sale marked an early termination of the joint venture agreement
Downstream
Key statistics
Segment earnings [A]
Including:
Revenue (including inter-segment sales)
Share of profit of joint ventures and associates [A]
Interest and other income
Operating expenses [B]
Depreciation, depletion and amortisation
Taxation charge [A]
Capital investment [B]
Divestments [B]
Refinery availability (%) [C]
Chemical plant availability (%) [C]
Refinery processing intake (thousand b/d)
Oil products sales volumes (thousand b/d)
Chemicals sales volumes (thousand tonnes)
$ million, except where indicated
2017
2016
8,258
6,588
2015
10,243
268,979
203,550
237,746
19,583
19,681
1,956
154
3,877
1,783
6,416
2,703
91
92
2,572
6,599
2,244
851
3,681
1,008
6,057
2,889
90
90
2,701
6,483
2,215
1,156
20,816
3,667
1,639
5,119
2,282
90
85
2,805
6,432
17,148
[A] See Note 4 to the “Consolidated Financial Statements” on pages 149-150. Segment earnings are presented on a current cost of supplies basis.
[B] See “Non-GAAP measures reconciliations” on pages 225-226.
[C] The basis of calculation differs from that used for the “Refinery and chemical plant availability” measure in “Performance indicators” on page 23, which excludes downtime due to uncontrollable factors and,
in 2017, excludes assets which were not part of Shell’s operational performance metrics because of portfolio activity (Fredericia and former Motiva sites).
18,239
17,292
OVERVIEW
REFINERY AND CHEMICAL PLANT AVAILABILITY
Our Downstream business is made up of a number of different Oil Products
Refinery availability was 91% in 2017, compared with 90% in 2016.
and Chemicals activities, part of an integrated value chain, including trading
activities, that turns crude oil and other feedstocks into a range of products
Chemicals plant availability was 92% in 2017, compared with 90% in
which are moved and marketed around the world for domestic, industrial and
2016, mainly reflecting recovery at the Bukom site in Singapore, which
transport use. The products we sell include gasoline, diesel, heating oil,
suffered unit shutdowns in 2016.
aviation fuel, marine fuel, biofuel, lubricants, bitumen and sulphur. In addition,
we produce and sell petrochemicals for industrial use worldwide.
OIL PRODUCTS AND CHEMICALS SALES
Our Oil Products activities comprise Refining and Trading, and Marketing,
reflecting higher trading volumes partly offset by lower marketing volumes
referred to as classes of business. Marketing includes Retail, Lubricants,
mainly as a result of the Motiva transaction (see “Portfolio and business
Oil products sales volumes increased by 2% in 2017 compared with 2016,
Business to Business (B2B), Pipelines and Biofuels. Chemicals has major
developments” on page 47).
manufacturing plants, located close to refineries, and its own marketing
network. In Trading and Supply, we trade crude oil, oil products and
Chemicals sales volumes increased by 5% in 2017 compared with 2016,
petrochemicals, to optimise feedstocks for Refining and Chemicals, to supply
principally due to improved asset availability and utilisation. In 2016, sales
our Marketing businesses and third parties, and for our own profit.
volumes were negatively impacted by outages at Bukom.
BUSINESS CONDITIONS
EARNINGS 2017-2016
Industry gross refining margins were higher on average in 2017 than in
Segment earnings are presented on a current cost of supplies basis (see
2016 in each of the key refining hubs of Europe, Singapore and the USA.
“Summary of results” on page 19), which were $964 million lower in 2017
Oil products demand growth was stronger globally, with an increase of
than on a first-in, first-out basis (2016: $1,085 million lower), as shown in
1.5 million b/d compared with 2016, according to the International Energy
“Non-GAAP measures reconciliations” on page 225.
Agency’s Oil Market Report published in January 2018, driven in part by a
continued low-price crude oil environment and industrial demand growth.
Segment earnings in 2017 of $8,258 million were 25% higher than in
Demand growth and refinery outages, notably in Latin America, reduced
2016. Earnings in 2017 included a net charge of $824 million, compared
overcapacity despite new refinery capacity additions in 2017 in China.
with a net charge in 2016 of $655 million, described at the end of this
Asian naphtha cracker margins rose for the third consecutive year, although
section.
only slightly in 2017, driven by continued strong demand, periods of
Excluding the impact of these items, earnings in 2017 were $9,082 million,
reduced cracker capacity availability and higher naphtha cracker utilisation.
compared with $7,243 million in 2016. Refining and Trading accounted for
European naphtha cracker margins increased, supported by tight ethylene
27% of these 2017 earnings, Marketing for 44% and Chemicals for 29%.
markets and high global utilisation. US ethane cracker margins increased
slightly but remained lower than margins in Asia and Europe as continued
The Motiva transaction, described in “Portfolio and business developments”
low crude oil prices reduced the margin available in the ethane to
on page 47, impacted Shell’s ongoing reporting and therefore the
polyethylene value chain.
comparison with 2016. With effect from May 2017, Shell reports revenue
and costs from assets which were previously part of the Motiva joint venture,
See “Market overview” on page 18.
instead of reporting a share of joint venture profit.
The increase in Downstream earnings, excluding the net charges, of
$1,839 million (25%) compared with 2016 was driven by higher realised
refining and trading margins (around $1,230 million), improved chemical
margins (around $870 million), a lower effective tax rate (around
$380 million) and other net negative impacts (around $640 million). Refining
and trading margins were higher in part following the Motiva transaction.
Chemicals margins were helped by improved operating performance and the
lower effective tax rate resulted from one-off impacts and a change in the
geographical split of earnings. The other net negative impacts included
higher depreciation charges and costs, following the Motiva transaction,
and lower marketing margins, impacted by a shortage of feedstock from our
Pearl gas-to-liquids (GTL) plant in Qatar to our Lubricants business.
The increase in earnings of $1,839 million analysed by class of business
was as follows:
■ Refining and Trading earnings were $993 million higher than in 2016.
Realised refining margins were higher, reflecting improving global
economic activity, and improved operational efficiency globally, most
notably at our Bukom refinery. In the USA, the integration of the Convent
and Norco refineries, following the Motiva transaction, enabled us to
capitalise on improved market margins although Deer Park suffered
continuing operational issues on top of industry shutdowns due to Hurricane
Harvey. In Canada, there were significantly higher margins at Scotford,
following a major turnaround in 2016. In Europe, we benefited from a
stronger margin environment. However, operations at the Pernis refinery in
the Netherlands were impacted by a shutdown lasting almost a month due
to a substation fire. In Asia, earnings benefited from improved operations
at Bukom and a higher margin environment. Trading margins were lower
than in 2016 mainly due to lower market volatility and challenging market
conditions.
■ Marketing earnings were $93 million lower than in 2016. Lubricants
margins were negatively impacted by a shortage of feedstock from our
Pearl GTL plant. Earnings from our Raízen joint venture (Shell interest 50%)
in Brazil decreased, impacted by lower sugar prices, lower demand and
weather-related delays to sugar cane crushing. Partly offsetting these
impacts were improved results from our Retail business, with a strong
performance from our joint ventures in China.
■ Chemicals earnings were $939 million higher than in 2016. Earnings in
2017 benefited from shorter unit shutdowns at Bukom than during 2016,
improved market conditions and strong asset performance in Europe, and
improved margins in the Americas, mainly due to higher demand for
glycols.
Segment earnings in 2017 included a net charge of $824 million, reflecting
impairment charges of $315 million reported in depreciation (mainly
expenditure at Bukom and charges in relation to the Phenol 3 unit at the
Chemicals cracker at Deer Park), redundancy and restructuring charges of
$200 million, charges of $142 million related to US tax reform legislation
and a tax rate change in France and other net charges of $231 million
(mainly onerous contract provisions in Refining and Trading and a legal
provision in Chemicals). Partly offsetting these impacts were divestment gains
of $39 million (including a $546 million net charge from the Motiva
transaction, mainly related to tax, which were more than offset by gains on
the sale of assets in Saudi Arabia, Africa, Australia, Hong Kong and Macau)
and a net gain from fair value accounting of commodity derivatives of
$25 million.
Segment earnings in 2016 included a net charge of $655 million, reflecting
redundancy and restructuring charges of $523 million, impairments of
$506 million (mainly in respect of the Port Dickson refinery in Malaysia, the
Fredericia refinery in Denmark and expenditure at the Bukom refinery), a net
charge from fair value accounting of commodity derivatives of $373 million
and other net charges of $25 million. These were partly offset by net gains
on divestments of $772 million (mainly in respect of Showa Shell in Japan
and our Marketing business in Denmark) reported in interest and other
income.
EARNINGS 2016-2015
Segment earnings were presented on a current cost of supplies basis, which
were $1,085 million lower in 2016 than on a first-in, first-out basis (2015:
$1,955 million higher).
Segment earnings in 2016 of $6,588 million were 36% lower than in
2015. Earnings in 2016 included a net charge of $655 million described
above. Earnings in 2015 included a net gain of $495 million, reflecting net
gains on divestments of $1,095 million (primarily in China, France and
Norway), partly offset by impairment charges of $505 million (mainly related
to the Westward Ho pipeline in the USA and to expenditure at the Bukom
refinery) and other net charges of $95 million.
Excluding the impact of these items, earnings in 2016 were $7,243 million,
compared with $9,748 million in 2015. Refining and Trading accounted for
20% of these 2016 earnings, Marketing for 57% and Chemicals for 23%.
The decrease in these earnings of $2,505 million (26%) compared with
2015 was mainly driven by lower realised refining and trading margins
(around $2,710 million); a higher effective tax rate (around $540 million),
mainly due to one-off impacts and the geographical split of earnings; and
other net negative impacts (around $250 million). There was a partial offset
from lower operating expenses and stronger marketing margins (around
$500 million each) excluding the effect of divestments and exchange rates.
CAPITAL INVESTMENT
Capital investment was $6.4 billion in 2017, compared with $6.1 billion in
2016. Capital investment related to our former Motiva assets was
$0.6 billion (2016: $nil, when Motiva was a joint venture). Excluding this,
capital investment in Refining decreased by $0.4 billion to $1.8 billion, in
Marketing it increased by $0.1 billion to $1.5 billion and Chemicals capital
investment was in line with 2016 at $2.5 billion.
DIVESTMENTS
Divestments were $2.7 billion in 2017, compared with $2.9 billion in
2016. The principal divestments in 2017 were the Motiva transaction in the
USA, the sale of our interest in the SADAF joint venture in Saudi Arabia, our
interest in Vivo Energy in Africa, our aviation business in Australia, our LPG
marketing businesses in Hong Kong and Macau (first phase) and the sale of
an interest in Shell Midstream Partners, L.P. in the USA.
PORTFOLIO AND BUSINESS DEVELOPMENTS
We continued to divest selected assets and restructure parts of our portfolio.
In 2017, this included:
■ In the USA, the separation of assets, liabilities and businesses of the Motiva
Enterprises LLC (Motiva) joint venture, in which Shell held a 50% interest,
took place (Motiva transaction). Shell assumed sole ownership of the
Norco and Convent refineries in Louisiana, 11 distribution terminals and
Shell-branded markets in Alabama, Mississippi, Tennessee, Louisiana, a
portion of the Florida panhandle, and the north-eastern region of the USA,
and received cash which was reported in divestments. See Note 29 to the
“Consolidated Financial Statements” on page 178.
■ In the USA, we issued 10.46 million new common units in Shell Midstream
Partners, L.P., bringing the total common units issued and outstanding to
187.78 million.
■ In Saudi Arabia, we sold our 50% share in the SADAF petrochemicals joint
venture located in Al Jubail. The joint venture encompassed six
petrochemical plants with a total output of more than 4 million tonnes per
year. The sale marked an early termination of the joint venture agreement
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downstream Continued
which was due to expire in 2020. Shell’s other activities in the country are
not impacted.
We also manufacture premium lubricants from natural gas using GTL base oils
produced at our Pearl GTL plant in Qatar (see “Integrated Gas” page 26).
CHEMICALS
Manufacturing
Ethylene capacity [A]
■ We sold our 20% interest in Vivo Energy to Vitol Africa B.V. (Vitol). As part
of the transaction, a long-term brand licence agreement was renewed with
Vitol to ensure that the Shell brand will remain visible in more than 16
countries across Africa.
■ In Australia, we sold our aviation fuel business.
■ In Hong Kong and Macau, we completed the first phase of the sale of our
LPG marketing businesses to DCC Energy.
The previously agreed sale of A/S Dansk Shell, which includes the Fredericia
refinery and local trading and supply activities in Denmark, was cancelled.
We continue to look for the right opportunities to grow our Downstream
business. In September 2017, we opened our first Mexican retail service
station on the outskirts of Mexico City. Assuming market conditions continue to
develop at their current rate, we plan to open more sites in Mexico over the
next few years.
BUSINESS AND PROPERTY
REFINING AND TRADING
Refining
We have interests in 21 refineries worldwide with the capacity to process a
total of 2.9 million barrels of crude oil per day (Shell share). Our refining
capacity is 36% in Europe and Africa, 40% in the Americas and 24% in Asia
and Oceania.
Trading and Supply
Trading and Supply trades in physical and financial contracts, lease storage
and transportation capacities, and manages shipping and wholesale
commercial fuel activities globally. This includes supplying feedstocks for our
refineries and chemical plants and finished products such as gasoline, diesel
and aviation fuel to our Marketing businesses and customers.
Operating in around 25 countries, with more than 125 Shell and joint
venture terminals, we believe our supply and distribution infrastructure is well
positioned to make deliveries around the world.
Shell Wholesale Commercial Fuels provides transport, industrial and heating
fuels. Our range of products, from reliable main-grade fuels to premium
products, is designed to provide tangible vehicle and business benefits.
MARKETING
Retail
There were more than 44,000 Shell-branded retail stations operating in over
70 countries at the end of 2017. Every day, more than 30 million customers
pass through these sites to buy fuel and convenience items, including
beverages and snacks.
We have more than 100 years’ experience in fuel development. In recent
years, aided by our innovative partnership with Scuderia Ferrari, we have
concentrated on developing fuels with special formulations designed to clean
engines and improve performance. We sold such fuels under the Shell
V-Power brand in more than 60 countries as at the end of 2017. We have
also launched a new, improved formulation across our portfolio of Shell
gasoline and diesel products in 24 markets and introduced electric vehicle
charging at Shell stations in key European markets.
Lubricants
Across more than 100 countries, we produce, market and sell technically
advanced lubricants for passenger cars, motorcycles, trucks, coaches, and
machinery used in the manufacturing, mining, power generation, agriculture
and construction sectors.
We have a global lubricants supply chain with a network of five base oil
manufacturing plants, 40 lubricant blending plants, 10 grease plants and four
GTL base oil storage hubs.
Through our marine activities, we primarily provide lubricants, but also fuels
and related technical services, to the shipping and maritime sectors. We
supply around 90 grades of lubricants and nine types of fuel to vessels
worldwide, ranging from large ocean-going tankers to small fishing boats.
Business to Business
Our Business-to-Business (B2B) activities encompass the sale of fuels and
speciality products and services to a broad range of commercial customers.
Shell Aviation has a presence at about 850 airports in around 30 countries
and refuels an aircraft every 14 seconds, on average.
Shell Bitumen supplies over 1,600 customers across 30 countries and
provides enough bitumen to resurface 450 kilometres of road lanes every
day. It also invests in technology research and development to create
innovative products.
Shell Sulphur Solutions is a business that manages the complete value chain
of sulphur, from refining to marketing. The business provides sulphur for
industries such as mining and textiles and also develops new products that
incorporate sulphur, such as fertilisers.
Pipelines
Shell Pipeline Company LP (Shell interest 100%) owns and operates seven
tank farms across the USA and transports more than 1.5 billion barrels of
crude oil and refined products a year through about 6,000 kilometres of
pipelines in the Gulf of Mexico and five US states. Our various non-Shell-
operated ownership interests provide about a further 13,000 pipeline
kilometres.
We carry more than 40 types of crude oil and more than 20 grades of
gasoline, as well as diesel, aviation fuel, chemicals and ethylene.
Shell Midstream Partners, L.P., a midstream limited partnership, owns,
operates, develops and acquires pipelines and other midstream assets. Its
assets consist of interests in entities that own pipeline systems and related
assets that serve as key infrastructure to store onshore and offshore crude oil
production, transport it to refining markets and deliver refined products to
major demand centres. Shell controls the general partner.
Biofuels
Raízen, our joint venture in Brazil (Shell interest 50%), produces ethanol from
sugar cane, with an annual production capacity of more than 2 billion litres;
exports sugar, with an annual production of about 4.2 million tonnes; and
manages a retail network. Raízen opened its first cellulosic ethanol plant at its
Costa Pinto mill in Brazil in 2015, which produced almost 10 million litres in
2017. When fully operational, the mill is expected to produce around
40 million litres a year of advanced biofuels from sugar-cane residues.
With effect from 2017, our biofuel development and hydrogen activities are
reported within Integrated Gas as part of our New Energies business. Raízen
remains within Downstream.
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Our plants produce a range of base chemicals, including ethylene, propylene
and aromatics, as well as intermediate chemicals such as styrene monomer,
propylene oxide, solvents, detergent alcohols, ethylene oxide and ethylene
glycol. We have the capacity to produce about 6 million tonnes of ethylene
a year.
Marketing
Each year, we supply more than 18 million tonnes of petrochemicals to
around 1,000 major industrial customers worldwide. Our products are used
to make numerous everyday items, from clothing and cars to detergents and
bicycle helmets.
DOWNSTREAM BUSINESS ACTIVITIES WITH IRAN,
SUDAN AND SYRIA
IRAN
Shell transactions with Iran are disclosed separately. See “Section 13(r) of the
US Securities Exchange Act of 1934 Disclosure” on page 224.
We ceased all operational activities in Sudan in 2008.
SUDAN
SYRIA
We supply limited quantities of polyols via a Netherlands-based distributor to
private sector customers in Syria. Polyols are commonly used for the
production of foam in mattresses and soft furnishings.
DOWNSTREAM DATA TABLES
The tables below reflect Shell subsidiaries and instances where Shell owns the
crude oil or feedstocks processed by a refinery. In addition, it reflects the 50%
interest in the Motiva joint venture in the USA. Other joint ventures and
associates are only included where explicitly stated. Following the Motiva
transaction in May 2017, the data in respect of assets assumed by Shell,
Oceania
such as the Norco and Convent refineries, are included on a 100% basis.
Europe
Asia
Oceania
Africa
Americas
Total
Europe
Asia
Oceania
Africa
Americas
Total
Crude oil
Feedstocks
Total
Europe
Asia
Africa
Americas
[A] Includes the Shell share of capacity entitlement (offtake rights) of joint ventures and associates, which
may be different from nominal equity interest. Nominal capacity is quoted at December 31.
Oil products – crude oil processed [A]
Thousand b/d
[A] Includes natural gas liquids, share of joint ventures and associates and processing for others.
2,471 2,617 2,761
Refinery processing intake [A]
Thousand b/d
Thousand tonnes/year
2017
2016
2015
1,702 1,702 1,702
1,904 2,222 2,222
—
—
—
—
—
—
2,267 2,235 2,235
5,873 6,159 6,159
2017
2016
892
898
528
563
—
54
—
68
2015
870
685
—
56
997 1,088 1,150
2017
2016
2015
2,364 2,317 2,596
208
384
209
2,572 2,701 2,805
892
896
539
568
—
54
—
67
903
627
—
56
1,087 1,170 1,219
2,572 2,701 2,805
Thousand b/d
2017
2016
2015
955 1,021 1,012
290
326
925
942
265
277
334
386
316
972
290
449
2,769 2,952 3,039
Oil products – cost of crude oil
processed or consumed [A]
$ per barrel
Total
[A] Includes crude oil, natural gas liquids and feedstocks processed in crude distillation units and in
secondary conversion units.
[A] Includes Upstream margin on crude oil supplied by Shell subsidiaries, joint ventures and associates.
Refinery processing outturn [A]
2017
2016
2015
46.78 34.47 40.91
Crude distillation capacity [A]
Thousand b/calendar day [B]
Gasolines
Kerosines
Gas/Diesel oils
Fuel oil
Other
Total
2017
2016
2015
970
973 1,037
704
808
816
—
82
—
82
—
82
1,176 1,223 1,219
2,932 3,086 3,154
[A] Excludes own use and products acquired for blending purposes.
Total
Europe
Asia
Oceania
Africa
Americas
Total
[A] Average operating capacity for the year, excluding mothballed capacity.
[B] Calendar day capacity is the maximum sustainable capacity adjusted for normal unit downtime.
which was due to expire in 2020. Shell’s other activities in the country are
We also manufacture premium lubricants from natural gas using GTL base oils
not impacted.
produced at our Pearl GTL plant in Qatar (see “Integrated Gas” page 26).
■ We sold our 20% interest in Vivo Energy to Vitol Africa B.V. (Vitol). As part
of the transaction, a long-term brand licence agreement was renewed with
Vitol to ensure that the Shell brand will remain visible in more than 16
countries across Africa.
■ In Australia, we sold our aviation fuel business.
■ In Hong Kong and Macau, we completed the first phase of the sale of our
LPG marketing businesses to DCC Energy.
The previously agreed sale of A/S Dansk Shell, which includes the Fredericia
refinery and local trading and supply activities in Denmark, was cancelled.
We continue to look for the right opportunities to grow our Downstream
business. In September 2017, we opened our first Mexican retail service
station on the outskirts of Mexico City. Assuming market conditions continue to
We have a global lubricants supply chain with a network of five base oil
manufacturing plants, 40 lubricant blending plants, 10 grease plants and four
GTL base oil storage hubs.
Through our marine activities, we primarily provide lubricants, but also fuels
and related technical services, to the shipping and maritime sectors. We
supply around 90 grades of lubricants and nine types of fuel to vessels
worldwide, ranging from large ocean-going tankers to small fishing boats.
Business to Business
Our Business-to-Business (B2B) activities encompass the sale of fuels and
speciality products and services to a broad range of commercial customers.
develop at their current rate, we plan to open more sites in Mexico over the
Shell Aviation has a presence at about 850 airports in around 30 countries
next few years.
and refuels an aircraft every 14 seconds, on average.
BUSINESS AND PROPERTY
REFINING AND TRADING
Refining
Shell Bitumen supplies over 1,600 customers across 30 countries and
provides enough bitumen to resurface 450 kilometres of road lanes every
day. It also invests in technology research and development to create
We have interests in 21 refineries worldwide with the capacity to process a
innovative products.
total of 2.9 million barrels of crude oil per day (Shell share). Our refining
capacity is 36% in Europe and Africa, 40% in the Americas and 24% in Asia
Shell Sulphur Solutions is a business that manages the complete value chain
and Oceania.
Trading and Supply
of sulphur, from refining to marketing. The business provides sulphur for
industries such as mining and textiles and also develops new products that
incorporate sulphur, such as fertilisers.
Trading and Supply trades in physical and financial contracts, lease storage
and transportation capacities, and manages shipping and wholesale
Pipelines
commercial fuel activities globally. This includes supplying feedstocks for our
Shell Pipeline Company LP (Shell interest 100%) owns and operates seven
refineries and chemical plants and finished products such as gasoline, diesel
and aviation fuel to our Marketing businesses and customers.
Operating in around 25 countries, with more than 125 Shell and joint
venture terminals, we believe our supply and distribution infrastructure is well
kilometres.
positioned to make deliveries around the world.
tank farms across the USA and transports more than 1.5 billion barrels of
crude oil and refined products a year through about 6,000 kilometres of
pipelines in the Gulf of Mexico and five US states. Our various non-Shell-
operated ownership interests provide about a further 13,000 pipeline
Shell Wholesale Commercial Fuels provides transport, industrial and heating
gasoline, as well as diesel, aviation fuel, chemicals and ethylene.
We carry more than 40 types of crude oil and more than 20 grades of
fuels. Our range of products, from reliable main-grade fuels to premium
products, is designed to provide tangible vehicle and business benefits.
MARKETING
Retail
Shell Midstream Partners, L.P., a midstream limited partnership, owns,
operates, develops and acquires pipelines and other midstream assets. Its
assets consist of interests in entities that own pipeline systems and related
assets that serve as key infrastructure to store onshore and offshore crude oil
concentrated on developing fuels with special formulations designed to clean
manages a retail network. Raízen opened its first cellulosic ethanol plant at its
pass through these sites to buy fuel and convenience items, including
beverages and snacks.
Biofuels
We have more than 100 years’ experience in fuel development. In recent
years, aided by our innovative partnership with Scuderia Ferrari, we have
engines and improve performance. We sold such fuels under the Shell
V-Power brand in more than 60 countries as at the end of 2017. We have
also launched a new, improved formulation across our portfolio of Shell
gasoline and diesel products in 24 markets and introduced electric vehicle
charging at Shell stations in key European markets.
Lubricants
Across more than 100 countries, we produce, market and sell technically
advanced lubricants for passenger cars, motorcycles, trucks, coaches, and
machinery used in the manufacturing, mining, power generation, agriculture
and construction sectors.
Raízen, our joint venture in Brazil (Shell interest 50%), produces ethanol from
sugar cane, with an annual production capacity of more than 2 billion litres;
exports sugar, with an annual production of about 4.2 million tonnes; and
Costa Pinto mill in Brazil in 2015, which produced almost 10 million litres in
2017. When fully operational, the mill is expected to produce around
40 million litres a year of advanced biofuels from sugar-cane residues.
With effect from 2017, our biofuel development and hydrogen activities are
reported within Integrated Gas as part of our New Energies business. Raízen
remains within Downstream.
CHEMICALS
Manufacturing
Our plants produce a range of base chemicals, including ethylene, propylene
and aromatics, as well as intermediate chemicals such as styrene monomer,
propylene oxide, solvents, detergent alcohols, ethylene oxide and ethylene
glycol. We have the capacity to produce about 6 million tonnes of ethylene
a year.
Marketing
Each year, we supply more than 18 million tonnes of petrochemicals to
around 1,000 major industrial customers worldwide. Our products are used
to make numerous everyday items, from clothing and cars to detergents and
bicycle helmets.
DOWNSTREAM BUSINESS ACTIVITIES WITH IRAN,
SUDAN AND SYRIA
IRAN
Shell transactions with Iran are disclosed separately. See “Section 13(r) of the
US Securities Exchange Act of 1934 Disclosure” on page 224.
SUDAN
We ceased all operational activities in Sudan in 2008.
SYRIA
We supply limited quantities of polyols via a Netherlands-based distributor to
private sector customers in Syria. Polyols are commonly used for the
production of foam in mattresses and soft furnishings.
DOWNSTREAM DATA TABLES
The tables below reflect Shell subsidiaries and instances where Shell owns the
crude oil or feedstocks processed by a refinery. In addition, it reflects the 50%
interest in the Motiva joint venture in the USA. Other joint ventures and
associates are only included where explicitly stated. Following the Motiva
transaction in May 2017, the data in respect of assets assumed by Shell,
such as the Norco and Convent refineries, are included on a 100% basis.
Ethylene capacity [A]
Europe
Asia
Oceania
Africa
Americas
Thousand tonnes/year
2015
2016
2017
1,702 1,702 1,702
1,904 2,222 2,222
—
—
2,267 2,235 2,235
—
—
—
—
Total
5,873 6,159 6,159
[A] Includes the Shell share of capacity entitlement (offtake rights) of joint ventures and associates, which
may be different from nominal equity interest. Nominal capacity is quoted at December 31.
Oil products – crude oil processed [A]
2017
Thousand b/d
2015
2016
Europe
Asia
Oceania
Africa
Americas
892
528
—
54
870
685
—
56
997 1,088 1,150
898
563
—
68
Total
[A] Includes natural gas liquids, share of joint ventures and associates and processing for others.
2,471 2,617 2,761
Refinery processing intake [A]
2017
Thousand b/d
2015
2016
Crude oil
Feedstocks
Total
Europe
Asia
Oceania
Africa
Americas
2,364 2,317 2,596
209
208
384
2,572 2,701 2,805
892
539
—
54
903
627
—
56
1,087 1,170 1,219
896
568
—
67
Oil products – cost of crude oil
processed or consumed [A]
$ per barrel
2017
2016
2015
Total
[A] Includes crude oil, natural gas liquids and feedstocks processed in crude distillation units and in
secondary conversion units.
2,572 2,701 2,805
Total
46.78 34.47 40.91
[A] Includes Upstream margin on crude oil supplied by Shell subsidiaries, joint ventures and associates.
Refinery processing outturn [A]
2017
Thousand b/d
2015
2016
There were more than 44,000 Shell-branded retail stations operating in over
production, transport it to refining markets and deliver refined products to
70 countries at the end of 2017. Every day, more than 30 million customers
major demand centres. Shell controls the general partner.
Crude distillation capacity [A]
Europe
Asia
Oceania
Africa
Americas
Thousand b/calendar day [B]
2015
2017
2016
970
704
—
82
973 1,037
816
808
—
—
82
82
1,176 1,223 1,219
Gasolines
Kerosines
Gas/Diesel oils
Fuel oil
Other
955 1,021 1,012
316
972
290
449
290
925
265
334
326
942
277
386
Total
[A] Excludes own use and products acquired for blending purposes.
2,769 2,952 3,039
Total
[A] Average operating capacity for the year, excluding mothballed capacity.
2,932 3,086 3,154
[B] Calendar day capacity is the maximum sustainable capacity adjusted for normal unit downtime.
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downstream Continued
Oil product sales volumes [A][B]
2017
Thousand b/d
2015
2016
Chemicals sales volumes [A]
Thousand tonnes
2015
2016
2017
Europe
Base chemicals
Intermediates and others
Total
Asia
Base chemicals
Intermediates and others
Total
Oceania
Base chemicals
Intermediates and others
Total
Africa
Base chemicals
Intermediates and others
Total
Americas
Base chemicals
Intermediates and others
Total
Total product sales
Base chemicals
Intermediates and others
Total
[A] Excludes feedstock trading and by-products.
4,059 3,670 3,000
2,056 2,073 1,936
6,115 5,743 4,936
2,515 2,200 2,319
3,243 2,927 3,576
5,758 5,127 5,895
—
—
—
—
—
—
—
—
—
—
22
22
—
—
—
—
37
37
3,839 4,041 3,036
2,527 2,359 3,244
6,366 6,400 6,280
10,413 9,911 8,355
7,826 7,381 8,793
18,239 17,292 17,148
Europe
Gasolines
Kerosines
Gas/Diesel oils
Fuel oil
Other products
Total
Asia
Gasolines
Kerosines
Gas/Diesel oils
Fuel oil
Other products
Total
Oceania
Gasolines
Kerosines
Gas/Diesel oils
Fuel oil
Other products
Total
Africa
Gasolines
Kerosines
Gas/Diesel oils
Fuel oil
Other products
Total
Americas
Gasolines
Kerosines
Gas/Diesel oils
Fuel oil
Other products
Total
Total product sales [C]
Gasolines
Kerosines
Gas/Diesel oils
Fuel oil
Other products
317
272
758
170
362
309
258
765
183
287
403
251
779
186
240
1,879 1,802 1,859
399
216
516
349
536
388
195
519
354
593
379
214
533
340
489
2,016 2,049 1,955
—
23
—
—
—
23
43
13
78
2
6
—
55
—
—
—
55
41
10
66
1
7
—
51
—
—
—
51
37
9
57
1
15
142
125
119
1,415 1,331 1,325
204
212
584
545
86
92
249
275
205
540
69
307
2,539 2,452 2,448
723
2,174 2,069 2,144
736
729
1,897 1,890 1,953
613
607
613
993
1,179 1,194
Total
[A] Excludes deliveries to other companies under reciprocal sale and purchase arrangements, which
are in the nature of exchanges. Sales of condensate and natural gas liquids are included.
[B] Includes the Shell share of Raízen’s sales volumes.
[C] Certain contracts are held for trading purposes and reported net rather than gross. The effect in
2017 was a reduction in oil product sales of approximately 596,000 b/d (2016: 839,000 b/d;
2015: 1,158,000 b/d).
6,599 6,483 6,432
MANUFACTURING PLANTS AT DECEMBER 31, 2017
Refineries in operation
Europe
Denmark
Germany
Netherlands
Asia
Japan
Pakistan
Philippines
Saudi Arabia
Singapore
Africa
Americas
Argentina
Canada
Alberta
Ontario
USA
California
Louisiana
Texas
Washington
Location
Fredericia [C]
Miro [D]
Rheinland
Schwedt [D]
Pernis
Mizue (Toa) [D]
Yamaguchi [D]
Yokkaichi [D]
Karachi [D]
Tabangao
Al Jubail [D]
Pulau Bukom
Scotford
Sarnia
Martinez
Convent [E]
Norco [E]
Deer Park
Puget Sound
Thousand barrels/calendar day, 100% capacity [B]
Asset class
Shell interest (%)
[A]
Catalytic
cracking
Hydro-
cracking
Crude
distillation
capacity
Thermal
cracking/
visbreaking/
coking
●
■●
■●
●◆
◆
●◆
●◆
■●
◆
◆
●
◆
■
■●
●◆
100
32
100
38
100
2
1
3
32
55
50
100
100
100
100
100
100
50
100
67
287
325
214
404
64
110
234
43
96
292
463
92
73
145
223
229
312
137
25
34
44
40
45
24
—
—
—
31
62
72
—
4
43
—
25
78
23
—
87
—
52
48
38
25
55
—
—
—
34
—
19
65
79
107
63
52
—
—
80
—
83
—
—
—
—
—
45
55
—
—
74
9
38
30
39
53
—
South Africa
Durban [D]
◆
36
165
23
34
Buenos Aires
●◆
100
100
18
20
[A] Shell interest is rounded to the nearest whole percentage point; Shell share of production capacity may differ.
[B] Calendar day capacity is the maximum sustainable capacity adjusted for normal unit downtime.
[C] The previously agreed sale of our Fredericia refinery has been cancelled.
[D] Not operated by Shell.
[E] In 2017, we assumed 100% ownership as a result of the Motiva transaction.
■ Integrated refinery and chemical complex.
● Refinery complex with cogeneration capacity.
◆ Refinery complex with chemical unit(s).
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Europe
Gasolines
Kerosines
Gas/Diesel oils
Fuel oil
Other products
Total
Asia
Gasolines
Kerosines
Gas/Diesel oils
Fuel oil
Other products
Total
Oceania
Gasolines
Kerosines
Gas/Diesel oils
Fuel oil
Other products
Total
Africa
Gasolines
Kerosines
Gas/Diesel oils
Fuel oil
Other products
Total
Americas
Gasolines
Kerosines
Gas/Diesel oils
Fuel oil
Other products
Total
Total product sales [C]
Gasolines
Kerosines
Gas/Diesel oils
Fuel oil
Other products
Total
1,879 1,802 1,859
Intermediates and others
Base chemicals
2,016 2,049 1,955
Base chemicals
Intermediates and others
Europe
Total
Asia
Total
Oceania
Total
Africa
Total
Americas
Base chemicals
Intermediates and others
Base chemicals
Intermediates and others
Total
Total product sales
Base chemicals
317
309
272
258
758
765
170
183
362
287
399
388
216
195
516
519
349
354
536
593
23
55
—
23
—
—
—
43
13
78
2
6
—
55
—
—
—
41
10
66
1
7
403
251
779
186
240
379
214
533
340
489
—
51
—
—
—
51
37
9
57
1
15
142
125
119
1,415 1,331 1,325
212
205
545
540
92
69
204
584
86
275
307
249
2,539 2,452 2,448
2,174 2,069 2,144
736
723
729
1,897 1,890 1,953
613
607
1,179 1,194
613
993
6,599 6,483 6,432
[A] Excludes deliveries to other companies under reciprocal sale and purchase arrangements, which
are in the nature of exchanges. Sales of condensate and natural gas liquids are included.
[B] Includes the Shell share of Raízen’s sales volumes.
[C] Certain contracts are held for trading purposes and reported net rather than gross. The effect in
2017 was a reduction in oil product sales of approximately 596,000 b/d (2016: 839,000 b/d;
2015: 1,158,000 b/d).
Oil product sales volumes [A][B]
Thousand b/d
Chemicals sales volumes [A]
2017
2016
2015
Thousand tonnes
2017
2016
2015
MANUFACTURING PLANTS AT DECEMBER 31, 2017
Refineries in operation
Base chemicals
4,059 3,670 3,000
Intermediates and others
2,056 2,073 1,936
6,115 5,743 4,936
2,515 2,200 2,319
3,243 2,927 3,576
5,758 5,127 5,895
—
—
—
—
—
—
—
—
—
—
22
22
—
—
—
—
37
37
3,839 4,041 3,036
2,527 2,359 3,244
6,366 6,400 6,280
Europe
Denmark
Germany
Netherlands
Asia
Japan
Pakistan
Philippines
Saudi Arabia
Singapore
Africa
Location
Fredericia [C]
Miro [D]
Rheinland
Schwedt [D]
Pernis
Mizue (Toa) [D]
Yamaguchi [D]
Yokkaichi [D]
Karachi [D]
Tabangao
Al Jubail [D]
Pulau Bukom
Asset class
Shell interest (%)
[A]
Thousand barrels/calendar day, 100% capacity [B]
Crude
distillation
capacity
Thermal
cracking/
visbreaking/
coking
Catalytic
cracking
Hydro-
cracking
●
■●
■●
●◆
◆
●◆
●◆
■●
100
32
100
38
100
2
1
3
32
55
50
100
67
287
325
214
404
64
110
234
43
96
292
463
25
34
44
40
45
24
—
—
—
31
62
72
—
87
—
52
48
38
25
55
—
—
—
34
10,413 9,911 8,355
Americas
South Africa
Durban [D]
◆
36
165
23
34
Buenos Aires
●◆
100
100
18
20
Intermediates and others
7,826 7,381 8,793
Total
18,239 17,292 17,148
[A] Excludes feedstock trading and by-products.
Argentina
Canada
Alberta
Ontario
USA
Scotford
Sarnia
◆
◆
California
Louisiana
Martinez
Convent [E]
Norco [E]
Deer Park
Puget Sound
[A] Shell interest is rounded to the nearest whole percentage point; Shell share of production capacity may differ.
[B] Calendar day capacity is the maximum sustainable capacity adjusted for normal unit downtime.
[C] The previously agreed sale of our Fredericia refinery has been cancelled.
[D] Not operated by Shell.
[E] In 2017, we assumed 100% ownership as a result of the Motiva transaction.
●
◆
■
■●
●◆
Texas
Washington
100
100
100
100
100
50
100
92
73
145
223
229
312
137
—
4
43
—
25
78
23
—
19
65
79
107
63
52
—
—
80
—
83
—
—
—
—
—
45
55
—
—
74
9
38
30
39
53
—
■ Integrated refinery and chemical complex.
● Refinery complex with cogeneration capacity.
◆ Refinery complex with chemical unit(s).
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downstream Continued
Major chemical plants in operation [A]
Location
Ethylene
Europe
Germany
Netherlands
UK
Asia
China
Singapore
Americas
Canada
USA
Rheinland
Moerdijk
Mossmorran [D]
Stanlow [D]
Nanhai [D]
Jurong Island
Pulau Bukom
Scotford
Deer Park
Geismar
Norco
315
972
415
—
475
281
1,148
—
836
—
1,431
Thousand tonnes/year, Shell share capacity [B]
Higher olefins
[C]
Styrene
monomer
Ethylene
glycol
—
816
—
—
320
1,069
—
—
153
—
—
175
1,158
—
—
—
—
315
—
—
—
485
—
—
—
2,690
520
—
400
—
2,406
—
—
965
—
1,280
Additional
products
A
A, I
—
I
A, I, P
A, I, P, O
A, I
A, I
A, I
I
A
Total
[A] Major chemical plants are large integrated chemical facilities, typically producing a range of chemical products from an array of feedstocks, and are a core part of our global Chemicals business.
[B] Shell share of capacity of subsidiaries, joint arrangements and associates (Shell and non-Shell-operated), excluding capacity of the Infineum additives joint ventures.
[C] Higher olefins are linear alpha and internal olefins (products range from C6-C2024).
5,873
[D] Not operated by Shell.
A Aromatics, lower olefins.
I Intermediates.
P Polyethylene, polypropylene.
O Other.
Other chemical locations [A]
Europe
Germany
Netherlands
Americas
Argentina
Canada
USA
[A] Other chemical locations reflect locations with smaller chemical units, typically serving more local markets.
A Aromatics, lower olefins.
I Intermediates.
O Other.
Location
Products
other services. The majority of the headquarters and central-function costs are
Given our dependency on IT systems for our operations and the increasing
recovered from the business segments. Those costs that are not recovered are
role of digital technologies across our business, we are aware that cyber
Karlsruhe
Schwedt
Pernis
Buenos Aires
Sarnia
Martinez
Mobile
Puget Sound
A
A
A, I, O
I
A, I
O
A
I
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Corporate
Earnings
Segment earnings
Comprising:
Net interest and investment expense [A]
Net foreign exchange gains/(losses) [B]
Taxation and other [C]
entities’ portfolio of debt securities.
2017
2016
(2,416 )
(1,751 )
(2,413 )
(1,824 )
(292 )
289
3
70
$ million
2015
(425 )
(995 )
(731)
1,301
[A] Mainly Shell’s interest expense (excluding accretion expense) and interest income, together with the Shell share of joint ventures and associates’ net interest expense, and net gains on sales from Shell insurance
[B] On Shell’s financing activities, together with the Shell share of joint ventures and associates’ net foreign exchange gains/(losses) on financing activities.
[C] Other earnings mainly comprise headquarters and central functions’ costs not recovered from business segments, and net gains on sale of properties.
OVERVIEW
SELF-INSURANCE
The Corporate segment covers the non-operating activities supporting Shell.
We mainly rely on self-insurance for many of our risk exposures and capital is
It comprises Shell’s holdings and treasury organisation, its self-insurance
set aside to meet self-insurance obligations (see “Risk factors” on page 15).
activities and its headquarters and central functions. All finance expense and
We seek to ensure that the capital held to support the self-insurance
income as well as related taxes are included in the Corporate segment
obligations is at a level at least equivalent to what would be held in the third-
earnings rather than in the earnings of the business segments.
party insurance market. Periodically, surveys of key assets are undertaken that
provide risk-engineering knowledge and best practices to Shell subsidiaries
The holdings and treasury organisation manages many of the Corporate
with the aim to reduce their exposure to hazard risks. Actions identified during
entities and is the point of contact between Shell and external capital markets.
these surveys are monitored to completion.
It conducts a broad range of transactions – from raising debt instruments to
transacting foreign exchange. Treasury centres in London and Singapore
support these activities.
INFORMATION TECHNOLOGY AND CYBER SECURITY
Given our reliance on information technology (IT) systems for our operations,
we continuously monitor external developments and share information on
Headquarters and central functions provide business support in the areas of
threats and security incidents. Shell employees and contract staff are subject
communications, finance, health, human resources, information technology,
to mandatory courses and regular awareness campaigns, aimed at protecting
legal services, real estate and security. They also provide support for the
us against cyber threats. We periodically review and adapt our disaster
shareholder-related activities of the Company. The central functions are
recovery plans and security response processes, and seek to enhance our
supported by business service centres located around the world, which
security monitoring capability.
process transactions, manage data and produce statutory returns, among
security attacks can cause significant harm to Shell in the form of loss of
productivity, loss of intellectual property, regulatory fines and/or reputational
damage. As a result, we continuously measure and, where required, further
improve our cyber-security capabilities to reduce the likelihood of successful
cyber-attacks. Our cyber-security capabilities are embedded into our IT
systems and our IT landscape is protected by various detective and protective
technologies. The identification and assessment capabilities are built into our
support processes and the Shell workforce behaviour is influenced through
mandatory information security training and awareness campaigns. The
security of IT services, operated by external IT security companies, is
managed through contractual security requirements and assurance reports.
Shell is frequently subject to cyber-security attacks. In 2017, none of these
events led to breaches of our business-critical IT landscape and, as such, did
not result in any material business impact. When significant incidents occur,
they are followed up with a thorough root-cause analysis and, if needed, will
result in taking appropriate follow-up actions.
See “Risk factors” on page 15.
retained in Corporate.
EARNINGS 2017-2015
Segment earnings in 2017 were a loss of $2,416 million, compared with a
loss of $1,751 million in 2016 and a loss of $425 million in 2015.
Net interest and investment expense increased by $589 million between
2016 and 2017. Interest expense increased due to the inclusion of a full
year of interest on debt assumed on the BG acquisition in 2016, finance
leases entered into during 2017 and higher interest rates (see Note 14 to the
“Consolidated Financial Statements” on pages 157-159). In 2016, net
interest and investment expense increased by $829 million compared with
2015. Interest expense was higher, driven by additional bond issuances for
the BG acquisition and additional debt, including finance leases, assumed on
the acquisition.
Net foreign exchange gains/(losses) generally relate to the impact of
changes in exchange rates on non-functional currency loans and cash
balances in operating units. In 2017, they included a charge of $545 million
from the release of cumulative currency translation differences following the
restructuring of funding for our North America businesses.
Taxation and other earnings increased by $219 million in 2017, compared
with 2016. Lower costs in 2017, mainly due to 2016 costs incurred in
connection with the BG acquisition and integration, were partly offset by a
charge in 2017 due to US tax reform legislation. Other earnings in 2015
included a gain on the sale of an office building in the UK.
Major chemical plants in operation [A]
Location
Ethylene
Thousand tonnes/year, Shell share capacity [B]
Styrene
monomer
Ethylene
glycol
Higher olefins
Additional
products
Europe
Germany
Netherlands
UK
Asia
China
Singapore
Americas
Canada
USA
Total
Rheinland
Moerdijk
Mossmorran [D]
Stanlow [D]
Nanhai [D]
Jurong Island
Pulau Bukom
Scotford
Deer Park
Geismar
Norco
315
972
415
—
475
281
1,148
—
836
—
1,431
5,873
—
816
—
—
320
1,069
—
485
—
—
—
—
153
—
—
175
1,158
—
520
—
400
—
[C]
—
—
—
315
—
—
—
—
—
965
—
1,280
A, I, P
A, I, P, O
A
A, I
—
I
A, I
A, I
A, I
I
A
[A] Major chemical plants are large integrated chemical facilities, typically producing a range of chemical products from an array of feedstocks, and are a core part of our global Chemicals business.
[B] Shell share of capacity of subsidiaries, joint arrangements and associates (Shell and non-Shell-operated), excluding capacity of the Infineum additives joint ventures.
[C] Higher olefins are linear alpha and internal olefins (products range from C6-C2024).
2,690
2,406
[D] Not operated by Shell.
A Aromatics, lower olefins.
I Intermediates.
P Polyethylene, polypropylene.
O Other.
Other chemical locations [A]
Europe
Germany
Netherlands
Americas
Argentina
Canada
USA
A Aromatics, lower olefins.
I Intermediates.
O Other.
[A] Other chemical locations reflect locations with smaller chemical units, typically serving more local markets.
Location
Products
Karlsruhe
Schwedt
Pernis
Buenos Aires
Sarnia
Martinez
Mobile
Puget Sound
A
A
A, I, O
A, I
O
A
I
I
Corporate
Corporate
Earnings
Segment earnings
Comprising:
Net interest and investment expense [A]
Net foreign exchange gains/(losses) [B]
Taxation and other [C]
2017
2016
(2,416 )
(1,751 )
(2,413 )
(292 )
289
(1,824 )
3
70
$ million
2015
(425 )
(995 )
(731)
1,301
[A] Mainly Shell’s interest expense (excluding accretion expense) and interest income, together with the Shell share of joint ventures and associates’ net interest expense, and net gains on sales from Shell insurance
entities’ portfolio of debt securities.
[B] On Shell’s financing activities, together with the Shell share of joint ventures and associates’ net foreign exchange gains/(losses) on financing activities.
[C] Other earnings mainly comprise headquarters and central functions’ costs not recovered from business segments, and net gains on sale of properties.
OVERVIEW
The Corporate segment covers the non-operating activities supporting Shell.
It comprises Shell’s holdings and treasury organisation, its self-insurance
activities and its headquarters and central functions. All finance expense and
income as well as related taxes are included in the Corporate segment
earnings rather than in the earnings of the business segments.
The holdings and treasury organisation manages many of the Corporate
entities and is the point of contact between Shell and external capital markets.
It conducts a broad range of transactions – from raising debt instruments to
transacting foreign exchange. Treasury centres in London and Singapore
support these activities.
Headquarters and central functions provide business support in the areas of
communications, finance, health, human resources, information technology,
legal services, real estate and security. They also provide support for the
shareholder-related activities of the Company. The central functions are
supported by business service centres located around the world, which
process transactions, manage data and produce statutory returns, among
other services. The majority of the headquarters and central-function costs are
recovered from the business segments. Those costs that are not recovered are
retained in Corporate.
EARNINGS 2017-2015
Segment earnings in 2017 were a loss of $2,416 million, compared with a
loss of $1,751 million in 2016 and a loss of $425 million in 2015.
Net interest and investment expense increased by $589 million between
2016 and 2017. Interest expense increased due to the inclusion of a full
year of interest on debt assumed on the BG acquisition in 2016, finance
leases entered into during 2017 and higher interest rates (see Note 14 to the
“Consolidated Financial Statements” on pages 157-159). In 2016, net
interest and investment expense increased by $829 million compared with
2015. Interest expense was higher, driven by additional bond issuances for
the BG acquisition and additional debt, including finance leases, assumed on
the acquisition.
Net foreign exchange gains/(losses) generally relate to the impact of
changes in exchange rates on non-functional currency loans and cash
balances in operating units. In 2017, they included a charge of $545 million
from the release of cumulative currency translation differences following the
restructuring of funding for our North America businesses.
Taxation and other earnings increased by $219 million in 2017, compared
with 2016. Lower costs in 2017, mainly due to 2016 costs incurred in
connection with the BG acquisition and integration, were partly offset by a
charge in 2017 due to US tax reform legislation. Other earnings in 2015
included a gain on the sale of an office building in the UK.
SELF-INSURANCE
We mainly rely on self-insurance for many of our risk exposures and capital is
set aside to meet self-insurance obligations (see “Risk factors” on page 15).
We seek to ensure that the capital held to support the self-insurance
obligations is at a level at least equivalent to what would be held in the third-
party insurance market. Periodically, surveys of key assets are undertaken that
provide risk-engineering knowledge and best practices to Shell subsidiaries
with the aim to reduce their exposure to hazard risks. Actions identified during
these surveys are monitored to completion.
INFORMATION TECHNOLOGY AND CYBER SECURITY
Given our reliance on information technology (IT) systems for our operations,
we continuously monitor external developments and share information on
threats and security incidents. Shell employees and contract staff are subject
to mandatory courses and regular awareness campaigns, aimed at protecting
us against cyber threats. We periodically review and adapt our disaster
recovery plans and security response processes, and seek to enhance our
security monitoring capability.
Given our dependency on IT systems for our operations and the increasing
role of digital technologies across our business, we are aware that cyber
security attacks can cause significant harm to Shell in the form of loss of
productivity, loss of intellectual property, regulatory fines and/or reputational
damage. As a result, we continuously measure and, where required, further
improve our cyber-security capabilities to reduce the likelihood of successful
cyber-attacks. Our cyber-security capabilities are embedded into our IT
systems and our IT landscape is protected by various detective and protective
technologies. The identification and assessment capabilities are built into our
support processes and the Shell workforce behaviour is influenced through
mandatory information security training and awareness campaigns. The
security of IT services, operated by external IT security companies, is
managed through contractual security requirements and assurance reports.
Shell is frequently subject to cyber-security attacks. In 2017, none of these
events led to breaches of our business-critical IT landscape and, as such, did
not result in any material business impact. When significant incidents occur,
they are followed up with a thorough root-cause analysis and, if needed, will
result in taking appropriate follow-up actions.
See “Risk factors” on page 15.
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Liquidity and capital resources
Liquidity and capital resources
We manage our businesses to deliver strong cash flows to fund investment for
profitable growth. Our aim is that, across the business cycle, “cash in”
(including cash from operations and divestments) at least equals “cash out”
(including capital expenditure, interest and dividends), while maintaining a
strong balance sheet. Our priorities for applying our cash are the servicing
and reduction of debt commitments, payment of dividends, followed by a
balance of capital investment and share buybacks.
FINANCIAL CONDITION AND LIQUIDITY
Strong operational performance in 2017, together with improved market
conditions and proceeds from our divestment programme, supported a
reduction in gearing to 24.8% at December 31, 2017 (2016: 28.0%). The
acquisition of BG Group plc (BG) in 2016 had increased gearing by 9.7%.
Gearing, defined as net debt (total debt less cash and cash equivalents) as a
percentage of total capital (net debt plus total equity), is a key measure of our
capital structure. Across the business cycle, we aim to manage gearing within
a range of 0-30%. Note 14 to the “Consolidated Financial Statements” on
pages 157-159 provides information on our debt arrangements, including
gearing.
We are affected by the global macroeconomic environment as well as
financial and commodity market conditions. This exposes us to treasury and
trading risks, including liquidity risk, market risk (interest rate risk, foreign
exchange risk and commodity price risk) and credit risk. See “Risk factors” on
page 14 and Note 19 to the “Consolidated Financial Statements” on pages
167-172. The size and scope of our businesses require a robust financial
control framework and effective management of our various risk exposures.
LIQUIDITY
We satisfy our funding and working capital requirements from the cash
generated from our operations, the issuance of debt and divestments. In
2017, access to the international debt capital markets remained strong,
with our debt principally financed from these markets through central debt
programmes consisting of:
While our subsidiaries are subject to restrictions, such as foreign withholding
taxes on the transfer of funds in the form of cash dividends, loans or
advances, such restrictions are not expected to have a material impact on our
ability to meet our cash obligations.
MARKET RISK AND CREDIT RISK
In the normal course of business, financial instruments of various kinds are
used for the purposes of managing exposure to commodity price, foreign
exchange and interest rate movements. Our treasury and trading operations
are highly centralised, and seek to manage credit exposures associated with
our substantial cash, commodity, foreign exchange and interest rate positions.
Our portfolio of cash investments is diversified to avoid concentrating risk in
any one instrument, country, or counterparty. We monitor our investments and
adjust them in light of new market information. Exposure to failed financial
and trading counterparties was not material in 2017. Treasury standards are
applicable to all our subsidiaries, and each subsidiary is required to adopt a
treasury policy consistent with these standards. Other than in exceptional
cases, the use of external derivative instruments is confined to specialist
trading and central treasury organisations that have appropriate skills,
experience, supervision, control and reporting systems.
PENSION COMMITMENTS
We have substantial pension commitments, whose funding is subject to
capital market risks (see “Risk factors” on page 15). We address key pension
risks in a number of ways. Principal among these is the Pensions Forum,
chaired by the Chief Financial Officer, which provides guidance on Shell’s
input to pension strategy, policy and operation. The forum is supported by a
risk committee in reviewing the results of assurance processes with respect to
pension risks. In general, local trustees manage the funded defined benefit
pension plans and set the required contributions based on independent
actuarial valuations in accordance with local regulations. Our total employer
contributions to defined benefit pension plans were $1.8 billion in 2017 and
are estimated to be $1.0 billion in 2018.
■ a $10 billion global commercial paper (CP) programme, with maturities
Capitalisation table
not exceeding 270 days;
■ a $10 billion US CP programme, with maturities not exceeding 397 days;
■ an unlimited Euro medium-term note (EMTN) programme (also referred to as
the Multi-Currency Debt Securities Programme); and
■ an unlimited US universal shelf (US shelf) registration.
All these CP, EMTN and US shelf issuances are issued by Shell International
Finance B.V., the issuance company for Shell, with its debt being guaranteed
by Royal Dutch Shell plc (the Company).
We also maintain a committed credit facility, which was increased in
February 2017 to $8.5 billion from $7.5 billion and expires in 2020.
It remained undrawn at December 31, 2017. This facility and internally
available liquidity provide back-up coverage for our CP programmes. Other
than certain borrowing by local subsidiaries, we do not have any other
committed credit facilities.
Our total debt decreased by $6.8 billion in 2017 to $85.7 billion at
December 31, 2017. The amount excluding finance leases will mature as
follows: 15% in 2018; 12% in 2019; 9% in 2020; 7% in 2021; and 57%
in 2022 and beyond. The portion of debt maturing in 2018 is expected to
be repaid from a combination of cash balances, cash generated from
operations, divestments and the issuance of new debt.
In 2017, we did not issue any bonds under our US shelf registration or
EMTN programme. Periodically, we did issue CP. We believe our current
working capital is sufficient for our present requirements.
Equity attributable to Royal Dutch Shell
plc shareholders
Current debt
Non-current debt
Total debt [A]
Dec 31, 2017
$ million
Dec 31, 2016
194,356
11,795
73,870
85,665
186,646
9,484
82,992
92,476
Total capitalisation
[A] Of total debt, $70.1 billion (2016: $77.7 billion) was unsecured and $15.6 billion (2016:
$14.8 billion) was secured. See Note 14 to the “Consolidated Financial Statements” on
pages 157-159 for further disclosure on debt.
280,021
279,122
The consolidated ratio of earnings to fixed charges of Shell for each of the
five years ended December 31, 2013-2017, is as follows:
Ratio of earnings to fixed charges [A]
2016
2017
2015
2014
2013
Ratio of earnings
to fixed charges
[A] See “Exhibit 7.1” on page E1 for the calculation of the ratio of earnings to fixed charges.
5.28 2.47 1.93 14.41 20.11
STATEMENT OF CASH FLOWS
prices of crude oil and natural gas in any particular period therefore provide
Cash flow from operating activities in 2017 was an inflow of $35.7 billion.
only a broad indicator of changes in our Integrated Gas and Upstream
The increase from $20.6 billion in 2016 was mainly due to higher earnings.
earnings in that period. In the longer term, replacement of proved oil and gas
The decrease in cash flow from operating activities in 2016 compared with
reserves will affect our ability to maintain or increase production levels, which
$29.8 billion in 2015 mainly reflected unfavourable working capital impacts.
in turn will affect our earnings and cash flows. Changes in any one of a
Cash flow from investing activities in 2017 was an outflow of $8.0 billion,
compared with $31.0 billion in 2016. The decrease was mainly due to the
acquisition of BG in 2016 and higher proceeds from the sale of assets in
2017 compared with 2016. The increased cash outflow in 2016 compared
with $22.4 billion in 2015 was mainly due to the acquisition of BG.
Cash flow from financing activities in 2017 was an outflow of $27.1 billion
compared with an outflow of $0.8 billion in 2016 and an inflow of
$3.8 billion in 2015. In 2017, this included net repayment of debt of
$11.8 billion (2016: $11.1 billion net issuance of debt; 2015:
$14.9 billion net issuance of debt), payment of dividends to Royal Dutch
Shell plc shareholders of $10.9 billion (2016: $9.7 billion; 2015:
$9.4 billion) and interest paid of $3.6 billion (2016: $2.9 billion; 2015:
$1.7 billion).
range of factors derived from either within the industry or the broader
economic environment can influence refining and marketing margins. The
precise impact of any such changes depends on how the oil markets respond
to them. The market response is affected by factors such as: whether the
change affects all crude oil types or only a specific grade; regional and
global crude-oil and refined-products inventories; and the collective speed of
response of refiners and product marketers in adjusting their operations. As a
result, margins fluctuate from region to region and from period to period.
CAPITAL INVESTMENT
The reduction in organic capital investment in 2017 compared with 2016,
and in 2016 compared with 2015, reflects our decision to curtail spending
by reducing the number of new investments and implementing lower-cost
development solutions. The decrease in inorganic capital investment in 2017
compared with 2016 was mainly due to the BG acquisition in 2016.
Cash and cash equivalents were $20.3 billion at December 31, 2017
(2016: $19.1 billion; 2015: $31.8 billion).
Capital investment [A]
CASH FLOW FROM OPERATING ACTIVITIES
The most significant factors affecting our cash flow from operating activities
are earnings, which are mainly impacted by: realised prices for crude oil,
natural gas and liquefied natural gas (LNG); production levels of crude oil,
natural gas and LNG; refining and marketing margins; and movements in
working capital.
The impact on earnings from changes in market prices depends on: the extent
to which contractual arrangements are tied to market prices; the dynamics of
production-sharing contracts; the existence of agreements with governments or
state-owned oil and gas companies that have limited sensitivity to crude oil
and natural gas prices; tax impacts; and the extent to which changes in
commodity prices flow through into operating costs. Changes in benchmark
Integrated Gas
Upstream
Downstream
Corporate
Of which:
$ million
2017
2016
2015
3,827 26,214 5,178
13,648 47,507 18,349
6,416 6,057 5,119
115
99
215
Total capital investment
24,006 79,877 28,861
Organic capital investment
22,177 26,913 28,403
Inorganic capital investment
1,829 52,964
458
[A] See “Non-GAAP measures reconciliations” on page 225.
Cash flow information [A]
Cash flow from operating activities excluding working capital movements
2017
2016
$ billion
2015
Integrated Gas
Upstream
Downstream
Corporate
Total
(Increase)/decrease in inventories
(Increase)/decrease in current receivables
Increase/(decrease) in current payables
(Increase)/decrease in working capital
Cash flow from operating activities
Cash flow from investing activities
Cash flow from financing activities
Currency translation differences relating to cash and cash equivalents
Increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
[A] See the “Consolidated Statement of Cash Flows” on page 141.
8.6
16.8
12.8
0.6
38.8
(2.0 )
(1.7 )
0.6
(3.1 )
35.7
(8.0 )
(27.1 )
0.6
1.2
19.1
20.3
6.3
10.5
9.8
0.3
26.9
(5.6 )
2.0
(2.7 )
(6.3 )
20.6
(31.0 )
(0.8 )
(1.5 )
(12.7 )
31.8
19.1
8.2
5.0
10.6
0.5
24.3
2.8
9.9
(7.2)
5.5
29.8
(22.4)
3.8
(1.0)
10.2
21.6
31.8
STRATEGIC REPORT SHELL ANNUAL REPORT AND FORM 20-F 2017
54
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Liquidity and capital resources
We manage our businesses to deliver strong cash flows to fund investment for
While our subsidiaries are subject to restrictions, such as foreign withholding
profitable growth. Our aim is that, across the business cycle, “cash in”
taxes on the transfer of funds in the form of cash dividends, loans or
(including cash from operations and divestments) at least equals “cash out”
advances, such restrictions are not expected to have a material impact on our
(including capital expenditure, interest and dividends), while maintaining a
ability to meet our cash obligations.
strong balance sheet. Our priorities for applying our cash are the servicing
and reduction of debt commitments, payment of dividends, followed by a
balance of capital investment and share buybacks.
FINANCIAL CONDITION AND LIQUIDITY
MARKET RISK AND CREDIT RISK
In the normal course of business, financial instruments of various kinds are
used for the purposes of managing exposure to commodity price, foreign
exchange and interest rate movements. Our treasury and trading operations
Strong operational performance in 2017, together with improved market
are highly centralised, and seek to manage credit exposures associated with
conditions and proceeds from our divestment programme, supported a
our substantial cash, commodity, foreign exchange and interest rate positions.
reduction in gearing to 24.8% at December 31, 2017 (2016: 28.0%). The
Our portfolio of cash investments is diversified to avoid concentrating risk in
acquisition of BG Group plc (BG) in 2016 had increased gearing by 9.7%.
any one instrument, country, or counterparty. We monitor our investments and
Gearing, defined as net debt (total debt less cash and cash equivalents) as a
adjust them in light of new market information. Exposure to failed financial
percentage of total capital (net debt plus total equity), is a key measure of our
and trading counterparties was not material in 2017. Treasury standards are
capital structure. Across the business cycle, we aim to manage gearing within
applicable to all our subsidiaries, and each subsidiary is required to adopt a
a range of 0-30%. Note 14 to the “Consolidated Financial Statements” on
treasury policy consistent with these standards. Other than in exceptional
pages 157-159 provides information on our debt arrangements, including
cases, the use of external derivative instruments is confined to specialist
gearing.
trading and central treasury organisations that have appropriate skills,
experience, supervision, control and reporting systems.
We are affected by the global macroeconomic environment as well as
financial and commodity market conditions. This exposes us to treasury and
PENSION COMMITMENTS
trading risks, including liquidity risk, market risk (interest rate risk, foreign
We have substantial pension commitments, whose funding is subject to
exchange risk and commodity price risk) and credit risk. See “Risk factors” on
capital market risks (see “Risk factors” on page 15). We address key pension
page 14 and Note 19 to the “Consolidated Financial Statements” on pages
risks in a number of ways. Principal among these is the Pensions Forum,
167-172. The size and scope of our businesses require a robust financial
chaired by the Chief Financial Officer, which provides guidance on Shell’s
control framework and effective management of our various risk exposures.
input to pension strategy, policy and operation. The forum is supported by a
LIQUIDITY
We satisfy our funding and working capital requirements from the cash
generated from our operations, the issuance of debt and divestments. In
2017, access to the international debt capital markets remained strong,
risk committee in reviewing the results of assurance processes with respect to
pension risks. In general, local trustees manage the funded defined benefit
pension plans and set the required contributions based on independent
actuarial valuations in accordance with local regulations. Our total employer
contributions to defined benefit pension plans were $1.8 billion in 2017 and
with our debt principally financed from these markets through central debt
are estimated to be $1.0 billion in 2018.
programmes consisting of:
not exceeding 270 days;
■ a $10 billion global commercial paper (CP) programme, with maturities
Capitalisation table
■ a $10 billion US CP programme, with maturities not exceeding 397 days;
■ an unlimited Euro medium-term note (EMTN) programme (also referred to as
Equity attributable to Royal Dutch Shell
the Multi-Currency Debt Securities Programme); and
■ an unlimited US universal shelf (US shelf) registration.
plc shareholders
Current debt
Non-current debt
Total debt [A]
All these CP, EMTN and US shelf issuances are issued by Shell International
Finance B.V., the issuance company for Shell, with its debt being guaranteed
Total capitalisation
280,021
279,122
Dec 31, 2017
Dec 31, 2016
$ million
194,356
186,646
11,795
73,870
85,665
9,484
82,992
92,476
by Royal Dutch Shell plc (the Company).
We also maintain a committed credit facility, which was increased in
February 2017 to $8.5 billion from $7.5 billion and expires in 2020.
It remained undrawn at December 31, 2017. This facility and internally
available liquidity provide back-up coverage for our CP programmes. Other
than certain borrowing by local subsidiaries, we do not have any other
committed credit facilities.
Our total debt decreased by $6.8 billion in 2017 to $85.7 billion at
December 31, 2017. The amount excluding finance leases will mature as
follows: 15% in 2018; 12% in 2019; 9% in 2020; 7% in 2021; and 57%
in 2022 and beyond. The portion of debt maturing in 2018 is expected to
be repaid from a combination of cash balances, cash generated from
operations, divestments and the issuance of new debt.
In 2017, we did not issue any bonds under our US shelf registration or
EMTN programme. Periodically, we did issue CP. We believe our current
working capital is sufficient for our present requirements.
[A] Of total debt, $70.1 billion (2016: $77.7 billion) was unsecured and $15.6 billion (2016:
$14.8 billion) was secured. See Note 14 to the “Consolidated Financial Statements” on
pages 157-159 for further disclosure on debt.
The consolidated ratio of earnings to fixed charges of Shell for each of the
five years ended December 31, 2013-2017, is as follows:
Ratio of earnings to fixed charges [A]
2017
2016
2015
2014
2013
Ratio of earnings
to fixed charges
[A] See “Exhibit 7.1” on page E1 for the calculation of the ratio of earnings to fixed charges.
5.28 2.47 1.93 14.41 20.11
STATEMENT OF CASH FLOWS
Cash flow from operating activities in 2017 was an inflow of $35.7 billion.
The increase from $20.6 billion in 2016 was mainly due to higher earnings.
The decrease in cash flow from operating activities in 2016 compared with
$29.8 billion in 2015 mainly reflected unfavourable working capital impacts.
Cash flow from investing activities in 2017 was an outflow of $8.0 billion,
compared with $31.0 billion in 2016. The decrease was mainly due to the
acquisition of BG in 2016 and higher proceeds from the sale of assets in
2017 compared with 2016. The increased cash outflow in 2016 compared
with $22.4 billion in 2015 was mainly due to the acquisition of BG.
Cash flow from financing activities in 2017 was an outflow of $27.1 billion
compared with an outflow of $0.8 billion in 2016 and an inflow of
$3.8 billion in 2015. In 2017, this included net repayment of debt of
$11.8 billion (2016: $11.1 billion net issuance of debt; 2015:
$14.9 billion net issuance of debt), payment of dividends to Royal Dutch
Shell plc shareholders of $10.9 billion (2016: $9.7 billion; 2015:
$9.4 billion) and interest paid of $3.6 billion (2016: $2.9 billion; 2015:
$1.7 billion).
prices of crude oil and natural gas in any particular period therefore provide
only a broad indicator of changes in our Integrated Gas and Upstream
earnings in that period. In the longer term, replacement of proved oil and gas
reserves will affect our ability to maintain or increase production levels, which
in turn will affect our earnings and cash flows. Changes in any one of a
range of factors derived from either within the industry or the broader
economic environment can influence refining and marketing margins. The
precise impact of any such changes depends on how the oil markets respond
to them. The market response is affected by factors such as: whether the
change affects all crude oil types or only a specific grade; regional and
global crude-oil and refined-products inventories; and the collective speed of
response of refiners and product marketers in adjusting their operations. As a
result, margins fluctuate from region to region and from period to period.
CAPITAL INVESTMENT
The reduction in organic capital investment in 2017 compared with 2016,
and in 2016 compared with 2015, reflects our decision to curtail spending
by reducing the number of new investments and implementing lower-cost
development solutions. The decrease in inorganic capital investment in 2017
compared with 2016 was mainly due to the BG acquisition in 2016.
Cash and cash equivalents were $20.3 billion at December 31, 2017
(2016: $19.1 billion; 2015: $31.8 billion).
Capital investment [A]
2017
2016
$ million
2015
CASH FLOW FROM OPERATING ACTIVITIES
The most significant factors affecting our cash flow from operating activities
are earnings, which are mainly impacted by: realised prices for crude oil,
natural gas and liquefied natural gas (LNG); production levels of crude oil,
natural gas and LNG; refining and marketing margins; and movements in
working capital.
The impact on earnings from changes in market prices depends on: the extent
to which contractual arrangements are tied to market prices; the dynamics of
production-sharing contracts; the existence of agreements with governments or
state-owned oil and gas companies that have limited sensitivity to crude oil
and natural gas prices; tax impacts; and the extent to which changes in
commodity prices flow through into operating costs. Changes in benchmark
Cash flow information [A]
Cash flow from operating activities excluding working capital movements
Integrated Gas
Upstream
Downstream
Corporate
Total
(Increase)/decrease in inventories
(Increase)/decrease in current receivables
Increase/(decrease) in current payables
(Increase)/decrease in working capital
Cash flow from operating activities
Cash flow from investing activities
Cash flow from financing activities
Currency translation differences relating to cash and cash equivalents
Increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
[A] See the “Consolidated Statement of Cash Flows” on page 141.
Integrated Gas
Upstream
Downstream
Corporate
Total capital investment
Of which:
3,827 26,214 5,178
13,648 47,507 18,349
6,416 6,057 5,119
215
115
99
24,006 79,877 28,861
Organic capital investment
Inorganic capital investment
22,177 26,913 28,403
458
1,829 52,964
[A] See “Non-GAAP measures reconciliations” on page 225.
2017
2016
$ billion
2015
8.6
16.8
12.8
0.6
38.8
(2.0 )
(1.7 )
0.6
(3.1 )
35.7
(8.0 )
(27.1 )
0.6
1.2
19.1
20.3
6.3
10.5
9.8
0.3
26.9
(5.6 )
2.0
(2.7 )
(6.3 )
20.6
(31.0 )
(0.8 )
(1.5 )
(12.7 )
31.8
19.1
8.2
5.0
10.6
0.5
24.3
2.8
9.9
(7.2)
5.5
29.8
(22.4)
3.8
(1.0)
10.2
21.6
31.8
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Liquidity and capital resources Continued
DIVESTMENTS
In 2017, we continued to divest assets that fail to deliver competitive
performance or no longer meet our longer-term strategic objectives, including
assets in Canada, the UK, Australia, the USA and Saudi Arabia. We also
sold part of our interest in Shell Midstream Partners, L.P., while retaining
control.
Divestments [A]
Integrated Gas
Upstream
Downstream
Corporate
2017 2016[B]
$ million
2015
352
269
3,077
11,542 1,726 2,478
2,703 2,889 2,282
511
18
17
Total
[A] See “Non-GAAP measures reconciliations” on page 225.
[B] As adjusted, see “Non-GAAP measures reconciliations” on page 225.
17,340 4,984 5,540
DIVIDENDS
Our policy is to grow the dollar dividend through time, in line with our view
of our underlying earnings and cash flow. When setting the dividend, the
Board of Directors looks at a range of factors, including the macroeconomic
environment, the current balance sheet and future investment plans.
We returned $15.6 billion to our shareholders through dividends in 2017.
Some of those dividends were paid out in 168.2 million shares issued to
shareholders who had elected to receive new shares instead of cash, under
our Scrip Dividend Programme. The Scrip Dividend Programme has been
cancelled with effect from the fourth quarter 2017 interim dividend.
The fourth quarter 2017 interim dividend of $0.47 per share will be payable
to shareholders on the register at February 16, 2018. See Note 23 to the
“Consolidated Financial Statements” on page 175. The Board expects that
the first quarter 2018 interim dividend will be $0.47 per share, equal to the
US dollar dividend for the same quarter in 2017.
PURCHASES OF SECURITIES
At the 2017 Annual General Meeting (AGM), shareholders granted an
authority, which expires at the end of the 2018 AGM, for the Company to
repurchase up to a maximum of 817 million of its shares (excluding purchases
for employee share plans). While no share repurchases for cancellation were
made during 2017, the Board continues to regard the ability to repurchase
issued shares in suitable circumstances as an important part of Shell’s
financial management. At Management Day in November 2017, we
confirmed our intention to undertake a share buyback programme of at least
$25 billion in the period 2017 to 2020, subject to progress with debt
reduction and recovery in oil prices. A resolution will be proposed at the
2018 AGM to renew the authority for the Company to purchase its own
share capital, up to specified limits, for a further year. This proposal will be
described in more detail in the Notice of Annual General Meeting.
Shares are also purchased by the employee share ownership trusts and trust-
like entities (see the “Directors’ Report” on page 75) to meet delivery
commitments under employee share plans. All share purchases are made in
open-market transactions.
The table below provides information on purchases of shares in 2017 by the
issuer and affiliated purchasers. Purchases in euros and sterling are converted
into dollars using the exchange rate on each transaction date.
Purchases of equity securities by issuer and affiliated purchasers in 2017 [A]
Purchase period
January
February
March
April
May
June
July
August
September
October
November
December
Number
purchased
for employee
share plans
A shares
Weighted
average
price ($)[C]
Number
purchased
for employee
share plans
B shares
Weighted
average
price ($)[C]
—
—
2,612,020
—
—
—
—
—
7,404,400
2,908,530
—
—
12,924,950
—
—
26.39
—
—
—
—
—
29.59
30.06
—
—
29.05
—
—
103,495
—
—
51,807
—
—
50,058
—
—
40,255
245,615
—
—
27.49
—
—
27.63
—
—
29.85
—
—
33.42
28.97
Number
purchased
for employee
share plans
1,142,102
—
—
—
—
—
—
—
—
—
—
4,237,129
5,379,231
A ADSs[B]
Weighted
average
price ($)[C]
55.62
—
—
—
—
—
—
—
—
—
—
65.14
63.12
Total 2017
[A] Excludes shares issued to affiliated purchasers pursuant to the Scrip Dividend Programme.
[B] American Depository Shares.
[C] Includes stamp duty and brokers’ commission.
CONTRACTUAL OBLIGATIONS
The table below summarises our principal contractual obligations at
December 31, 2017, by expected settlement period. The amounts presented
have not been offset by any committed third-party revenue in relation to these
obligations.
Contractual obligations
$ billion
Between
Between
Less than
1 and 3
3 and 5
5 years
1 year
years
years
and later
Total
10.7 14.4 9.9 35.0
2.3 4.2 4.0 15.1
4.8 7.2 5.8 5.7
70.0
25.6
23.5
Debt [A]
Finance leases [A]
Operating leases [A]
Other long-term
contractual liabilities [C]
Total
Purchase obligations [B]
135.4 83.5 45.5 131.4 395.8
— 0.7 0.3 1.0
2.0
153.2 110.0 65.5 188.2 516.9
[A] See Note 14 to the “Consolidated Financial Statements” on pages 157-159. Debt contractual
obligations exclude interest, which is estimated to be $2.0 billion payable in less than one year,
$3.1 billion between one and three years, $2.5 billion between three and five years, and
$15.3 billion in five years and later. For this purpose, we assume that interest rates with respect to
variable interest rate debt remain constant at the rates in effect at December 31, 2017, and that there
is no change in the aggregate principal amount of debt other than repayment at scheduled maturity as
reflected in the table. Finance lease contractual obligations include interest.
[B] A purchase obligation is an agreement to purchase goods or services that is enforceable and
legally binding and specifies terms such as: fixed or minimum quantities to be purchased; fixed,
minimum or variable price provisions; and the approximate timing of the transaction.
[C] Includes all obligations included in “Trade and other payables” in “Non-current liabilities” in the
“Consolidated Balance Sheet” that are contractually fixed as to timing and amount. In addition to these
amounts, Shell has certain obligations that are not contractually fixed as to timing and amount, including
contributions to defined benefit pension plans (see Note 17 to the “Consolidated Financial Statements”
on pages 163-165) and obligations associated with decommissioning and restoration (see Note 18 to
the “Consolidated Financial Statements” on page 166).
GUARANTEES AND OTHER OFF-BALANCE SHEET
ARRANGEMENTS
There were no off-balance sheet arrangements at December 31, 2017,
or 2016, reasonably likely to have a material effect on Shell.
FINANCIAL INFORMATION RELATING TO THE ROYAL
DUTCH SHELL DIVIDEND ACCESS TRUST
The results of operations and financial position of the Royal Dutch Shell
Dividend Access Trust (the Trust) are included in the consolidated results of
operations and financial position of Shell. Certain condensed financial
information in respect of the Trust is given below. See “Royal Dutch Shell
Dividend Access Trust Financial Statements” on pages 213-216.
The Shell Transport and Trading Company Limited and BG Group Limited
have each issued a dividend access share to Computershare Trustees (Jersey)
Limited (the Trustee). For the years 2017, 2016 and 2015, the Trust
recorded income before tax of £4,567 million, £3,879 million, and
£2,726 million respectively. In each period, this reflected the amount of
dividends received on the dividend access shares.
At December 31, 2017, the Trust had total equity of £nil (2016: £nil; 2015:
£nil), reflecting cash of £2 million (2016: £2 million; 2015: £2 million) and
unclaimed dividends of £2 million (2016: £2 million; 2015: £2 million). The
Trust only records a liability for an unclaimed dividend, and a corresponding
amount of cash, to the extent that dividend cheque payments have not been
presented within 12 months, have expired or have been returned
unpresented.
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Total
Less than
1 year
5 years
and later
Between
3 and 5
years
Between
1 and 3
years
DIVESTMENTS
The fourth quarter 2017 interim dividend of $0.47 per share will be payable
In 2017, we continued to divest assets that fail to deliver competitive
to shareholders on the register at February 16, 2018. See Note 23 to the
performance or no longer meet our longer-term strategic objectives, including
“Consolidated Financial Statements” on page 175. The Board expects that
assets in Canada, the UK, Australia, the USA and Saudi Arabia. We also
the first quarter 2018 interim dividend will be $0.47 per share, equal to the
sold part of our interest in Shell Midstream Partners, L.P., while retaining
US dollar dividend for the same quarter in 2017.
CONTRACTUAL OBLIGATIONS
The table below summarises our principal contractual obligations at
December 31, 2017, by expected settlement period. The amounts presented
have not been offset by any committed third-party revenue in relation to these
obligations.
Contractual obligations
$ billion
control.
Divestments [A]
Integrated Gas
Upstream
Downstream
Corporate
Total
DIVIDENDS
2017 2016[B]
2015
3,077
352
269
11,542 1,726 2,478
2,703 2,889 2,282
18
17
511
17,340 4,984 5,540
[A] See “Non-GAAP measures reconciliations” on page 225.
[B] As adjusted, see “Non-GAAP measures reconciliations” on page 225.
Our policy is to grow the dollar dividend through time, in line with our view
of our underlying earnings and cash flow. When setting the dividend, the
Board of Directors looks at a range of factors, including the macroeconomic
environment, the current balance sheet and future investment plans.
We returned $15.6 billion to our shareholders through dividends in 2017.
Some of those dividends were paid out in 168.2 million shares issued to
shareholders who had elected to receive new shares instead of cash, under
our Scrip Dividend Programme. The Scrip Dividend Programme has been
cancelled with effect from the fourth quarter 2017 interim dividend.
PURCHASES OF SECURITIES
$ million
At the 2017 Annual General Meeting (AGM), shareholders granted an
authority, which expires at the end of the 2018 AGM, for the Company to
repurchase up to a maximum of 817 million of its shares (excluding purchases
for employee share plans). While no share repurchases for cancellation were
made during 2017, the Board continues to regard the ability to repurchase
issued shares in suitable circumstances as an important part of Shell’s
financial management. At Management Day in November 2017, we
confirmed our intention to undertake a share buyback programme of at least
$25 billion in the period 2017 to 2020, subject to progress with debt
reduction and recovery in oil prices. A resolution will be proposed at the
2018 AGM to renew the authority for the Company to purchase its own
share capital, up to specified limits, for a further year. This proposal will be
described in more detail in the Notice of Annual General Meeting.
Shares are also purchased by the employee share ownership trusts and trust-
like entities (see the “Directors’ Report” on page 75) to meet delivery
commitments under employee share plans. All share purchases are made in
open-market transactions.
The table below provides information on purchases of shares in 2017 by the
issuer and affiliated purchasers. Purchases in euros and sterling are converted
into dollars using the exchange rate on each transaction date.
Purchases of equity securities by issuer and affiliated purchasers in 2017 [A]
Purchase period
January
February
March
April
May
June
July
August
September
October
November
December
Total 2017
Number
purchased
for employee
share plans
A shares
Weighted
average
price ($)[C]
Number
purchased
for employee
share plans
B shares
Weighted
average
price ($)[C]
2,612,020
26.39
103,495
27.49
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
51,807
27.63
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
7,404,400
2,908,530
29.59
30.06
50,058
29.85
Number
purchased
for employee
share plans
A ADSs[B]
Weighted
average
price ($)[C]
1,142,102
55.62
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
40,255
245,615
33.42
28.97
4,237,129
5,379,231
65.14
63.12
[A] Excludes shares issued to affiliated purchasers pursuant to the Scrip Dividend Programme.
12,924,950
29.05
[B] American Depository Shares.
[C] Includes stamp duty and brokers’ commission.
2.0
— 0.7 0.3 1.0
153.2 110.0 65.5 188.2 516.9
70.0
10.7 14.4 9.9 35.0
25.6
2.3 4.2 4.0 15.1
4.8 7.2 5.8 5.7
23.5
135.4 83.5 45.5 131.4 395.8
Debt [A]
Finance leases [A]
Operating leases [A]
Purchase obligations [B]
Other long-term
contractual liabilities [C]
Total
[A] See Note 14 to the “Consolidated Financial Statements” on pages 157-159. Debt contractual
obligations exclude interest, which is estimated to be $2.0 billion payable in less than one year,
$3.1 billion between one and three years, $2.5 billion between three and five years, and
$15.3 billion in five years and later. For this purpose, we assume that interest rates with respect to
variable interest rate debt remain constant at the rates in effect at December 31, 2017, and that there
is no change in the aggregate principal amount of debt other than repayment at scheduled maturity as
reflected in the table. Finance lease contractual obligations include interest.
[B] A purchase obligation is an agreement to purchase goods or services that is enforceable and
legally binding and specifies terms such as: fixed or minimum quantities to be purchased; fixed,
minimum or variable price provisions; and the approximate timing of the transaction.
[C] Includes all obligations included in “Trade and other payables” in “Non-current liabilities” in the
“Consolidated Balance Sheet” that are contractually fixed as to timing and amount. In addition to these
amounts, Shell has certain obligations that are not contractually fixed as to timing and amount, including
contributions to defined benefit pension plans (see Note 17 to the “Consolidated Financial Statements”
on pages 163-165) and obligations associated with decommissioning and restoration (see Note 18 to
the “Consolidated Financial Statements” on page 166).
GUARANTEES AND OTHER OFF-BALANCE SHEET
ARRANGEMENTS
There were no off-balance sheet arrangements at December 31, 2017,
or 2016, reasonably likely to have a material effect on Shell.
FINANCIAL INFORMATION RELATING TO THE ROYAL
DUTCH SHELL DIVIDEND ACCESS TRUST
The results of operations and financial position of the Royal Dutch Shell
Dividend Access Trust (the Trust) are included in the consolidated results of
operations and financial position of Shell. Certain condensed financial
information in respect of the Trust is given below. See “Royal Dutch Shell
Dividend Access Trust Financial Statements” on pages 213-216.
The Shell Transport and Trading Company Limited and BG Group Limited
have each issued a dividend access share to Computershare Trustees (Jersey)
Limited (the Trustee). For the years 2017, 2016 and 2015, the Trust
recorded income before tax of £4,567 million, £3,879 million, and
£2,726 million respectively. In each period, this reflected the amount of
dividends received on the dividend access shares.
At December 31, 2017, the Trust had total equity of £nil (2016: £nil; 2015:
£nil), reflecting cash of £2 million (2016: £2 million; 2015: £2 million) and
unclaimed dividends of £2 million (2016: £2 million; 2015: £2 million). The
Trust only records a liability for an unclaimed dividend, and a corresponding
amount of cash, to the extent that dividend cheque payments have not been
presented within 12 months, have expired or have been returned
unpresented.
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Environment and society
Environment and society
Our success in business depends on our ability to meet a range of
environmental and social challenges. We must operate safely and manage
the effect our activities can have on neighbouring communities and wider
society. If we fail to do this, we may incur liabilities or sanctions, lose
business opportunities, harm our reputation, or our licence to operate may be
impacted (see “Risk factors” on page 14).
Data in this section are reported on a 100% basis in respect of activities
where we are the operator. Reporting on this operational control basis differs
from that applied for financial reporting purposes in the “Consolidated
Financial Statements” on pages 137-178. Detailed data and information on
our 2017 environmental and social performance will be published in the
Shell Sustainability Report in April 2018.
CONTROL FRAMEWORK
The Shell General Business Principles set out our responsibilities to
shareholders, customers, employees, business partners and society. They set
the standards for the way we conduct business, with integrity and respect for
people, the environment and communities. All ventures that we operate must
conduct their activities in line with our business principles.
We aim to minimise the environmental impact of new projects and existing
operations and we engage with local communities and non-governmental
organisations to understand and respond to their concerns. Shell conducts an
environmental, social and health impact assessment for every major project.
This helps us to understand and manage the effects our projects could have
on the surrounding environment and local communities. We have standards
and a clear governance structure in place to help manage potential impacts.
Our standards are defined in our Health, Safety, Security, Environment and
Social Performance (HSSE & SP) Control Framework (Control Framework), in
line with our Commitment and Policy and the Shell Code of Conduct, and are
supported by a number of guidance documents. They apply to every Shell
entity, including all employees and contract staff, and to Shell-operated
ventures. The Control Framework defines standards and accountabilities at
each level of the organisation, and sets out the procedures and processes
people are required to follow. We manage HSSE & SP risks to as low as
reasonably practicable, which is a business responsibility supported by the
HSSE & SP function. The process safety and HSSE & SP assurance team
provides assurance on the effectiveness of HSSE & SP controls.
HSSE & SP Control Framework
Mandatory
HSE Policy & Commitment
HSSE & SP Standards
Manuals
Health
Personal Safety
Process Safety
Security
Environment
Contractor HSSE Mgmt.
Projects
Transport
Product Stewardship
Social Performance
HSSE Management System
BG HSSE & SP requirements for all former BG assets were reviewed against
the Control Framework, and now comply with it or have risk-based plans in
place to close gaps by early 2019.
Our three Golden Rules require our employees and contract staff to comply
with laws and regulations as well as our standards and procedures, to
intervene in unsafe or non-compliant situations, and to respect our neighbours.
In ventures not operated by us, Shell-appointed representatives encourage our
partners to apply standards and principles similar to our own. We support
these ventures in their implementation of our HSSE & SP Control Framework,
or of a similar framework, and offer to review the effectiveness of their
implementation. Even if such a review is not carried out, we periodically
evaluate HSSE & SP risks faced by our ventures which we do not operate. If
one of these ventures falls below expectations, we work to put plans in place,
in agreement with our partners, to improve performance.
SAFETY
Safety is central to the responsible delivery of energy. We develop and
operate our facilities with the aim of preventing any incidents that may harm
our employees, contract staff or nearby communities, or cause damage to our
assets or adversely impact the environment. We manage safety risks across
our businesses through clear standards, controls and compliance systems,
combined with a safety-focused culture. We focus on the three areas of safety
with the highest risks associated with our activities: personal, process, and
transport. We ensure that people responsible for tasks involving a significant
safety hazard have the necessary training and skills. Safety performance is
included in our annual bonus scorecard for all our employees. Also see
“Directors’ Remuneration Report” on page 102.
We continue to strengthen the safety culture and leadership among our
employees and contract staff, with the focus on caring for people. Our safety
goal is to achieve no harm and no leaks across all of our operations. We
refer to this as our Goal Zero ambition.
We expect everyone working for us to intervene and stop work that may
appear to be unsafe. In addition to our ongoing safety awareness
programmes, we hold an annual global safety day to give employees and
contract staff time to reflect on how to prevent incidents. We expect everyone
working for us to comply with our 12 mandatory Life-Saving Rules. If
employees break these rules, they face disciplinary action up to and including
termination of employment. If contract staff break the Life-Saving Rules, they
can be removed from the worksite.
Process safety management is about keeping hazardous substances inside
pipes, tanks and vessels so they do not cause any harm to people or the
environment. It starts at the design and construction stage of our projects and is
implemented throughout the life cycle of these facilities to ensure they are
operated safely, well-maintained and regularly inspected. Our global standards
and operating procedures define the controls and physical barriers we require
to prevent incidents. For example, our offshore wells are designed with at least
two independent barriers in the direction of flow to mitigate the risk of an
uncontrolled release of hydrocarbons. We regularly inspect, test and maintain
these barriers to ensure they meet our standards. In the event of a loss of
containment such as a spill or a leak, we employ independent recovery
measures to prevent the release from becoming catastrophic. This system of
barriers and recovery measures is known as a “bow-tie”, a model that visually
represents a system where process safety hazards are managed through
prevention and response barriers. Since 2016, we have been working on
strengthening barriers that involve critical safety tasks carried out by frontline
staff. We have developed a set of process safety fundamentals, providing clear
guidelines for good operating practice to prevent unplanned releases.
For example, the availability of fresh water is a growing challenge in some
parts of the world. A combination of increasing demand for water resources,
growing stakeholder expectations and concerns, and water-related legislation
may drive actions that affect our ability to secure access to fresh water and to
discharge water from our operations. We manage our water use carefully,
and we tailor our use of fresh water to local conditions because water
constraints affect people at the local or regional level. In some cases, we use
alternatives to fresh water in our operations; these include recycled water,
processed sewage water and desalinated water. For example, at our gas-to-
liquids plant in the Qatari desert, we clean and reuse industrial process
water. This means that we avoid using the country’s scarce natural water
resources. An assessment of risks to water availability is required to be
undertaken for each of our assets and projects and, in areas of water
scarcity, we develop water-management action plans that identify ways to
use less fresh water, recycle water and closely monitor its use.
We also routinely prepare and practise our emergency response to potential
incidents such as a spill or a fire. This involves working closely with local
services and regulatory agencies to jointly test our plans and procedures.
These tests continually improve our readiness to respond. If an incident does
occur, we have procedures in place to reduce the impact on people and the
See “Climate change and energy transition” on pages 62-66 for more
environment.
information on how we manage our GHG emissions.
Moving large numbers of people, products and equipment by road, rail, sea
SPILLS
and air poses safety risks. We develop best-practice standards within Shell to
Large spills of crude oil, oil products and chemicals associated with our
find ways of reducing transport safety risks, and work with specialist
contractors, industry bodies, non-governmental organisations and
governments.
Singapore.
While we continually work to minimise the likelihood of incidents, some do
occur. For example, in 2017, there were fires at the Shell-operated Enchilada
platform in the US Gulf of Mexico and at our Bukom manufacturing site in
We investigate all incidents to understand the underlying causes and seek to
translate these into improvements in standards or ways of working that can be
applied broadly across similar facilities in Shell. As set out in “Performance
indicators” on page 23, our total recordable case frequency (injuries per
million working hours) was 0.8 in 2017, compared with 1.0 in 2016, and
there were 166 operational Tier 1 and 2 process safety events in 2017,
compared with 146 in 2016. Detailed information on our 2017 safety
performance will be published in the Shell Sustainability Report in April 2018.
Our performance indicators report on personal and process safety in line with
industry standards. Not reflected in these indicators is a devastating road-
tanker incident that occurred in Pakistan in June 2017. A tanker, operated by
a contractor, was transporting fuel from the Shell Pakistan Limited oil terminal
in Karachi to Vehari when it overturned in the central Punjab province
resulting in a fuel spill. Following the accident, people from a nearby village
approached the site to collect the fuel spilling from the tanker. Tragically, the
fuel ignited and more than 200 people died and more were injured. Shell
Pakistan Limited is implementing a long-term relief plan for those impacted.
ENVIRONMENT
operations can adversely impact the environment and result in major clean-up
costs as well as fines and other damages. They can also affect our licence to
operate and harm our reputation. We have clear requirements and
procedures designed to prevent spills, and our asset integrity programmes
include the design, maintenance and operation of spill containment facilities.
Our business units are responsible for organising and executing oil-spill
responses in line with Shell guidelines as well as with relevant legal and
regulatory requirements. All our offshore installations have plans in place to
respond to spills. These plans detail response strategies and techniques,
available equipment, and trained personnel and contracts. We are able to
call upon significant resources such as containment booms, collection vessels
and aircraft. We are also able to draw upon the contracted services of oil-
spill response organisations, if required. We conduct regular exercises that
seek to ensure these plans remain effective. We have further developed our
capability to respond to spills to water, and maintain a Global Response
Support Network to support our worldwide response capability. This is also
supported by our global Oil Spill Expertise Centre, which tests local
capability and maintains our capability globally to respond to a significant
incident.
We are a founding member of the Marine Well Containment Company, a
non-profit industry consortium providing a well-containment response system
for the Gulf of Mexico. In addition, we were a founding member of the
Subsea Well Response Project, an industry cooperative effort to enhance
global well-containment capabilities. The additional well-containment
capability developed by this project is managed by an industry consortium
via Oil Spill Response Limited.
We carefully consider the potential environmental impact of our activities and
We also maintain site-specific emergency response plans in the event of an
how local communities might be affected during the lifetime of our projects
onshore spill. Like the offshore response plans, these are designed to meet
and operations. We seek to comply with environmental regulations, to
Shell guidelines as well as relevant legal and regulatory requirements. They
continually improve our performance, and to prepare to respond to future
also provide for the initial assessment of incidents and the mobilisation of
challenges and opportunities. We use external standards and guidelines,
resources needed to manage them.
such as those developed by the World Bank and International Finance
Corporation, to inform our approach. We have global environmental
standards, which we believe meet all regulatory requirements and often
increased to 99 from 72 in 2016 (see “Performance indicators” on page
exceed them. Our standards cover our environmental performance, including
23). The number for 2016 was updated from 71 to reflect the completion of
managing emissions of greenhouse gases (GHG), using energy more
investigations into spills. At the time of publication of this Report, there were
efficiently, flaring less gas during oil production, preventing spills and leaks of
three spills under investigation in Nigeria that may result in adjustments.
In 2017, the number of operational spills of more than 100 kilograms
hazardous materials, using less fresh water and conserving biodiversity
wherever we operate.
STRATEGIC REPORT SHELL ANNUAL REPORT AND FORM 20-F 2017
58
58
strategic report SHELL ANNUAL REPORT AND FORM 20-F 2017
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Environment and society
Our success in business depends on our ability to meet a range of
BG HSSE & SP requirements for all former BG assets were reviewed against
environmental and social challenges. We must operate safely and manage
the Control Framework, and now comply with it or have risk-based plans in
Risk management approach
the effect our activities can have on neighbouring communities and wider
place to close gaps by early 2019.
society. If we fail to do this, we may incur liabilities or sanctions, lose
business opportunities, harm our reputation, or our licence to operate may be
Our three Golden Rules require our employees and contract staff to comply
CONTROLS, BARRIERS
RECOVERY MEASURES
with laws and regulations as well as our standards and procedures, to
intervene in unsafe or non-compliant situations, and to respect our neighbours.
Threats
TOP
EVENT
Consequences
We also routinely prepare and practise our emergency response to potential
incidents such as a spill or a fire. This involves working closely with local
services and regulatory agencies to jointly test our plans and procedures.
These tests continually improve our readiness to respond. If an incident does
occur, we have procedures in place to reduce the impact on people and the
environment.
Moving large numbers of people, products and equipment by road, rail, sea
and air poses safety risks. We develop best-practice standards within Shell to
find ways of reducing transport safety risks, and work with specialist
contractors, industry bodies, non-governmental organisations and
governments.
While we continually work to minimise the likelihood of incidents, some do
occur. For example, in 2017, there were fires at the Shell-operated Enchilada
platform in the US Gulf of Mexico and at our Bukom manufacturing site in
Singapore.
We investigate all incidents to understand the underlying causes and seek to
translate these into improvements in standards or ways of working that can be
applied broadly across similar facilities in Shell. As set out in “Performance
indicators” on page 23, our total recordable case frequency (injuries per
million working hours) was 0.8 in 2017, compared with 1.0 in 2016, and
there were 166 operational Tier 1 and 2 process safety events in 2017,
compared with 146 in 2016. Detailed information on our 2017 safety
performance will be published in the Shell Sustainability Report in April 2018.
Our performance indicators report on personal and process safety in line with
industry standards. Not reflected in these indicators is a devastating road-
tanker incident that occurred in Pakistan in June 2017. A tanker, operated by
a contractor, was transporting fuel from the Shell Pakistan Limited oil terminal
in Karachi to Vehari when it overturned in the central Punjab province
resulting in a fuel spill. Following the accident, people from a nearby village
approached the site to collect the fuel spilling from the tanker. Tragically, the
fuel ignited and more than 200 people died and more were injured. Shell
Pakistan Limited is implementing a long-term relief plan for those impacted.
ENVIRONMENT
We carefully consider the potential environmental impact of our activities and
how local communities might be affected during the lifetime of our projects
and operations. We seek to comply with environmental regulations, to
continually improve our performance, and to prepare to respond to future
challenges and opportunities. We use external standards and guidelines,
such as those developed by the World Bank and International Finance
Corporation, to inform our approach. We have global environmental
standards, which we believe meet all regulatory requirements and often
exceed them. Our standards cover our environmental performance, including
managing emissions of greenhouse gases (GHG), using energy more
efficiently, flaring less gas during oil production, preventing spills and leaks of
hazardous materials, using less fresh water and conserving biodiversity
wherever we operate.
impacted (see “Risk factors” on page 14).
Data in this section are reported on a 100% basis in respect of activities
where we are the operator. Reporting on this operational control basis differs
from that applied for financial reporting purposes in the “Consolidated
Financial Statements” on pages 137-178. Detailed data and information on
our 2017 environmental and social performance will be published in the
Shell Sustainability Report in April 2018.
CONTROL FRAMEWORK
The Shell General Business Principles set out our responsibilities to
shareholders, customers, employees, business partners and society. They set
the standards for the way we conduct business, with integrity and respect for
people, the environment and communities. All ventures that we operate must
conduct their activities in line with our business principles.
SAFETY
We aim to minimise the environmental impact of new projects and existing
operations and we engage with local communities and non-governmental
organisations to understand and respond to their concerns. Shell conducts an
environmental, social and health impact assessment for every major project.
This helps us to understand and manage the effects our projects could have
on the surrounding environment and local communities. We have standards
and a clear governance structure in place to help manage potential impacts.
Our standards are defined in our Health, Safety, Security, Environment and
Social Performance (HSSE & SP) Control Framework (Control Framework), in
line with our Commitment and Policy and the Shell Code of Conduct, and are
supported by a number of guidance documents. They apply to every Shell
entity, including all employees and contract staff, and to Shell-operated
ventures. The Control Framework defines standards and accountabilities at
each level of the organisation, and sets out the procedures and processes
In ventures not operated by us, Shell-appointed representatives encourage our
partners to apply standards and principles similar to our own. We support
these ventures in their implementation of our HSSE & SP Control Framework,
or of a similar framework, and offer to review the effectiveness of their
implementation. Even if such a review is not carried out, we periodically
evaluate HSSE & SP risks faced by our ventures which we do not operate. If
one of these ventures falls below expectations, we work to put plans in place,
in agreement with our partners, to improve performance.
Safety is central to the responsible delivery of energy. We develop and
operate our facilities with the aim of preventing any incidents that may harm
our employees, contract staff or nearby communities, or cause damage to our
assets or adversely impact the environment. We manage safety risks across
our businesses through clear standards, controls and compliance systems,
combined with a safety-focused culture. We focus on the three areas of safety
with the highest risks associated with our activities: personal, process, and
transport. We ensure that people responsible for tasks involving a significant
safety hazard have the necessary training and skills. Safety performance is
included in our annual bonus scorecard for all our employees. Also see
“Directors’ Remuneration Report” on page 102.
We continue to strengthen the safety culture and leadership among our
employees and contract staff, with the focus on caring for people. Our safety
goal is to achieve no harm and no leaks across all of our operations. We
refer to this as our Goal Zero ambition.
people are required to follow. We manage HSSE & SP risks to as low as
We expect everyone working for us to intervene and stop work that may
reasonably practicable, which is a business responsibility supported by the
appear to be unsafe. In addition to our ongoing safety awareness
HSSE & SP function. The process safety and HSSE & SP assurance team
programmes, we hold an annual global safety day to give employees and
provides assurance on the effectiveness of HSSE & SP controls.
contract staff time to reflect on how to prevent incidents. We expect everyone
working for us to comply with our 12 mandatory Life-Saving Rules. If
employees break these rules, they face disciplinary action up to and including
termination of employment. If contract staff break the Life-Saving Rules, they
can be removed from the worksite.
Process safety management is about keeping hazardous substances inside
pipes, tanks and vessels so they do not cause any harm to people or the
environment. It starts at the design and construction stage of our projects and is
implemented throughout the life cycle of these facilities to ensure they are
operated safely, well-maintained and regularly inspected. Our global standards
and operating procedures define the controls and physical barriers we require
to prevent incidents. For example, our offshore wells are designed with at least
two independent barriers in the direction of flow to mitigate the risk of an
uncontrolled release of hydrocarbons. We regularly inspect, test and maintain
these barriers to ensure they meet our standards. In the event of a loss of
containment such as a spill or a leak, we employ independent recovery
measures to prevent the release from becoming catastrophic. This system of
barriers and recovery measures is known as a “bow-tie”, a model that visually
represents a system where process safety hazards are managed through
prevention and response barriers. Since 2016, we have been working on
strengthening barriers that involve critical safety tasks carried out by frontline
staff. We have developed a set of process safety fundamentals, providing clear
guidelines for good operating practice to prevent unplanned releases.
For example, the availability of fresh water is a growing challenge in some
parts of the world. A combination of increasing demand for water resources,
growing stakeholder expectations and concerns, and water-related legislation
may drive actions that affect our ability to secure access to fresh water and to
discharge water from our operations. We manage our water use carefully,
and we tailor our use of fresh water to local conditions because water
constraints affect people at the local or regional level. In some cases, we use
alternatives to fresh water in our operations; these include recycled water,
processed sewage water and desalinated water. For example, at our gas-to-
liquids plant in the Qatari desert, we clean and reuse industrial process
water. This means that we avoid using the country’s scarce natural water
resources. An assessment of risks to water availability is required to be
undertaken for each of our assets and projects and, in areas of water
scarcity, we develop water-management action plans that identify ways to
use less fresh water, recycle water and closely monitor its use.
See “Climate change and energy transition” on pages 62-66 for more
information on how we manage our GHG emissions.
SPILLS
Large spills of crude oil, oil products and chemicals associated with our
operations can adversely impact the environment and result in major clean-up
costs as well as fines and other damages. They can also affect our licence to
operate and harm our reputation. We have clear requirements and
procedures designed to prevent spills, and our asset integrity programmes
include the design, maintenance and operation of spill containment facilities.
Our business units are responsible for organising and executing oil-spill
responses in line with Shell guidelines as well as with relevant legal and
regulatory requirements. All our offshore installations have plans in place to
respond to spills. These plans detail response strategies and techniques,
available equipment, and trained personnel and contracts. We are able to
call upon significant resources such as containment booms, collection vessels
and aircraft. We are also able to draw upon the contracted services of oil-
spill response organisations, if required. We conduct regular exercises that
seek to ensure these plans remain effective. We have further developed our
capability to respond to spills to water, and maintain a Global Response
Support Network to support our worldwide response capability. This is also
supported by our global Oil Spill Expertise Centre, which tests local
capability and maintains our capability globally to respond to a significant
incident.
We are a founding member of the Marine Well Containment Company, a
non-profit industry consortium providing a well-containment response system
for the Gulf of Mexico. In addition, we were a founding member of the
Subsea Well Response Project, an industry cooperative effort to enhance
global well-containment capabilities. The additional well-containment
capability developed by this project is managed by an industry consortium
via Oil Spill Response Limited.
We also maintain site-specific emergency response plans in the event of an
onshore spill. Like the offshore response plans, these are designed to meet
Shell guidelines as well as relevant legal and regulatory requirements. They
also provide for the initial assessment of incidents and the mobilisation of
resources needed to manage them.
In 2017, the number of operational spills of more than 100 kilograms
increased to 99 from 72 in 2016 (see “Performance indicators” on page
23). The number for 2016 was updated from 71 to reflect the completion of
investigations into spills. At the time of publication of this Report, there were
three spills under investigation in Nigeria that may result in adjustments.
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environment and society Continued
Spills in Nigeria
Most oil spills in the Niger Delta region of Nigeria continue to be caused by
crude oil theft or sabotage of facilities, as well as illegal oil refining. In 2017,
close to 90% of the number of oil spills of more than 100 kilograms from The
Shell Petroleum Development Company of Nigeria Limited (SPDC) joint
venture facilities was due to illegal activities by third parties. However, there
are instances where spills occur due to operational reasons. Irrespective of the
cause, SPDC cleans up and remediates areas impacted by spills originating
from its facilities. In the case of operational spills, SPDC also pays
compensation to people and communities impacted by the spill. Once clean-
up and remediation work are completed, the work is inspected and, if
satisfactory, approved and certified by Nigerian regulators.
SPDC representatives continued to actively support the clean-up process
within the governance framework established in August 2016 by the
Nigerian government to oversee the process. The UNEP report recommended
the creation of an Ogoni Restoration Fund (ORF) with capital of $1 billion,
to be co-funded by the Nigerian government and the SPDC joint venture,
as well as other operators in the area. SPDC remains fully committed to
supporting and contributing its share to the ORF and on behalf of the SPDC
joint venture made available $10 million in early 2017 to help set up the
Hydrocarbon Pollution and Remediation Project, a government-led body to
clean up contaminated sites. Over the last six years, SPDC has taken action
on all the UNEP recommendations addressed specifically to it as operator of
the joint venture and has carried out the majority of these recommendations.
To reduce the number of operational spills, SPDC is focused on implementing
its ongoing work programme to appraise, maintain and replace key sections
of pipelines and flow lines. Over the last six years, more than 1,200
kilometres of pipelines and flow lines have been replaced.
SPDC continues to undertake initiatives to prevent and minimise spills caused
by theft and sabotage of its facilities in the Niger Delta. In 2017, SPDC
continued on-ground surveillance efforts on the SPDC joint venture’s areas of
operations, including its pipeline network, to mitigate incidences of third-party
interference and ensure that spills are detected and responded to as quickly
as possible. There are also daily overflights of the pipeline network to identify
any new spill incidents or illegal activities. SPDC has also implemented anti-
theft protection mechanisms on key infrastructure.
Since 2012, SPDC has worked with the International Union for Conservation
of Nature to enhance remediation techniques and to protect biodiversity at
sites affected by oil spills in SPDC’s areas of operation in the Niger Delta.
Based on this partnership, SPDC has launched further remediation
improvement initiatives to help strengthen its remediation and rehabilitation
efforts.
SPDC also works with a range of stakeholders in the Niger Delta to build
greater trust in spill response and clean-up processes. Wherever possible,
local communities take part in the remediation work. In certain instances,
some non-governmental organisations have also participated in joint
investigation visits along with government regulators, SPDC and impacted
communities, to establish the cause and volume of oil spilled.
In addition, SPDC has implemented several initiatives and partnerships to
raise awareness on the negative impact of crude oil theft and illegal oil
refining. Examples include community-based pipeline surveillance and the
promotion of alternative livelihoods through Shell’s flagship youth
entrepreneurship programme, Shell LiveWIRE.
In 2015, SPDC, on behalf of the SPDC joint venture and the Bodo
community, signed a memorandum of understanding (MOU) granting access
to SPDC to begin the clean-up of areas affected by two operational spills in
2008. The MOU also provided for the selection of two contractors to
conduct the clean-up and to be overseen by an independent project director.
The clean-up project suffered a delay in 2016 and most of 2017 due to
access challenges from the community. After significant engagement with the
communities and other stakeholders managed by the Bodo Mediation
Initiative, the clean-up and remediation activities of Bodo started in September
2017. The clean-up will consist of four phases: clean-up of free-phase surface
oil, remediation of soil, restoration of mangroves, and monitoring. Should
activities continue uninterrupted, the process is expected to take around three
years. However, for it to be successful, the repeated re-contamination of
remediated sites due to crude oil theft and illegal refining must end.
HYDRAULIC FRACTURING
Tight and shale oil and gas continue to play an important role in meeting
global energy demand. Over the last decade, we have expanded our
onshore oil and gas portfolio using advances in technology to access
previously uneconomic tight-oil and tight-gas resources, including those locked
in shale formations.
One of the key technologies applied in tight-oil and tight-gas fields is known
as hydraulic fracturing, a technique used since the 1950s. It involves
pumping fluids that are typically 99% water and sand and around 1%
chemical additives into tight sand or shale rock at high pressure. This creates
thread-like fissures, through which oil and gas can flow.
Shell developed and publicly shares a set of five global operating principles
that govern the onshore tight/shale oil and gas activities where hydraulic
fracturing is used. The principles cover safety, air quality, water protection
and use, operational footprint, and engagement with local communities. We
support the development of regulations consistent with these principles, which
are designed to reduce risks to the environment and seek to ensure the safety
of those living near our operations. As new technologies, challenges and
regulatory requirements emerge, we review and update our operating
principles.
Each of our projects takes into account the local context, including the
geology of the area, and we then design our activities with the aim to suit
local conditions. Before we drill, conduct exploratory field work, or develop a
field, we conduct a hazard assessment. Throughout our operations, we take
measures to protect both ground and surface water, and ensure
environmentally responsible water sourcing, use, storage and disposal.
We recycle or reuse water to the extent that it is reasonably practicable.
To protect and isolate potable groundwater from hydraulic-fracturing fluids in
the wellbore, we line all our wells with steel casing and cement. All of our
wells are expected to have two or more subsurface barriers to protect
groundwater. We monitor a wellbore’s integrity before, during and after
hydraulic fracturing. When we acquire assets, we evaluate the assets’ wells
for conformity with our safety and operating principles, and put in place a
plan with a timeline for rectifying any inconsistencies as far as reasonably
practicable.
To the extent allowed by our suppliers, we support full disclosure of the
chemicals used in hydraulic-fracturing fluids for Shell-operated wells. Material
Safety Data Sheet information is available on site where wells are being
hydraulically fractured. We support regulation to require suppliers to release
such information. The chemicals used in hydraulic fracturing will vary from
well to well and from contractor to contractor, but some can be toxic. For that
reason, we have stringent procedures for handling hydraulic-fracturing
chemicals.
SPDC remains committed to the implementation of the 2011 United Nations
Environmental Programme (UNEP) Report on Ogoniland. Throughout 2017,
The formations into which hydraulic-fracturing chemicals may be injected are
typically more than a kilometre below freshwater aquifers. Our procedures
require that potable groundwater must be isolated from well completion and
We place a premium on developing effective technologies that are also safe
production activities. Moreover, we only use air, water or a water-based
for the environment. However, when operating at the forefront of technology,
liquid while drilling through the potable groundwater aquifer to a depth
there is always the possibility that a new technology brings with it
below the aquifer. The casing and cement are then put in place before
environmental impacts that have not been assessed, foreseen or determined
drilling is resumed and hydraulic fracturing is initiated. As permitted, we test
to be harmful when originally implemented. While we believe we take all
potable groundwater that is being used for drinking, farming and other
reasonable precautions to limit these risks, we are subject to additional
activities near our fracturing operations.
remedial environmental and litigation costs as a result of our operations’
unknown and unforeseen impacts on the environment. Although these costs
have so far not been material to us, no assurance can be given that this will
Some jurisdictions are considering more stringent permitting, reduced
freshwater use, well-construction and other regulations relating to fracturing,
as well as local bans and other land use restrictions. Such regulations could
always be the case.
subject our operations to delays, increased costs or prohibitions. We believe
SECURITY
our current procedures meet or exceed the existing regulatory requirements of
Our operations expose us to social instability, civil unrest, terrorism, piracy,
the jurisdictions where we operate. We believe we can safely and
acts of war and risks of pandemic diseases that could have a material
responsibly explore, develop and produce tight-oil and tight-gas where
adverse effect on our business (see “Risk factors” on page 13). We seek to
hydraulic fracturing technology is used – and we support regulation, as long
obtain the best possible information to enable us to assess threats and risks.
as it is fit-for-purpose and effective.
SEISMICITY
As oil and gas fields mature, seismic activity may increase in certain
circumstances based on the unique geology of individual fields. For example,
in recent years, public concern about gas production in Groningen province
in the Netherlands has grown as a result of an increase in the number and
severity of induced earthquakes in the area (see “Upstream” on page 33).
The field is operated by Nederlandse Aardolie Maatschappij B.V. (NAM,
Shell interest 50%) and is one of the largest onshore gas fields in Europe. A
range of actions have been taken to improve safety, liveability and economic
prospects in the region. NAM is working together with all relevant parties to
fulfil commitments to the residents of the area.
There have also been some reports linking hydraulic fracturing and long-term
water disposal to earth tremors. The vast majority of earthquakes are tectonic
(natural) but, under some circumstances, seismicity can be induced by human
activities. Some areas are more seismically active than others. We analyse
publicly available seismic, geologic and geophysical data to determine
historical seismicity in areas where we plan to operate. If we detect high
seismic activity or any such activity beyond historic levels, we will investigate
and review our operations. We are supportive of local regulations that are fit-
for-purpose, based on local geology and surface conditions, in managing the
potential for induced seismicity in our operating areas. In addition to
the potential and effects of induced seismicity in the area, as well as
recommendations that outline monitoring, mitigation and response
procedures.
ENVIRONMENTAL COSTS
We conduct detailed assessments for all sites and activities, and implement
appropriate risk mitigation measures to detect, deter and respond to security
threats. This includes building strong and open relationships with government
security agencies, the physical hardening of sites, journey management, and
information risk management. We conduct training and awareness
campaigns, including travel advice and medical assistance before travel. The
identities of our employees and contract staff and their access to our sites and
activities, both physical and logical, are consistently verified and controlled.
We manage and exercise crisis response and management plans.
NEIGHBOURING COMMUNITIES
Earning the trust of local communities is essential to the success of our projects
and operations. We have global requirements for social performance, which
aim to ensure that we operate in a responsible way, deliver projects without
delay and minimise the social impacts of our operations. Our requirements
also help us to better share the benefits of our activities, such as employment
and contractual opportunities that help develop local economies.
Specifically, the requirements set clear rules and expectations for how we
engage with and respect communities that may be impacted by our
operations. Shell-operated major projects and facilities are required to have a
social performance plan and an effective community feedback mechanism.
This helps the business to understand the social context in which we plan to
operate, identify potential negative and positive effects on the community and
communities to communicate with our operations so that their concerns and
wishes are managed in a timely manner. In addition, we have specific
requirements intended to minimise our impact on indigenous peoples’
traditional lifestyles, cultural heritage and on handling involuntary resettlement.
adhering to local regulations, we have our own guidelines on how to assess
manage impacts and opportunities. It also helps our neighbouring
We are subject to a variety of environmental laws, regulations and reporting
requirements in the countries where we operate. Infringing any of these laws,
regulations and requirements could result in significant costs, including clean-
up costs, fines, sanctions and third-party claims, as well as harm our
reputation and our ability to do business.
HUMAN RIGHTS
Respect for human rights is embedded in our Business Principles and in our
Code of Conduct. Our approach is informed by the Universal Declaration of
Human Rights, the core conventions of the International Labour Organization
and the United Nations’ Guiding Principles on Business and Human Rights.
Our ongoing operating expenses include the costs of avoiding unauthorised
discharges into the air and water, and the safe disposal and handling of
waste.
We work closely with other companies and non-governmental organisations
to continuously improve the way we apply these principles. Our focus is on
four key areas: communities, security, labour rights, and supply chain. We
have systems and processes in place for managing projects, contracting and
procurement, recruitment and employment, security and social performance.
We require all our companies and our contractors to respect the human rights
of our workforce and our neighbouring communities. Our Modern Slavery
Statement provides more details about the process we apply. It can be found
at www.shell.com/uk-modern-slavery-act.html.
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Spills in Nigeria
SPDC representatives continued to actively support the clean-up process
Most oil spills in the Niger Delta region of Nigeria continue to be caused by
within the governance framework established in August 2016 by the
crude oil theft or sabotage of facilities, as well as illegal oil refining. In 2017,
Nigerian government to oversee the process. The UNEP report recommended
close to 90% of the number of oil spills of more than 100 kilograms from The
the creation of an Ogoni Restoration Fund (ORF) with capital of $1 billion,
Shell Petroleum Development Company of Nigeria Limited (SPDC) joint
to be co-funded by the Nigerian government and the SPDC joint venture,
venture facilities was due to illegal activities by third parties. However, there
as well as other operators in the area. SPDC remains fully committed to
are instances where spills occur due to operational reasons. Irrespective of the
supporting and contributing its share to the ORF and on behalf of the SPDC
cause, SPDC cleans up and remediates areas impacted by spills originating
joint venture made available $10 million in early 2017 to help set up the
from its facilities. In the case of operational spills, SPDC also pays
Hydrocarbon Pollution and Remediation Project, a government-led body to
compensation to people and communities impacted by the spill. Once clean-
clean up contaminated sites. Over the last six years, SPDC has taken action
up and remediation work are completed, the work is inspected and, if
on all the UNEP recommendations addressed specifically to it as operator of
satisfactory, approved and certified by Nigerian regulators.
the joint venture and has carried out the majority of these recommendations.
To reduce the number of operational spills, SPDC is focused on implementing
HYDRAULIC FRACTURING
its ongoing work programme to appraise, maintain and replace key sections
Tight and shale oil and gas continue to play an important role in meeting
of pipelines and flow lines. Over the last six years, more than 1,200
kilometres of pipelines and flow lines have been replaced.
global energy demand. Over the last decade, we have expanded our
onshore oil and gas portfolio using advances in technology to access
previously uneconomic tight-oil and tight-gas resources, including those locked
SPDC continues to undertake initiatives to prevent and minimise spills caused
in shale formations.
by theft and sabotage of its facilities in the Niger Delta. In 2017, SPDC
continued on-ground surveillance efforts on the SPDC joint venture’s areas of
operations, including its pipeline network, to mitigate incidences of third-party
interference and ensure that spills are detected and responded to as quickly
as possible. There are also daily overflights of the pipeline network to identify
any new spill incidents or illegal activities. SPDC has also implemented anti-
theft protection mechanisms on key infrastructure.
Since 2012, SPDC has worked with the International Union for Conservation
of Nature to enhance remediation techniques and to protect biodiversity at
sites affected by oil spills in SPDC’s areas of operation in the Niger Delta.
Based on this partnership, SPDC has launched further remediation
improvement initiatives to help strengthen its remediation and rehabilitation
efforts.
SPDC also works with a range of stakeholders in the Niger Delta to build
greater trust in spill response and clean-up processes. Wherever possible,
local communities take part in the remediation work. In certain instances,
some non-governmental organisations have also participated in joint
investigation visits along with government regulators, SPDC and impacted
communities, to establish the cause and volume of oil spilled.
In addition, SPDC has implemented several initiatives and partnerships to
raise awareness on the negative impact of crude oil theft and illegal oil
refining. Examples include community-based pipeline surveillance and the
promotion of alternative livelihoods through Shell’s flagship youth
entrepreneurship programme, Shell LiveWIRE.
In 2015, SPDC, on behalf of the SPDC joint venture and the Bodo
community, signed a memorandum of understanding (MOU) granting access
to SPDC to begin the clean-up of areas affected by two operational spills in
2008. The MOU also provided for the selection of two contractors to
conduct the clean-up and to be overseen by an independent project director.
The clean-up project suffered a delay in 2016 and most of 2017 due to
access challenges from the community. After significant engagement with the
communities and other stakeholders managed by the Bodo Mediation
Initiative, the clean-up and remediation activities of Bodo started in September
2017. The clean-up will consist of four phases: clean-up of free-phase surface
oil, remediation of soil, restoration of mangroves, and monitoring. Should
activities continue uninterrupted, the process is expected to take around three
years. However, for it to be successful, the repeated re-contamination of
remediated sites due to crude oil theft and illegal refining must end.
One of the key technologies applied in tight-oil and tight-gas fields is known
as hydraulic fracturing, a technique used since the 1950s. It involves
pumping fluids that are typically 99% water and sand and around 1%
chemical additives into tight sand or shale rock at high pressure. This creates
thread-like fissures, through which oil and gas can flow.
Shell developed and publicly shares a set of five global operating principles
that govern the onshore tight/shale oil and gas activities where hydraulic
fracturing is used. The principles cover safety, air quality, water protection
and use, operational footprint, and engagement with local communities. We
support the development of regulations consistent with these principles, which
are designed to reduce risks to the environment and seek to ensure the safety
of those living near our operations. As new technologies, challenges and
regulatory requirements emerge, we review and update our operating
principles.
Each of our projects takes into account the local context, including the
geology of the area, and we then design our activities with the aim to suit
local conditions. Before we drill, conduct exploratory field work, or develop a
field, we conduct a hazard assessment. Throughout our operations, we take
measures to protect both ground and surface water, and ensure
environmentally responsible water sourcing, use, storage and disposal.
We recycle or reuse water to the extent that it is reasonably practicable.
To protect and isolate potable groundwater from hydraulic-fracturing fluids in
the wellbore, we line all our wells with steel casing and cement. All of our
wells are expected to have two or more subsurface barriers to protect
groundwater. We monitor a wellbore’s integrity before, during and after
hydraulic fracturing. When we acquire assets, we evaluate the assets’ wells
for conformity with our safety and operating principles, and put in place a
plan with a timeline for rectifying any inconsistencies as far as reasonably
practicable.
To the extent allowed by our suppliers, we support full disclosure of the
chemicals used in hydraulic-fracturing fluids for Shell-operated wells. Material
Safety Data Sheet information is available on site where wells are being
hydraulically fractured. We support regulation to require suppliers to release
such information. The chemicals used in hydraulic fracturing will vary from
well to well and from contractor to contractor, but some can be toxic. For that
reason, we have stringent procedures for handling hydraulic-fracturing
chemicals.
SPDC remains committed to the implementation of the 2011 United Nations
Environmental Programme (UNEP) Report on Ogoniland. Throughout 2017,
The formations into which hydraulic-fracturing chemicals may be injected are
typically more than a kilometre below freshwater aquifers. Our procedures
require that potable groundwater must be isolated from well completion and
production activities. Moreover, we only use air, water or a water-based
liquid while drilling through the potable groundwater aquifer to a depth
below the aquifer. The casing and cement are then put in place before
drilling is resumed and hydraulic fracturing is initiated. As permitted, we test
potable groundwater that is being used for drinking, farming and other
activities near our fracturing operations.
Some jurisdictions are considering more stringent permitting, reduced
freshwater use, well-construction and other regulations relating to fracturing,
as well as local bans and other land use restrictions. Such regulations could
subject our operations to delays, increased costs or prohibitions. We believe
our current procedures meet or exceed the existing regulatory requirements of
the jurisdictions where we operate. We believe we can safely and
responsibly explore, develop and produce tight-oil and tight-gas where
hydraulic fracturing technology is used – and we support regulation, as long
as it is fit-for-purpose and effective.
SEISMICITY
As oil and gas fields mature, seismic activity may increase in certain
circumstances based on the unique geology of individual fields. For example,
in recent years, public concern about gas production in Groningen province
in the Netherlands has grown as a result of an increase in the number and
severity of induced earthquakes in the area (see “Upstream” on page 33).
The field is operated by Nederlandse Aardolie Maatschappij B.V. (NAM,
Shell interest 50%) and is one of the largest onshore gas fields in Europe. A
range of actions have been taken to improve safety, liveability and economic
prospects in the region. NAM is working together with all relevant parties to
fulfil commitments to the residents of the area.
There have also been some reports linking hydraulic fracturing and long-term
water disposal to earth tremors. The vast majority of earthquakes are tectonic
(natural) but, under some circumstances, seismicity can be induced by human
activities. Some areas are more seismically active than others. We analyse
publicly available seismic, geologic and geophysical data to determine
historical seismicity in areas where we plan to operate. If we detect high
seismic activity or any such activity beyond historic levels, we will investigate
and review our operations. We are supportive of local regulations that are fit-
for-purpose, based on local geology and surface conditions, in managing the
potential for induced seismicity in our operating areas. In addition to
adhering to local regulations, we have our own guidelines on how to assess
the potential and effects of induced seismicity in the area, as well as
recommendations that outline monitoring, mitigation and response
procedures.
ENVIRONMENTAL COSTS
We are subject to a variety of environmental laws, regulations and reporting
requirements in the countries where we operate. Infringing any of these laws,
regulations and requirements could result in significant costs, including clean-
up costs, fines, sanctions and third-party claims, as well as harm our
reputation and our ability to do business.
Our ongoing operating expenses include the costs of avoiding unauthorised
discharges into the air and water, and the safe disposal and handling of
waste.
We place a premium on developing effective technologies that are also safe
for the environment. However, when operating at the forefront of technology,
there is always the possibility that a new technology brings with it
environmental impacts that have not been assessed, foreseen or determined
to be harmful when originally implemented. While we believe we take all
reasonable precautions to limit these risks, we are subject to additional
remedial environmental and litigation costs as a result of our operations’
unknown and unforeseen impacts on the environment. Although these costs
have so far not been material to us, no assurance can be given that this will
always be the case.
SECURITY
Our operations expose us to social instability, civil unrest, terrorism, piracy,
acts of war and risks of pandemic diseases that could have a material
adverse effect on our business (see “Risk factors” on page 13). We seek to
obtain the best possible information to enable us to assess threats and risks.
We conduct detailed assessments for all sites and activities, and implement
appropriate risk mitigation measures to detect, deter and respond to security
threats. This includes building strong and open relationships with government
security agencies, the physical hardening of sites, journey management, and
information risk management. We conduct training and awareness
campaigns, including travel advice and medical assistance before travel. The
identities of our employees and contract staff and their access to our sites and
activities, both physical and logical, are consistently verified and controlled.
We manage and exercise crisis response and management plans.
NEIGHBOURING COMMUNITIES
Earning the trust of local communities is essential to the success of our projects
and operations. We have global requirements for social performance, which
aim to ensure that we operate in a responsible way, deliver projects without
delay and minimise the social impacts of our operations. Our requirements
also help us to better share the benefits of our activities, such as employment
and contractual opportunities that help develop local economies.
Specifically, the requirements set clear rules and expectations for how we
engage with and respect communities that may be impacted by our
operations. Shell-operated major projects and facilities are required to have a
social performance plan and an effective community feedback mechanism.
This helps the business to understand the social context in which we plan to
operate, identify potential negative and positive effects on the community and
manage impacts and opportunities. It also helps our neighbouring
communities to communicate with our operations so that their concerns and
wishes are managed in a timely manner. In addition, we have specific
requirements intended to minimise our impact on indigenous peoples’
traditional lifestyles, cultural heritage and on handling involuntary resettlement.
HUMAN RIGHTS
Respect for human rights is embedded in our Business Principles and in our
Code of Conduct. Our approach is informed by the Universal Declaration of
Human Rights, the core conventions of the International Labour Organization
and the United Nations’ Guiding Principles on Business and Human Rights.
We work closely with other companies and non-governmental organisations
to continuously improve the way we apply these principles. Our focus is on
four key areas: communities, security, labour rights, and supply chain. We
have systems and processes in place for managing projects, contracting and
procurement, recruitment and employment, security and social performance.
We require all our companies and our contractors to respect the human rights
of our workforce and our neighbouring communities. Our Modern Slavery
Statement provides more details about the process we apply. It can be found
at www.shell.com/uk-modern-slavery-act.html.
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Climate change and energy transition
Climate change and energy transition
The Remuneration Committee (REMCO) is responsible for setting the Directors’
Remuneration Policy in alignment with strategy. In 2017, activities for
REMCO included setting annual bonus performance measures and targets,
for example, introducing GHG metrics in the scorecard following
recommendations by the CSRC, and embedding the energy transition into the
Chief Executive Officer´s (CEO) personal performance targets. See “Directors’
Remuneration Report” on pages 94-95. The Shell employee scorecard
structure for determining employees’ annual bonus in 2017 was consistent
with the Executive Directors’ scorecard.
The Audit Committee has key responsibilities in assisting the Board in fulfilling
its oversight responsibilities in relation to areas such as the effectiveness of the
system of risk management and internal control. Any concerns regarding
improvement needed are promptly reported to the Board.
The CEO is the most senior individual with accountability for climate change
risk. We have set up several dedicated climate change and GHG-related
forums at different levels of the organisation where climate change issues are
addressed, monitored and reviewed, and each Shell subsidiary has
operational responsibility for implementing climate change policies and
strategies.
A senior manager – the Executive Vice President for Safety and Environment –
reporting directly to an Executive Director (the Projects & Technology Director)
is accountable, among other things, for oversight of GHG issues. This
manager´s department includes the dedicated Group CO2 team, which is
accountable for monitoring and examining the strategic implications of
climate change for Shell and the impact of developments in governmental
policy and regulation. The Group CO2 team is responsible for preparing
proposed policy positions based on analysis within Shell and external input.
The team also ensures consistency in application of our core principles and
policy tasks in interactions with policy makers. Reporting to the same manager
is the HSSE & SP Assurance and Reporting team, which is accountable for the
delivery of Shell’s non-financial reporting and for auditing the businesses´
performance against our HSSE & SP Control Framework requirements,
including climate change risk management. See “Environment and society” on
page 58.
Group CO2 also has oversight of Shell’s GHG management programme and
supports the different lines of business in embedding GHG management
strategies. The team includes GHG project managers to guide the largest
projects, which represent around 80% of all additional GHG emissions from
new investments, in managing GHG-related content, from both a risk and an
opportunity standpoint. Risk management at an asset or project level is a
structured process of identifying and assessing risks, planning and
implementing responses, monitoring, improving and closing out action items
that have an impact on projects and assets’ objectives. Group CO2 support is
provided for each relevant milestone and a formal sign-off process on
abatement plans and targets is applied.
Further support for embedding GHG risk management is provided by a
global expertise team for GHG and energy management. This team is a
network of subject-matter experts in GHG topics that works globally and
across our lines of business. Team members are experts in their relevant
disciplines, defining improvement areas globally and capturing and sharing
best practices.
Shell has long recognised that greenhouse gas (GHG) emissions from the use
of fossil fuels are contributing to the warming of the climate system. In
December 2015, 195 nations adopted the Paris Agreement. We welcomed
the efforts made by governments to reach this global climate agreement,
which entered into force in November 2016. We fully support the Paris
Agreement’s goal to keep the rise in global average temperature this century
to well below two degrees Celsius (2°C) above pre-industrial levels and to
pursue efforts to limit the temperature increase even further to 1.5°C. In pursuit
of this goal, we also support the vision of a transition towards a net-zero
emissions energy system. We also agree with the International Energy
Agency (IEA) that meeting the goal of limiting the increase in global
temperatures to well below 2°C will be extremely challenging, but of vital
importance to the sustained prosperity of future generations.
Society faces a dual challenge: how to transition to a low-carbon energy
future to manage the risks of climate change, while also extending the
economic and social benefits of energy to everyone on the planet. This is an
ambition that requires changes in the way energy is produced, used and
made accessible to more people while drastically cutting emissions.
We believe that the need to reduce GHG emissions, which are largely
caused by burning fossil fuels, will transform the energy system in this century.
This transformation will generate both challenges and opportunities for our
existing and future portfolio.
We welcome and support efforts, such as those led by the Task Force on
Climate-related Financial Disclosures (TCFD), to increase transparency and to
promote investors’ understanding of companies’ strategies to respond to the
risks and opportunities presented by climate change. We believe that
companies should be clear about how they plan to be resilient in the energy
transition. Therefore, we are working with the TCFD to develop guidance on
effective disclosures which, where commercially possible, will be most
relevant and useful to investors. The Shell Sustainability Report (April 2018)
and other publications aim to complement our 2017 Annual Report in
responding to the TCFD recommendations, including discussing the energy
transition and Shell´s portfolio resilience.
OUR GOVERNANCE AND MANAGEMENT OF CLIMATE
CHANGE RISKS AND OPPORTUNITIES
Climate change and risks resulting from GHG emissions have been identified
as a significant risk factor for Shell and are managed in accordance with
other significant risks through the Board and Executive Committee.
See “Corporate governance” on page 82.
Shell has a climate change risk management structure in place which is
supported by standards, policies and controls.
This includes the work of the Board, which discusses a number of regular
agenda items, among them reporting on environmental topics. Throughout
2017, the Board held strategy sessions in the context of the changing global
energy market, energy transition and climate change, and considered risks
and opportunities of the current and future shape of Shell´s portfolio for
different timescales. The top priorities identified for 2018 in this area include
the energy transition and implementation of our strategy for the New Energies
business.
The Board committees (see “Corporate governance” on page 80) play an
important role in assisting the Board with regard to governance and
management of climate change risks and opportunities.
The responsibilities of the Corporate and Social Responsibility Committee
(CSRC) include the review of the management of environmental and social
impacts of projects and operations. In 2017, among the key topics were the
energy transition, GHG emission targets, and other carbon dioxide (CO2)
and methane-related developments, such as Shell’s net carbon footprint
ambition and guiding principles on reducing methane emissions.
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The above-mentioned teams and experts have provided their input to shape a
and assess mitigation options and the most viable responses. Climate-related
set of mandatory manuals and complementary guidance documents which
risks are analysed in context of other identified material risks. See “Risk
are ultimately based on our HSSE & SP Control Framework. These documents
factors” on pages 12-16.
provide guidance on how to monitor, communicate and report changes in the
risk environment, and how to review the effectiveness of actions taken to
manage the identified risks, including ways to:
■ ensure consistent assessment of climate risk across Shell;
■ clarify expectations for risk management and reporting, including roles and
responsibilities;
■ strengthen decision making through better visibility and understanding of
the climate risk by line of business; and
■ enable integration of Shell’s reporting.
different time horizons, see page 65.
For more detail on our definition of risk categories and their relationship to
to test their resilience across a range of future scenarios. The project
Our portfolio exposure is reviewed annually against changing GHG
regulatory regimes and physical conditions to identify emerging risks. We test
the resilience of our portfolio against externally published future pathways,
including a low emissions pathway.
To test the resilience of new projects, we assess potential costs associated
with GHG emissions when evaluating all new investments. Our approach
generally applies a project screening value (PSV) of $40 (real terms) per
tonne of GHG emissions to the total GHG emissions of each investment. This
PSV is generally applied when evaluating our new projects around the world
development process features a number of checks that may require
development of detailed GHG and energy management plans. High-emitting
projects undergo additional sensitivity testing, including more detailed
economic analysis on local GHG costs, demand sensitivity and the potential
for later retrofitting of carbon capture and storage (CCS) facilities. In certain
countries, these estimated GHG costs can exceed $100/tonne (in real terms)
in the post 2030 environment, reflecting our presumption that governments
will eventually take aggressive action to regulate GHG emissions in
accordance with their Paris Agreement ambitions. Projects in the most GHG-
exposed asset classes have GHG intensity targets that reflect standards
sufficient to allow them to compete and prosper in a more GHG-regulated
future. These processes can lead to projects being stopped, designs being
changed, and potential GHG mitigation investments being identified, in
preparation for when regulation would make these investments commercially
compelling.
While monitoring emerging climate change plans, we consider the robustness
of our activities against a range of scenarios, including the IEA scenarios.
We believe our business strategy is resilient to the envisaged implementation
of the Paris Agreement, which is now progressing through countries’
development of individual plans in their Nationally Determined Contributions
(NDCs). The emissions resulting from energy consumers using Shell products
are for a large part covered by these NDCs. The Paris Agreement
acknowledges that emissions will continue and even grow in some parts of
the world. It does not stipulate that emissions must fall in all sectors or
countries simultaneously, or that all actors within the system will reduce their
emissions. What is important is that emissions fall overall.
OUR PORTFOLIO AND CLIMATE CHANGE
We are seeking cost-effective ways to manage GHG emissions and see
potential business opportunities in developing such solutions. We seek to
contribute to reducing global GHG emissions in a number of ways:
■ supplying more natural gas to replace coal for power generation;
■ progressing CCS technologies;
■ implementing energy-efficiency measures in our operations where
■ developing new fuels for transport such as advanced biofuels and
reasonably practical;
hydrogen; and
and renewable electricity.
■ participating throughout the power value chain with a focus on natural gas
To support this, we continue to advocate the introduction of effective
government-led carbon pricing mechanisms.
While we aspire to reduce our GHG intensity, as energy demand increases
and easily accessible oil and gas resources decline, we may develop
resources that require more energy and advanced technologies to produce.
If our production becomes more energy intensive, this could result in an
associated increase in direct GHG emissions from our upstream facilities.
This structured approach supports the prioritisation of risks and opportunities.
We actively monitor the GHG footprint of all our assets, as well as our
products, to quantify future regulatory costs related to GHG or other climate-
related policies. This allows us to effectively prioritise areas of greater concern
STRATEGIC REPORT SHELL ANNUAL REPORT AND FORM 20-F 2017
63
Climate change and energy transition
Shell has long recognised that greenhouse gas (GHG) emissions from the use
The Remuneration Committee (REMCO) is responsible for setting the Directors’
of fossil fuels are contributing to the warming of the climate system. In
Remuneration Policy in alignment with strategy. In 2017, activities for
December 2015, 195 nations adopted the Paris Agreement. We welcomed
REMCO included setting annual bonus performance measures and targets,
the efforts made by governments to reach this global climate agreement,
which entered into force in November 2016. We fully support the Paris
Agreement’s goal to keep the rise in global average temperature this century
to well below two degrees Celsius (2°C) above pre-industrial levels and to
pursue efforts to limit the temperature increase even further to 1.5°C. In pursuit
of this goal, we also support the vision of a transition towards a net-zero
emissions energy system. We also agree with the International Energy
Agency (IEA) that meeting the goal of limiting the increase in global
temperatures to well below 2°C will be extremely challenging, but of vital
importance to the sustained prosperity of future generations.
Society faces a dual challenge: how to transition to a low-carbon energy
future to manage the risks of climate change, while also extending the
economic and social benefits of energy to everyone on the planet. This is an
ambition that requires changes in the way energy is produced, used and
made accessible to more people while drastically cutting emissions.
for example, introducing GHG metrics in the scorecard following
recommendations by the CSRC, and embedding the energy transition into the
Chief Executive Officer´s (CEO) personal performance targets. See “Directors’
Remuneration Report” on pages 94-95. The Shell employee scorecard
structure for determining employees’ annual bonus in 2017 was consistent
with the Executive Directors’ scorecard.
The Audit Committee has key responsibilities in assisting the Board in fulfilling
its oversight responsibilities in relation to areas such as the effectiveness of the
system of risk management and internal control. Any concerns regarding
improvement needed are promptly reported to the Board.
The CEO is the most senior individual with accountability for climate change
risk. We have set up several dedicated climate change and GHG-related
forums at different levels of the organisation where climate change issues are
addressed, monitored and reviewed, and each Shell subsidiary has
operational responsibility for implementing climate change policies and
We believe that the need to reduce GHG emissions, which are largely
caused by burning fossil fuels, will transform the energy system in this century.
This transformation will generate both challenges and opportunities for our
strategies.
existing and future portfolio.
We welcome and support efforts, such as those led by the Task Force on
Climate-related Financial Disclosures (TCFD), to increase transparency and to
promote investors’ understanding of companies’ strategies to respond to the
risks and opportunities presented by climate change. We believe that
companies should be clear about how they plan to be resilient in the energy
transition. Therefore, we are working with the TCFD to develop guidance on
effective disclosures which, where commercially possible, will be most
relevant and useful to investors. The Shell Sustainability Report (April 2018)
and other publications aim to complement our 2017 Annual Report in
responding to the TCFD recommendations, including discussing the energy
transition and Shell´s portfolio resilience.
A senior manager – the Executive Vice President for Safety and Environment –
reporting directly to an Executive Director (the Projects & Technology Director)
is accountable, among other things, for oversight of GHG issues. This
manager´s department includes the dedicated Group CO2 team, which is
accountable for monitoring and examining the strategic implications of
climate change for Shell and the impact of developments in governmental
policy and regulation. The Group CO2 team is responsible for preparing
proposed policy positions based on analysis within Shell and external input.
The team also ensures consistency in application of our core principles and
policy tasks in interactions with policy makers. Reporting to the same manager
is the HSSE & SP Assurance and Reporting team, which is accountable for the
delivery of Shell’s non-financial reporting and for auditing the businesses´
performance against our HSSE & SP Control Framework requirements,
including climate change risk management. See “Environment and society” on
OUR GOVERNANCE AND MANAGEMENT OF CLIMATE
page 58.
CHANGE RISKS AND OPPORTUNITIES
Climate change and risks resulting from GHG emissions have been identified
as a significant risk factor for Shell and are managed in accordance with
other significant risks through the Board and Executive Committee.
See “Corporate governance” on page 82.
Shell has a climate change risk management structure in place which is
supported by standards, policies and controls.
Group CO2 also has oversight of Shell’s GHG management programme and
supports the different lines of business in embedding GHG management
strategies. The team includes GHG project managers to guide the largest
projects, which represent around 80% of all additional GHG emissions from
new investments, in managing GHG-related content, from both a risk and an
opportunity standpoint. Risk management at an asset or project level is a
structured process of identifying and assessing risks, planning and
implementing responses, monitoring, improving and closing out action items
This includes the work of the Board, which discusses a number of regular
that have an impact on projects and assets’ objectives. Group CO2 support is
agenda items, among them reporting on environmental topics. Throughout
provided for each relevant milestone and a formal sign-off process on
2017, the Board held strategy sessions in the context of the changing global
abatement plans and targets is applied.
energy market, energy transition and climate change, and considered risks
and opportunities of the current and future shape of Shell´s portfolio for
different timescales. The top priorities identified for 2018 in this area include
the energy transition and implementation of our strategy for the New Energies
business.
Further support for embedding GHG risk management is provided by a
global expertise team for GHG and energy management. This team is a
network of subject-matter experts in GHG topics that works globally and
across our lines of business. Team members are experts in their relevant
disciplines, defining improvement areas globally and capturing and sharing
The Board committees (see “Corporate governance” on page 80) play an
best practices.
important role in assisting the Board with regard to governance and
management of climate change risks and opportunities.
The responsibilities of the Corporate and Social Responsibility Committee
(CSRC) include the review of the management of environmental and social
impacts of projects and operations. In 2017, among the key topics were the
energy transition, GHG emission targets, and other carbon dioxide (CO2)
and methane-related developments, such as Shell’s net carbon footprint
ambition and guiding principles on reducing methane emissions.
The above-mentioned teams and experts have provided their input to shape a
set of mandatory manuals and complementary guidance documents which
are ultimately based on our HSSE & SP Control Framework. These documents
provide guidance on how to monitor, communicate and report changes in the
risk environment, and how to review the effectiveness of actions taken to
manage the identified risks, including ways to:
■ ensure consistent assessment of climate risk across Shell;
■ clarify expectations for risk management and reporting, including roles and
responsibilities;
■ strengthen decision making through better visibility and understanding of
the climate risk by line of business; and
■ enable integration of Shell’s reporting.
For more detail on our definition of risk categories and their relationship to
different time horizons, see page 65.
Climate change management organogram
Board of Royal
Dutch Shell plc [1]
Corporate and
Social Responsibility
Committee (CSRC) [2]
Audit
Committee
(AC) [3]
Remuneration
Committee
(REMCO) [4]
CEO and Executive Committee
Executive Vice President,
Safety & Environment
Most senior individuals
with accountability for
climate change risk
management
Vice President, Group CO2
Chair
Businesses and
Functions [5]
CO2 Leadership Team
Ensures the effective delivery of Shell´s
GHG management programme throughout
Shell´s businesses, and the oversight of
GHG policy positions
[1] Oversight of climate change risk management.
[2] Non-executive Directors appointed by the Board to review and advise
on sustainability policies and practices including climate change.
[3] Non-executive Directors appointed by the Board to oversee the effectiveness
of the system of risk management and internal control.
[4] Non-executive Directors appointed by the Board to set the remuneration
policy in alignment with strategy.
[5] Responsible for implementing Shell´s GHG strategy. They are represented
in the CO2 Leadership Team.
This structured approach supports the prioritisation of risks and opportunities.
We actively monitor the GHG footprint of all our assets, as well as our
products, to quantify future regulatory costs related to GHG or other climate-
related policies. This allows us to effectively prioritise areas of greater concern
STRATEGIC REPORT SHELL ANNUAL REPORT AND FORM 20-F 2017
62
STRATEGIC REPORT SHELL ANNUAL REPORT AND FORM 20-F 2017
63
and assess mitigation options and the most viable responses. Climate-related
risks are analysed in context of other identified material risks. See “Risk
factors” on pages 12-16.
Our portfolio exposure is reviewed annually against changing GHG
regulatory regimes and physical conditions to identify emerging risks. We test
the resilience of our portfolio against externally published future pathways,
including a low emissions pathway.
To test the resilience of new projects, we assess potential costs associated
with GHG emissions when evaluating all new investments. Our approach
generally applies a project screening value (PSV) of $40 (real terms) per
tonne of GHG emissions to the total GHG emissions of each investment. This
PSV is generally applied when evaluating our new projects around the world
to test their resilience across a range of future scenarios. The project
development process features a number of checks that may require
development of detailed GHG and energy management plans. High-emitting
projects undergo additional sensitivity testing, including more detailed
economic analysis on local GHG costs, demand sensitivity and the potential
for later retrofitting of carbon capture and storage (CCS) facilities. In certain
countries, these estimated GHG costs can exceed $100/tonne (in real terms)
in the post 2030 environment, reflecting our presumption that governments
will eventually take aggressive action to regulate GHG emissions in
accordance with their Paris Agreement ambitions. Projects in the most GHG-
exposed asset classes have GHG intensity targets that reflect standards
sufficient to allow them to compete and prosper in a more GHG-regulated
future. These processes can lead to projects being stopped, designs being
changed, and potential GHG mitigation investments being identified, in
preparation for when regulation would make these investments commercially
compelling.
While monitoring emerging climate change plans, we consider the robustness
of our activities against a range of scenarios, including the IEA scenarios.
We believe our business strategy is resilient to the envisaged implementation
of the Paris Agreement, which is now progressing through countries’
development of individual plans in their Nationally Determined Contributions
(NDCs). The emissions resulting from energy consumers using Shell products
are for a large part covered by these NDCs. The Paris Agreement
acknowledges that emissions will continue and even grow in some parts of
the world. It does not stipulate that emissions must fall in all sectors or
countries simultaneously, or that all actors within the system will reduce their
emissions. What is important is that emissions fall overall.
OUR PORTFOLIO AND CLIMATE CHANGE
We are seeking cost-effective ways to manage GHG emissions and see
potential business opportunities in developing such solutions. We seek to
contribute to reducing global GHG emissions in a number of ways:
■ supplying more natural gas to replace coal for power generation;
■ progressing CCS technologies;
■ implementing energy-efficiency measures in our operations where
reasonably practical;
■ developing new fuels for transport such as advanced biofuels and
hydrogen; and
■ participating throughout the power value chain with a focus on natural gas
and renewable electricity.
To support this, we continue to advocate the introduction of effective
government-led carbon pricing mechanisms.
While we aspire to reduce our GHG intensity, as energy demand increases
and easily accessible oil and gas resources decline, we may develop
resources that require more energy and advanced technologies to produce.
If our production becomes more energy intensive, this could result in an
associated increase in direct GHG emissions from our upstream facilities.
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climate change and energy transition Continued
Some governments have introduced carbon pricing mechanisms, which we
believe can be an effective measure to reduce GHG emissions across the
economy at lowest overall cost to society, and we expect more governments
to follow. However, we believe measures taken by governments to control
national energy transitions may also cause unintended consequences when
prohibition of one technology supports others that could even increase GHG
emissions.
See “Risk factors” on page 13.
NATURAL GAS
According to the IEA, more than 40% of global CO2 emissions in 2015
came from electricity and heat generation. For many countries, using more
gas in power generation instead of coal can make the largest contribution, at
lowest cost, in meeting their GHG emission reduction objectives. We expect
that, in combination with renewables and use of CCS, natural gas will be
essential for significantly lower GHG emissions. Natural gas made up more
than half of Shell’s proved reserves at the end of 2017. As one of the leaders
in liquefied natural gas (LNG), our portfolio of conventional gas assets and
our technologies for recovering gas from tight-rock formations, we can supply
natural gas to replace coal for power generation. Natural gas can also act
as a partner for intermittent renewable energy, such as solar and wind, to
maintain a steady supply of electricity, because gas-fired plants can start and
stop relatively quickly.
Methane is a more potent GHG than CO2: it has 34 times the global
warming potential of CO2 on a 100-year timeframe, according to the
Intergovernmental Panel on Climate Change (IPCC) Fifth Assessment Report.
Natural gas emits between 45% and 55% less GHG emissions than coal
when burnt at a power plant according to IEA data, but methane leakage in
the natural gas supply chain would reduce this benefit. We recognise the
importance of reducing methane emissions. Methane from the flaring and
venting of gas (including equipment venting) in our upstream oil and gas
operations was the largest contributor to our reported methane emissions in
2017. We are working to reduce methane emissions from these sources by
reducing the overall level of flaring and venting. In addition, we continue to
implement leak detection and repair programmes across our sites to identify
unintended losses (for example, small leaks sometimes called fugitive
emissions) and high-emission equipment, such as high-bleed pneumatic
devices, so they can be replaced or repaired. We continue to work to
confirm that we have identified all potential methane sources and that we
have reported our emissions from these sources in line with regulations and
industry standards. In 2017, we joined the Climate and Clean Air Coalition
Oil & Gas Methane Partnership. It brings together industry, governments and
non-governmental organisations to improve understanding of methane
emissions and work towards reducing them. In November 2017, Shell –
along with seven other energy companies – signed guiding principles for
reducing methane emissions across the natural gas value chain. The
principles focus on: continually reducing methane emissions; advancing
strong performance across gas value chains; improving accuracy of methane
emissions data; advocating sound policies and regulations on methane
emissions; and increasing transparency.
Shell is also a member of the Oil and Gas Climate Initiative (OGCI), a CEO-
led initiative to lead the industry’s response to climate change. One of
OGCI’s focus areas is methane management. In 2017, OGCI’s CEOs
committed to: establish a methodology to improve the collection, verification
and reporting of methane emission data; develop a baseline of methane
emissions; and announce a methane target by the end of 2018. In 2017,
OGCI´s investment arm, OGCI Climate Investments, made its first investments
in innovative technologies that have the potential to significantly reduce GHG
emissions.
Detailed information on our approach to managing methane emissions and
performance will be published in the Shell Sustainability Report in April 2018.
CARBON CAPTURE AND STORAGE
CCS is a technology used for capturing CO2 before it is emitted into the
atmosphere, then transporting it through pipelines and injecting it into a deep
geological formation for long-term storage. In the IEA 450 Scenario, CCS
contributes around 12% of the CO2 mitigation effort required by 2050,
assuming that the use of CCS technology grows in accordance with the IEA
scenario. In November 2015, we launched our Quest CCS project in
Canada, which has captured and safely stored more than 2 million tonnes of
CO2 since it began operating. We are also involved in a CCS test centre in
Mongstad, Norway, the development of the Gorgon CO2 injection project in
Australia, and the Qatar Carbonates and Carbon Storage Research Centre in
the UK. We also have technology that can remove both CO2 and sulphur
dioxide from industrial flue gases. It is being used at Boundary Dam, a third-
party coal-fired power plant in Canada.
ENERGY EFFICIENCY
We continue to work on improving energy efficiency at our oil and gas
production facilities, refineries and chemical plants. Measures include our
GHG and energy management programme that focuses on the efficient
operation of existing equipment. This means, for example, using monitoring
systems which give us real-time information that we can use to make energy-
saving changes and identify opportunities for energy-saving investments in the
medium term. Shell’s scorecard now incorporates GHG metrics that help
create additional incentives for all our employees to reduce GHG emissions
in our portfolio. Also see “Directors’ Remuneration Report” on page 102.
NEW ENERGIES
In 2016, we formed our New Energies business to explore lower-carbon
energy opportunities with clear commercial value. New Energies is an
emerging opportunity, in which we plan to invest on average $1-2 billion a
year until 2020 as we look for commercial investments that build on our
strengths in new and fast-growing segments of the energy industry. It focuses
on two main areas: new fuels for transport and power. Our activities in new
fuels range from developing advanced biofuels to opening hydrogen stations.
In power, we focus on meeting commercial, industrial and residential
customers’ needs supported by our activities in electricity generation, trading
and supply. Digital technologies complement our activities in both of these
areas. See “Integrated Gas” on pages 28-29.
New fuels
We invest in a range of low-carbon technologies and fuels, including
hydrogen and battery-electric vehicle charging. Hydrogen has the potential
to be an important low-carbon transport fuel. We are involved in several
initiatives to encourage the adoption of hydrogen-electric energy. See
“Integrated Gas” on page 28.
Biofuels
We believe that low-carbon biofuels will continue to play a valuable part in
reducing CO2 emissions in the transport sector in the coming decades. Our
Raízen joint venture (Shell interest 50%) in Brazil has produced low-carbon
biofuel from sugar cane since 2011. We are also investing in research to
help develop and commercialise advanced biofuels.
The international market for biofuels has grown over the past decade, driven
largely by the introduction of new energy policies in Europe and the USA that
call for more renewable, lower-carbon fuels for transport. They represent
approximately 3% of global transport fuels today. According to the IEA,
sustainable biofuels are expected to play a bigger role in helping to meet
customers’ fuel needs and reduce CO2 emissions.
From cultivation to use, some biofuels emit significantly less CO2 compared
with conventional gasoline. But this depends on several factors, such as how
the feedstock is cultivated and the way biofuels are produced. Other
challenges include concerns over land competing with food crops, labour
■ regulatory risk: the potential for strengthening of existing and introduction of
rights, and the water used in the production process.
new regulations; and
In 2017, we used around 9 billion litres of biofuel in our gasoline and diesel
blends worldwide to comply with applicable mandates and targets in the
markets where we operate. Through our own long-established sustainability
clauses in supply contracts, we request that the biofuels we buy are produced
in a way that is environmentally and socially responsible across the life cycle
of the production chain.
Where possible, we source biofuels that have been certified against
internationally recognised sustainability standards. Shell supports the adoption
of international sustainability standards, including the Round Table on
Responsible Soy, the Roundtable for Sustainable Palm Oil, and Bonsucro, a
non-profit organisation for sugar cane. We also support the Roundtable for
Sustainable Biomaterials and the International Sustainability and Carbon
Certification scheme, both of which can be used for any feedstocks. We also
continue to work with industry, governments and voluntary organisations
towards the development and adoption of internationally recognised
sustainability standards for biofuels.
Through our Raízen joint venture, we produce one of the lowest CO2 biofuels
available today. Raízen produces approximately 2 billion litres of ethanol
from sugar cane annually. Brazilian sugar-cane ethanol can reduce CO2
emissions by around 70% when compared with conventional gasoline, from
cultivation of the sugar cane to using the ethanol as fuel.
In 2015, Raízen opened its first advanced biofuels plant at the Costa Pinto
mill in Brazil. The technology was first developed from our funding of the
Iogen Energy venture, which was subsequently transferred to Raízen. In
2017, the plant produced 10 million litres of cellulosic ethanol from sugar-
cane residues. It is expected to produce 40 million litres a year once fully
operational.
Outside Brazil, we continue to invest in new ways of producing biofuels from
sustainable feedstocks, such as biofuels made from waste products or
cellulosic biomass. In 2017, we completed construction of a demonstration
plant at the Shell Technology Centre Bangalore, India. Currently, this plant
demonstrates a technology called IH2 that turns waste into transport fuel but it
is not producing on a commercial scale. We continue to look for
opportunities to invest in third-party technologies and to collaborate in scaling
these up for commercialisation. For example, in 2017, Shell signed an
agreement with SBI Bioenergy in Canada for exclusive technology
development and licensing rights of a technology that turns waste oils into
drop-in fuels (fuels that can be added to conventional fuels and do not require
modifications of distribution infrastructure or engines).
Power
■ physical risk: the potential impact on our facilities and the communities in
which we operate due to changing physical conditions.
This is how we describe the different time horizons and the relevance for the
identification of risks and the business planning:
■ Short term (up to three years): detailed financial projections are developed
and used to manage performance and expectations on a three-year cycle.
This three-year plan is shared with the Board;
■ Medium term (three years up to around 10 years): the majority of
production and earnings expected to be generated in this period come
from our existing assets; and
■ Long term (beyond around 10 years): for this period, the current Shell
portfolio is not representative of our performance or the potential risks, and
questions emerging on the thematic structure of the portfolio guide decision
making and risk identification.
Shell has a rigorous approach to understanding, managing and mitigating
climate risks to its facilities. Shell also requires each business and function to
monitor, communicate and report changes in the risk environment and the
effectiveness of actions taken to manage identified risks on an ongoing basis.
This is outlined in a toolkit for risk management including our Risk
Management Manual and complementary guidance documents that cover
specific aspects such as climate risk.
Each Shell business unit needs to consider the acceptability of climate-related
risks in their portfolios. To ensure that informed judgements are made,
businesses´ senior managers present their current assessments of the likelihood
of the climate-related risks discussed above materialising and their potential
impact, along with summaries of current mitigation efforts under way within
their business unit. Each risk is then categorised as either acceptable or as
needing improvement.
We aim to reduce the GHG intensity of our portfolio and we continue to
work on improving the energy efficiency of our existing operations. In
addition, and as a better way to inform and drive our investment choices and
adapt our business over time, in November 2017 we announced our
ambition to reduce the net carbon footprint of our energy products in step
with society’s drive to reduce GHG emissions. We aim to cut our and our
customers’ GHG emissions from energy products that Shell sells – expressed
in grams of CO2 equivalent per megajoule consumed – by around half by
2050. As an interim step, by 2035, and predicated on societal progress,
we aim for a reduction of around 20% compared with 2017 levels. Our
approach to reducing the net carbon footprint covers emissions directly from
Shell operations (including from the extraction, transportation and processing
of raw materials, and transportation of products), those generated by third
Power is the fastest-growing segment of the energy system. We expect that
parties who supply energy to us for production, and our customers’ emissions
people and companies around the world will use more electricity to power
from their consumption of our energy products. Also included are emissions
transport and industry, instead of coal and oil, as part of the drive to lower
from elements of this life cycle not owned by Shell, such as oil and gas
carbon emissions. To help meet this demand, Shell aims to become an
processed by Shell but not produced by Shell, or from oil products and
integrated power player and grow, over time, a material new business.
electricity marketed by Shell that have not been processed or generated at a
We are working to deliver more electricity generated by renewable energy,
Shell facility. Excluded are our emissions or our customers’ emissions from our
from developing wind and solar projects to selling electricity generated by
chemicals and lubricants products, which are not used to produce energy.
renewable sources. See “Integrated Gas” on pages 28-29.
OUR STRATEGY ON CLIMATE CHANGE
Our strategy to assess and manage risks and opportunities resulting from
climate change includes consideration of different time horizons and specific:
Our long-term ambition for 2050 is a stretching aspiration that aims to ensure
that Shell continues to develop a resilient and relevant portfolio over the
coming decades. While this is a long-term aspiration that will need periodic
recalibration in line with the pace of change in broader society and the wider
energy system, it is intended to help ensure that we remain relevant and are
■ societal risk: the potential for a deteriorating relationship with the public,
competitively positioned in the energy transition. This means supplying energy
other companies, and governments in countries where Shell operates;
products and services that our customers need, now and in the future, and
■ commercial risk: the potential for structural shifts in demand profiles for
developing a resilient portfolio in line with our purpose of providing more and
industry products;
cleaner energy to society.
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Some governments have introduced carbon pricing mechanisms, which we
CARBON CAPTURE AND STORAGE
believe can be an effective measure to reduce GHG emissions across the
CCS is a technology used for capturing CO2 before it is emitted into the
economy at lowest overall cost to society, and we expect more governments
atmosphere, then transporting it through pipelines and injecting it into a deep
to follow. However, we believe measures taken by governments to control
geological formation for long-term storage. In the IEA 450 Scenario, CCS
national energy transitions may also cause unintended consequences when
contributes around 12% of the CO2 mitigation effort required by 2050,
prohibition of one technology supports others that could even increase GHG
assuming that the use of CCS technology grows in accordance with the IEA
emissions.
See “Risk factors” on page 13.
NATURAL GAS
According to the IEA, more than 40% of global CO2 emissions in 2015
came from electricity and heat generation. For many countries, using more
gas in power generation instead of coal can make the largest contribution, at
lowest cost, in meeting their GHG emission reduction objectives. We expect
that, in combination with renewables and use of CCS, natural gas will be
essential for significantly lower GHG emissions. Natural gas made up more
than half of Shell’s proved reserves at the end of 2017. As one of the leaders
in liquefied natural gas (LNG), our portfolio of conventional gas assets and
our technologies for recovering gas from tight-rock formations, we can supply
natural gas to replace coal for power generation. Natural gas can also act
as a partner for intermittent renewable energy, such as solar and wind, to
maintain a steady supply of electricity, because gas-fired plants can start and
stop relatively quickly.
Methane is a more potent GHG than CO2: it has 34 times the global
warming potential of CO2 on a 100-year timeframe, according to the
Intergovernmental Panel on Climate Change (IPCC) Fifth Assessment Report.
Natural gas emits between 45% and 55% less GHG emissions than coal
when burnt at a power plant according to IEA data, but methane leakage in
the natural gas supply chain would reduce this benefit. We recognise the
importance of reducing methane emissions. Methane from the flaring and
venting of gas (including equipment venting) in our upstream oil and gas
operations was the largest contributor to our reported methane emissions in
2017. We are working to reduce methane emissions from these sources by
reducing the overall level of flaring and venting. In addition, we continue to
implement leak detection and repair programmes across our sites to identify
unintended losses (for example, small leaks sometimes called fugitive
emissions) and high-emission equipment, such as high-bleed pneumatic
devices, so they can be replaced or repaired. We continue to work to
confirm that we have identified all potential methane sources and that we
have reported our emissions from these sources in line with regulations and
industry standards. In 2017, we joined the Climate and Clean Air Coalition
Oil & Gas Methane Partnership. It brings together industry, governments and
non-governmental organisations to improve understanding of methane
emissions and work towards reducing them. In November 2017, Shell –
along with seven other energy companies – signed guiding principles for
reducing methane emissions across the natural gas value chain. The
principles focus on: continually reducing methane emissions; advancing
strong performance across gas value chains; improving accuracy of methane
emissions data; advocating sound policies and regulations on methane
emissions; and increasing transparency.
Shell is also a member of the Oil and Gas Climate Initiative (OGCI), a CEO-
led initiative to lead the industry’s response to climate change. One of
OGCI’s focus areas is methane management. In 2017, OGCI’s CEOs
committed to: establish a methodology to improve the collection, verification
and reporting of methane emission data; develop a baseline of methane
emissions; and announce a methane target by the end of 2018. In 2017,
OGCI´s investment arm, OGCI Climate Investments, made its first investments
emissions.
Detailed information on our approach to managing methane emissions and
performance will be published in the Shell Sustainability Report in April 2018.
scenario. In November 2015, we launched our Quest CCS project in
Canada, which has captured and safely stored more than 2 million tonnes of
CO2 since it began operating. We are also involved in a CCS test centre in
Mongstad, Norway, the development of the Gorgon CO2 injection project in
Australia, and the Qatar Carbonates and Carbon Storage Research Centre in
the UK. We also have technology that can remove both CO2 and sulphur
dioxide from industrial flue gases. It is being used at Boundary Dam, a third-
party coal-fired power plant in Canada.
ENERGY EFFICIENCY
We continue to work on improving energy efficiency at our oil and gas
production facilities, refineries and chemical plants. Measures include our
GHG and energy management programme that focuses on the efficient
operation of existing equipment. This means, for example, using monitoring
systems which give us real-time information that we can use to make energy-
saving changes and identify opportunities for energy-saving investments in the
medium term. Shell’s scorecard now incorporates GHG metrics that help
create additional incentives for all our employees to reduce GHG emissions
in our portfolio. Also see “Directors’ Remuneration Report” on page 102.
NEW ENERGIES
In 2016, we formed our New Energies business to explore lower-carbon
energy opportunities with clear commercial value. New Energies is an
emerging opportunity, in which we plan to invest on average $1-2 billion a
year until 2020 as we look for commercial investments that build on our
strengths in new and fast-growing segments of the energy industry. It focuses
on two main areas: new fuels for transport and power. Our activities in new
fuels range from developing advanced biofuels to opening hydrogen stations.
In power, we focus on meeting commercial, industrial and residential
customers’ needs supported by our activities in electricity generation, trading
and supply. Digital technologies complement our activities in both of these
areas. See “Integrated Gas” on pages 28-29.
New fuels
We invest in a range of low-carbon technologies and fuels, including
hydrogen and battery-electric vehicle charging. Hydrogen has the potential
to be an important low-carbon transport fuel. We are involved in several
initiatives to encourage the adoption of hydrogen-electric energy. See
“Integrated Gas” on page 28.
Biofuels
We believe that low-carbon biofuels will continue to play a valuable part in
reducing CO2 emissions in the transport sector in the coming decades. Our
Raízen joint venture (Shell interest 50%) in Brazil has produced low-carbon
biofuel from sugar cane since 2011. We are also investing in research to
help develop and commercialise advanced biofuels.
The international market for biofuels has grown over the past decade, driven
largely by the introduction of new energy policies in Europe and the USA that
call for more renewable, lower-carbon fuels for transport. They represent
approximately 3% of global transport fuels today. According to the IEA,
sustainable biofuels are expected to play a bigger role in helping to meet
customers’ fuel needs and reduce CO2 emissions.
with conventional gasoline. But this depends on several factors, such as how
the feedstock is cultivated and the way biofuels are produced. Other
in innovative technologies that have the potential to significantly reduce GHG
From cultivation to use, some biofuels emit significantly less CO2 compared
challenges include concerns over land competing with food crops, labour
rights, and the water used in the production process.
In 2017, we used around 9 billion litres of biofuel in our gasoline and diesel
blends worldwide to comply with applicable mandates and targets in the
markets where we operate. Through our own long-established sustainability
clauses in supply contracts, we request that the biofuels we buy are produced
in a way that is environmentally and socially responsible across the life cycle
of the production chain.
Where possible, we source biofuels that have been certified against
internationally recognised sustainability standards. Shell supports the adoption
of international sustainability standards, including the Round Table on
Responsible Soy, the Roundtable for Sustainable Palm Oil, and Bonsucro, a
non-profit organisation for sugar cane. We also support the Roundtable for
Sustainable Biomaterials and the International Sustainability and Carbon
Certification scheme, both of which can be used for any feedstocks. We also
continue to work with industry, governments and voluntary organisations
towards the development and adoption of internationally recognised
sustainability standards for biofuels.
Through our Raízen joint venture, we produce one of the lowest CO2 biofuels
available today. Raízen produces approximately 2 billion litres of ethanol
from sugar cane annually. Brazilian sugar-cane ethanol can reduce CO2
emissions by around 70% when compared with conventional gasoline, from
cultivation of the sugar cane to using the ethanol as fuel.
In 2015, Raízen opened its first advanced biofuels plant at the Costa Pinto
mill in Brazil. The technology was first developed from our funding of the
Iogen Energy venture, which was subsequently transferred to Raízen. In
2017, the plant produced 10 million litres of cellulosic ethanol from sugar-
cane residues. It is expected to produce 40 million litres a year once fully
operational.
Outside Brazil, we continue to invest in new ways of producing biofuels from
sustainable feedstocks, such as biofuels made from waste products or
cellulosic biomass. In 2017, we completed construction of a demonstration
plant at the Shell Technology Centre Bangalore, India. Currently, this plant
demonstrates a technology called IH2 that turns waste into transport fuel but it
is not producing on a commercial scale. We continue to look for
opportunities to invest in third-party technologies and to collaborate in scaling
these up for commercialisation. For example, in 2017, Shell signed an
agreement with SBI Bioenergy in Canada for exclusive technology
development and licensing rights of a technology that turns waste oils into
drop-in fuels (fuels that can be added to conventional fuels and do not require
modifications of distribution infrastructure or engines).
Power
Power is the fastest-growing segment of the energy system. We expect that
people and companies around the world will use more electricity to power
transport and industry, instead of coal and oil, as part of the drive to lower
carbon emissions. To help meet this demand, Shell aims to become an
integrated power player and grow, over time, a material new business.
We are working to deliver more electricity generated by renewable energy,
from developing wind and solar projects to selling electricity generated by
renewable sources. See “Integrated Gas” on pages 28-29.
OUR STRATEGY ON CLIMATE CHANGE
Our strategy to assess and manage risks and opportunities resulting from
climate change includes consideration of different time horizons and specific:
■ societal risk: the potential for a deteriorating relationship with the public,
other companies, and governments in countries where Shell operates;
■ commercial risk: the potential for structural shifts in demand profiles for
industry products;
■ regulatory risk: the potential for strengthening of existing and introduction of
new regulations; and
■ physical risk: the potential impact on our facilities and the communities in
which we operate due to changing physical conditions.
This is how we describe the different time horizons and the relevance for the
identification of risks and the business planning:
■ Short term (up to three years): detailed financial projections are developed
and used to manage performance and expectations on a three-year cycle.
This three-year plan is shared with the Board;
■ Medium term (three years up to around 10 years): the majority of
production and earnings expected to be generated in this period come
from our existing assets; and
■ Long term (beyond around 10 years): for this period, the current Shell
portfolio is not representative of our performance or the potential risks, and
questions emerging on the thematic structure of the portfolio guide decision
making and risk identification.
Shell has a rigorous approach to understanding, managing and mitigating
climate risks to its facilities. Shell also requires each business and function to
monitor, communicate and report changes in the risk environment and the
effectiveness of actions taken to manage identified risks on an ongoing basis.
This is outlined in a toolkit for risk management including our Risk
Management Manual and complementary guidance documents that cover
specific aspects such as climate risk.
Each Shell business unit needs to consider the acceptability of climate-related
risks in their portfolios. To ensure that informed judgements are made,
businesses´ senior managers present their current assessments of the likelihood
of the climate-related risks discussed above materialising and their potential
impact, along with summaries of current mitigation efforts under way within
their business unit. Each risk is then categorised as either acceptable or as
needing improvement.
We aim to reduce the GHG intensity of our portfolio and we continue to
work on improving the energy efficiency of our existing operations. In
addition, and as a better way to inform and drive our investment choices and
adapt our business over time, in November 2017 we announced our
ambition to reduce the net carbon footprint of our energy products in step
with society’s drive to reduce GHG emissions. We aim to cut our and our
customers’ GHG emissions from energy products that Shell sells – expressed
in grams of CO2 equivalent per megajoule consumed – by around half by
2050. As an interim step, by 2035, and predicated on societal progress,
we aim for a reduction of around 20% compared with 2017 levels. Our
approach to reducing the net carbon footprint covers emissions directly from
Shell operations (including from the extraction, transportation and processing
of raw materials, and transportation of products), those generated by third
parties who supply energy to us for production, and our customers’ emissions
from their consumption of our energy products. Also included are emissions
from elements of this life cycle not owned by Shell, such as oil and gas
processed by Shell but not produced by Shell, or from oil products and
electricity marketed by Shell that have not been processed or generated at a
Shell facility. Excluded are our emissions or our customers’ emissions from our
chemicals and lubricants products, which are not used to produce energy.
Our long-term ambition for 2050 is a stretching aspiration that aims to ensure
that Shell continues to develop a resilient and relevant portfolio over the
coming decades. While this is a long-term aspiration that will need periodic
recalibration in line with the pace of change in broader society and the wider
energy system, it is intended to help ensure that we remain relevant and are
competitively positioned in the energy transition. This means supplying energy
products and services that our customers need, now and in the future, and
developing a resilient portfolio in line with our purpose of providing more and
cleaner energy to society.
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climate change and energy transition Continued
Our people
In the period to 2035, we believe that all forms of GHG reduction measures
must be accelerated and increased in scale. Major improvements in energy
efficiency and new sources of energy, such as renewables, combined with
the use of cleaner fossil fuels, such as replacing coal with natural gas, are
needed to meet the growing global population’s energy needs while
reducing GHG emissions. In addition, the world will need significant growth
in CCS and sustained reductions in demand. The management of GHG
emissions will become increasingly important to our shareholders as concerns
over climate change lead to tighter environmental regulations. Policies and
regulations designed to limit the increase in global temperatures to well below
2°C could have a material adverse effect on Shell – through higher operating
costs and reduced demand for some of our products. We actively monitor
and assess these potential threats and are best able to manage them when
local policies provide a stable and predictable regulatory foundation for our
future investments. At this stage, industry is still facing significant uncertainty
about how local regulatory policies and consumer behaviour will shape the
evolution of the energy system and which technologies and business models
will thrive.
OUR PERFORMANCE
Data in this section are reported on a 100% basis in respect of activities
where we are the operator. Reporting on this operational control basis differs
from that applied for financial reporting purposes in the “Consolidated
Financial Statements” on pages 137-178. Detailed data and information on
our 2017 environmental and social performance will be published in the
Shell Sustainability Report in April 2018.
Our direct GHG emissions increased from 70 million tonnes of CO2
equivalent in 2016 to 73 million tonnes of CO2 equivalent in 2017. The
main contributors to this increase were the inclusion of the assets previously
operated by the Motiva Enterprises LLC joint venture in the USA in our data
from May 2017 and the return to production of previously shut-down units at
the Bukom site in Singapore. The level of flaring in our Upstream and
Integrated Gas businesses combined increased by slightly less than 10% in
2017, compared with 2016. These increases were partly offset by
divestments (for example in Canada, Gabon, Malaysia and the UK) and
reduced production at our Pearl gas-to-liquids (GTL) plant in Qatar.
In 2015, we signed up to the World Bank’s “Zero Routine Flaring by 2030”
initiative. This is an important initiative to ensure that all stakeholders,
including governments and companies, work together to address routine
flaring. Flaring, or burning off, of gas in our Upstream and Integrated Gas
businesses contributed around 11% of our overall direct GHG emissions in
2017. Almost half of this flaring took place at facilities where there was no
infrastructure to capture the gas produced with oil, known as associated gas.
Our involvement in Basrah Gas Company (BGC), a non-Shell-operated joint
venture between Shell, South Gas Company and Mitsubishi Corporation in
the south of Iraq, continues to reduce flaring in the country. It is the largest gas
company in Iraq’s history and the world’s largest flaring reduction project.
BGC captures associated gas that would otherwise be flared from three non-
Shell-operated oil fields in southern Iraq (Rumaila, West Qurna 1 and Zubair).
The gathered gas is processed into dry gas, liquefied petroleum gas (LPG)
and condensate. Dry gas is supplied to the gas network in southern Iraq and
then used to generate electricity. LPG and condensate are delivered to South
Gas Company for distribution in the domestic market and excess production
is exported. In 2017, BGC processed an average of 676 million standard
cubic feet of gas per day.
Almost a quarter of flaring in our Upstream and Integrated Gas facilities in
2017 took place in assets operated by The Shell Petroleum Development
Company of Nigeria Limited (SPDC). Flaring from SPDC-operated facilities fell
by more than 40% between 2013 and 2017. However, flaring intensity
levels in SPDC increased in 2017 compared with 2016, partly due to the
restart of facilities that were offline for most of 2016. Several new gas-
gathering projects came on stream at the end of 2017. However, the
planned start-up dates for two gas-gathering projects have historically been
delayed due to lack of adequate joint venture funding. Nevertheless, with
funding now restored, the projects are planned for completion in 2018-19.
GHG emissions data are provided below in accordance with UK regulations.
GHG emissions comprise CO2, methane, nitrous oxide, hydrofluorocarbons,
perfluorocarbons, sulphur hexafluoride and nitrogen trifluoride. The data are
calculated using locally regulated methods where they exist. Where there is
no locally regulated method, the data are calculated using the 2009 API
Compendium, which is the recognised industry standard under the GHG
Protocol Corporate Accounting and Reporting Standard. There are inherent
limitations to the accuracy of such data. Oil and gas industry guidelines
(IPIECA/API/IOGP) indicate that a number of sources of uncertainty can
contribute to the overall uncertainty of a corporate emissions inventory.
Greenhouse gas emissions
Emissions (million tonnes of CO2 equivalent)
Direct [A]
Energy indirect [B]
Intensity ratios (tonne/tonne)
All facilities [C][D]
2017
2016
73
12
70
11
0.25
0.23
pool.
[A] Emissions from the combustion of fuel and the operation of facilities, calculated using global
warming potentials from the IPCC’s Fourth Assessment Report.
[B] Emissions from the purchase of electricity, heat, steam and cooling for our own use using a market-
based method as defined by the GHG Protocol Corporate Accounting and Reporting Standard.
[C] In tonnes of total direct and energy indirect GHG emissions per tonne of crude oil and feedstocks
processed and petrochemicals produced in Downstream manufacturing, oil and gas available for sale,
LNG and GTL production in Integrated Gas and Upstream. Additional information by segment will be
published on www.shell.com/ghg.
[D] In 2017, we updated our methodology for calculating the intensity ratio. The 2016 ratio has been
recalculated to reflect the change in scope.
Detailed information on our 2017 GHG emissions will be published in the
Shell Sustainability Report in April 2018 and on www.shell.com/ghg.
The statements in this “Climate change and energy transition” section,
including those related to net carbon footprint, are forward-looking statements
based on management’s current expectations and certain material
assumptions and, accordingly, involve risks and uncertainties that could cause
actual results, performance or events to differ materially from those expressed
or implied herein. See “About this Report” on page 05 and “Risk factors” on
page 12-16.
Performing competitively in the evolving energy landscape requires competent
and empowered people working safely together across Shell. We recruit,
train and recompense people according to a strategy that aims to organise
our businesses effectively; accelerate development of our people; grow and
strengthen our leadership capabilities; and enhance employee performance
through strong engagement. Our people are essential to the successful
delivery of the Shell strategy and to sustaining business performance over the
long term.
EMPLOYEE OVERVIEW
The employee numbers presented here are the full-time employee equivalents
of the total number of people on full-time or part-time employment contracts
with Shell subsidiaries, including our share of employees of Shell-operated
joint operations. It excludes employees working for Shell’s joint ventures and
associates.
At December 31, 2017, we employed 84,000 people, compared with
89,000 at December 31, 2016, and 90,000 at December 31, 2015. The
reduction in 2017 was driven by portfolio activities and our continued effort
to improve operational efficiency and to reduce costs following the BG
acquisition in 2016. These impacts were partly offset by the insourcing of
The Shell Global Helpline is managed by an independent third party, and all
allegations concerning bribery or corruption are investigated. See “Corporate
governance” on page 77.
DIVERSITY AND INCLUSION
Our intention is to sustain a diverse workforce and an inclusive environment
that respects and shows care for all our people and helps improve our
business performance. Our diversity and inclusion (D&I) approach focuses on
talent acquisition, progression and retention, leadership visibility, inclusive
culture and on differentiating our external reputation. Our leaders aim to be
role models for D&I and assume accountability for continuous progress. We
believe that diverse teams led by inclusive leaders are more engaged, and
therefore deliver better safety and business performance. By embedding D&I
into our operations, we have a better understanding of the needs of our
employees as well as the needs of our varied customers, partners and
stakeholders throughout the world. It also allows us to benefit from a wider
external talent pool for recruitment purposes.
We provide equal opportunity in recruitment, career development, promotion,
training and rewards for all employees, including those with disabilities. In
2017, we began implementation of a workplace accessibility service at our
specific skill sets into the organisation (predominantly into our business service
major locations to ensure that all employees have access to reasonable
centres) and other external recruitment to build our talent pipeline. We
adjustments so that they can work effectively. In addition, we introduced a
continue to leverage and expand capabilities to ensure a sustainable talent
global minimum standard for maternity leave of 16 weeks.
During 2017, we employed an average of 86,000 people, shown by
in 2017, we were ranked in the top category in the Workplace Pride global
geographical area in the table below and by business segment in Note 26
lesbian, gay, bisexual, transgender and intersexed (LGBTI) inclusive
Our focus on workplace inclusion also continues in other areas. For example,
to the “Consolidated Financial Statements” on page 176.
Average number of employees
by geographical area
Europe
Asia
Oceania
Africa
North America
South America
Total
2017
2016
2015
24
29
2
3
24
4
86
25
28
2
4
29
4
92
25
29
1
3
31
4
93
workplace benchmark and earned a 100% score in the Human Rights
Campaign Foundation’s Corporate Equality Index. We actively monitor
representation of women and local nationals in senior leadership positions,
and have talent-development processes to support us in mitigating any biases
Thousand
and delivering more diverse representation.
At the end of 2017, the proportion of women in senior leadership positions was
22% compared with 20% at the end of 2016. “Senior leadership position” is a
Shell measure based on senior salary group levels and is distinct from the term
“senior manager” in the statutory disclosures set out below.
EMPLOYEE COMMUNICATION AND INVOLVEMENT
We strive to maintain a healthy employee and industrial relations environment
in which dialogue between management and employees – both directly and,
where appropriate, through employee representative bodies – is embedded
in our work practices. On a quarterly basis, management briefs employees
on our operational and financial results through various channels, including
team meetings, face-to-face gatherings, an email from the Chief Executive
Officer, webcasts and online publications.
Strong employee engagement is especially significant in maintaining strong
business delivery in times of great change. The Shell People Survey is one of the
principal tools used to measure employee engagement, which aims to reflect the
degree of employee affiliation and commitment to Shell. It provides insights into
employees’ views and has had a consistently high response rate. In 2017, Shell
used an improved survey tool with a new scoring methodology that showed
average indices, instead of the percentages in favour shown by the previous
tool. Our average employee engagement score remained stable at 76 points
Total
out of 100 (2016: 79% under the previous methodology).
Greater than 80%
Less than 80%
Gender diversity data (at December 31, 2017)
Directors of the Company
Senior managers [A]
Employees (thousand)
Men
64%
75%
68%
7
751
57
Number
Women
4
252
27
36%
25%
32%
[A] Senior manager is defined in section 414C(9) of the Companies Act 2006 and accordingly the
number disclosed comprises the Executive Committee members who were not Directors of the
Company, as well as other directors of Shell subsidiaries.
The local national coverage is the number of senior local nationals (both those
working in their respective base country and those expatriated) as a
percentage of the number of senior leadership positions in their base country.
Local national coverage (at December 31)
Number of selected key business countries
2017
2016
2015
10
10
20
10
10
20
12
8
20
We promote safe reporting of views about our processes and practices. In
In line with the UN Global Compact Principle 10 (Businesses should work
addition to local channels, the Shell Global Helpline enables employees to
against corruption in all its forms, including extortion and bribery), we maintain
report potential breaches of the Shell General Business Principles and Shell
Code of Conduct, confidentially and anonymously, in a variety of languages.
a global Anti Bribery and Corruption (ABC) programme designed to prevent or
detect, and remediate and learn from, potential violations. The programme is
CODE OF CONDUCT
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In the period to 2035, we believe that all forms of GHG reduction measures
gathering projects came on stream at the end of 2017. However, the
must be accelerated and increased in scale. Major improvements in energy
planned start-up dates for two gas-gathering projects have historically been
efficiency and new sources of energy, such as renewables, combined with
delayed due to lack of adequate joint venture funding. Nevertheless, with
the use of cleaner fossil fuels, such as replacing coal with natural gas, are
funding now restored, the projects are planned for completion in 2018-19.
needed to meet the growing global population’s energy needs while
reducing GHG emissions. In addition, the world will need significant growth
in CCS and sustained reductions in demand. The management of GHG
emissions will become increasingly important to our shareholders as concerns
over climate change lead to tighter environmental regulations. Policies and
regulations designed to limit the increase in global temperatures to well below
2°C could have a material adverse effect on Shell – through higher operating
costs and reduced demand for some of our products. We actively monitor
and assess these potential threats and are best able to manage them when
local policies provide a stable and predictable regulatory foundation for our
future investments. At this stage, industry is still facing significant uncertainty
about how local regulatory policies and consumer behaviour will shape the
evolution of the energy system and which technologies and business models
will thrive.
OUR PERFORMANCE
GHG emissions data are provided below in accordance with UK regulations.
GHG emissions comprise CO2, methane, nitrous oxide, hydrofluorocarbons,
perfluorocarbons, sulphur hexafluoride and nitrogen trifluoride. The data are
calculated using locally regulated methods where they exist. Where there is
no locally regulated method, the data are calculated using the 2009 API
Compendium, which is the recognised industry standard under the GHG
Protocol Corporate Accounting and Reporting Standard. There are inherent
limitations to the accuracy of such data. Oil and gas industry guidelines
(IPIECA/API/IOGP) indicate that a number of sources of uncertainty can
contribute to the overall uncertainty of a corporate emissions inventory.
Greenhouse gas emissions
Emissions (million tonnes of CO2 equivalent)
Data in this section are reported on a 100% basis in respect of activities
Direct [A]
where we are the operator. Reporting on this operational control basis differs
Energy indirect [B]
from that applied for financial reporting purposes in the “Consolidated
Financial Statements” on pages 137-178. Detailed data and information on
our 2017 environmental and social performance will be published in the
Intensity ratios (tonne/tonne)
All facilities [C][D]
Shell Sustainability Report in April 2018.
2017
2016
73
12
70
11
0.25
0.23
the Bukom site in Singapore. The level of flaring in our Upstream and
recalculated to reflect the change in scope.
[A] Emissions from the combustion of fuel and the operation of facilities, calculated using global
warming potentials from the IPCC’s Fourth Assessment Report.
[B] Emissions from the purchase of electricity, heat, steam and cooling for our own use using a market-
based method as defined by the GHG Protocol Corporate Accounting and Reporting Standard.
[C] In tonnes of total direct and energy indirect GHG emissions per tonne of crude oil and feedstocks
processed and petrochemicals produced in Downstream manufacturing, oil and gas available for sale,
LNG and GTL production in Integrated Gas and Upstream. Additional information by segment will be
published on www.shell.com/ghg.
[D] In 2017, we updated our methodology for calculating the intensity ratio. The 2016 ratio has been
Detailed information on our 2017 GHG emissions will be published in the
Shell Sustainability Report in April 2018 and on www.shell.com/ghg.
The statements in this “Climate change and energy transition” section,
including those related to net carbon footprint, are forward-looking statements
based on management’s current expectations and certain material
assumptions and, accordingly, involve risks and uncertainties that could cause
actual results, performance or events to differ materially from those expressed
or implied herein. See “About this Report” on page 05 and “Risk factors” on
page 12-16.
Our direct GHG emissions increased from 70 million tonnes of CO2
equivalent in 2016 to 73 million tonnes of CO2 equivalent in 2017. The
main contributors to this increase were the inclusion of the assets previously
operated by the Motiva Enterprises LLC joint venture in the USA in our data
from May 2017 and the return to production of previously shut-down units at
Integrated Gas businesses combined increased by slightly less than 10% in
2017, compared with 2016. These increases were partly offset by
divestments (for example in Canada, Gabon, Malaysia and the UK) and
reduced production at our Pearl gas-to-liquids (GTL) plant in Qatar.
In 2015, we signed up to the World Bank’s “Zero Routine Flaring by 2030”
initiative. This is an important initiative to ensure that all stakeholders,
including governments and companies, work together to address routine
flaring. Flaring, or burning off, of gas in our Upstream and Integrated Gas
businesses contributed around 11% of our overall direct GHG emissions in
2017. Almost half of this flaring took place at facilities where there was no
infrastructure to capture the gas produced with oil, known as associated gas.
Our involvement in Basrah Gas Company (BGC), a non-Shell-operated joint
venture between Shell, South Gas Company and Mitsubishi Corporation in
the south of Iraq, continues to reduce flaring in the country. It is the largest gas
company in Iraq’s history and the world’s largest flaring reduction project.
BGC captures associated gas that would otherwise be flared from three non-
Shell-operated oil fields in southern Iraq (Rumaila, West Qurna 1 and Zubair).
The gathered gas is processed into dry gas, liquefied petroleum gas (LPG)
and condensate. Dry gas is supplied to the gas network in southern Iraq and
then used to generate electricity. LPG and condensate are delivered to South
Gas Company for distribution in the domestic market and excess production
is exported. In 2017, BGC processed an average of 676 million standard
cubic feet of gas per day.
Almost a quarter of flaring in our Upstream and Integrated Gas facilities in
2017 took place in assets operated by The Shell Petroleum Development
Company of Nigeria Limited (SPDC). Flaring from SPDC-operated facilities fell
by more than 40% between 2013 and 2017. However, flaring intensity
levels in SPDC increased in 2017 compared with 2016, partly due to the
restart of facilities that were offline for most of 2016. Several new gas-
Our people
Our people
Performing competitively in the evolving energy landscape requires competent
and empowered people working safely together across Shell. We recruit,
train and recompense people according to a strategy that aims to organise
our businesses effectively; accelerate development of our people; grow and
strengthen our leadership capabilities; and enhance employee performance
through strong engagement. Our people are essential to the successful
delivery of the Shell strategy and to sustaining business performance over the
long term.
EMPLOYEE OVERVIEW
The employee numbers presented here are the full-time employee equivalents
of the total number of people on full-time or part-time employment contracts
with Shell subsidiaries, including our share of employees of Shell-operated
joint operations. It excludes employees working for Shell’s joint ventures and
associates.
At December 31, 2017, we employed 84,000 people, compared with
89,000 at December 31, 2016, and 90,000 at December 31, 2015. The
reduction in 2017 was driven by portfolio activities and our continued effort
to improve operational efficiency and to reduce costs following the BG
acquisition in 2016. These impacts were partly offset by the insourcing of
specific skill sets into the organisation (predominantly into our business service
centres) and other external recruitment to build our talent pipeline. We
continue to leverage and expand capabilities to ensure a sustainable talent
pool.
During 2017, we employed an average of 86,000 people, shown by
geographical area in the table below and by business segment in Note 26
to the “Consolidated Financial Statements” on page 176.
Average number of employees
by geographical area
Europe
Asia
Oceania
Africa
North America
South America
Total
2017
2016
Thousand
2015
24
29
2
3
24
4
86
25
28
2
4
29
4
92
25
29
1
3
31
4
93
EMPLOYEE COMMUNICATION AND INVOLVEMENT
We strive to maintain a healthy employee and industrial relations environment
in which dialogue between management and employees – both directly and,
where appropriate, through employee representative bodies – is embedded
in our work practices. On a quarterly basis, management briefs employees
on our operational and financial results through various channels, including
team meetings, face-to-face gatherings, an email from the Chief Executive
Officer, webcasts and online publications.
Strong employee engagement is especially significant in maintaining strong
business delivery in times of great change. The Shell People Survey is one of the
principal tools used to measure employee engagement, which aims to reflect the
degree of employee affiliation and commitment to Shell. It provides insights into
employees’ views and has had a consistently high response rate. In 2017, Shell
used an improved survey tool with a new scoring methodology that showed
average indices, instead of the percentages in favour shown by the previous
tool. Our average employee engagement score remained stable at 76 points
out of 100 (2016: 79% under the previous methodology).
We promote safe reporting of views about our processes and practices. In
addition to local channels, the Shell Global Helpline enables employees to
report potential breaches of the Shell General Business Principles and Shell
Code of Conduct, confidentially and anonymously, in a variety of languages.
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The Shell Global Helpline is managed by an independent third party, and all
allegations concerning bribery or corruption are investigated. See “Corporate
governance” on page 77.
DIVERSITY AND INCLUSION
Our intention is to sustain a diverse workforce and an inclusive environment
that respects and shows care for all our people and helps improve our
business performance. Our diversity and inclusion (D&I) approach focuses on
talent acquisition, progression and retention, leadership visibility, inclusive
culture and on differentiating our external reputation. Our leaders aim to be
role models for D&I and assume accountability for continuous progress. We
believe that diverse teams led by inclusive leaders are more engaged, and
therefore deliver better safety and business performance. By embedding D&I
into our operations, we have a better understanding of the needs of our
employees as well as the needs of our varied customers, partners and
stakeholders throughout the world. It also allows us to benefit from a wider
external talent pool for recruitment purposes.
We provide equal opportunity in recruitment, career development, promotion,
training and rewards for all employees, including those with disabilities. In
2017, we began implementation of a workplace accessibility service at our
major locations to ensure that all employees have access to reasonable
adjustments so that they can work effectively. In addition, we introduced a
global minimum standard for maternity leave of 16 weeks.
Our focus on workplace inclusion also continues in other areas. For example,
in 2017, we were ranked in the top category in the Workplace Pride global
lesbian, gay, bisexual, transgender and intersexed (LGBTI) inclusive
workplace benchmark and earned a 100% score in the Human Rights
Campaign Foundation’s Corporate Equality Index. We actively monitor
representation of women and local nationals in senior leadership positions,
and have talent-development processes to support us in mitigating any biases
and delivering more diverse representation.
At the end of 2017, the proportion of women in senior leadership positions was
22% compared with 20% at the end of 2016. “Senior leadership position” is a
Shell measure based on senior salary group levels and is distinct from the term
“senior manager” in the statutory disclosures set out below.
Gender diversity data (at December 31, 2017)
Men
Number
Women
Directors of the Company
Senior managers [A]
Employees (thousand)
[A] Senior manager is defined in section 414C(9) of the Companies Act 2006 and accordingly the
number disclosed comprises the Executive Committee members who were not Directors of the
Company, as well as other directors of Shell subsidiaries.
7
751
57
64%
75%
68%
4
252
27
36%
25%
32%
The local national coverage is the number of senior local nationals (both those
working in their respective base country and those expatriated) as a
percentage of the number of senior leadership positions in their base country.
Local national coverage (at December 31)
Number of selected key business countries
2015
2017
2016
Greater than 80%
Less than 80%
Total
10
10
20
10
10
20
12
8
20
CODE OF CONDUCT
In line with the UN Global Compact Principle 10 (Businesses should work
against corruption in all its forms, including extortion and bribery), we maintain
a global Anti Bribery and Corruption (ABC) programme designed to prevent or
detect, and remediate and learn from, potential violations. The programme is
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our people Continued
Governance
The Board of Royal Dutch Shell plc
underpinned by our anti-bribery commitment, a fundamental component of the
Shell General Business Principles and Code of Conduct.
We do not tolerate the direct or indirect offer, payment, solicitation or
acceptance of bribes in any form. Facilitation payments are also prohibited.
The Shell Code of Conduct includes specific guidance for Shell staff (which
comprises employees and contract staff) on requirements to avoid or declare
actual, potential or perceived conflicts of interest, and on offering or accepting
gifts and hospitality.
Communications from leaders emphasise both the importance of these
commitments and compliance with requirements. These are reinforced with
both global and targeted communications, to ensure that Shell staff are
frequently reminded of their obligations.
cash flow (FCF) and the remaining 37.5% is linked to a comparative
performance condition which involves a comparison with four of our main
competitors over the period, based on three measures. Under the LTIP, from
2017, 25% of the award is linked to the FCF measure and the remaining 75%
is linked to the comparative performance condition mentioned above. Prior to
2017, 50% of the PSP award and all of the LTIP award were linked to a
comparative performance condition based on four measures.
Separately, following the BG acquisition, certain employee share awards
made in 2015 under BG’s Long-Term Incentive Plan were automatically
exchanged for equivalent awards over shares in the Company. These awards
either do not have performance conditions or have the same performance
conditions applied as the Company’s LTIP. Awards take the form of either
conditional awards or nil cost options.
Supporting the Code of Conduct, we have mandatory anti-bribery procedures
and controls applicable to all Shell staff. The risk-based procedures and
controls address a range of corruption-related risks and ensure we focus
resources and attention appropriately. By making a commitment to our core
values – honesty, integrity and respect – and following the Code of Conduct,
we protect Shell’s reputation.
Under all plans, all shares that vest are increased by an amount equal to the
notional dividends accrued on those shares during the period from the award
date to the vesting date. In certain circumstances, awards may be adjusted
before delivery or reclaimed after delivery. None of the awards results in
beneficial ownership until the shares vest.
BEN VAN BEURDEN
Chief Executive Officer
CHARLES O. HOLLIDAY
Chair
since September 2010.
Born March 9, 1948. A US national, appointed Chair of the Company with
Born April 23, 1958. A Dutch national, appointed Chief Executive Officer of
effect from May 2015, having previously served as a Non-executive Director
the Company with effect from January 2014.
He was Downstream Director from January to September 2013. Before that,
He was Chief Executive Officer of DuPont from 1998 to 2009, and
he was Executive Vice President Chemicals from 2006 to 2012. In this
Chairman from 1999 to 2009. He joined DuPont in 1970 after receiving a
period, he also served on the boards of a number of leading industry
B.S. in industrial engineering from the University of Tennessee and held
associations, including the International Council of Chemicals Associations
various manufacturing and business assignments, including a six-year, Tokyo-
and the European Chemical Industry Council. Prior to this, he held a number
based posting as President of DuPont Asia/Pacific. He has previously served
of operational and commercial roles in both Upstream and Downstream,
as Chairman of the Bank of America Corporation, The Business Council,
including Vice President Manufacturing Excellence. He joined Shell in 1983,
Catalyst, the National Academy of Engineering, the Society of Chemical
after graduating with a Master’s Degree in Chemical Engineering from Delft
Industry - American Section and the World Business Council for Sustainable
University of Technology, the Netherlands.
Development. He is a founding member of the International Business Council.
He is a Director of HCA Holdings, Inc. [A] and Deere & Company and is a
member of the Critical Resource’s Senior Advisory Panel and the Royal
Academy of Engineering.
Born January 29, 1968. A US national, appointed Chief Financial Officer of
the Company with effect from March 9, 2017.
JESSICA UHL
Chief Financial Officer
As part of our commitment to ethics and compliance, we ensure that our anti-
corruption policies, standards and procedures are communicated to all Shell
staff and, where necessary and appropriate, to agents and business partners.
Particular areas of focus with third parties include continued strengthening of our
due diligence procedures, and clearly articulated requirements (for example,
through the use of standard contract clauses).
The Shell Ethics and Compliance Office assists the businesses and functions
with the ABC programme implementation, and monitors and reports on
progress. Legal counsel provides legal advice globally and supports the
programme’s implementation. The Shell Ethics and Compliance Office
regularly reviews and revises the programme to ensure it remains up-to-date
with applicable laws, regulations and best practices. This includes
incorporating results from relevant internal audits, reviews and investigations.
We have a duty to investigate all good faith allegations of breaches of or
questions about the Code of Conduct, however they are raised. We are
committed to ensuring all such incidents are investigated fairly by our Business
Integrity Department. Violations of the Code of Conduct and/or its policies
can result in disciplinary action, up to and including dismissal. In some cases,
we may report a violation to the relevant authorities, which could lead to
legal action, fines or imprisonment.
Internal investigations confirmed 261 substantiated breaches of the Code of
Conduct allegations in 2017. As a result, we dismissed or terminated the
contracts of 73 employees and contract staff.
EMPLOYEE SHARE PLANS
We have a number of share plans designed to align employees’ interests
with our performance through share ownership. For information on the share-
based compensation plans for Executive Directors, see the “Directors’
Remuneration Report” on pages 94-117.
PERFORMANCE SHARE PLAN, LONG-TERM INCENTIVE PLAN AND
EXCHANGED AWARDS UNDER THE BG LONG-TERM INCENTIVE PLAN
Conditional awards of the Company’s shares are made under the terms of the
Performance Share Plan (PSP) to around 17,000 employees each year. Senior
executives receive conditional awards of the Company’s shares under the terms
of the Long-term Incentive Plan (LTIP) rather than under the terms of the PSP. The
extent to which the awards vest under both plans is determined over a three-
year performance period, but the performance conditions applicable to each
plan are different. Under the PSP, 50% of the award is linked to certain of the
indicators described in “Performance indicators” on pages 22-23, averaged
over the period. From 2017 onwards, 12.5% of the award is linked to free
See Note 21 to the “Consolidated Financial Statements” on pages 172-173.
[A] On February 22, 2018, the Board of HCA Holdings, Inc. approved the appointment of Charles O.
RESTRICTED SHARE PLAN
Under the Restricted Share Plan, awards are made on a highly selective basis
to senior staff. Shares are awarded subject to a three-year retention period.
All shares that vest are increased by an amount equal to the notional
dividends accrued on those shares during the period from the award date to
the vesting date. In certain circumstances, awards may be adjusted before
delivery or reclaimed after delivery.
GLOBAL EMPLOYEE SHARE PURCHASE PLAN
Eligible employees in participating countries may participate in the Global
Employee Share Purchase Plan. This plan enables them to make contributions
from net pay towards the purchase of the Company’s shares at a 15%
discount to the market price, either at the start or at the end of an annual
cycle, whichever date offers the lower market price.
UK SHELL ALL EMPLOYEE SHARE OWNERSHIP PLAN
Eligible employees of participating Shell companies in the UK may participate in
the Shell All Employee Share Ownership Plan, under which monthly contributions
from gross pay are made towards the purchase of the Company’s shares.
UK SHARESAVE SCHEME
Eligible employees of participating Shell companies in the UK have been
able to participate in the UK Sharesave Scheme. Options have been granted
over the Company’s shares at market value on the invitation date. These
options are normally exercisable after completion of a three-year or five-year
contractual savings period. No further grants will be made under this plan.
Separately, following the acquisition of BG, certain participants in the BG
Sharesave Scheme chose to roll over their outstanding BG share options into
options over the Company’s shares. The BG option price (at a discount of 20%
to market value) was converted to an equivalent Company option price at a
ratio agreed with Her Majesty’s Revenue and Customs. These options are
normally exercisable after completion of a three-year contractual savings period.
Strategic Report signed on behalf of the Board
/s/ Linda M. Szymanski
Linda M. Szymanski
Company Secretary
March 14, 2018
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Chair of the Nomination and Succession Committee
Holliday as Presiding Director with effect from April 26, 2018.
HANS WIJERS [A]
Deputy Chair and Senior Independent Director
Born January 11, 1951. A Dutch national, appointed a Non-executive
Director of the Company with effect from January 2009.
He was Chief Executive Officer and Chairman of the Board of Management
of AkzoNobel N.V. from 2003 to 2012, having become a Board member
in 2002. From 1999 to 2002, he was Senior Partner at The Boston
Consulting Group. He was Minister of Economic Affairs of the Netherlands
from 1994 to 1998, and was previously Managing Partner of The Boston
Consulting Group. He obtained a PhD in economics from Erasmus University
Rotterdam while teaching there. From 2012 to 2016 he was Chairman of
the Supervisory Board of AFC Ajax N.V. and from 2013 to 2016 he was a
Non-executive Director of GlaxoSmithKline plc.
He is Chairman of the Supervisory Board of Heineken N.V., a member of the
Supervisory Board of HAL Holding N.V. and ING Group N.V., and a trustee
of various charities.
Chair of the Corporate and Social Responsibility Committee and
member of the Nomination and Succession Committee
[A] Hans Wijers stands down as a Director of the Company at the close of business of the 2018
Annual General Meeting to be held on May 22, 2018.
She was Executive Vice President Finance for the Integrated Gas business
from January 2016 to March 2017. Previously, she was Executive Vice
President Finance for Upstream Americas from 2014 to 2015, Vice President
Finance for Upstream Americas Unconventionals from 2013 to 2014, Vice
President Controller for Upstream and Projects & Technology from 2010 to
2012, Vice President Finance for the global Lubricants business from 2009 to
2010, and Head of External Reporting from 2007 to 2009. She joined Shell
in 2004 in finance and business development, supporting the Renewables
business. Prior to joining Shell, she worked for Enron in the USA and Panama
from 1997 to 2003 and for Citibank in San Francisco, USA, from 1990 to
1996. She obtained an MBA at INSEAD in 1997.
EULEEN GOH
Non-executive Director
Born April 20, 1955. A Singaporean national, appointed a Non-executive
Director of the Company with effect from September 2014.
She is a chartered accountant and also has professional qualifications in
banking and taxation. She held various senior management positions with
Standard Chartered Bank and was Chief Executive Officer of Standard
Chartered Bank, Singapore, from 2001 until 2006.
She has also held non-executive appointments on various boards including
Aviva plc, MediaCorp Pte Limited, Singapore Airlines Limited, Singapore
Exchange Limited, Standard Chartered Bank Malaysia Berhad and Standard
Chartered Bank Thai pcl. She was previously Non-executive Chairman of the
Singapore International Foundation and Chairman of International Enterprise
Singapore and the Accounting Standards Council, Singapore.
She is Chairman of SATS Limited, a Non-executive Director of CapitaLand
Limited, DBS Bank Limited and DBS Group Holdings Limited, and a Trustee of
the Singapore Institute of International Affairs Endowment Fund and the
Temasek Trust. She is also a member of the Governing Council of the
Singapore Institute of Management and a Non-executive Director of
Singapore Health Services Pte Limited, both not-for-profit organisations.
Chair of the Audit Committee
underpinned by our anti-bribery commitment, a fundamental component of the
cash flow (FCF) and the remaining 37.5% is linked to a comparative
Shell General Business Principles and Code of Conduct.
We do not tolerate the direct or indirect offer, payment, solicitation or
acceptance of bribes in any form. Facilitation payments are also prohibited.
The Shell Code of Conduct includes specific guidance for Shell staff (which
comprises employees and contract staff) on requirements to avoid or declare
actual, potential or perceived conflicts of interest, and on offering or accepting
gifts and hospitality.
Communications from leaders emphasise both the importance of these
commitments and compliance with requirements. These are reinforced with
both global and targeted communications, to ensure that Shell staff are
frequently reminded of their obligations.
performance condition which involves a comparison with four of our main
competitors over the period, based on three measures. Under the LTIP, from
2017, 25% of the award is linked to the FCF measure and the remaining 75%
is linked to the comparative performance condition mentioned above. Prior to
2017, 50% of the PSP award and all of the LTIP award were linked to a
comparative performance condition based on four measures.
Separately, following the BG acquisition, certain employee share awards
made in 2015 under BG’s Long-Term Incentive Plan were automatically
exchanged for equivalent awards over shares in the Company. These awards
either do not have performance conditions or have the same performance
conditions applied as the Company’s LTIP. Awards take the form of either
conditional awards or nil cost options.
Supporting the Code of Conduct, we have mandatory anti-bribery procedures
and controls applicable to all Shell staff. The risk-based procedures and
controls address a range of corruption-related risks and ensure we focus
resources and attention appropriately. By making a commitment to our core
values – honesty, integrity and respect – and following the Code of Conduct,
we protect Shell’s reputation.
Under all plans, all shares that vest are increased by an amount equal to the
notional dividends accrued on those shares during the period from the award
date to the vesting date. In certain circumstances, awards may be adjusted
before delivery or reclaimed after delivery. None of the awards results in
beneficial ownership until the shares vest.
As part of our commitment to ethics and compliance, we ensure that our anti-
corruption policies, standards and procedures are communicated to all Shell
staff and, where necessary and appropriate, to agents and business partners.
Particular areas of focus with third parties include continued strengthening of our
due diligence procedures, and clearly articulated requirements (for example,
through the use of standard contract clauses).
See Note 21 to the “Consolidated Financial Statements” on pages 172-173.
RESTRICTED SHARE PLAN
Under the Restricted Share Plan, awards are made on a highly selective basis
to senior staff. Shares are awarded subject to a three-year retention period.
All shares that vest are increased by an amount equal to the notional
dividends accrued on those shares during the period from the award date to
The Shell Ethics and Compliance Office assists the businesses and functions
the vesting date. In certain circumstances, awards may be adjusted before
with the ABC programme implementation, and monitors and reports on
delivery or reclaimed after delivery.
progress. Legal counsel provides legal advice globally and supports the
programme’s implementation. The Shell Ethics and Compliance Office
regularly reviews and revises the programme to ensure it remains up-to-date
with applicable laws, regulations and best practices. This includes
GLOBAL EMPLOYEE SHARE PURCHASE PLAN
Eligible employees in participating countries may participate in the Global
Employee Share Purchase Plan. This plan enables them to make contributions
incorporating results from relevant internal audits, reviews and investigations.
from net pay towards the purchase of the Company’s shares at a 15%
We have a duty to investigate all good faith allegations of breaches of or
questions about the Code of Conduct, however they are raised. We are
discount to the market price, either at the start or at the end of an annual
cycle, whichever date offers the lower market price.
committed to ensuring all such incidents are investigated fairly by our Business
UK SHELL ALL EMPLOYEE SHARE OWNERSHIP PLAN
Integrity Department. Violations of the Code of Conduct and/or its policies
Eligible employees of participating Shell companies in the UK may participate in
can result in disciplinary action, up to and including dismissal. In some cases,
the Shell All Employee Share Ownership Plan, under which monthly contributions
we may report a violation to the relevant authorities, which could lead to
from gross pay are made towards the purchase of the Company’s shares.
legal action, fines or imprisonment.
Internal investigations confirmed 261 substantiated breaches of the Code of
Conduct allegations in 2017. As a result, we dismissed or terminated the
contracts of 73 employees and contract staff.
EMPLOYEE SHARE PLANS
We have a number of share plans designed to align employees’ interests
with our performance through share ownership. For information on the share-
based compensation plans for Executive Directors, see the “Directors’
Remuneration Report” on pages 94-117.
PERFORMANCE SHARE PLAN, LONG-TERM INCENTIVE PLAN AND
EXCHANGED AWARDS UNDER THE BG LONG-TERM INCENTIVE PLAN
Conditional awards of the Company’s shares are made under the terms of the
Performance Share Plan (PSP) to around 17,000 employees each year. Senior
executives receive conditional awards of the Company’s shares under the terms
of the Long-term Incentive Plan (LTIP) rather than under the terms of the PSP. The
extent to which the awards vest under both plans is determined over a three-
year performance period, but the performance conditions applicable to each
plan are different. Under the PSP, 50% of the award is linked to certain of the
indicators described in “Performance indicators” on pages 22-23, averaged
over the period. From 2017 onwards, 12.5% of the award is linked to free
UK SHARESAVE SCHEME
Eligible employees of participating Shell companies in the UK have been
able to participate in the UK Sharesave Scheme. Options have been granted
over the Company’s shares at market value on the invitation date. These
options are normally exercisable after completion of a three-year or five-year
contractual savings period. No further grants will be made under this plan.
Separately, following the acquisition of BG, certain participants in the BG
Sharesave Scheme chose to roll over their outstanding BG share options into
options over the Company’s shares. The BG option price (at a discount of 20%
to market value) was converted to an equivalent Company option price at a
ratio agreed with Her Majesty’s Revenue and Customs. These options are
normally exercisable after completion of a three-year contractual savings period.
Strategic Report signed on behalf of the Board
/s/ Linda M. Szymanski
Linda M. Szymanski
Company Secretary
March 14, 2018
Governance
governance
The Board of Royal Dutch Shell plc
The Board of Royal Dutch Shell plc
CHARLES O. HOLLIDAY
Chair
Born March 9, 1948. A US national, appointed Chair of the Company with
effect from May 2015, having previously served as a Non-executive Director
since September 2010.
He was Chief Executive Officer of DuPont from 1998 to 2009, and
Chairman from 1999 to 2009. He joined DuPont in 1970 after receiving a
B.S. in industrial engineering from the University of Tennessee and held
various manufacturing and business assignments, including a six-year, Tokyo-
based posting as President of DuPont Asia/Pacific. He has previously served
as Chairman of the Bank of America Corporation, The Business Council,
Catalyst, the National Academy of Engineering, the Society of Chemical
Industry - American Section and the World Business Council for Sustainable
Development. He is a founding member of the International Business Council.
He is a Director of HCA Holdings, Inc. [A] and Deere & Company and is a
member of the Critical Resource’s Senior Advisory Panel and the Royal
Academy of Engineering.
Chair of the Nomination and Succession Committee
[A] On February 22, 2018, the Board of HCA Holdings, Inc. approved the appointment of Charles O.
Holliday as Presiding Director with effect from April 26, 2018.
HANS WIJERS [A]
Deputy Chair and Senior Independent Director
Born January 11, 1951. A Dutch national, appointed a Non-executive
Director of the Company with effect from January 2009.
He was Chief Executive Officer and Chairman of the Board of Management
of AkzoNobel N.V. from 2003 to 2012, having become a Board member
in 2002. From 1999 to 2002, he was Senior Partner at The Boston
Consulting Group. He was Minister of Economic Affairs of the Netherlands
from 1994 to 1998, and was previously Managing Partner of The Boston
Consulting Group. He obtained a PhD in economics from Erasmus University
Rotterdam while teaching there. From 2012 to 2016 he was Chairman of
the Supervisory Board of AFC Ajax N.V. and from 2013 to 2016 he was a
Non-executive Director of GlaxoSmithKline plc.
He is Chairman of the Supervisory Board of Heineken N.V., a member of the
Supervisory Board of HAL Holding N.V. and ING Group N.V., and a trustee
of various charities.
Chair of the Corporate and Social Responsibility Committee and
member of the Nomination and Succession Committee
[A] Hans Wijers stands down as a Director of the Company at the close of business of the 2018
Annual General Meeting to be held on May 22, 2018.
BEN VAN BEURDEN
Chief Executive Officer
Born April 23, 1958. A Dutch national, appointed Chief Executive Officer of
the Company with effect from January 2014.
He was Downstream Director from January to September 2013. Before that,
he was Executive Vice President Chemicals from 2006 to 2012. In this
period, he also served on the boards of a number of leading industry
associations, including the International Council of Chemicals Associations
and the European Chemical Industry Council. Prior to this, he held a number
of operational and commercial roles in both Upstream and Downstream,
including Vice President Manufacturing Excellence. He joined Shell in 1983,
after graduating with a Master’s Degree in Chemical Engineering from Delft
University of Technology, the Netherlands.
JESSICA UHL
Chief Financial Officer
Born January 29, 1968. A US national, appointed Chief Financial Officer of
the Company with effect from March 9, 2017.
She was Executive Vice President Finance for the Integrated Gas business
from January 2016 to March 2017. Previously, she was Executive Vice
President Finance for Upstream Americas from 2014 to 2015, Vice President
Finance for Upstream Americas Unconventionals from 2013 to 2014, Vice
President Controller for Upstream and Projects & Technology from 2010 to
2012, Vice President Finance for the global Lubricants business from 2009 to
2010, and Head of External Reporting from 2007 to 2009. She joined Shell
in 2004 in finance and business development, supporting the Renewables
business. Prior to joining Shell, she worked for Enron in the USA and Panama
from 1997 to 2003 and for Citibank in San Francisco, USA, from 1990 to
1996. She obtained an MBA at INSEAD in 1997.
EULEEN GOH
Non-executive Director
Born April 20, 1955. A Singaporean national, appointed a Non-executive
Director of the Company with effect from September 2014.
She is a chartered accountant and also has professional qualifications in
banking and taxation. She held various senior management positions with
Standard Chartered Bank and was Chief Executive Officer of Standard
Chartered Bank, Singapore, from 2001 until 2006.
She has also held non-executive appointments on various boards including
Aviva plc, MediaCorp Pte Limited, Singapore Airlines Limited, Singapore
Exchange Limited, Standard Chartered Bank Malaysia Berhad and Standard
Chartered Bank Thai pcl. She was previously Non-executive Chairman of the
Singapore International Foundation and Chairman of International Enterprise
Singapore and the Accounting Standards Council, Singapore.
She is Chairman of SATS Limited, a Non-executive Director of CapitaLand
Limited, DBS Bank Limited and DBS Group Holdings Limited, and a Trustee of
the Singapore Institute of International Affairs Endowment Fund and the
Temasek Trust. She is also a member of the Governing Council of the
Singapore Institute of Management and a Non-executive Director of
Singapore Health Services Pte Limited, both not-for-profit organisations.
Chair of the Audit Committee
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the Board of royal dutch shell plc Continued
CATHERINE J. HUGHES
Non-executive Director
Born September 13, 1962. A Canadian and French dual national,
appointed a Non-executive Director of the Company with effect from June 1,
2017.
ROBERTO SETUBAL
Non-executive Director
Born October 13, 1954. A Brazilian national, appointed a Non-executive
Director of the Company with effect from October 1, 2017.
She was Executive Vice President International at Nexen Inc. from January
2012 until her retirement in April 2013, where she was responsible for all oil
and gas activities including exploration, production, development and project
activities outside Canada. She joined Nexen in 2009 as Vice President
Operational Services, Technology and Human Resources.
Prior to joining Nexen Inc. she was Vice President Oil Sands at Husky Oil
from 2007 to 2009 and Vice President Exploration & Production Services,
from 2005 to 2007. She started her career with Schlumberger in 1986 and
held key positions in various countries, including Italy, Nigeria, the UK, the
USA and France, and was President of Schlumberger Canada Limited for five
years, based in Calgary. She was a Non-executive Director of Statoil from
2013 to 2015.
She is a Non-executive Director of Precision Drilling Corp. and SNC-Lavalin
Group Inc.
He was Chief Executive Officer and Vice Chairman of the Board of Directors
of Itaú Unibanco Holding S.A. in Sao Paulo, Brazil, until April 2017. At that
time, he retired as Chief Executive Officer and currently serves as Co-
Chairman of the Board of Directors. Following a brief period with Citibank in
New York, he joined Banco Itaú in 1984 where he held a variety of senior
roles in individual banking, consumer credit operations and retail banking
before being appointed Chief Executive Officer in 1994. Following the
merger of Banco Itaú and Unibanco, he was appointed to the position of
President and Chief Executive Officer of Itaú Unibanco Holding S.A.
He is a member of the board of the International Monetary Conference
(IMC), the board of the Institute of International Finance (IIF), the International
Advisory Committee of the Federal Reserve Bank of New York, the Economic
and Social Development Council of the Presidency of Brazil, and the
International Business Council of the World Economic Forum. Previously, he
was a Non-executive Director of Petrobras S.A, President of the IMC, and
Vice-Chairman of the IIF.
Member of the Corporate and Social Responsibility Committee and
member of the Remuneration Committee
He is also the President of the Fundação Itaú Social and a member of the
Executive Committee of the Instituto Itaú Cultural.
GERARD KLEISTERLEE [A]
Non-executive Director
Born September 28, 1946. A Dutch national, appointed a Non-executive
Director of the Company with effect from November 2010.
He was President/Chief Executive Officer and Chairman of the Board of
Management of Koninklijke Philips N.V. from 2001 to 2011. Having joined
Philips in 1974, he held several positions before being appointed as Chief
Executive Officer of Philips’ Components division in 1999 and Executive Vice-
President of Philips in 2000. From 2010 to 2013, he was a member of the
board of Directors of Dell Inc., from 2009 to 2014 he was a member of the
Supervisory Board of Daimler AG, and from 2014 to 2016 he was a Non-
executive Director of IBEX Global Solutions plc.
He is Chairman of Vodafone Group plc and Chairman of the Supervisory
Board of ASML Holding N.V.
Chair of the Remuneration Committee
[A] On March 14, 2018, the Board appointed Gerard Kleisterlee as Deputy Chair and Senior
Independent Director and member of the Nomination and Succession Committee with effect from
May 23, 2018.
Member of the Audit Committee
SIR NIGEL SHEINWALD GCMG [A]
Non-executive Director
Born June 26, 1953. A British national, appointed a Non-executive Director
of the Company with effect from July 2012.
He was a senior British diplomat who served as British Ambassador to the
USA from 2007 to 2012, before retiring from the Diplomatic Service. Prior to
this, he served as Foreign Policy and Defence Adviser to the Prime Minister
and Head of the Cabinet Office Defence and Overseas Secretariat. He
served as British Ambassador and Permanent Representative to the European
Union in Brussels from 2000 to 2003. He joined the Diplomatic Service in
1976 and served in Brussels, Washington, Moscow and in a wide range of
policy roles in London.
He is a Non-executive Director of Invesco Limited and Raytheon UK, a Senior
Adviser to the Universal Music Group and a Visiting Professor and Council
Member of King’s College, London.
Member of the Corporate and Social Responsibility Committee and
member of the Remuneration Committee
[A] On March 14, 2018, the Board appointed Sir Nigel Sheinwald as Chair of the Corporate and
Social Responsibility Committee with effect from May 23, 2018.
LINDA G. STUNTZ [A]
Non-executive Director
BOARD COMMITTEE MEMBERSHIP
On March 14, 2018, the Board approved a number of changes to the
Born September 11, 1954. A US national, appointed a Non-executive
membership of the Board committees. These changes are set out in footnotes
Director of the Company with effect from June 2011.
for the respective Directors.
She is a founding partner of the law firm of Stuntz, Davis & Staffier, P.C.,
based in Washington, DC. Her law practice includes energy and
environmental regulation, as well as matters relating to government support of
technology development and transfer. She was a member of the US Secretary
of Energy Advisory Board from 2015 to January 2017, she chaired the
Electricity Advisory Committee to the US Department of Energy from 2008 to
2009, and was a member of the board of Directors of Schlumberger Limited
from 1993 to 2010 and Raytheon Company from 2004 to 2015. From
1989 to 1993, she held senior policy positions at the US Department of
Energy, including Deputy Secretary. She played a principal role in the
development and enactment of the Energy Policy Act of 1992. From 1981 to
1987, she was an Associate Minority Counsel and Minority Counsel to the
Energy and Commerce Committee of the US House of Representatives.
She is a Director of Edison International.
Member of the Audit Committee and member of the Nomination and
Succession Committee
[A] On March 14, 2018, the Board appointed Linda G. Stuntz as member of the Corporate and
Social Responsibility Committee with effect from May 23, 2018. She will stand down as a member of
the Audit Committee on May 22, 2018.
GERRIT ZALM [A]
Non-executive Director
Born May 6, 1952. A Dutch national, appointed a Non-executive Director of
the Company with effect from January 2013.
He was an adviser to PricewaterhouseCoopers during 2007, Chairman of
the trustees of the International Accounting Standards Board from 2007 to
2010, an adviser to Permira from 2007 to 2008, Chief Economist from July
2007 to January 2008, and Chief Financial Officer from January 2008 to
December 2008 of DSB Bank, and Chairman of the Managing Board of
ABN AMRO Bank N.V. from 2010 to 2016. He was Minister of Finance of
the Netherlands twice, from 1994 to 2002 and from 2003 to 2007. In
between, he was Chairman of the parliamentary party of the VVD. Prior to
1994, he was head of the Netherlands Bureau for Economic Policy Analysis,
a professor at Vrije Universiteit Amsterdam and held various positions at the
Ministry of Finance and the Ministry of Economic Affairs. He studied General
Economics at Vrije Universiteit Amsterdam and received an Honorary
Doctorate in Economics from that university.
Member of the Audit Committee and member of the Remuneration
Committee
[A] On February 16, 2018, Moody’s Corporation announced that Gerrit Zalm will be nominated for
election as a Director at its annual meeting of stockholders to be held in April 2018.
LINDA M. SZYMANSKI
Company Secretary
Born April 7, 1967. A US national, appointed General Counsel Corporate
with effect from August 2016 and Company Secretary with effect from
January 1, 2017.
Previously, she was General Counsel of the Upstream Americas business and
Head of Legal US based in the USA from 2014 to 2016, and was Group
Chief Ethics & Compliance Officer based in the Netherlands from 2011 to
2014. She joined Shell in 1995 and has held a variety of legal positions
within Shell Oil Company in the USA, including Chemicals Legal Managing
Counsel and other senior roles in employment, litigation, and commercial
practice.
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ROBERTO SETUBAL
Non-executive Director
CATHERINE J. HUGHES
Non-executive Director
2017.
Born September 13, 1962. A Canadian and French dual national,
Born October 13, 1954. A Brazilian national, appointed a Non-executive
appointed a Non-executive Director of the Company with effect from June 1,
Director of the Company with effect from October 1, 2017.
She was Executive Vice President International at Nexen Inc. from January
of Itaú Unibanco Holding S.A. in Sao Paulo, Brazil, until April 2017. At that
2012 until her retirement in April 2013, where she was responsible for all oil
time, he retired as Chief Executive Officer and currently serves as Co-
and gas activities including exploration, production, development and project
Chairman of the Board of Directors. Following a brief period with Citibank in
activities outside Canada. She joined Nexen in 2009 as Vice President
New York, he joined Banco Itaú in 1984 where he held a variety of senior
He was Chief Executive Officer and Vice Chairman of the Board of Directors
Operational Services, Technology and Human Resources.
roles in individual banking, consumer credit operations and retail banking
before being appointed Chief Executive Officer in 1994. Following the
Prior to joining Nexen Inc. she was Vice President Oil Sands at Husky Oil
merger of Banco Itaú and Unibanco, he was appointed to the position of
from 2007 to 2009 and Vice President Exploration & Production Services,
President and Chief Executive Officer of Itaú Unibanco Holding S.A.
from 2005 to 2007. She started her career with Schlumberger in 1986 and
held key positions in various countries, including Italy, Nigeria, the UK, the
He is a member of the board of the International Monetary Conference
USA and France, and was President of Schlumberger Canada Limited for five
(IMC), the board of the Institute of International Finance (IIF), the International
years, based in Calgary. She was a Non-executive Director of Statoil from
Advisory Committee of the Federal Reserve Bank of New York, the Economic
2013 to 2015.
Group Inc.
She is a Non-executive Director of Precision Drilling Corp. and SNC-Lavalin
was a Non-executive Director of Petrobras S.A, President of the IMC, and
Vice-Chairman of the IIF.
Member of the Corporate and Social Responsibility Committee and
He is also the President of the Fundação Itaú Social and a member of the
member of the Remuneration Committee
Executive Committee of the Instituto Itaú Cultural.
GERARD KLEISTERLEE [A]
Non-executive Director
Member of the Audit Committee
Born September 28, 1946. A Dutch national, appointed a Non-executive
Director of the Company with effect from November 2010.
SIR NIGEL SHEINWALD GCMG [A]
Non-executive Director
He was President/Chief Executive Officer and Chairman of the Board of
Management of Koninklijke Philips N.V. from 2001 to 2011. Having joined
Philips in 1974, he held several positions before being appointed as Chief
Executive Officer of Philips’ Components division in 1999 and Executive Vice-
President of Philips in 2000. From 2010 to 2013, he was a member of the
board of Directors of Dell Inc., from 2009 to 2014 he was a member of the
Supervisory Board of Daimler AG, and from 2014 to 2016 he was a Non-
executive Director of IBEX Global Solutions plc.
He is Chairman of Vodafone Group plc and Chairman of the Supervisory
policy roles in London.
Board of ASML Holding N.V.
Chair of the Remuneration Committee
[A] On March 14, 2018, the Board appointed Gerard Kleisterlee as Deputy Chair and Senior
Independent Director and member of the Nomination and Succession Committee with effect from
May 23, 2018.
Born June 26, 1953. A British national, appointed a Non-executive Director
of the Company with effect from July 2012.
He was a senior British diplomat who served as British Ambassador to the
USA from 2007 to 2012, before retiring from the Diplomatic Service. Prior to
this, he served as Foreign Policy and Defence Adviser to the Prime Minister
and Head of the Cabinet Office Defence and Overseas Secretariat. He
served as British Ambassador and Permanent Representative to the European
Union in Brussels from 2000 to 2003. He joined the Diplomatic Service in
1976 and served in Brussels, Washington, Moscow and in a wide range of
He is a Non-executive Director of Invesco Limited and Raytheon UK, a Senior
Adviser to the Universal Music Group and a Visiting Professor and Council
Member of King’s College, London.
Member of the Corporate and Social Responsibility Committee and
member of the Remuneration Committee
[A] On March 14, 2018, the Board appointed Sir Nigel Sheinwald as Chair of the Corporate and
Social Responsibility Committee with effect from May 23, 2018.
LINDA G. STUNTZ [A]
Non-executive Director
Born September 11, 1954. A US national, appointed a Non-executive
Director of the Company with effect from June 2011.
BOARD COMMITTEE MEMBERSHIP
On March 14, 2018, the Board approved a number of changes to the
membership of the Board committees. These changes are set out in footnotes
for the respective Directors.
She is a founding partner of the law firm of Stuntz, Davis & Staffier, P.C.,
based in Washington, DC. Her law practice includes energy and
environmental regulation, as well as matters relating to government support of
technology development and transfer. She was a member of the US Secretary
of Energy Advisory Board from 2015 to January 2017, she chaired the
Electricity Advisory Committee to the US Department of Energy from 2008 to
2009, and was a member of the board of Directors of Schlumberger Limited
from 1993 to 2010 and Raytheon Company from 2004 to 2015. From
1989 to 1993, she held senior policy positions at the US Department of
Energy, including Deputy Secretary. She played a principal role in the
development and enactment of the Energy Policy Act of 1992. From 1981 to
1987, she was an Associate Minority Counsel and Minority Counsel to the
Energy and Commerce Committee of the US House of Representatives.
and Social Development Council of the Presidency of Brazil, and the
International Business Council of the World Economic Forum. Previously, he
She is a Director of Edison International.
Member of the Audit Committee and member of the Nomination and
Succession Committee
[A] On March 14, 2018, the Board appointed Linda G. Stuntz as member of the Corporate and
Social Responsibility Committee with effect from May 23, 2018. She will stand down as a member of
the Audit Committee on May 22, 2018.
GERRIT ZALM [A]
Non-executive Director
Born May 6, 1952. A Dutch national, appointed a Non-executive Director of
the Company with effect from January 2013.
He was an adviser to PricewaterhouseCoopers during 2007, Chairman of
the trustees of the International Accounting Standards Board from 2007 to
2010, an adviser to Permira from 2007 to 2008, Chief Economist from July
2007 to January 2008, and Chief Financial Officer from January 2008 to
December 2008 of DSB Bank, and Chairman of the Managing Board of
ABN AMRO Bank N.V. from 2010 to 2016. He was Minister of Finance of
the Netherlands twice, from 1994 to 2002 and from 2003 to 2007. In
between, he was Chairman of the parliamentary party of the VVD. Prior to
1994, he was head of the Netherlands Bureau for Economic Policy Analysis,
a professor at Vrije Universiteit Amsterdam and held various positions at the
Ministry of Finance and the Ministry of Economic Affairs. He studied General
Economics at Vrije Universiteit Amsterdam and received an Honorary
Doctorate in Economics from that university.
Member of the Audit Committee and member of the Remuneration
Committee
[A] On February 16, 2018, Moody’s Corporation announced that Gerrit Zalm will be nominated for
election as a Director at its annual meeting of stockholders to be held in April 2018.
LINDA M. SZYMANSKI
Company Secretary
Born April 7, 1967. A US national, appointed General Counsel Corporate
with effect from August 2016 and Company Secretary with effect from
January 1, 2017.
Previously, she was General Counsel of the Upstream Americas business and
Head of Legal US based in the USA from 2014 to 2016, and was Group
Chief Ethics & Compliance Officer based in the Netherlands from 2011 to
2014. She joined Shell in 1995 and has held a variety of legal positions
within Shell Oil Company in the USA, including Chemicals Legal Managing
Counsel and other senior roles in employment, litigation, and commercial
practice.
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Senior Management
Senior Management
Directors’ Report
The Senior Management of the Company comprises the Executive Directors
and those listed below. All are members of the Executive Committee
(see “Corporate governance” on page 80).
JOHN ABBOTT
Downstream Director
Born March 24, 1960. A British national, appointed Downstream Director
with effect from October 2013. Previously, he was Executive Vice President
Manufacturing, responsible for oil refineries and petrochemicals plants
worldwide. He joined Shell in 1981, and has held various management
positions in refining, chemicals and upstream heavy oil, working in Canada,
the Netherlands, Singapore, Thailand, the UK and the USA.
HARRY BREKELMANS
Projects & Technology Director
Born June 11, 1965. A Dutch national, appointed Projects & Technology
Director with effect from October 2014. Previously, he was Executive Vice
President for Upstream International Operated based in the Netherlands.
He joined Shell in 1990 and has held various management positions in
Exploration and Production, Internal Audit, and Group Strategy and Planning.
From 2011 to 2013, he was Country Chair – Russia and Executive Vice
President for Russia and the Caspian region.
ANDREW BROWN
Upstream Director
Born January 29, 1962. A British national, appointed Upstream Director with
effect from January 2016, having served on the Executive Committee as
Upstream International Director from 2012. Previously, he was Executive Vice
President for Shell’s activities in Qatar and a member of the Upstream
International Leadership Team. He was awarded the Order of the British
Empire in 2012 for his services to British-Qatari business relations.
RONAN CASSIDY
Chief Human Resources & Corporate Officer
Born February 10, 1967. A British national, appointed Chief Human
Resources & Corporate Officer with effect from January 2016. Previously,
he was Executive Vice President Human Resources, Upstream International.
He joined Shell in 1988 and has held various human resources positions in
Upstream and Downstream.
DONNY CHING
Legal Director
Born February 14, 1964. A Malaysian national, appointed Legal Director
with effect from February 2014. Previously, he was General Counsel for
Projects & Technology based in the Netherlands. He joined Shell in 1988
based in Australia and then moved to Hong Kong and later to London. In
2008, he was appointed Head of Legal at Shell Singapore, having served
as Associate General Counsel for Gas & Power in Asia-Pacific.
MAARTEN WETSELAAR
Integrated Gas and New Energies Director
Born December 30, 1968. A Dutch national, appointed Integrated Gas
Director with effect from January 2016. Previously, he was Executive Vice
President of Integrated Gas based in Singapore. He joined Shell in 1995
and has held various financial, commercial and general management roles in
Downstream, Trading and Upstream.
MANAGEMENT REPORT
DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE
This Directors’ Report, together with the “Strategic Report” on pages 06-68,
PREPARATION OF THE ANNUAL REPORT
serves as the Management Report for the purpose of Disclosure Guidance
AND ACCOUNTS
and Transparency Rule 4.1.8R.
FINANCIAL STATEMENTS AND DIVIDENDS
can be found on pages 138 and 139 respectively.
The Directors are responsible for preparing the Annual Report, including the
financial statements, in accordance with applicable laws and regulations.
Company law requires the Directors to prepare financial statements for each
Parent Company Financial Statements in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union (EU). In preparing
The “Consolidated Statement of Income” and “Consolidated Balance Sheet”
financial year. Under that law, the Directors have prepared the Consolidated and
The table below sets out the dividends on each class of share and each class
these financial statements, the Directors have also elected to comply with IFRS as
of American Depositary Share (ADS [A]). The Company announces its
issued by the International Accounting Standards Board (IASB). Under company
dividends in dollars and, at a later date, announces the euro and sterling
law, the Directors must not approve the financial statements unless they are
equivalent amounts using a market exchange rate. Dividends on Royal Dutch
satisfied that they give a true and fair view of the state of affairs of Shell and the
Shell plc A shares (A shares) are paid by default in euros, although holders
Company and of the profit or loss of Shell and the Company for that period.
may elect to receive dividends in sterling. Dividends on Royal Dutch Shell plc
In preparing these financial statements, the Directors are required to:
B shares (B shares) are paid by default in sterling, although holders may elect
to receive dividends in euros. Dividends on ADSs are paid in dollars.
■ adopt the going concern basis unless it is inappropriate to do so;
[A] ADSs are listed on the New York Stock Exchange under the symbols RDS.A and RDS.B. Each ADS
represents two shares – two A shares in the case of RDS.A or two B shares in the case of RDS.B.
■ select suitable accounting policies and then apply them consistently;
■ make judgements and accounting estimates that are reasonable and
The Company operated a Scrip Dividend Programme until the third quarter of
2017, which enabled shareholders to increase their shareholding by
choosing to receive new shares instead of cash dividends (if approved by the
Board). Only new A shares were issued under the programme, including to
shareholders who hold B shares. More information can be found at
www.shell.com/scrip.
The Directors have announced a fourth-quarter interim dividend as set out in
the table below, payable on March 26, 2018, to shareholders on the
Register of Members at close of business on February 16, 2018. The closing
date for dividend currency elections was March 2, 2018 [A] and the euro
and sterling equivalents announcement date was March 9, 2018.
[A] A different dividend currency election date may apply to shareholders holding shares in a securities
account with a bank or financial institution ultimately through Euroclear Nederland. This may also apply
to other shareholders who do not hold their shares either directly on the Register of Members or in the
corporate sponsored nominee arrangement. Such shareholders can contact their broker, financial
intermediary, bank or financial institution for the election deadline that applies.
■ state whether IFRS as adopted by the EU and IFRS as issued by the IASB
prudent; and
have been followed.
The Directors are responsible for keeping adequate accounting records that
are sufficient to show and explain the transactions of Shell and the Company
and disclose with reasonable accuracy, at any time, the financial position of
Shell and the Company and to enable them to ensure that the financial
statements comply with the Companies Act 2006 (the Act) and, as regards
the Consolidated Financial Statements, with Article 4 of the IAS Regulation
and therefore are in accordance with IFRS as adopted by the EU. The
Directors are also responsible for safeguarding the assets of Shell and the
Company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
Each of the Directors, whose names and functions can be found on
pages 69-71, confirms that, to the best of their knowledge:
■ the financial statements, which have been prepared in accordance with
IFRS as adopted by the EU and with IFRS as issued by the IASB give a true
and fair view of the assets, liabilities, financial position and profit of Shell
and the Company; and
■ the Management Report includes a fair review of the development and
performance of the business and the position of Shell, together with a
description of the principal risks and uncertainties that it faces.
Furthermore, so far as each of the Directors is aware, there is no relevant
audit information of which the auditors are unaware, and each of the
Directors has taken all the steps that ought to have been taken in order to
become aware of any relevant audit information and to establish that the
auditors are aware of that information.
Dividends
Q1
Q2
Q3
Q4
€
0.4194
0.3949
0.3985
0.3818
$
0.47
0.47
0.47
0.47
1.88
A shares
pence
37.12
36.28
35.02
33.91
B shares[A]
A ADSs
$
pence
€
0.47
0.47
0.47
0.47
1.88
37.12 0.4194
36.28 0.3949
35.02 0.3985
33.91 0.3818
142.33 1.5946
147.06 1.6548
2017
B ADSs
$
0.94
0.94
0.94
0.94
3.76
3.76
$
0.94
0.94
0.94
0.94
3.76
3.76
Total announced in respect of the year
Amount paid during the year
1.5946
142.33
1.6548
147.06
[A] It is expected that holders of B shares will receive dividends through the dividend access mechanism applicable to such shares. The dividend access mechanism is described more fully on page 205.
GOVERNANCE SHELL ANNUAL REPORT AND FORM 20-F 2017
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Senior Management
Directors’ Report
Directors’ Report
MANAGEMENT REPORT
This Directors’ Report, together with the “Strategic Report” on pages 06-68,
serves as the Management Report for the purpose of Disclosure Guidance
and Transparency Rule 4.1.8R.
FINANCIAL STATEMENTS AND DIVIDENDS
The “Consolidated Statement of Income” and “Consolidated Balance Sheet”
can be found on pages 138 and 139 respectively.
The table below sets out the dividends on each class of share and each class
of American Depositary Share (ADS [A]). The Company announces its
dividends in dollars and, at a later date, announces the euro and sterling
equivalent amounts using a market exchange rate. Dividends on Royal Dutch
Shell plc A shares (A shares) are paid by default in euros, although holders
may elect to receive dividends in sterling. Dividends on Royal Dutch Shell plc
B shares (B shares) are paid by default in sterling, although holders may elect
to receive dividends in euros. Dividends on ADSs are paid in dollars.
[A] ADSs are listed on the New York Stock Exchange under the symbols RDS.A and RDS.B. Each ADS
represents two shares – two A shares in the case of RDS.A or two B shares in the case of RDS.B.
The Company operated a Scrip Dividend Programme until the third quarter of
2017, which enabled shareholders to increase their shareholding by
choosing to receive new shares instead of cash dividends (if approved by the
Board). Only new A shares were issued under the programme, including to
shareholders who hold B shares. More information can be found at
www.shell.com/scrip.
The Directors have announced a fourth-quarter interim dividend as set out in
the table below, payable on March 26, 2018, to shareholders on the
Register of Members at close of business on February 16, 2018. The closing
date for dividend currency elections was March 2, 2018 [A] and the euro
and sterling equivalents announcement date was March 9, 2018.
[A] A different dividend currency election date may apply to shareholders holding shares in a securities
account with a bank or financial institution ultimately through Euroclear Nederland. This may also apply
to other shareholders who do not hold their shares either directly on the Register of Members or in the
corporate sponsored nominee arrangement. Such shareholders can contact their broker, financial
intermediary, bank or financial institution for the election deadline that applies.
DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE
PREPARATION OF THE ANNUAL REPORT
AND ACCOUNTS
The Directors are responsible for preparing the Annual Report, including the
financial statements, in accordance with applicable laws and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law, the Directors have prepared the Consolidated and
Parent Company Financial Statements in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union (EU). In preparing
these financial statements, the Directors have also elected to comply with IFRS as
issued by the International Accounting Standards Board (IASB). Under company
law, the Directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of affairs of Shell and the
Company and of the profit or loss of Shell and the Company for that period.
In preparing these financial statements, the Directors are required to:
■ adopt the going concern basis unless it is inappropriate to do so;
■ select suitable accounting policies and then apply them consistently;
■ make judgements and accounting estimates that are reasonable and
prudent; and
■ state whether IFRS as adopted by the EU and IFRS as issued by the IASB
have been followed.
The Directors are responsible for keeping adequate accounting records that
are sufficient to show and explain the transactions of Shell and the Company
and disclose with reasonable accuracy, at any time, the financial position of
Shell and the Company and to enable them to ensure that the financial
statements comply with the Companies Act 2006 (the Act) and, as regards
the Consolidated Financial Statements, with Article 4 of the IAS Regulation
and therefore are in accordance with IFRS as adopted by the EU. The
Directors are also responsible for safeguarding the assets of Shell and the
Company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
Each of the Directors, whose names and functions can be found on
pages 69-71, confirms that, to the best of their knowledge:
■ the financial statements, which have been prepared in accordance with
IFRS as adopted by the EU and with IFRS as issued by the IASB give a true
and fair view of the assets, liabilities, financial position and profit of Shell
and the Company; and
■ the Management Report includes a fair review of the development and
performance of the business and the position of Shell, together with a
description of the principal risks and uncertainties that it faces.
Furthermore, so far as each of the Directors is aware, there is no relevant
audit information of which the auditors are unaware, and each of the
Directors has taken all the steps that ought to have been taken in order to
become aware of any relevant audit information and to establish that the
auditors are aware of that information.
The Senior Management of the Company comprises the Executive Directors
and those listed below. All are members of the Executive Committee
(see “Corporate governance” on page 80).
JOHN ABBOTT
Downstream Director
Born March 24, 1960. A British national, appointed Downstream Director
with effect from October 2013. Previously, he was Executive Vice President
Manufacturing, responsible for oil refineries and petrochemicals plants
worldwide. He joined Shell in 1981, and has held various management
positions in refining, chemicals and upstream heavy oil, working in Canada,
the Netherlands, Singapore, Thailand, the UK and the USA.
HARRY BREKELMANS
Projects & Technology Director
Born June 11, 1965. A Dutch national, appointed Projects & Technology
Director with effect from October 2014. Previously, he was Executive Vice
President for Upstream International Operated based in the Netherlands.
He joined Shell in 1990 and has held various management positions in
Exploration and Production, Internal Audit, and Group Strategy and Planning.
From 2011 to 2013, he was Country Chair – Russia and Executive Vice
President for Russia and the Caspian region.
ANDREW BROWN
Upstream Director
Born January 29, 1962. A British national, appointed Upstream Director with
effect from January 2016, having served on the Executive Committee as
Upstream International Director from 2012. Previously, he was Executive Vice
President for Shell’s activities in Qatar and a member of the Upstream
International Leadership Team. He was awarded the Order of the British
Empire in 2012 for his services to British-Qatari business relations.
RONAN CASSIDY
Chief Human Resources & Corporate Officer
Born February 10, 1967. A British national, appointed Chief Human
Resources & Corporate Officer with effect from January 2016. Previously,
he was Executive Vice President Human Resources, Upstream International.
He joined Shell in 1988 and has held various human resources positions in
Upstream and Downstream.
DONNY CHING
Legal Director
Born February 14, 1964. A Malaysian national, appointed Legal Director
with effect from February 2014. Previously, he was General Counsel for
Projects & Technology based in the Netherlands. He joined Shell in 1988
based in Australia and then moved to Hong Kong and later to London. In
2008, he was appointed Head of Legal at Shell Singapore, having served
as Associate General Counsel for Gas & Power in Asia-Pacific.
MAARTEN WETSELAAR
Integrated Gas and New Energies Director
Born December 30, 1968. A Dutch national, appointed Integrated Gas
Director with effect from January 2016. Previously, he was Executive Vice
President of Integrated Gas based in Singapore. He joined Shell in 1995
and has held various financial, commercial and general management roles in
Downstream, Trading and Upstream.
B shares[A]
A ADSs
2017
B ADSs
Dividends
Q1
Q2
Q3
Q4
Total announced in respect of the year
$
0.47
0.47
0.47
0.47
1.88
€
0.4194
0.3949
0.3985
0.3818
A shares
pence
37.12
36.28
35.02
33.91
1.5946
142.33
$
pence
€
0.47
0.47
0.47
0.47
1.88
37.12 0.4194
36.28 0.3949
35.02 0.3985
33.91 0.3818
142.33 1.5946
$
0.94
0.94
0.94
0.94
3.76
$
0.94
0.94
0.94
0.94
3.76
3.76
Amount paid during the year
[A] It is expected that holders of B shares will receive dividends through the dividend access mechanism applicable to such shares. The dividend access mechanism is described more fully on page 205.
147.06 1.6548
1.6548
147.06
3.76
GOVERNANCE SHELL ANNUAL REPORT AND FORM 20-F 2017
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directors’ report Continued
The Directors consider that the Annual Report, including the financial
statements, taken as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to assess Shell’s position
and performance, business model and strategy.
The Directors consider it appropriate to continue to adopt the going concern
basis of accounting in preparing the financial statements.
The Directors are responsible for the maintenance and integrity of the Shell
website (www.shell.com). Legislation in the UK governing the preparation
and dissemination of financial statements may differ from legislation in other
jurisdictions.
VIABILITY STATEMENT
The “Strategic Report” includes information about Shell’s strategy, financial
condition, cash flows and liquidity, as well as the factors, including the principal
risks, likely to affect Shell’s future development. The Directors assess Shell’s
prospects both at an operating and strategic level, each involving different time
horizons. On an annual basis the Directors approve a detailed three-year
operating plan, which forecasts Shell’s cash flows and ability to service
financing requirements, pay dividends and fund investing activities during the
period, having taken into consideration upward and downward sensitivities.
This period is considered appropriate for operating purposes because it allows
for credible detailed forecasts. The Directors also receive regular updates on
Shell’s funding position and consider significant investment, divestment and
financing proposals. At least biannually, the Directors discuss changes to Shell’s
principal risks and assess the potential impact and any related mitigations.
Taking account of Shell’s position and principal risks at December 31, 2017,
the Directors have a reasonable expectation that Shell will be able to
continue in operation and meet its liabilities as they fall due over its three-year
operating plan period. Annually, the Directors also review Shell’s strategic
plan which takes account of longer-term forecasts including external
environment factors and Shell’s business portfolio developments and endorse
any updates required. “Business overview” on page 10 describes Shell’s
business model, including competitive advantages and key strengths, and its
sustainability and resilience. This aims to describe Shell’s long-term viability
and ability to meet longer-term commitments such as debt and contractual
obligations which can extend over several decades. The Directors continually
assess Shell’s portfolio and strategy against a wide range of outlooks,
including assessing the potential impacts of various possible energy transition
pathways and scenarios for changes in societal expectations in relation to
climate change. Shell recognises in its strategy that the world is transitioning
to a lower-carbon energy system (see “Climate change and energy transition”
on pages 62-66).
REPURCHASES OF SHARES
At the 2017 Annual General Meeting (AGM), shareholders granted an
authority, which expires at the end of the 2018 AGM, for the Company to
repurchase up to a maximum of 817 million of its shares (excluding purchases
for employee share plans). While no share repurchases for cancellation were
made during 2017, the Board continues to regard the ability to repurchase
issued shares in suitable circumstances as an important part of Shell’s
financial management. A resolution will be proposed at the 2018 AGM to
renew the authority for the Company to purchase its own share capital, up to
specified limits, for a further year. This proposal will be described in more
detail in the Notice of Annual General Meeting.
BOARD OF DIRECTORS
The Directors during the year were Ben van Beurden, Guy Elliott (who stood
down on October 18, 2017), Euleen Goh, Simon Henry (who stood down on
March 9, 2017), Charles O. Holliday, Catherine J. Hughes (appointed with
effect from June 1, 2017), Gerard Kleisterlee, Roberto Setubal (appointed with
effect from October 1, 2017), Sir Nigel Sheinwald, Linda G. Stuntz, Jessica
Uhl (appointed with effect from March 9, 2017), Hans Wijers, Patricia A.
Woertz (who stood down on May 23, 2017) and Gerrit Zalm [A].
[A] At its meeting in July 2017, the Board authorised a matter declared by Gerrit Zalm, namely his
temporary appointment by the Dutch Second Chamber of Parliament to investigate the political support
for a coalition government. The matter was authorised subject to certain conditions Gerrit Zalm
requested during the term of the appointment, including that he did not participate in the making of
decisions related to the Company (whether at meetings of the Directors or otherwise) and that he be
excluded from the receipt of information he would otherwise receive in his role as a Director of the
Company. Such conditions were revoked in October 2017 after the conclusion of his temporary
appointment subject to certain further conditions designed to avoid any future actual or perceived
conflicts of interest.
RETIREMENT, REAPPOINTMENT AND APPOINTMENT OF
DIRECTORS
In line with the UK Corporate Governance Code (Code), all Directors will
retire at the 2018 AGM and seek reappointment by shareholders, except for
Hans Wijers who will stand down as a Director of the Company at the close
of business of the AGM on May 22, 2018. Shareholders will also be asked
to vote on the appointment of Ann Godbehere with effect from May 23,
2018.
The biographies of all current Directors are given on pages 69-71 and
biographies for those seeking appointment or reappointment will also be
included in the Notice of Annual General Meeting. Details of the Executive
Directors’ contracts can be found on pages 115-116 and copies are
available for inspection from the Company Secretary. Furthermore, a copy of
the form of these contracts has been filed with the US Securities and
Exchange Commission as an exhibit.
The terms and conditions of appointment of Non-executive Directors are set
out in their letters of appointment with the Company which, in accordance
with the Code, are available for inspection from the Company Secretary.
No Director is, or was, materially interested in any contract subsisting during
or at the end of the year that was significant in relation to the Company’s
business. See also “Related party transactions” below.
DIRECTORS’ INTERESTS
The interests (in shares of the Company or calculated equivalents) of the
Directors in office at the end of the year, including any interests of a
“connected person” [A], can be found in the “Directors’ Remuneration Report”
on pages 104-105.
[A] “Connected person” has the meaning given to “person closely associated” within the Market Abuse
Regulation.
Changes in Directors’ share interests during the period from December 31,
2017, to March 14, 2018, can be found in the “Directors’ Remuneration
Report” on page 105.
QUALIFYING THIRD-PARTY INDEMNITIES
The Company has entered into a deed of indemnity with each Director who
served during the year under identical terms. The deeds indemnify the
Directors to the widest extent permitted by the applicable laws of England
against all liability incurred as a Director or employee of the Company or of
certain other entities.
RELATED PARTY TRANSACTIONS
Other than disclosures given in Notes 9 and 27 to the “Consolidated
Financial Statements” on pages 155 and 177 respectively, there were no
transactions or proposed transactions that were material to either the
Company or any related party. Nor were there any transactions with any
related party that were unusual in their nature or conditions.
POLITICAL CONTRIBUTIONS
TRANSFER OF SECURITIES
No donations were made by the Company or any of its subsidiaries to
There are no significant restrictions on the transfer of securities.
political parties or organisations during the year. Shell Oil Company
administers the non-partisan Shell Oil Company Employees’ Political
Awareness Committee (SEPAC), a political action committee registered with
Shell has three primary employee share ownership trusts and trust-like entities:
the US Federal Election Commission. Eligible employees may make voluntary
a Dutch foundation (stichting) and two US Rabbi Trusts. The shares held by the
SHARE OWNERSHIP TRUSTS AND TRUST-LIKE ENTITIES
personal contributions to the SEPAC.
Dutch foundation are voted by its Board and the shares in the US Rabbi Trusts
are voted by the Voting Trustee, Newport Trust Company. Both the Board of
RECENT DEVELOPMENTS AND POST-BALANCE SHEET
the Dutch foundation and the Voting Trustee are independent of Shell.
There are no material recent developments or post-balance sheet events to
The UK Shell All Employee Share Ownership Plan has a separate related
EVENTS
report.
LIKELY FUTURE DEVELOPMENTS
Information relating to likely future developments can be found in the
“Strategic Report” on pages 06-68.
share ownership trust. Shares held by the trust are voted by its trustee,
Computershare Trustees Limited, as directed by the participants.
SIGNIFICANT SHAREHOLDINGS
Information concerning significant shareholdings can be found on page 218.
RESEARCH AND DEVELOPMENT
Information relating to Shell’s research and development, including
expenditure, can be found in “Business overview” on page 11.
ARTICLES OF ASSOCIATION
Information concerning the Articles of Association can be found on
pages 83-89.
DIVERSITY AND INCLUSION
Information concerning diversity and inclusion can be found in “Our people”
on page 67.
LISTING RULE INFORMATION [A]
Information concerning the amount of interest capitalised by Shell can be
found in Note 6 to the “Consolidated Financial Statements” on page 151.
[A] This information is given in accordance with Listing Rule 9.8.4R.
EMPLOYEE COMMUNICATION AND INVOLVEMENT
Information concerning employee communication and involvement can be
AUDITOR
found in “Our people” on page 67.
CORPORATE SOCIAL RESPONSIBILITY
A summary of Shell’s approach to corporate social responsibility can be
found in “Environment and society” on pages 58-61 and “Our people” on
pages 67-68. Further details will be available in the Shell Sustainability
Report 2017.
GREENHOUSE GAS EMISSIONS
Information relating to greenhouse gas emissions can be found in “Climate
change and energy transition” on pages 62-66.
A resolution relating to the appointment of Ernst & Young LLP as auditor for the
financial year 2018 will be proposed at the 2018 AGM.
CORPORATE GOVERNANCE
The Company’s statement on corporate governance is included in the
“Corporate governance” report on pages 76-89 and is incorporated in this
Directors’ Report by way of reference.
ANNUAL GENERAL MEETING
The AGM will be held on May 22, 2018, at the Circustheater, Circusstraat
4, 2586 CW, The Hague, The Netherlands. The Notice of Annual General
Meeting will include details of the business to be put to shareholders at the
FINANCIAL RISK MANAGEMENT, OBJECTIVES
AGM.
AND POLICIES
Descriptions of the use of financial instruments and Shell’s financial risk
management objectives and policies, and exposure to market risk (including
price risk), credit risk and liquidity risk can be found in Note 19 to the
“Consolidated Financial Statements” on pages 167-172.
Signed on behalf of the Board
/s/ Linda M. Szymanski
SHARE CAPITAL
The Company’s issued share capital on December 31, 2017, is set out in
Note 8 to the “Parent Company Financial Statements” on pages 204-205.
The percentage of the total issued share capital represented by each class of
share is given below.
Linda M. Szymanski
Company Secretary
March 14, 2018
Share capital percentage
Share class
A ordinary
B ordinary
Sterling deferred
%
55.10
44.90
de minimis
GOVERNANCE SHELL ANNUAL REPORT AND FORM 20-F 2017
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The Directors consider that the Annual Report, including the financial
statements, taken as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to assess Shell’s position
and performance, business model and strategy.
The Directors consider it appropriate to continue to adopt the going concern
basis of accounting in preparing the financial statements.
The Directors are responsible for the maintenance and integrity of the Shell
website (www.shell.com). Legislation in the UK governing the preparation
and dissemination of financial statements may differ from legislation in other
jurisdictions.
VIABILITY STATEMENT
The “Strategic Report” includes information about Shell’s strategy, financial
condition, cash flows and liquidity, as well as the factors, including the principal
risks, likely to affect Shell’s future development. The Directors assess Shell’s
prospects both at an operating and strategic level, each involving different time
horizons. On an annual basis the Directors approve a detailed three-year
operating plan, which forecasts Shell’s cash flows and ability to service
financing requirements, pay dividends and fund investing activities during the
period, having taken into consideration upward and downward sensitivities.
This period is considered appropriate for operating purposes because it allows
for credible detailed forecasts. The Directors also receive regular updates on
Shell’s funding position and consider significant investment, divestment and
financing proposals. At least biannually, the Directors discuss changes to Shell’s
principal risks and assess the potential impact and any related mitigations.
Taking account of Shell’s position and principal risks at December 31, 2017,
the Directors have a reasonable expectation that Shell will be able to
continue in operation and meet its liabilities as they fall due over its three-year
operating plan period. Annually, the Directors also review Shell’s strategic
plan which takes account of longer-term forecasts including external
environment factors and Shell’s business portfolio developments and endorse
any updates required. “Business overview” on page 10 describes Shell’s
business model, including competitive advantages and key strengths, and its
sustainability and resilience. This aims to describe Shell’s long-term viability
and ability to meet longer-term commitments such as debt and contractual
obligations which can extend over several decades. The Directors continually
assess Shell’s portfolio and strategy against a wide range of outlooks,
including assessing the potential impacts of various possible energy transition
pathways and scenarios for changes in societal expectations in relation to
climate change. Shell recognises in its strategy that the world is transitioning
to a lower-carbon energy system (see “Climate change and energy transition”
on pages 62-66).
REPURCHASES OF SHARES
At the 2017 Annual General Meeting (AGM), shareholders granted an
authority, which expires at the end of the 2018 AGM, for the Company to
repurchase up to a maximum of 817 million of its shares (excluding purchases
for employee share plans). While no share repurchases for cancellation were
made during 2017, the Board continues to regard the ability to repurchase
issued shares in suitable circumstances as an important part of Shell’s
financial management. A resolution will be proposed at the 2018 AGM to
detail in the Notice of Annual General Meeting.
BOARD OF DIRECTORS
The Directors during the year were Ben van Beurden, Guy Elliott (who stood
down on October 18, 2017), Euleen Goh, Simon Henry (who stood down on
March 9, 2017), Charles O. Holliday, Catherine J. Hughes (appointed with
effect from June 1, 2017), Gerard Kleisterlee, Roberto Setubal (appointed with
effect from October 1, 2017), Sir Nigel Sheinwald, Linda G. Stuntz, Jessica
Uhl (appointed with effect from March 9, 2017), Hans Wijers, Patricia A.
Woertz (who stood down on May 23, 2017) and Gerrit Zalm [A].
[A] At its meeting in July 2017, the Board authorised a matter declared by Gerrit Zalm, namely his
temporary appointment by the Dutch Second Chamber of Parliament to investigate the political support
for a coalition government. The matter was authorised subject to certain conditions Gerrit Zalm
requested during the term of the appointment, including that he did not participate in the making of
decisions related to the Company (whether at meetings of the Directors or otherwise) and that he be
excluded from the receipt of information he would otherwise receive in his role as a Director of the
Company. Such conditions were revoked in October 2017 after the conclusion of his temporary
appointment subject to certain further conditions designed to avoid any future actual or perceived
conflicts of interest.
DIRECTORS
RETIREMENT, REAPPOINTMENT AND APPOINTMENT OF
In line with the UK Corporate Governance Code (Code), all Directors will
retire at the 2018 AGM and seek reappointment by shareholders, except for
Hans Wijers who will stand down as a Director of the Company at the close
of business of the AGM on May 22, 2018. Shareholders will also be asked
to vote on the appointment of Ann Godbehere with effect from May 23,
2018.
The biographies of all current Directors are given on pages 69-71 and
biographies for those seeking appointment or reappointment will also be
included in the Notice of Annual General Meeting. Details of the Executive
Directors’ contracts can be found on pages 115-116 and copies are
available for inspection from the Company Secretary. Furthermore, a copy of
the form of these contracts has been filed with the US Securities and
Exchange Commission as an exhibit.
The terms and conditions of appointment of Non-executive Directors are set
out in their letters of appointment with the Company which, in accordance
with the Code, are available for inspection from the Company Secretary.
No Director is, or was, materially interested in any contract subsisting during
or at the end of the year that was significant in relation to the Company’s
business. See also “Related party transactions” below.
DIRECTORS’ INTERESTS
The interests (in shares of the Company or calculated equivalents) of the
Directors in office at the end of the year, including any interests of a
“connected person” [A], can be found in the “Directors’ Remuneration Report”
[A] “Connected person” has the meaning given to “person closely associated” within the Market Abuse
on pages 104-105.
Regulation.
Changes in Directors’ share interests during the period from December 31,
2017, to March 14, 2018, can be found in the “Directors’ Remuneration
Report” on page 105.
QUALIFYING THIRD-PARTY INDEMNITIES
The Company has entered into a deed of indemnity with each Director who
served during the year under identical terms. The deeds indemnify the
Directors to the widest extent permitted by the applicable laws of England
against all liability incurred as a Director or employee of the Company or of
certain other entities.
Financial Statements” on pages 155 and 177 respectively, there were no
transactions or proposed transactions that were material to either the
Company or any related party. Nor were there any transactions with any
related party that were unusual in their nature or conditions.
renew the authority for the Company to purchase its own share capital, up to
RELATED PARTY TRANSACTIONS
specified limits, for a further year. This proposal will be described in more
Other than disclosures given in Notes 9 and 27 to the “Consolidated
POLITICAL CONTRIBUTIONS
No donations were made by the Company or any of its subsidiaries to
political parties or organisations during the year. Shell Oil Company
administers the non-partisan Shell Oil Company Employees’ Political
Awareness Committee (SEPAC), a political action committee registered with
the US Federal Election Commission. Eligible employees may make voluntary
personal contributions to the SEPAC.
RECENT DEVELOPMENTS AND POST-BALANCE SHEET
EVENTS
There are no material recent developments or post-balance sheet events to
report.
LIKELY FUTURE DEVELOPMENTS
Information relating to likely future developments can be found in the
“Strategic Report” on pages 06-68.
TRANSFER OF SECURITIES
There are no significant restrictions on the transfer of securities.
SHARE OWNERSHIP TRUSTS AND TRUST-LIKE ENTITIES
Shell has three primary employee share ownership trusts and trust-like entities:
a Dutch foundation (stichting) and two US Rabbi Trusts. The shares held by the
Dutch foundation are voted by its Board and the shares in the US Rabbi Trusts
are voted by the Voting Trustee, Newport Trust Company. Both the Board of
the Dutch foundation and the Voting Trustee are independent of Shell.
The UK Shell All Employee Share Ownership Plan has a separate related
share ownership trust. Shares held by the trust are voted by its trustee,
Computershare Trustees Limited, as directed by the participants.
SIGNIFICANT SHAREHOLDINGS
Information concerning significant shareholdings can be found on page 218.
RESEARCH AND DEVELOPMENT
Information relating to Shell’s research and development, including
expenditure, can be found in “Business overview” on page 11.
ARTICLES OF ASSOCIATION
Information concerning the Articles of Association can be found on
pages 83-89.
DIVERSITY AND INCLUSION
Information concerning diversity and inclusion can be found in “Our people”
on page 67.
LISTING RULE INFORMATION [A]
Information concerning the amount of interest capitalised by Shell can be
found in Note 6 to the “Consolidated Financial Statements” on page 151.
[A] This information is given in accordance with Listing Rule 9.8.4R.
AUDITOR
A resolution relating to the appointment of Ernst & Young LLP as auditor for the
financial year 2018 will be proposed at the 2018 AGM.
CORPORATE GOVERNANCE
The Company’s statement on corporate governance is included in the
“Corporate governance” report on pages 76-89 and is incorporated in this
Directors’ Report by way of reference.
ANNUAL GENERAL MEETING
The AGM will be held on May 22, 2018, at the Circustheater, Circusstraat
4, 2586 CW, The Hague, The Netherlands. The Notice of Annual General
Meeting will include details of the business to be put to shareholders at the
AGM.
Signed on behalf of the Board
/s/ Linda M. Szymanski
Linda M. Szymanski
Company Secretary
March 14, 2018
EMPLOYEE COMMUNICATION AND INVOLVEMENT
Information concerning employee communication and involvement can be
found in “Our people” on page 67.
CORPORATE SOCIAL RESPONSIBILITY
A summary of Shell’s approach to corporate social responsibility can be
found in “Environment and society” on pages 58-61 and “Our people” on
pages 67-68. Further details will be available in the Shell Sustainability
Report 2017.
GREENHOUSE GAS EMISSIONS
Information relating to greenhouse gas emissions can be found in “Climate
change and energy transition” on pages 62-66.
FINANCIAL RISK MANAGEMENT, OBJECTIVES
AND POLICIES
Descriptions of the use of financial instruments and Shell’s financial risk
management objectives and policies, and exposure to market risk (including
price risk), credit risk and liquidity risk can be found in Note 19 to the
“Consolidated Financial Statements” on pages 167-172.
SHARE CAPITAL
The Company’s issued share capital on December 31, 2017, is set out in
Note 8 to the “Parent Company Financial Statements” on pages 204-205.
The percentage of the total issued share capital represented by each class of
share is given below.
Share capital percentage
Share class
A ordinary
B ordinary
Sterling deferred
%
55.10
44.90
de minimis
GOVERNANCE SHELL ANNUAL REPORT AND FORM 20-F 2017
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Corporate governance
Corporate governance
Dear Shareholders,
I am pleased to introduce this report which describes the activities of your Board
during the year along with our governance arrangements and how we have
applied the main principles and complied with the relevant provisions set out in
the UK Corporate Governance Code (the Code) issued by the Financial
Reporting Council (FRC). The Code is regularly reviewed and updated and this
is the first time we are required to apply the 2016 version, which incorporates
changes relating to audit committee matters.
This year, the Board primarily focused on our three strategic aims: strengthening
our world-class investment case including operational excellence and our
financial framework, thriving through the energy transition and sustaining our
societal licence to operate. In November 2017, our executive team
communicated our progress on delivering these three aims and announced our
net carbon footprint ambition. More information on Board meeting discussions
can be found in the following pages, and our Strategic Report provides more
information on the strategic aims and our net carbon footprint ambition.
Succession is another key topic that remains a Board priority, and 2017
brought several changes to the composition of the Board. In March, we saw the
departure of Simon Henry as Chief Financial Officer (CFO). Two of our
Non-executive Directors also stood down: Patricia Woertz at the 2017 Annual
General Meeting (AGM) in May and Guy Elliott in October. I would like to
again thank each of them for their commitment and lasting contributions to the
Board.
We appointed Jessica Uhl in March as our CFO, succeeding Simon Henry,
and we welcomed Catherine Hughes and Roberto Setubal as Non-executive
Directors in June and October respectively. All three appointments were
overwhelmingly endorsed by shareholders at the 2017 AGM and we are
delighted with the valuable contributions already being made by our new
colleagues. Additionally, Linda Szymanski took up her new role as Company
Secretary in January 2017.
At the forthcoming AGM, Hans Wijers will stand down as a Non-executive
Director having served with distinction for nine years, including service as
Senior Independent Director, Chair of the Remuneration Committee and Chair
of the Corporate and Social Responsibility Committee. Also at the AGM,
shareholders will be asked to vote on the appointment of Ann Godbehere as
a Non-executive Director with effect from May 23, 2018.
We take the issue of diversity in the Boardroom very seriously and are mindful
of important recent developments in this area. In terms of gender diversity, for
example, the Hampton-Alexander Review recommended that a minimum of
33% of directors are women, and I am pleased to report that we meet this
target, ranking in the top quartile of FTSE100 companies. We are also
committed to gender diversity in our other senior leadership positions and you
can read more about this in “Our people” on page 67.
Another important development in the area of diversity was the publication of
the Parker Review Committee’s report in October which focussed on ethnic
and cultural diversity in the boardroom. Your Board presently has a strong mix
of diverse perspectives, and we are currently considering how best to apply
the recommendations in the Parker Review given the complexity in some
jurisdictions in obtaining ethnicity data. You can read more about our
approach to diversity later in this report.
The changes to the composition of the Board in 2017 gave us the
opportunity to refresh the membership of the Board committees and you can
review these changes and the work of Nomination and Succession
Committee later in this report and, in the case of the Audit Committee and the
Remuneration Committee, in their separate reports to shareholders on pages
90-93 and pages 94-117 respectively.
The Nomination and Succession Committee had a very busy year. In addition
to leading the process for the Board changes noted above, it also continued
its focus on ongoing succession planning, monitored and reviewed corporate
governance developments and made related recommendations to the Board.
There were numerous corporate governance developments throughout the
year, including the publication of a paper by the UK government in August
setting out its proposed corporate governance reforms and the publication of
a consultation paper by the FRC in December on amendments to the Code.
The government’s paper set out 12 key actions for reform, focussing on matters
including executive pay and strengthening the voice of employees and other
stakeholders. It is expected that the government will introduce legislation in time
for the reforms to apply to accounting periods beginning on or after January 1,
2019. Regarding the Code, the FRC consultation paper proposed both specific
amendments suggested by the government and a range of new requirements.
The consultation ended in February 2018 and the FRC is aiming to publish the
final version of the new Code by early summer. The Nomination and
Succession Committee will continue to monitor and review all these
developments and make recommendations to the Board at the appropriate time.
In December, the Board conducted its annual performance evaluation. In
2016, we used an external facilitator to conduct an in-depth process lasting
from January through to June, however in 2017 we conducted a more
streamlined evaluation. It was led by the Nomination and Succession
Committee and involved Directors completing a series of confidential online
questionnaires made available via a corporate advisory firm. While the
process was less extensive than last year, it still proved to be a valuable
exercise generating reflective discussions and planned actions. You can read
more about the process later in this report.
Finally, I would like to thank my fellow Directors, past and present, for their
support in achieving our high standards of corporate governance. We look
forward to the publication of the legislative and Code changes that are
expected in 2018. We remain committed to our high standards of corporate
governance which we believe to be a critical factor to the long-term success
of the Company.
Chad Holliday
Chair
March 14, 2018
STATEMENT OF COMPLIANCE
The Board confirms that throughout the year the Company has applied the main
principles and complied with the relevant provisions set out in the Code issued
by the FRC in April 2016 [A]. In addition to complying with applicable
corporate governance requirements in the UK, the Company must follow the
rules of Euronext Amsterdam as well as Dutch securities laws because of its
listing on that exchange. The Company must likewise follow US securities laws
and the New York Stock Exchange (NYSE) rules and regulations because its
securities are registered in the USA and listed on the NYSE.
[A] A copy of the Code can be found on the FRC’s website (frc.org.uk).
NYSE GOVERNANCE STANDARDS
In accordance with the NYSE rules for foreign private issuers, the Company
follows home-country practice in relation to corporate governance. However,
foreign private issuers are required to have an audit committee that satisfies
the requirements of the US Securities and Exchange Commission’s (SEC) Rule
10A-3. The Company’s Audit Committee satisfies such requirements. The
NYSE also requires a foreign private issuer to provide certain written
affirmations and notices to the NYSE, as well as a summary of the significant
ways in which its corporate governance practices differ from those followed
by domestic US companies under NYSE listing standards (see Section
303A.11 of the NYSE Listed Company Manual). The Company’s summary of
its corporate governance differences is given below and can be found at
www.shell.com/investor.
NON-EXECUTIVE DIRECTOR INDEPENDENCE
The Board follows the provisions of the Code in determining Non-executive
Director independence, which states that at least half of the Board, excluding
the Chair, should comprise Non-executive Directors determined by the Board to
be independent. In the case of the Company, the Board has determined that all
the Non-executive Directors at the end of 2017 are wholly independent.
NOMINATING/CORPORATE GOVERNANCE COMMITTEE AND
COMPENSATION COMMITTEE
The NYSE listing standards require that a listed company maintain a
nominating/corporate governance committee and a compensation committee,
both composed entirely of independent directors and with certain specific
responsibilities. The Company’s Nomination and Succession Committee and
Remuneration Committee both comply with these requirements, except that the
terms of reference of the Nomination and Succession Committee require only a
majority of the committee members to be independent.
AUDIT COMMITTEE
As required by NYSE listing standards, the Company maintains an Audit
Committee for the purpose of assisting the Board’s oversight of its financial
statements, its internal audit function and its independent auditors. The
Company’s Audit Committee is in full compliance with the SEC’s Rule 10A-3
and Section 303A.06 of the NYSE Listed Company Manual.
The Company’s Audit Committee is not directly responsible for the appointment
of independent auditors. However, the Company’s Audit Committee makes
recommendations to the Board for it to put to shareholders for approval in
general meeting. UK legislation provides that it is for shareholders to agree the
appointment, reappointment and removal of the Company’s independent
auditors.
PLANS
SHAREHOLDER APPROVAL OF SHARE-BASED COMPENSATION
The Company complies with the listing rules of the UK Listing Authority (UKLA),
which require shareholder approval for the adoption of share-based
compensation plans which are either long-term incentive plans in which one or
more Directors can participate or plans which involve or may involve the issue of
new shares or the transfer of treasury shares. Under the UKLA rules, such plans
cannot be changed to the advantage of participants without shareholder
approval, except for certain minor amendments, for example to benefit the
administration of the plan or to take account of tax benefits. The rules on the
requirements to seek shareholder approval for share-based compensation plans,
including those in respect of material revisions to such plans, may deviate from
the NYSE listing standards.
CODE OF BUSINESS CONDUCT AND ETHICS
The NYSE listing standards require that listed companies adopt a code of
business conduct and ethics for all directors, officers and employees and
promptly disclose any waivers of the code for directors or executive officers. The
Company has adopted the Shell General Business Principles (see below), which
satisfy the NYSE requirements. The Company also has internal procedures in
place by which any employee can raise in confidence accounting, internal
accounting controls and auditing concerns. Additionally, any employee can
report concerns to management by telephone or over the internet without
jeopardising their position (see below).
SHELL GENERAL BUSINESS PRINCIPLES
The Shell General Business Principles define how Shell subsidiaries are
expected to conduct their affairs and are underpinned by the Shell core values
of honesty, integrity and respect for people. These principles include, among
other things, Shell’s commitment to support fundamental human rights in line with
the legitimate role of business and to contribute to sustainable development.
They are designed to mitigate the risk of damage to our business reputation and
to prevent violations of local and international legislation. They can be found at
www.shell.com/sgbp. See “Risk factors” on page 15.
SHELL CODE OF CONDUCT
Directors, officers, employees and contract staff are required to comply with the
Shell Code of Conduct, which is intended to help them put Shell’s business
principles into practice. This code clarifies the basic rules and standards they
are expected to follow and the behaviour expected of them. These individuals
must also complete mandatory Code of Conduct training. Designated
individuals are required to complete additional mandatory training on antitrust
and competition laws, anti-bribery, anti-corruption and anti-money laundering
laws, data protection laws and trade compliance requirements (see “Risk
factors” on pages 15-16). The Shell Code of Conduct can be found at
www.shell.com/codeofconduct.
CODE OF ETHICS
Executive Directors and Senior Financial Officers of Shell must also comply with
a Code of Ethics. This code is specifically intended to meet the requirements of
Section 406 of the Sarbanes-Oxley Act and the listing requirements of the NYSE
(see above). It can be found at www.shell.com/codeofethics.
SHELL GLOBAL HELPLINE
Employees, contract staff, third parties with whom Shell has a business
relationship (such as customers, suppliers and agents), and any member of the
public (including shareholders) may raise ethics and compliance concerns
(anonymously if preferred) through the Shell Global Helpline. This is a
worldwide confidential reporting mechanism, operated by an external third
party, and is available 24 hours a day, seven days a week by telephone
and at www.shell.com or https://shell.alertline.eu.
BOARD STRUCTURE AND COMPOSITION
During 2017, the Board comprised the Chair; two Executive Directors, namely
the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO) [A];
and Non-executive Directors, including the Deputy Chair and Senior
Independent Director, as follows:
Number of Non-executive Directors
Period
January 1 to May 23
May 24 to May 31
June 1 to September 30
October 1 to October 18
October 19 to December 31
8
7
8
9
8
[A] With effect from March 9, 2017, Simon Henry stood down as CFO and was succeeded by Jessica Uhl.
At its meeting in July 2017, the Board authorised a matter declared by Gerrit
Zalm, namely his temporary appointment by the Dutch Second Chamber of
Parliament to investigate the political support for a coalition government. The
matter was authorised subject to certain conditions Gerrit Zalm requested
during the term of the appointment, including that he did not participate in the
making of decisions related to the Company (whether at meetings of the
Directors or otherwise) and that he be excluded from the receipt of
information he would otherwise receive in his role as a Director of the
Company. Such conditions were revoked in October 2017 after the
conclusion of his temporary appointment subject to certain further conditions
designed to avoid any future actual or perceived conflicts of interest.
A list of current Directors, including their biographies, can be found on pages 69-71.
The Board recognises its collective responsibility for the long-term success of
the Company. Generally, it meets eight times a year [A] and has a formal
schedule of matters reserved to it. This includes: overall strategy and
management; corporate structure and capital structure; financial reporting and
control, including approval of the Annual Report and Form 20-F, and interim
dividends; oversight and review of risk management and internal control;
significant contracts; and succession planning and new Board appointments.
The full list of matters reserved to the Board for decision can be found at
www.shell.com/investor.
[A] See page 79 for the number of meetings held in 2017.
GOVERNANCE SHELL ANNUAL REPORT AND FORM 20-F 2017
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Corporate governance
Dear Shareholders,
I am pleased to introduce this report which describes the activities of your Board
during the year along with our governance arrangements and how we have
applied the main principles and complied with the relevant provisions set out in
the UK Corporate Governance Code (the Code) issued by the Financial
Reporting Council (FRC). The Code is regularly reviewed and updated and this
is the first time we are required to apply the 2016 version, which incorporates
changes relating to audit committee matters.
This year, the Board primarily focused on our three strategic aims: strengthening
our world-class investment case including operational excellence and our
financial framework, thriving through the energy transition and sustaining our
societal licence to operate. In November 2017, our executive team
communicated our progress on delivering these three aims and announced our
net carbon footprint ambition. More information on Board meeting discussions
can be found in the following pages, and our Strategic Report provides more
information on the strategic aims and our net carbon footprint ambition.
Succession is another key topic that remains a Board priority, and 2017
brought several changes to the composition of the Board. In March, we saw the
departure of Simon Henry as Chief Financial Officer (CFO). Two of our
Non-executive Directors also stood down: Patricia Woertz at the 2017 Annual
General Meeting (AGM) in May and Guy Elliott in October. I would like to
again thank each of them for their commitment and lasting contributions to the
Board.
We appointed Jessica Uhl in March as our CFO, succeeding Simon Henry,
and we welcomed Catherine Hughes and Roberto Setubal as Non-executive
Directors in June and October respectively. All three appointments were
overwhelmingly endorsed by shareholders at the 2017 AGM and we are
delighted with the valuable contributions already being made by our new
colleagues. Additionally, Linda Szymanski took up her new role as Company
Secretary in January 2017.
The Nomination and Succession Committee had a very busy year. In addition
to leading the process for the Board changes noted above, it also continued
its focus on ongoing succession planning, monitored and reviewed corporate
governance developments and made related recommendations to the Board.
There were numerous corporate governance developments throughout the
year, including the publication of a paper by the UK government in August
setting out its proposed corporate governance reforms and the publication of
a consultation paper by the FRC in December on amendments to the Code.
The government’s paper set out 12 key actions for reform, focussing on matters
including executive pay and strengthening the voice of employees and other
stakeholders. It is expected that the government will introduce legislation in time
for the reforms to apply to accounting periods beginning on or after January 1,
2019. Regarding the Code, the FRC consultation paper proposed both specific
amendments suggested by the government and a range of new requirements.
The consultation ended in February 2018 and the FRC is aiming to publish the
final version of the new Code by early summer. The Nomination and
Succession Committee will continue to monitor and review all these
developments and make recommendations to the Board at the appropriate time.
In December, the Board conducted its annual performance evaluation. In
2016, we used an external facilitator to conduct an in-depth process lasting
from January through to June, however in 2017 we conducted a more
streamlined evaluation. It was led by the Nomination and Succession
Committee and involved Directors completing a series of confidential online
questionnaires made available via a corporate advisory firm. While the
process was less extensive than last year, it still proved to be a valuable
exercise generating reflective discussions and planned actions. You can read
more about the process later in this report.
Finally, I would like to thank my fellow Directors, past and present, for their
support in achieving our high standards of corporate governance. We look
forward to the publication of the legislative and Code changes that are
expected in 2018. We remain committed to our high standards of corporate
governance which we believe to be a critical factor to the long-term success
At the forthcoming AGM, Hans Wijers will stand down as a Non-executive
Director having served with distinction for nine years, including service as
Senior Independent Director, Chair of the Remuneration Committee and Chair
of the Corporate and Social Responsibility Committee. Also at the AGM,
shareholders will be asked to vote on the appointment of Ann Godbehere as
a Non-executive Director with effect from May 23, 2018.
of the Company.
Chad Holliday
Chair
March 14, 2018
We take the issue of diversity in the Boardroom very seriously and are mindful
of important recent developments in this area. In terms of gender diversity, for
example, the Hampton-Alexander Review recommended that a minimum of
33% of directors are women, and I am pleased to report that we meet this
target, ranking in the top quartile of FTSE100 companies. We are also
The Board confirms that throughout the year the Company has applied the main
principles and complied with the relevant provisions set out in the Code issued
by the FRC in April 2016 [A]. In addition to complying with applicable
corporate governance requirements in the UK, the Company must follow the
rules of Euronext Amsterdam as well as Dutch securities laws because of its
committed to gender diversity in our other senior leadership positions and you
listing on that exchange. The Company must likewise follow US securities laws
can read more about this in “Our people” on page 67.
and the New York Stock Exchange (NYSE) rules and regulations because its
STATEMENT OF COMPLIANCE
Another important development in the area of diversity was the publication of
the Parker Review Committee’s report in October which focussed on ethnic
and cultural diversity in the boardroom. Your Board presently has a strong mix
of diverse perspectives, and we are currently considering how best to apply
the recommendations in the Parker Review given the complexity in some
jurisdictions in obtaining ethnicity data. You can read more about our
approach to diversity later in this report.
The changes to the composition of the Board in 2017 gave us the
opportunity to refresh the membership of the Board committees and you can
review these changes and the work of Nomination and Succession
Committee later in this report and, in the case of the Audit Committee and the
Remuneration Committee, in their separate reports to shareholders on pages
90-93 and pages 94-117 respectively.
securities are registered in the USA and listed on the NYSE.
[A] A copy of the Code can be found on the FRC’s website (frc.org.uk).
NYSE GOVERNANCE STANDARDS
In accordance with the NYSE rules for foreign private issuers, the Company
follows home-country practice in relation to corporate governance. However,
foreign private issuers are required to have an audit committee that satisfies
the requirements of the US Securities and Exchange Commission’s (SEC) Rule
10A-3. The Company’s Audit Committee satisfies such requirements. The
NYSE also requires a foreign private issuer to provide certain written
affirmations and notices to the NYSE, as well as a summary of the significant
ways in which its corporate governance practices differ from those followed
by domestic US companies under NYSE listing standards (see Section
303A.11 of the NYSE Listed Company Manual). The Company’s summary of
its corporate governance differences is given below and can be found at
www.shell.com/investor.
NON-EXECUTIVE DIRECTOR INDEPENDENCE
The Board follows the provisions of the Code in determining Non-executive
Director independence, which states that at least half of the Board, excluding
the Chair, should comprise Non-executive Directors determined by the Board to
be independent. In the case of the Company, the Board has determined that all
the Non-executive Directors at the end of 2017 are wholly independent.
NOMINATING/CORPORATE GOVERNANCE COMMITTEE AND
COMPENSATION COMMITTEE
The NYSE listing standards require that a listed company maintain a
nominating/corporate governance committee and a compensation committee,
both composed entirely of independent directors and with certain specific
responsibilities. The Company’s Nomination and Succession Committee and
Remuneration Committee both comply with these requirements, except that the
terms of reference of the Nomination and Succession Committee require only a
majority of the committee members to be independent.
AUDIT COMMITTEE
As required by NYSE listing standards, the Company maintains an Audit
Committee for the purpose of assisting the Board’s oversight of its financial
statements, its internal audit function and its independent auditors. The
Company’s Audit Committee is in full compliance with the SEC’s Rule 10A-3
and Section 303A.06 of the NYSE Listed Company Manual.
The Company’s Audit Committee is not directly responsible for the appointment
of independent auditors. However, the Company’s Audit Committee makes
recommendations to the Board for it to put to shareholders for approval in
general meeting. UK legislation provides that it is for shareholders to agree the
appointment, reappointment and removal of the Company’s independent
auditors.
SHAREHOLDER APPROVAL OF SHARE-BASED COMPENSATION
PLANS
The Company complies with the listing rules of the UK Listing Authority (UKLA),
which require shareholder approval for the adoption of share-based
compensation plans which are either long-term incentive plans in which one or
more Directors can participate or plans which involve or may involve the issue of
new shares or the transfer of treasury shares. Under the UKLA rules, such plans
cannot be changed to the advantage of participants without shareholder
approval, except for certain minor amendments, for example to benefit the
administration of the plan or to take account of tax benefits. The rules on the
requirements to seek shareholder approval for share-based compensation plans,
including those in respect of material revisions to such plans, may deviate from
the NYSE listing standards.
CODE OF BUSINESS CONDUCT AND ETHICS
The NYSE listing standards require that listed companies adopt a code of
business conduct and ethics for all directors, officers and employees and
promptly disclose any waivers of the code for directors or executive officers. The
Company has adopted the Shell General Business Principles (see below), which
satisfy the NYSE requirements. The Company also has internal procedures in
place by which any employee can raise in confidence accounting, internal
accounting controls and auditing concerns. Additionally, any employee can
report concerns to management by telephone or over the internet without
jeopardising their position (see below).
SHELL CODE OF CONDUCT
Directors, officers, employees and contract staff are required to comply with the
Shell Code of Conduct, which is intended to help them put Shell’s business
principles into practice. This code clarifies the basic rules and standards they
are expected to follow and the behaviour expected of them. These individuals
must also complete mandatory Code of Conduct training. Designated
individuals are required to complete additional mandatory training on antitrust
and competition laws, anti-bribery, anti-corruption and anti-money laundering
laws, data protection laws and trade compliance requirements (see “Risk
factors” on pages 15-16). The Shell Code of Conduct can be found at
www.shell.com/codeofconduct.
CODE OF ETHICS
Executive Directors and Senior Financial Officers of Shell must also comply with
a Code of Ethics. This code is specifically intended to meet the requirements of
Section 406 of the Sarbanes-Oxley Act and the listing requirements of the NYSE
(see above). It can be found at www.shell.com/codeofethics.
SHELL GLOBAL HELPLINE
Employees, contract staff, third parties with whom Shell has a business
relationship (such as customers, suppliers and agents), and any member of the
public (including shareholders) may raise ethics and compliance concerns
(anonymously if preferred) through the Shell Global Helpline. This is a
worldwide confidential reporting mechanism, operated by an external third
party, and is available 24 hours a day, seven days a week by telephone
and at www.shell.com or https://shell.alertline.eu.
BOARD STRUCTURE AND COMPOSITION
During 2017, the Board comprised the Chair; two Executive Directors, namely
the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO) [A];
and Non-executive Directors, including the Deputy Chair and Senior
Independent Director, as follows:
Number of Non-executive Directors
Period
8
January 1 to May 23
7
May 24 to May 31
8
June 1 to September 30
9
October 1 to October 18
October 19 to December 31
8
[A] With effect from March 9, 2017, Simon Henry stood down as CFO and was succeeded by Jessica Uhl.
At its meeting in July 2017, the Board authorised a matter declared by Gerrit
Zalm, namely his temporary appointment by the Dutch Second Chamber of
Parliament to investigate the political support for a coalition government. The
matter was authorised subject to certain conditions Gerrit Zalm requested
during the term of the appointment, including that he did not participate in the
making of decisions related to the Company (whether at meetings of the
Directors or otherwise) and that he be excluded from the receipt of
information he would otherwise receive in his role as a Director of the
Company. Such conditions were revoked in October 2017 after the
conclusion of his temporary appointment subject to certain further conditions
designed to avoid any future actual or perceived conflicts of interest.
A list of current Directors, including their biographies, can be found on pages 69-71.
SHELL GENERAL BUSINESS PRINCIPLES
The Shell General Business Principles define how Shell subsidiaries are
expected to conduct their affairs and are underpinned by the Shell core values
of honesty, integrity and respect for people. These principles include, among
other things, Shell’s commitment to support fundamental human rights in line with
the legitimate role of business and to contribute to sustainable development.
They are designed to mitigate the risk of damage to our business reputation and
to prevent violations of local and international legislation. They can be found at
www.shell.com/sgbp. See “Risk factors” on page 15.
The Board recognises its collective responsibility for the long-term success of
the Company. Generally, it meets eight times a year [A] and has a formal
schedule of matters reserved to it. This includes: overall strategy and
management; corporate structure and capital structure; financial reporting and
control, including approval of the Annual Report and Form 20-F, and interim
dividends; oversight and review of risk management and internal control;
significant contracts; and succession planning and new Board appointments.
The full list of matters reserved to the Board for decision can be found at
www.shell.com/investor.
[A] See page 79 for the number of meetings held in 2017.
GOVERNANCE SHELL ANNUAL REPORT AND FORM 20-F 2017
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corporate governance Continued
ROLE OF DIRECTORS
The roles of the Chair, a non-executive role, and the CEO are separate,
and the Board has agreed their respective responsibilities.
The Chair is responsible for the leadership and management of the Board
and for ensuring that the Board and its committees function effectively. One
way in which this is achieved is by ensuring Directors receive accurate, timely
and clear information. He is also responsible for agreeing and regularly
reviewing the training and development needs of each Director (see
“Induction and training” below) which he does with the assistance of the
Company Secretary.
The CEO bears overall responsibility for the implementation of the strategy
agreed by the Board, the operational management of the Company and the
business enterprises connected with it. He is supported in this by the Executive
Committee which he chairs (see page 80).
NON-EXECUTIVE DIRECTORS
Non-executive Directors are appointed by the Board or by shareholders at
general meetings and, in accordance with the Code, must seek re-election by
shareholders on an annual basis. Their letter of appointment refers to a
specific term of office, such term being subject to the provisions of the Code
and the Company’s Articles of Association (the Articles). Upon appointment,
Non-executive Directors confirm they are able to allocate sufficient time to
meet the expectations of the role. Appointments are subject to a minimum of
three months’ notice of termination, and there is no compensation provision
for early termination.
The Non-executive Directors bring a wide range and balance of skills and
international business experience to Shell. Through their contribution to Board
meetings and to Board committee meetings, they are expected to challenge
and help develop proposals on strategy and bring independent judgement on
issues of performance and risk. Generally, prior to each meeting of the
Board, the Chair and the Non-executive Directors meet without the Executive
Directors to discuss, among other things, the performance of individual
Executive Directors. A number of Non-executive Directors also meet major
shareholders from time to time.
The role of the Senior Independent Director is to provide a sounding board
for the Chair and to serve as an intermediary for the other Directors when
necessary. The Senior Independent Director is available to shareholders if
they have concerns which contact through the normal channels of Chair,
CEO or CFO has failed to resolve or for which such contact is inappropriate.
All the Non-executive Directors are considered by the Board to be wholly
independent.
CONFLICTS OF INTEREST
Certain statutory duties with respect to directors’ conflicts of interest are in
force under the Companies Act 2006 (the Act). In accordance with the Act
and the Articles, the Board may authorise any matter that otherwise may
involve any of the Directors breaching their duty to avoid conflicts of interest.
The Board has adopted a procedure to address these requirements. It
includes the Directors completing detailed conflict of interest questionnaires.
The matters disclosed in the questionnaires are reviewed by the Board and,
if considered appropriate, authorised in accordance with the Act and the
Articles. Conflicts of interest as well as any gifts and hospitality received by
and provided by Directors are kept under review by the Board. Further
information relating to conflicts of interest can be found on pages 84-85.
SIGNIFICANT COMMITMENTS OF THE CHAIR
The Chair’s other significant commitments are given in his biography on
page 70.
INDEPENDENT PROFESSIONAL ADVICE
All Directors may seek independent professional advice in connection with
their role as a Director. All Directors have access to the advice and services
of the Company Secretary. The Company has provided both indemnities and
directors’ and officers’ insurance to the Directors in connection with the
performance of their responsibilities. Copies of these indemnities and the
directors’ and officers’ insurance policies are open to inspection. A copy of
the form of these indemnities has been previously filed with the SEC and is
incorporated by reference as an exhibit to this Report.
BOARD ACTIVITIES DURING THE YEAR
The Board generally meets eight times a year, however in 2017 there were
seven meetings, all of which were held in The Hague, the Netherlands.
The agenda for each meeting included a number of regular items, including
reports from the CEO, the CFO and other members of the Executive
Committee, from each of the Board committees and from the various
functions, including finance (which includes investor relations), health and
security, human resources, and legal (which includes the Company
Secretary). The Board also considered and approved the quarterly, half-year
and full-year financial results and dividend announcements and, at most
meetings, considered a number of investment, divestment and financing
proposals.
At its meeting in February, the Board focused on strategic issues and laid the
foundations for further strategy sessions throughout the year. The strategy
sessions were held within the context of the changing global energy market,
Shell’s strategy and its competitive positioning. The Board considered risks
and opportunities of the current and possible future shape of Shell’s portfolio
under various scenarios. During the year the Board also focused on the
management of Shell’s financial framework and the levers available to meet
its strategic objectives.
Along with the focus on strategic matters, the Board also received reports and
presentations on certain of Shell’s activities (including those in Australia,
Canada, Kazakhstan, Nigeria and Saudi Arabia), and on the New Energies
business, trading and supply, marketing and the Chemicals business, and
discussed ways to strengthen the ethics and compliance culture. In addition,
it received reports on ethics and compliance, litigation, risk management and
internal control, safety and environmental performance, senior management
succession and corporate governance developments.
In June, the Board conducted site visits of various Shell operations and offices
in the USA (see “Induction and training” below). The visits were designed to
provide Directors with first-hand insights into some key US portfolio positions,
and Directors held various workforce engagements in those locations as well
as external stakeholder engagements in some locations. At its meeting in
November, the Board established a committee to oversee matters related to
investigations and litigation against the Company regarding oil prospecting
licence (OPL) 245, a deep-water block in Nigeria. The committee comprises
Linda G. Stuntz (Chair), Euleen Goh and Charles O. Holliday and met once
during the year. The remit of the committee is to review and consider matters
related to the investigations and litigation and make recommendations to the
Board.
INDUCTION AND TRAINING
Following appointment to the Board, Directors receive a comprehensive
induction tailored to their individual needs. This includes site visits and
meetings with senior management to enable them to build up a detailed
understanding of Shell’s business and strategy, and the key risks and issues
which they face. For Catherine J. Hughes and Roberto Setubal, who were
appointed to the Board with effect from June 1, 2017, and October 1,
2017, respectively, Director-specific briefing materials and induction sessions
were held with various businesses and functions and each participated in
separate site visits.
Throughout the year, regular updates on developments in legal matters,
governance and accounting are provided to all Directors. The Board regards
site visits as an integral part of ongoing Director training, and during the year
the locations visited by Directors, individually or in groups, included: the
Moerdijk chemical complex and the Pernis refinery in the Netherlands; the
Bacton gas terminal in the UK; the Permian Basin in Texas, USA; the
Pennsylvania Chemicals Complex in the USA; Gulf of Mexico operations in
Louisiana, USA; trading operations in the USA and in the Netherlands; and
various Downstream retail sites in the Netherlands, Singapore and the UK.
Additional training is available so that Directors can update their skills and
knowledge as appropriate.
ATTENDANCE AT BOARD AND BOARD COMMITTEE MEETINGS
Attendance during 2017 for all Board and Board committee meetings is given in the table below.
Attendance at Board and Board committee meetings [A]
Ben van Beurden
Guy Elliott
Euleen Goh
Simon Henry
Charles O. Holliday
Catherine J. Hughes [B]
Gerard Kleisterlee
Roberto Setubal
Sir Nigel Sheinwald
Linda G. Stuntz
Jessica Uhl
Hans Wijers
Patricia A. Woertz
Gerrit Zalm [C][D]
Board
Committee
Audit
Social Responsibility
Committee
Succession
Committee
Remuneration
Committee
Corporate and
Nomination and
7/7
5/5
7/7
2/2
7/7
4/4
7/7
2/2
7/7
7/7
5/5
7/7
2/2
4/5
2/2
6/6
5/5
2/2
6/6
3/3
1/1
4/4
6/6
6/6
6/6
1/2
6/6
6/6
2/2
2/2
5/5
3/3
2/2
4/4
[A] The first figure represents attendance and the second figure the possible number of meetings. For example, 7/7 signifies attendance at seven out of seven possible meetings. Where a Director stood down
from the Board or a Board committee during the year, or was appointed during the year, only meetings before standing down or after the date of appointment are shown.
[B] Catherine J. Hughes was unable to attend the meeting of the Corporate and Social Responsibility Committee held in November 2017 due to an external business commitment made prior to her joining the
Board.
[C] Gerrit Zalm was unable to attend the meeting of the Board held in March 2017 due to illness.
[D] At its meeting in July 2017, the Board authorised a matter declared by Gerrit Zalm subject to certain conditions, including that he did not participate in the making of decisions related to the Company and
that he be excluded from the receipt of information he would otherwise receive in his role as a Director of the Company. Such conditions were revoked in October 2017 subject to certain further conditions
designed to avoid any actual or perceived conflicts of interest. As a result of such arrangement, the possible number of meetings that Gerrit Zalm was permitted to attend was five Board, three Audit Committee
and four Remuneration Committee meetings. Further information can be found on page 77.
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Throughout the year, regular updates on developments in legal matters,
governance and accounting are provided to all Directors. The Board regards
site visits as an integral part of ongoing Director training, and during the year
the locations visited by Directors, individually or in groups, included: the
Moerdijk chemical complex and the Pernis refinery in the Netherlands; the
Bacton gas terminal in the UK; the Permian Basin in Texas, USA; the
Pennsylvania Chemicals Complex in the USA; Gulf of Mexico operations in
Louisiana, USA; trading operations in the USA and in the Netherlands; and
various Downstream retail sites in the Netherlands, Singapore and the UK.
Additional training is available so that Directors can update their skills and
knowledge as appropriate.
ATTENDANCE AT BOARD AND BOARD COMMITTEE MEETINGS
Attendance during 2017 for all Board and Board committee meetings is given in the table below.
Attendance at Board and Board committee meetings [A]
Board
Audit
Committee
Corporate and
Social Responsibility
Committee
Nomination and
Succession
Committee
Remuneration
Committee
4/4
1/1
2/2
6/6
Ben van Beurden
Guy Elliott
Euleen Goh
Simon Henry
Charles O. Holliday
Catherine J. Hughes [B]
Gerard Kleisterlee
Roberto Setubal
Sir Nigel Sheinwald
Linda G. Stuntz
Jessica Uhl
Hans Wijers
Patricia A. Woertz
Gerrit Zalm [C][D]
[A] The first figure represents attendance and the second figure the possible number of meetings. For example, 7/7 signifies attendance at seven out of seven possible meetings. Where a Director stood down
from the Board or a Board committee during the year, or was appointed during the year, only meetings before standing down or after the date of appointment are shown.
[B] Catherine J. Hughes was unable to attend the meeting of the Corporate and Social Responsibility Committee held in November 2017 due to an external business commitment made prior to her joining the
Board.
[C] Gerrit Zalm was unable to attend the meeting of the Board held in March 2017 due to illness.
[D] At its meeting in July 2017, the Board authorised a matter declared by Gerrit Zalm subject to certain conditions, including that he did not participate in the making of decisions related to the Company and
that he be excluded from the receipt of information he would otherwise receive in his role as a Director of the Company. Such conditions were revoked in October 2017 subject to certain further conditions
designed to avoid any actual or perceived conflicts of interest. As a result of such arrangement, the possible number of meetings that Gerrit Zalm was permitted to attend was five Board, three Audit Committee
and four Remuneration Committee meetings. Further information can be found on page 77.
7/7
5/5
7/7
2/2
7/7
4/4
7/7
2/2
7/7
7/7
5/5
7/7
2/2
4/5
6/6
2/2
5/5
2/2
1/2
6/6
6/6
6/6
6/6
6/6
3/3
2/2
5/5
3/3
2/2
4/4
ROLE OF DIRECTORS
The roles of the Chair, a non-executive role, and the CEO are separate,
and the Board has agreed their respective responsibilities.
The Chair is responsible for the leadership and management of the Board
and for ensuring that the Board and its committees function effectively. One
way in which this is achieved is by ensuring Directors receive accurate, timely
and clear information. He is also responsible for agreeing and regularly
reviewing the training and development needs of each Director (see
“Induction and training” below) which he does with the assistance of the
Company Secretary.
The CEO bears overall responsibility for the implementation of the strategy
agreed by the Board, the operational management of the Company and the
business enterprises connected with it. He is supported in this by the Executive
Committee which he chairs (see page 80).
NON-EXECUTIVE DIRECTORS
Non-executive Directors are appointed by the Board or by shareholders at
general meetings and, in accordance with the Code, must seek re-election by
shareholders on an annual basis. Their letter of appointment refers to a
specific term of office, such term being subject to the provisions of the Code
and the Company’s Articles of Association (the Articles). Upon appointment,
Non-executive Directors confirm they are able to allocate sufficient time to
meet the expectations of the role. Appointments are subject to a minimum of
three months’ notice of termination, and there is no compensation provision
for early termination.
The Non-executive Directors bring a wide range and balance of skills and
international business experience to Shell. Through their contribution to Board
meetings and to Board committee meetings, they are expected to challenge
and help develop proposals on strategy and bring independent judgement on
issues of performance and risk. Generally, prior to each meeting of the
Board, the Chair and the Non-executive Directors meet without the Executive
Directors to discuss, among other things, the performance of individual
Executive Directors. A number of Non-executive Directors also meet major
shareholders from time to time.
The role of the Senior Independent Director is to provide a sounding board
for the Chair and to serve as an intermediary for the other Directors when
necessary. The Senior Independent Director is available to shareholders if
they have concerns which contact through the normal channels of Chair,
CEO or CFO has failed to resolve or for which such contact is inappropriate.
All the Non-executive Directors are considered by the Board to be wholly
independent.
CONFLICTS OF INTEREST
Certain statutory duties with respect to directors’ conflicts of interest are in
INDEPENDENT PROFESSIONAL ADVICE
All Directors may seek independent professional advice in connection with
their role as a Director. All Directors have access to the advice and services
of the Company Secretary. The Company has provided both indemnities and
directors’ and officers’ insurance to the Directors in connection with the
performance of their responsibilities. Copies of these indemnities and the
directors’ and officers’ insurance policies are open to inspection. A copy of
the form of these indemnities has been previously filed with the SEC and is
incorporated by reference as an exhibit to this Report.
BOARD ACTIVITIES DURING THE YEAR
The Board generally meets eight times a year, however in 2017 there were
seven meetings, all of which were held in The Hague, the Netherlands.
The agenda for each meeting included a number of regular items, including
reports from the CEO, the CFO and other members of the Executive
Committee, from each of the Board committees and from the various
functions, including finance (which includes investor relations), health and
security, human resources, and legal (which includes the Company
Secretary). The Board also considered and approved the quarterly, half-year
and full-year financial results and dividend announcements and, at most
meetings, considered a number of investment, divestment and financing
proposals.
At its meeting in February, the Board focused on strategic issues and laid the
foundations for further strategy sessions throughout the year. The strategy
sessions were held within the context of the changing global energy market,
Shell’s strategy and its competitive positioning. The Board considered risks
and opportunities of the current and possible future shape of Shell’s portfolio
under various scenarios. During the year the Board also focused on the
management of Shell’s financial framework and the levers available to meet
its strategic objectives.
Along with the focus on strategic matters, the Board also received reports and
presentations on certain of Shell’s activities (including those in Australia,
Canada, Kazakhstan, Nigeria and Saudi Arabia), and on the New Energies
business, trading and supply, marketing and the Chemicals business, and
discussed ways to strengthen the ethics and compliance culture. In addition,
it received reports on ethics and compliance, litigation, risk management and
internal control, safety and environmental performance, senior management
succession and corporate governance developments.
In June, the Board conducted site visits of various Shell operations and offices
in the USA (see “Induction and training” below). The visits were designed to
provide Directors with first-hand insights into some key US portfolio positions,
and Directors held various workforce engagements in those locations as well
as external stakeholder engagements in some locations. At its meeting in
November, the Board established a committee to oversee matters related to
investigations and litigation against the Company regarding oil prospecting
force under the Companies Act 2006 (the Act). In accordance with the Act
licence (OPL) 245, a deep-water block in Nigeria. The committee comprises
and the Articles, the Board may authorise any matter that otherwise may
Linda G. Stuntz (Chair), Euleen Goh and Charles O. Holliday and met once
involve any of the Directors breaching their duty to avoid conflicts of interest.
during the year. The remit of the committee is to review and consider matters
The Board has adopted a procedure to address these requirements. It
includes the Directors completing detailed conflict of interest questionnaires.
The matters disclosed in the questionnaires are reviewed by the Board and,
if considered appropriate, authorised in accordance with the Act and the
Articles. Conflicts of interest as well as any gifts and hospitality received by
and provided by Directors are kept under review by the Board. Further
information relating to conflicts of interest can be found on pages 84-85.
SIGNIFICANT COMMITMENTS OF THE CHAIR
The Chair’s other significant commitments are given in his biography on
page 70.
related to the investigations and litigation and make recommendations to the
Board.
INDUCTION AND TRAINING
Following appointment to the Board, Directors receive a comprehensive
induction tailored to their individual needs. This includes site visits and
meetings with senior management to enable them to build up a detailed
understanding of Shell’s business and strategy, and the key risks and issues
which they face. For Catherine J. Hughes and Roberto Setubal, who were
appointed to the Board with effect from June 1, 2017, and October 1,
2017, respectively, Director-specific briefing materials and induction sessions
were held with various businesses and functions and each participated in
separate site visits.
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corporate governance Continued
BOARD EVALUATION
During the year, the Board carried out its annual performance evaluation.
As in previous years, this was led by the Nomination and Succession
Committee. On this occasion, it engaged Lintstock Limited, a London-based
corporate advisory firm with no other connection to the Company, as an
external facilitator to assist in the process.
The process involved each Director completing a confidential online
questionnaire designed by the external facilitator and the Nomination and
Succession Committee. The completed questionnaires were only available to
the facilitator, which prepared a report for the Chair, the Deputy Chair and
the chairs of the Board committees.
BOARD COMMITTEES
There are four Board committees made up of Non-executive Directors.
These are the:
■ Audit Committee;
■ Corporate and Social Responsibility Committee;
■ Nomination and Succession Committee; and
■ Remuneration Committee.
Each of these Board committees has produced a report which has been
approved by the relevant chair. A copy of each committee’s terms of
reference is available from the Company Secretary and can be found at
www.shell.com/investor.
In December, the performance of the Board as a whole and the Board
committees was discussed by the Nomination and Succession Committee and
subsequently by the full Board. The discussions were led by the Chair and
focussed on issues such as:
AUDIT COMMITTEE
The Audit Committee Report, which sets out the composition and work of the
Audit Committee during 2017, is on pages 90-93.
■ Board composition, dynamics, expertise and support;
■ the Board’s understanding of the views and requirements of major
investors, employees, governments, customers and communities;
■ the management and focus of meetings; and
■ the capacity of the organisation to deliver Shell’s strategy.
The top priorities for the Board over the coming year were discussed and it
was agreed that they included financial performance, the energy transition
and the strategy for New Energies, digitalisation and succession planning.
The performance evaluation of the Chair was reviewed in a session led by
the Deputy Chair with attendance by all other Directors excluding the Chair.
Directors had previously answered questions which included matters related to
his relationship and communications with the CEO and other Directors, his
management of the input of Directors both inside and outside Board meetings,
and his relationship with stakeholders, including shareholders. It was
concluded that the Chair’s performance was very positive.
EXECUTIVE COMMITTEE
The Executive Committee operates under the direction of the CEO in support
of his responsibility for the overall management of Shell’s business. The CEO
has final authority in all matters of management that are not within the duties
and authorities of the Board or of the shareholders’ general meeting.
The current composition of the Executive Committee is as follows:
Executive Committee
Ben van Beurden
Jessica Uhl
John Abbott
Harry Brekelmans
Andrew Brown
Ronan Cassidy
Donny Ching
CEO [A][B]
CFO [A][B][C]
Downstream Director [B]
Projects & Technology Director [B]
Upstream Director [B]
Chief Human Resources & Corporate Officer [B]
Legal Director [B]
Maarten Wetselaar
Integrated Gas and New Energies Director [B]
[A] Director of the Company.
[B] Designated an Executive Officer pursuant to US Exchange Act Rule 3b-7. Beneficially owns less than
1% of outstanding classes of securities.
[C] Jessica Uhl was appointed a Director of the Company and a member of the Executive Committee
with effect from March 9, 2017. She succeeded Simon Henry as CFO who stood down from that
date.
CORPORATE AND SOCIAL RESPONSIBILITY COMMITTEE
The members of the Corporate and Social Responsibility Committee are Hans
Wijers (Chair of the Committee), Catherine J. Hughes (appointed with effect
from November 1, 2017) and Sir Nigel Sheinwald. Guy Elliott (appointed
with effect from March 8, 2017) and Patricia A. Woertz stood down as
members of the Committee on October 18, 2017 and May 23, 2017,
respectively. The Committee met six times during the year; the Committee
members’ attendances are shown on page 79.
The Committee has a mandate to maintain a comprehensive overview of the
policies and performance of the subsidiaries of the Company with respect to
the Shell General Business Principles and the Shell Code of Conduct, as well
as major issues of public concern. Conclusions and recommendations made
by the Committee are reported directly to executive management and the
Board.
The Committee fulfils its responsibilities by reviewing a wide range of areas,
including the management of health, safety, security, environmental and
social impacts of projects and operations. It does this through a series of
reviews of performance, audit findings and other specific areas, such as
process safety. It also monitors major issues of public concern and Shell’s
strategy to address them, especially in respect of environmental and social
issues, and matters regarding ethics and compliance. In addition, it provides
input into the Shell Sustainability Report and reviews a draft of the report
before publication.
The key topics discussed by the Committee in 2017 were the energy
transition, net carbon footprint ambition, carbon dioxide and methane related
developments, induced seismic activity in Groningen province,
the Netherlands, Shell’s operations in Nigeria, human rights, asset integrity
and process safety.
In addition to holding regular formal meetings, the Committee visits Shell
locations and meets with local staff and external stakeholders to hear their
perspectives and observe how Shell’s standards regarding health, safety,
security, the environment and social performance are being implemented.
In 2017, the Committee visited the Pennsylvania Chemicals Complex in the
USA, where it engaged with employees, contractors and local stakeholders.
Individual Committee members visited the Pernis refinery in the Netherlands
and the Bacton gas terminal in the UK.
NOMINATION AND SUCCESSION COMMITTEE
As part of its annual programme of work, the Committee reviewed its terms of
The members of the Nomination and Succession Committee are Charles O.
Holliday (Chair of the Committee), Linda G. Stuntz, and Hans Wijers. Guy
Elliott stood down as a member of the Committee on October 18, 2017.
The Committee met six times during the year; the Committee members’
attendances are shown on page 79.
The Committee continually reviews the leadership needs of the Company and
identifies and nominates suitable candidates for the Board’s approval to fill
vacancies when they arise. In addition, it makes recommendations on who
should be appointed Chair of the Audit Committee, the Corporate and Social
Responsibility Committee and the Remuneration Committee and, in
consultation with the relevant chair, recommends who should sit on the Board
committees. It also makes recommendations on corporate governance
guidelines, monitors compliance with corporate governance requirements and
makes recommendations on disclosures connected with corporate governance
of its appointment processes.
reference and made certain amendments in relation to diversity to reflect
changes to the Financial Conduct Authority’s Disclosure Guidance and
Transparency Rules. The amendment extends the list of aspects for
consideration by the Board to include age, educational and professional
background when applying its goal of becoming more diverse [A].
[A] The terms of reference of the Nomination and Succession Committee can be found at
www.shell.com/investor.
The Committee was assisted during the year by Egon Zehnder and Russell
Reynolds, external global search firms, whose main role was to propose
suitable candidates. Egon Zehnder and Russell Reynolds do not have any
connection with the Company other than that of search consultants.
REMUNERATION COMMITTEE
The Directors’ Remuneration Report, which sets out the composition and work
of the Remuneration Committee, the Directors’ remuneration for 2017 and the
Directors’ Remuneration Policy which was approved by shareholders at the
2017 AGM, is on pages 94-117.
During 2017, the Committee dealt with the appointment of two new Non-
executive Directors, namely Catherine J. Hughes and Roberto Setubal. The
SHAREHOLDER COMMUNICATIONS
appointment process involved the Committee agreeing on a candidate profile
The Board recognises the importance of two-way communication with the
and, following an interview and benchmarking process, making a
Company’s shareholders. The Chair, the Deputy Chair and Senior
recommendation to the Board. The Board then sought shareholder approval
Independent Director, the CEO, the CFO and the Executive Vice President
for the appointments at the 2017 AGM held in May, proposing that the
appointments be effective from June 1 and October 1, respectively. Both
appointments were overwhelmingly endorsed by shareholders, as was the
reappointment of Jessica Uhl (CFO) whose original appointment was effective
from March 9, 2017, and had been recommended by the Committee to the
Board in December 2016.
In addition to continuing its ongoing programme of succession planning for
the non-executive Directors and in particular for the Deputy Chair and Senior
Independent Director, the Committee also considered the senior management
talent pipeline and scheduled a series of meetings with prospective
candidates with future senior leadership appointments in mind. It also
reviewed Board committee membership and made a number of
recommendations to the Board, considered any potential conflicts of interest
and the independence of the Non-executive Directors and led the Board
evaluation process. The Committee also approved a more formal review
process in relation to the acceptance by Directors of additional directorships
or other appointments and indeed considered a number of such directorships
and appointments in accordance with the new process.
In accordance with its terms of reference, the Committee monitored and
reviewed corporate governance developments throughout the year. Such
developments were numerous, and included UK government proposals
related to matters such as executive pay and the role of employees and other
stakeholders, and a proposed wide-ranging reform of the Code by the FRC.
The monitoring and review of these and other corporate governance
developments, as well as considering whether and how current Company
governance matters should be strengthened, is likely to keep the Committee
engaged for the remainder of 2018 and beyond.
The Board continues to take the issue of boardroom diversity seriously and
believes maintaining an appropriate level of diversity is key to its effective
performance. It is mindful of external developments in this area, including the
Hampton-Alexander Review which recommended that a minimum of 33% of
directors are women and the publication of the Parker Review Committee’s
report in October, which focused on ethnic and cultural diversity in the
boardroom. While the Board itself meets the gender diversity target, it is also
keen to ensure gender diversity in other senior leadership positions across
Shell[A]. As regards ethnic and cultural diversity, the Board will look to see
how it can best apply the recommendations of the Parker Review report
during the Board appointment process.
[A] More information on gender diversity is given in “Our people” on page 67.
Investor Relations each meet regularly with major shareholders and report the
views of such shareholders to the Board. As well as the Company giving a
balanced report of results and progress at each AGM, all shareholders have
an opportunity to ask questions in person. Shareholders are also free to
contact the Company directly at any time of the year via dedicated
shareholder email addresses or via dedicated shareholder telephone numbers
as given on the inside back cover of this Report. Shell’s website at
www.shell.com/investor has information for institutional and retail
shareholders alike.
The Company’s Registrar, Equiniti, operates an internet access facility for
registered shareholders, providing details of their shareholdings at
www.shareview.co.uk. Facilities are also provided for shareholders to lodge
proxy appointments electronically. The Company’s Corporate Nominee
provides a facility for investors to hold their shares in the Company in
paperless form.
RESULTS PRESENTATIONS AND ANALYSTS’ MEETINGS
The quarterly, half-yearly and annual results presentations, as well as all major
analysts’ meetings, are announced in advance on the Shell website and
through a regulatory release. Generally, presentations are broadcast live via
webcast and teleconference. Other meetings with analysts or investors are not
normally announced in advance, nor can they be followed remotely by
webcast or any other means. Procedures are in place to ensure that
discussions in such meetings are always limited to non-material information or
information already in the public domain.
Results and meeting presentations can be found at www.shell.com/investor.
This is in line with the requirement to ensure that all shareholders and other
parties in the financial market have equal and simultaneous access to
information that may influence the price of the Company’s securities.
NOTIFICATION OF MAJOR SHAREHOLDINGS
Information concerning notifications of major shareholdings can be found on
page 218.
RESPONSIBILITY FOR PREPARING THE ANNUAL REPORT
AND ACCOUNTS
Information concerning the responsibility for preparing the Annual Report and
Accounts can be found on page 73.
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BOARD EVALUATION
BOARD COMMITTEES
During the year, the Board carried out its annual performance evaluation.
There are four Board committees made up of Non-executive Directors.
As in previous years, this was led by the Nomination and Succession
These are the:
Committee. On this occasion, it engaged Lintstock Limited, a London-based
corporate advisory firm with no other connection to the Company, as an
■ Audit Committee;
external facilitator to assist in the process.
■ Corporate and Social Responsibility Committee;
■ Nomination and Succession Committee; and
The process involved each Director completing a confidential online
■ Remuneration Committee.
questionnaire designed by the external facilitator and the Nomination and
Succession Committee. The completed questionnaires were only available to
the facilitator, which prepared a report for the Chair, the Deputy Chair and
the chairs of the Board committees.
Each of these Board committees has produced a report which has been
approved by the relevant chair. A copy of each committee’s terms of
reference is available from the Company Secretary and can be found at
In December, the performance of the Board as a whole and the Board
committees was discussed by the Nomination and Succession Committee and
subsequently by the full Board. The discussions were led by the Chair and
focussed on issues such as:
■ Board composition, dynamics, expertise and support;
■ the Board’s understanding of the views and requirements of major
investors, employees, governments, customers and communities;
■ the management and focus of meetings; and
■ the capacity of the organisation to deliver Shell’s strategy.
The top priorities for the Board over the coming year were discussed and it
was agreed that they included financial performance, the energy transition
and the strategy for New Energies, digitalisation and succession planning.
The performance evaluation of the Chair was reviewed in a session led by
the Deputy Chair with attendance by all other Directors excluding the Chair.
Directors had previously answered questions which included matters related to
his relationship and communications with the CEO and other Directors, his
management of the input of Directors both inside and outside Board meetings,
and his relationship with stakeholders, including shareholders. It was
concluded that the Chair’s performance was very positive.
Board.
EXECUTIVE COMMITTEE
The Executive Committee operates under the direction of the CEO in support
of his responsibility for the overall management of Shell’s business. The CEO
has final authority in all matters of management that are not within the duties
and authorities of the Board or of the shareholders’ general meeting.
www.shell.com/investor.
AUDIT COMMITTEE
The Audit Committee Report, which sets out the composition and work of the
Audit Committee during 2017, is on pages 90-93.
CORPORATE AND SOCIAL RESPONSIBILITY COMMITTEE
The members of the Corporate and Social Responsibility Committee are Hans
Wijers (Chair of the Committee), Catherine J. Hughes (appointed with effect
from November 1, 2017) and Sir Nigel Sheinwald. Guy Elliott (appointed
with effect from March 8, 2017) and Patricia A. Woertz stood down as
members of the Committee on October 18, 2017 and May 23, 2017,
respectively. The Committee met six times during the year; the Committee
members’ attendances are shown on page 79.
The Committee has a mandate to maintain a comprehensive overview of the
policies and performance of the subsidiaries of the Company with respect to
the Shell General Business Principles and the Shell Code of Conduct, as well
as major issues of public concern. Conclusions and recommendations made
by the Committee are reported directly to executive management and the
The Committee fulfils its responsibilities by reviewing a wide range of areas,
including the management of health, safety, security, environmental and
social impacts of projects and operations. It does this through a series of
reviews of performance, audit findings and other specific areas, such as
process safety. It also monitors major issues of public concern and Shell’s
strategy to address them, especially in respect of environmental and social
issues, and matters regarding ethics and compliance. In addition, it provides
input into the Shell Sustainability Report and reviews a draft of the report
The key topics discussed by the Committee in 2017 were the energy
transition, net carbon footprint ambition, carbon dioxide and methane related
developments, induced seismic activity in Groningen province,
the Netherlands, Shell’s operations in Nigeria, human rights, asset integrity
and process safety.
The current composition of the Executive Committee is as follows:
before publication.
Executive Committee
Ben van Beurden
CEO [A][B]
Jessica Uhl
John Abbott
CFO [A][B][C]
Downstream Director [B]
Harry Brekelmans
Projects & Technology Director [B]
Andrew Brown
Ronan Cassidy
Donny Ching
Legal Director [B]
Upstream Director [B]
In addition to holding regular formal meetings, the Committee visits Shell
Chief Human Resources & Corporate Officer [B]
locations and meets with local staff and external stakeholders to hear their
Maarten Wetselaar
Integrated Gas and New Energies Director [B]
[B] Designated an Executive Officer pursuant to US Exchange Act Rule 3b-7. Beneficially owns less than
[A] Director of the Company.
1% of outstanding classes of securities.
perspectives and observe how Shell’s standards regarding health, safety,
security, the environment and social performance are being implemented.
In 2017, the Committee visited the Pennsylvania Chemicals Complex in the
USA, where it engaged with employees, contractors and local stakeholders.
Individual Committee members visited the Pernis refinery in the Netherlands
[C] Jessica Uhl was appointed a Director of the Company and a member of the Executive Committee
with effect from March 9, 2017. She succeeded Simon Henry as CFO who stood down from that
and the Bacton gas terminal in the UK.
date.
NOMINATION AND SUCCESSION COMMITTEE
The members of the Nomination and Succession Committee are Charles O.
Holliday (Chair of the Committee), Linda G. Stuntz, and Hans Wijers. Guy
Elliott stood down as a member of the Committee on October 18, 2017.
The Committee met six times during the year; the Committee members’
attendances are shown on page 79.
The Committee continually reviews the leadership needs of the Company and
identifies and nominates suitable candidates for the Board’s approval to fill
vacancies when they arise. In addition, it makes recommendations on who
should be appointed Chair of the Audit Committee, the Corporate and Social
Responsibility Committee and the Remuneration Committee and, in
consultation with the relevant chair, recommends who should sit on the Board
committees. It also makes recommendations on corporate governance
guidelines, monitors compliance with corporate governance requirements and
makes recommendations on disclosures connected with corporate governance
of its appointment processes.
During 2017, the Committee dealt with the appointment of two new Non-
executive Directors, namely Catherine J. Hughes and Roberto Setubal. The
appointment process involved the Committee agreeing on a candidate profile
and, following an interview and benchmarking process, making a
recommendation to the Board. The Board then sought shareholder approval
for the appointments at the 2017 AGM held in May, proposing that the
appointments be effective from June 1 and October 1, respectively. Both
appointments were overwhelmingly endorsed by shareholders, as was the
reappointment of Jessica Uhl (CFO) whose original appointment was effective
from March 9, 2017, and had been recommended by the Committee to the
Board in December 2016.
In addition to continuing its ongoing programme of succession planning for
the non-executive Directors and in particular for the Deputy Chair and Senior
Independent Director, the Committee also considered the senior management
talent pipeline and scheduled a series of meetings with prospective
candidates with future senior leadership appointments in mind. It also
reviewed Board committee membership and made a number of
recommendations to the Board, considered any potential conflicts of interest
and the independence of the Non-executive Directors and led the Board
evaluation process. The Committee also approved a more formal review
process in relation to the acceptance by Directors of additional directorships
or other appointments and indeed considered a number of such directorships
and appointments in accordance with the new process.
In accordance with its terms of reference, the Committee monitored and
reviewed corporate governance developments throughout the year. Such
developments were numerous, and included UK government proposals
related to matters such as executive pay and the role of employees and other
stakeholders, and a proposed wide-ranging reform of the Code by the FRC.
The monitoring and review of these and other corporate governance
developments, as well as considering whether and how current Company
governance matters should be strengthened, is likely to keep the Committee
engaged for the remainder of 2018 and beyond.
The Board continues to take the issue of boardroom diversity seriously and
believes maintaining an appropriate level of diversity is key to its effective
performance. It is mindful of external developments in this area, including the
Hampton-Alexander Review which recommended that a minimum of 33% of
directors are women and the publication of the Parker Review Committee’s
report in October, which focused on ethnic and cultural diversity in the
boardroom. While the Board itself meets the gender diversity target, it is also
keen to ensure gender diversity in other senior leadership positions across
Shell[A]. As regards ethnic and cultural diversity, the Board will look to see
how it can best apply the recommendations of the Parker Review report
during the Board appointment process.
[A] More information on gender diversity is given in “Our people” on page 67.
As part of its annual programme of work, the Committee reviewed its terms of
reference and made certain amendments in relation to diversity to reflect
changes to the Financial Conduct Authority’s Disclosure Guidance and
Transparency Rules. The amendment extends the list of aspects for
consideration by the Board to include age, educational and professional
background when applying its goal of becoming more diverse [A].
[A] The terms of reference of the Nomination and Succession Committee can be found at
www.shell.com/investor.
The Committee was assisted during the year by Egon Zehnder and Russell
Reynolds, external global search firms, whose main role was to propose
suitable candidates. Egon Zehnder and Russell Reynolds do not have any
connection with the Company other than that of search consultants.
REMUNERATION COMMITTEE
The Directors’ Remuneration Report, which sets out the composition and work
of the Remuneration Committee, the Directors’ remuneration for 2017 and the
Directors’ Remuneration Policy which was approved by shareholders at the
2017 AGM, is on pages 94-117.
SHAREHOLDER COMMUNICATIONS
The Board recognises the importance of two-way communication with the
Company’s shareholders. The Chair, the Deputy Chair and Senior
Independent Director, the CEO, the CFO and the Executive Vice President
Investor Relations each meet regularly with major shareholders and report the
views of such shareholders to the Board. As well as the Company giving a
balanced report of results and progress at each AGM, all shareholders have
an opportunity to ask questions in person. Shareholders are also free to
contact the Company directly at any time of the year via dedicated
shareholder email addresses or via dedicated shareholder telephone numbers
as given on the inside back cover of this Report. Shell’s website at
www.shell.com/investor has information for institutional and retail
shareholders alike.
The Company’s Registrar, Equiniti, operates an internet access facility for
registered shareholders, providing details of their shareholdings at
www.shareview.co.uk. Facilities are also provided for shareholders to lodge
proxy appointments electronically. The Company’s Corporate Nominee
provides a facility for investors to hold their shares in the Company in
paperless form.
RESULTS PRESENTATIONS AND ANALYSTS’ MEETINGS
The quarterly, half-yearly and annual results presentations, as well as all major
analysts’ meetings, are announced in advance on the Shell website and
through a regulatory release. Generally, presentations are broadcast live via
webcast and teleconference. Other meetings with analysts or investors are not
normally announced in advance, nor can they be followed remotely by
webcast or any other means. Procedures are in place to ensure that
discussions in such meetings are always limited to non-material information or
information already in the public domain.
Results and meeting presentations can be found at www.shell.com/investor.
This is in line with the requirement to ensure that all shareholders and other
parties in the financial market have equal and simultaneous access to
information that may influence the price of the Company’s securities.
NOTIFICATION OF MAJOR SHAREHOLDINGS
Information concerning notifications of major shareholdings can be found on
page 218.
RESPONSIBILITY FOR PREPARING THE ANNUAL REPORT
AND ACCOUNTS
Information concerning the responsibility for preparing the Annual Report and
Accounts can be found on page 73.
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corporate governance Continued
CONTROLS AND PROCEDURES
The Board is responsible for maintaining a sound system of risk management
and internal control, and for regularly reviewing its effectiveness. It has
delegated authority to the Audit Committee to assist it in fulfilling its
responsibilities in relation to internal control and financial reporting
(see “Audit Committee Report” on pages 90-93).
A single overall control framework is in place for the Company and its
subsidiaries that is designed to manage rather than eliminate the risk of failure
to achieve business objectives. It therefore only provides a reasonable and
not an absolute assurance against material misstatement or loss.
A risk appetite framework has been defined with three different risk appetite
lenses that have been applied (Strategic Risk Appetite, Operational Risk
Appetite and Conduct Risk Appetite). Risk appetite parameters have been
identified and are being monitored. The Strategic Risk Appetite lens
supplements current and future portfolio considerations, with specific focus on
explicit articulation of key strategic beliefs. The Operational Risk Appetite lens
promotes both a more granular assessment of risks that the organisation faces
and the purposeful assessment of risk appetite. The Conduct Risk Appetite lens
brings together a number of leading and lagging risk indicators, which help
to provide a more holistic view of the culture of the organisation.
The diagram below illustrates the control framework’s key components:
“Foundations”, “Management Processes” and “Organisation”. “Foundations”
comprises the objectives, principles and rules that underpin and establish
boundaries for Shell’s activities. “Management Processes” refers to the more
material management processes, including how strategy, planning and
appraisal are used to improve performance and how risks are to be
managed through effective controls and assurance. “Organisation” sets out
how the various legal entities relate to each other and how their business
activities are organised and managed, and how authority is delegated.
Control framework
External Environment
Shell General Business Principles
Board of Royal Dutch Shell plc,
Chief Executive Officer and Executive Committee
Code of Conduct
Strategy, Planning
and Appraisal
Statement on
Risk Management
Standards
and Manuals
Controls and
Assurance
Businesses and Functions
Legal Entities
Foundations
Management Processes
Organisation
Shell has a climate change risk management structure in place which is
supported by standards, policies and controls (see “Risk factors” on page 13
and “Climate change and energy transition” on pages 62-63). Climate
change and risks resulting from greenhouse gas emissions have been
identified as a significant risk factor for Shell and are managed in
accordance with other significant risks through the Board and Executive
Committee.
Many of our major projects and operations are conducted in joint
arrangements or associates, which may reduce the degree of control and
ability to identify and manage risks (see “Risk factors” on page 15). In each
case, Shell appoints a representative to manage its interests who seeks to
ensure that such projects operate under equivalent standards to Shell.
We operate in more than 70 countries that have differing degrees of
political, legal and fiscal stability. This exposes us to a wide range of political
developments that could result in changes to contractual terms, laws and
regulations. In addition, we and our joint arrangements and associates face
the risk of litigation and disputes worldwide (see “Risk factors” on page 13).
We continuously monitor geopolitical developments and societal issues
relevant to our interests. Employees who engage with government officials are
subject to specific training programmes, procedures and regular
communications, in addition to Shell General Business Principles and Shell
Code of Conduct compliance. We are prepared to exit a country if we
believe we can no longer operate in that country in accordance with our
standards and applicable law, and we have done so in the past.
The Board confirms that there is a robust process for identifying, evaluating
and managing the principal risks to the achievement of Shell’s objectives. This
has been in place throughout 2017 and up to the date of this Report and is
regularly reviewed by the Board and accords with the Internal Control:
Guidance to Directors (formerly known as the Turnbull Guidance).
The system of risk management and internal control over financial reporting is
an integral part of the control framework. Regular reviews are performed to
identify the significant risks to financial reporting and the key controls
designed to address them. These controls are documented, responsibility is
assigned, and they are monitored for design and operating effectiveness.
Controls found not to be effective are remediated. The principal risks faced
by Shell are set out in “Risk factors” on pages 12-16.
MANAGEMENT’S EVALUATION OF DISCLOSURE CONTROLS AND
PROCEDURES OF SHELL
As indicated in the certifications in Exhibits 12.1 and 12.2 of this Report,
Shell’s CEO and CFO have evaluated the effectiveness of Shell’s disclosure
controls and procedures at December 31, 2017. Based on that evaluation,
they concluded that Shell’s disclosure controls and procedures are effective.
The Board has conducted its annual review of the effectiveness of Shell’s
system of risk management and internal control, including financial,
operational and compliance controls.
Shell has a variety of processes for obtaining assurance on the adequacy of
risk management and internal control and implements a broad array of
measures to manage its various risks which are set out in the relevant sections
of this Report. There are also risks that Shell accepts or does not seek to fully
mitigate. The Executive Committee and the Board regularly consider group-
level risks and associated control mechanisms.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING OF SHELL
Management, including the CEO and CFO, is responsible for establishing
and maintaining adequate internal control over Shell’s financial reporting and
the preparation of the “Consolidated Financial Statements”. It conducted an
evaluation of the effectiveness of Shell’s internal control over financial
reporting and the preparation of the “Consolidated Financial Statements”
based on the Internal Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission. On
the basis of this evaluation, management concluded that, at December 31,
2017, the Company’s internal control over Shell’s financial reporting and the
preparation of the “Consolidated Financial Statements” was effective.
Ernst & Young LLP, the independent registered public accounting firm that
audited the “Consolidated Financial Statements”, has issued an attestation
report on the Company’s internal control over financial reporting, as stated in
its report on page 135.
THE TRUSTEE’S AND MANAGEMENT’S EVALUATION OF
DISCLOSURE CONTROLS AND PROCEDURES FOR THE ROYAL
DUTCH SHELL DIVIDEND ACCESS TRUST
The Trustee of the Royal Dutch Shell Dividend Access Trust (the Trustee) and
Shell’s CEO and CFO have evaluated the effectiveness of the disclosure
controls and procedures in respect of the Dividend Access Trust (the Trust) at
December 31, 2017. On the basis of this evaluation, these officers have
concluded that the disclosure controls and procedures of the Trust are
effective.
shareholding of four times their base salary over the same period. Non-executive Directors are
encouraged to hold shares with a value equivalent to 100% of their fixed annual fee and maintain that
holding during their tenure. All Directors hold shares and such interests can be found in the “Directors’
Remuneration Report” on pages 104-105.
Appointment of Directors
person to be a Director.
The Company can, by passing an ordinary resolution, appoint any willing
The Board can appoint any willing person to be a Director. Any Director
appointed in this way must retire from office at the first AGM after his
appointment. A Director who retires in this way is then eligible for
reappointment.
At the general meeting at which a Director retires, shareholders can pass an
ordinary resolution to reappoint the Director or to appoint some other eligible
THE TRUSTEE’S AND MANAGEMENT’S REPORT ON INTERNAL
CONTROL OVER FINANCIAL REPORTING OF THE ROYAL DUTCH
person in their place.
SHELL DIVIDEND ACCESS TRUST
The Trustee is responsible for establishing and maintaining adequate internal
control over the Trust’s financial reporting. The Trustee and the Company’s
The only people who can be appointed as Directors at a general meeting are
the following: (i) Directors retiring at the meeting; (ii) anyone recommended by
a resolution of the Board; and (iii) anyone nominated by a shareholder (not
management conducted an evaluation of the effectiveness of internal control
being a person to be nominated), where the shareholder is entitled to vote at
over financial reporting based on the Internal Control – Integrated Framework
the meeting and delivers to the Company’s registered office, not less than six
(2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission. On the basis of this evaluation, the Trustee and
management concluded that, at December 31, 2017, the Trust’s internal
control over financial reporting was effective.
Ernst & Young LLP, the independent registered public accounting firm that
audited the Trust’s financial statements, has issued an attestation report on the
Trustee’s and management’s internal control over financial reporting, as stated
in its report on pages 210-211.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There has not been any change in the internal control over financial reporting
of Shell or the Trust that occurred during the period covered by this Report that
has materially affected, or is reasonably likely to materially affect, the internal
control over financial reporting. Material financial information of the Trust is
included in the “Consolidated Financial Statements” and is therefore subject
but not more than 21 days before the day of the meeting, a letter stating that
he intends to nominate another person for appointment as a Director and
written confirmation from that person that he is willing to be appointed.
Retirement of Directors
Under the Articles, at every AGM, the following Directors must retire from
office: (i) any Director who has been appointed by the Board since the last
AGM, (ii) any Director who held office at the time of the two preceding
AGMs and who did not retire at either of them, and (iii) any Director who has
been in office, other than as a Director holding an executive position, for a
continuous period of nine years or more at the date of the meeting.
Notwithstanding the Articles, the Company complies with the Code which
contains, among other matters, provisions regarding the composition of the
Board and re-election of the Directors. As a result, the Company’s current
policy is that Directors are subject to annual re-election by shareholders.
to the same disclosure controls and procedures as Shell. See the
Any Director who retires at an AGM may offer themselves for reappointment
“Royal Dutch Shell Dividend Access Trust Financial Statements” on pages
by the shareholders.
213-216 for additional information.
ARTICLES OF ASSOCIATION
The following summarises certain provisions of the Articles [A] and of the
applicable legislation (the legislation). This summary is qualified in its entirety
by reference to the Articles and the Act.
[A] Copies of the Articles have been previously filed with the SEC and are incorporated by reference as
exhibits to this Report. They can be found at www.shell.com.
MANAGEMENT AND DIRECTORS
The Company has a single tier Board of Directors headed by a Chair, with
management led by a CEO. See “Board structure and composition” on
page 77.
Number of Directors
The Articles provide that the Company must have a minimum of three and can
have a maximum of 20 Directors (disregarding alternate directors), but these
restrictions can be changed by the Board.
Directors’ shareholding qualification
The Directors are not required to hold any shares in the Company [A].
[A] While the Articles do not require Directors to hold shares in the Company, the Remuneration
Committee believes that Executive Directors should align their interests with those of shareholders by
holding shares in the Company. The CEO is expected to build up a shareholding of seven times his
base salary over five years from appointment and other Executive Directors are expected to build up a
Removal of Directors
In addition to any power to remove Directors conferred by the legislation,
the Company can pass a special resolution to remove a Director from office,
even though his time in office has not ended, and can appoint a person to
replace a Director who has been removed in this way by passing an ordinary
resolution.
Vacation of office by Directors
Any Director automatically stops being a Director if: (i) he gives the Company
a written notice of resignation; (ii) he gives the Company a written notice in
which he offers to resign and the Board decides to accept this offer; (iii) all of
the other Directors (who must comprise at least three people) pass a resolution
or sign a written notice requiring the Director to resign; (iv) he is or has been
suffering from mental or physical ill-health and the Board passes a resolution
removing the Director from office; (v) he has missed Directors’ meetings
(whether or not an alternate director appointed by him attends those meetings)
for a continuous period of six months without permission from the Board and
the Board passes a resolution removing the Director from office; (vi) a
bankruptcy order is made against him or he makes any arrangement or
composition with his creditors generally; (vii) he is prohibited from being a
Director under the legislation; or (viii) he ceases to be a Director under the
legislation or he is removed from office under the Articles. If a Director stops
being a Director for any reason, he will also automatically cease to be a
member of any committee or sub-committee of the Board.
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CONTROLS AND PROCEDURES
The Board is responsible for maintaining a sound system of risk management
and internal control, and for regularly reviewing its effectiveness. It has
delegated authority to the Audit Committee to assist it in fulfilling its
responsibilities in relation to internal control and financial reporting
(see “Audit Committee Report” on pages 90-93).
A single overall control framework is in place for the Company and its
subsidiaries that is designed to manage rather than eliminate the risk of failure
to achieve business objectives. It therefore only provides a reasonable and
not an absolute assurance against material misstatement or loss.
A risk appetite framework has been defined with three different risk appetite
lenses that have been applied (Strategic Risk Appetite, Operational Risk
Appetite and Conduct Risk Appetite). Risk appetite parameters have been
identified and are being monitored. The Strategic Risk Appetite lens
supplements current and future portfolio considerations, with specific focus on
explicit articulation of key strategic beliefs. The Operational Risk Appetite lens
promotes both a more granular assessment of risks that the organisation faces
and the purposeful assessment of risk appetite. The Conduct Risk Appetite lens
brings together a number of leading and lagging risk indicators, which help
to provide a more holistic view of the culture of the organisation.
The diagram below illustrates the control framework’s key components:
“Foundations”, “Management Processes” and “Organisation”. “Foundations”
comprises the objectives, principles and rules that underpin and establish
boundaries for Shell’s activities. “Management Processes” refers to the more
material management processes, including how strategy, planning and
appraisal are used to improve performance and how risks are to be
Shell has a climate change risk management structure in place which is
supported by standards, policies and controls (see “Risk factors” on page 13
and “Climate change and energy transition” on pages 62-63). Climate
change and risks resulting from greenhouse gas emissions have been
identified as a significant risk factor for Shell and are managed in
accordance with other significant risks through the Board and Executive
managed through effective controls and assurance. “Organisation” sets out
Committee.
how the various legal entities relate to each other and how their business
activities are organised and managed, and how authority is delegated.
Many of our major projects and operations are conducted in joint
arrangements or associates, which may reduce the degree of control and
ability to identify and manage risks (see “Risk factors” on page 15). In each
case, Shell appoints a representative to manage its interests who seeks to
ensure that such projects operate under equivalent standards to Shell.
We operate in more than 70 countries that have differing degrees of
political, legal and fiscal stability. This exposes us to a wide range of political
developments that could result in changes to contractual terms, laws and
regulations. In addition, we and our joint arrangements and associates face
the risk of litigation and disputes worldwide (see “Risk factors” on page 13).
We continuously monitor geopolitical developments and societal issues
relevant to our interests. Employees who engage with government officials are
subject to specific training programmes, procedures and regular
communications, in addition to Shell General Business Principles and Shell
Code of Conduct compliance. We are prepared to exit a country if we
believe we can no longer operate in that country in accordance with our
standards and applicable law, and we have done so in the past.
The Board confirms that there is a robust process for identifying, evaluating
and managing the principal risks to the achievement of Shell’s objectives. This
has been in place throughout 2017 and up to the date of this Report and is
regularly reviewed by the Board and accords with the Internal Control:
Guidance to Directors (formerly known as the Turnbull Guidance).
As indicated in the certifications in Exhibits 12.1 and 12.2 of this Report,
Shell’s CEO and CFO have evaluated the effectiveness of Shell’s disclosure
controls and procedures at December 31, 2017. Based on that evaluation,
they concluded that Shell’s disclosure controls and procedures are effective.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER
Management, including the CEO and CFO, is responsible for establishing
and maintaining adequate internal control over Shell’s financial reporting and
the preparation of the “Consolidated Financial Statements”. It conducted an
reporting and the preparation of the “Consolidated Financial Statements”
based on the Internal Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission. On
the basis of this evaluation, management concluded that, at December 31,
2017, the Company’s internal control over Shell’s financial reporting and the
preparation of the “Consolidated Financial Statements” was effective.
The system of risk management and internal control over financial reporting is
MANAGEMENT’S EVALUATION OF DISCLOSURE CONTROLS AND
an integral part of the control framework. Regular reviews are performed to
PROCEDURES OF SHELL
identify the significant risks to financial reporting and the key controls
designed to address them. These controls are documented, responsibility is
assigned, and they are monitored for design and operating effectiveness.
Controls found not to be effective are remediated. The principal risks faced
by Shell are set out in “Risk factors” on pages 12-16.
The Board has conducted its annual review of the effectiveness of Shell’s
FINANCIAL REPORTING OF SHELL
system of risk management and internal control, including financial,
operational and compliance controls.
Shell has a variety of processes for obtaining assurance on the adequacy of
evaluation of the effectiveness of Shell’s internal control over financial
risk management and internal control and implements a broad array of
measures to manage its various risks which are set out in the relevant sections
of this Report. There are also risks that Shell accepts or does not seek to fully
mitigate. The Executive Committee and the Board regularly consider group-
level risks and associated control mechanisms.
Ernst & Young LLP, the independent registered public accounting firm that
audited the “Consolidated Financial Statements”, has issued an attestation
report on the Company’s internal control over financial reporting, as stated in
its report on page 135.
shareholding of four times their base salary over the same period. Non-executive Directors are
encouraged to hold shares with a value equivalent to 100% of their fixed annual fee and maintain that
holding during their tenure. All Directors hold shares and such interests can be found in the “Directors’
Remuneration Report” on pages 104-105.
THE TRUSTEE’S AND MANAGEMENT’S EVALUATION OF
DISCLOSURE CONTROLS AND PROCEDURES FOR THE ROYAL
DUTCH SHELL DIVIDEND ACCESS TRUST
The Trustee of the Royal Dutch Shell Dividend Access Trust (the Trustee) and
Shell’s CEO and CFO have evaluated the effectiveness of the disclosure
controls and procedures in respect of the Dividend Access Trust (the Trust) at
December 31, 2017. On the basis of this evaluation, these officers have
concluded that the disclosure controls and procedures of the Trust are
effective.
THE TRUSTEE’S AND MANAGEMENT’S REPORT ON INTERNAL
CONTROL OVER FINANCIAL REPORTING OF THE ROYAL DUTCH
SHELL DIVIDEND ACCESS TRUST
The Trustee is responsible for establishing and maintaining adequate internal
control over the Trust’s financial reporting. The Trustee and the Company’s
management conducted an evaluation of the effectiveness of internal control
over financial reporting based on the Internal Control – Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission. On the basis of this evaluation, the Trustee and
management concluded that, at December 31, 2017, the Trust’s internal
control over financial reporting was effective.
Ernst & Young LLP, the independent registered public accounting firm that
audited the Trust’s financial statements, has issued an attestation report on the
Trustee’s and management’s internal control over financial reporting, as stated
in its report on pages 210-211.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There has not been any change in the internal control over financial reporting
of Shell or the Trust that occurred during the period covered by this Report that
has materially affected, or is reasonably likely to materially affect, the internal
control over financial reporting. Material financial information of the Trust is
included in the “Consolidated Financial Statements” and is therefore subject
to the same disclosure controls and procedures as Shell. See the
“Royal Dutch Shell Dividend Access Trust Financial Statements” on pages
213-216 for additional information.
ARTICLES OF ASSOCIATION
The following summarises certain provisions of the Articles [A] and of the
applicable legislation (the legislation). This summary is qualified in its entirety
by reference to the Articles and the Act.
[A] Copies of the Articles have been previously filed with the SEC and are incorporated by reference as
exhibits to this Report. They can be found at www.shell.com.
MANAGEMENT AND DIRECTORS
The Company has a single tier Board of Directors headed by a Chair, with
management led by a CEO. See “Board structure and composition” on
page 77.
Number of Directors
The Articles provide that the Company must have a minimum of three and can
have a maximum of 20 Directors (disregarding alternate directors), but these
restrictions can be changed by the Board.
Directors’ shareholding qualification
The Directors are not required to hold any shares in the Company [A].
[A] While the Articles do not require Directors to hold shares in the Company, the Remuneration
Committee believes that Executive Directors should align their interests with those of shareholders by
holding shares in the Company. The CEO is expected to build up a shareholding of seven times his
base salary over five years from appointment and other Executive Directors are expected to build up a
Appointment of Directors
The Company can, by passing an ordinary resolution, appoint any willing
person to be a Director.
The Board can appoint any willing person to be a Director. Any Director
appointed in this way must retire from office at the first AGM after his
appointment. A Director who retires in this way is then eligible for
reappointment.
At the general meeting at which a Director retires, shareholders can pass an
ordinary resolution to reappoint the Director or to appoint some other eligible
person in their place.
The only people who can be appointed as Directors at a general meeting are
the following: (i) Directors retiring at the meeting; (ii) anyone recommended by
a resolution of the Board; and (iii) anyone nominated by a shareholder (not
being a person to be nominated), where the shareholder is entitled to vote at
the meeting and delivers to the Company’s registered office, not less than six
but not more than 21 days before the day of the meeting, a letter stating that
he intends to nominate another person for appointment as a Director and
written confirmation from that person that he is willing to be appointed.
Retirement of Directors
Under the Articles, at every AGM, the following Directors must retire from
office: (i) any Director who has been appointed by the Board since the last
AGM, (ii) any Director who held office at the time of the two preceding
AGMs and who did not retire at either of them, and (iii) any Director who has
been in office, other than as a Director holding an executive position, for a
continuous period of nine years or more at the date of the meeting.
Notwithstanding the Articles, the Company complies with the Code which
contains, among other matters, provisions regarding the composition of the
Board and re-election of the Directors. As a result, the Company’s current
policy is that Directors are subject to annual re-election by shareholders.
Any Director who retires at an AGM may offer themselves for reappointment
by the shareholders.
Removal of Directors
In addition to any power to remove Directors conferred by the legislation,
the Company can pass a special resolution to remove a Director from office,
even though his time in office has not ended, and can appoint a person to
replace a Director who has been removed in this way by passing an ordinary
resolution.
Vacation of office by Directors
Any Director automatically stops being a Director if: (i) he gives the Company
a written notice of resignation; (ii) he gives the Company a written notice in
which he offers to resign and the Board decides to accept this offer; (iii) all of
the other Directors (who must comprise at least three people) pass a resolution
or sign a written notice requiring the Director to resign; (iv) he is or has been
suffering from mental or physical ill-health and the Board passes a resolution
removing the Director from office; (v) he has missed Directors’ meetings
(whether or not an alternate director appointed by him attends those meetings)
for a continuous period of six months without permission from the Board and
the Board passes a resolution removing the Director from office; (vi) a
bankruptcy order is made against him or he makes any arrangement or
composition with his creditors generally; (vii) he is prohibited from being a
Director under the legislation; or (viii) he ceases to be a Director under the
legislation or he is removed from office under the Articles. If a Director stops
being a Director for any reason, he will also automatically cease to be a
member of any committee or sub-committee of the Board.
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corporate governance Continued
Alternate directors
Any Director can appoint any person (including another Director) to act in his
place as an alternate director. That appointment requires the approval of the
Board, unless previously approved by the Board or unless the appointee is
another Director.
The Board, or any committee authorised by the Board, can award extra fees
to any Director who, in its view, performs any special or extra services for the
Company. The extra fees can take the form of salary, commission, profit-
sharing or other benefits (and can be paid partly in one way and partly in
another).
Proceedings of the Board
Meetings of the Board will usually be held in the Netherlands but the Board
may decide in each case when and where to have meetings and how they
will be conducted. The Board can also adjourn its meetings. If no other
quorum is fixed by the Board, two Directors are a quorum. A Directors’
meeting at which a quorum is present can exercise all the powers and
discretions of the Board.
All or any of the Directors can take part in a meeting of the Directors by way
of a conference telephone or any communication equipment which allows
everybody to take part in the meeting by being able to hear each of the other
people at the meeting and by being able to speak to all of them at the same
time. A person taking part in this way will be treated as being present at the
meeting and will be entitled to vote and be counted in the quorum. Any such
meeting will be deemed to take place where the largest group of Directors
participating is assembled or, if there is no such group, where the chairman
of the meeting then is.
The Board can appoint any Director as chairman or as deputy chairman and
can remove him from that office at any time. Matters to be decided at a
Directors’ meeting will be decided by a majority vote. If votes are equal,
the chairman of the meeting has a second, casting vote.
The Board will manage the Company’s business. It can use all the
Company’s powers except where the Articles or the legislation say that
powers can only be used by shareholders voting to do so at a general
meeting. The Board is, however, subject to the provisions of the legislation,
the requirements of the Articles and any regulations laid down by the
shareholders by passing a special resolution at a general meeting.
The Board can exercise the Company’s powers: (i) to borrow money; (ii) to
guarantee; (iii) to indemnify; (iv) to mortgage or charge all or any of the
Company’s undertaking, property and assets (present and future) and
uncalled capital; (v) to issue debentures and other securities; and (vi) to give
security, either outright or as collateral security, for any debt, liability or
obligation of the Company or of any third party. The Board must limit the
borrowings of the Company and exercise all voting and other rights or
powers of control exercisable by the Company in relation to its subsidiary
undertakings so as to ensure that no money is borrowed if the total amount of
the group’s borrowings (as defined in the Articles) then exceeds, or would as
a result of such borrowing exceed, two times the Company’s adjusted capital
and reserves (as defined in the Articles). Shareholders may pass an ordinary
resolution allowing borrowings to exceed such limit.
The Board can delegate any of its powers or discretions to committees of one
or more persons. Any committee must comply with any regulations laid down
by the Board. These regulations can require or allow people who are not
Directors to be members of the committee, and can give voting rights to such
people but there must be more Directors on a committee than persons who
are not Directors and a resolution of the committee is only effective if a
majority of the members of the committee present at the time of the resolution
were Directors.
Fees
The total fees paid to all of the Directors (excluding any payments made
under any other provision of the Articles) must not exceed €4,000,000 a
year or any higher sum decided on by an ordinary resolution at a general
meeting. It is for the Board to decide how much to pay each Director by way
of fees.
The Company can pay the reasonable travel, hotel and incidental expenses
of each Director incurred in attending and returning from general meetings,
meetings of the Board or committees of the Board or any other meetings
which, as a Director, he is entitled to attend. The Company will pay all other
expenses properly and reasonably incurred by each Director in connection
with the Company’s business or in the performance of his duties as a Director.
The Company can also fund a Director’s or former Director’s expenditure and
that of a Director or former Director of any holding company of the Company
for the purposes permitted by the legislation and can do anything to enable a
Director or former Director of the Company or any holding company of the
Company to avoid incurring such expenditure all as provided in the
legislation.
Pensions and gratuities
The Board or any committee authorised by the Board can decide whether to
provide pensions, annual payments or other benefits to any Director or former
Director, or any relation or dependant of, or person connected to, such a
person. The Board can also decide to contribute to a scheme or fund or to
pay premiums to a third party for these purposes. The Company can only
provide pensions and other benefits to people who are or were Directors but
who have not been employed by or held an office or executive position in the
Company or any of its subsidiary undertakings or former subsidiary
undertakings or any predecessor in business of the Company or any such
other company or to relations or dependants of, or persons connected to,
these Directors or former Directors if the shareholders approve this by passing
an ordinary resolution.
Directors’ interests
Conflicts of interest requiring authorisation by Directors
The Board may, subject to the relevant quorum and voting requirements,
authorise any matter which would otherwise involve a Director breaching his
duty under the legislation to avoid conflicts of interest. A Director seeking
authorisation in respect of such a conflict of interest must tell the Board the
nature and extent of his interest in the conflict of interest as soon as possible.
The Director must give the Board sufficient details of the relevant matter to
enable it to decide how to address the conflict of interest, together with any
additional information which it may request.
Any Director (including the relevant Director) may propose that the relevant
Director be authorised in relation to any matter which is the subject of such a
conflict of interest. Such proposal and any authority given by the Board shall
be effected in the same way as any other matter may be proposed to and
resolved upon by the Board except that: (i) the relevant Director and any other
Director with a similar interest will not count in the quorum and will not vote
on a resolution giving such authority; and (ii) the conflicted Director and any
other Director with a similar interest may, if the other members of the Board so
decide, be excluded from any meeting of the Board while the conflict of
interest is under consideration.
Where the Board gives authority in relation to a conflict of interest or where
any of the situations described in (i) to (v) of “Other conflicts of interest” on the
next page applies in relation to a Director: (i) the Board may (whether at the
relevant time or subsequently) (a) require that the relevant Director is excluded
from the receipt of information, the participation in discussion and/or the
making of decisions related to the conflict or the situation and (b) impose
upon the relevant Director such other terms for the purpose of dealing with the
conflict or situation as they think fit; (ii) the relevant Director will be obliged to
conduct himself in accordance with any terms imposed by the Board in
relation to the conflict or situation; (iii) the Board may also provide that, where
the relevant Director obtains (other than through his position as a Director of
the Company) information that is confidential to a third party, the Director will
by the shareholders or by the Board as long as there is no conflict with any
not be obliged to disclose that information to the Company, or to use or
resolution passed by the shareholders.
apply the information in relation to the Company’s affairs, where to do so
would amount to a breach of that confidence; (iv) the terms of the authority
shall be recorded in writing (but the authority shall be effective whether or not
the terms are so recorded); and (v) the Board may revoke or vary such
authority at any time but this will not affect anything done by the relevant
Director prior to such revocation in accordance with the terms of such
authority.
Other conflicts of interest
If a Director knows that he is in any way directly or indirectly interested in a
proposed contract with the Company or a contract that has been entered into
by the Company, he must tell the other Directors of the nature and extent of
that interest in accordance with the legislation. If he has so disclosed the
nature and extent of his interest, a Director can do one or more of the
following: (i) have any kind of interest in a contract with or involving the
Company or another company in which the Company has an interest;
(ii) hold any other office or place of profit with the Company (except that of
auditor) in conjunction with his office of Director for such period and upon
such terms, including as to remuneration, as the Board may decide;
(iii) alone, or through a firm with which he is associated, do paid professional
work for the Company or another company in which the Company has an
interest (other than as auditor); (iv) be or become a Director or other officer of,
or employed by or otherwise be interested in, any holding company or
subsidiary company of the Company or any other company in which the
Company has an interest; and (v) be or become a Director of any other
company in which the Company does not have an interest and which cannot
reasonably be regarded as giving rise to a conflict of interest at the time of
his appointment as a Director of that other company.
Benefits
A Director does not have to hand over to the Company or its shareholders
any benefit he receives or profit that he makes as a result of any matter which
would otherwise involve a direct breach of his duty under the legislation to
avoid conflicts of interest but which has been authorised or anything allowed
under (i) to (v) of “Other conflicts of interest” above, nor is any type of contract
so authorised or so allowed liable to be avoided.
Quorum and voting requirements
Subject to certain exceptions, a Director cannot vote or be counted in the
quorum on a resolution of the Board relating to appointing that Director to a
position with the Company or a company in which the Company has an interest
or the terms or the termination of the appointment and a Director cannot vote or
be counted in the quorum on a resolution of the Board about a contract in
which he has an interest and, if he does vote, his vote will not be counted.
The Company can, by ordinary resolution, suspend or relax the provisions of
the relevant article in the Articles to any extent or ratify any contract which has
not been properly authorised in accordance with that relevant article.
Directors’ indemnities
As far as the legislation allows this, the Company can indemnify any Director
or former Director of the Company, of any associated company or of any
affiliate against any liability and can purchase and maintain insurance
against any liability for any Director or former Director of the Company, of
any associated company or of any affiliate. A Director or former Director of
the Company, of any associated company or of any affiliate will not be
accountable to the Company or the shareholders for any benefit so provided.
Anyone receiving such a benefit will not be disqualified from being or
becoming a Director of the Company.
RIGHTS ATTACHING TO SHARES
The Company can issue shares with any rights or restrictions attached to them
as long as this is not restricted by any rights attached to existing shares. These
rights or restrictions can be decided either by an ordinary resolution passed
Dividends
Currently, only A shares and B shares are entitled to a dividend.
Under the legislation, dividends are payable only out of profits available for
distribution, as determined in accordance with the Act and under IFRS.
Subject to the Act, if the Directors consider that the Company’s financial
position justifies the payment of a dividend, the Company can pay a fixed or
other dividend on any class of shares on the dates prescribed for the
payments of those dividends and pay interim dividends on shares of any class
of any amounts and on any dates and for any periods which it decides.
Shareholders can declare dividends in accordance with the rights of
shareholders by passing an ordinary resolution, although such dividends
cannot exceed the amount recommended by the Board.
Dividends are payable to persons registered as the holder(s) of shares, or to
anyone entitled in any other way, at a particular time on a particular day
selected by the Board. All dividends will be declared and paid in proportions
based on the amounts paid up on the relevant shares during any period for
which that dividend is paid.
Any dividend or other money payable in cash relating to a share can be paid
by sending a cheque, warrant or similar financial instrument payable to the
shareholder entitled to the dividend by post to the shareholder’s registered
address. Alternatively, it can be made payable to someone else named in a
written instruction from the shareholder (or all joint shareholders) and sent by
post to the address specified in that instruction. A dividend can also be paid
by inter-bank transfer or by other electronic means (including payment through
CREST) directly to an account with a bank or other financial institution (or
another organisation operating deposit accounts if allowed by the Company)
named in a written instruction from the person entitled to receive the payment
under the Articles. Such an account must be held at an institution based in the
UK, unless the share on which the payment is to be made is held by
Euroclear Nederland and is subject to the Dutch Securities Giro Act (“Wet
giraal effectenverkeer”). Alternatively, a dividend can be paid in some other
way if requested in writing by a shareholder (or all joint shareholders) and
agreed with the Company. The Company will not be responsible for a
payment which is lost or delayed. Unless the rights attached to any shares,
the terms of any shares or the Articles say otherwise, a dividend or any other
money payable in respect of a share can be declared and paid in whatever
currency or currencies the Board decides using an exchange rate or
exchange rates selected by the Board for any currency conversions required.
The Board can also decide how any costs relating to the choice of currency
will be met. The Board can offer shareholders the choice to receive dividends
and other money payable in respect of their shares in alternative currencies
on such terms and conditions as the Board may prescribe from time to time.
Where any dividends or other amounts payable on a share have not been
claimed, the Board can invest them or use them in any other way for the
Company’s benefit until they are claimed. The Company will not be a trustee
of the money and will not be liable to pay interest on it. If a dividend or other
money has not been claimed for 12 years after being declared or becoming
due for payment, it will be forfeited and go back to the Company, unless the
Board decides otherwise.
The Company expects that dividends in respect of B shares will be paid
under the dividend access mechanism described below. Currently, the
Articles provide that if any amount paid by way of dividend by a subsidiary
of the Company is received by the dividend access trustee on behalf of any
holder of B shares and paid by the dividend access trustee to such holder,
the entitlement of such holder of B shares to be paid any dividend declared
pursuant to the Articles will be reduced by the corresponding amount that has
been paid by the dividend access trustee to such holder. If a dividend is
declared pursuant to the Articles and the entitlement of any holder of B shares
to be paid his pro rata share of such dividend is not fully extinguished on the
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Alternate directors
The Board, or any committee authorised by the Board, can award extra fees
Any Director can appoint any person (including another Director) to act in his
to any Director who, in its view, performs any special or extra services for the
place as an alternate director. That appointment requires the approval of the
Company. The extra fees can take the form of salary, commission, profit-
Board, unless previously approved by the Board or unless the appointee is
sharing or other benefits (and can be paid partly in one way and partly in
another).
another Director.
Proceedings of the Board
discretions of the Board.
Meetings of the Board will usually be held in the Netherlands but the Board
of each Director incurred in attending and returning from general meetings,
may decide in each case when and where to have meetings and how they
meetings of the Board or committees of the Board or any other meetings
will be conducted. The Board can also adjourn its meetings. If no other
which, as a Director, he is entitled to attend. The Company will pay all other
quorum is fixed by the Board, two Directors are a quorum. A Directors’
expenses properly and reasonably incurred by each Director in connection
meeting at which a quorum is present can exercise all the powers and
with the Company’s business or in the performance of his duties as a Director.
The Company can pay the reasonable travel, hotel and incidental expenses
The Company can also fund a Director’s or former Director’s expenditure and
that of a Director or former Director of any holding company of the Company
All or any of the Directors can take part in a meeting of the Directors by way
for the purposes permitted by the legislation and can do anything to enable a
of a conference telephone or any communication equipment which allows
Director or former Director of the Company or any holding company of the
everybody to take part in the meeting by being able to hear each of the other
Company to avoid incurring such expenditure all as provided in the
people at the meeting and by being able to speak to all of them at the same
legislation.
time. A person taking part in this way will be treated as being present at the
meeting and will be entitled to vote and be counted in the quorum. Any such
Pensions and gratuities
meeting will be deemed to take place where the largest group of Directors
The Board or any committee authorised by the Board can decide whether to
participating is assembled or, if there is no such group, where the chairman
provide pensions, annual payments or other benefits to any Director or former
of the meeting then is.
Director, or any relation or dependant of, or person connected to, such a
person. The Board can also decide to contribute to a scheme or fund or to
The Board can appoint any Director as chairman or as deputy chairman and
pay premiums to a third party for these purposes. The Company can only
can remove him from that office at any time. Matters to be decided at a
provide pensions and other benefits to people who are or were Directors but
Directors’ meeting will be decided by a majority vote. If votes are equal,
who have not been employed by or held an office or executive position in the
the chairman of the meeting has a second, casting vote.
Company or any of its subsidiary undertakings or former subsidiary
undertakings or any predecessor in business of the Company or any such
The Board will manage the Company’s business. It can use all the
other company or to relations or dependants of, or persons connected to,
Company’s powers except where the Articles or the legislation say that
these Directors or former Directors if the shareholders approve this by passing
powers can only be used by shareholders voting to do so at a general
an ordinary resolution.
meeting. The Board is, however, subject to the provisions of the legislation,
the requirements of the Articles and any regulations laid down by the
shareholders by passing a special resolution at a general meeting.
Directors’ interests
Conflicts of interest requiring authorisation by Directors
The Board may, subject to the relevant quorum and voting requirements,
The Board can exercise the Company’s powers: (i) to borrow money; (ii) to
authorise any matter which would otherwise involve a Director breaching his
guarantee; (iii) to indemnify; (iv) to mortgage or charge all or any of the
Company’s undertaking, property and assets (present and future) and
duty under the legislation to avoid conflicts of interest. A Director seeking
authorisation in respect of such a conflict of interest must tell the Board the
uncalled capital; (v) to issue debentures and other securities; and (vi) to give
nature and extent of his interest in the conflict of interest as soon as possible.
security, either outright or as collateral security, for any debt, liability or
obligation of the Company or of any third party. The Board must limit the
borrowings of the Company and exercise all voting and other rights or
powers of control exercisable by the Company in relation to its subsidiary
The Director must give the Board sufficient details of the relevant matter to
enable it to decide how to address the conflict of interest, together with any
additional information which it may request.
undertakings so as to ensure that no money is borrowed if the total amount of
Any Director (including the relevant Director) may propose that the relevant
the group’s borrowings (as defined in the Articles) then exceeds, or would as
Director be authorised in relation to any matter which is the subject of such a
a result of such borrowing exceed, two times the Company’s adjusted capital
conflict of interest. Such proposal and any authority given by the Board shall
and reserves (as defined in the Articles). Shareholders may pass an ordinary
be effected in the same way as any other matter may be proposed to and
resolution allowing borrowings to exceed such limit.
resolved upon by the Board except that: (i) the relevant Director and any other
Director with a similar interest will not count in the quorum and will not vote
The Board can delegate any of its powers or discretions to committees of one
on a resolution giving such authority; and (ii) the conflicted Director and any
or more persons. Any committee must comply with any regulations laid down
other Director with a similar interest may, if the other members of the Board so
by the Board. These regulations can require or allow people who are not
decide, be excluded from any meeting of the Board while the conflict of
Directors to be members of the committee, and can give voting rights to such
interest is under consideration.
people but there must be more Directors on a committee than persons who
are not Directors and a resolution of the committee is only effective if a
majority of the members of the committee present at the time of the resolution
were Directors.
Fees
The total fees paid to all of the Directors (excluding any payments made
under any other provision of the Articles) must not exceed €4,000,000 a
year or any higher sum decided on by an ordinary resolution at a general
meeting. It is for the Board to decide how much to pay each Director by way
of fees.
Where the Board gives authority in relation to a conflict of interest or where
any of the situations described in (i) to (v) of “Other conflicts of interest” on the
next page applies in relation to a Director: (i) the Board may (whether at the
relevant time or subsequently) (a) require that the relevant Director is excluded
from the receipt of information, the participation in discussion and/or the
making of decisions related to the conflict or the situation and (b) impose
upon the relevant Director such other terms for the purpose of dealing with the
conflict or situation as they think fit; (ii) the relevant Director will be obliged to
conduct himself in accordance with any terms imposed by the Board in
relation to the conflict or situation; (iii) the Board may also provide that, where
the relevant Director obtains (other than through his position as a Director of
the Company) information that is confidential to a third party, the Director will
not be obliged to disclose that information to the Company, or to use or
apply the information in relation to the Company’s affairs, where to do so
would amount to a breach of that confidence; (iv) the terms of the authority
shall be recorded in writing (but the authority shall be effective whether or not
the terms are so recorded); and (v) the Board may revoke or vary such
authority at any time but this will not affect anything done by the relevant
Director prior to such revocation in accordance with the terms of such
authority.
Other conflicts of interest
If a Director knows that he is in any way directly or indirectly interested in a
proposed contract with the Company or a contract that has been entered into
by the Company, he must tell the other Directors of the nature and extent of
that interest in accordance with the legislation. If he has so disclosed the
nature and extent of his interest, a Director can do one or more of the
following: (i) have any kind of interest in a contract with or involving the
Company or another company in which the Company has an interest;
(ii) hold any other office or place of profit with the Company (except that of
auditor) in conjunction with his office of Director for such period and upon
such terms, including as to remuneration, as the Board may decide;
(iii) alone, or through a firm with which he is associated, do paid professional
work for the Company or another company in which the Company has an
interest (other than as auditor); (iv) be or become a Director or other officer of,
or employed by or otherwise be interested in, any holding company or
subsidiary company of the Company or any other company in which the
Company has an interest; and (v) be or become a Director of any other
company in which the Company does not have an interest and which cannot
reasonably be regarded as giving rise to a conflict of interest at the time of
his appointment as a Director of that other company.
Benefits
A Director does not have to hand over to the Company or its shareholders
any benefit he receives or profit that he makes as a result of any matter which
would otherwise involve a direct breach of his duty under the legislation to
avoid conflicts of interest but which has been authorised or anything allowed
under (i) to (v) of “Other conflicts of interest” above, nor is any type of contract
so authorised or so allowed liable to be avoided.
Quorum and voting requirements
Subject to certain exceptions, a Director cannot vote or be counted in the
quorum on a resolution of the Board relating to appointing that Director to a
position with the Company or a company in which the Company has an interest
or the terms or the termination of the appointment and a Director cannot vote or
be counted in the quorum on a resolution of the Board about a contract in
which he has an interest and, if he does vote, his vote will not be counted.
The Company can, by ordinary resolution, suspend or relax the provisions of
the relevant article in the Articles to any extent or ratify any contract which has
not been properly authorised in accordance with that relevant article.
Directors’ indemnities
As far as the legislation allows this, the Company can indemnify any Director
or former Director of the Company, of any associated company or of any
affiliate against any liability and can purchase and maintain insurance
against any liability for any Director or former Director of the Company, of
any associated company or of any affiliate. A Director or former Director of
the Company, of any associated company or of any affiliate will not be
accountable to the Company or the shareholders for any benefit so provided.
Anyone receiving such a benefit will not be disqualified from being or
becoming a Director of the Company.
RIGHTS ATTACHING TO SHARES
The Company can issue shares with any rights or restrictions attached to them
as long as this is not restricted by any rights attached to existing shares. These
rights or restrictions can be decided either by an ordinary resolution passed
by the shareholders or by the Board as long as there is no conflict with any
resolution passed by the shareholders.
Dividends
Currently, only A shares and B shares are entitled to a dividend.
Under the legislation, dividends are payable only out of profits available for
distribution, as determined in accordance with the Act and under IFRS.
Subject to the Act, if the Directors consider that the Company’s financial
position justifies the payment of a dividend, the Company can pay a fixed or
other dividend on any class of shares on the dates prescribed for the
payments of those dividends and pay interim dividends on shares of any class
of any amounts and on any dates and for any periods which it decides.
Shareholders can declare dividends in accordance with the rights of
shareholders by passing an ordinary resolution, although such dividends
cannot exceed the amount recommended by the Board.
Dividends are payable to persons registered as the holder(s) of shares, or to
anyone entitled in any other way, at a particular time on a particular day
selected by the Board. All dividends will be declared and paid in proportions
based on the amounts paid up on the relevant shares during any period for
which that dividend is paid.
Any dividend or other money payable in cash relating to a share can be paid
by sending a cheque, warrant or similar financial instrument payable to the
shareholder entitled to the dividend by post to the shareholder’s registered
address. Alternatively, it can be made payable to someone else named in a
written instruction from the shareholder (or all joint shareholders) and sent by
post to the address specified in that instruction. A dividend can also be paid
by inter-bank transfer or by other electronic means (including payment through
CREST) directly to an account with a bank or other financial institution (or
another organisation operating deposit accounts if allowed by the Company)
named in a written instruction from the person entitled to receive the payment
under the Articles. Such an account must be held at an institution based in the
UK, unless the share on which the payment is to be made is held by
Euroclear Nederland and is subject to the Dutch Securities Giro Act (“Wet
giraal effectenverkeer”). Alternatively, a dividend can be paid in some other
way if requested in writing by a shareholder (or all joint shareholders) and
agreed with the Company. The Company will not be responsible for a
payment which is lost or delayed. Unless the rights attached to any shares,
the terms of any shares or the Articles say otherwise, a dividend or any other
money payable in respect of a share can be declared and paid in whatever
currency or currencies the Board decides using an exchange rate or
exchange rates selected by the Board for any currency conversions required.
The Board can also decide how any costs relating to the choice of currency
will be met. The Board can offer shareholders the choice to receive dividends
and other money payable in respect of their shares in alternative currencies
on such terms and conditions as the Board may prescribe from time to time.
Where any dividends or other amounts payable on a share have not been
claimed, the Board can invest them or use them in any other way for the
Company’s benefit until they are claimed. The Company will not be a trustee
of the money and will not be liable to pay interest on it. If a dividend or other
money has not been claimed for 12 years after being declared or becoming
due for payment, it will be forfeited and go back to the Company, unless the
Board decides otherwise.
The Company expects that dividends in respect of B shares will be paid
under the dividend access mechanism described below. Currently, the
Articles provide that if any amount paid by way of dividend by a subsidiary
of the Company is received by the dividend access trustee on behalf of any
holder of B shares and paid by the dividend access trustee to such holder,
the entitlement of such holder of B shares to be paid any dividend declared
pursuant to the Articles will be reduced by the corresponding amount that has
been paid by the dividend access trustee to such holder. If a dividend is
declared pursuant to the Articles and the entitlement of any holder of B shares
to be paid his pro rata share of such dividend is not fully extinguished on the
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corporate governance Continued
relevant payment date by virtue of a payment made by the dividend access
trustee, the Company has a full and unconditional obligation to make
payment in respect of the outstanding part of such dividend entitlement
immediately. Where amounts are paid by the dividend access trustee in one
currency and a dividend is declared by the Company in another currency,
the amounts so paid by the dividend access trustee will, for the purposes of
the comparison required by the two immediately preceding sentences, be
converted into the currency in which the Company has declared the dividend
at such rate as the Board shall consider appropriate. For the purposes of the
provisions referred to in this paragraph, the amount that the dividend access
trustee has paid to any holder of B shares in respect of any particular
dividend paid by a subsidiary of the Company (a “specified dividend”) will
be deemed to include: (i) any amount that the dividend access trustee may be
compelled by law to withhold; (ii) a pro rata share of any tax that the
subsidiary paying the specified dividend is obliged to withhold or to deduct
from the same; and (iii) a pro rata share of any tax that is payable by the
dividend access trustee in respect of the specified dividend.
The Board can offer shareholders of ordinary shares (excluding any
shareholder holding shares as treasury shares) the right to choose to receive
extra ordinary shares, which are credited as fully paid up, instead of some or
all of their cash dividend. Before the Board can do this, shareholders must
have passed an ordinary resolution authorising the Board to make this offer.
Dividend access mechanism for B shares
General
A and B shares are identical, except for the dividend access mechanism,
which will only apply to B shares. Dividends paid on A shares have a Dutch
source for tax purposes and are subject to Dutch withholding tax.
It is the expectation and the intention, although there can be no certainty,
that holders of B shares will receive dividends through the dividend access
mechanism. Any dividends paid on the dividend access shares will have a
UK source for UK and Dutch tax purposes. There will be no Dutch withholding
tax on such dividends. For further details regarding the tax treatment of
dividends paid on the A and B shares and American Depositary Shares
(ADSs), refer to “Shareholder information” on pages 222-223.
Description of dividend access mechanism
The “Shell” Transport and Trading Company, p.l.c., now The Shell Transport
and Trading Company Limited (Shell Transport), and BG Group plc, now BG
Group Limited (BG), have each issued a dividend access share to
Computershare Trustees (Jersey) Limited as Trustee. Pursuant to a declaration of
trust, the Trustee will hold any dividends paid in respect of the dividend access
shares on trust for the holders of B shares and will arrange for prompt
disbursement of such dividends to holders of B shares. Interest and other income
earned on unclaimed dividends will be for the account of Shell Transport and
BG and any dividends which are unclaimed after 12 years will revert to Shell
Transport and BG, as appropriate. Holders of B shares will not have any
interest in either dividend access share and will not have any rights against Shell
Transport and BG as issuers of the dividend access shares. The only assets held
on trust for the benefit of the holders of B shares will be dividends paid to the
Trustee in respect of the dividend access shares.
The declaration and payment of dividends on the dividend access shares will
require board action by Shell Transport and BG (as applicable) and will be
subject to any applicable limitations in law or in the Shell Transport or BG (as
appropriate) articles of association in effect. In no event will the aggregate
amount of the dividend paid by Shell Transport and BG under the dividend
access mechanism for a particular period exceed the aggregate of the
dividend announced by the Board of the Company on B shares in respect of
the same period (after giving effect to currency conversions).
In particular, under their respective articles of association, Shell Transport and
BG are each only able to pay a dividend on their respective dividend access
share which represents a proportional amount of the aggregate of any
dividend announced by the Company on the B shares in respect of the
relevant period, where such proportions are calculated by reference to, in the
case of Shell Transport, the number of B shares in existence prior to
completion of the Company’s acquisition of BG (the Acquisition) and, in the
case of BG, the number of B shares issued as part of the Acquisition, in each
case as against the total number of B shares in issue immediately following
completion of the Acquisition.
Operation of the dividend access mechanism
If, in connection with the announcement of a dividend by the Company on B
shares, the Board of Shell Transport and/or the Board of BG elects to declare
and pay a dividend on their respective dividend access shares to the Trustee,
the holders of B shares will be beneficially entitled to receive their share of
those dividends pursuant to the declaration of trust (and arrangements will be
made to ensure that the dividend is paid in the same currency in which they
would have received a dividend from the Company).
If any amount is paid by Shell Transport or BG by way of a dividend on the
dividend access shares and paid by the Trustee to any holder of B shares,
the dividend which the Company would otherwise pay on B shares will be
reduced by an amount equal to the amount paid to such holders of B shares
by the Trustee.
The Company will have a full and unconditional obligation, in the event that
the Trustee does not pay an amount to holders of B shares on a cash
dividend payment date (even if that amount has been paid to the Trustee), to
pay immediately the dividend announced on B shares. The right of holders of
B shares to receive distributions from the Trustee will be reduced by an
amount equal to the amount of any payment actually made by the Company
on account of any dividend on B shares.
If for any reason no dividend is paid on the dividend access shares, holders
of B shares will only receive dividends from the Company directly. Any
payment by the Company will be subject to Dutch withholding tax (unless an
exemption is obtained under Dutch law or under the provisions of an
applicable tax treaty).
The Dutch tax treatment of dividends paid under the dividend access
mechanism has been confirmed by the Dutch Revenue Service in an
agreement (“vaststellingsovereenkomst”) with the Company and N.V.
Koninklijke Nederlandsche Petroleum Maatschappij (Royal Dutch Petroleum
Company) dated October 26, 2004, as supplemented and amended by an
agreement between the same parties dated April 25, 2005, and a final
settlement agreement in connection with the Acquisition dated November 9,
2015. The agreements state, among other things, that dividend distributions
on the dividend access shares by Shell Transport and/or BG will not be
subject to Dutch withholding tax provided that the dividend access
mechanism is structured and operated substantially as set out above.
The Company may not extend the dividend access mechanism to any future
issuances of B shares without prior consultation with the Dutch Revenue Service.
Accordingly, the Company would not expect to issue additional B shares
unless confirmation from the Dutch Revenue Service was obtained or the
Company were to determine that the continued operation of the dividend
access mechanism was unnecessary. Any further issue of B shares is subject
to advance consultation with the Dutch Revenue Service.
The dividend access mechanism may be suspended or terminated at any time
by the Company’s Directors or the Directors of Shell Transport or BG, for any
reason and without financial recompense. This might, for instance, occur in
or of any right to call for the allotment or issue of such shares or securities, is
response to changes in relevant tax legislation.
for these purposes deemed not to be an abrogation or variation or to have an
effect on the rights and privileges attaching to sterling deferred shares); (v) all
The daily operations of the Trust are administered on behalf of the Company
provisions of the Articles relating to general meetings of the Company will
by the Trustee. Material financial information of the Trust is included in the
apply, with necessary modifications, to every general meeting of the holders
“Consolidated Financial Statements” and is therefore subject to the same
of the sterling deferred shares; (vi) subject to the legislation, the Company will
disclosure controls and procedures as Shell.
Pre-emption rights
Subject to the Act and the Listing Rules, any equity securities allotted by the
Company for cash must first be offered to shareholders in proportion to their
holdings. The Act and the Listing Rules allow for the disapplication of pre-
emption rights which may be waived by a special resolution of the
shareholders, either generally or specifically.
Voting
Currently, only the A and B shares have voting rights.
Changing the rights attached to the shares
The Act provides that the Articles can be amended by a special resolution.
The Articles provide that, if the legislation allows this, the rights attached to
any class of shares can be changed if this is approved either in writing by
shareholders holding at least three-quarters of the issued shares of that class
by amount (excluding any shares of that class held as treasury shares) or by a
special resolution passed at a separate meeting of the relevant shareholders.
At each such separate meeting, all of the provisions of the Articles relating to
proceedings at a general meeting apply, except that: (i) a quorum will be
present if at least one shareholder who is entitled to vote is present in person
or by proxy who owns at least one-third in amount of the issued shares of the
relevant class; (ii) any shareholder who is present in person or by proxy and
entitled to vote can demand a poll; and (iii) at an adjourned meeting, one
person entitled to vote and who holds shares of the class, or his proxy, will be
a quorum. These provisions are not more restrictive than required by law in
England.
If new shares are created or issued which rank equally with any other existing
shares, the rights of the existing shares will not be regarded as changed or
abrogated unless the terms of the existing shares expressly say otherwise.
Redemption provisions
The Company’s shares are not subject to any redemption provisions.
Rights attaching to the sterling deferred shares
The sterling deferred shares are (unlike the A and B shares) not ordinary
shares and, therefore, they have different rights and restrictions.
The sterling deferred shares have the following rights and restrictions: (i) on a
distribution of assets of the Company among its shareholders on a winding-
up, the holders of the sterling deferred shares will be entitled (such entitlement
ranking in priority to the rights of holders of ordinary shares) to receive an
amount equal to the aggregate of the capital paid up or credited as paid up
on each sterling deferred share; (ii) save as provided in (i), the holders of the
sterling deferred shares will not be entitled to any participation in the profits or
assets of the Company; (iii) the holders of sterling deferred shares will not be
entitled to receive notice of or to attend and/or speak or vote (whether on a
show of hands or on a poll) at general meetings of the Company; (iv) the
written consent of the holders of three-quarters in nominal value of the issued
sterling deferred shares or the sanction of a special resolution passed at a
separate general meeting of the holders of the sterling deferred shares is
required if the special rights and privileges attaching to the sterling deferred
shares are to be abrogated, or adversely varied or otherwise directly
adversely affected in any way (the creation, allotment or issue of shares or
securities which rank in priority to or equally with the sterling deferred shares,
have the right at any time to redeem any such sterling deferred shares
(provided that it is credited as fully paid) at a price not exceeding £1 for all
the sterling deferred shares redeemed at any one time (to be paid on such
date as the Board shall select as the date of redemption to such one of the
holders, if more than one, as may be selected by lot) without the requirement
to give notice to the holder(s) of the sterling deferred shares; (vii) if any holder
of a sterling deferred share to be redeemed fails or refuses to surrender the
share certificate(s) or indemnity for such sterling deferred share or if the holder
selected by lot to receive the redemption monies fails or refuses to accept the
redemption monies payable in respect of it, such sterling deferred share will,
notwithstanding the foregoing, be redeemed and cancelled by the Company
and, in the event of a failure or refusal to accept the redemption monies, the
Company will retain such money and hold it on trust for the selected holder
without interest, and, in each case, the Company will have no further
obligation whatsoever to the holder of such sterling deferred share; and
(viii) no sterling deferred share will be redeemed otherwise than out of
distributable profits or the proceeds of a fresh issue of shares made for the
purposes of the redemption or out of capital to the extent permitted by the
legislation.
Calls on shares
The Board can call on shareholders to pay any money which has not yet
been paid to the Company for their shares. This includes the nominal value of
the shares and any premium which may be payable on those shares. The
Board can also make calls on people who are entitled to shares by law.
Winding-up of the Company
If the Company is voluntarily wound up, the liquidator can distribute to
shareholders any assets remaining after the liquidator’s fees and expenses
have been paid and all sums due to prior-ranking creditors (as defined under
the laws of England) have been paid.
Sinking fund provisions
The shares are not subject to any sinking fund provision under the Articles or
as a matter of the laws of England.
Discriminating provisions
There are no provisions in the Articles discriminating against a shareholder
because of his ownership of a particular number of shares.
Limitations on rights to own shares
There are no limitations imposed by the Articles or the legislation on the rights
to own shares, including the right of non-residents or foreign persons to hold
or vote shares, other than limitations that would generally apply to all
shareholders.
Transfer of shares
There are no significant restrictions on the transfer of shares.
Except as set out below, any shareholder can transfer some or all of his
certificated shares to another person. A transfer of certificated shares must be
made in writing and either in the usual standard form or in any other form
approved by the Board.
Except as set out below, any shareholder can transfer some or all of his
CREST shares to another person. A transfer of CREST shares must be made
through CREST and must comply with the uncertificated securities rules.
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relevant payment date by virtue of a payment made by the dividend access
In particular, under their respective articles of association, Shell Transport and
trustee, the Company has a full and unconditional obligation to make
BG are each only able to pay a dividend on their respective dividend access
payment in respect of the outstanding part of such dividend entitlement
share which represents a proportional amount of the aggregate of any
immediately. Where amounts are paid by the dividend access trustee in one
dividend announced by the Company on the B shares in respect of the
currency and a dividend is declared by the Company in another currency,
relevant period, where such proportions are calculated by reference to, in the
the amounts so paid by the dividend access trustee will, for the purposes of
case of Shell Transport, the number of B shares in existence prior to
the comparison required by the two immediately preceding sentences, be
completion of the Company’s acquisition of BG (the Acquisition) and, in the
converted into the currency in which the Company has declared the dividend
case of BG, the number of B shares issued as part of the Acquisition, in each
at such rate as the Board shall consider appropriate. For the purposes of the
case as against the total number of B shares in issue immediately following
provisions referred to in this paragraph, the amount that the dividend access
completion of the Acquisition.
trustee has paid to any holder of B shares in respect of any particular
dividend paid by a subsidiary of the Company (a “specified dividend”) will
be deemed to include: (i) any amount that the dividend access trustee may be
compelled by law to withhold; (ii) a pro rata share of any tax that the
subsidiary paying the specified dividend is obliged to withhold or to deduct
from the same; and (iii) a pro rata share of any tax that is payable by the
dividend access trustee in respect of the specified dividend.
Operation of the dividend access mechanism
If, in connection with the announcement of a dividend by the Company on B
shares, the Board of Shell Transport and/or the Board of BG elects to declare
and pay a dividend on their respective dividend access shares to the Trustee,
the holders of B shares will be beneficially entitled to receive their share of
those dividends pursuant to the declaration of trust (and arrangements will be
made to ensure that the dividend is paid in the same currency in which they
The Board can offer shareholders of ordinary shares (excluding any
would have received a dividend from the Company).
shareholder holding shares as treasury shares) the right to choose to receive
extra ordinary shares, which are credited as fully paid up, instead of some or
all of their cash dividend. Before the Board can do this, shareholders must
have passed an ordinary resolution authorising the Board to make this offer.
Dividend access mechanism for B shares
General
A and B shares are identical, except for the dividend access mechanism,
which will only apply to B shares. Dividends paid on A shares have a Dutch
source for tax purposes and are subject to Dutch withholding tax.
It is the expectation and the intention, although there can be no certainty,
that holders of B shares will receive dividends through the dividend access
mechanism. Any dividends paid on the dividend access shares will have a
UK source for UK and Dutch tax purposes. There will be no Dutch withholding
tax on such dividends. For further details regarding the tax treatment of
dividends paid on the A and B shares and American Depositary Shares
(ADSs), refer to “Shareholder information” on pages 222-223.
Description of dividend access mechanism
The “Shell” Transport and Trading Company, p.l.c., now The Shell Transport
and Trading Company Limited (Shell Transport), and BG Group plc, now BG
Group Limited (BG), have each issued a dividend access share to
Computershare Trustees (Jersey) Limited as Trustee. Pursuant to a declaration of
trust, the Trustee will hold any dividends paid in respect of the dividend access
shares on trust for the holders of B shares and will arrange for prompt
disbursement of such dividends to holders of B shares. Interest and other income
earned on unclaimed dividends will be for the account of Shell Transport and
BG and any dividends which are unclaimed after 12 years will revert to Shell
Transport and BG, as appropriate. Holders of B shares will not have any
interest in either dividend access share and will not have any rights against Shell
Transport and BG as issuers of the dividend access shares. The only assets held
on trust for the benefit of the holders of B shares will be dividends paid to the
Trustee in respect of the dividend access shares.
The declaration and payment of dividends on the dividend access shares will
require board action by Shell Transport and BG (as applicable) and will be
subject to any applicable limitations in law or in the Shell Transport or BG (as
appropriate) articles of association in effect. In no event will the aggregate
amount of the dividend paid by Shell Transport and BG under the dividend
access mechanism for a particular period exceed the aggregate of the
dividend announced by the Board of the Company on B shares in respect of
the same period (after giving effect to currency conversions).
If any amount is paid by Shell Transport or BG by way of a dividend on the
dividend access shares and paid by the Trustee to any holder of B shares,
the dividend which the Company would otherwise pay on B shares will be
reduced by an amount equal to the amount paid to such holders of B shares
by the Trustee.
The Company will have a full and unconditional obligation, in the event that
the Trustee does not pay an amount to holders of B shares on a cash
dividend payment date (even if that amount has been paid to the Trustee), to
pay immediately the dividend announced on B shares. The right of holders of
B shares to receive distributions from the Trustee will be reduced by an
amount equal to the amount of any payment actually made by the Company
on account of any dividend on B shares.
If for any reason no dividend is paid on the dividend access shares, holders
of B shares will only receive dividends from the Company directly. Any
payment by the Company will be subject to Dutch withholding tax (unless an
exemption is obtained under Dutch law or under the provisions of an
applicable tax treaty).
The Dutch tax treatment of dividends paid under the dividend access
mechanism has been confirmed by the Dutch Revenue Service in an
agreement (“vaststellingsovereenkomst”) with the Company and N.V.
Koninklijke Nederlandsche Petroleum Maatschappij (Royal Dutch Petroleum
Company) dated October 26, 2004, as supplemented and amended by an
agreement between the same parties dated April 25, 2005, and a final
settlement agreement in connection with the Acquisition dated November 9,
2015. The agreements state, among other things, that dividend distributions
on the dividend access shares by Shell Transport and/or BG will not be
subject to Dutch withholding tax provided that the dividend access
mechanism is structured and operated substantially as set out above.
The Company may not extend the dividend access mechanism to any future
issuances of B shares without prior consultation with the Dutch Revenue Service.
Accordingly, the Company would not expect to issue additional B shares
unless confirmation from the Dutch Revenue Service was obtained or the
Company were to determine that the continued operation of the dividend
access mechanism was unnecessary. Any further issue of B shares is subject
to advance consultation with the Dutch Revenue Service.
The dividend access mechanism may be suspended or terminated at any time
by the Company’s Directors or the Directors of Shell Transport or BG, for any
reason and without financial recompense. This might, for instance, occur in
response to changes in relevant tax legislation.
The daily operations of the Trust are administered on behalf of the Company
by the Trustee. Material financial information of the Trust is included in the
“Consolidated Financial Statements” and is therefore subject to the same
disclosure controls and procedures as Shell.
Pre-emption rights
Subject to the Act and the Listing Rules, any equity securities allotted by the
Company for cash must first be offered to shareholders in proportion to their
holdings. The Act and the Listing Rules allow for the disapplication of pre-
emption rights which may be waived by a special resolution of the
shareholders, either generally or specifically.
Voting
Currently, only the A and B shares have voting rights.
Changing the rights attached to the shares
The Act provides that the Articles can be amended by a special resolution.
The Articles provide that, if the legislation allows this, the rights attached to
any class of shares can be changed if this is approved either in writing by
shareholders holding at least three-quarters of the issued shares of that class
by amount (excluding any shares of that class held as treasury shares) or by a
special resolution passed at a separate meeting of the relevant shareholders.
At each such separate meeting, all of the provisions of the Articles relating to
proceedings at a general meeting apply, except that: (i) a quorum will be
present if at least one shareholder who is entitled to vote is present in person
or by proxy who owns at least one-third in amount of the issued shares of the
relevant class; (ii) any shareholder who is present in person or by proxy and
entitled to vote can demand a poll; and (iii) at an adjourned meeting, one
person entitled to vote and who holds shares of the class, or his proxy, will be
a quorum. These provisions are not more restrictive than required by law in
England.
If new shares are created or issued which rank equally with any other existing
shares, the rights of the existing shares will not be regarded as changed or
abrogated unless the terms of the existing shares expressly say otherwise.
Redemption provisions
The Company’s shares are not subject to any redemption provisions.
Rights attaching to the sterling deferred shares
The sterling deferred shares are (unlike the A and B shares) not ordinary
shares and, therefore, they have different rights and restrictions.
The sterling deferred shares have the following rights and restrictions: (i) on a
distribution of assets of the Company among its shareholders on a winding-
up, the holders of the sterling deferred shares will be entitled (such entitlement
ranking in priority to the rights of holders of ordinary shares) to receive an
amount equal to the aggregate of the capital paid up or credited as paid up
on each sterling deferred share; (ii) save as provided in (i), the holders of the
sterling deferred shares will not be entitled to any participation in the profits or
assets of the Company; (iii) the holders of sterling deferred shares will not be
entitled to receive notice of or to attend and/or speak or vote (whether on a
show of hands or on a poll) at general meetings of the Company; (iv) the
written consent of the holders of three-quarters in nominal value of the issued
sterling deferred shares or the sanction of a special resolution passed at a
separate general meeting of the holders of the sterling deferred shares is
required if the special rights and privileges attaching to the sterling deferred
shares are to be abrogated, or adversely varied or otherwise directly
adversely affected in any way (the creation, allotment or issue of shares or
securities which rank in priority to or equally with the sterling deferred shares,
or of any right to call for the allotment or issue of such shares or securities, is
for these purposes deemed not to be an abrogation or variation or to have an
effect on the rights and privileges attaching to sterling deferred shares); (v) all
provisions of the Articles relating to general meetings of the Company will
apply, with necessary modifications, to every general meeting of the holders
of the sterling deferred shares; (vi) subject to the legislation, the Company will
have the right at any time to redeem any such sterling deferred shares
(provided that it is credited as fully paid) at a price not exceeding £1 for all
the sterling deferred shares redeemed at any one time (to be paid on such
date as the Board shall select as the date of redemption to such one of the
holders, if more than one, as may be selected by lot) without the requirement
to give notice to the holder(s) of the sterling deferred shares; (vii) if any holder
of a sterling deferred share to be redeemed fails or refuses to surrender the
share certificate(s) or indemnity for such sterling deferred share or if the holder
selected by lot to receive the redemption monies fails or refuses to accept the
redemption monies payable in respect of it, such sterling deferred share will,
notwithstanding the foregoing, be redeemed and cancelled by the Company
and, in the event of a failure or refusal to accept the redemption monies, the
Company will retain such money and hold it on trust for the selected holder
without interest, and, in each case, the Company will have no further
obligation whatsoever to the holder of such sterling deferred share; and
(viii) no sterling deferred share will be redeemed otherwise than out of
distributable profits or the proceeds of a fresh issue of shares made for the
purposes of the redemption or out of capital to the extent permitted by the
legislation.
Calls on shares
The Board can call on shareholders to pay any money which has not yet
been paid to the Company for their shares. This includes the nominal value of
the shares and any premium which may be payable on those shares. The
Board can also make calls on people who are entitled to shares by law.
Winding-up of the Company
If the Company is voluntarily wound up, the liquidator can distribute to
shareholders any assets remaining after the liquidator’s fees and expenses
have been paid and all sums due to prior-ranking creditors (as defined under
the laws of England) have been paid.
Sinking fund provisions
The shares are not subject to any sinking fund provision under the Articles or
as a matter of the laws of England.
Discriminating provisions
There are no provisions in the Articles discriminating against a shareholder
because of his ownership of a particular number of shares.
Limitations on rights to own shares
There are no limitations imposed by the Articles or the legislation on the rights
to own shares, including the right of non-residents or foreign persons to hold
or vote shares, other than limitations that would generally apply to all
shareholders.
Transfer of shares
There are no significant restrictions on the transfer of shares.
Except as set out below, any shareholder can transfer some or all of his
certificated shares to another person. A transfer of certificated shares must be
made in writing and either in the usual standard form or in any other form
approved by the Board.
Except as set out below, any shareholder can transfer some or all of his
CREST shares to another person. A transfer of CREST shares must be made
through CREST and must comply with the uncertificated securities rules.
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corporate governance Continued
The Board can refuse to register the transfer of any shares which are not fully
paid. Further rights to decline registration are as follows:
Certificated shares
A share transfer form cannot be used to transfer more than one class of share.
Each class needs a separate form. Transfers cannot be in favour of more than
four joint holders. The share transfer form must be properly stamped to show
payment of any applicable stamp duty or certified or otherwise shown to the
satisfaction of the Board to be exempt from stamp duty and must be delivered
to the Company’s registered office, or any other place decided on by the
Board. The transfer form must be accompanied by the share certificate
relating to the share being transferred, unless the transfer is being made by a
person to whom the Company was not required to, and did not send, a
certificate. The Board can also ask (acting reasonably) for any other evidence
to show that the person wishing to transfer the share is entitled to do so and,
if the share transfer form is signed by another person on behalf of the person
making the transfer, evidence of the authority of that person to do so.
CREST shares
Registration of a transfer of CREST shares can be refused in the circumstances
set out in the uncertificated securities rules. Transfers cannot be in favour of
more than four joint holders.
Where a share has not yet been entered on the register, the Board can
recognise a renunciation by that person of his right to the share in favour of
some other person. Such renunciation will be treated as a transfer and the
Board has the same powers of refusing to give effect to such a renunciation
as if it were a transfer.
Partly paid shares
The Articles provide that, if a shareholder fails to pay the Company any
amount due on his partly paid shares, the Board can enforce the Company’s
lien by selling all or any of the partly paid shares in any way they decide
(subject to certain conditions).
Change of control
There are no provisions in the Articles that would delay, defer or prevent a
change of control.
Capital changes
The conditions imposed by the Articles for changes in capital are not more
stringent than those required by the applicable laws of England.
Disputes between a shareholder or ADS holder and Royal Dutch Shell
plc, any subsidiary, Director or professional service provider
The Articles generally require that, except as noted below, all disputes:
(i) between a shareholder in such capacity and the Company and/or its
Directors, arising out of or in connection with the Articles or otherwise; (ii) so far
as permitted by law, between the Company and any of its Directors in their
capacities as such or as the Company’s employees, including all claims made
by the Company or on behalf of the Company against any or all of its Directors;
(iii) between a shareholder in such capacity and the Company’s professional
service providers (which could include the Company’s auditors, legal counsel,
bankers and ADS depositaries); and/or (iv) between the Company and its
professional service providers arising in connection with any claim within the
scope of (iii) above, shall be exclusively and finally resolved by arbitration under
the Rules of Arbitration of the International Chamber of Commerce (ICC), as
amended from time to time. This would include all disputes arising under UK,
Dutch or US law (including securities laws), or under any other law, between
parties covered by the arbitration provision. Accordingly, the ability of
shareholders to obtain monetary or other relief, including in respect of securities
law claims, may be determined in accordance with these provisions, and the
ability of shareholders to obtain monetary or other relief may therefore be limited
and their cost of seeking and obtaining recoveries in a dispute may be higher
than otherwise would be the case.
The tribunal shall consist of three arbitrators to be appointed in accordance
with the ICC rules. The chairman of the tribunal must have at least 20 years’
experience as a lawyer qualified to practise in a common-law jurisdiction
which is within the Commonwealth (as constituted on May 12, 2005) and
each other arbitrator must have at least 20 years’ experience as a qualified
lawyer. The place of arbitration must be The Hague, the Netherlands; and
the language of the arbitration must be English.
Pursuant to the exclusive jurisdiction provision in the Articles, if a court or other
competent authority in any jurisdiction determines that the arbitration requirement
described above is invalid or unenforceable in relation to any particular dispute
in that jurisdiction, then that dispute may only be brought in the courts of
England and Wales, as is the case with any derivative claim brought under the
Act. The governing law of the Articles is the substantive law of England.
Disputes relating to the Company’s failure or alleged failure to pay all or part
of a dividend which has been announced and which has fallen due for
payment will not be subject to the arbitration and exclusive jurisdiction
provisions of the Articles. Any derivative claim brought under the Act will not
be subject to the arbitration provisions of the Articles.
Pursuant to the relevant depositary agreement, each holder of ADSs is bound
by the arbitration and exclusive jurisdiction provisions of the Articles as
described in this section as if that holder were a shareholder.
GENERAL MEETINGS
Under the applicable laws of England, the Company is required in each year to
hold an AGM of shareholders in addition to any other meeting of shareholders
that may be held. Each AGM must be held in the period six months from the
date following the Company’s accounting reference date. Additionally,
shareholders may submit resolutions in accordance with Section 338 of the Act.
Directors have the power to convene a general meeting of shareholders at
any time. In addition, Directors are required to call a general meeting once
requests to do so have been received by the Company from shareholders
representing at least 5% of such paid-up capital of the Company as carries
voting rights at general meetings of the Company (excluding any paid-up
capital held as treasury shares) pursuant to Section 303 of the Act. A request
for a general meeting must state the general nature of the business to be dealt
with at the meeting and must be authenticated by the requesting shareholders.
If Directors fail to call such a meeting within 21 days from receipt of such
requests, and on a date not more than 28 days after the date of the notice
convening the meeting, the shareholders that requested the general meeting,
or any of them representing more than half of the total voting rights of all
shareholders that requested the meeting, may themselves convene a general
meeting which must be called for a date not more than three months after the
date upon which the Directors became subject to the requirement to call a
general meeting. Any such meeting must be convened in the same manner,
as nearly as possible, as that in which meetings are required to be convened
by the Directors of the Company.
Under the Act, the Company is required to give at least 21 clear days’ notice
of any AGM or, except where the conditions in Section 307A of the Act
apply, any other general meeting of the Company. In addition, the Company
complies with the Code which currently states that notices of AGMs should be
sent to shareholders at least 20 working days before the meeting.
The Articles require that, in addition to any requirements under the legislation,
the notice for any general meeting must state where the meeting is to be held
(the principal meeting place) and the location of any satellite meeting place,
which shall be identified as such in the notice as well as details of any
arrangements made for those persons not entitled to attend a general meeting to
be able to view and hear the proceedings (making it clear that participation in
those arrangements will not amount to attendance at the meeting to which the
notice relates). At the same time that notice is given for any general meeting, an
announcement of the date, time and place of that meeting will, if practical, be
published in a national newspaper in the Netherlands.
A shareholder is entitled to appoint a proxy (who is not required to be
at the date of delivery of the restriction notice, the restriction notice can also
another shareholder) to represent and vote on behalf of the shareholder at
contain the following further restrictions: (i) the Board can withhold any
any general meeting of shareholders, including the AGM, if a duly completed
dividend or part of a dividend (including scrip dividend) or other money
form of proxy has been received by the Company within the relevant
which would otherwise be payable in respect of the identified shares without
deadlines (in general, where a poll is not demanded, 48 hours (or such
any liability to pay interest when such money is finally paid to the
shorter time as the Board decides) before the meeting).
shareholder; and (ii) the Board can refuse to register a transfer of any of the
identified shares which are certificated shares unless the Board is satisfied that
Before a general meeting starts to do business, there must be a quorum
they have been sold outright to an independent third party (as specified in the
present. Save as in relation to adjourned meetings, a quorum for all purposes
Articles). Once a restriction notice has been given, the Board is free to cancel
is two people who are entitled to vote. They can be shareholders who are
it or exclude any shares from it at any time the Board thinks fit. In addition,
personally present, proxies for shareholders, or a combination of both. If a
the Board must cancel the restriction notice within seven days of being
quorum is not present, a chairman of the meeting can still be chosen and this
satisfied that all of the information requested in the statutory notice has been
will not be treated as part of the business of the meeting.
given. Also, where any of the identified shares are sold and the Board is
satisfied that they were sold outright to an independent third party, it must
If a quorum is not present within five minutes of the time fixed for a general
cancel the restriction notice within seven days of receipt of notification of the
meeting to start or within any longer period not exceeding one hour which the
sale. The Articles do not restrict in any way the provision of the legislation
chairman of the meeting can decide, or if a quorum ceases to be present
which applies to failures to comply with notices under the legislation.
during a general meeting: (i) if the meeting was called by shareholders, it will
be cancelled; (ii) any other meeting will be adjourned to a day (being not
The UK City Code on Takeovers and Mergers (the Takeover Code) imposes
less than 10 days later, excluding the day on which it is adjourned and the
disclosure obligations on parties subject to the Takeover Code’s disclosure
day for which it is reconvened) with the time and place decided upon by the
regime. The Takeover Code requires that an opening position disclosure be
chairman of the meeting; and (iii) one shareholder present in person or by
made by: (i) an offeror company after the announcement that first identifies it as
proxy and entitled to vote will constitute a quorum at any such adjourned
an offeror and after the announcement that first identifies a competing securities
general meeting and any notice of such an adjourned meeting will say this.
exchange offeror; and (ii) an offeree company after the commencement of an
Notice of cancellation of a proxy’s right to vote must be received at the
exchange offeror. An opening position disclosure must be made by any person
Company’s registered office (or other place specified by the Company for
that is interested in 1% or more of any class of relevant securities of the offeree
receipt) not later than the last time at which a proxy form should have been
company or any securities exchange offeror. The Takeover Code also requires
received to be valid for use at the meeting or on the holding of the poll at
any person who is, or becomes, interested in 1% or more of any class of
offer period and, if later, after the announcement that first identifies any securities
which the vote was given or the poll taken.
DEEMED DELIVERY OF DOCUMENTS
relevant securities of an offeree company or any securities exchange offeror to
make a dealing disclosure if the person deals in any relevant securities of the
offeree company or any securities exchange offeror during an offer period.
Under the Articles, if any notice, document or other information is given, sent
Where two or more persons act together pursuant to an agreement or
or supplied by the Company by inland post, it is treated as being received
understanding, whether formal or informal, to acquire or control an interest in
the day after it was posted if first class post (or a service similar to first class
relevant securities, they will normally be deemed to be a single person for the
post) was used, or 72 hours after it was posted if first class post (or a service
purpose of the relevant provisions of the Takeover Code.
similar to first class post) was not used. If a notice or document is sent by the
Company by airmail, it is treated as being received 72 hours after it was
Rule 13d-1 of the US Securities Exchange Act of 1934 requires that a person
posted. Any notice, document or other information left at a shareholder’s
or group that acquires beneficial ownership of more than 5% of equity
registered address or a postal address notified to the Company in
securities registered under the US Securities Exchange Act, and that is not
accordance with the Articles by a shareholder or a person entitled to a share
eligible to file a short-form report, disclose such information to the SEC within
by law is treated as being received on the day on which it was left.
10 days after the acquisition.
THRESHOLD FOR DISCLOSURE OF SHARE OWNERSHIP
The Disclosure Guidance and Transparency Rules of the UK’s Financial Conduct
Authority impose an obligation on persons [A] to notify the Company of the
percentage of voting rights held as a shareholder, or through the direct or indirect
holding of financial instruments, if the percentage of voting rights held in the
Company reaches, exceeds or falls below 3% or any 1% threshold above 3%.
[A] For this purpose “persons” includes companies, natural persons, legal persons and partnerships.
FURTHER INFORMATION
The following information can be found at www.shell.com/investor:
■ the terms of reference of the Audit Committee, Corporate and Social
Responsibility Committee, Nomination and Succession Committee and
Remuneration Committee (these documents explain the Committees’ roles
and the authority the Board delegates to them);
■ the full list of matters reserved to the Board for decision;
As noted in the Articles, Section 793 of the Act governs the Company’s right
to investigate who has an interest in its shares. Under that section, a public
company may give notice to any person it knows or has reasonable cause to
believe is, or was at any time in the preceding three years, interested in its
shares in order to obtain certain information about that interest.
■ Shell General Business Principles;
■ Shell Code of Conduct;
■ Articles of Association.
■ Code of Ethics for Executive Directors and Senior Financial Officers; and
Signed on behalf of the Board
The Articles provide that, when a person receives a statutory notice, he has
14 days to comply with it. If he does not do so or if he makes a statement in
response to the notice which is false or inadequate in some important way,
the Company can decide to restrict the rights relating to the identified shares
and send out a further notice to the shareholder, known as a restriction notice,
which will take effect when delivered. The restriction notice will state that the
identified shares no longer give the shareholder any right to attend or vote
either personally or by proxy at a shareholders’ meeting or to exercise any
right in relation to shareholders’ meetings. Where the identified shares make
up 0.25% or more (in amount or in number) of the existing shares of a class
/s/ Linda M. Szymanski
Linda M. Szymanski
Company Secretary
March 14, 2018
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The Board can refuse to register the transfer of any shares which are not fully
The tribunal shall consist of three arbitrators to be appointed in accordance
paid. Further rights to decline registration are as follows:
Certificated shares
A share transfer form cannot be used to transfer more than one class of share.
Each class needs a separate form. Transfers cannot be in favour of more than
four joint holders. The share transfer form must be properly stamped to show
payment of any applicable stamp duty or certified or otherwise shown to the
satisfaction of the Board to be exempt from stamp duty and must be delivered
to the Company’s registered office, or any other place decided on by the
Board. The transfer form must be accompanied by the share certificate
relating to the share being transferred, unless the transfer is being made by a
person to whom the Company was not required to, and did not send, a
certificate. The Board can also ask (acting reasonably) for any other evidence
to show that the person wishing to transfer the share is entitled to do so and,
if the share transfer form is signed by another person on behalf of the person
making the transfer, evidence of the authority of that person to do so.
CREST shares
Registration of a transfer of CREST shares can be refused in the circumstances
set out in the uncertificated securities rules. Transfers cannot be in favour of
more than four joint holders.
Where a share has not yet been entered on the register, the Board can
recognise a renunciation by that person of his right to the share in favour of
some other person. Such renunciation will be treated as a transfer and the
Board has the same powers of refusing to give effect to such a renunciation
with the ICC rules. The chairman of the tribunal must have at least 20 years’
experience as a lawyer qualified to practise in a common-law jurisdiction
which is within the Commonwealth (as constituted on May 12, 2005) and
each other arbitrator must have at least 20 years’ experience as a qualified
lawyer. The place of arbitration must be The Hague, the Netherlands; and
the language of the arbitration must be English.
Pursuant to the exclusive jurisdiction provision in the Articles, if a court or other
competent authority in any jurisdiction determines that the arbitration requirement
described above is invalid or unenforceable in relation to any particular dispute
in that jurisdiction, then that dispute may only be brought in the courts of
England and Wales, as is the case with any derivative claim brought under the
Act. The governing law of the Articles is the substantive law of England.
Disputes relating to the Company’s failure or alleged failure to pay all or part
of a dividend which has been announced and which has fallen due for
payment will not be subject to the arbitration and exclusive jurisdiction
provisions of the Articles. Any derivative claim brought under the Act will not
be subject to the arbitration provisions of the Articles.
Pursuant to the relevant depositary agreement, each holder of ADSs is bound
by the arbitration and exclusive jurisdiction provisions of the Articles as
described in this section as if that holder were a shareholder.
GENERAL MEETINGS
Under the applicable laws of England, the Company is required in each year to
hold an AGM of shareholders in addition to any other meeting of shareholders
that may be held. Each AGM must be held in the period six months from the
date following the Company’s accounting reference date. Additionally,
Directors have the power to convene a general meeting of shareholders at
any time. In addition, Directors are required to call a general meeting once
requests to do so have been received by the Company from shareholders
representing at least 5% of such paid-up capital of the Company as carries
capital held as treasury shares) pursuant to Section 303 of the Act. A request
for a general meeting must state the general nature of the business to be dealt
with at the meeting and must be authenticated by the requesting shareholders.
requests, and on a date not more than 28 days after the date of the notice
convening the meeting, the shareholders that requested the general meeting,
or any of them representing more than half of the total voting rights of all
shareholders that requested the meeting, may themselves convene a general
meeting which must be called for a date not more than three months after the
date upon which the Directors became subject to the requirement to call a
as if it were a transfer.
Partly paid shares
Change of control
change of control.
Capital changes
The Articles provide that, if a shareholder fails to pay the Company any
shareholders may submit resolutions in accordance with Section 338 of the Act.
amount due on his partly paid shares, the Board can enforce the Company’s
lien by selling all or any of the partly paid shares in any way they decide
(subject to certain conditions).
There are no provisions in the Articles that would delay, defer or prevent a
voting rights at general meetings of the Company (excluding any paid-up
The conditions imposed by the Articles for changes in capital are not more
If Directors fail to call such a meeting within 21 days from receipt of such
stringent than those required by the applicable laws of England.
Disputes between a shareholder or ADS holder and Royal Dutch Shell
plc, any subsidiary, Director or professional service provider
The Articles generally require that, except as noted below, all disputes:
(i) between a shareholder in such capacity and the Company and/or its
Directors, arising out of or in connection with the Articles or otherwise; (ii) so far
general meeting. Any such meeting must be convened in the same manner,
as permitted by law, between the Company and any of its Directors in their
as nearly as possible, as that in which meetings are required to be convened
capacities as such or as the Company’s employees, including all claims made
by the Directors of the Company.
by the Company or on behalf of the Company against any or all of its Directors;
(iii) between a shareholder in such capacity and the Company’s professional
Under the Act, the Company is required to give at least 21 clear days’ notice
service providers (which could include the Company’s auditors, legal counsel,
of any AGM or, except where the conditions in Section 307A of the Act
bankers and ADS depositaries); and/or (iv) between the Company and its
professional service providers arising in connection with any claim within the
apply, any other general meeting of the Company. In addition, the Company
complies with the Code which currently states that notices of AGMs should be
scope of (iii) above, shall be exclusively and finally resolved by arbitration under
sent to shareholders at least 20 working days before the meeting.
the Rules of Arbitration of the International Chamber of Commerce (ICC), as
amended from time to time. This would include all disputes arising under UK,
Dutch or US law (including securities laws), or under any other law, between
parties covered by the arbitration provision. Accordingly, the ability of
The Articles require that, in addition to any requirements under the legislation,
the notice for any general meeting must state where the meeting is to be held
(the principal meeting place) and the location of any satellite meeting place,
shareholders to obtain monetary or other relief, including in respect of securities
which shall be identified as such in the notice as well as details of any
law claims, may be determined in accordance with these provisions, and the
arrangements made for those persons not entitled to attend a general meeting to
ability of shareholders to obtain monetary or other relief may therefore be limited
be able to view and hear the proceedings (making it clear that participation in
and their cost of seeking and obtaining recoveries in a dispute may be higher
those arrangements will not amount to attendance at the meeting to which the
than otherwise would be the case.
notice relates). At the same time that notice is given for any general meeting, an
announcement of the date, time and place of that meeting will, if practical, be
published in a national newspaper in the Netherlands.
A shareholder is entitled to appoint a proxy (who is not required to be
another shareholder) to represent and vote on behalf of the shareholder at
any general meeting of shareholders, including the AGM, if a duly completed
form of proxy has been received by the Company within the relevant
deadlines (in general, where a poll is not demanded, 48 hours (or such
shorter time as the Board decides) before the meeting).
Before a general meeting starts to do business, there must be a quorum
present. Save as in relation to adjourned meetings, a quorum for all purposes
is two people who are entitled to vote. They can be shareholders who are
personally present, proxies for shareholders, or a combination of both. If a
quorum is not present, a chairman of the meeting can still be chosen and this
will not be treated as part of the business of the meeting.
If a quorum is not present within five minutes of the time fixed for a general
meeting to start or within any longer period not exceeding one hour which the
chairman of the meeting can decide, or if a quorum ceases to be present
during a general meeting: (i) if the meeting was called by shareholders, it will
be cancelled; (ii) any other meeting will be adjourned to a day (being not
less than 10 days later, excluding the day on which it is adjourned and the
day for which it is reconvened) with the time and place decided upon by the
chairman of the meeting; and (iii) one shareholder present in person or by
proxy and entitled to vote will constitute a quorum at any such adjourned
general meeting and any notice of such an adjourned meeting will say this.
Notice of cancellation of a proxy’s right to vote must be received at the
Company’s registered office (or other place specified by the Company for
receipt) not later than the last time at which a proxy form should have been
received to be valid for use at the meeting or on the holding of the poll at
which the vote was given or the poll taken.
DEEMED DELIVERY OF DOCUMENTS
Under the Articles, if any notice, document or other information is given, sent
or supplied by the Company by inland post, it is treated as being received
the day after it was posted if first class post (or a service similar to first class
post) was used, or 72 hours after it was posted if first class post (or a service
similar to first class post) was not used. If a notice or document is sent by the
Company by airmail, it is treated as being received 72 hours after it was
posted. Any notice, document or other information left at a shareholder’s
registered address or a postal address notified to the Company in
accordance with the Articles by a shareholder or a person entitled to a share
by law is treated as being received on the day on which it was left.
THRESHOLD FOR DISCLOSURE OF SHARE OWNERSHIP
The Disclosure Guidance and Transparency Rules of the UK’s Financial Conduct
Authority impose an obligation on persons [A] to notify the Company of the
percentage of voting rights held as a shareholder, or through the direct or indirect
holding of financial instruments, if the percentage of voting rights held in the
Company reaches, exceeds or falls below 3% or any 1% threshold above 3%.
[A] For this purpose “persons” includes companies, natural persons, legal persons and partnerships.
As noted in the Articles, Section 793 of the Act governs the Company’s right
to investigate who has an interest in its shares. Under that section, a public
company may give notice to any person it knows or has reasonable cause to
believe is, or was at any time in the preceding three years, interested in its
shares in order to obtain certain information about that interest.
The Articles provide that, when a person receives a statutory notice, he has
14 days to comply with it. If he does not do so or if he makes a statement in
response to the notice which is false or inadequate in some important way,
the Company can decide to restrict the rights relating to the identified shares
and send out a further notice to the shareholder, known as a restriction notice,
which will take effect when delivered. The restriction notice will state that the
identified shares no longer give the shareholder any right to attend or vote
either personally or by proxy at a shareholders’ meeting or to exercise any
right in relation to shareholders’ meetings. Where the identified shares make
up 0.25% or more (in amount or in number) of the existing shares of a class
at the date of delivery of the restriction notice, the restriction notice can also
contain the following further restrictions: (i) the Board can withhold any
dividend or part of a dividend (including scrip dividend) or other money
which would otherwise be payable in respect of the identified shares without
any liability to pay interest when such money is finally paid to the
shareholder; and (ii) the Board can refuse to register a transfer of any of the
identified shares which are certificated shares unless the Board is satisfied that
they have been sold outright to an independent third party (as specified in the
Articles). Once a restriction notice has been given, the Board is free to cancel
it or exclude any shares from it at any time the Board thinks fit. In addition,
the Board must cancel the restriction notice within seven days of being
satisfied that all of the information requested in the statutory notice has been
given. Also, where any of the identified shares are sold and the Board is
satisfied that they were sold outright to an independent third party, it must
cancel the restriction notice within seven days of receipt of notification of the
sale. The Articles do not restrict in any way the provision of the legislation
which applies to failures to comply with notices under the legislation.
The UK City Code on Takeovers and Mergers (the Takeover Code) imposes
disclosure obligations on parties subject to the Takeover Code’s disclosure
regime. The Takeover Code requires that an opening position disclosure be
made by: (i) an offeror company after the announcement that first identifies it as
an offeror and after the announcement that first identifies a competing securities
exchange offeror; and (ii) an offeree company after the commencement of an
offer period and, if later, after the announcement that first identifies any securities
exchange offeror. An opening position disclosure must be made by any person
that is interested in 1% or more of any class of relevant securities of the offeree
company or any securities exchange offeror. The Takeover Code also requires
any person who is, or becomes, interested in 1% or more of any class of
relevant securities of an offeree company or any securities exchange offeror to
make a dealing disclosure if the person deals in any relevant securities of the
offeree company or any securities exchange offeror during an offer period.
Where two or more persons act together pursuant to an agreement or
understanding, whether formal or informal, to acquire or control an interest in
relevant securities, they will normally be deemed to be a single person for the
purpose of the relevant provisions of the Takeover Code.
Rule 13d-1 of the US Securities Exchange Act of 1934 requires that a person
or group that acquires beneficial ownership of more than 5% of equity
securities registered under the US Securities Exchange Act, and that is not
eligible to file a short-form report, disclose such information to the SEC within
10 days after the acquisition.
FURTHER INFORMATION
The following information can be found at www.shell.com/investor:
■ the terms of reference of the Audit Committee, Corporate and Social
Responsibility Committee, Nomination and Succession Committee and
Remuneration Committee (these documents explain the Committees’ roles
and the authority the Board delegates to them);
■ the full list of matters reserved to the Board for decision;
■ Shell General Business Principles;
■ Shell Code of Conduct;
■ Code of Ethics for Executive Directors and Senior Financial Officers; and
■ Articles of Association.
Signed on behalf of the Board
/s/ Linda M. Szymanski
Linda M. Szymanski
Company Secretary
March 14, 2018
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Audit Committee Report
Audit Committee Report
Dear Shareholders,
I am pleased to present our annual Audit Committee Report which provides
an insight into our work, the issues handled and the focus of the Audit
Committee’s (AC) deliberations during 2017. The AC assists the Board in
fulfilling its oversight responsibilities in areas such as the integrity of financial
reporting, the effectiveness of the risk management and internal control system
and related governance and compliance matters. We are also responsible
for making a recommendation to the Board on the appointment or
reappointment of the external auditor.
At our meetings in 2017 we were briefed on and discussed a variety of
topics including special topics such as: key control matters relating to trading
and supply; information risk management; risks faced by Shell in the context
of a changing tax landscape; the governance and management of retirement
benefit arrangements; and the management and governance of non-Shell-
operated joint ventures. We received briefings from the Chief Internal Auditor
on the effectiveness of Shell’s risk management and internal control system
and on outcomes of significant audits and notable control weaknesses,
including potential improvements and mitigating actions agreed with
management. Specific attention was given to topics that we considered
particularly significant, including issues and judgements relating to Shell’s
2017 Consolidated Financial Statements, as discussed in more detail later in
this report together with how we addressed them.
Shell’s independence policy regarding the provision of services by the
external auditor was updated with effect from January 1, 2017, in order to
take account of changes in related standards and regulatory requirements,
and the independence of the external auditor was carefully monitored in line
with this policy.
We again carefully considered the appropriateness of the viability statement,
including whether the three-year period selected by the Board for the review
of Shell’s prospects, in line with the operating plan, remained suitable. We
concluded that this remained the case and was in line with prevailing market
practice. The factors which we further considered in support of the viability
statement are discussed later in this report.
As with the Board’s annual performance evaluation for 2017, the AC’s
performance evaluation was also facilitated by Lintstock Limited, a London-
based corporate advisory firm. Each AC member completed a confidential
questionnaire related to the AC’s performance via a secure web-based system
and our discussion of the outcomes was assisted by a performance evaluation
report produced by Lintstock. We concluded that the AC was effective and
able to fulfil its role in accordance with its terms of reference, which can be
found at www.shell.com/investor. As part of the evaluation the AC discussed
the priorities, in addition to the standing items, for its 2018 agenda,
including a visit to the trading and supply office in London and further
discussions on Shell’s insurance arrangements, IFRS 16 implementation,
regulatory developments and information risk management.
Finally, Guy Elliott and Gerard Kleisterlee stood down from the AC in March
and November 2017, respectively. I would like to thank each of them for
their outstanding contributions to the Committee. We were delighted to
welcome Gerrit Zalm and Roberto Setubal with effect from March and
October, respectively; their respective expertise will be valuable to the work
of the committee.
Euleen Goh
Chair of the Audit Committee
March 14, 2018
COMPOSITION OF THE AUDIT COMMITTEE
During 2017, the members of the AC were Euleen Goh (Chair of the AC),
Linda G. Stuntz, Guy Elliott (who stood down as a member on March 8,
2017), Gerard Kleisterlee (who stood down as a member on November 1,
2017), Gerrit Zalm (appointed as a member with effect from March 8,
2017) and Roberto Setubal (appointed as a member with effect from
October 1, 2017), all of whom are financially literate, independent Non-
executive Directors. In respect of the year ended December 31, 2017, for
the purposes of the UK Corporate Governance Code, Euleen Goh qualifies
as a person with “recent and relevant financial experience” and competence
in accounting and, for the purposes of US securities laws, an “audit
committee financial expert”. The AC had six meetings during the year; the AC
members’ attendances are shown on page 79. The experience of the AC
members outlined on pages 69-71 demonstrates that the AC as a whole has
competence relevant to the sector in which Shell operates. The AC members
have gained further knowledge and experience of the sector as a result of
their Board membership and through various site visits since their respective
appointments.
RESPONSIBILITIES
The key responsibilities of the AC are to assist the Board in fulfilling its
oversight responsibilities in relation to: financial reporting; the effectiveness of
the system of risk management and internal control; compliance with
applicable external legal and regulatory requirements; monitoring the
qualifications, expertise, resources and independence of both the internal and
external auditors; and assessing the internal and external auditors’
performance and effectiveness each year. The AC keeps the Board informed
of its activities and recommendations. Where the AC is not satisfied with, or if
it considers that action or improvement is required concerning any aspect of
financial reporting, risk management and internal control, compliance or
audit-related activities, it promptly reports these concerns to the Board.
ACTIVITIES
The AC covers a variety of topics in its meetings. These include both standing
items that the AC considers as a matter of course, typically in relation to the
quarterly unaudited financial statements, control issues, accounting policies
and judgements and reporting matters, and a range of topics relevant to
Shell’s control framework. The AC invites the Chief Executive Officer, the
Chief Financial Officer, the Legal Director, the Chief Internal Auditor, the
Executive Vice President Controller, the Vice President Accounting and
Reporting and the external auditor to attend each meeting. The Chair of the
Board also regularly attends the meetings as an observer. Other members of
management attend when requested. At every meeting, the AC holds private
sessions separately with the external auditor and the Chief Internal Auditor
without members of management, except for the Legal Director, being
present.
During 2017, the AC received comprehensive reports from management and
the internal and external auditors. In particular, it discussed with the Chief
Financial Officer, the Executive Vice President Controller, the Vice President
Accounting and Reporting and the external auditor issues that arose on
accounting policies, practices and reporting, and reviewed aggregated
whistle-blowing reports, internal audit reports and analyses of financial
reporting matters. The AC assessed the robustness of information risk
management, including the monitoring of access controls, use of lightly
managed applications, and the management of cyber threats and information
security incidents generally. To inform its assessment, the AC received an
update on the status of information risk management from the Chief
Information Officer to receive assurance on the appropriate levels of controls
and activities undertaken. The AC also reviewed assurances for: proved oil
and gas reserves; discount rates used for financial reporting, particularly with
respect to impairment testing; policy and procedures for the use of non-GAAP
measures/alternative performance measures; changes related to the joint
venture Nederlandse Aardolie Maatschappij B.V.’s earthquake-related
provisions, considering the latest hazard and risk assessment study; and the
As requested by the Board, the AC advised the Board of its view that the
effectiveness of financial controls. The AC discussed with the Chief Ethics and
Annual Report including the financial statements for the year ended December
Compliance Officer her annual report on compliance matters, including
31, 2017, taken as a whole, is fair, balanced and understandable and
regulatory developments and compliance risks.
provides the information necessary for shareholders to assess Shell’s position
and performance, business model and strategy (see the “Directors’ Report” on
The AC discussed with management the Company’s responses to matters
pages 73-74). To arrive at this conclusion, the AC critically assessed drafts of
raised by the UK Financial Reporting Council’s (FRC) Corporate Reporting
the Annual Report including the financial statements and discussed with
Review team as a result of the FRC’s thematic review of companies’
management the process undertaken to ensure that these requirements were
disclosures of significant accounting judgements and sources of estimation
met. This process included: verifying that the contents of the Annual Report are
uncertainty. The responses, including how Shell is proposing to use the review
consistent with the information shared with the Board and management during
to improve its disclosures, were welcomed by the FRC and enabled its
the year to support their assessment of Shell’s position and performance;
enquiries to be closed out. We note the inherent limitations of the FRC’s
ensuring that consistent materiality thresholds are applied for favourable and
review. The FRC stated that the scope of its review was based on the
unfavourable items; considering comments from the external auditor; and
Company’s 2016 Annual Report and Accounts and was conducted by staff
receiving assurance from the Executive Committee (EC). The AC further
of the FRC who have an understanding of the relevant legal and accounting
reviewed and considered the Directors’ half-year and full-year statements with
framework. The review did not benefit from detailed knowledge of the
respect to the going concern basis of accounting. As noted in the viability
Company’s business or an understanding of the underlying transactions
statement, the Board also reviews the strategic plan which takes account of
entered into. The FRC’s review only covered the specific disclosures relating
longer-term forecasts. Factors considered included: external environment
to this thematic review and did not provide assurance that the Company’s
factors such as oil and gas prices; the financial framework; Shell’s business
2016 Annual Report and Accounts are correct in all material respects.
portfolio developments; and the project funnel to support future growth.
The AC considered the viability statement and supported its inclusion in the
The AC also discussed the Company’s Annual Report and Accounts, half-year
“Directors’ Report” on page 74.
report and quarterly unaudited financial statements with management and the
external auditor. The AC reviewed, discussed and approved the internal audit
SYSTEM OF RISK MANAGEMENT AND INTERNAL
function’s annual audit plan. It also reviewed the internal audit’s performance
CONTROL
self-assessment report focusing on impact of the audits, people, audit quality
The AC reviewed, discussed and briefed the Board on the regular reports on
and compliance, and operational excellence. The AC assessed the
risks, controls and assurance, including the annual assessment of the system of
performance of the internal audit function as effective. The AC also reviewed,
risk management and internal control, in order to monitor the effectiveness of
considered and approved the external audit plan (including the audit scope
the procedures for internal control over financial reporting, compliance and
and materiality levels) and related remuneration to ensure that the level of fees
operational matters. This included the Company’s evaluation of the internal
would allow an effective and high-quality audit to be conducted by the
control over financial reporting as required under Section 404 of the
external auditor.
Sarbanes-Oxley Act.
In addition to the items discussed under significant issues on page 92, the AC
SIGNIFICANT ISSUES
also requested reports on matters that it deemed appropriate, for example:
accounting for retirement benefits; the impact of new accounting standards
not yet adopted (IFRS 9 Financial Instruments, IFRS 15 Revenue from
Contracts with Customers and IFRS 16 Leases); ethics and compliance;
litigation matters, including investigations by authorities in various countries
relating to Shell’s investment in Nigerian oil block OPL 245 and the 2011
auditors.
settlement of litigation pertaining to that block (see “Corporate governance”
on page 78 and Note 25 to the “Consolidated Financial Statements” on
pages 175-176); tax transparency; and new and impending regulatory
requirements.
The AC assessed the following significant issues, including those related to
Shell’s 2017 Consolidated Financial Statements. The AC was satisfied with
how each of the issues below was addressed. As part of this assessment, the
AC received reports, requested and received clarification from management,
and sought assurance and received input from the internal and external
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Audit Committee Report
Dear Shareholders,
I am pleased to present our annual Audit Committee Report which provides
an insight into our work, the issues handled and the focus of the Audit
Committee’s (AC) deliberations during 2017. The AC assists the Board in
fulfilling its oversight responsibilities in areas such as the integrity of financial
reporting, the effectiveness of the risk management and internal control system
and related governance and compliance matters. We are also responsible
for making a recommendation to the Board on the appointment or
reappointment of the external auditor.
At our meetings in 2017 we were briefed on and discussed a variety of
topics including special topics such as: key control matters relating to trading
and supply; information risk management; risks faced by Shell in the context
of a changing tax landscape; the governance and management of retirement
benefit arrangements; and the management and governance of non-Shell-
operated joint ventures. We received briefings from the Chief Internal Auditor
on the effectiveness of Shell’s risk management and internal control system
and on outcomes of significant audits and notable control weaknesses,
including potential improvements and mitigating actions agreed with
management. Specific attention was given to topics that we considered
particularly significant, including issues and judgements relating to Shell’s
2017 Consolidated Financial Statements, as discussed in more detail later in
this report together with how we addressed them.
Shell’s independence policy regarding the provision of services by the
external auditor was updated with effect from January 1, 2017, in order to
take account of changes in related standards and regulatory requirements,
and the independence of the external auditor was carefully monitored in line
with this policy.
We again carefully considered the appropriateness of the viability statement,
including whether the three-year period selected by the Board for the review
of Shell’s prospects, in line with the operating plan, remained suitable. We
concluded that this remained the case and was in line with prevailing market
practice. The factors which we further considered in support of the viability
statement are discussed later in this report.
As with the Board’s annual performance evaluation for 2017, the AC’s
performance evaluation was also facilitated by Lintstock Limited, a London-
based corporate advisory firm. Each AC member completed a confidential
COMPOSITION OF THE AUDIT COMMITTEE
During 2017, the members of the AC were Euleen Goh (Chair of the AC),
Linda G. Stuntz, Guy Elliott (who stood down as a member on March 8,
2017), Gerard Kleisterlee (who stood down as a member on November 1,
2017), Gerrit Zalm (appointed as a member with effect from March 8,
2017) and Roberto Setubal (appointed as a member with effect from
October 1, 2017), all of whom are financially literate, independent Non-
executive Directors. In respect of the year ended December 31, 2017, for
the purposes of the UK Corporate Governance Code, Euleen Goh qualifies
as a person with “recent and relevant financial experience” and competence
in accounting and, for the purposes of US securities laws, an “audit
committee financial expert”. The AC had six meetings during the year; the AC
members’ attendances are shown on page 79. The experience of the AC
members outlined on pages 69-71 demonstrates that the AC as a whole has
competence relevant to the sector in which Shell operates. The AC members
have gained further knowledge and experience of the sector as a result of
their Board membership and through various site visits since their respective
appointments.
RESPONSIBILITIES
The key responsibilities of the AC are to assist the Board in fulfilling its
oversight responsibilities in relation to: financial reporting; the effectiveness of
the system of risk management and internal control; compliance with
applicable external legal and regulatory requirements; monitoring the
qualifications, expertise, resources and independence of both the internal and
external auditors; and assessing the internal and external auditors’
performance and effectiveness each year. The AC keeps the Board informed
of its activities and recommendations. Where the AC is not satisfied with, or if
it considers that action or improvement is required concerning any aspect of
financial reporting, risk management and internal control, compliance or
audit-related activities, it promptly reports these concerns to the Board.
ACTIVITIES
The AC covers a variety of topics in its meetings. These include both standing
items that the AC considers as a matter of course, typically in relation to the
quarterly unaudited financial statements, control issues, accounting policies
and judgements and reporting matters, and a range of topics relevant to
Shell’s control framework. The AC invites the Chief Executive Officer, the
Chief Financial Officer, the Legal Director, the Chief Internal Auditor, the
Executive Vice President Controller, the Vice President Accounting and
Reporting and the external auditor to attend each meeting. The Chair of the
questionnaire related to the AC’s performance via a secure web-based system
Board also regularly attends the meetings as an observer. Other members of
and our discussion of the outcomes was assisted by a performance evaluation
management attend when requested. At every meeting, the AC holds private
report produced by Lintstock. We concluded that the AC was effective and
able to fulfil its role in accordance with its terms of reference, which can be
found at www.shell.com/investor. As part of the evaluation the AC discussed
the priorities, in addition to the standing items, for its 2018 agenda,
including a visit to the trading and supply office in London and further
discussions on Shell’s insurance arrangements, IFRS 16 implementation,
regulatory developments and information risk management.
Finally, Guy Elliott and Gerard Kleisterlee stood down from the AC in March
and November 2017, respectively. I would like to thank each of them for
their outstanding contributions to the Committee. We were delighted to
welcome Gerrit Zalm and Roberto Setubal with effect from March and
October, respectively; their respective expertise will be valuable to the work
of the committee.
Euleen Goh
Chair of the Audit Committee
March 14, 2018
sessions separately with the external auditor and the Chief Internal Auditor
without members of management, except for the Legal Director, being
present.
During 2017, the AC received comprehensive reports from management and
the internal and external auditors. In particular, it discussed with the Chief
Financial Officer, the Executive Vice President Controller, the Vice President
Accounting and Reporting and the external auditor issues that arose on
accounting policies, practices and reporting, and reviewed aggregated
whistle-blowing reports, internal audit reports and analyses of financial
reporting matters. The AC assessed the robustness of information risk
management, including the monitoring of access controls, use of lightly
managed applications, and the management of cyber threats and information
security incidents generally. To inform its assessment, the AC received an
update on the status of information risk management from the Chief
Information Officer to receive assurance on the appropriate levels of controls
and activities undertaken. The AC also reviewed assurances for: proved oil
and gas reserves; discount rates used for financial reporting, particularly with
respect to impairment testing; policy and procedures for the use of non-GAAP
measures/alternative performance measures; changes related to the joint
venture Nederlandse Aardolie Maatschappij B.V.’s earthquake-related
provisions, considering the latest hazard and risk assessment study; and the
effectiveness of financial controls. The AC discussed with the Chief Ethics and
Compliance Officer her annual report on compliance matters, including
regulatory developments and compliance risks.
The AC discussed with management the Company’s responses to matters
raised by the UK Financial Reporting Council’s (FRC) Corporate Reporting
Review team as a result of the FRC’s thematic review of companies’
disclosures of significant accounting judgements and sources of estimation
uncertainty. The responses, including how Shell is proposing to use the review
to improve its disclosures, were welcomed by the FRC and enabled its
enquiries to be closed out. We note the inherent limitations of the FRC’s
review. The FRC stated that the scope of its review was based on the
Company’s 2016 Annual Report and Accounts and was conducted by staff
of the FRC who have an understanding of the relevant legal and accounting
framework. The review did not benefit from detailed knowledge of the
Company’s business or an understanding of the underlying transactions
entered into. The FRC’s review only covered the specific disclosures relating
to this thematic review and did not provide assurance that the Company’s
2016 Annual Report and Accounts are correct in all material respects.
The AC also discussed the Company’s Annual Report and Accounts, half-year
report and quarterly unaudited financial statements with management and the
external auditor. The AC reviewed, discussed and approved the internal audit
function’s annual audit plan. It also reviewed the internal audit’s performance
self-assessment report focusing on impact of the audits, people, audit quality
and compliance, and operational excellence. The AC assessed the
performance of the internal audit function as effective. The AC also reviewed,
considered and approved the external audit plan (including the audit scope
and materiality levels) and related remuneration to ensure that the level of fees
would allow an effective and high-quality audit to be conducted by the
external auditor.
In addition to the items discussed under significant issues on page 92, the AC
also requested reports on matters that it deemed appropriate, for example:
accounting for retirement benefits; the impact of new accounting standards
not yet adopted (IFRS 9 Financial Instruments, IFRS 15 Revenue from
Contracts with Customers and IFRS 16 Leases); ethics and compliance;
litigation matters, including investigations by authorities in various countries
relating to Shell’s investment in Nigerian oil block OPL 245 and the 2011
settlement of litigation pertaining to that block (see “Corporate governance”
on page 78 and Note 25 to the “Consolidated Financial Statements” on
pages 175-176); tax transparency; and new and impending regulatory
requirements.
As requested by the Board, the AC advised the Board of its view that the
Annual Report including the financial statements for the year ended December
31, 2017, taken as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to assess Shell’s position
and performance, business model and strategy (see the “Directors’ Report” on
pages 73-74). To arrive at this conclusion, the AC critically assessed drafts of
the Annual Report including the financial statements and discussed with
management the process undertaken to ensure that these requirements were
met. This process included: verifying that the contents of the Annual Report are
consistent with the information shared with the Board and management during
the year to support their assessment of Shell’s position and performance;
ensuring that consistent materiality thresholds are applied for favourable and
unfavourable items; considering comments from the external auditor; and
receiving assurance from the Executive Committee (EC). The AC further
reviewed and considered the Directors’ half-year and full-year statements with
respect to the going concern basis of accounting. As noted in the viability
statement, the Board also reviews the strategic plan which takes account of
longer-term forecasts. Factors considered included: external environment
factors such as oil and gas prices; the financial framework; Shell’s business
portfolio developments; and the project funnel to support future growth.
The AC considered the viability statement and supported its inclusion in the
“Directors’ Report” on page 74.
SYSTEM OF RISK MANAGEMENT AND INTERNAL
CONTROL
The AC reviewed, discussed and briefed the Board on the regular reports on
risks, controls and assurance, including the annual assessment of the system of
risk management and internal control, in order to monitor the effectiveness of
the procedures for internal control over financial reporting, compliance and
operational matters. This included the Company’s evaluation of the internal
control over financial reporting as required under Section 404 of the
Sarbanes-Oxley Act.
SIGNIFICANT ISSUES
The AC assessed the following significant issues, including those related to
Shell’s 2017 Consolidated Financial Statements. The AC was satisfied with
how each of the issues below was addressed. As part of this assessment, the
AC received reports, requested and received clarification from management,
and sought assurance and received input from the internal and external
auditors.
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audit committee report Continued
Significant issues
Subject
DISPOSALS
See Notes 5 and 29 to the
“Consolidated Financial
Statements” on pages 151 and
178.
IMPAIRMENTS
See Notes 2 and 8 to the
“Consolidated Financial
Statements” on pages 142-148
and 153-155.
Issue
As part of the disposal programme for 2016-2018,
several significant disposals were completed in 2017.
Prior to expected disposal, judgement is required in
determining whether a sale is highly probable and, if this is
the case, the accounting consequence is to change the
status to asset held for sale, which may result in an
impairment test.
Judgement may also be required in the accounting on
disposal, for example in estimating the amount of any
liabilities which have been retained by Shell.
The disposal of oil sands and in-situ assets in Canada
resulted in impairment and redundancy and restructuring
charges.
The separation of assets, liabilities and businesses of the
Motiva Enterprises LLC (Motiva) joint venture was a
complex transaction accounted for as a disposal of Shell’s
50% interest in Motiva and a subsequent business
acquisition.
How the AC addressed the issue
The AC examined the accounting for assets held for sale and
consequential disposals, including: the sale of shares in
Woodside in Australia; Upstream assets in the UK North
Sea, Ireland and Gabon; SADAF (the petrochemicals joint
venture in Al Jubail, Saudi Arabia); as well as a number of
smaller disposals. Particular attention was given to the
accounting for any retained obligations, the assumptions
used in determining any resulting charges and the tax
treatment.
With respect to the disposal of oil sands and in-situ assets in
Canada, the AC reviewed the accounting for the charges as
well as of the utilisation of proceeds to repay inter-company
loans.
The AC scrutinised the accounting for the separation of the
Motiva joint venture. The AC received information on the
purchase price allocation process and supported
management’s conclusions on the amount of goodwill
recognised as part of the transaction.
The carrying amount of an asset should be tested for
impairment when there is a change in circumstances such
as a reduction in performance, other than short-term, or
being classified as held for sale.
The oil and gas price outlook was reviewed against market
developments and benchmarks, and the potential impact of
certain price sensitivities were considered. The relevant
discount rates utilised were also reviewed.
Although oil and gas prices were on average higher in
2017 than in 2016, management decided to change
Shell’s long-term price forecasts downwards, following the
downward revision of the short-term price outlook in 2016.
The downward revision in forecasts was a trigger for
impairment testing.
The AC reviewed the impairment testing of various assets
and the impairment charges in respect of certain Integrated
Gas, Upstream and Downstream assets which were mainly
triggered by asset disposals and the changes in Shell’s oil
and gas price outlook.
TAXATION
See Notes 2 and 16 to the
“Consolidated Financial
Statements” on pages 142-148
and 160-162
The determination of tax assets and liabilities requires the
application of judgement as to the ultimate outcome, which
can change over time depending on facts and
circumstances. In particular, the recognition of deferred tax
assets requires management to make assumptions
regarding future profitability and is therefore inherently
uncertain.
The AC reviewed management updates and external auditor
assessments on certain tax matters. The AC discussed the
recoverability of deferred tax assets, particularly as part of
the 2017 disposals, and accepted the resulting assessments
of the deferred tax positions. The AC also considered the
impact on the financial results arising from the US tax law
reform enacted at the end of 2017.
RECOVERABILITY OF
GOVERNMENT RECEIVABLES
See Notes 2 and 11 to the
“Consolidated Financial
Statements” on pages 142-148
and 156.
DEPRECIATION, DEPLETION
AND AMORTISATION
See Notes 2 and 8 to the
“Consolidated Financial
Statements” on pages 142-148
and 153-155.
Updates were provided to the AC on the agreements
reached in relation to material government receivables,
notably in Egypt and Nigeria. The receivables were in
respect of various contested expenditures and associated
interest, tax, royalty and cost recovery disputes.
The AC reviewed and accepted management assessments
of the recoverability of the material receivables.
Upstream production assets are generally depreciated on
a unit-of-production basis over proved developed
reserves, which are calculated in accordance with
requirements based on yearly average prices. In the
current price environment, it was considered necessary to
apply other approaches for certain assets, in order that
the periodic depreciation charges more appropriately
reflect the expected utilisation of those assets.
Similar to the review carried out in 2016, the AC reviewed
the justification to use alternatives to determine the reserves
base applied in calculating unit-of-production depreciation
for certain Upstream assets, such as using management’s
expectations of future oil and gas prices rather than yearly
average prices. The AC accepted that this provides a more
appropriate phasing of periodic depreciation charges.
DECOMMISSIONING AND
RESTORATION PROVISIONS
See Note 18 to the
“Consolidated Financial
Statements” on page 166.
Management undertook a review of the methodology used
to calculate decommissioning and restoration provisions
and confirmed that it continues to be appropriate. It
provided the AC with the outcome of this review, including
insights into alternative methodologies.
The AC reviewed and accepted the methodology to arrive
at the decommissioning and restoration provisions.
IT CONTROL FRAMEWORK
Management has addressed improvements to the
information technology (IT) control framework. Additional
attention was provided to the further migration of BG
systems, standardisation of IT processes and user access
management.
The AC scrutinised actions taken to improve the IT controls,
and discussed the challenges with management. The AC
requested and were provided with additional information from
the internal and external auditors on IT controls.
CYBER-SECURITY
Information on Shell’s management of cyber-security risks
was presented to the AC.
The AC discussed the measures in place to mitigate against
these risks with the Chief Information Officer.
INTERNAL AUDITOR
included: professionalism in areas including competence, integrity and
The internal audit function is an independent and objective assurance function
objectivity; efficiency, covering aspects such as service level, cost efficiency
which aims to improve Shell’s overall control framework. The internal audit
and innovation in the audit process; thought leadership and value added;
function assists in the maintenance of a systematic and disciplined approach
and compliance with relevant legislative, regulatory and professional
to evaluate and improve the design and effectiveness of Shell’s risk
management, control and governance processes. The primary role of the
requirements. The AC concluded that EY had performed effectively.
internal audit function, through its assurance and investigation activities, is to
Following due consideration, the AC will recommend to the Board to propose
safeguard value by protecting Shell’s assets, reputation and sustainability in
to the 2018 AGM that EY be reappointed as the external auditor of the
relation to the organisation's defined goals and objectives. The AC defines
Company for the year ending December 31, 2018. There are no contractual
the responsibility and scope of the internal audit function and approves its
obligations that restrict the AC’s ability to make such a recommendation.
annual plan.
The Chief Internal Auditor periodically assesses whether the purpose,
from EY confirming its independence.
authority, and responsibility of the internal audit function continue to enable it
to accomplish its objectives. The result of this periodic assessment is
EY presented its views on the Annual Report including the financial statements for
communicated to the EC and AC. The Chief Internal Auditor maintains an
the year ended December 31, 2017, to the AC and to the Board.
As required under UK and US auditing standards, the AC received a letter
internal quality assurance and improvement programme, covering all aspects
of the internal audit activities, to evaluate the conformance of these activities
NON-AUDIT SERVICES
with the standards of the Institute of Internal Auditors. The programme also
The AC updated its independence policy in respect of the provision of
assesses the efficiency and effectiveness of the internal audit activities and
services by the external auditor with effect from January 1, 2017, to
identifies opportunities for improvement. The result of this annual assessment is
accommodate changes in related standard and regulatory requirements. This
communicated to the EC and AC, and includes a reconfirmation to the AC of
policy, designed to safeguard auditor objectivity and independence, includes
the continued validity of the charter of the internal audit function, or it
rules relating to the provision of audit services, audit-related services and other
proposes an update. At least every five years, the effectiveness and quality of
non-audit services, and stipulates which services require specific prior
the internal audit function is assessed externally and the report shared with the
approval by the AC.
AC. The next external assessment is due to be conducted in 2018.
The policy also defines prohibited services that are not to be provided by the
auditor as these represent a risk to external auditor independence. Prohibited
EXTERNAL AUDITOR
At the Annual General Meeting (AGM) in May 2016, the tender process [A]
services are any that relate to management decision taking or any other
for the appointment of the external auditor for the financial year 2016, which
service that would compromise auditor independence or the perception
had started in mid-2014, was concluded by shareholder approval for the
thereof. These prohibited services include all services listed as prohibited in
appointment of Ernst & Young LLP (EY) as the Company’s external auditor for
the UK and US auditor independence rules.
the year ending December 31, 2016. This approval ratified the appointment
of EY by the Board in April 2016 to fill the casual vacancy created by the
For certain services that are not prohibited, because of the knowledge and
resignation of PricewaterhouseCoopers LLP following the completion of its
experience of the external auditor and/or for reasons of confidentiality, it can
audit of the Company’s 2015 financial statements. The tender was carried
be more efficient or prudent to engage the external auditor rather than
out in compliance with The Statutory Audit Services for Large Companies
another party. This is particularly the case in relation to audit-related
Market Investigation (Mandatory Use of Competitive Tender Processes and
assurance services that are closely connected to the audit function where the
Audit Committee Responsibilities) Order 2014 effective January 1, 2015,
external auditor has the benefit of experience gained from work already
as issued by the Competition & Markets Authority in the UK.
performed as part of the audit.
At the AGM in May 2017, a resolution to reappoint EY as external auditor
interest risk in fact or in appearance. The AC reviews quarterly reports from
[A] In October 2015, Shell published a disclosure on its website providing a detailed overview of the
auditor tender process, which can be found on www.shell.com/investor.
until the conclusion of the next AGM was approved by shareholders. There
are no current plans to retender the appointment. The current external audit
partner is Allister Wilson, who has held this position since EY’s initial
appointment as external auditor for 2016.
Under the policy, the AC will only approve services to be carried out by the
external auditor or its affiliates where such services do not present a conflict of
management on the audit and non-audit services reported in accordance with
the policy or for which specific prior approval from the AC is being sought.
To the extent that the fee value of an additional audit service contract does
not individually exceed $500,000, then no prior approval of the AC is
required. All non-audit services where the fee for each individual contract
During 2017, the Audit Quality Review (AQR) team of the FRC conducted a
exceeds $50,000, including audit-related services, require individual prior
review of EY’s audit of Shell’s Consolidated Financial Statements for the year
approval by the AC. In each case where the audit or non-audit service
ended December 31, 2016. In December 2017, the AQR team provided
contract does not exceed the relevant threshold, the matter is subsequently
their final report to the Chair of the AC. The AC is pleased to note that none
reported to the next quarterly AC meeting.
of the AQR team’s findings were considered to be of sufficient significance to
be included in the AQR team’s report. Additionally, the AQR team’s report
For UK reporting purposes, the scope of the non-audit services (those that are
noted two particular areas where they considered EY’s audit work to be of a
not prohibited) contracted with the external auditor in 2017 consisted mainly
high standard, as well as two specific examples of good audit practice. The
of interim reviews and other audit-related assurance services and the
associated compensation amounted to 9% of total auditor’s remuneration.
AC welcomes the positive outcome of this regulatory review, particularly
given the fact that this was EY’s first audit of Shell. The AC evaluated the
effectiveness of EY and the external audit process in its second year as
FEES
auditor, taking into account the results of Shell management’s internal survey
Note 28 to the “Consolidated Financial Statements” on page 177 provides a
relating to EY’s performance over the financial year 2017 as well as views
and recommendations from management and the Chief Internal Auditor and
its own experiences with the external auditor. Key criteria of the evaluation
specification of the auditor’s remuneration.
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Significant issues
Subject
DISPOSALS
Issue
How the AC addressed the issue
As part of the disposal programme for 2016-2018,
The AC examined the accounting for assets held for sale and
See Notes 5 and 29 to the
“Consolidated Financial
several significant disposals were completed in 2017.
consequential disposals, including: the sale of shares in
Prior to expected disposal, judgement is required in
Woodside in Australia; Upstream assets in the UK North
Statements” on pages 151 and
determining whether a sale is highly probable and, if this is
Sea, Ireland and Gabon; SADAF (the petrochemicals joint
178.
the case, the accounting consequence is to change the
venture in Al Jubail, Saudi Arabia); as well as a number of
status to asset held for sale, which may result in an
impairment test.
Judgement may also be required in the accounting on
disposal, for example in estimating the amount of any
liabilities which have been retained by Shell.
The disposal of oil sands and in-situ assets in Canada
resulted in impairment and redundancy and restructuring
charges.
The separation of assets, liabilities and businesses of the
Motiva Enterprises LLC (Motiva) joint venture was a
complex transaction accounted for as a disposal of Shell’s
50% interest in Motiva and a subsequent business
acquisition.
smaller disposals. Particular attention was given to the
accounting for any retained obligations, the assumptions
used in determining any resulting charges and the tax
treatment.
loans.
With respect to the disposal of oil sands and in-situ assets in
Canada, the AC reviewed the accounting for the charges as
well as of the utilisation of proceeds to repay inter-company
The AC scrutinised the accounting for the separation of the
Motiva joint venture. The AC received information on the
purchase price allocation process and supported
management’s conclusions on the amount of goodwill
recognised as part of the transaction.
IMPAIRMENTS
See Notes 2 and 8 to the
“Consolidated Financial
The carrying amount of an asset should be tested for
The oil and gas price outlook was reviewed against market
impairment when there is a change in circumstances such
developments and benchmarks, and the potential impact of
as a reduction in performance, other than short-term, or
certain price sensitivities were considered. The relevant
Statements” on pages 142-148
being classified as held for sale.
discount rates utilised were also reviewed.
and 153-155.
Although oil and gas prices were on average higher in
The AC reviewed the impairment testing of various assets
2017 than in 2016, management decided to change
and the impairment charges in respect of certain Integrated
Shell’s long-term price forecasts downwards, following the
Gas, Upstream and Downstream assets which were mainly
downward revision of the short-term price outlook in 2016.
triggered by asset disposals and the changes in Shell’s oil
The downward revision in forecasts was a trigger for
and gas price outlook.
impairment testing.
TAXATION
The determination of tax assets and liabilities requires the
The AC reviewed management updates and external auditor
See Notes 2 and 16 to the
“Consolidated Financial
application of judgement as to the ultimate outcome, which
assessments on certain tax matters. The AC discussed the
can change over time depending on facts and
recoverability of deferred tax assets, particularly as part of
Statements” on pages 142-148
circumstances. In particular, the recognition of deferred tax
the 2017 disposals, and accepted the resulting assessments
and 160-162
assets requires management to make assumptions
regarding future profitability and is therefore inherently
of the deferred tax positions. The AC also considered the
impact on the financial results arising from the US tax law
uncertain.
reform enacted at the end of 2017.
RECOVERABILITY OF
Updates were provided to the AC on the agreements
The AC reviewed and accepted management assessments
GOVERNMENT RECEIVABLES
reached in relation to material government receivables,
of the recoverability of the material receivables.
See Notes 2 and 11 to the
“Consolidated Financial
notably in Egypt and Nigeria. The receivables were in
respect of various contested expenditures and associated
Statements” on pages 142-148
interest, tax, royalty and cost recovery disputes.
and 156.
DEPRECIATION, DEPLETION
Upstream production assets are generally depreciated on
Similar to the review carried out in 2016, the AC reviewed
AND AMORTISATION
See Notes 2 and 8 to the
“Consolidated Financial
a unit-of-production basis over proved developed
reserves, which are calculated in accordance with
requirements based on yearly average prices. In the
the justification to use alternatives to determine the reserves
base applied in calculating unit-of-production depreciation
for certain Upstream assets, such as using management’s
Statements” on pages 142-148
current price environment, it was considered necessary to
expectations of future oil and gas prices rather than yearly
and 153-155.
apply other approaches for certain assets, in order that
average prices. The AC accepted that this provides a more
the periodic depreciation charges more appropriately
appropriate phasing of periodic depreciation charges.
reflect the expected utilisation of those assets.
DECOMMISSIONING AND
RESTORATION PROVISIONS
See Note 18 to the
“Consolidated Financial
Statements” on page 166.
and confirmed that it continues to be appropriate. It
provided the AC with the outcome of this review, including
insights into alternative methodologies.
Management undertook a review of the methodology used
The AC reviewed and accepted the methodology to arrive
to calculate decommissioning and restoration provisions
at the decommissioning and restoration provisions.
IT CONTROL FRAMEWORK
Management has addressed improvements to the
The AC scrutinised actions taken to improve the IT controls,
information technology (IT) control framework. Additional
and discussed the challenges with management. The AC
attention was provided to the further migration of BG
requested and were provided with additional information from
systems, standardisation of IT processes and user access
the internal and external auditors on IT controls.
management.
CYBER-SECURITY
Information on Shell’s management of cyber-security risks
The AC discussed the measures in place to mitigate against
was presented to the AC.
these risks with the Chief Information Officer.
INTERNAL AUDITOR
The internal audit function is an independent and objective assurance function
which aims to improve Shell’s overall control framework. The internal audit
function assists in the maintenance of a systematic and disciplined approach
to evaluate and improve the design and effectiveness of Shell’s risk
management, control and governance processes. The primary role of the
internal audit function, through its assurance and investigation activities, is to
safeguard value by protecting Shell’s assets, reputation and sustainability in
relation to the organisation's defined goals and objectives. The AC defines
the responsibility and scope of the internal audit function and approves its
annual plan.
The Chief Internal Auditor periodically assesses whether the purpose,
authority, and responsibility of the internal audit function continue to enable it
to accomplish its objectives. The result of this periodic assessment is
communicated to the EC and AC. The Chief Internal Auditor maintains an
internal quality assurance and improvement programme, covering all aspects
of the internal audit activities, to evaluate the conformance of these activities
with the standards of the Institute of Internal Auditors. The programme also
assesses the efficiency and effectiveness of the internal audit activities and
identifies opportunities for improvement. The result of this annual assessment is
communicated to the EC and AC, and includes a reconfirmation to the AC of
the continued validity of the charter of the internal audit function, or it
proposes an update. At least every five years, the effectiveness and quality of
the internal audit function is assessed externally and the report shared with the
AC. The next external assessment is due to be conducted in 2018.
EXTERNAL AUDITOR
At the Annual General Meeting (AGM) in May 2016, the tender process [A]
for the appointment of the external auditor for the financial year 2016, which
had started in mid-2014, was concluded by shareholder approval for the
appointment of Ernst & Young LLP (EY) as the Company’s external auditor for
the year ending December 31, 2016. This approval ratified the appointment
of EY by the Board in April 2016 to fill the casual vacancy created by the
resignation of PricewaterhouseCoopers LLP following the completion of its
audit of the Company’s 2015 financial statements. The tender was carried
out in compliance with The Statutory Audit Services for Large Companies
Market Investigation (Mandatory Use of Competitive Tender Processes and
Audit Committee Responsibilities) Order 2014 effective January 1, 2015,
as issued by the Competition & Markets Authority in the UK.
[A] In October 2015, Shell published a disclosure on its website providing a detailed overview of the
auditor tender process, which can be found on www.shell.com/investor.
At the AGM in May 2017, a resolution to reappoint EY as external auditor
until the conclusion of the next AGM was approved by shareholders. There
are no current plans to retender the appointment. The current external audit
partner is Allister Wilson, who has held this position since EY’s initial
appointment as external auditor for 2016.
During 2017, the Audit Quality Review (AQR) team of the FRC conducted a
review of EY’s audit of Shell’s Consolidated Financial Statements for the year
ended December 31, 2016. In December 2017, the AQR team provided
their final report to the Chair of the AC. The AC is pleased to note that none
of the AQR team’s findings were considered to be of sufficient significance to
be included in the AQR team’s report. Additionally, the AQR team’s report
noted two particular areas where they considered EY’s audit work to be of a
high standard, as well as two specific examples of good audit practice. The
AC welcomes the positive outcome of this regulatory review, particularly
given the fact that this was EY’s first audit of Shell. The AC evaluated the
effectiveness of EY and the external audit process in its second year as
auditor, taking into account the results of Shell management’s internal survey
relating to EY’s performance over the financial year 2017 as well as views
and recommendations from management and the Chief Internal Auditor and
its own experiences with the external auditor. Key criteria of the evaluation
included: professionalism in areas including competence, integrity and
objectivity; efficiency, covering aspects such as service level, cost efficiency
and innovation in the audit process; thought leadership and value added;
and compliance with relevant legislative, regulatory and professional
requirements. The AC concluded that EY had performed effectively.
Following due consideration, the AC will recommend to the Board to propose
to the 2018 AGM that EY be reappointed as the external auditor of the
Company for the year ending December 31, 2018. There are no contractual
obligations that restrict the AC’s ability to make such a recommendation.
As required under UK and US auditing standards, the AC received a letter
from EY confirming its independence.
EY presented its views on the Annual Report including the financial statements for
the year ended December 31, 2017, to the AC and to the Board.
NON-AUDIT SERVICES
The AC updated its independence policy in respect of the provision of
services by the external auditor with effect from January 1, 2017, to
accommodate changes in related standard and regulatory requirements. This
policy, designed to safeguard auditor objectivity and independence, includes
rules relating to the provision of audit services, audit-related services and other
non-audit services, and stipulates which services require specific prior
approval by the AC.
The policy also defines prohibited services that are not to be provided by the
auditor as these represent a risk to external auditor independence. Prohibited
services are any that relate to management decision taking or any other
service that would compromise auditor independence or the perception
thereof. These prohibited services include all services listed as prohibited in
the UK and US auditor independence rules.
For certain services that are not prohibited, because of the knowledge and
experience of the external auditor and/or for reasons of confidentiality, it can
be more efficient or prudent to engage the external auditor rather than
another party. This is particularly the case in relation to audit-related
assurance services that are closely connected to the audit function where the
external auditor has the benefit of experience gained from work already
performed as part of the audit.
Under the policy, the AC will only approve services to be carried out by the
external auditor or its affiliates where such services do not present a conflict of
interest risk in fact or in appearance. The AC reviews quarterly reports from
management on the audit and non-audit services reported in accordance with
the policy or for which specific prior approval from the AC is being sought.
To the extent that the fee value of an additional audit service contract does
not individually exceed $500,000, then no prior approval of the AC is
required. All non-audit services where the fee for each individual contract
exceeds $50,000, including audit-related services, require individual prior
approval by the AC. In each case where the audit or non-audit service
contract does not exceed the relevant threshold, the matter is subsequently
reported to the next quarterly AC meeting.
For UK reporting purposes, the scope of the non-audit services (those that are
not prohibited) contracted with the external auditor in 2017 consisted mainly
of interim reviews and other audit-related assurance services and the
associated compensation amounted to 9% of total auditor’s remuneration.
FEES
Note 28 to the “Consolidated Financial Statements” on page 177 provides a
specification of the auditor’s remuneration.
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Directors’ Remuneration Report
Directors’ Remuneration Report
PRINCIPLES
The principles underpinning the Remuneration Committee’s approach to
executive remuneration serve as the foundation for everything we do, and are
listed below.
■ Alignment with Shell’s strategy: the Executive Directors’ compensation
package should be strongly linked to the achievement of stretching targets
that are seen as indicators of the execution of Shell’s strategy.
■ Pay for performance: the majority of the Executive Directors’ compensation
(excluding benefits and pensions) should be linked directly to Shell’s
performance through variable pay instruments.
■ Competitiveness: remuneration levels should be determined by reference
internally against Shell’s Senior Management and externally against
companies of comparable size, complexity and global scope.
■ Long-term creation of shareholder value: Executive Directors should align
their interests with those of shareholders by holding shares in Royal Dutch
Shell plc (the Company).
■ Consistency: the remuneration structure for Executive Directors should
generally be consistent with the remuneration structure for Shell’s Senior
Management. This consistency builds a culture of alignment with Shell’s
purpose and a common approach to sharing in Shell’s success.
■ Compliance: decisions should be made in the context of the Shell General
Business Principles and REMCO should ensure compliance with applicable
laws and corporate governance requirements when designing and
implementing policies and plans.
■ Risk assessment: the remuneration structures and rewards should meet risk-
assessment tests to ensure that shareholder interests are safeguarded and
that inappropriate actions are avoided.
STATEMENT BY THE CHAIR OF THE REMUNERATION
COMMITTEE
Dear Shareholders,
As Chair of REMCO, I am pleased to present the Directors’ Remuneration
Report for the year ended December 31, 2017. It sets out how we have
implemented the policy that was approved by shareholders at the 2017
Annual General Meeting (AGM), in accordance with the principles above.
It was gratifying to note 92% of votes were cast in favour of the new policy.
Your input, and voting outcomes in recent years, suggest that our policy and
approach are appropriate. Since the AGM, much of the Committee’s work has
centred on overseeing the implementation of the policy and monitoring its
performance.
STRATEGIC AMBITION AND LINK TO REMUNERATION
As REMCO, we believe that the direction of a company should be determined
by first agreeing on a strategic ambition and then setting a remuneration policy
that aligns with delivering on that ambition. To ensure alignment with Shell’s
intent to be a world-class investment, a number of key changes were made
with effect from January 1, 2017. This included (i) FCF, the sum of cash flow
from operating activities and cash flow from investing activities, replacing EPS
as a measure in the Long-term Incentive Plan, to reflect Shell’s focus on
strengthening its balance sheet; (ii) the re-balancing of operational excellence
measures in the annual bonus scorecard to reflect Shell’s strategic themes; and
(iii) the introduction of metrics for greenhouse gas management in the
scorecard. We also moved to embed the energy transition into the CEO’s
personal performance targets.
The LTIP measures support the strategic intent to deliver competitive returns on
capital employed and enhance FCF, while retaining total shareholder return
(TSR) as an important underpinning. We feel that it is too early to start
including long-term energy transition metrics in remuneration in a meaningful
way, not least because the New Energies business is not yet at scale. Shell’s
total capital employed was $283 billion at the end of 2017. It will take time
for our New Energies business to develop into a profitable and sizable
business for Shell. It is therefore included in the CEO’s individual performance
targets, rather than Shell-wide incentives. As this new business evolves and
matures, we may see it reflected in more specific performance measures.
In my statement last year, I shared with you that FCF would initially be
measured on an absolute basis in the LTIP as, following the BG acquisition,
Shell has a specific short-term priority to restructure the recently enlarged
portfolio, deliver a $30 billion divestment programme and reduce net debt.
I am pleased to see the focus on absolute FCF performance and the good
progress made with the programme and the debt reduction. As we have not
completed the divestment programme, we have concluded that we will
maintain FCF on an absolute basis for the 2018 LTIP award.
Shell’s strategy also underlines the importance of LNG, and, consequently, the
weighting of the LNG measure in the scorecard was raised when the measures
were re-balanced.
Our discussions with you around what are appropriate GHG targets for a
company to set, how to drive internal improvements, and how to inform and
report to external stakeholders on GHG-related matters, are evolving as
understanding and methodologies mature. We believe it is important to have
measures that are clear and simple to explain and understand. In 2017, the
GHG scorecard measures focused on three specific business areas: refining
and chemical plants in our Downstream business and flaring in our Integrated
Gas and Upstream businesses, which covered approximately 60% of our
direct and energy indirect operated emissions. For 2018, the GHG metrics
will evolve and cover close to 90% of Shell’s operated portfolio emissions.
This operational focus on GHG emissions intensity in the short term will help to
ensure the continued portfolio resilience to climate-related impacts as we
prepare for a longer-term energy transition.
LISTENING TO YOUR FEEDBACK
In a rapidly evolving remuneration landscape we attach great importance to a
continuous dialogue with institutional investors and other relevant stakeholders
and we spend considerable time reflecting on feedback received. We trust
you see this reflected in our updated policy. We have considered existing and
emerging views on alternative remuneration designs, but decided against
further change until broader investor consensus is clear.
We have clearly noted questions about the maximum quantum opportunity in
our current structure. REMCO believes that most of the Executive Directors’
compensation should be delivered through variable pay elements, whereby
outcome levels are predictable but conditional on the achievement of stretching
targets. We strongly believe that outcomes should not reward poor
performance and will use our discretion when necessary. Our remuneration
package is designed to achieve an average long-term payout at around target.
This is 590% of base salary for the CEO and the 10-year average CEO
payout has been approximately 550% of base salary. The outcomes are
proportional to Shell’s underlying performance and reflect REMCO’s
implementation of the policy. Indeed, during shareholder consultations,
investors largely acknowledged that REMCO has a track record of setting
stretching targets and ensuring that payments are in line with performance.
Moreover, the base salary, bonus and LTIP opportunities for the CEO and
Chief Financial Officer (CFO) have remained at similar levels for the past
decade.
We have also noted questions on threshold vesting levels for the LTIP and we
will continue to monitor evolving views on this topic. REMCO believes that
Shell’s LTIP structure is not directly comparable with that in many other
companies, given the emphasis we place on relative performance against a
small peer group of direct competitors, against which median performance
(third place in a group of five) is more challenging and is seen as target rather
than threshold performance. Outperforming the other oil majors across all
relative metrics is seen to represent significant stretch. This can be illustrated by
our historical outcomes, with average vesting over the last decade of 75% of
the initial award, or 37.5% of the total maximum opportunity.
PAY IN THE WIDER CONTEXT
improvements, primarily driven by a higher number of incidents reported in
REMCO believes in remuneration structures that are consistent with those of the
Downstream.
wider workforce, which provides for a shared culture and alignment with
Shell’s purpose, strategy and values. We pay close attention to pay levels and
conditions across Shell and make sure our remuneration packages are both
internally consistent and externally competitive. This ensures that the CEO’s pay
is not only externally benchmarked, but internally proportionate to that of the
CFO, Senior Management and across Shell. We have reviewed Shell’s 2016
CEO pay ratio relative to FTSE 30 and FTSE 100 companies and the various
potential outcomes show that we were in line with our peers. The comparison
with the FTSE 30 is illustrated below.
The CEO has provided strong leadership on the development of Shell’s
roadmap for the energy transition. The CEO is leading the discussion on our
ambition to reduce the net carbon footprint of Shell’s energy products in line
with society’s drive to align with the Paris Agreement goals, an industry first.
The New Energies strategic review was comprehensive, including an
assessment of financial information and differentiators, and extensively
discussed by the Board. In the next few years, the New Energies business will
be strengthened so that it can become a growth priority in the 2020s, and
position Shell as a key player in the world’s energy future. The New Energies
strategy is ambitious and integral to Shell’s strategic ambition to thrive in the
energy transition. Our strategy on climate change is discussed further in
“Climate change and energy transition” on pages 62-66.
DECISIONS MADE
Against the above-mentioned background, REMCO made the following
decisions regarding the remuneration of the Executive Directors.
Annual bonus
discretion was applied.
REMCO approved the annual bonus scorecard outcome of 1.13 and no
Individual performance factor
The Chair reviewed the CEO’s performance with REMCO, and the CEO
discussed the CFO’s performance with REMCO. Having considered the very
strong leadership the CEO has provided with regard to Shell’s position on the
energy transition, along with overall performance, and the CFO’s successful
transition into the role, REMCO determined to award them an individual
performance factor of 1.2 and 1.0, respectively.
LTIP outcome
However, it is difficult to reflect the CEO’s remuneration meaningfully by
Shell’s investment case is built on long-term sustainable performance and creating
reference to a single pay ratio figure in relation to the UK workforce, given the
long-term shareholder value. In an industry with an evolving energy mix
global nature of Shell. As a company, we provide equal pay for work of equal
landscape, it is important that Shell’s reward arrangements for Executive Directors
value in the respective countries in which we operate, not just because this is a
are aligned with this long-term outlook in our strategic thinking and growth, rather
legal requirement but because it is the right thing to do. In this context, we also
than short-term decision making. For this reason, we have long holding periods,
reviewed Shell’s UK gender pay gap outcomes and welcome the actions
significant shareholding requirements and the majority of our incentives are
being taken to address gender imbalance in our workforce.
2017 PERFORMANCE CONTEXT AND OUTCOMES
weighted towards the LTIP. Furthermore, the TSR underpin ensures the final LTIP
payout always reflects the shareholder experience over the performance period.
2017 was a transformative year, one in which Shell delivered on a number of
While 2017 was a year of strong financial performance for Shell, over the
fronts. It was a year of strong financial delivery from each of the businesses –
longer-term performance relative to the other oil majors has been mixed. There
FCF was more than $27 billion, production from new projects more than offset
was strong relative three-year performance in cash flow from operating
the impact of divestments, and there were record LNG liquefaction and sales
activities, median return on average capital employed (ROACE) and EPS
volumes.
performance, and the TSR outcome was disappointing. The 2015 LTIP award
vested below target at 70% (or 35% of maximum).
Cash flow from operating activities was around $36 billion, an above target
scorecard outcome, which illustrates the cash-generating capability of Shell’s
Overall, this resulted in the variable part of remuneration (annual bonus plus
portfolio, with each of our businesses successfully following a strategy focused
LTIP vesting) paying out below target, in line with the pay for performance
on cost savings, operational excellence and activities with high margins.
approach described earlier, which balances operational performance with
long-term competitive financial outcomes.
The overall score for operational excellence was near target, with mixed
performances on the individual measures within this section. There was strong
LOOKING AHEAD
project delivery performance, reflecting the organisation’s continued focus on
As a committee, we recognise the agenda of the year ahead given the
delivering projects within budget and on schedule, and outstanding
performance in delivering LNG liquefaction volumes. Production volumes were
below target, with performance impacted by the shutdown at our Pearl gas-to-
liquids plant. The combined refinery and chemicals plant availability measure
was below threshold, because of higher maintenance and unplanned
downtime.
continued focus and debate on executive pay, including evolving corporate
governance perspectives and the legislative introduction of CEO pay ratios
disclosure in the UK. We will also begin to assess key areas for review in
respect of the Directors’ Remuneration Policy in 2018, prior to putting it to a
binding vote at the 2020 AGM, and will continue to use shareholder
engagements as an opportunity to seek your input to ensure Shell’s
remuneration policy is aligned with Shell’s long-term strategy and with your
Sustainable development was near target overall. However, process safety
interests.
was disappointing and scored below threshold, after five years of
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Directors’ Remuneration Report
The principles underpinning the Remuneration Committee’s approach to
targets, rather than Shell-wide incentives. As this new business evolves and
executive remuneration serve as the foundation for everything we do, and are
matures, we may see it reflected in more specific performance measures.
business for Shell. It is therefore included in the CEO’s individual performance
PRINCIPLES
listed below.
■ Alignment with Shell’s strategy: the Executive Directors’ compensation
package should be strongly linked to the achievement of stretching targets
that are seen as indicators of the execution of Shell’s strategy.
■ Pay for performance: the majority of the Executive Directors’ compensation
(excluding benefits and pensions) should be linked directly to Shell’s
performance through variable pay instruments.
■ Competitiveness: remuneration levels should be determined by reference
internally against Shell’s Senior Management and externally against
companies of comparable size, complexity and global scope.
■ Long-term creation of shareholder value: Executive Directors should align
their interests with those of shareholders by holding shares in Royal Dutch
Shell plc (the Company).
■ Consistency: the remuneration structure for Executive Directors should
generally be consistent with the remuneration structure for Shell’s Senior
Management. This consistency builds a culture of alignment with Shell’s
purpose and a common approach to sharing in Shell’s success.
■ Compliance: decisions should be made in the context of the Shell General
Business Principles and REMCO should ensure compliance with applicable
laws and corporate governance requirements when designing and
implementing policies and plans.
In my statement last year, I shared with you that FCF would initially be
measured on an absolute basis in the LTIP as, following the BG acquisition,
Shell has a specific short-term priority to restructure the recently enlarged
portfolio, deliver a $30 billion divestment programme and reduce net debt.
I am pleased to see the focus on absolute FCF performance and the good
progress made with the programme and the debt reduction. As we have not
completed the divestment programme, we have concluded that we will
maintain FCF on an absolute basis for the 2018 LTIP award.
Shell’s strategy also underlines the importance of LNG, and, consequently, the
weighting of the LNG measure in the scorecard was raised when the measures
were re-balanced.
Our discussions with you around what are appropriate GHG targets for a
company to set, how to drive internal improvements, and how to inform and
report to external stakeholders on GHG-related matters, are evolving as
understanding and methodologies mature. We believe it is important to have
measures that are clear and simple to explain and understand. In 2017, the
GHG scorecard measures focused on three specific business areas: refining
and chemical plants in our Downstream business and flaring in our Integrated
Gas and Upstream businesses, which covered approximately 60% of our
direct and energy indirect operated emissions. For 2018, the GHG metrics
■ Risk assessment: the remuneration structures and rewards should meet risk-
will evolve and cover close to 90% of Shell’s operated portfolio emissions.
assessment tests to ensure that shareholder interests are safeguarded and
This operational focus on GHG emissions intensity in the short term will help to
that inappropriate actions are avoided.
STATEMENT BY THE CHAIR OF THE REMUNERATION
COMMITTEE
Dear Shareholders,
As Chair of REMCO, I am pleased to present the Directors’ Remuneration
Report for the year ended December 31, 2017. It sets out how we have
implemented the policy that was approved by shareholders at the 2017
Annual General Meeting (AGM), in accordance with the principles above.
It was gratifying to note 92% of votes were cast in favour of the new policy.
Your input, and voting outcomes in recent years, suggest that our policy and
approach are appropriate. Since the AGM, much of the Committee’s work has
centred on overseeing the implementation of the policy and monitoring its
performance.
STRATEGIC AMBITION AND LINK TO REMUNERATION
As REMCO, we believe that the direction of a company should be determined
by first agreeing on a strategic ambition and then setting a remuneration policy
that aligns with delivering on that ambition. To ensure alignment with Shell’s
intent to be a world-class investment, a number of key changes were made
with effect from January 1, 2017. This included (i) FCF, the sum of cash flow
from operating activities and cash flow from investing activities, replacing EPS
as a measure in the Long-term Incentive Plan, to reflect Shell’s focus on
ensure the continued portfolio resilience to climate-related impacts as we
prepare for a longer-term energy transition.
LISTENING TO YOUR FEEDBACK
In a rapidly evolving remuneration landscape we attach great importance to a
continuous dialogue with institutional investors and other relevant stakeholders
and we spend considerable time reflecting on feedback received. We trust
you see this reflected in our updated policy. We have considered existing and
emerging views on alternative remuneration designs, but decided against
further change until broader investor consensus is clear.
We have clearly noted questions about the maximum quantum opportunity in
our current structure. REMCO believes that most of the Executive Directors’
compensation should be delivered through variable pay elements, whereby
outcome levels are predictable but conditional on the achievement of stretching
targets. We strongly believe that outcomes should not reward poor
performance and will use our discretion when necessary. Our remuneration
package is designed to achieve an average long-term payout at around target.
This is 590% of base salary for the CEO and the 10-year average CEO
payout has been approximately 550% of base salary. The outcomes are
proportional to Shell’s underlying performance and reflect REMCO’s
implementation of the policy. Indeed, during shareholder consultations,
investors largely acknowledged that REMCO has a track record of setting
stretching targets and ensuring that payments are in line with performance.
Moreover, the base salary, bonus and LTIP opportunities for the CEO and
Chief Financial Officer (CFO) have remained at similar levels for the past
strengthening its balance sheet; (ii) the re-balancing of operational excellence
measures in the annual bonus scorecard to reflect Shell’s strategic themes; and
decade.
(iii) the introduction of metrics for greenhouse gas management in the
scorecard. We also moved to embed the energy transition into the CEO’s
personal performance targets.
The LTIP measures support the strategic intent to deliver competitive returns on
capital employed and enhance FCF, while retaining total shareholder return
(TSR) as an important underpinning. We feel that it is too early to start
including long-term energy transition metrics in remuneration in a meaningful
way, not least because the New Energies business is not yet at scale. Shell’s
total capital employed was $283 billion at the end of 2017. It will take time
for our New Energies business to develop into a profitable and sizable
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We have also noted questions on threshold vesting levels for the LTIP and we
will continue to monitor evolving views on this topic. REMCO believes that
Shell’s LTIP structure is not directly comparable with that in many other
companies, given the emphasis we place on relative performance against a
small peer group of direct competitors, against which median performance
(third place in a group of five) is more challenging and is seen as target rather
than threshold performance. Outperforming the other oil majors across all
relative metrics is seen to represent significant stretch. This can be illustrated by
our historical outcomes, with average vesting over the last decade of 75% of
the initial award, or 37.5% of the total maximum opportunity.
PAY IN THE WIDER CONTEXT
REMCO believes in remuneration structures that are consistent with those of the
wider workforce, which provides for a shared culture and alignment with
Shell’s purpose, strategy and values. We pay close attention to pay levels and
conditions across Shell and make sure our remuneration packages are both
internally consistent and externally competitive. This ensures that the CEO’s pay
is not only externally benchmarked, but internally proportionate to that of the
CFO, Senior Management and across Shell. We have reviewed Shell’s 2016
CEO pay ratio relative to FTSE 30 and FTSE 100 companies and the various
potential outcomes show that we were in line with our peers. The comparison
with the FTSE 30 is illustrated below.
CEO: Pay ratio
2016 FTSE 30 CEO single total figure against actual average
global employee costs
Lower quartile
Median
Lowest CEO pay ratio
Highest CEO pay ratio
Shell minimum pay ratio[B]
Shell 2016 CEO single total figure pay ratio[A]
Shell maximum pay ratio[B]
[A] See “Single total figure of remuneration for Executive Directors” on page 101.
[B] Calculated based on CEO pay scenarios as illustrated on page 114 against 2016
actual average global employee costs.
However, it is difficult to reflect the CEO’s remuneration meaningfully by
reference to a single pay ratio figure in relation to the UK workforce, given the
global nature of Shell. As a company, we provide equal pay for work of equal
value in the respective countries in which we operate, not just because this is a
legal requirement but because it is the right thing to do. In this context, we also
reviewed Shell’s UK gender pay gap outcomes and welcome the actions
being taken to address gender imbalance in our workforce.
2017 PERFORMANCE CONTEXT AND OUTCOMES
2017 was a transformative year, one in which Shell delivered on a number of
fronts. It was a year of strong financial delivery from each of the businesses –
FCF was more than $27 billion, production from new projects more than offset
the impact of divestments, and there were record LNG liquefaction and sales
volumes.
Cash flow from operating activities was around $36 billion, an above target
scorecard outcome, which illustrates the cash-generating capability of Shell’s
portfolio, with each of our businesses successfully following a strategy focused
on cost savings, operational excellence and activities with high margins.
The overall score for operational excellence was near target, with mixed
performances on the individual measures within this section. There was strong
project delivery performance, reflecting the organisation’s continued focus on
delivering projects within budget and on schedule, and outstanding
performance in delivering LNG liquefaction volumes. Production volumes were
below target, with performance impacted by the shutdown at our Pearl gas-to-
liquids plant. The combined refinery and chemicals plant availability measure
was below threshold, because of higher maintenance and unplanned
downtime.
Sustainable development was near target overall. However, process safety
was disappointing and scored below threshold, after five years of
improvements, primarily driven by a higher number of incidents reported in
Downstream.
The CEO has provided strong leadership on the development of Shell’s
roadmap for the energy transition. The CEO is leading the discussion on our
ambition to reduce the net carbon footprint of Shell’s energy products in line
with society’s drive to align with the Paris Agreement goals, an industry first.
The New Energies strategic review was comprehensive, including an
assessment of financial information and differentiators, and extensively
discussed by the Board. In the next few years, the New Energies business will
be strengthened so that it can become a growth priority in the 2020s, and
position Shell as a key player in the world’s energy future. The New Energies
strategy is ambitious and integral to Shell’s strategic ambition to thrive in the
energy transition. Our strategy on climate change is discussed further in
“Climate change and energy transition” on pages 62-66.
DECISIONS MADE
Against the above-mentioned background, REMCO made the following
decisions regarding the remuneration of the Executive Directors.
Annual bonus
REMCO approved the annual bonus scorecard outcome of 1.13 and no
discretion was applied.
Individual performance factor
The Chair reviewed the CEO’s performance with REMCO, and the CEO
discussed the CFO’s performance with REMCO. Having considered the very
strong leadership the CEO has provided with regard to Shell’s position on the
energy transition, along with overall performance, and the CFO’s successful
transition into the role, REMCO determined to award them an individual
performance factor of 1.2 and 1.0, respectively.
LTIP outcome
Shell’s investment case is built on long-term sustainable performance and creating
long-term shareholder value. In an industry with an evolving energy mix
landscape, it is important that Shell’s reward arrangements for Executive Directors
are aligned with this long-term outlook in our strategic thinking and growth, rather
than short-term decision making. For this reason, we have long holding periods,
significant shareholding requirements and the majority of our incentives are
weighted towards the LTIP. Furthermore, the TSR underpin ensures the final LTIP
payout always reflects the shareholder experience over the performance period.
While 2017 was a year of strong financial performance for Shell, over the
longer-term performance relative to the other oil majors has been mixed. There
was strong relative three-year performance in cash flow from operating
activities, median return on average capital employed (ROACE) and EPS
performance, and the TSR outcome was disappointing. The 2015 LTIP award
vested below target at 70% (or 35% of maximum).
Overall, this resulted in the variable part of remuneration (annual bonus plus
LTIP vesting) paying out below target, in line with the pay for performance
approach described earlier, which balances operational performance with
long-term competitive financial outcomes.
LOOKING AHEAD
As a committee, we recognise the agenda of the year ahead given the
continued focus and debate on executive pay, including evolving corporate
governance perspectives and the legislative introduction of CEO pay ratios
disclosure in the UK. We will also begin to assess key areas for review in
respect of the Directors’ Remuneration Policy in 2018, prior to putting it to a
binding vote at the 2020 AGM, and will continue to use shareholder
engagements as an opportunity to seek your input to ensure Shell’s
remuneration policy is aligned with Shell’s long-term strategy and with your
interests.
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directors’ remuneration report Continued
Annual Report on Remuneration
THIS REPORT
This Directors’ Remuneration Report for 2017 has been prepared in
accordance with relevant UK corporate governance and legal requirements, in
particular Schedule 8 of The Large and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008 (as amended). The Board has
approved this report.
This report consists of two further sections:
■ the Annual Report on Remuneration (describing 2017 remuneration as well
as the planned implementation of the Directors’ Remuneration Policy in
2018) which will be subject to an advisory vote at the 2018 AGM; and
■ the Directors’ Remuneration Policy which was approved by shareholders at
the 2017 AGM and is included for reference.
Gerard Kleisterlee
Chair of REMCO
March 14, 2018
The Annual Report on Remuneration sets out:
In addition, REMCO has the responsibility for determining the Chair of the
Board’s remuneration and for recommending and monitoring the level and
■ REMCO and its responsibilities and activities;
structure of remuneration for Senior Management.
■ an illustration of Shell’s strategy and link to remuneration and a summary of
remuneration policy implementation in 2017 and 2018;
REMCO operates within its terms of reference, which are regularly reviewed.
■ the statement of the planned implementation of policy in 2018; and
They were last updated on January 28, 2015, and are available at
■ Directors’ remuneration for 2017.
www.shell.com.
The base currency in this Annual Report on Remuneration is the euro, as this is
Advice from within Shell on various subjects, including the Executive Directors’
the currency of the base salary of the Executive Directors. Where amounts are
annual bonus scorecard architecture and the remuneration of Senior
shown in other currencies, an average exchange rate for the relevant year is
Management, was provided by:
used, unless a specific date is stated, in which case the average exchange
rate for the specific date is used.
■ Ben van Beurden, CEO;
REMUNERATION COMMITTEE
The following Directors were members of REMCO during 2017:
■ Stephanie Boyde, Executive Vice President Remuneration,
■ Ronan Cassidy, Chief Human Resources & Corporate Officer
and Secretary to REMCO; and
■ Gerard Kleisterlee (Chair of REMCO);
■ Catherine J. Hughes with effect from July 26, 2017;
■ Sir Nigel Sheinwald with effect from May 24, 2017;
■ Patricia A. Woertz until she stood down on May 23, 2017; and
Benefits & Services.
The Chair of the Board and the CEO were consulted on remuneration
proposals affecting the CFO.
■ Gerrit Zalm.
During 2017, REMCO met five times and its activities included:
Biographies of the current members are given on pages 70-71; REMCO
■ finalising the Directors’ Remuneration Policy;
meeting attendance is given on page 79.
REMCO’s key responsibilities in respect of Executive Directors include:
■ setting annual bonus performance measures and targets;
■ agreeing performance frameworks, setting targets and reviewing
■ determining vesting of the 2014 LTIP award for the CEO and the CFO;
■ determining actual remuneration and benefits; and
■ tracking external developments and assessing their impact on Shell’s
■ setting the remuneration policy;
performance;
■ determining contractual terms.
■ approving the 2016 Directors’ Remuneration Report;
■ consulting with major shareholders;
■ deciding on base salaries for the CEO and the CFO;
■ determining the 2016 annual bonus outcomes;
and
remuneration policy.
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THIS REPORT
This Directors’ Remuneration Report for 2017 has been prepared in
accordance with relevant UK corporate governance and legal requirements, in
particular Schedule 8 of The Large and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008 (as amended). The Board has
approved this report.
This report consists of two further sections:
■ the Annual Report on Remuneration (describing 2017 remuneration as well
as the planned implementation of the Directors’ Remuneration Policy in
2018) which will be subject to an advisory vote at the 2018 AGM; and
■ the Directors’ Remuneration Policy which was approved by shareholders at
the 2017 AGM and is included for reference.
Gerard Kleisterlee
Chair of REMCO
March 14, 2018
Annual Report on Remuneration
Annual Report on Remuneration
The Annual Report on Remuneration sets out:
■ REMCO and its responsibilities and activities;
■ an illustration of Shell’s strategy and link to remuneration and a summary of
In addition, REMCO has the responsibility for determining the Chair of the
Board’s remuneration and for recommending and monitoring the level and
structure of remuneration for Senior Management.
remuneration policy implementation in 2017 and 2018;
■ the statement of the planned implementation of policy in 2018; and
■ Directors’ remuneration for 2017.
REMCO operates within its terms of reference, which are regularly reviewed.
They were last updated on January 28, 2015, and are available at
www.shell.com.
The base currency in this Annual Report on Remuneration is the euro, as this is
the currency of the base salary of the Executive Directors. Where amounts are
shown in other currencies, an average exchange rate for the relevant year is
used, unless a specific date is stated, in which case the average exchange
rate for the specific date is used.
REMUNERATION COMMITTEE
The following Directors were members of REMCO during 2017:
■ Gerard Kleisterlee (Chair of REMCO);
■ Catherine J. Hughes with effect from July 26, 2017;
■ Sir Nigel Sheinwald with effect from May 24, 2017;
■ Patricia A. Woertz until she stood down on May 23, 2017; and
■ Gerrit Zalm.
Biographies of the current members are given on pages 70-71; REMCO
meeting attendance is given on page 79.
REMCO’s key responsibilities in respect of Executive Directors include:
■ setting the remuneration policy;
■ agreeing performance frameworks, setting targets and reviewing
performance;
■ determining actual remuneration and benefits; and
■ determining contractual terms.
Advice from within Shell on various subjects, including the Executive Directors’
annual bonus scorecard architecture and the remuneration of Senior
Management, was provided by:
■ Ben van Beurden, CEO;
■ Ronan Cassidy, Chief Human Resources & Corporate Officer
and Secretary to REMCO; and
■ Stephanie Boyde, Executive Vice President Remuneration,
Benefits & Services.
The Chair of the Board and the CEO were consulted on remuneration
proposals affecting the CFO.
During 2017, REMCO met five times and its activities included:
■ finalising the Directors’ Remuneration Policy;
■ approving the 2016 Directors’ Remuneration Report;
■ consulting with major shareholders;
■ setting annual bonus performance measures and targets;
■ deciding on base salaries for the CEO and the CFO;
■ determining the 2016 annual bonus outcomes;
■ determining vesting of the 2014 LTIP award for the CEO and the CFO;
and
■ tracking external developments and assessing their impact on Shell’s
remuneration policy.
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annual report on remuneration Continued
Strategy and link to remuneration
Strategy
How the strategy links to the CEO’s variable pay
Thrive in
the energy
transition
World-class
investment
case
Strong
licence to
operate
CEO INDIVIDUAL
PERFORMANCE
The vision for thriving in the energy transition is led by the CEO and embedded in his individual
performance targets.
LONG-TERM
INCENTIVE PLAN
World-class investment metrics such as cash generation and capital discipline, as well as value
created for shareholders, are included in the LTIP.
The 2018 benchmarking comparator group is unchanged from 2017 and
consists of the other oil majors (BP, Chevron, ExxonMobil, and Total) as well
on the following measures:
as a selection of major Europe-based companies.
ANNUAL BONUS
Licence to operate measures such as operational excellence and sustainable development
are included in the scorecard. These measures are key building blocks to being a world-class
investment and support our journey to thrive in the energy transition.
Target CEO pay mix
Fixed pay 21%
Variable pay 79%
0
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
See “CEO pay scenarios” on page 114.
Remuneration at a glance
2017
2018
2019
2020
2021
2022
Base salary:
CEO: €1,490,000
CFO: €980,000
FIXED PAY
Benefits: Typically include: car allowance,
transport between home and office, and
medical insurance.
Pension: Retirement benefits maintained in
base country pension arrangements.
Base pay:
CEO: €1,527,000
(+2.5%)
CFO: €995,000
(+1.5%)
Pension:
CEO: Normal
retirement age
has changed
Bonus opportunity as a percentage of salary:
Target: CEO: 150% CFO: 120%
2017 outcome: CEO: 201% CFO: 107%
50%
delivered
in cash
GHG measures in
the 2018 scorecard
have evolved
50%
delivered
in shares
Shares subject to three-year holding
period which applies beyond an
Executive Director’s tenure
Same award
opportunities and
performance
measures as in 2017
Three-year performance period
Vested shares subject to three-year holding period
which applies beyond an Executive Director’s tenure
ANNUAL
BONUS
Performance measures:
Cash flow from operating activities – 30%
Operational excellence – 50%
Sustainable development – 20%
Subject to malus and clawback
LONG-TERM
INCENTIVE
PLAN
2017 LTIP award as a percentage of salary:
Target: CEO: 340% CFO: 270%
Performance measures:
Free cash flow – 25%
TSR – 25%
ROACE growth – 25%
Cash flow from operating activities growth – 25%
Vesting of 2015 award: 70% of target (35% of maximum)
Subject to malus and clawback
Executive Directors’ shareholding
% of base salary
CEO, Ben van Beurden
CFO, Jessica Uhl
0
100%
200%
300%
400%
500%
600%
700%
Value of shares counting towards guideline at December 31, 2017
Shareholding guideline
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STATEMENT OF 2018 PLANNED IMPLEMENTATION OF
Long-term Incentive Plan
POLICY
The Directors’ Remuneration Policy on pages 109-117 took effect from
May 23, 2017, and will be effective until the 2020 AGM, unless a further
policy is proposed by the Company and approved by shareholders in the
meantime. This section describes elements that apply for 2018, some of
which have changed compared with 2017 within the boundaries of the
On February 2, 2018, a conditional award of performance shares under the
LTIP was made to the Executive Directors. The award had a face value of
340% of the base salary for the CEO and 270% of the base salary for the
CFO, resulting in 190,001 Royal Dutch Shell plc A shares (A shares) being
conditionally awarded to Ben van Beurden and 49,857 Royal Dutch Shell
plc A American Depositary Shares (A ADSs) to Jessica Uhl.
policy.
COMPARATOR GROUP
2018 European comparator group
Allianz
AstraZeneca
BAT
Bayer
BHP Billiton
GlaxoSmithKline
Daimler
Diageo
Nestle
Novartis
Rio Tinto
Roche
Siemens
Unilever
Vodafone
EXECUTIVE DIRECTORS
Salaries
Effective from January 1, 2018, the base salaries were set at €1,527,000
(+2.5%) for Ben van Beurden, CEO and at €995,000 (+1.5%) for
Jessica Uhl, CFO.
When determining base salaries, REMCO mainly considered: the external
market positioning of the Executive Directors’ compensation packages; Senior
Management salaries; the planned average increases for 2018 for other
employees across three major countries (the Netherlands, the UK and the
USA); the impact of the increase on other elements of the package; the
current economic conditions; and Shell’s own performance.
Annual bonus
The 2018 performance measures remain aligned with a number of our
performance indicators set out on pages 22-23, and comprise of cash flow
from operating activities, operational excellence and sustainable development
measures. In 2017, the GHG metrics covered around 60% of Shell’s
operated direct and energy indirect GHG emissions. The GHG metrics in the
2018 scorecard have evolved and coverage has increased to close to 90%
of the operated portfolio emissions. The refining and chemicals metrics will be
retained and emissions coverage in Integrated Gas and Upstream will be
measured on an intensity basis and expanded beyond flaring.
Annual bonus scorecard targets are not disclosed prospectively because to
do so in a meaningful manner would require the disclosure of commercially
sensitive information. As in previous years, scorecard targets will be disclosed
For LTIP awards made in 2018, performance is assessed over a three-year
period based on four financial measures. FCF (25%) is based on absolute
performance and relative performance is compared with the other oil majors
■ TSR, calculated in dollars using a 90-day averaging period around the
start and end of the performance period (25%);
■ ROACE growth (25%). For this purpose, in order to facilitate the
comparison, the calculation of ROACE differs from that described in
“Performance indicators” on page 22 as there is no adjustment for after-tax
interest expense; and
■ Cash flow from operating activities growth (25%).
The vesting schedule for the relative measures is unchanged from 2017.
The target for FCF, along with the ranges for threshold and outstanding
performance, will be set by reference to Shell’s operating plan, being the
aggregate of our plan FCF targets over the three-year performance period. As
a result, FCF targets will only be disclosed retrospectively after the three-year
period. 20% of the maximum available under this measure will be payable
for threshold performance, rising to full vesting of that measure for outstanding
performance. A straight-line vesting schedule will apply for performance
between threshold and outstanding.
Vested LTIP shares are subject to a three-year holding period which remains in
force beyond an Executive Director’s tenure.
FCF progress to date on outstanding 2017 LTIP award
At December 31, 2017, FCF performance, at more than $27 billion, is
above target. As two years of FCF performance remain, and 75% of the
award is subject to relative performance conditions, this does not reflect the
potential vesting of the award.
Adjustment (malus) and recovery (clawback)
Variable pay elements are subject to adjustment (malus) and recovery
(clawback) provisions, which may apply in case of direct responsibility or
supervisory accountability.
REMCO may adjust an award, for example by lapsing part or all of it,
reducing the number of shares which would otherwise vest, by imposing
additional conditions on it, or imposing a new holding period. Award
adjustments may be made as a result of: Shell restating the relevant year(s)’
in a subsequent Directors’ Remuneration Report when they are no longer
financial statements due to material non-compliance with any financial
deemed to be commercially sensitive. Disclosure of detailed personal targets
reporting requirement; an individual’s misconduct or misconduct through the
is inappropriate as these are deemed commercially sensitive. However, the
individual’s direction or non-direction, which influenced the metrics and
basis for the determination of the individual multiplier will be disclosed.
outcomes used in determining the individual’s annual bonus or LTIP outcome;
any material breach of health and safety or environment regulations; serious
reputational damage to Shell; material failure of risk management; and other
exceptional events at the discretion of REMCO.
50% of the annual bonus awarded for the 2018 performance year will be
delivered in cash and 50% will be delivered in shares subject to a three-year
holding period which remains in force beyond an Executive Director’s tenure.
STATEMENT OF 2018 PLANNED IMPLEMENTATION OF
POLICY
The Directors’ Remuneration Policy on pages 109-117 took effect from
May 23, 2017, and will be effective until the 2020 AGM, unless a further
policy is proposed by the Company and approved by shareholders in the
meantime. This section describes elements that apply for 2018, some of
which have changed compared with 2017 within the boundaries of the
policy.
COMPARATOR GROUP
The 2018 benchmarking comparator group is unchanged from 2017 and
consists of the other oil majors (BP, Chevron, ExxonMobil, and Total) as well
as a selection of major Europe-based companies.
2018 European comparator group
Allianz
AstraZeneca
BAT
Bayer
BHP Billiton
Daimler
Diageo
GlaxoSmithKline
Nestle
Novartis
Rio Tinto
Roche
Siemens
Unilever
Vodafone
EXECUTIVE DIRECTORS
Salaries
Effective from January 1, 2018, the base salaries were set at €1,527,000
(+2.5%) for Ben van Beurden, CEO and at €995,000 (+1.5%) for
Jessica Uhl, CFO.
When determining base salaries, REMCO mainly considered: the external
market positioning of the Executive Directors’ compensation packages; Senior
Management salaries; the planned average increases for 2018 for other
employees across three major countries (the Netherlands, the UK and the
USA); the impact of the increase on other elements of the package; the
current economic conditions; and Shell’s own performance.
Annual bonus
The 2018 performance measures remain aligned with a number of our
performance indicators set out on pages 22-23, and comprise of cash flow
from operating activities, operational excellence and sustainable development
measures. In 2017, the GHG metrics covered around 60% of Shell’s
operated direct and energy indirect GHG emissions. The GHG metrics in the
2018 scorecard have evolved and coverage has increased to close to 90%
of the operated portfolio emissions. The refining and chemicals metrics will be
retained and emissions coverage in Integrated Gas and Upstream will be
measured on an intensity basis and expanded beyond flaring.
Annual bonus scorecard targets are not disclosed prospectively because to
do so in a meaningful manner would require the disclosure of commercially
sensitive information. As in previous years, scorecard targets will be disclosed
in a subsequent Directors’ Remuneration Report when they are no longer
deemed to be commercially sensitive. Disclosure of detailed personal targets
is inappropriate as these are deemed commercially sensitive. However, the
basis for the determination of the individual multiplier will be disclosed.
50% of the annual bonus awarded for the 2018 performance year will be
delivered in cash and 50% will be delivered in shares subject to a three-year
holding period which remains in force beyond an Executive Director’s tenure.
Long-term Incentive Plan
On February 2, 2018, a conditional award of performance shares under the
LTIP was made to the Executive Directors. The award had a face value of
340% of the base salary for the CEO and 270% of the base salary for the
CFO, resulting in 190,001 Royal Dutch Shell plc A shares (A shares) being
conditionally awarded to Ben van Beurden and 49,857 Royal Dutch Shell
plc A American Depositary Shares (A ADSs) to Jessica Uhl.
For LTIP awards made in 2018, performance is assessed over a three-year
period based on four financial measures. FCF (25%) is based on absolute
performance and relative performance is compared with the other oil majors
on the following measures:
■ TSR, calculated in dollars using a 90-day averaging period around the
start and end of the performance period (25%);
■ ROACE growth (25%). For this purpose, in order to facilitate the
comparison, the calculation of ROACE differs from that described in
“Performance indicators” on page 22 as there is no adjustment for after-tax
interest expense; and
■ Cash flow from operating activities growth (25%).
The vesting schedule for the relative measures is unchanged from 2017.
The target for FCF, along with the ranges for threshold and outstanding
performance, will be set by reference to Shell’s operating plan, being the
aggregate of our plan FCF targets over the three-year performance period. As
a result, FCF targets will only be disclosed retrospectively after the three-year
period. 20% of the maximum available under this measure will be payable
for threshold performance, rising to full vesting of that measure for outstanding
performance. A straight-line vesting schedule will apply for performance
between threshold and outstanding.
Vested LTIP shares are subject to a three-year holding period which remains in
force beyond an Executive Director’s tenure.
FCF progress to date on outstanding 2017 LTIP award
At December 31, 2017, FCF performance, at more than $27 billion, is
above target. As two years of FCF performance remain, and 75% of the
award is subject to relative performance conditions, this does not reflect the
potential vesting of the award.
Adjustment (malus) and recovery (clawback)
Variable pay elements are subject to adjustment (malus) and recovery
(clawback) provisions, which may apply in case of direct responsibility or
supervisory accountability.
REMCO may adjust an award, for example by lapsing part or all of it,
reducing the number of shares which would otherwise vest, by imposing
additional conditions on it, or imposing a new holding period. Award
adjustments may be made as a result of: Shell restating the relevant year(s)’
financial statements due to material non-compliance with any financial
reporting requirement; an individual’s misconduct or misconduct through the
individual’s direction or non-direction, which influenced the metrics and
outcomes used in determining the individual’s annual bonus or LTIP outcome;
any material breach of health and safety or environment regulations; serious
reputational damage to Shell; material failure of risk management; and other
exceptional events at the discretion of REMCO.
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annual report on remuneration Continued
Adjustment may also apply after employment ends if the individual: (a)
breaches any provision of his/her employment contract which applies after
cessation of employment or any provision of an agreement entered into on
termination of employment; (b) is found to have committed fraud or dishonesty
with respect to Shell; (c) wilfully damaged the assets of or engaged in
misconduct which, in any material respect, is or was injurious to Shell; (d)
wrongfully disclosed or used any proprietary or confidential information which
is related to the business, properties or affairs of Shell and the release of
which is detrimental, in any material respect, to the competitive position or
goodwill of Shell; (e) engaged in any activity which, in any material respect,
reasonably constituted a conflict with the interests of Shell; or (f) breached any
business principle or a term of any code of conduct applicable to employees
or former employees of Shell.
Clawback applies in case of restatement of financial statements due to
material non-compliance with any financial reporting requirement or as a
result of the individual’s misconduct or misconduct through the individual’s
direction or non-direction, which influenced the metrics and outcomes used in
determining his/her annual bonus or LTIP outcome.
Pension
The normal retirement age for the Dutch pension plans, in which the Ben van
Beurden is a member, changed from 67 to 68, with effect from January 1,
2018. Ben van Beurden’s pension arrangements comprise a defined benefit
plan for which the maximum pensionable salary has increased to €94,446,
and a net pay defined contribution pension plan with an employer
contribution of 23% of salary in excess of €94,446 until April 30, 2018,
and 27% with effect from May 1, 2018, when he enters the next age
bracket for contribution levels. There are no changes to the pension plans in
which Jessica Uhl participates.
NON-EXECUTIVE DIRECTORS’ FEES
Non-executive Directors’ fees 2018
Chair of the Board
Non-executive Director
Senior Independent Director
Audit Committee
Chair [A]
Member
€ Other fees
850,000 Non-executive
135,000 Directors
55,000 receive an
additional fee
60,000 of €5,000 for
25,000 any Board
Corporate and Social Responsibility Committee
meeting involving
Chair [A]
Member
Nomination and Succession Committee
Chair [A]
Member
Remuneration Committee
Chair [A]
Member
35,000 intercontinental
17,250 travel – except
for one
25,000 meeting
12,000 a year held in a
location other
40,000 than The
17,250 Hague.
[A] The chair of a committee does not receive an additional fee for membership of that committee
in the UK.
The Chair’s fee is determined by REMCO and the annual fee for Charles O.
Holliday was set at €850,000 upon appointment in 2015 and will remain
unchanged for 2018. The other Non-executive Directors receive a basic fee.
There are additional fees for the Senior Independent Director, a Board
committee chair or a Board committee membership for each committee.
Non-executive Directors receive an additional fee of €5,000 for any Board
meeting involving intercontinental travel, except for one meeting a year held
in a location other than The Hague. Business expenses (including transport
between home and office and occasional business-required spouse travel)
and associated tax are paid or reimbursed by Shell. The Chair has use of
Shell-provided accommodation in The Hague.
The Board reviews Non-executive Directors’ fees periodically to ensure that
they are aligned with those of other major listed companies. The last review
was carried out in 2016, and the changes made were effective from
January 1, 2017. Non-executive Directors’ fees will remain unchanged for
2018.
[G] As a result of arrangements related to Gerrit Zalm’s attendance at Board and committee meetings detailed in “Corporate governance” on page 77, his fees have been pro-rated and exclude the period July 1,
DIRECTORS’ REMUNERATION FOR 2017
NON-EXECUTIVE DIRECTORS’ REMUNERATION FOR 2017
Single total figure of remuneration for Non-executive Directors (audited)
€ thousand
Taxable benefits[A]
2017
2016
2017
[A] UK regulations require the inclusion of benefits where these would be taxable in the UK, on the assumption that Directors are tax residents in the UK. On this premise, the taxable benefits include the cost of
Non-executive Director’s occasional business-required spouse travel. Shell also pays for travel between home and the head office in The Hague, where Board and committee meetings are typically held, as well
as related hotel and subsistence costs. For consistency, these business expenses are not reported as taxable benefits as for most Non-executive Directors this is international travel and hence would not be taxable
Guy Elliott [B]
Euleen Goh
Charles O. Holliday
Catherine J. Hughes [D]
Gerard Kleisterlee
Roberto Setubal [E]
Sir Nigel Sheinwald
Linda G. Stuntz
Hans Wijers
Patricia A. Woertz [F]
Gerrit Zalm [G]
2017
133
225
850
99
196
50
163
202
237
72
117
Fees
2016
167
225
850
N/A
190
N/A
147
197
232
195
147
[B] Stood down as a Director with effect from October 18, 2017. No payments for loss of office were made.
[C] Including the use of an apartment (2017: €68,612; 2016: €70,157).
[D] Appointed as a Director with effect from June 1, 2017.
[E] Appointed as a Director with effect from October 1, 2017.
[F] Stood down as a Director with effect from May 23, 2017. No payments for loss of office were made.
2017 to October 24, 2017.
EXECUTIVE DIRECTORS’ REMUNERATION FOR 2017
Salaries
Taxable benefits
Total fixed remuneration
Annual bonus [B]
LTIP and Deferred Bonus Plan (DBP) [D]
Total variable remuneration
Total direct remuneration
Pension [E]
Tax equalisation [F]
Total remuneration including pension
and tax equalisation
2017
1,490
30
1,520
3,000
4,021
7,021
8,541
368
—
8,909
10,067
7,811
83[C]
—
—
—
—
3
6
—
7
—
—
2016
1,460
22
1,482
2,400
4,381
6,781
8,263
330
—
8,593
9,515
7,046
—
—
77
N/A
—
N/A
—
—
—
—
—
2017
198
8
206
[C]
—
—
206
—
68
274
310
240
133
225
933
99
196
53
169
202
244
72
117
2016
1,040
24
1,064
1,350
2,644
3,994
5,058
524
374
5,956
6,595
4,884
Total
2016
167
225
927
N/A
190
N/A
147
197
232
195
147
2017
796
44
840
1,050
623
1,673
2,513
287
194
2,994
3,383
2,625
Single total figure of remuneration for Executive Directors (audited)
€ thousand
Ben van Beurden
Simon Henry[A]
Jessica Uhl[A]
in dollars
in sterling
accordingly.
period.
[A] Simon Henry stood down as an Executive Director with effect from March 9, 2017, and Jessica Uhl was appointed as an Executive Director with effect from that date. Their remuneration for 2017 is pro-rated
[B] The full value of the bonus, comprising both the cash and bonus delivered in shares. For 2017, 50% of the bonus was delivered in shares and the market price of A shares on February 22, 2018 (€25.75),
was used to determine the number of shares delivered, resulting in 30,102 A shares for Ben van Beurden and 10,536 A shares for Jessica Uhl.
[C] After standing down as CFO, Simon Henry was available to the incoming CFO and to the Board to assist with the transition and left employment with Shell on June 30, 2017. His performance bonus in
relation to all service in 2017 was determined after he left Shell. The details are set out on page 106 under the “Payments to past Directors” section, along with other remuneration arrangements during this
[D] Remuneration for performance periods of more than one year, comprising the value of released LTIP awards and DBP performance matching shares (in respect of 2016). The original deferred bonus share
awards, which are those represented by the deferred bonus and dividend shares accrued on these shares, are not considered as long-term remuneration, as they relate to the short-term annual bonus value. The
amounts reported for 2017 relate to the 2015 LTIP award, which vested on March 2, 2018, at the market price of €25.37 and $63.09 for A shares and A ADSs respectively. The value in respect of the LTIP is
calculated as the product of: the number of shares of the original award multiplied by the vesting percentage; plus accrued dividend shares; and the market price of A shares or A ADSs at the vesting date. The
market price of A ADSs is converted into euros using the exchange rate on the respective date.
[E] The accrual for the period (net of inflation) multiplied by 20 in accordance with UK reporting regulations.
[F] Includes tax equalisation of pension contributions to foreign pension plan(s), when they are taxable above a certain pensionable salary threshold or once a double tax treaty exemption ceases, under Dutch
law. Tax equalisation is applied for the loss of pension relief for members of a foreign pension plan(s) in their host country.
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Adjustment may also apply after employment ends if the individual: (a)
NON-EXECUTIVE DIRECTORS’ FEES
breaches any provision of his/her employment contract which applies after
cessation of employment or any provision of an agreement entered into on
termination of employment; (b) is found to have committed fraud or dishonesty
with respect to Shell; (c) wilfully damaged the assets of or engaged in
misconduct which, in any material respect, is or was injurious to Shell; (d)
Chair of the Board
wrongfully disclosed or used any proprietary or confidential information which
Non-executive Director
is related to the business, properties or affairs of Shell and the release of
which is detrimental, in any material respect, to the competitive position or
goodwill of Shell; (e) engaged in any activity which, in any material respect,
reasonably constituted a conflict with the interests of Shell; or (f) breached any
business principle or a term of any code of conduct applicable to employees
Senior Independent Director
Audit Committee
Non-executive Directors’ fees 2018
or former employees of Shell.
Corporate and Social Responsibility Committee
meeting involving
Clawback applies in case of restatement of financial statements due to
material non-compliance with any financial reporting requirement or as a
result of the individual’s misconduct or misconduct through the individual’s
direction or non-direction, which influenced the metrics and outcomes used in
determining his/her annual bonus or LTIP outcome.
Pension
The normal retirement age for the Dutch pension plans, in which the Ben van
Beurden is a member, changed from 67 to 68, with effect from January 1,
2018. Ben van Beurden’s pension arrangements comprise a defined benefit
plan for which the maximum pensionable salary has increased to €94,446,
and a net pay defined contribution pension plan with an employer
contribution of 23% of salary in excess of €94,446 until April 30, 2018,
and 27% with effect from May 1, 2018, when he enters the next age
bracket for contribution levels. There are no changes to the pension plans in
which Jessica Uhl participates.
€ Other fees
850,000 Non-executive
135,000 Directors
55,000 receive an
additional fee
60,000 of €5,000 for
25,000 any Board
35,000 intercontinental
17,250 travel – except
25,000 meeting
12,000 a year held in a
location other
40,000 than The
17,250 Hague.
Chair [A]
Member
Chair [A]
Member
Chair [A]
Member
Chair [A]
Member
Remuneration Committee
Nomination and Succession Committee
for one
[A] The chair of a committee does not receive an additional fee for membership of that committee
The Chair’s fee is determined by REMCO and the annual fee for Charles O.
Holliday was set at €850,000 upon appointment in 2015 and will remain
unchanged for 2018. The other Non-executive Directors receive a basic fee.
There are additional fees for the Senior Independent Director, a Board
committee chair or a Board committee membership for each committee.
Non-executive Directors receive an additional fee of €5,000 for any Board
meeting involving intercontinental travel, except for one meeting a year held
in a location other than The Hague. Business expenses (including transport
between home and office and occasional business-required spouse travel)
and associated tax are paid or reimbursed by Shell. The Chair has use of
Shell-provided accommodation in The Hague.
The Board reviews Non-executive Directors’ fees periodically to ensure that
they are aligned with those of other major listed companies. The last review
was carried out in 2016, and the changes made were effective from
January 1, 2017. Non-executive Directors’ fees will remain unchanged for
2018.
DIRECTORS’ REMUNERATION FOR 2017
NON-EXECUTIVE DIRECTORS’ REMUNERATION FOR 2017
Single total figure of remuneration for Non-executive Directors (audited)
2017
Fees
2016
2017
Taxable benefits[A]
€ thousand
Total
2016
2017
167
225
850
N/A
190
N/A
147
197
232
195
147
133
225
850
99
196
50
163
202
237
72
117
Guy Elliott [B]
Euleen Goh
Charles O. Holliday
Catherine J. Hughes [D]
Gerard Kleisterlee
Roberto Setubal [E]
Sir Nigel Sheinwald
Linda G. Stuntz
Hans Wijers
Patricia A. Woertz [F]
Gerrit Zalm [G]
[A] UK regulations require the inclusion of benefits where these would be taxable in the UK, on the assumption that Directors are tax residents in the UK. On this premise, the taxable benefits include the cost of
Non-executive Director’s occasional business-required spouse travel. Shell also pays for travel between home and the head office in The Hague, where Board and committee meetings are typically held, as well
as related hotel and subsistence costs. For consistency, these business expenses are not reported as taxable benefits as for most Non-executive Directors this is international travel and hence would not be taxable
in the UK.
[B] Stood down as a Director with effect from October 18, 2017. No payments for loss of office were made.
[C] Including the use of an apartment (2017: €68,612; 2016: €70,157).
[D] Appointed as a Director with effect from June 1, 2017.
[E] Appointed as a Director with effect from October 1, 2017.
[F] Stood down as a Director with effect from May 23, 2017. No payments for loss of office were made.
[G] As a result of arrangements related to Gerrit Zalm’s attendance at Board and committee meetings detailed in “Corporate governance” on page 77, his fees have been pro-rated and exclude the period July 1,
2017 to October 24, 2017.
133
225
933
99
196
53
169
202
244
72
117
—
—
83[C]
—
—
3
6
—
7
—
—
167
225
927
N/A
190
N/A
147
197
232
195
147
2016
—
—
77
N/A
—
N/A
—
—
—
—
—
EXECUTIVE DIRECTORS’ REMUNERATION FOR 2017
Single total figure of remuneration for Executive Directors (audited)
Ben van Beurden
Simon Henry[A]
Salaries
Taxable benefits
Total fixed remuneration
Annual bonus [B]
LTIP and Deferred Bonus Plan (DBP) [D]
Total variable remuneration
Total direct remuneration
Pension [E]
Tax equalisation [F]
Total remuneration including pension
and tax equalisation
2017
1,490
30
1,520
3,000
4,021
7,021
8,541
368
—
2016
1,460
22
1,482
2,400
4,381
6,781
8,263
330
—
2017
198
8
206
[C]
—
—
206
—
68
2016
1,040
24
1,064
1,350
2,644
3,994
5,058
524
374
€ thousand
Jessica Uhl[A]
2017
796
44
840
1,050
623
1,673
2,513
287
194
8,909
8,593
274
5,956
2,994
9,515
7,046
in dollars
in sterling
10,067
7,811
3,383
2,625
[A] Simon Henry stood down as an Executive Director with effect from March 9, 2017, and Jessica Uhl was appointed as an Executive Director with effect from that date. Their remuneration for 2017 is pro-rated
accordingly.
[B] The full value of the bonus, comprising both the cash and bonus delivered in shares. For 2017, 50% of the bonus was delivered in shares and the market price of A shares on February 22, 2018 (€25.75),
was used to determine the number of shares delivered, resulting in 30,102 A shares for Ben van Beurden and 10,536 A shares for Jessica Uhl.
[C] After standing down as CFO, Simon Henry was available to the incoming CFO and to the Board to assist with the transition and left employment with Shell on June 30, 2017. His performance bonus in
relation to all service in 2017 was determined after he left Shell. The details are set out on page 106 under the “Payments to past Directors” section, along with other remuneration arrangements during this
period.
[D] Remuneration for performance periods of more than one year, comprising the value of released LTIP awards and DBP performance matching shares (in respect of 2016). The original deferred bonus share
awards, which are those represented by the deferred bonus and dividend shares accrued on these shares, are not considered as long-term remuneration, as they relate to the short-term annual bonus value. The
amounts reported for 2017 relate to the 2015 LTIP award, which vested on March 2, 2018, at the market price of €25.37 and $63.09 for A shares and A ADSs respectively. The value in respect of the LTIP is
calculated as the product of: the number of shares of the original award multiplied by the vesting percentage; plus accrued dividend shares; and the market price of A shares or A ADSs at the vesting date. The
market price of A ADSs is converted into euros using the exchange rate on the respective date.
[E] The accrual for the period (net of inflation) multiplied by 20 in accordance with UK reporting regulations.
[F] Includes tax equalisation of pension contributions to foreign pension plan(s), when they are taxable above a certain pensionable salary threshold or once a double tax treaty exemption ceases, under Dutch
law. Tax equalisation is applied for the loss of pension relief for members of a foreign pension plan(s) in their host country.
6,595
4,884
310
240
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annual report on remuneration Continued
NOTES TO THE SINGLE TOTAL FIGURE OF REMUNERATION FOR
EXECUTIVE DIRECTORS TABLE (AUDITED)
Salaries
As disclosed in the 2016 Directors’ Remuneration Report, REMCO set Ben
van Beurden’s base salary for 2017 at €1,490,000 (+2.1% compared with
2016) effective from January 1, 2017, and Jessica Uhl’s base salary at
€980,000 from March 9, 2017 (on appointment). For 2017, the base
salary for Simon Henry was unchanged from 2016 at €1,040,000.
Taxable benefits
Executive Directors received car allowances or lease cars, transport between
home and office, occasional business-required spouse travel, as well as
employer contributions to life and medical insurance plans.
Annual bonus
The scorecard measures are grouped into three sections: financial,
operational excellence and sustainable development. At the beginning of the
year, REMCO sets a target range and weighting for each measure. The
actual outcome for each measure results in a score of between zero and two,
with a score of one representing “on target”. These scores are multiplied by
the respective weighting of each measure and aggregated, resulting in a
mathematical scorecard outcome of between zero and two. REMCO may
then make an adjustment to the overall scorecard outcome in view of the
wider business performance for the year.
An Executive Director’s individual performance is also taken into account in
determining their annual bonus through the application of a multiplier
between zero and 1.2.
50% of the annual bonus is delivered in shares subject to a three-year holding
period.
Determination of the 2017 annual bonus
The mathematical scorecard outcome for 2017 was 1.13 and REMCO
approved this outcome without exercising discretion. The outcome was based
on strong cash flow from operating activities and project delivery and
outstanding performance in LNG liquefaction volumes. The overall score for
operational excellence and sustainable development was near target, with
mixed performances on the individual measures within these sections.
Production volumes were below target, as performance was impacted by the
Pearl shutdown. The combined refinery and chemicals availability measure
scored below threshold, because of higher maintenance and unplanned
downtime. Personal safety performance was above target, driven by a
significant reduction in the number of injuries in 2017 compared with 2016,
and our lowest injury rate ever. Process safety was below threshold, after five
years of improvements, primarily driven by a higher number of incidents
reported in Downstream. On GHG emissions, our overall performance was
broadly on target in 2017.
The CEO delivered on a number of fronts; in particular he provided a clear
vision for establishing Shell’s net carbon footprint ambitions and gave strong
leadership for the evolution of the strategy for New Energies, both of which
are central to Shell’s aim to thrive in the energy transition. The CEO’s
performance is discussed further in the Chair’s statement on page 95.
REMCO determined an individual performance factor of 1.2 for the CEO
and determined a final bonus outcome of €3,000,000.
The CFO successfully transitioned into her role. The divestment programme
remains on track, with the finance team under her direction creating successful
strategies in terms of structuring deals. Good progress was also made in
terms of managing operating expenses, which required setting a clear
ambition and alignment across the businesses and functions.
REMCO determined an individual performance factor of 1.0 for the CFO
and determined a final pro-rated bonus outcome of €1,050,000.
Half of the bonus was delivered in cash and half was delivered in shares
subject to a three-year holding period. The table below summarises the 2017
annual bonus scorecard measures including their weightings, targets and
outcomes. Charts illustrating the calculation of the final 2017 bonus payable
to the CEO and CFO are also provided.
2017 annual bonus outcome (audited)
Measures
Cash flow from operating activities ($ billion) [A]
Operational excellence
Production (kboe/d)
LNG liquefaction volumes (mtpa)
Refinery and chemical plant availability (%)
Project delivery on schedule (%)
Project delivery on budget (%)
Sustainable development
Total recordable case frequency (injuries/million hours)
Operational Tier 1 and 2 process safety events (number)
Refining GHG intensity (tonnes CO2 equivalent per Solomon’s Utilized
Equivalent Distillation Capacity (UEDC™))
Chemicals GHG intensity (tonnes CO2 equivalent per tonne of production)
Upstream flaring (million tonnes CO2 equivalent)
Weight
(% of scorecard)
30%
50%
12.5%
12.5%
12.5%
6.25%
6.25%
20%
5%
5%
4%
3%
3%
100%
Mathematical scorecard outcome
[A] Excluding tax on divestments.
Threshold
28
Target
set Outstanding
34
40
3,576
31.1
90.7
60
105
1.1
163
1.21
0.50
10.1
3,687
32.1
92.7
80
100
0.9
130
1.15
0.45
8.1
3,798
33.1
94.7
100
95
0.7
97
1.09
0.40
6.1
Result
achieved
36
3,664
33.2
90.7
86
93
0.8
166
1.14
0.46
8.0
Score (0-2)
1.32
1.11
0.79
2.00
0.00
1.30
2.00
0.89
1.50
0.00
1.17
0.80
1.05
1.13
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LTIP vesting
Pension
In 2015, Ben van Beurden and Jessica Uhl were each granted a conditional
Ben van Beurden’s pension arrangements comprise a defined benefit plan
award of performance shares under the LTIP. For Ben van Beurden, this
with a maximum pensionable salary of €92,885, and a net pay defined
award was based on 340% of his base salary, with a maximum vesting of
contribution pension plan with a 2017 employer contribution of 24% of
680%. Jessica Uhl was granted an award of 13,800 A ADSs prior to her
salary in excess of €92,885, with the option to take cash as an alternative to
appointment as an Executive Director, with a maximum vesting of two times
pension contributions (in either case subject to income tax). The CEO has
the original award.
elected to take his benefit in the form of contributions throughout 2017.
The LTIP vesting outcome at the end of the performance period (January 1,
Simon Henry’s pension is in the form of defined benefit plans.
2015, to December 31, 2017) is illustrated in the following LTIP vesting
outcome table. REMCO also considered the underlying financial performance
Jessica Uhl is a member of the Shell US retirement benefit arrangements,
of Shell and decided to vest 70% of shares under the LTIP, using no
which include the Shell Pension Plan, a defined benefit plan, and a defined
discretion, resulting in 158,510 A shares for Ben van Beurden and 12,117
contribution plan with an employer contribution of 10% of salary. As for all
A ADSs for Jessica Uhl. At vesting, these shares (including accrued dividend
other pre-2013 members of the Shell Pension Plan, she has an annual choice
shares) had a value of €4,021,399 and €622,730 respectively.
of two accrual formulas with different forms of benefits, one in the form of a
lifetime annuity and the other allows for a lump-sum payment. She elected to
accrue benefits for 2017 under the latter. She also has a deferred Dutch
defined benefit pension plan, as a result of a prior Shell assignment on local
Dutch terms and conditions.
See further details on pension arrangements on pages 107-108.
NOTES TO THE SINGLE TOTAL FIGURE OF REMUNERATION FOR
operational excellence and sustainable development was near target, with
EXECUTIVE DIRECTORS TABLE (AUDITED)
Salaries
mixed performances on the individual measures within these sections.
Production volumes were below target, as performance was impacted by the
As disclosed in the 2016 Directors’ Remuneration Report, REMCO set Ben
Pearl shutdown. The combined refinery and chemicals availability measure
van Beurden’s base salary for 2017 at €1,490,000 (+2.1% compared with
scored below threshold, because of higher maintenance and unplanned
2016) effective from January 1, 2017, and Jessica Uhl’s base salary at
downtime. Personal safety performance was above target, driven by a
€980,000 from March 9, 2017 (on appointment). For 2017, the base
significant reduction in the number of injuries in 2017 compared with 2016,
salary for Simon Henry was unchanged from 2016 at €1,040,000.
and our lowest injury rate ever. Process safety was below threshold, after five
Taxable benefits
Executive Directors received car allowances or lease cars, transport between
home and office, occasional business-required spouse travel, as well as
employer contributions to life and medical insurance plans.
Annual bonus
years of improvements, primarily driven by a higher number of incidents
reported in Downstream. On GHG emissions, our overall performance was
broadly on target in 2017.
The CEO delivered on a number of fronts; in particular he provided a clear
vision for establishing Shell’s net carbon footprint ambitions and gave strong
leadership for the evolution of the strategy for New Energies, both of which
The scorecard measures are grouped into three sections: financial,
are central to Shell’s aim to thrive in the energy transition. The CEO’s
operational excellence and sustainable development. At the beginning of the
performance is discussed further in the Chair’s statement on page 95.
year, REMCO sets a target range and weighting for each measure. The
actual outcome for each measure results in a score of between zero and two,
REMCO determined an individual performance factor of 1.2 for the CEO
and determined a final bonus outcome of €3,000,000.
2017 bonus outcome calculation
BEN VAN BEURDEN
Target bonus:
€1,490,000 (base salary)
x 150% =
€2,235,000
JESSICA UHL
Target bonus:
€980,000 (base salary)
x 120% =
€1,176,000
2017 scorecard
result = 1.13
Individual performance
factor = 1.2
€3,000,000 [A]
(201% of base salary)
2017 scorecard
result = 1.13
Individual performance
factor = 1.0
€1,050,000 [A,B]
(107% of base salary)
[A] Rounded downwards to the nearest €50,000, and half was delivered in shares subject to a three-year holding period.
[B] Amount is pro-rated from March 9, 2017, to December 31, 2017.
LTIP vesting
In 2015, Ben van Beurden and Jessica Uhl were each granted a conditional
award of performance shares under the LTIP. For Ben van Beurden, this
award was based on 340% of his base salary, with a maximum vesting of
680%. Jessica Uhl was granted an award of 13,800 A ADSs prior to her
appointment as an Executive Director, with a maximum vesting of two times
the original award.
Pension
Ben van Beurden’s pension arrangements comprise a defined benefit plan
with a maximum pensionable salary of €92,885, and a net pay defined
contribution pension plan with a 2017 employer contribution of 24% of
salary in excess of €92,885, with the option to take cash as an alternative to
pension contributions (in either case subject to income tax). The CEO has
elected to take his benefit in the form of contributions throughout 2017.
The LTIP vesting outcome at the end of the performance period (January 1,
2015, to December 31, 2017) is illustrated in the following LTIP vesting
outcome table. REMCO also considered the underlying financial performance
of Shell and decided to vest 70% of shares under the LTIP, using no
discretion, resulting in 158,510 A shares for Ben van Beurden and 12,117
A ADSs for Jessica Uhl. At vesting, these shares (including accrued dividend
shares) had a value of €4,021,399 and €622,730 respectively.
Target
Result
LTIP vesting outcome
Measures
TSR
EPS growth [A]
ROACE growth
Cash flow from operating activities growth
Total
Weighting
30%
30%
20%
20%
[A] Diluted EPS growth on a current cost of supplies basis.
Rank versus peers
1 2 3
54
1 2
3
4 5
1
32
4 5
1
2
3 4 5
Vesting
0%
24%
16%
30%
70%
Simon Henry’s pension is in the form of defined benefit plans.
Jessica Uhl is a member of the Shell US retirement benefit arrangements,
which include the Shell Pension Plan, a defined benefit plan, and a defined
contribution plan with an employer contribution of 10% of salary. As for all
other pre-2013 members of the Shell Pension Plan, she has an annual choice
of two accrual formulas with different forms of benefits, one in the form of a
lifetime annuity and the other allows for a lump-sum payment. She elected to
accrue benefits for 2017 under the latter. She also has a deferred Dutch
defined benefit pension plan, as a result of a prior Shell assignment on local
Dutch terms and conditions.
See further details on pension arrangements on pages 107-108.
with a score of one representing “on target”. These scores are multiplied by
the respective weighting of each measure and aggregated, resulting in a
mathematical scorecard outcome of between zero and two. REMCO may
then make an adjustment to the overall scorecard outcome in view of the
wider business performance for the year.
An Executive Director’s individual performance is also taken into account in
determining their annual bonus through the application of a multiplier
between zero and 1.2.
50% of the annual bonus is delivered in shares subject to a three-year holding
period.
Determination of the 2017 annual bonus
The mathematical scorecard outcome for 2017 was 1.13 and REMCO
approved this outcome without exercising discretion. The outcome was based
on strong cash flow from operating activities and project delivery and
outstanding performance in LNG liquefaction volumes. The overall score for
2017 annual bonus outcome (audited)
Operational excellence
Production (kboe/d)
LNG liquefaction volumes (mtpa)
Refinery and chemical plant availability (%)
Project delivery on schedule (%)
Project delivery on budget (%)
Sustainable development
Total recordable case frequency (injuries/million hours)
Operational Tier 1 and 2 process safety events (number)
Refining GHG intensity (tonnes CO2 equivalent per Solomon’s Utilized
Equivalent Distillation Capacity (UEDC™))
Chemicals GHG intensity (tonnes CO2 equivalent per tonne of production)
Upstream flaring (million tonnes CO2 equivalent)
Mathematical scorecard outcome
[A] Excluding tax on divestments.
Weight
30%
50%
12.5%
12.5%
12.5%
6.25%
6.25%
20%
5%
5%
4%
3%
3%
100%
The CFO successfully transitioned into her role. The divestment programme
remains on track, with the finance team under her direction creating successful
strategies in terms of structuring deals. Good progress was also made in
terms of managing operating expenses, which required setting a clear
ambition and alignment across the businesses and functions.
REMCO determined an individual performance factor of 1.0 for the CFO
and determined a final pro-rated bonus outcome of €1,050,000.
Half of the bonus was delivered in cash and half was delivered in shares
subject to a three-year holding period. The table below summarises the 2017
annual bonus scorecard measures including their weightings, targets and
outcomes. Charts illustrating the calculation of the final 2017 bonus payable
to the CEO and CFO are also provided.
3,576
3,687
3,798
3,664
31.1
90.7
60
105
1.1
163
1.21
0.50
10.1
32.1
92.7
80
100
0.9
130
1.15
0.45
8.1
33.1
94.7
100
95
0.7
97
1.09
0.40
6.1
33.2
90.7
86
93
0.8
166
1.14
0.46
8.0
1.32
1.11
0.79
2.00
0.00
1.30
2.00
0.89
1.50
0.00
1.17
0.80
1.05
1.13
Measures
(% of scorecard)
Threshold
set Outstanding
achieved
Score (0-2)
Cash flow from operating activities ($ billion) [A]
28
34
40
36
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annual report on remuneration Continued
Scheme interests awarded to Executive Directors in 2017 (audited)
Scheme
interest type
LTIP
Type of
interest awarded
Performance
shares
to 3.4 x base salary or €5,066,000. Jessica
Uhl: 54,277 A ADSs, equivalent to 2.7 x base
salary or €2,646,000.
End of
performance period
December 31, 2019 Ben van Beurden: 198,900 A shares, equivalent
Target award[A]
€
Potential amount vesting
DIRECTORS’ SHARE INTERESTS
The only changes in Directors’ share interests during the period from
The interests (in shares of the Company or calculated equivalents) of the
December 31, 2017, to March 14, 2018, were that Ben van Beurden’s
Directors in office during 2017, including any interests of their connected
interests increased by 147,363 A shares, as 50% of 2017 annual bonus
persons, are set out in the table below.
Maximum performance
(% of shares of the target award[A][C])
Minimum
performance
(% of shares
awarded)[B]
0% Maximum number of shares vesting is
200% of the number of shares awarded,
equivalent to €10,132,000 for Ben van
Beurden and €5,292,000 for Jessica Uhl.
Ben van Beurden
33,703
— 132,979
—
157%, respectively, at March 2, 2018.
[A] The award for Ben van Beurden was based on the closing market price on February 3, 2017, for A shares of €25.47. The award for Jessica Uhl was made after her appointment as an Executive Director
and based on the closing market price on March 10, 2017, for A ADSs of $51.74.
[B] Minimum performance relates to the lowest level of achievement, for which no reward is given.
[C] The equivalent values exclude share price movements and accrued dividend shares.
STATEMENT OF DIRECTORS’ SHAREHOLDING AND
SHARE INTERESTS (AUDITED)
SHAREHOLDING GUIDELINES
REMCO believes that Executive Directors should align their interests with those
of shareholders by holding shares in the Company. The CEO is expected to
build a shareholding with a value of 700% of base salary, and other
Executive Directors 400% of base salary. Only unfettered shares count.
Unvested shares held under DBP and any shares delivered but subject to
holding requirements, also count towards the guidelines. Both Ben van
Beurden and Jessica Uhl have not yet met the required shareholding level.
Non-executive Directors are encouraged to hold shares with a value
equivalent to 100% of their fixed annual fee and maintain that holding during
their tenure.
Executive Directors’ shareholding (audited)
Value of shares counting
towards guideline
(% of base salary at
December 31, 2017)[A]
Shareholding guideline
(% of base salary)
700%
400%
400%
450%
Ben van Beurden
1,157%[B]
Simon Henry
101%
Jessica Uhl
[A] Representing the value of share interests and the estimated after-tax value of DBP shares (not subject
to performance conditions).
[B] Based on shareholding at March 9, 2017, when he stood down as an Executive Director.
The measures and weightings applying to LTIP awards made in 2017 were:
FCF (25%); TSR (25%); ROACE growth (25%) and cash flow from operating
activities growth (25%).
The LTIP will vest on the basis of the absolute performance of FCF and the
ranking of the three relative performance measures, as indicated in the table
below.
2017 LTIP measures and vesting schedule
PERFORMANCE
MEASURE AND
WEIGHTING
Free cash flow
(25%)
LINK TO STRATEGY
Recognition of the importance
of generating cash after net
capital expenditure to service
and reduce debt, pay
dividends, buy back shares
and make future capital
investments.
VESTING
SCHEDULE
(% OF INITIAL
LTIP AWARD)
Maximum – 200%
Target – 100%
Threshold – 40%
Below threshold – 0%
TSR (25%)
Assessment of actual wealth
created for shareholders.
ROACE growth
(25%)
Indicator of capital discipline.
1st – 200%
2nd – 150%
3rd – 80%
4th or 5th – nil
Cash flow
from operating
activities
growth (25%)
Source of capital expenditure
commitments which support
sustainable growth based on
portfolio and cost management.
If the TSR ranking is fourth or fifth, the level of the award that can vest on the
basis of the three other measures will be capped at 50% of the maximum.
To deliver the shares under the LTIP, market-purchased shares are used rather
than the issuing of new shares.
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was delivered in shares on February 22, 2018, and the 2015 LTIP and DBP
awards vested on March 2, 2018, and Jessica Uhl’s interests increased by
10,536 A shares, as 50% of 2017 annual bonus was delivered in shares on
February 22, 2018, and by 7,348 A ADSs as the 2015 LTIP award vested
on March 2, 2018. The value of shares counting towards the shareholding
guideline (as a % of base salary) for the CEO and CFO, were 586% and
At March 14, 2018, the Directors and Senior Management (pages 69-72)
of the Company beneficially owned, individually and in aggregate (including
shares under option), less than 1% of the total shares of each class of the
Company shares outstanding.
Directors’ share interests [A] (audited)
January 1, 2017
December 31, 2017
A shares
B shares
A shares
B shares
Guy Elliott
Euleen Goh
Simon Henry
—
—
5,825
12,895
—
—
5,825[B]
12,895
54,368 305,959
54,368 [C] 314,107[C]
Charles O. Holliday
—
50,000 [D]
—
50,000[D]
Catherine J. Hughes
3,316 [E] 41,404 [E]
4,080
46,904
Gerard Kleisterlee
5,254
—
5,254
— [F] 15,400 [G]
1,124
12,400 [H]
—
—
1,124
12,400[H]
— [F]
—
—
Roberto Setubal
Sir Nigel Sheinwald
Linda G. Stuntz
Jessica Uhl
Hans Wijers
35,460 [I][J]
— [I] 35,460 [J]
5,251
—
5,251
Patricia A. Woertz
—
6,000 [K]
— [L]
6,000[K][L]
Gerrit Zalm
2,026
—
2,026
[A] Includes vested LTIP awards subject to holding conditions. Excludes unvested interests in shares
—
—
—
—
—
awarded under the LTIP and DBP.
[B] Interests at October 18, 2017, when he stood down as a Director.
[C] Interests at March 9, 2017, when he stood down as a Director.
[D] Held as 25,000 ADSs (RDS.B ADS). Each RDS.B ADS represents two B shares.
[E] Interests at June 1, 2017, when she was appointed as a Director.
[F] Interests at October 1, 2017, when he was appointed as a Director.
[G] Held as 7,700 ADSs (RDS.A ADS). Each RDS.A ADS represents two A shares.
[H] Held as 6,200 ADSs (RDS.B ADS). Each RDS.B ADS represents two B shares.
[I] Interests at March 9, 2017, when she was appointed as a Director.
[J] Held as 17,730 ADSs (RDS.A ADS). Each RDS.A ADS represents two A shares.
[K] Held as 3,000 ADSs (RDS.B ADS). Each RDS.B ADS represents two B shares.
[L] Interests at May 23, 2017, when she stood down as a Director.
DIRECTORS’ SCHEME INTERESTS
99 respectively.
Directors’ scheme interests (audited)
The table below shows the aggregate position for Directors’ interests under share schemes at December 31. These are A shares for Ben van Beurden, B shares
for Simon Henry, and A ADSs for Jessica Uhl. During the period from December 31, 2017, to March 14, 2018, scheme interests have changed as a result of
the vesting of the 2015 LTIP and DBP awards on March 2, 2018, and the 2018 LTIP awards made on February 2, 2018, as described on pages 103 and
LTIP/PSP subject to
performance
conditions[B]
DBP not subject to
performance
conditions[C]
DBP subject to
performance
conditions[D]
Share plan interests[A]
Total
2016
Ben van Beurden
Simon Henry
Jessica Uhl
2017
2016
2017
2016
2017
2016
2017
707,727 662,359
226,196 179,621
266,371 [E] 374,671
119,625[E] 114,390
89,901
42,011
—
—
—
—[E]
—
7,564 933,923 849,544
10,052 385,996[E] 499,113
—
89,901 42,011
[A] Includes unvested long-term incentive awards and notional dividend shares accrued at December 31. Interests are shown on the basis of the original awards. The shares subject to performance conditions can
vest at between 0% and 200%. Dividend shares accumulate each year on an assumed notional LTIP/DBP award. Such dividend shares are disclosed and recorded on the basis of the number of shares
conditionally awarded but, when an award vests, dividend shares will be awarded only in relation to vested shares as if the vested shares were held from the award date. Shares released during the year are
included in the “Directors’ share interests” table.
[B] Total number of unvested LTIP shares at December 31, including dividend shares accrued on the original LTIP award.
[C] The number of shares deferred from the bonus (original DBP award) and the dividend shares accrued on these at December 31. Delivery of the original DBP award and the related accrued dividend shares is
not subject to performance conditions.
[D] The target number of performance matching shares, which corresponds to the original 2014 DBP award. The DBP did not attract performance matching shares with effect from 2015 awards. The actual
number of performance matching shares for the 2014 DBP award were determined at vesting on the same basis as the LTIP vesting and disclosed in the 2016 Directors’ Remuneration Report. There are no
outstanding DBP awards subject to performance conditions.
[E] Interests at March 9, 2017, when he stood down as a Director.
Scheme interests awarded to Executive Directors in 2017 (audited)
Scheme
Type of
End of
interest type
interest awarded
performance period
Target award[A]
LTIP
Performance
December 31, 2019 Ben van Beurden: 198,900 A shares, equivalent
0% Maximum number of shares vesting is
shares
to 3.4 x base salary or €5,066,000. Jessica
Uhl: 54,277 A ADSs, equivalent to 2.7 x base
salary or €2,646,000.
200% of the number of shares awarded,
equivalent to €10,132,000 for Ben van
Beurden and €5,292,000 for Jessica Uhl.
[A] The award for Ben van Beurden was based on the closing market price on February 3, 2017, for A shares of €25.47. The award for Jessica Uhl was made after her appointment as an Executive Director
and based on the closing market price on March 10, 2017, for A ADSs of $51.74.
[B] Minimum performance relates to the lowest level of achievement, for which no reward is given.
[C] The equivalent values exclude share price movements and accrued dividend shares.
The measures and weightings applying to LTIP awards made in 2017 were:
STATEMENT OF DIRECTORS’ SHAREHOLDING AND
FCF (25%); TSR (25%); ROACE growth (25%) and cash flow from operating
activities growth (25%).
SHARE INTERESTS (AUDITED)
SHAREHOLDING GUIDELINES
The LTIP will vest on the basis of the absolute performance of FCF and the
of shareholders by holding shares in the Company. The CEO is expected to
ranking of the three relative performance measures, as indicated in the table
build a shareholding with a value of 700% of base salary, and other
REMCO believes that Executive Directors should align their interests with those
below.
Executive Directors 400% of base salary. Only unfettered shares count.
Unvested shares held under DBP and any shares delivered but subject to
holding requirements, also count towards the guidelines. Both Ben van
Beurden and Jessica Uhl have not yet met the required shareholding level.
Non-executive Directors are encouraged to hold shares with a value
equivalent to 100% of their fixed annual fee and maintain that holding during
their tenure.
Executive Directors’ shareholding (audited)
Value of shares counting
towards guideline
(% of base salary at
Shareholding guideline
(% of base salary)
December 31, 2017)[A]
700%
400%
400%
450%
1,157%[B]
101%
Ben van Beurden
Simon Henry
Jessica Uhl
to performance conditions).
[A] Representing the value of share interests and the estimated after-tax value of DBP shares (not subject
[B] Based on shareholding at March 9, 2017, when he stood down as an Executive Director.
If the TSR ranking is fourth or fifth, the level of the award that can vest on the
basis of the three other measures will be capped at 50% of the maximum.
To deliver the shares under the LTIP, market-purchased shares are used rather
than the issuing of new shares.
The only changes in Directors’ share interests during the period from
December 31, 2017, to March 14, 2018, were that Ben van Beurden’s
interests increased by 147,363 A shares, as 50% of 2017 annual bonus
was delivered in shares on February 22, 2018, and the 2015 LTIP and DBP
awards vested on March 2, 2018, and Jessica Uhl’s interests increased by
10,536 A shares, as 50% of 2017 annual bonus was delivered in shares on
February 22, 2018, and by 7,348 A ADSs as the 2015 LTIP award vested
on March 2, 2018. The value of shares counting towards the shareholding
guideline (as a % of base salary) for the CEO and CFO, were 586% and
157%, respectively, at March 2, 2018.
At March 14, 2018, the Directors and Senior Management (pages 69-72)
of the Company beneficially owned, individually and in aggregate (including
shares under option), less than 1% of the total shares of each class of the
Company shares outstanding.
Potential amount vesting
€
Minimum
performance
(% of shares
awarded)[B]
Maximum performance
(% of shares of the target award[A][C])
DIRECTORS’ SHARE INTERESTS
The interests (in shares of the Company or calculated equivalents) of the
Directors in office during 2017, including any interests of their connected
persons, are set out in the table below.
Directors’ share interests [A] (audited)
January 1, 2017
B shares
A shares
December 31, 2017
B shares
A shares
— 132,979
—
—
—
12,895
—
5,825[B]
— [F]
—
—
1,124
12,400 [H]
—
4,080
5,254
33,703
—
—
—
— [F] 15,400 [G]
5,825
12,895
54,368 305,959
50,000 [D]
3,316 [E] 41,404 [E]
5,254
54,368 [C] 314,107[C]
50,000[D]
46,904
—
—
1,124
12,400[H]
Ben van Beurden
Guy Elliott
Euleen Goh
Simon Henry
Charles O. Holliday
Catherine J. Hughes
Gerard Kleisterlee
Roberto Setubal
Sir Nigel Sheinwald
Linda G. Stuntz
—
Jessica Uhl
—
Hans Wijers
6,000[K][L]
Patricia A. Woertz
—
Gerrit Zalm
[A] Includes vested LTIP awards subject to holding conditions. Excludes unvested interests in shares
awarded under the LTIP and DBP.
[B] Interests at October 18, 2017, when he stood down as a Director.
[C] Interests at March 9, 2017, when he stood down as a Director.
[D] Held as 25,000 ADSs (RDS.B ADS). Each RDS.B ADS represents two B shares.
[E] Interests at June 1, 2017, when she was appointed as a Director.
[F] Interests at October 1, 2017, when he was appointed as a Director.
[G] Held as 7,700 ADSs (RDS.A ADS). Each RDS.A ADS represents two A shares.
[H] Held as 6,200 ADSs (RDS.B ADS). Each RDS.B ADS represents two B shares.
[I] Interests at March 9, 2017, when she was appointed as a Director.
[J] Held as 17,730 ADSs (RDS.A ADS). Each RDS.A ADS represents two A shares.
[K] Held as 3,000 ADSs (RDS.B ADS). Each RDS.B ADS represents two B shares.
[L] Interests at May 23, 2017, when she stood down as a Director.
—
—
— [I] 35,460 [J]
—
5,251
6,000 [K]
—
35,460 [I][J]
5,251
—
2,026
2,026
— [L]
DIRECTORS’ SCHEME INTERESTS
The table below shows the aggregate position for Directors’ interests under share schemes at December 31. These are A shares for Ben van Beurden, B shares
for Simon Henry, and A ADSs for Jessica Uhl. During the period from December 31, 2017, to March 14, 2018, scheme interests have changed as a result of
the vesting of the 2015 LTIP and DBP awards on March 2, 2018, and the 2018 LTIP awards made on February 2, 2018, as described on pages 103 and
99 respectively.
Directors’ scheme interests (audited)
LTIP/PSP subject to
performance
conditions[B]
DBP not subject to
performance
conditions[C]
2017
2016
2017
2016
2017
DBP subject to
performance
conditions[D]
2016
Share plan interests[A]
2017
Total
2016
89,901
226,196 179,621
119,625[E] 114,390
—
707,727 662,359
266,371 [E] 374,671
42,011
7,564 933,923 849,544
Ben van Beurden
10,052 385,996[E] 499,113
Simon Henry
Jessica Uhl
89,901 42,011
[A] Includes unvested long-term incentive awards and notional dividend shares accrued at December 31. Interests are shown on the basis of the original awards. The shares subject to performance conditions can
vest at between 0% and 200%. Dividend shares accumulate each year on an assumed notional LTIP/DBP award. Such dividend shares are disclosed and recorded on the basis of the number of shares
conditionally awarded but, when an award vests, dividend shares will be awarded only in relation to vested shares as if the vested shares were held from the award date. Shares released during the year are
included in the “Directors’ share interests” table.
[B] Total number of unvested LTIP shares at December 31, including dividend shares accrued on the original LTIP award.
[C] The number of shares deferred from the bonus (original DBP award) and the dividend shares accrued on these at December 31. Delivery of the original DBP award and the related accrued dividend shares is
not subject to performance conditions.
[D] The target number of performance matching shares, which corresponds to the original 2014 DBP award. The DBP did not attract performance matching shares with effect from 2015 awards. The actual
number of performance matching shares for the 2014 DBP award were determined at vesting on the same basis as the LTIP vesting and disclosed in the 2016 Directors’ Remuneration Report. There are no
outstanding DBP awards subject to performance conditions.
[E] Interests at March 9, 2017, when he stood down as a Director.
—
—[E]
—
—
—
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annual report on remuneration Continued
DILUTION
In any 10-year period, no more than 5% of the issued ordinary share capital
of the Company may be issued or issuable under executive (discretionary)
share plans adopted by the Company. To date, no shareholder dilution has
resulted from these plans, although it is permitted under the rules of the plans
subject to these limits.
PAYMENTS FOR LOSS OF OFFICE (AUDITED)
As disclosed in the 2016 Directors’ Remuneration Report, Simon Henry stood
down from the Board and his role as CFO with effect from March 9, 2017.
In accordance with the policy approved by shareholders at the 2014 AGM,
he received a payment for loss of office of €2,288,000, equivalent to one
times annual pay (base salary plus target bonus). The payment was phased in
six equal monthly instalments.
No 2017 LTIP award was made and outstanding LTIP awards will not vest
early and are prorated for service. Outstanding DBP awards will not vest
early and are not prorated as the deferred bonus has been earned. The
applicable DBP holding periods remain in force post-leaving employment.
The conditional LTIP awards and outstanding DBP awards are subject to
adjustments events (malus and clawback) and these provisions remain in
force.
PAYMENTS TO PAST DIRECTORS (AUDITED)
After standing down as CFO, Simon Henry was available to the incoming
CFO and to the Board to assist with the transition and left employment with
Shell on June 30, 2017. His remuneration during this period is set out below:
■ Base salary: no changes to base salary or pensionable base salary during
this period.
■ Annual bonus: a prorated annual bonus in relation to performance year
2017 of €625,000 was determined by REMCO, for all service in 2017.
50% of the bonus was delivered in cash and 50% was delivered in shares
subject to a three-year holding period which remains in force post leaving
employment.
■ Pension: continued participation in the UK defined benefit plans.
■ Benefits: standard Shell benefits applied, such as cash in lieu of accrued
leave, relocation support and normal benefits for UK local employees.
On March 2, 2018, Simon Henry’s 2015 LTIP award vested at 70%.
The value at vesting of the LTIP shares was €1,853,995.
Payments below €5,000 are not reported as they are considered de minimis.
TSR PERFORMANCE AND CEO PAY
PERFORMANCE GRAPHS
The graphs compare the TSR performance of the Company over the past nine
financial years with that of the companies comprising the Euronext 100 and
the FTSE 100 share indices. The Board regards these indices as appropriate
broad market equity indices for comparison, as they are the leading market
indices in the Company’s home markets.
Historical TSR performance (RDSA)
Growth in the value of a hypothetical €100 holding over nine years
Euronext 100 comparison based on 30 trading day average values
CEO PAY OUTCOMES
RELATIVE IMPORTANCE OF SPEND ON PAY
The following table sets out the single total figure of remuneration, and the
Distributions to shareholders by way of dividends and share buybacks and
annual bonus payout and long-term incentive (LTI) vesting rates compared with
remuneration paid to or receivable by employees for the last five years are set
the respective maximum opportunity, for the CEO for the last nine years.
out below, together with annual percentage changes.
i
g
n
d
o
h
l
0
0
1
€
l
a
c
i
t
t
e
h
o
p
y
h
f
o
l
e
u
a
V
€275
€250
€225
€200
€175
€150
€125
€100
€75
€50
€25
€0
Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17
RDSA
Euronext 100
Historical TSR performance (RDSB)
Growth in the value of a hypothetical £100 holding over nine years
FTSE 100 comparison based on 30 trading day average values
i
g
n
d
o
h
l
0
0
1
£
l
a
c
i
t
t
e
h
o
p
y
h
f
o
l
e
u
a
V
£275
£250
£225
£200
£175
£150
£125
£100
£75
£50
£25
£0
Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17
RDSB
FTSE 100
CEO pay outcomes
Relative importance of spend on pay
Annual bonus
Dividends and share buybacks[A] Spend on pay (all employees)[B]
Single total
figure of
remuneration
payout
LTI vesting
against
rates against
maximum
maximum
opportunity
opportunity
CEO
Ben van Beurden
Ben van Beurden
Ben van Beurden
(€000)
8,909
8,593
5,576
Ben van Beurden
24,198
Peter Voser
Peter Voser
Peter Voser
Peter Voser
Peter Voser
8,456
18,246
9,941
10,611
100%
Jeroen van der Veer
6,228
3,748
81%
66%
98%
94%
44%
83%
90%
50%
66%
35%
42%
8%
49%
30%
88%
30%
75%
0%
0%
Year
2017
2016
2015
2014
2013
Statements”.
Year
2017
2016
2015
2014
2013
2012
2011
2010
2009
2009
Peter Voser stood down on December 31, 2013, and was succeeded by
Ben van Beurden. Ben van Beurden’s single figure for 2014 was impacted
by the increase in pension accrual calculated under the UK reporting
regulations and tax equalisation as a result of his promotion and prior
assignment to the UK. Jeroen van der Veer stood down on July 1, 2009, and
Peter Voser took over from that date. Only remuneration relating to their
position as CEO is included.
CHANGE IN REMUNERATION OF CEO AND EMPLOYEES
FROM 2016 TO 2017
The CEO data compares the remuneration of Ben van Beurden for 2017 with
2016. The comparator group consists of local employees in the Netherlands,
the UK and the USA. This is considered to be a suitable employee
comparator group, because: these are countries with a significant Shell
employee base; a large proportion of senior managers come from these
countries; and REMCO considers remuneration levels in these countries when
setting base salaries for Executive Directors.
Taxable benefits are those that align with the definition of taxable benefits
applying in the respective country. In line with the “Single total figure of
remuneration for Executive Directors” table, the annual bonus is included in
the year in which it was earned.
Change in remuneration of CEO and employees
Salaries
Taxable benefits
Annual bonus
$ billion
15.6
15.0
12.0
14.6
17.1
Annual
change
4%
25%
-18%
-14%
35%
$ billion
14.3
15.7
17.1
16.4
16.4
Annual
change
-9%
-8%
5%
0%
9%
[A] Dividends paid, which includes the dividends settled in shares via our Scrip Dividend Programme,
and repurchases of shares as reported in the “Consolidated Statement of Changes in Equity”.
[B] Employee costs, excluding redundancy costs, as reported in Note 26 to the “Consolidated Financial
Spend on pay can be compared with the major costs associated with
generating income by referring to the “Consolidated Statement of Income”.
Over the last five years, the average spend on pay was 5% of the major costs
of generating income. These costs are considered to be the sum of:
purchases; production and manufacturing expenses; selling, distribution and
administrative expenses; research and development; exploration; and
depreciation, depletion and amortisation.
TOTAL PENSION ENTITLEMENTS (AUDITED)
During 2017, Ben van Beurden, Simon Henry and Jessica Uhl accrued
retirement benefits under defined benefit plans. The pension accrued under
these plans at December 31, 2017, is set out below. The exchange rates
used for conversion into euros and dollars are at December 31, 2017.
Accrued pension (audited)
Ben van Beurden [A]
Simon Henry [A][B]
Jessica Uhl [C]
Thousand
Local
€
$
1,176 1,176
€
€
$1,407
498
£
$1,087
€
563
€
908
$673
$1,087
[A] The accrued retirement benefits are disclosed on a per annum basis.
[B] Accrued retirement benefits at March 9, 2017 when he stood down as a Director.
[C] Jessica Uhl has an annual choice of two accrual formulas with different forms of benefits, one in the
form of a lifetime annuity and the other allows for a lump-sum payment. She elected to accrue benefits
for 2017 under the latter and the eventual lump sum benefit is shown. She also has a deferred Dutch
defined benefit pension plan, as a result of a prior Shell assignment on local Dutch terms and
conditions. The age at which Jessica Uhl can receive any pension benefit without an actuarial reduction
under this plan is 60. The value of the deferred pension benefit is €3,252 per annum.
The ages at which Ben van Beurden, Simon Henry and Jessica Uhl can
receive any pension benefit without actuarial reduction are 68, 60 and 65
CEO
Employees
(in the US retirement plans) respectively. Any pension benefits on early
retirement are reduced using actuarial factors to reflect early payment. No
payments were made in 2017 regarding early retirement or in lieu of
2.1%
32.6%
25.0%
1.4%
0.8%
-0.4%
retirement benefits.
BEN VAN BEURDEN
Ben van Beurden is a member of the “Stichting Shell Pensioenfonds”, the
pension plan for Shell employees in the Netherlands who joined before July
2013 that provides benefits in defined benefit form. Ben van Beurden is also
a member of the Shell net pay defined contribution pension plan in the
Netherlands with effect from January 1, 2015.
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DILUTION
In any 10-year period, no more than 5% of the issued ordinary share capital
of the Company may be issued or issuable under executive (discretionary)
share plans adopted by the Company. To date, no shareholder dilution has
resulted from these plans, although it is permitted under the rules of the plans
subject to these limits.
PAYMENTS FOR LOSS OF OFFICE (AUDITED)
As disclosed in the 2016 Directors’ Remuneration Report, Simon Henry stood
down from the Board and his role as CFO with effect from March 9, 2017.
In accordance with the policy approved by shareholders at the 2014 AGM,
he received a payment for loss of office of €2,288,000, equivalent to one
times annual pay (base salary plus target bonus). The payment was phased in
six equal monthly instalments.
No 2017 LTIP award was made and outstanding LTIP awards will not vest
early and are prorated for service. Outstanding DBP awards will not vest
early and are not prorated as the deferred bonus has been earned. The
applicable DBP holding periods remain in force post-leaving employment.
The conditional LTIP awards and outstanding DBP awards are subject to
adjustments events (malus and clawback) and these provisions remain in
force.
PAYMENTS TO PAST DIRECTORS (AUDITED)
After standing down as CFO, Simon Henry was available to the incoming
CFO and to the Board to assist with the transition and left employment with
Shell on June 30, 2017. His remuneration during this period is set out below:
■ Base salary: no changes to base salary or pensionable base salary during
■ Annual bonus: a prorated annual bonus in relation to performance year
2017 of €625,000 was determined by REMCO, for all service in 2017.
50% of the bonus was delivered in cash and 50% was delivered in shares
subject to a three-year holding period which remains in force post leaving
this period.
employment.
■ Pension: continued participation in the UK defined benefit plans.
■ Benefits: standard Shell benefits applied, such as cash in lieu of accrued
leave, relocation support and normal benefits for UK local employees.
On March 2, 2018, Simon Henry’s 2015 LTIP award vested at 70%.
The value at vesting of the LTIP shares was €1,853,995.
Payments below €5,000 are not reported as they are considered de minimis.
TSR PERFORMANCE AND CEO PAY
PERFORMANCE GRAPHS
The graphs compare the TSR performance of the Company over the past nine
financial years with that of the companies comprising the Euronext 100 and
the FTSE 100 share indices. The Board regards these indices as appropriate
broad market equity indices for comparison, as they are the leading market
indices in the Company’s home markets.
CEO PAY OUTCOMES
The following table sets out the single total figure of remuneration, and the
annual bonus payout and long-term incentive (LTI) vesting rates compared with
the respective maximum opportunity, for the CEO for the last nine years.
RELATIVE IMPORTANCE OF SPEND ON PAY
Distributions to shareholders by way of dividends and share buybacks and
remuneration paid to or receivable by employees for the last five years are set
out below, together with annual percentage changes.
CEO pay outcomes
Relative importance of spend on pay
Single total
figure of
remuneration
(€000)
8,909
8,593
5,576
24,198
8,456
18,246
9,941
10,611
6,228
3,748
CEO
Ben van Beurden
Ben van Beurden
Ben van Beurden
Ben van Beurden
Peter Voser
Peter Voser
Peter Voser
Peter Voser
Peter Voser
Jeroen van der Veer
Annual bonus
payout
against
maximum
opportunity
LTI vesting
rates against
maximum
opportunity
35%
42%
8%
49%
30%
88%
30%
75%
0%
0%
81%
66%
98%
94%
44%
83%
90%
100%
50%
66%
Year
2017
2016
2015
2014
2013
2012
2011
2010
2009
2009
Peter Voser stood down on December 31, 2013, and was succeeded by
Ben van Beurden. Ben van Beurden’s single figure for 2014 was impacted
by the increase in pension accrual calculated under the UK reporting
regulations and tax equalisation as a result of his promotion and prior
assignment to the UK. Jeroen van der Veer stood down on July 1, 2009, and
Peter Voser took over from that date. Only remuneration relating to their
position as CEO is included.
CHANGE IN REMUNERATION OF CEO AND EMPLOYEES
FROM 2016 TO 2017
The CEO data compares the remuneration of Ben van Beurden for 2017 with
2016. The comparator group consists of local employees in the Netherlands,
the UK and the USA. This is considered to be a suitable employee
comparator group, because: these are countries with a significant Shell
employee base; a large proportion of senior managers come from these
countries; and REMCO considers remuneration levels in these countries when
setting base salaries for Executive Directors.
Taxable benefits are those that align with the definition of taxable benefits
applying in the respective country. In line with the “Single total figure of
remuneration for Executive Directors” table, the annual bonus is included in
the year in which it was earned.
Dividends and share buybacks[A] Spend on pay (all employees)[B]
Annual
change
$ billion
$ billion
Year
15.6
15.0
12.0
14.6
17.1
2017
2016
2015
2014
2013
[A] Dividends paid, which includes the dividends settled in shares via our Scrip Dividend Programme,
and repurchases of shares as reported in the “Consolidated Statement of Changes in Equity”.
[B] Employee costs, excluding redundancy costs, as reported in Note 26 to the “Consolidated Financial
Statements”.
14.3
15.7
17.1
16.4
16.4
-9%
-8%
5%
0%
9%
Annual
change
4%
25%
-18%
-14%
35%
Spend on pay can be compared with the major costs associated with
generating income by referring to the “Consolidated Statement of Income”.
Over the last five years, the average spend on pay was 5% of the major costs
of generating income. These costs are considered to be the sum of:
purchases; production and manufacturing expenses; selling, distribution and
administrative expenses; research and development; exploration; and
depreciation, depletion and amortisation.
TOTAL PENSION ENTITLEMENTS (AUDITED)
During 2017, Ben van Beurden, Simon Henry and Jessica Uhl accrued
retirement benefits under defined benefit plans. The pension accrued under
these plans at December 31, 2017, is set out below. The exchange rates
used for conversion into euros and dollars are at December 31, 2017.
Accrued pension (audited)
Local
Thousand
$
1,176 1,176 $1,407
563
€
$673
€
908 $1,087
€
€
€
498
£
$1,087
Ben van Beurden [A]
Simon Henry [A][B]
Jessica Uhl [C]
[A] The accrued retirement benefits are disclosed on a per annum basis.
[B] Accrued retirement benefits at March 9, 2017 when he stood down as a Director.
[C] Jessica Uhl has an annual choice of two accrual formulas with different forms of benefits, one in the
form of a lifetime annuity and the other allows for a lump-sum payment. She elected to accrue benefits
for 2017 under the latter and the eventual lump sum benefit is shown. She also has a deferred Dutch
defined benefit pension plan, as a result of a prior Shell assignment on local Dutch terms and
conditions. The age at which Jessica Uhl can receive any pension benefit without an actuarial reduction
under this plan is 60. The value of the deferred pension benefit is €3,252 per annum.
Change in remuneration of CEO and employees
CEO
Salaries
Taxable benefits
Annual bonus
2.1%
32.6%
25.0%
The ages at which Ben van Beurden, Simon Henry and Jessica Uhl can
receive any pension benefit without actuarial reduction are 68, 60 and 65
(in the US retirement plans) respectively. Any pension benefits on early
retirement are reduced using actuarial factors to reflect early payment. No
payments were made in 2017 regarding early retirement or in lieu of
retirement benefits.
Employees
1.4%
0.8%
-0.4%
BEN VAN BEURDEN
Ben van Beurden is a member of the “Stichting Shell Pensioenfonds”, the
pension plan for Shell employees in the Netherlands who joined before July
2013 that provides benefits in defined benefit form. Ben van Beurden is also
a member of the Shell net pay defined contribution pension plan in the
Netherlands with effect from January 1, 2015.
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annual report on remuneration Continued
Directors’ Remuneration Policy
SIMON HENRY
Simon Henry is a member of the Shell Overseas Contributory Pension Fund
(SOCPF) and the Shell Contributory Pension Fund (SCPF), with both these
funded pension plans providing benefits in defined benefit form. The SOCPF
provides benefits in respect of his periods of employment outside the UK,
while the SCPF provides benefits in respect of his periods of employment in
the UK. Simon Henry has elected to have his benefits from the SCPF restricted
to the UK lifetime allowance with any excess provided from an unfunded
arrangement, the Shell Supplementary Pension Plan.
DIRECTORS’ EMPLOYMENT ARRANGEMENTS AND
LETTERS OF APPOINTMENT
Executive Directors are employed for an indefinite period. Non-executive
Directors, including the Chair, have letters of appointment. Details of
Executive Directors’ employment arrangements can be found in the Directors’
Remuneration Policy on page 115. Further details of Non-executive Director
terms of appointment can be found in the “Directors’ Report” on page 74 and
the “Corporate governance” report on page 78.
This section describes the Directors’ Remuneration Policy (Policy) as published
The Executive Directors’ remuneration structure is made up of a fixed element
in the 2016 Directors’ Remuneration Report which, following shareholder
of basic pay and the majority of the package is tied to two variable elements:
approval at the 2017 Annual General Meeting (AGM), came into effect from
the annual bonus (50% delivered in shares) and the Long-term Incentive Plan
May 23, 2017, and will be effective until the 2020 AGM, unless a further
(LTIP). Variable pay outcomes are conditional on the successful execution of
policy is proposed by the Company and approved by shareholders in the
the operating plan in the short term and financial out-performance over the
meantime.
longer term. Furthermore, the award of shares under the bonus and LTIP,
along with significant shareholding requirements, is intended to ensure
The Policy has evolved over time, to align with: Shell’s strategy, market
executives build up a sizeable shareholding stake in Royal Dutch Shell plc
practice and shareholders’ views. A consistent and competitive structure,
(the Company) and experience the same outcomes as shareholders.
JESSICA UHL
Jessica Uhl is a member of the Shell US retirement benefit arrangements,
which include the Shell Pension Plan, a defined benefit plan, and the Shell
Provident Fund, a defined contribution plan. Unlike other US participants,
Jessica Uhl’s pensionable compensation does not include the annual bonus.
She also has a deferred Dutch defined benefit pension plan, as a result of a
prior Shell assignment on local Dutch terms and conditions.
EXTERNAL APPOINTMENTS
The Board considers external appointments to be valuable in broadening
Executive Directors’ knowledge and experience. The number of outside
directorships is generally limited to one. Exceptions to this are considered in
the final year of employment. The Board must explicitly approve such
appointments. Executive Directors are allowed to retain any cash or share-
based compensation they receive from such external board directorships.
The Executive Directors currently do not hold any Non-executive Directorships.
STATEMENT OF VOTING AT 2017 AGM
The Company’s 2017 AGM was held on May 23, 2017, in the
Netherlands. The results of the polls in respect of Directors’ remuneration were
as follows:
COMPENSATION OF DIRECTORS AND SENIOR
MANAGEMENT
During the year ended December 31, 2017, Shell paid and/or accrued
compensation totalling $46 million (2016: $43 million) to Directors and
Senior Management for services in all capacities while serving as a Director
or member of Senior Management, including $3 million (2016: $3 million)
accrued to provide pension, retirement and similar benefits. The amounts
stated are those recognised in Shell’s income on an IFRS basis. See Note 27
to the “Consolidated Financial Statements”. Personal loans or guarantees
were not provided to Directors or Senior Management.
which applies across the workforce, is also a core principle. This consistency
allows for a culture of shared purpose and performance.
EXECUTIVE DIRECTORS
Executive Directors’ remuneration policy table
Element
Purpose and link to strategy
Maximum opportunity
Operation and performance measurement
Base salary and
Provides a fixed level of
We have retained a
Base salary and pensionable base salary (where different) are reviewed annually
earnings to attract and
maximum of
with salary adjustments effective from January 1 each year.
pensionable
base salary
retain Executive Directors.
€2,000,000, for both
base salary and
In making salary determinations, the Remuneration Committee (REMCO) will
pensionable base salary,
consider:
in the context of current
peer group base salary
levels.
■ the market positioning of the Executive Directors’ compensation packages;
■ comparison with Senior Management salaries;
■ the employee context, and planned average salary increase for other
employees across three major countries – the Netherlands, the UK and
4,401,641,364 [A]
100.00%
Benefits
Provides benefits, in line
The maximum opportunity
Benefits that Executive Directors typically receive include car allowances and
Approval of Directors’ Remuneration Policy
Number
Votes
4,064,279,529
337,361,835
Percentage
92.34%
7.66%
Withheld [B]
[A] Representing 53.53% of issued share capital.
[B] A vote “withheld” is not a vote under English law and is not counted in the calculation of the
proportion of the votes “for” and “against” a resolution.
37,303,341
Approval of Directors’ Remuneration Report
Number
Votes
4,113,584,774
299,920,969
Percentage
93.20%
6.80%
4,413,505,743 [A]
100.00%
For
Against
Total cast
For
Against
Total cast
Withheld [B]
[A] Representing 53.68% of issued share capital.
[B] A vote “withheld” is not a vote under English law and is not counted in the calculation of the proportion of
the votes “for” and “against” a resolution.
30,845,259
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with those applicable to the
is the cost to the
transport to and from home and office, risk benefits (for example ill-health,
wider workforce, in order to
Company of providing
disability or death-in-service), as well as employer contributions to insurance plans
attract and retain Executive
the relevant benefit as
(such as medical). Precise benefits will depend on the Executive Director’s
Directors.
specified in Shell’s
specific circumstances such as nationality, country of residence, length of service,
standard policies. These
and family status. Post-retirement benefits such as healthcare may be applicable
costs can vary.
under their country-specific policies. Shell’s mobility policies may apply, such as
■ the experience, skills and performance of the Executive Director, or any
change in the scope and responsibility of their role;
■ general economic conditions, Shell’s financial performance, and governance
■ the impact of salary increases on pension benefits and other elements of the
the USA;
trends; and
package.
For Executive Directors employed outside their base country, euro base salaries
are translated into their home currencies for pension plan purposes. Pensionable
base salaries are maintained in line with euro base salaries taking into account
exchange rate fluctuations and other factors as determined by REMCO.
for relocation and tax return preparation support, as may tax equalisation related
to expatriate employment prior to Board appointment, or in other limited
circumstances to offset double taxation. REMCO may adjust the range and
scope of the benefits offered in the context of developments for other employees
in relevant countries. Personal loans or guarantees are not provided to Executive
Directors.
In relation to the maximum opportunity, and by way of example, maximum
relocation and tax equalisation settlement benefits will be the grossed-up cost of
meeting the specific Executive Director’s costs incurred as a result of appointment
and any associated relocation (in line with Shell’s policy), and will depend on a
variety of factors such as length of service, salary increase on appointment and
the tax regime in place at the time.
SIMON HENRY
DIRECTORS’ EMPLOYMENT ARRANGEMENTS AND
Simon Henry is a member of the Shell Overseas Contributory Pension Fund
LETTERS OF APPOINTMENT
(SOCPF) and the Shell Contributory Pension Fund (SCPF), with both these
funded pension plans providing benefits in defined benefit form. The SOCPF
provides benefits in respect of his periods of employment outside the UK,
while the SCPF provides benefits in respect of his periods of employment in
the UK. Simon Henry has elected to have his benefits from the SCPF restricted
to the UK lifetime allowance with any excess provided from an unfunded
arrangement, the Shell Supplementary Pension Plan.
Executive Directors are employed for an indefinite period. Non-executive
Directors, including the Chair, have letters of appointment. Details of
Executive Directors’ employment arrangements can be found in the Directors’
Remuneration Policy on page 115. Further details of Non-executive Director
terms of appointment can be found in the “Directors’ Report” on page 74 and
the “Corporate governance” report on page 78.
COMPENSATION OF DIRECTORS AND SENIOR
MANAGEMENT
During the year ended December 31, 2017, Shell paid and/or accrued
compensation totalling $46 million (2016: $43 million) to Directors and
Senior Management for services in all capacities while serving as a Director
or member of Senior Management, including $3 million (2016: $3 million)
accrued to provide pension, retirement and similar benefits. The amounts
stated are those recognised in Shell’s income on an IFRS basis. See Note 27
to the “Consolidated Financial Statements”. Personal loans or guarantees
were not provided to Directors or Senior Management.
JESSICA UHL
Jessica Uhl is a member of the Shell US retirement benefit arrangements,
which include the Shell Pension Plan, a defined benefit plan, and the Shell
Provident Fund, a defined contribution plan. Unlike other US participants,
Jessica Uhl’s pensionable compensation does not include the annual bonus.
She also has a deferred Dutch defined benefit pension plan, as a result of a
prior Shell assignment on local Dutch terms and conditions.
EXTERNAL APPOINTMENTS
The Board considers external appointments to be valuable in broadening
Executive Directors’ knowledge and experience. The number of outside
directorships is generally limited to one. Exceptions to this are considered in
the final year of employment. The Board must explicitly approve such
appointments. Executive Directors are allowed to retain any cash or share-
based compensation they receive from such external board directorships.
The Executive Directors currently do not hold any Non-executive Directorships.
STATEMENT OF VOTING AT 2017 AGM
The Company’s 2017 AGM was held on May 23, 2017, in the
Netherlands. The results of the polls in respect of Directors’ remuneration were
Approval of Directors’ Remuneration Policy
as follows:
Votes
For
Against
Total cast
Withheld [B]
Votes
For
Against
Total cast
Withheld [B]
[A] Representing 53.53% of issued share capital.
[B] A vote “withheld” is not a vote under English law and is not counted in the calculation of the
proportion of the votes “for” and “against” a resolution.
Approval of Directors’ Remuneration Report
Number
Percentage
4,064,279,529
337,361,835
92.34%
7.66%
4,401,641,364 [A]
100.00%
37,303,341
Number
Percentage
4,113,584,774
299,920,969
93.20%
6.80%
4,413,505,743 [A]
100.00%
30,845,259
[B] A vote “withheld” is not a vote under English law and is not counted in the calculation of the proportion of
[A] Representing 53.68% of issued share capital.
the votes “for” and “against” a resolution.
Directors’ Remuneration Policy
Directors’ Remuneration Policy
This section describes the Directors’ Remuneration Policy (Policy) as published
in the 2016 Directors’ Remuneration Report which, following shareholder
approval at the 2017 Annual General Meeting (AGM), came into effect from
May 23, 2017, and will be effective until the 2020 AGM, unless a further
policy is proposed by the Company and approved by shareholders in the
meantime.
The Policy has evolved over time, to align with: Shell’s strategy, market
practice and shareholders’ views. A consistent and competitive structure,
which applies across the workforce, is also a core principle. This consistency
allows for a culture of shared purpose and performance.
EXECUTIVE DIRECTORS
The Executive Directors’ remuneration structure is made up of a fixed element
of basic pay and the majority of the package is tied to two variable elements:
the annual bonus (50% delivered in shares) and the Long-term Incentive Plan
(LTIP). Variable pay outcomes are conditional on the successful execution of
the operating plan in the short term and financial out-performance over the
longer term. Furthermore, the award of shares under the bonus and LTIP,
along with significant shareholding requirements, is intended to ensure
executives build up a sizeable shareholding stake in Royal Dutch Shell plc
(the Company) and experience the same outcomes as shareholders.
Executive Directors’ remuneration policy table
Purpose and link to strategy
Element
Base salary and
Provides a fixed level of
pensionable
earnings to attract and
base salary
retain Executive Directors.
Maximum opportunity
We have retained a
maximum of
€2,000,000, for both
base salary and
pensionable base salary,
in the context of current
peer group base salary
levels.
Benefits
Provides benefits, in line
with those applicable to the
wider workforce, in order to
attract and retain Executive
Directors.
The maximum opportunity
is the cost to the
Company of providing
the relevant benefit as
specified in Shell’s
standard policies. These
costs can vary.
Operation and performance measurement
Base salary and pensionable base salary (where different) are reviewed annually
with salary adjustments effective from January 1 each year.
In making salary determinations, the Remuneration Committee (REMCO) will
consider:
■ the market positioning of the Executive Directors’ compensation packages;
■ comparison with Senior Management salaries;
■ the employee context, and planned average salary increase for other
employees across three major countries – the Netherlands, the UK and
the USA;
■ the experience, skills and performance of the Executive Director, or any
change in the scope and responsibility of their role;
■ general economic conditions, Shell’s financial performance, and governance
trends; and
■ the impact of salary increases on pension benefits and other elements of the
package.
For Executive Directors employed outside their base country, euro base salaries
are translated into their home currencies for pension plan purposes. Pensionable
base salaries are maintained in line with euro base salaries taking into account
exchange rate fluctuations and other factors as determined by REMCO.
Benefits that Executive Directors typically receive include car allowances and
transport to and from home and office, risk benefits (for example ill-health,
disability or death-in-service), as well as employer contributions to insurance plans
(such as medical). Precise benefits will depend on the Executive Director’s
specific circumstances such as nationality, country of residence, length of service,
and family status. Post-retirement benefits such as healthcare may be applicable
under their country-specific policies. Shell’s mobility policies may apply, such as
for relocation and tax return preparation support, as may tax equalisation related
to expatriate employment prior to Board appointment, or in other limited
circumstances to offset double taxation. REMCO may adjust the range and
scope of the benefits offered in the context of developments for other employees
in relevant countries. Personal loans or guarantees are not provided to Executive
Directors.
In relation to the maximum opportunity, and by way of example, maximum
relocation and tax equalisation settlement benefits will be the grossed-up cost of
meeting the specific Executive Director’s costs incurred as a result of appointment
and any associated relocation (in line with Shell’s policy), and will depend on a
variety of factors such as length of service, salary increase on appointment and
the tax regime in place at the time.
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directors’ remuneration policy Continued
Executive Directors’ remuneration policy table (continued)
Element
Annual bonus
Purpose and link to strategy
Rewards the delivery of
short-term operational
targets as derived from
Shell’s operating plan as
well as individual
contribution to Shell.
To reinforce alignment
with shareholder interests,
50% is delivered in cash
and 50% is delivered in
shares. Shares are subject
to a three-year holding
period, which applies
beyond an Executive
Director’s tenure.
Maximum opportunity
Maximum bonus (as a
percentage of base
salary):
■ Chief Executive Officer
(CEO): 250%
■ Other Executive
Directors: 240%
Target levels (as a
percentage of base
salary):
■ CEO: 150%
■ Other Executive
Directors: 120%
LTIP
Awards may be made up
to a value of 400% of
base salary.
2017 Award levels:
■ CEO: 340%
■ Other Executive
Directors: 270%
Awards may vest at up to
200% of the shares
originally awarded, plus
dividends.
Rewards longer-term value
creation linked to Shell’s
strategy. The measures
predominantly focus on
financial growth and
increases in value
compared with the other
oil majors.
To reinforce alignment
with shareholder interests,
shares delivered from
vested LTIP awards are
subject to a three-year
holding period, which
applies beyond an
Executive Director’s
tenure.
Executive Directors’ remuneration policy table (continued)
Element
Pension
Purpose and link to strategy
Maximum opportunity
Operation and performance measurement
Provides a competitive
By reference to pensionable base
Executive Directors’ retirement benefits are maintained in line with
retirement provision in line
salary, pension accrual and
those of the wider workforce in their base country. Only base salary
with the individual’s base
contribution rates and other
is pensionable, unless country plan regulations specify otherwise. The
country benefits policy, to
pensionable elements, as determined
rules of the relevant plans detail the pension benefits which members
attract and retain Executive
by the rules of the base country pension
can receive on retirement (including on ill-health), death or leaving
Directors.
plan of which the Executive Director is
service. REMCO retains the right to amend the form of any Executive
a member.
Shareholding Aligns interests of
Shareholding (% of base salary):
Executive Directors are expected to build up their shareholding to the
Director’s pension arrangements where appropriate, for example in
response to changes in legislation to ensure the original objective of
this element of remuneration is preserved.
required level over a period of five years from appointment and,
once reached, to maintain this level for the full period of their
appointment. The intention is for the shareholding guideline to be
reached through retention of vested shares from share plans. REMCO
will monitor individual progress and retains the ability to adjust the
guideline in special circumstances on an individual basis.
Executive Directors with
■ CEO: 700%
■ Other Executive Directors: 400%
those of shareholders by
creating a connection
between individual wealth
and Shell’s long-term
performance.
NOTES TO THE EXECUTIVE DIRECTORS’ REMUNERATION POLICY
Benefits for Executive Directors deemed taxable in the UK are included as
taxable benefits in the single total figure of remuneration table. These elements
may include transport to and from home and office, the provision of home
security, and occasional business-required spouse travel, which are generally
considered legitimate business expenses rather than components of
TABLE
Benefits
remuneration.
Annual bonus
For the 2017 performance year, the scorecard framework will consist of cash
flow from operating activities (30% weight), operational excellence (50%
weight) and sustainable development (20% weight). REMCO believes it is
important for annual variable pay to remain balanced, with operational and
environmental components, complementing the LTIP’s focus on longer-term
financial outcomes. The same annual bonus scorecard approach applies to
Senior Management and other senior executives, supporting consistency of
remuneration and alignment of objectives.
Operation and performance measurement
■ The bonus is determined by reference to performance from January 1 to
December 31 each year.
■ Annual bonus = base salary x target bonus % x scorecard result (0–2); adjusted
for individual performance with a 0–1.2 multiplier.
■ Taking the Shell operating plan into consideration, REMCO sets stretching
scorecard targets and weightings which support the delivery of the strategy.
Measures are related to financial performance, operational excellence and
sustainable development. Indicative weightings are 30%, 50% and 20%
respectively. This balance ensures that the achievement of short-term financial
performance does not undermine future shareholder value creation. Stretching
individual targets are also set.
■ Scorecard targets will be disclosed in a subsequent Directors’ Remuneration
Report when they are no longer deemed to be commercially sensitive.
■ Individual performance is reflected by adjusting the bonus outcome. Upward
adjustment is capped at 20% and subject to the overall maximum bonus cap.
The CEO’s maximum bonus is asymmetrically capped at 250%. There is no
limit to downward adjustment.
■ There are no prescribed thresholds or minimum levels of performance that
equate to a prescribed payment under the Policy and this structure can result in
no bonus being awarded.
■ The annual bonus is subject to malus provisions before it is delivered and to
clawback provisions thereafter.
■ REMCO retains the ability to adjust performance measure targets and
weightings year by year within the overall target and maximum payouts
approved in the Policy.
■ Award levels are determined annually by REMCO and are set within the
maximum approved in the Policy.
■ Awards may vest between 0% and 200% of the initial award level depending
on Shell’s performance on either an absolute basis, or on a relative basis
against the other oil majors.
■ For 2017, performance is assessed over a three-year period based on
absolute free cash flow (FCF), which is the sum of cash flow from operating
activities and cash flow from investing activities (25%), and the following
relative performance measures: total shareholder return (TSR) (25%), return on
average capital employed (ROACE) growth (25%) and cash flow from
operating activities growth (25%). Each measure can vest independently, but if
the TSR measure does not result in vesting, then the total vesting level will be
capped at 50% of the maximum payout.
■ Although it is possible for no LTIP shares to vest, on current measures and
weightings, 5% of the maximum LTIP award would vest if there was a threshold
vesting outcome in respect of FCF and no vesting on the other measures.
■ Additional shares are released representing the value of dividends payable on
the vested shares, as if these had been owned from the award date.
■ Following payment of taxes, delivered shares from LTIP awards must be held for
a further three years to align with Shell’s longer-term time horizon and strategy.
■ The LTIP award is subject to malus provisions before it is delivered and to
clawback provisions thereafter.
■ REMCO may adjust or change the LTIP measures, targets and weightings to
ensure continued alignment with Shell’s strategy.
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Maximum opportunity
Purpose and link to strategy
Provides a competitive
retirement provision in line
with the individual’s base
country benefits policy, to
attract and retain Executive
Directors.
Executive Directors’ remuneration policy table (continued)
Element
Pension
By reference to pensionable base
salary, pension accrual and
contribution rates and other
pensionable elements, as determined
by the rules of the base country pension
plan of which the Executive Director is
a member.
Shareholding Aligns interests of
Executive Directors with
those of shareholders by
creating a connection
between individual wealth
and Shell’s long-term
performance.
Shareholding (% of base salary):
■ CEO: 700%
■ Other Executive Directors: 400%
Operation and performance measurement
Executive Directors’ retirement benefits are maintained in line with
those of the wider workforce in their base country. Only base salary
is pensionable, unless country plan regulations specify otherwise. The
rules of the relevant plans detail the pension benefits which members
can receive on retirement (including on ill-health), death or leaving
service. REMCO retains the right to amend the form of any Executive
Director’s pension arrangements where appropriate, for example in
response to changes in legislation to ensure the original objective of
this element of remuneration is preserved.
Executive Directors are expected to build up their shareholding to the
required level over a period of five years from appointment and,
once reached, to maintain this level for the full period of their
appointment. The intention is for the shareholding guideline to be
reached through retention of vested shares from share plans. REMCO
will monitor individual progress and retains the ability to adjust the
guideline in special circumstances on an individual basis.
Executive Directors’ remuneration policy table (continued)
Element
Purpose and link to strategy
Maximum opportunity
Operation and performance measurement
Annual bonus
Rewards the delivery of
Maximum bonus (as a
■ The bonus is determined by reference to performance from January 1 to
short-term operational
percentage of base
December 31 each year.
targets as derived from
salary):
■ Annual bonus = base salary x target bonus % x scorecard result (0–2); adjusted
Shell’s operating plan as
■ Chief Executive Officer
for individual performance with a 0–1.2 multiplier.
well as individual
(CEO): 250%
■ Taking the Shell operating plan into consideration, REMCO sets stretching
contribution to Shell.
■ Other Executive
scorecard targets and weightings which support the delivery of the strategy.
Directors: 240%
Measures are related to financial performance, operational excellence and
To reinforce alignment
sustainable development. Indicative weightings are 30%, 50% and 20%
with shareholder interests,
Target levels (as a
respectively. This balance ensures that the achievement of short-term financial
50% is delivered in cash
percentage of base
performance does not undermine future shareholder value creation. Stretching
and 50% is delivered in
salary):
individual targets are also set.
shares. Shares are subject
■ CEO: 150%
■ Scorecard targets will be disclosed in a subsequent Directors’ Remuneration
to a three-year holding
■ Other Executive
Report when they are no longer deemed to be commercially sensitive.
Directors: 120%
■ Individual performance is reflected by adjusting the bonus outcome. Upward
period, which applies
beyond an Executive
Director’s tenure.
adjustment is capped at 20% and subject to the overall maximum bonus cap.
The CEO’s maximum bonus is asymmetrically capped at 250%. There is no
limit to downward adjustment.
■ There are no prescribed thresholds or minimum levels of performance that
equate to a prescribed payment under the Policy and this structure can result in
■ The annual bonus is subject to malus provisions before it is delivered and to
no bonus being awarded.
clawback provisions thereafter.
■ REMCO retains the ability to adjust performance measure targets and
weightings year by year within the overall target and maximum payouts
approved in the Policy.
LTIP
Rewards longer-term value
Awards may be made up
■ Award levels are determined annually by REMCO and are set within the
creation linked to Shell’s
to a value of 400% of
maximum approved in the Policy.
strategy. The measures
base salary.
■ Awards may vest between 0% and 200% of the initial award level depending
predominantly focus on
on Shell’s performance on either an absolute basis, or on a relative basis
financial growth and
2017 Award levels:
against the other oil majors.
increases in value
■ CEO: 340%
■ For 2017, performance is assessed over a three-year period based on
compared with the other
■ Other Executive
absolute free cash flow (FCF), which is the sum of cash flow from operating
oil majors.
Directors: 270%
activities and cash flow from investing activities (25%), and the following
relative performance measures: total shareholder return (TSR) (25%), return on
To reinforce alignment
Awards may vest at up to
average capital employed (ROACE) growth (25%) and cash flow from
with shareholder interests,
200% of the shares
operating activities growth (25%). Each measure can vest independently, but if
shares delivered from
originally awarded, plus
the TSR measure does not result in vesting, then the total vesting level will be
vested LTIP awards are
dividends.
capped at 50% of the maximum payout.
subject to a three-year
holding period, which
applies beyond an
Executive Director’s
tenure.
■ Although it is possible for no LTIP shares to vest, on current measures and
weightings, 5% of the maximum LTIP award would vest if there was a threshold
vesting outcome in respect of FCF and no vesting on the other measures.
■ Additional shares are released representing the value of dividends payable on
the vested shares, as if these had been owned from the award date.
■ Following payment of taxes, delivered shares from LTIP awards must be held for
a further three years to align with Shell’s longer-term time horizon and strategy.
■ The LTIP award is subject to malus provisions before it is delivered and to
clawback provisions thereafter.
■ REMCO may adjust or change the LTIP measures, targets and weightings to
ensure continued alignment with Shell’s strategy.
NOTES TO THE EXECUTIVE DIRECTORS’ REMUNERATION POLICY
TABLE
Benefits
Benefits for Executive Directors deemed taxable in the UK are included as
taxable benefits in the single total figure of remuneration table. These elements
may include transport to and from home and office, the provision of home
security, and occasional business-required spouse travel, which are generally
considered legitimate business expenses rather than components of
remuneration.
Annual bonus
For the 2017 performance year, the scorecard framework will consist of cash
flow from operating activities (30% weight), operational excellence (50%
weight) and sustainable development (20% weight). REMCO believes it is
important for annual variable pay to remain balanced, with operational and
environmental components, complementing the LTIP’s focus on longer-term
financial outcomes. The same annual bonus scorecard approach applies to
Senior Management and other senior executives, supporting consistency of
remuneration and alignment of objectives.
2017 annual bonus scorecard measures and weightings
PERFORMANCE
MEASURE AND
WEIGHTING
Cash flow from
operating activities
(30%)
LINK TO OPERATING PLAN
This reflects our business performance.
Operational
excellence (50%)
Project delivery: Indicator of our ability to
deliver projects, on time, and on budget.
Operations: Maximising oil and gas production,
LNG liquefaction volumes, and the availability
of refineries and chemical plants are indicators
of the full and effective use of our resources;
which in turn generate cash flow.
Sustainable
development (20%)
Safety and environmental performance are
both core to how we operate.
Safety: Is implicit in all our activities. A safe
work environment has been, and will always
be, an important indicator of Shell’s commitment
to its employees and contractor staff.
Environmental performance: We are managing
Shell’s carbon intensity as part of the long-term
transition to a lower carbon energy system.
Therefore greenhouse gas measures are
now included.
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directors’ remuneration policy Continued
For future years, the specific measures and weightings for the annual bonus
scorecard will be reviewed annually by REMCO and adjusted accordingly to
evolve with Shell’s strategy and circumstances. The annual review will also
consider the scorecard target and outcome history over a decade to ensure
that the targets set remain stretching but realistic. REMCO retains the right to
exercise its judgement to adjust the mathematical bonus scorecard outcome to
ensure that the bonus scorecard outcome for Executive Directors reflects other
aspects of Shell’s performance which REMCO deems appropriate for the
reported year. REMCO is aware that the simple application of arithmetic
performance targets may lead to anomalies between business performance
and shareholder experience and therefore careful consideration is given to
formulaic outcomes. REMCO has a track record of using its discretion to
make downward adjustments where appropriate.
REMCO strengthens the Executive Directors’ individual accountability by
increasing or decreasing their annual bonuses to take account of how well
they have delivered against their individual performance targets. Shell
operates this approach for most of its employees. These individual targets
typically relate to qualitative differentiators not already covered by the
scorecard. Examples for the Executive Directors have included management
of transformative portfolio changes, portfolio development, and organisational
and financial leadership. This individual performance element preserves
consistency with the wider workforce and reinforces and drives a company-
wide culture of performance and behaviour.
At the end of the one-year performance period, 50% of the annual bonus is
delivered in cash and 50% is delivered in shares. Shares are subject to a
three-year holding period, which remains in force beyond an Executive
Director’s tenure.
Bonus time horizon
Year 1
Year 2
Year 3
Year 4
Net shares held for three years
Shares
unrestricted
ANNUAL
BONUS
50% delivered
in shares
50% delivered
in cash
Performance
period
Bonus delivered
Long-term Incentive Plan
The LTIP rewards longer-term performance linked to Shell’s strategy, which
includes cash generation and capital discipline, as well as value created for
shareholders.
The LTIP measures are predominantly based on relative outperformance
compared with the other oil majors, in line with our strategic intent to be a
leader in the oil and gas industry. For 2017, the measures will consist of
absolute FCF and relative growth compared with our peers based on the
following: TSR, ROACE and cash flow from operating activities. REMCO will
regularly review the measures, weightings and comparator group, and retains
the right to adjust these to ensure that the LTIP continues to serve its intended
purpose and level of challenge.
FCF performance is measured by aggregating annual absolute FCF
performance over the three-year performance period and then comparing the
outcome to the aggregate of our plan FCF targets over three years. The
outstanding (maximum), target and threshold (minimum) levels are declared at
the end of the performance period and will be the aggregate respective
annual outstanding, target and threshold levels for each year of the
performance period. A straight-line vesting schedule will apply for
performance between threshold and outstanding. The target, along with the
ranges for threshold and outstanding performance, is set by reference to our
operating plan and is in line with our cash flow priorities, namely: to service
and reduce debt, pay dividends, buy back shares and make future capital
investments.
For relative measures, we measure and rank growth based on the data points
at the end of the performance period compared with those at the beginning
of the period, using publicly reported data. When comparing performance
against the other oil majors, the relative performance ranking is as indicated
in the table below.
2017 LTIP measures and vesting schedule
PERFORMANCE
MEASURE AND
WEIGHTING
Free cash flow
(25%)
LINK TO STRATEGY
Recognition of the importance
of generating cash after net
capital expenditure to service
and reduce debt, pay
dividends, buy back shares
and make future capital
investments.
VESTING
SCHEDULE
(% OF INITIAL
LTIP AWARD)
Maximum – 200%
Target – 100%
Threshold – 40%
Below threshold – 0%
TSR (25%)
Assessment of actual wealth
created for shareholders.
ROACE growth
(25%)
Indicator of capital discipline.
1st – 200%
2nd – 150%
3rd – 80%
4th or 5th – nil
Cash flow
from operating
activities
growth (25%)
Source of capital expenditure
commitments which support
sustainable growth based on
portfolio and cost management.
TSR underpin
If the TSR ranking is fourth or fifth, the level of the award that can vest on the
basis of the three other measures will be capped at 50% of the maximum
payout for the LTIP.
Performance outcomes
REMCO retains discretion to adjust the mathematical outcome if it believes
that this is distorted by circumstances which are unrelated to performance, for
example, reporting changes, ranking clustering, or corporate events in the
comparator group. Upward adjustment would only be considered after
consultation with major shareholders. An explanation of any such adjustment
would be set out in the relevant Directors’ Remuneration Report.
LTIP performance is assessed over a three-year period. Vested shares from the
Executive Directors are eligible to receive the standard benefits and
LTIP are subject to a further three-year holding period post vesting, which
allowances provided to other staff. The provisions which are not generally
remains in force beyond an Executive Director’s tenure. This time horizon has
available for other employees are described in “Benefits”.
been extended and is deemed to be suitable for incentive purposes, but is
recognised as short relative to some of Shell’s operations. However REMCO
The methodology used for determining the annual bonus for Executive
believes that it provides for broad alignment with shareholder interests when
Directors is broadly consistent with the approach for Shell employees
coupled with significant shareholding requirements.
Treatment of outstanding awards
Awards granted prior to the approval and implementation of this Policy
Executive Directors’ retirement benefits are maintained in line with those of the
and/or prior to an individual becoming an Executive Director will continue to
wider workforce in their base country. There are no special pension
vest and be delivered in accordance with the terms of the original award
arrangements exclusive to Executive Directors.
generally. However, the individual performance factor for Executive Directors
is capped at 1.2 and the scorecard used for the majority of Shell staff may
differ in the make-up and weighting of the metrics used. Like Executive
Directors, members of Senior Management receive 50% of their annual bonus
in shares.
Executive Directors are not eligible to receive new awards under employee
share plans other than the LTIP, although awards previously granted will
continue to vest in accordance with the terms of the original award. Selected
employees participate in the Performance Share Plan (PSP). The operation of
the PSP is similar to the LTIP, but currently differs, for example, in some
performance measures and their relative weightings. As at March 2017,
around 55,000 employees participate in one or more of Shell’s global share
plans and/or incentive plans, further supporting alignment with shareholder
interests.
ILLUSTRATION OF POTENTIAL REMUNERATION OUTCOMES
The charts on page 114 represent estimates under three performance
scenarios (“Minimum”, “On-target”, and “Maximum”) of the potential
remuneration outcomes for each Executive Director resulting from the
application of 2017 base salaries to awards, expected to be made in 2017
in accordance with the Policy.
even if this is not consistent with the terms of this Policy.
As at March 8, 2017, this applies to Executive Directors Ben van Beurden
and Simon Henry who each have outstanding awards under the LTIP and
DBP. Jessica Uhl, who is appointed an Executive Director with effect from
March 9, 2017, has outstanding awards under the LTIP.
Shareholding
REMCO believes significant shareholding by Executive Directors is an
important way of ensuring that shareholders and Executive Directors share the
same priorities. Shareholding is one of Shell’s core remuneration principles as
it creates a balanced connection between individual wealth and Shell’s long-
term performance. This will support effective governance and an ownership
mindset. Significant shareholding requirements reflect the performance
timescales of Shell and are aligned with absolute shareholder return.
The CEO is expected to build up a shareholding of seven times their base
salary over five years from appointment. Other Executive Directors are
expected to build up a shareholding of four times their base salary over the
same period. In the event of an increase to the guideline multiple of salary,
for every additional multiple of salary required, the director will have one
extra year to reach the increased guideline, subject to a maximum of five
years from the date of the change.
The holding periods for LTIP vested shares and shares delivered as part of the
annual bonus continue to apply after Executive Directors leave employment.
This is to ensure departing executives continue to have their interests aligned
with those of shareholders.
DIFFERENCES FOR EXECUTIVE DIRECTORS FROM OTHER EMPLOYEES
The remuneration structure and approach to setting remuneration levels is
consistent across Shell, with consideration given to location, seniority and
responsibilities. However, a higher proportion of total remuneration is tied to
variable pay for Executive Directors and members of Senior Management.
The salary for each Executive Director is determined based on the indicators
in the “Executive Directors’ remuneration policy table”, which reflect the
international nature of the Executive Directors’ labour market. The salary for
other employees is normally set on a country basis.
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For future years, the specific measures and weightings for the annual bonus
performance period. A straight-line vesting schedule will apply for
scorecard will be reviewed annually by REMCO and adjusted accordingly to
performance between threshold and outstanding. The target, along with the
evolve with Shell’s strategy and circumstances. The annual review will also
ranges for threshold and outstanding performance, is set by reference to our
consider the scorecard target and outcome history over a decade to ensure
operating plan and is in line with our cash flow priorities, namely: to service
that the targets set remain stretching but realistic. REMCO retains the right to
and reduce debt, pay dividends, buy back shares and make future capital
exercise its judgement to adjust the mathematical bonus scorecard outcome to
investments.
ensure that the bonus scorecard outcome for Executive Directors reflects other
aspects of Shell’s performance which REMCO deems appropriate for the
For relative measures, we measure and rank growth based on the data points
reported year. REMCO is aware that the simple application of arithmetic
at the end of the performance period compared with those at the beginning
performance targets may lead to anomalies between business performance
of the period, using publicly reported data. When comparing performance
and shareholder experience and therefore careful consideration is given to
against the other oil majors, the relative performance ranking is as indicated
formulaic outcomes. REMCO has a track record of using its discretion to
in the table below.
make downward adjustments where appropriate.
REMCO strengthens the Executive Directors’ individual accountability by
increasing or decreasing their annual bonuses to take account of how well
they have delivered against their individual performance targets. Shell
operates this approach for most of its employees. These individual targets
typically relate to qualitative differentiators not already covered by the
scorecard. Examples for the Executive Directors have included management
of transformative portfolio changes, portfolio development, and organisational
and financial leadership. This individual performance element preserves
consistency with the wider workforce and reinforces and drives a company-
wide culture of performance and behaviour.
At the end of the one-year performance period, 50% of the annual bonus is
delivered in cash and 50% is delivered in shares. Shares are subject to a
three-year holding period, which remains in force beyond an Executive
Director’s tenure.
Long-term Incentive Plan
The LTIP rewards longer-term performance linked to Shell’s strategy, which
includes cash generation and capital discipline, as well as value created for
shareholders.
The LTIP measures are predominantly based on relative outperformance
compared with the other oil majors, in line with our strategic intent to be a
leader in the oil and gas industry. For 2017, the measures will consist of
absolute FCF and relative growth compared with our peers based on the
following: TSR, ROACE and cash flow from operating activities. REMCO will
regularly review the measures, weightings and comparator group, and retains
the right to adjust these to ensure that the LTIP continues to serve its intended
purpose and level of challenge.
FCF performance is measured by aggregating annual absolute FCF
performance over the three-year performance period and then comparing the
outcome to the aggregate of our plan FCF targets over three years. The
outstanding (maximum), target and threshold (minimum) levels are declared at
the end of the performance period and will be the aggregate respective
annual outstanding, target and threshold levels for each year of the
If the TSR ranking is fourth or fifth, the level of the award that can vest on the
basis of the three other measures will be capped at 50% of the maximum
TSR underpin
payout for the LTIP.
Performance outcomes
REMCO retains discretion to adjust the mathematical outcome if it believes
that this is distorted by circumstances which are unrelated to performance, for
example, reporting changes, ranking clustering, or corporate events in the
comparator group. Upward adjustment would only be considered after
consultation with major shareholders. An explanation of any such adjustment
would be set out in the relevant Directors’ Remuneration Report.
LTIP performance is assessed over a three-year period. Vested shares from the
LTIP are subject to a further three-year holding period post vesting, which
remains in force beyond an Executive Director’s tenure. This time horizon has
been extended and is deemed to be suitable for incentive purposes, but is
recognised as short relative to some of Shell’s operations. However REMCO
believes that it provides for broad alignment with shareholder interests when
coupled with significant shareholding requirements.
LTIP time horizon
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
LONG-TERM
INCENTIVE
PLAN
100%
delivered
in shares
Net shares held for
three years
Shares
unrestricted
Performance period
Shares delivered
Treatment of outstanding awards
Awards granted prior to the approval and implementation of this Policy
and/or prior to an individual becoming an Executive Director will continue to
vest and be delivered in accordance with the terms of the original award
even if this is not consistent with the terms of this Policy.
As at March 8, 2017, this applies to Executive Directors Ben van Beurden
and Simon Henry who each have outstanding awards under the LTIP and
DBP. Jessica Uhl, who is appointed an Executive Director with effect from
March 9, 2017, has outstanding awards under the LTIP.
Shareholding
REMCO believes significant shareholding by Executive Directors is an
important way of ensuring that shareholders and Executive Directors share the
same priorities. Shareholding is one of Shell’s core remuneration principles as
it creates a balanced connection between individual wealth and Shell’s long-
term performance. This will support effective governance and an ownership
mindset. Significant shareholding requirements reflect the performance
timescales of Shell and are aligned with absolute shareholder return.
The CEO is expected to build up a shareholding of seven times their base
salary over five years from appointment. Other Executive Directors are
expected to build up a shareholding of four times their base salary over the
same period. In the event of an increase to the guideline multiple of salary,
for every additional multiple of salary required, the director will have one
extra year to reach the increased guideline, subject to a maximum of five
years from the date of the change.
The holding periods for LTIP vested shares and shares delivered as part of the
annual bonus continue to apply after Executive Directors leave employment.
This is to ensure departing executives continue to have their interests aligned
with those of shareholders.
DIFFERENCES FOR EXECUTIVE DIRECTORS FROM OTHER EMPLOYEES
The remuneration structure and approach to setting remuneration levels is
consistent across Shell, with consideration given to location, seniority and
responsibilities. However, a higher proportion of total remuneration is tied to
variable pay for Executive Directors and members of Senior Management.
The salary for each Executive Director is determined based on the indicators
in the “Executive Directors’ remuneration policy table”, which reflect the
international nature of the Executive Directors’ labour market. The salary for
other employees is normally set on a country basis.
Executive Directors are eligible to receive the standard benefits and
allowances provided to other staff. The provisions which are not generally
available for other employees are described in “Benefits”.
The methodology used for determining the annual bonus for Executive
Directors is broadly consistent with the approach for Shell employees
generally. However, the individual performance factor for Executive Directors
is capped at 1.2 and the scorecard used for the majority of Shell staff may
differ in the make-up and weighting of the metrics used. Like Executive
Directors, members of Senior Management receive 50% of their annual bonus
in shares.
Executive Directors are not eligible to receive new awards under employee
share plans other than the LTIP, although awards previously granted will
continue to vest in accordance with the terms of the original award. Selected
employees participate in the Performance Share Plan (PSP). The operation of
the PSP is similar to the LTIP, but currently differs, for example, in some
performance measures and their relative weightings. As at March 2017,
around 55,000 employees participate in one or more of Shell’s global share
plans and/or incentive plans, further supporting alignment with shareholder
interests.
Executive Directors’ retirement benefits are maintained in line with those of the
wider workforce in their base country. There are no special pension
arrangements exclusive to Executive Directors.
ILLUSTRATION OF POTENTIAL REMUNERATION OUTCOMES
The charts on page 114 represent estimates under three performance
scenarios (“Minimum”, “On-target”, and “Maximum”) of the potential
remuneration outcomes for each Executive Director resulting from the
application of 2017 base salaries to awards, expected to be made in 2017
in accordance with the Policy.
Performance scenarios
SCENARIO
OUTCOME
Minimum
Fixed remuneration includes 2017 base salaries,
2016 benefits (as reported in the single total figure of
remuneration table), with an estimate for the incoming
CFO, and a projection of 2017 pension for the CEO
and incoming CFO. There is no annual bonus or vesting
of the LTIP award.
On-target
Reflects fixed remuneration, plus on-target 2017 annual
bonus and vesting of LTIP award, as percentages of base
salary, as follows:
Annual
incentive
Long-term
incentive
CEO
150%
CFO
120%
340%
270%
Maximum
Reflects fixed remuneration, plus maximum pay-out of
2017 annual bonus and vesting of 200% of original LTIP
award, as percentages of base salary, as follows:
Annual
incentive
Long-term
incentive
CEO
250%
CFO
240%
680%
540%
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directors’ remuneration policy Continued
The majority of Executive Directors’ remuneration is delivered through variable
pay elements, which are conditional on the achievement of stretching targets.
The scenario charts are based on future Policy award levels and are
combined with projected single total figures of remuneration. The pay
scenarios are forward-looking and only serve to illustrate the future Policy.
For simplicity, the scenarios assume no share price movement and exclude
dividend accrual, for the portion of the bonus paid in shares and the LTIP,
although dividend accrual during the performance and holding period
applies.
The scenarios are based on the current CEO (Ben van Beurden) and
incoming CFO (Jessica Uhl) roles.
RECRUITMENT
EXECUTIVE DIRECTORS
When determining remuneration packages for new Executive Directors,
REMCO will seek a balanced outcome which allows Shell to:
REMCO determines the remuneration package for new Executive Director
appointments. These appointments may involve external or internal recruitment
■ attract and motivate candidates of the right quality;
or reflect a change in role of a current Executive Director.
■ take into account the individual’s current remuneration package and other
CEO pay scenarios
CFO pay scenarios
n
o
i
l
l
i
m
€
16
14
12
10
8
6
4
2
0
9.2
55%
24%
21%
1.9
100%
15.7
64%
24%
12%
Minimum
On-target
Maximum
n
o
i
l
l
i
m
€
16
14
12
10
8
6
4
2
0
1.5
100%
Minimum
9.1
58%
26%
16%
55%5.3
50%
22%
28%
On-target
Maximum
Compensation for the forfeiture of
To facilitate external recruitment, one-off compensation in consideration for forfeited
An amount equal to the value of the
Fixed remuneration
Annual incentive
Long-term incentive
Fixed remuneration
Annual incentive
Long-term incentive
NON-EXECUTIVE DIRECTORS
Non-executive Directors’ remuneration policy table
Fee structure
Non-executive Directors (NEDs) receive a fixed
annual fee for their directorship. The size of the fee
will differ based on the position on the Board:
Chair of the Board fee or standard Non-executive
Director fee.
Additional annual fee(s) are payable to any
director who serves as Senior Independent
Director, a Board committee chair, or a Board
committee member.
A NED receives either a chair or member fee for
each committee. This means that a chair of a
committee does not receive both fees.
NEDs receive an additional fee for any Board
meeting involving intercontinental travel – except
for one meeting a year held in a location other
than The Hague.
Approach to setting fees
The Chair’s fee is determined by
REMCO. The Board determines the
fees payable to NEDs. The maximum
aggregate annual fees will be within
the limit specified by the Articles of
Association and in accordance with
the NEDs’ responsibilities and time
commitments.
The Board reviews NED fees
periodically to ensure that they are
aligned with those of other major
listed companies.
Other remuneration
Business expenses incurred in respect of the performance of their
duties as a NED will be paid or reimbursed by Shell. Such
expenses could include transport between home and office and
occasional business-required spouse travel. Where required, the
Chair is offered Shell-provided accommodation in The Hague.
REMCO has the discretion to offer other benefits to the Chair as
appropriate to their circumstances. Where business expenses or
benefits create a personal tax liability to the director, Shell may
cover the associated tax.
The Chair and the other NEDs cannot receive awards under any
incentive or performance-based remuneration plans, and
personal loans or guarantees are not granted to them.
NEDs do not accrue any retirement benefits as a result of their
non-executive directorships with Shell.
NEDs are encouraged to hold shares with a value equivalent to
100% of their fixed annual fee and maintain that holding during
their tenure.
contractual entitlements;
■ seek a competitive pay position relative to our comparator group, without
overpaying;
■ encourage relocation if required; and
■ honour entitlements (for example, variable remuneration) of internal
candidates before their promotion to the Board.
REMCO will follow the approach set out in the table below when determining the remuneration package for a new Executive Director.
Remuneration package
Component
Approach
Maximum
Ongoing remuneration
The salary, benefits, annual bonus, long-term incentives and pension benefits will
As stated in the “Executive Directors’
be positioned and delivered within the framework of the Executive Directors’
remuneration policy table”.
remuneration policy.
any awards under variable
awards under variable remuneration arrangements entered into with a previous
forfeited variable remuneration
remuneration arrangements
employer may be required. REMCO will use its judgement to determine the
awards, as assessed by REMCO.
appropriate level of compensation by matching the value of any lost awards under
Consideration will be given to
variable remuneration arrangements with the candidate’s previous employer. This
appropriate performance conditions,
compensation may take the form of a one-off cash payment or an additional award
performance periods and clawback
under the LTIP. The compensation can alternatively be based on a newly created
arrangements.
long-term incentive plan arrangement where the only participant is the new director.
Replacement of forfeited
There may also be a need to compensate a new Executive Director in respect of
An amount equal to the value of the
entitlements other than any
forfeited entitlements other than any awards under variable remuneration
forfeited entitlements, as assessed by
awards under variable
arrangements. This could include, for example, pension or contractual
REMCO.
remuneration arrangements
entitlements, or other benefits. On recruitment, these entitlements may be
Exceptional recruitment incentive Apart from the ongoing annual remuneration package and any compensation in
One times the LTIP award level, subject
respect of the replacement of forfeited entitlements, there may be circumstances
to the limits set out in the “Executive
in which REMCO needs to offer a one-off recruitment incentive in the form of
Directors’ remuneration policy table”.
replicated within the Executive Directors’ remuneration policy or valued by
REMCO and compensated in cash.
In cases of internal promotion to the Board, any commitments made which
cannot be effectively replaced within the Executive Directors’ remuneration policy
may, at REMCO’s discretion, continue to be honoured.
cash or shares to ensure the right external candidate is attracted. REMCO
recognises the importance of internal succession planning but it must also have
the ability to compete for talent with other global companies. The necessity and
level of this incentive will depend on the individual’s circumstances.
MALUS AND CLAWBACK
Variable pay awards may be made subject to adjustment events. At the
discretion of REMCO, such an award may be adjusted before delivery
(malus) or reclaimed after delivery (clawback) if an adjustment event occurs.
Adjustment events will be specified in award documentation and it is intended
that they will, for example, relate to restatement of financial results due to:
non-compliance with a financial reporting requirement; or misconduct by an
Executive Director or misconduct through their direction or non-direction.
REMCO retains the right to alter the list of adjustment events in respect of
future awards.
In addition, REMCO will retain discretion in assuring itself that there is
satisfactory underlying performance before releasing any variable pay to
Executive Directors and may withhold all or some of the bonus or shares
awarded if it considers that the underlying performance (financial,
environmental, safety or other) of Shell is inadequate.
NON-EXECUTIVE DIRECTORS
DIRECTORS’ EMPLOYMENT ARRANGEMENTS AND
REMCO’s approach to setting the remuneration package for NEDs is to offer
LETTERS OF APPOINTMENT
fee levels and specific benefits (where appropriate) in line with the “Non-
Executive Directors are employed for an indefinite period. Executive Directors
executive Directors’ remuneration policy table” and subject to the Articles of
with the Netherlands as their base country will be employed on the basis of a
Association. NEDs are not offered variable remuneration or retention awards.
contract of employment governed by Dutch employment law. For Executive
When determining the benefits for a new Chair, the individual circumstances
determine their employment arrangements based on a number of
of the future Chair will be taken into account.
Directors with a base country other than the Netherlands, REMCO will
considerations, including Dutch immigration requirements and base country
retirement benefits. NEDs, including the Chair, have letters of appointment.
Executive Directors’ employment arrangements and NEDs’ letters of
appointment are available for inspection at the AGM or on request. For
further details on appointment and re-appointment of Directors, see the
“Directors’ Report” on page 74.
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NON-EXECUTIVE DIRECTORS
Non-executive Directors’ remuneration policy table
Fee structure
Approach to setting fees
Other remuneration
Non-executive Directors (NEDs) receive a fixed
The Chair’s fee is determined by
Business expenses incurred in respect of the performance of their
annual fee for their directorship. The size of the fee
REMCO. The Board determines the
duties as a NED will be paid or reimbursed by Shell. Such
will differ based on the position on the Board:
fees payable to NEDs. The maximum
expenses could include transport between home and office and
Chair of the Board fee or standard Non-executive
aggregate annual fees will be within
occasional business-required spouse travel. Where required, the
Director fee.
the limit specified by the Articles of
Chair is offered Shell-provided accommodation in The Hague.
Association and in accordance with
REMCO has the discretion to offer other benefits to the Chair as
Additional annual fee(s) are payable to any
the NEDs’ responsibilities and time
appropriate to their circumstances. Where business expenses or
director who serves as Senior Independent
commitments.
benefits create a personal tax liability to the director, Shell may
Director, a Board committee chair, or a Board
cover the associated tax.
committee member.
The Board reviews NED fees
A NED receives either a chair or member fee for
aligned with those of other major
incentive or performance-based remuneration plans, and
each committee. This means that a chair of a
listed companies.
personal loans or guarantees are not granted to them.
periodically to ensure that they are
The Chair and the other NEDs cannot receive awards under any
The majority of Executive Directors’ remuneration is delivered through variable
For simplicity, the scenarios assume no share price movement and exclude
pay elements, which are conditional on the achievement of stretching targets.
dividend accrual, for the portion of the bonus paid in shares and the LTIP,
although dividend accrual during the performance and holding period
The scenario charts are based on future Policy award levels and are
applies.
combined with projected single total figures of remuneration. The pay
scenarios are forward-looking and only serve to illustrate the future Policy.
The scenarios are based on the current CEO (Ben van Beurden) and
incoming CFO (Jessica Uhl) roles.
RECRUITMENT
EXECUTIVE DIRECTORS
REMCO determines the remuneration package for new Executive Director
appointments. These appointments may involve external or internal recruitment
or reflect a change in role of a current Executive Director.
When determining remuneration packages for new Executive Directors,
REMCO will seek a balanced outcome which allows Shell to:
■ attract and motivate candidates of the right quality;
■ take into account the individual’s current remuneration package and other
contractual entitlements;
■ seek a competitive pay position relative to our comparator group, without
overpaying;
■ encourage relocation if required; and
■ honour entitlements (for example, variable remuneration) of internal
candidates before their promotion to the Board.
REMCO will follow the approach set out in the table below when determining the remuneration package for a new Executive Director.
Remuneration package
Component
Approach
Ongoing remuneration
The salary, benefits, annual bonus, long-term incentives and pension benefits will
be positioned and delivered within the framework of the Executive Directors’
remuneration policy.
Maximum
As stated in the “Executive Directors’
remuneration policy table”.
Compensation for the forfeiture of
any awards under variable
remuneration arrangements
To facilitate external recruitment, one-off compensation in consideration for forfeited
awards under variable remuneration arrangements entered into with a previous
employer may be required. REMCO will use its judgement to determine the
appropriate level of compensation by matching the value of any lost awards under
variable remuneration arrangements with the candidate’s previous employer. This
compensation may take the form of a one-off cash payment or an additional award
under the LTIP. The compensation can alternatively be based on a newly created
long-term incentive plan arrangement where the only participant is the new director.
An amount equal to the value of the
forfeited variable remuneration
awards, as assessed by REMCO.
Consideration will be given to
appropriate performance conditions,
performance periods and clawback
arrangements.
Replacement of forfeited
entitlements other than any
awards under variable
remuneration arrangements
There may also be a need to compensate a new Executive Director in respect of
forfeited entitlements other than any awards under variable remuneration
arrangements. This could include, for example, pension or contractual
entitlements, or other benefits. On recruitment, these entitlements may be
replicated within the Executive Directors’ remuneration policy or valued by
REMCO and compensated in cash.
An amount equal to the value of the
forfeited entitlements, as assessed by
REMCO.
In cases of internal promotion to the Board, any commitments made which
cannot be effectively replaced within the Executive Directors’ remuneration policy
may, at REMCO’s discretion, continue to be honoured.
committee does not receive both fees.
NEDs receive an additional fee for any Board
meeting involving intercontinental travel – except
for one meeting a year held in a location other
than The Hague.
NEDs do not accrue any retirement benefits as a result of their
non-executive directorships with Shell.
NEDs are encouraged to hold shares with a value equivalent to
100% of their fixed annual fee and maintain that holding during
their tenure.
Exceptional recruitment incentive Apart from the ongoing annual remuneration package and any compensation in
respect of the replacement of forfeited entitlements, there may be circumstances
in which REMCO needs to offer a one-off recruitment incentive in the form of
cash or shares to ensure the right external candidate is attracted. REMCO
recognises the importance of internal succession planning but it must also have
the ability to compete for talent with other global companies. The necessity and
level of this incentive will depend on the individual’s circumstances.
One times the LTIP award level, subject
to the limits set out in the “Executive
Directors’ remuneration policy table”.
MALUS AND CLAWBACK
Variable pay awards may be made subject to adjustment events. At the
discretion of REMCO, such an award may be adjusted before delivery
In addition, REMCO will retain discretion in assuring itself that there is
satisfactory underlying performance before releasing any variable pay to
Executive Directors and may withhold all or some of the bonus or shares
(malus) or reclaimed after delivery (clawback) if an adjustment event occurs.
awarded if it considers that the underlying performance (financial,
Adjustment events will be specified in award documentation and it is intended
environmental, safety or other) of Shell is inadequate.
that they will, for example, relate to restatement of financial results due to:
non-compliance with a financial reporting requirement; or misconduct by an
Executive Director or misconduct through their direction or non-direction.
REMCO retains the right to alter the list of adjustment events in respect of
future awards.
NON-EXECUTIVE DIRECTORS
REMCO’s approach to setting the remuneration package for NEDs is to offer
fee levels and specific benefits (where appropriate) in line with the “Non-
executive Directors’ remuneration policy table” and subject to the Articles of
Association. NEDs are not offered variable remuneration or retention awards.
When determining the benefits for a new Chair, the individual circumstances
of the future Chair will be taken into account.
DIRECTORS’ EMPLOYMENT ARRANGEMENTS AND
LETTERS OF APPOINTMENT
Executive Directors are employed for an indefinite period. Executive Directors
with the Netherlands as their base country will be employed on the basis of a
contract of employment governed by Dutch employment law. For Executive
Directors with a base country other than the Netherlands, REMCO will
determine their employment arrangements based on a number of
considerations, including Dutch immigration requirements and base country
retirement benefits. NEDs, including the Chair, have letters of appointment.
Executive Directors’ employment arrangements and NEDs’ letters of
appointment are available for inspection at the AGM or on request. For
further details on appointment and re-appointment of Directors, see the
“Directors’ Report” on page 74.
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directors’ remuneration policy Continued
END OF EMPLOYMENT
EXECUTIVE DIRECTORS
Notice period
Employment arrangements of Executive Directors can generally end by either
the employee or the employer providing one month’s notice, or the
applicable statutory notice period. For example, under Dutch law, the
statutory notice period for the employer will vary in line with the length of
service, with the maximum being four months’ notice. Under Dutch law,
termination payments are not linked to the contract’s notice period.
The Netherlands statutory end-of-employment compensation
With effect from July 1, 2015, new employment legislation in the
Netherlands introduced statutory end-of-employment compensation. Under this
legislation, every termination (other than following retirement or for cause) of a
Dutch employment contract that has continued for a minimum of two years will
give rise to an obligation to pay the departing employee transition
compensation (“transitievergoeding”). The statutory compensation is capped
at one times the annual salary, which is deemed to include variable pay such
as the annual bonus. Executive Directors are expected not to claim transition
compensation or any other applicable statutory compensation over and
above the agreed compensation for loss of office as set out in the “End of
employment” table on page 116.
Outstanding entitlements
In cases of resignation or dismissal for cause, fixed remuneration (base salary,
benefits, and employer pension contributions) will cease on the last day of
employment, variable remuneration elements will generally lapse and the
Executive Director is not eligible for compensation for loss of office.
The information, on page 116, generally applies to termination of
employment by Shell giving notice, by mutual agreement, or in situations
where the employment terminates because of retirement with Shell consent at
a date other than the normal retirement date, redundancy or in other similar
circumstances at REMCO’s discretion.
End of employment
Provision
Compensation for loss of office For Executive Directors appointed prior to 2011, REMCO may offer a termination payment of up to one times annual pay
Policy
(base salary plus target bonus).
of this Policy.
For Executive Directors appointed between January 1, 2011 and December 31, 2016, employment contracts include a cap
on termination payments of one times annual pay (base salary plus target bonus). Delivery of compensation is mitigated by a
contractual obligation for the Executive Director to seek alternative employment and the Company’s ability to implement
phased payment terms.
For Executive Directors appointed on or after January 1, 2017, REMCO may offer a termination payment of up to one times
base salary (target bonus will not be included). However, REMCO may be obligated to pay statutory compensation over
and above the compensation for loss of office to a departing Executive Director who asserts a statutory claim thereto. Delivery
of compensation is mitigated by a contractual obligation for the Executive Director to seek alternative employment and the
Company’s ability to implement phased payment terms.
The reimbursement of standard end-of-employment benefits such as repatriation costs and outplacement support may also be
included, as deemed reasonable by REMCO.
REMCO may adjust the termination payment for any situation where a full payment is inappropriate, taking into consideration
applicable law, corporate governance provisions and the best interests of the Company and shareholders as a whole.
Annual bonus
Any annual bonus in the year of departure is prorated based on service. Depending on the timing of the departure, REMCO
may consider the latest scorecard position or defer payment until the full-year scorecard result is known.
LTIP
DBP shares and bonus delivered in shares represent the bonus which a participant has already earned and carry no further
performance conditions; therefore these shares will be unrestricted at the conclusion of the normal deferral or holding period
respectively and no proration will apply.
Outstanding awards are prorated on a monthly basis, by reference to the Executive Director’s service within the performance
period. They will generally survive the end of employment and will remain subject to the same vesting performance
conditions, and malus and clawback provisions, as if the Executive Director had remained in employment. The three-year
holding period will also remain in force for any awards made on or after January 1, 2017. If the participant dies before the
end of the performance period, the award will vest at the target level on the date of death. In case of death after the end of
the performance period, the award will vest as described in this Policy.
NON-EXECUTIVE DIRECTORS
No payments for loss of office will be made to NEDs.
CONSIDERATION OF SHAREHOLDER VIEWS
REMCO engages with major shareholders on a regular basis throughout the
year and this allows it to hear views on Shell’s remuneration approach and
CONSIDERATION OF OVERALL PAY AND EMPLOYMENT
test proposals when developing or evolving the Policy. Recent examples of
CONDITIONS
REMCO responding to shareholder views include introducing greenhouse gas
When setting the Policy, no specific employee groups were consulted.
management to variable pay and setting FCF as an absolute measure in the
However, Shell seeks to promote and maintain good relations with employee
LTIP performance conditions.
representative bodies as part of its employee engagement strategy, and
consults on matters affecting employees and business performance as
REMCO will review the Policy regularly to ensure it continues to reinforce
required.
Shell’s long-term strategy and remains closely aligned with shareholders’
interests.
When determining Executive Directors’ remuneration structure and outcomes,
REMCO reviews a set of information, including relevant reference points and
ADDITIONAL POLICY STATEMENT
trends, which includes internal data on employee remuneration (for example,
REMCO reserves the right to make payments outside the Policy in limited
employee relations matters in respect of remuneration and average salary
exceptional circumstances, such as for regulatory, tax or administrative
increases applying in the Netherlands, UK and the USA). During the Policy
purposes or to take account of a change in legislation or exchange controls,
review, pay and employment conditions of the wider Shell employee
and only where REMCO considers such payments are necessary to give
population were taken into account by adhering to the same performance,
effect to the intent of the Policy.
rewards and benefits philosophy for the Executive Directors, as well as overall
benchmarking principles. Furthermore, any potential differences from other
Signed on behalf of the Board
employees (see “Differences for Executive Directors from other employees”)
were taken into account when providing REMCO with advice in the formation
/s/ Linda M. Szymanski
Linda M. Szymanski
Company Secretary
March 14, 2018
Dialogue between management and staff is important, with the annual Shell
People Survey being one of the principal means of gathering employee views
on a range of matters. The Shell People Survey includes questions inviting
employees’ views on their pay and benefit arrangements. The Company also
encourages share ownership among employees, and many are shareholders
who are able to participate in the vote on the Policy at the AGM.
REMCO is kept informed by the CEO, the Chief Human Resources &
Corporate Officer and the Executive Vice President Remuneration, Benefits &
Services on the bonus scorecard and any relevant remuneration matters
affecting Senior Management and other senior executives, extending to
multiple levels below the Board.
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CONSIDERATION OF SHAREHOLDER VIEWS
REMCO engages with major shareholders on a regular basis throughout the
year and this allows it to hear views on Shell’s remuneration approach and
test proposals when developing or evolving the Policy. Recent examples of
REMCO responding to shareholder views include introducing greenhouse gas
management to variable pay and setting FCF as an absolute measure in the
LTIP performance conditions.
REMCO will review the Policy regularly to ensure it continues to reinforce
Shell’s long-term strategy and remains closely aligned with shareholders’
interests.
ADDITIONAL POLICY STATEMENT
REMCO reserves the right to make payments outside the Policy in limited
exceptional circumstances, such as for regulatory, tax or administrative
purposes or to take account of a change in legislation or exchange controls,
and only where REMCO considers such payments are necessary to give
effect to the intent of the Policy.
Signed on behalf of the Board
/s/ Linda M. Szymanski
Linda M. Szymanski
Company Secretary
March 14, 2018
END OF EMPLOYMENT
EXECUTIVE DIRECTORS
Notice period
as the annual bonus. Executive Directors are expected not to claim transition
compensation or any other applicable statutory compensation over and
above the agreed compensation for loss of office as set out in the “End of
NON-EXECUTIVE DIRECTORS
No payments for loss of office will be made to NEDs.
CONSIDERATION OF OVERALL PAY AND EMPLOYMENT
CONDITIONS
When setting the Policy, no specific employee groups were consulted.
However, Shell seeks to promote and maintain good relations with employee
representative bodies as part of its employee engagement strategy, and
consults on matters affecting employees and business performance as
required.
When determining Executive Directors’ remuneration structure and outcomes,
REMCO reviews a set of information, including relevant reference points and
trends, which includes internal data on employee remuneration (for example,
employee relations matters in respect of remuneration and average salary
increases applying in the Netherlands, UK and the USA). During the Policy
review, pay and employment conditions of the wider Shell employee
population were taken into account by adhering to the same performance,
rewards and benefits philosophy for the Executive Directors, as well as overall
benchmarking principles. Furthermore, any potential differences from other
employees (see “Differences for Executive Directors from other employees”)
were taken into account when providing REMCO with advice in the formation
of this Policy.
Dialogue between management and staff is important, with the annual Shell
People Survey being one of the principal means of gathering employee views
on a range of matters. The Shell People Survey includes questions inviting
employees’ views on their pay and benefit arrangements. The Company also
encourages share ownership among employees, and many are shareholders
who are able to participate in the vote on the Policy at the AGM.
REMCO is kept informed by the CEO, the Chief Human Resources &
Corporate Officer and the Executive Vice President Remuneration, Benefits &
Services on the bonus scorecard and any relevant remuneration matters
affecting Senior Management and other senior executives, extending to
multiple levels below the Board.
Employment arrangements of Executive Directors can generally end by either
employment” table on page 116.
the employee or the employer providing one month’s notice, or the
applicable statutory notice period. For example, under Dutch law, the
statutory notice period for the employer will vary in line with the length of
service, with the maximum being four months’ notice. Under Dutch law,
termination payments are not linked to the contract’s notice period.
Outstanding entitlements
In cases of resignation or dismissal for cause, fixed remuneration (base salary,
benefits, and employer pension contributions) will cease on the last day of
employment, variable remuneration elements will generally lapse and the
Executive Director is not eligible for compensation for loss of office.
The Netherlands statutory end-of-employment compensation
With effect from July 1, 2015, new employment legislation in the
The information, on page 116, generally applies to termination of
Netherlands introduced statutory end-of-employment compensation. Under this
employment by Shell giving notice, by mutual agreement, or in situations
legislation, every termination (other than following retirement or for cause) of a
where the employment terminates because of retirement with Shell consent at
Dutch employment contract that has continued for a minimum of two years will
a date other than the normal retirement date, redundancy or in other similar
give rise to an obligation to pay the departing employee transition
compensation (“transitievergoeding”). The statutory compensation is capped
at one times the annual salary, which is deemed to include variable pay such
circumstances at REMCO’s discretion.
End of employment
Provision
Policy
Compensation for loss of office For Executive Directors appointed prior to 2011, REMCO may offer a termination payment of up to one times annual pay
(base salary plus target bonus).
For Executive Directors appointed between January 1, 2011 and December 31, 2016, employment contracts include a cap
on termination payments of one times annual pay (base salary plus target bonus). Delivery of compensation is mitigated by a
contractual obligation for the Executive Director to seek alternative employment and the Company’s ability to implement
phased payment terms.
For Executive Directors appointed on or after January 1, 2017, REMCO may offer a termination payment of up to one times
base salary (target bonus will not be included). However, REMCO may be obligated to pay statutory compensation over
and above the compensation for loss of office to a departing Executive Director who asserts a statutory claim thereto. Delivery
of compensation is mitigated by a contractual obligation for the Executive Director to seek alternative employment and the
Company’s ability to implement phased payment terms.
The reimbursement of standard end-of-employment benefits such as repatriation costs and outplacement support may also be
included, as deemed reasonable by REMCO.
REMCO may adjust the termination payment for any situation where a full payment is inappropriate, taking into consideration
applicable law, corporate governance provisions and the best interests of the Company and shareholders as a whole.
Annual bonus
Any annual bonus in the year of departure is prorated based on service. Depending on the timing of the departure, REMCO
may consider the latest scorecard position or defer payment until the full-year scorecard result is known.
LTIP
DBP shares and bonus delivered in shares represent the bonus which a participant has already earned and carry no further
performance conditions; therefore these shares will be unrestricted at the conclusion of the normal deferral or holding period
respectively and no proration will apply.
Outstanding awards are prorated on a monthly basis, by reference to the Executive Director’s service within the performance
period. They will generally survive the end of employment and will remain subject to the same vesting performance
conditions, and malus and clawback provisions, as if the Executive Director had remained in employment. The three-year
holding period will also remain in force for any awards made on or after January 1, 2017. If the participant dies before the
end of the performance period, the award will vest at the target level on the date of death. In case of death after the end of
the performance period, the award will vest as described in this Policy.
GOVERNANCE SHELL ANNUAL REPORT AND FORM 20-F 2017
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Financial statements and supplements
Financial Statements and Supplements
Independent Auditor’s Report to the members of Royal Dutch Shell plc
Independent Auditor’s Report to the members of Royal Dutch Shell plc
REPORT ON THE FINANCIAL STATEMENTS
1. OUR OPINIONS AND CONCLUSIONS ARISING FROM OUR AUDIT
1.1 Our opinion on the financial statements
In our opinion, the financial statements of Royal Dutch Shell plc (the Parent Company) and its subsidiaries (collectively, Shell):
■
■
■
give a true and fair view of the state of Shell’s and of the Parent Company’s affairs as at December 31, 2017, and of Shell’s and the Parent Company’s
income for the year then ended;
have been properly prepared both in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and
IFRS as issued by the International Accounting Standards Board (IASB); and
have been prepared in accordance with the requirements of the Companies Act 2006, and, as regards Shell’s financial statements, Article 4 of the IAS
Regulation.
1.2 Our opinion on other matters prescribed by the Companies Act 2006
In our opinion:
■
■
the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; and
based on the work undertaken in the course of our audit:
■
■
the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is
consistent with the financial statements; and
the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
1.3 Matters on which we are required to report by exception
Our confirmations that we have nothing to report by exception, in relation to those matters where we are required so to report, are set out in sections 9
and 10 below.
1.4 What we have audited
We have audited Royal Dutch Shell plc’s financial statements for the year ended December 31, 2017, which are included in the Annual Report and
Form 20-F (the Annual Report) and comprise:
Shell
Consolidated Balance Sheet as at December 31, 2017
Consolidated Statement of Income for the year then ended
Consolidated Statement of Comprehensive Income for the year then ended
Consolidated Statement of Changes in Equity for the year then ended
Consolidated Statement of Cash Flows for the year then ended
Related Notes 1 to 29 to the Consolidated Financial Statements,
including a summary of significant accounting policies
Parent Company
Balance Sheet as at December 31, 2017
Statement of Income for the year then ended
Statement of Comprehensive Income for the year then ended
Statement of Changes in Equity for the year then ended
Statement of Cash Flows for the year then ended
Related Notes 1 to 15 to the Parent Company Financial Statements
The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and both IFRS as adopted by the EU
and IFRS as issued by the IASB.
2.
BASIS FOR OUR OPINION
We conducted our audit in accordance with International Standards on Auditing (UK) (ISA (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report below. We are independent of Shell
and the Parent Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s
Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained during the planning, execution and conclusion of our audit is sufficient and appropriate to provide a
suitable basis for our opinion.
3. USE OF OUR REPORT
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has
been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a
body, for our audit work, for this report, or for the opinions we have formed.
4. OUR CONCLUSIONS RELATING TO PRINICIPAL RISKS, GOING CONCERN AND VIABILITY STATEMENT
We have nothing to report in respect of the following information in the Annual Report, in relation to which ISA(UK) requires us to report to you whether we
the disclosures in the Annual Report set out on pages 12 to 16 that describe the principal risks and cross refer to where there are explanations of how the
have anything material to add or draw attention to:
risks are being managed or mitigated;
■
■
■
the Directors’ confirmation set out on page 82 in the Annual Report that they have carried out a robust assessment of the principal risks facing the entity,
including those that would threaten its business model, future performance, solvency or liquidity;
the Directors’ statement set out on pages 73 to 75 in the financial statements about whether they considered it appropriate to adopt the going concern
basis of accounting in preparing them, and their identification of any material uncertainties to the entity’s ability to continue to do so over a period of at
least twelve months from the date of approval of the financial statements;
■ whether the Directors’ statement in relation to going concern required under the Listing Rules in accordance with Listing Rule 9.8.6R(3) is materially
inconsistent with our knowledge obtained in the audit; or
■
the Directors’ explanation set out on pages 73 to 75 in the Annual Report as to how they have assessed the prospects of the entity, over what period
they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the
entity will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures
drawing attention to any necessary qualifications or assumptions.
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Financial Statements and Supplements
Independent Auditor’s Report to the members of Royal Dutch Shell plc
REPORT ON THE FINANCIAL STATEMENTS
1. OUR OPINIONS AND CONCLUSIONS ARISING FROM OUR AUDIT
1.1 Our opinion on the financial statements
Regulation.
In our opinion:
■
■
■
■
■
■
■
In our opinion, the financial statements of Royal Dutch Shell plc (the Parent Company) and its subsidiaries (collectively, Shell):
give a true and fair view of the state of Shell’s and of the Parent Company’s affairs as at December 31, 2017, and of Shell’s and the Parent Company’s
income for the year then ended;
have been properly prepared both in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and
IFRS as issued by the International Accounting Standards Board (IASB); and
have been prepared in accordance with the requirements of the Companies Act 2006, and, as regards Shell’s financial statements, Article 4 of the IAS
1.2 Our opinion on other matters prescribed by the Companies Act 2006
the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; and
based on the work undertaken in the course of our audit:
consistent with the financial statements; and
the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is
the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
1.3 Matters on which we are required to report by exception
Our confirmations that we have nothing to report by exception, in relation to those matters where we are required so to report, are set out in sections 9
and 10 below.
1.4 What we have audited
Form 20-F (the Annual Report) and comprise:
We have audited Royal Dutch Shell plc’s financial statements for the year ended December 31, 2017, which are included in the Annual Report and
Shell
Consolidated Balance Sheet as at December 31, 2017
Consolidated Statement of Income for the year then ended
Parent Company
Balance Sheet as at December 31, 2017
Statement of Income for the year then ended
Consolidated Statement of Comprehensive Income for the year then ended
Statement of Comprehensive Income for the year then ended
Consolidated Statement of Changes in Equity for the year then ended
Statement of Changes in Equity for the year then ended
Consolidated Statement of Cash Flows for the year then ended
Statement of Cash Flows for the year then ended
Related Notes 1 to 29 to the Consolidated Financial Statements,
Related Notes 1 to 15 to the Parent Company Financial Statements
including a summary of significant accounting policies
The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and both IFRS as adopted by the EU
and IFRS as issued by the IASB.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
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BASIS FOR OUR OPINION
2.
We conducted our audit in accordance with International Standards on Auditing (UK) (ISA (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report below. We are independent of Shell
and the Parent Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s
Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained during the planning, execution and conclusion of our audit is sufficient and appropriate to provide a
suitable basis for our opinion.
3. USE OF OUR REPORT
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has
been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a
body, for our audit work, for this report, or for the opinions we have formed.
4. OUR CONCLUSIONS RELATING TO PRINICIPAL RISKS, GOING CONCERN AND VIABILITY STATEMENT
We have nothing to report in respect of the following information in the Annual Report, in relation to which ISA(UK) requires us to report to you whether we
have anything material to add or draw attention to:
■
■
■
the disclosures in the Annual Report set out on pages 12 to 16 that describe the principal risks and cross refer to where there are explanations of how the
risks are being managed or mitigated;
the Directors’ confirmation set out on page 82 in the Annual Report that they have carried out a robust assessment of the principal risks facing the entity,
including those that would threaten its business model, future performance, solvency or liquidity;
the Directors’ statement set out on pages 73 to 75 in the financial statements about whether they considered it appropriate to adopt the going concern
basis of accounting in preparing them, and their identification of any material uncertainties to the entity’s ability to continue to do so over a period of at
least twelve months from the date of approval of the financial statements;
■ whether the Directors’ statement in relation to going concern required under the Listing Rules in accordance with Listing Rule 9.8.6R(3) is materially
inconsistent with our knowledge obtained in the audit; or
■
the Directors’ explanation set out on pages 73 to 75 in the Annual Report as to how they have assessed the prospects of the entity, over what period
they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the
entity will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures
drawing attention to any necessary qualifications or assumptions.
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5. OVERVIEW OF OUR AUDIT APPROACH
UNDERSTANDING
SHELL’S BUSINESS
AND ASSESSING
RISKS OF MATERIAL
MISSTATEMENT
Our global audit team has deep industry experience through working for many years on the audits of large international
oil companies. Building on this knowledge and the information obtained through our prior year audit of Shell, we updated
our understanding of Shell’s strategy, business model and the environment in which it operates. This was achieved through
enquiry, analytical procedures, observation and visiting a number of Shell’s operating units, as well as the review of
external data including industry specific trends, legal and regulatory frameworks and technological developments.
We performed risk assessment procedures, including data analytics, to identify risks of material misstatement. We
specifically considered the financial statement risks associated with sustained low oil and gas prices and the accounting
for assets under Shell’s disposal programme.
When we established our audit strategy, we determined overall materiality for the financial statements as a whole.
In so doing, we considered which earnings, activity or capital-based measure aligns best with the expectations of those
charged with governance at Shell and users of Shell’s financial statements. We also made judgements about the size
of misstatements that would be considered material.
MATERIALITY
(SECTION 6)
Our assessment of overall materiality for Shell is $800 million, which is derived from an average of Shell’s earnings on
a current cost of supplies basis (CCS earnings), excluding identified items reported by Shell in its quarterly results
announcements, and adjusted for an effective tax rate. This average includes both backward and forward-looking elements.
CCS earnings by segment are disclosed in Note 4 to the Consolidated Financial Statements.
Prior year comparison: In 2016, the overall materiality for Shell was set at $800 million. This was derived from an
average of Shell’s CCS earnings excluding identified items, and adjusted for an effective tax rate. The average included
a forward-looking element.
SCOPE
(SECTION 7)
KEY AUDIT MATTERS
(SECTION 8)
Our scope is tailored to the particular circumstances of our audit of Shell and is influenced by our assessed risks of
material misstatement and our determination of materiality.
We performed audits of the complete financial information of 25 operating units and specific audit procedures on an
additional 42 operating units. In selecting the operating units to be brought into audit scope, we assessed the risks of
material misstatement of the financial statements based on size, complexity and risk, including the risk of fraud, and
designed and implemented appropriate responses to the assessed risks. We performed procedures at a further 47
operating units that were specified by the group audit team in response to specific risk factors.
In addition, we performed other group audit procedures at the consolidated level. These procedures are included
in Section 7.
Prior year comparison: The main differences in scoping in 2017 as compared to 2016 are as a result of:
■ our reassessment of audit risk;
■ changes due to Shell’s disposal programme; and
■ the integration of legacy BG components with Shell components.
We have identified the following key audit matters that, in our professional judgement, had the greatest effect
on our overall audit strategy, the allocation of resources in the audit and in directing the global audit team’s efforts:
■ the estimation of oil and gas reserves, including reserves used in the calculation of depreciation, depletion
and amortisation;
■ the recoverable amounts of exploration and production assets, and investments in joint ventures and associates in the
Upstream and Integrated Gas (IG) segments;
■ estimation of decommissioning and restoration provisions;
■ accounting for assets under Shell’s disposal programme;
■ recognition and measurement of deferred tax assets;
■ the impact of US tax reform;
■ revenue recognition relating to unrealised trading gains and losses; and
■ enhancements to Shell’s system of IT general controls.
Prior year comparison: In 2016, our auditor’s report included key audit matters in relation to the first-year audit, the
acquisition of BG and the recoverable amount of goodwill. In the current year, we have added the impact of US tax reform
and enhancements to Shell’s system of IT general controls as key audit matters. The reasons for the changes are as follows:
■ Acquisition of BG: BG’s purchase price allocation was complete and therefore was not a key audit matter in 2017;
■ Goodwill: In 2016, key audit matters included the recoverable amount of goodwill. However, the results of our 2016
audit procedures revealed that the risk of impairment of goodwill in both Upstream and IG segments is low.
Consequently, our audit of goodwill was not considered to be a key audit matter in 2017;
■ The impact of US tax reform: The US tax reform legislation, which was enacted prior to December 31, 2017, had
a significant impact on Shell’s financial statements and required special audit consideration; and
■ Enhancements to Shell’s system of IT general controls: changes to Shell’s system of IT general controls required
special audit attention.
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6. OUR APPLICATION OF MATERIALITY
The scope of our work is influenced by our view of materiality. As we develop our audit strategy, we determine materiality at the overall level and at the
individual account level (referred to as our ‘performance materiality’).
Overall materiality
What we mean
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of identified
Level set
Group materiality
misstatements (including omissions) on our audit and in forming our audit opinion. For the purposes of determining whether Shell’s
financial statements are free from material misstatement (whether due to fraud or error), we define materiality as the magnitude of
misstatements that, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the
users of these financial statements. We are required to establish a materiality level for the financial statements as a whole that is
appropriate in the light of Shell’s particular circumstances.
Our overall materiality provides a basis for identifying and assessing the risk of material misstatement and determining the nature
and extent of audit procedures. Our evaluation of materiality requires professional judgement and necessarily takes into account
qualitative as well as quantitative considerations. It also takes into account our assessment of the expectations of those charged
with governance at Shell and users of Shell’s financial statements.
As required by auditing standards, we reassess materiality throughout the duration of the audit.
We set our preliminary overall materiality for Shell’s Consolidated Financial Statements at $800 million (2016: $800 million).
We kept this under review throughout the year and reassessed the appropriateness of our original assessment in the light of
Shell’s results and external market conditions. On the basis of this review, we did not find it necessary to revise our level of
overall materiality.
Parent Company materiality
We determined materiality for the Parent Company to be $2.5 billion (2016: $800 million), which is 1% (2016: 0.3%) of equity.
Equity is an appropriate basis to determine materiality for an investment holding company and 1% is a typical percentage of equity
to use to determine materiality. In our 2016 audit of the Parent Company we applied the same materiality of $800 million as the
group as we did not consider it appropriate to set our materiality at a higher level than the materiality applied to the Consolidated
Financial Statements in our first year as Shell’s auditor. Any balances in the Parent Company financial statements that were relevant
to our audit of the consolidated group were audited using an allocation of group performance materiality.
included both backward and forward-looking elements. The $800 million was determined by applying a percentage to the
calculated average CCS earnings. When using an earnings-related measure to determine overall materiality, the norm is to
apply a benchmark percentage of 5% of the pre-tax measure. In the case of Shell, because our earnings estimate includes a
forward-looking element, we have applied a more prudent rate that is below the 5% benchmark. Our overall materiality is also
less than 5% of the 2017 income before taxation.
In determining materiality, auditing standards require us to use benchmark measures, such as pre-tax income, gross profit and total
revenue. Nevertheless, we have to exercise considerable judgement, including the need to take account of the volatility of the
benchmarks applied and to consider which earnings, activity or capital based measure aligns best with the expectations of users of
Shell’s financial statements and the Audit Committee (AC).
We considered Shell’s business updates, the levels of activity in the business and the associated financial performance of 2017
relative to historic performance and expected future performance. We also considered current and forecast commodity prices for
oil and natural gas, the impact of Shell’s disposal programme as well as the basis on which overall materiality was determined
in the previous year.
In our view, including a forward-looking element in the calculation of average earnings is more appropriate at this time, due to
the low oil price environment, which commenced part way through 2015.
In determining the most appropriate benchmark on which to base our materiality assessment, we have applied a ‘reasonable
investor perspective’. This reflects our understanding of the common financial information needs of the users of Shell’s financial
statements as a group, which we believe is CCS earnings, excluding identified items. Shell’s results announcements feature CCS
Our basis for determining
materiality for 2017
Our assessment of overall materiality is $800 million. This is derived from an average of Shell’s CCS earnings, excluding
identified items reported by Shell in its quarterly results announcements and adjusted for an effective tax rate. This average
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6. OUR APPLICATION OF MATERIALITY
The scope of our work is influenced by our view of materiality. As we develop our audit strategy, we determine materiality at the overall level and at the
individual account level (referred to as our ‘performance materiality’).
Overall materiality
$800 million
Performance materiality
$400 million
Audit Committee
reporting threshold
$40 million
Overall materiality
What we mean
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of identified
misstatements (including omissions) on our audit and in forming our audit opinion. For the purposes of determining whether Shell’s
financial statements are free from material misstatement (whether due to fraud or error), we define materiality as the magnitude of
misstatements that, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the
users of these financial statements. We are required to establish a materiality level for the financial statements as a whole that is
appropriate in the light of Shell’s particular circumstances.
Our overall materiality provides a basis for identifying and assessing the risk of material misstatement and determining the nature
and extent of audit procedures. Our evaluation of materiality requires professional judgement and necessarily takes into account
qualitative as well as quantitative considerations. It also takes into account our assessment of the expectations of those charged
with governance at Shell and users of Shell’s financial statements.
As required by auditing standards, we reassess materiality throughout the duration of the audit.
Level set
Group materiality
Our basis for determining
materiality for 2017
We set our preliminary overall materiality for Shell’s Consolidated Financial Statements at $800 million (2016: $800 million).
We kept this under review throughout the year and reassessed the appropriateness of our original assessment in the light of
Shell’s results and external market conditions. On the basis of this review, we did not find it necessary to revise our level of
overall materiality.
Parent Company materiality
We determined materiality for the Parent Company to be $2.5 billion (2016: $800 million), which is 1% (2016: 0.3%) of equity.
Equity is an appropriate basis to determine materiality for an investment holding company and 1% is a typical percentage of equity
to use to determine materiality. In our 2016 audit of the Parent Company we applied the same materiality of $800 million as the
group as we did not consider it appropriate to set our materiality at a higher level than the materiality applied to the Consolidated
Financial Statements in our first year as Shell’s auditor. Any balances in the Parent Company financial statements that were relevant
to our audit of the consolidated group were audited using an allocation of group performance materiality.
Our assessment of overall materiality is $800 million. This is derived from an average of Shell’s CCS earnings, excluding
identified items reported by Shell in its quarterly results announcements and adjusted for an effective tax rate. This average
included both backward and forward-looking elements. The $800 million was determined by applying a percentage to the
calculated average CCS earnings. When using an earnings-related measure to determine overall materiality, the norm is to
apply a benchmark percentage of 5% of the pre-tax measure. In the case of Shell, because our earnings estimate includes a
forward-looking element, we have applied a more prudent rate that is below the 5% benchmark. Our overall materiality is also
less than 5% of the 2017 income before taxation.
In determining materiality, auditing standards require us to use benchmark measures, such as pre-tax income, gross profit and total
revenue. Nevertheless, we have to exercise considerable judgement, including the need to take account of the volatility of the
benchmarks applied and to consider which earnings, activity or capital based measure aligns best with the expectations of users of
Shell’s financial statements and the Audit Committee (AC).
We considered Shell’s business updates, the levels of activity in the business and the associated financial performance of 2017
relative to historic performance and expected future performance. We also considered current and forecast commodity prices for
oil and natural gas, the impact of Shell’s disposal programme as well as the basis on which overall materiality was determined
in the previous year.
In our view, including a forward-looking element in the calculation of average earnings is more appropriate at this time, due to
the low oil price environment, which commenced part way through 2015.
In determining the most appropriate benchmark on which to base our materiality assessment, we have applied a ‘reasonable
investor perspective’. This reflects our understanding of the common financial information needs of the users of Shell’s financial
statements as a group, which we believe is CCS earnings, excluding identified items. Shell’s results announcements feature CCS
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earnings excluding identified items as the primary measure for earnings.
CCS earnings excluding identified items removes both the effects of changes in oil price on inventory carrying amounts and items
disclosed as identified items that can significantly distort Shell’s results in any one particular year. In our view, the use of CCS
earnings excluding identified items allows investors to understand how management has performed in spite of the commodity
price environment, as opposed to because of it. Furthermore, analyst forecasts predominately feature CCS earnings, excluding
identified items, as the basis for earnings. The analyst consensus data supports our judgement that CCS earnings, excluding
identified items, is the key indicator of performance from an analyst’s perspective.
The identified items, reported by Shell in its quarterly results announcements, were: net divestment gains ($1.6 billion),
impairments ($3.0 billion charge), fair value accounting of commodity derivatives and certain gas contracts ($0.3 billion loss),
redundancy and restructuring ($0.4 billion charge), impact of exchange rate movements on tax balances ($0.6 billion gain),
impact arising from the US tax reform legislation ($2.0 billion charge) and the aggregate of other individually small items (net
$0.2 billion charge).
The identified items excluded in 2016 were: net divestment gains ($1.6 billion), impairments ($2.0 billion charge), fair value
accounting of commodity derivatives and certain gas contracts ($0.6 billion loss), redundancy and restructuring ($1.4 billion
charge); impact of exchange rate movements on tax balances ($0.3 billion gain) and the aggregate of other individually small
items (net $1.5 billion charge).
On the basis of our analysis of these factors, we concluded that we should focus on Shell’s CCS earnings, excluding identified
items reported by Shell in its quarterly results announcements, and adjusted for an effective tax rate.
Performance materiality
What we mean
Having established overall materiality, we determined ‘performance materiality’, which represents our tolerance for misstatement
in an individual account. It is calculated as a fraction of overall materiality in order to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality of $800 million for
Shell’s financial statements as a whole.
Once we determined our audit scope, we then assigned performance materiality to our various in-scope operating units. They
used this assigned performance materiality in performing their group audit procedures. The performance materiality allocation is
dependent on the size of the operating unit, measured by its contribution of earnings to Shell, or other appropriate metric, and
risk associated with the operating unit.
Level set
On the basis of our risk assessment, our judgement was that performance materiality should be 50% (2016: 50%) of our overall
materiality, namely $400 million (2016: $400 million).
In 2017, the range of performance materiality allocated to operating units was $40 million to $260 million (2016: $40 million
to $220 million). This is set out in more detail in section 7 below.
Audit difference reporting threshold
What we mean
This is the amount below which identified misstatements are considered to be clearly trivial.
The threshold is the level above which we collate and report audit differences to the AC. We also report differences below that
threshold that, in our view, warrant reporting on qualitative grounds. We evaluate any uncorrected misstatements against both
the quantitative measures of materiality discussed above and in the light of other relevant qualitative considerations in forming our
opinion.
Level set
We agreed with the AC that we would report to the Committee all audit differences in excess of $40 million
(2016: $40 million).
7. OUR SCOPE OF THE AUDIT OF SHELL’S FINANCIAL STATEMENTS
What we mean
We are required to establish an overall audit strategy that sets the scope, timing and direction of our audit, and that guides the
development of our audit plan. Audit scope comprises the physical locations, operating units, activities and processes to be
audited that, in aggregate, are expected to provide sufficient coverage of the financial statements in order for us to express an
audit opinion.
Criteria for determining our
Our assessment of audit risk and our evaluation of materiality determined our audit scope for each operating unit within Shell
audit scope
which, when taken together, enabled us to form an opinion on the financial statements under ISA (UK). Our audit effort was
focused towards higher risk areas, such as management judgements and on operating units that are considered significant
based upon size, complexity or risk.
Selection of in-scope
We selected 67 operating units (2016: 85) across 12 countries (2016: 13) on the basis of their size or risk characteristics. We
operating units
performed full scope audits of the complete financial information of 25 operating units (2016: 33). For the remaining 42 operating
The factors that we considered when assessing the scope of the Shell audit, and the level of work to be performed at the
operating units that are in scope for group reporting purposes, included the following:
■ the financial significance of an operating unit to Shell’s earnings, total assets or total liabilities, including consideration of
the financial significance of specific account balances or transactions;
■ the significance of specific risks relating to an operating unit, history of unusual or complex transactions, identification of
significant audit issues or the potential for, or a history of, material misstatements;
■ the effectiveness of the control environment and monitoring activities, including entity-level controls;
■ our assessment of locations that carry a higher than normal audit risk in relation to fraud, bribery or corruption; and
■ the findings, observations and audit differences that we noted as a result of our 2016 audit.
units (2016: 52) we performed specific scope audit procedures on selected account balances within the operating unit based on
the size of these individual account balances or their risk profiles. These 67 operating units (2016: 85) accounted for 60% of Shell’s
CCS earnings* (2016: 63%) and 72% of Shell’s total assets (2016: 69%).
In addition to the 67 operating units (2016: 85) discussed above, we selected a further 47 operating units (2016: 32) where we
performed procedures at the operating unit level that were specified by the group audit team in response to specific risk factors. Also,
we performed review procedures at an additional four operating units (2016: 11).
The remaining 688 operating units (2016: 601) together represented 27% of CCS earnings* (2016: 25%) and 16% of total assets
(2016: 19%). None of these was individually greater than 1.3% (2016: 1.0%) of CCS earnings* or 0.5% (0.3%) of total assets.
For these operating units, we performed supplementary audit procedures, including process and controls testing at the business
service centres (BSCs); testing of IT systems auditing the accounting of specific one-off transactions, testing of consolidation journals
and disaggregated analytical reviews. In addition to this testing, we utilised our Risk Scan analytics techniques, which consolidate
internal and external data in order to identify potential risks of material misstatement. This allowed us to risk rate each of the 688
operating units. The internal and external data sources included transactional data, forensic risk metrics, historic control findings and
results from our audit procedures and quarterly reviews. Through this analysis, our analytics tool identified 140 operating units
(together representing 8% of CCS earnings* and 4% of total assets) where we believed that it was appropriate to carry out targeted
testing, which included audit of manual journal entries and/or the testing of payments to third party vendors to ensure that these had
been approved in line with Shell’s policies and had an appropriate business rationale.
We kept our audit scope under review throughout the year in order to reflect changes in Shell’s underlying business and risks.
Our final coverage is summarised below:
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earnings excluding identified items as the primary measure for earnings.
CCS earnings excluding identified items removes both the effects of changes in oil price on inventory carrying amounts and items
disclosed as identified items that can significantly distort Shell’s results in any one particular year. In our view, the use of CCS
earnings excluding identified items allows investors to understand how management has performed in spite of the commodity
price environment, as opposed to because of it. Furthermore, analyst forecasts predominately feature CCS earnings, excluding
identified items, as the basis for earnings. The analyst consensus data supports our judgement that CCS earnings, excluding
identified items, is the key indicator of performance from an analyst’s perspective.
The identified items, reported by Shell in its quarterly results announcements, were: net divestment gains ($1.6 billion),
impairments ($3.0 billion charge), fair value accounting of commodity derivatives and certain gas contracts ($0.3 billion loss),
redundancy and restructuring ($0.4 billion charge), impact of exchange rate movements on tax balances ($0.6 billion gain),
impact arising from the US tax reform legislation ($2.0 billion charge) and the aggregate of other individually small items (net
$0.2 billion charge).
The identified items excluded in 2016 were: net divestment gains ($1.6 billion), impairments ($2.0 billion charge), fair value
accounting of commodity derivatives and certain gas contracts ($0.6 billion loss), redundancy and restructuring ($1.4 billion
charge); impact of exchange rate movements on tax balances ($0.3 billion gain) and the aggregate of other individually small
items (net $1.5 billion charge).
On the basis of our analysis of these factors, we concluded that we should focus on Shell’s CCS earnings, excluding identified
items reported by Shell in its quarterly results announcements, and adjusted for an effective tax rate.
Performance materiality
What we mean
Having established overall materiality, we determined ‘performance materiality’, which represents our tolerance for misstatement
in an individual account. It is calculated as a fraction of overall materiality in order to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality of $800 million for
Shell’s financial statements as a whole.
Once we determined our audit scope, we then assigned performance materiality to our various in-scope operating units. They
used this assigned performance materiality in performing their group audit procedures. The performance materiality allocation is
dependent on the size of the operating unit, measured by its contribution of earnings to Shell, or other appropriate metric, and
risk associated with the operating unit.
Level set
On the basis of our risk assessment, our judgement was that performance materiality should be 50% (2016: 50%) of our overall
materiality, namely $400 million (2016: $400 million).
In 2017, the range of performance materiality allocated to operating units was $40 million to $260 million (2016: $40 million
to $220 million). This is set out in more detail in section 7 below.
Audit difference reporting threshold
What we mean
This is the amount below which identified misstatements are considered to be clearly trivial.
The threshold is the level above which we collate and report audit differences to the AC. We also report differences below that
threshold that, in our view, warrant reporting on qualitative grounds. We evaluate any uncorrected misstatements against both
the quantitative measures of materiality discussed above and in the light of other relevant qualitative considerations in forming our
Level set
We agreed with the AC that we would report to the Committee all audit differences in excess of $40 million
opinion.
(2016: $40 million).
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7. OUR SCOPE OF THE AUDIT OF SHELL’S FINANCIAL STATEMENTS
What we mean
We are required to establish an overall audit strategy that sets the scope, timing and direction of our audit, and that guides the
development of our audit plan. Audit scope comprises the physical locations, operating units, activities and processes to be
audited that, in aggregate, are expected to provide sufficient coverage of the financial statements in order for us to express an
audit opinion.
Criteria for determining our
audit scope
Our assessment of audit risk and our evaluation of materiality determined our audit scope for each operating unit within Shell
which, when taken together, enabled us to form an opinion on the financial statements under ISA (UK). Our audit effort was
focused towards higher risk areas, such as management judgements and on operating units that are considered significant
based upon size, complexity or risk.
Selection of in-scope
operating units
The factors that we considered when assessing the scope of the Shell audit, and the level of work to be performed at the
operating units that are in scope for group reporting purposes, included the following:
■ the financial significance of an operating unit to Shell’s earnings, total assets or total liabilities, including consideration of
the financial significance of specific account balances or transactions;
■ the significance of specific risks relating to an operating unit, history of unusual or complex transactions, identification of
significant audit issues or the potential for, or a history of, material misstatements;
■ the effectiveness of the control environment and monitoring activities, including entity-level controls;
■ our assessment of locations that carry a higher than normal audit risk in relation to fraud, bribery or corruption; and
■ the findings, observations and audit differences that we noted as a result of our 2016 audit.
We selected 67 operating units (2016: 85) across 12 countries (2016: 13) on the basis of their size or risk characteristics. We
performed full scope audits of the complete financial information of 25 operating units (2016: 33). For the remaining 42 operating
units (2016: 52) we performed specific scope audit procedures on selected account balances within the operating unit based on
the size of these individual account balances or their risk profiles. These 67 operating units (2016: 85) accounted for 60% of Shell’s
CCS earnings* (2016: 63%) and 72% of Shell’s total assets (2016: 69%).
In addition to the 67 operating units (2016: 85) discussed above, we selected a further 47 operating units (2016: 32) where we
performed procedures at the operating unit level that were specified by the group audit team in response to specific risk factors. Also,
we performed review procedures at an additional four operating units (2016: 11).
The remaining 688 operating units (2016: 601) together represented 27% of CCS earnings* (2016: 25%) and 16% of total assets
(2016: 19%). None of these was individually greater than 1.3% (2016: 1.0%) of CCS earnings* or 0.5% (0.3%) of total assets.
For these operating units, we performed supplementary audit procedures, including process and controls testing at the business
service centres (BSCs); testing of IT systems auditing the accounting of specific one-off transactions, testing of consolidation journals
and disaggregated analytical reviews. In addition to this testing, we utilised our Risk Scan analytics techniques, which consolidate
internal and external data in order to identify potential risks of material misstatement. This allowed us to risk rate each of the 688
operating units. The internal and external data sources included transactional data, forensic risk metrics, historic control findings and
results from our audit procedures and quarterly reviews. Through this analysis, our analytics tool identified 140 operating units
(together representing 8% of CCS earnings* and 4% of total assets) where we believed that it was appropriate to carry out targeted
testing, which included audit of manual journal entries and/or the testing of payments to third party vendors to ensure that these had
been approved in line with Shell’s policies and had an appropriate business rationale.
We kept our audit scope under review throughout the year in order to reflect changes in Shell’s underlying business and risks.
Our final coverage is summarised below:
CCS earnings*
Total assets
Number of operating units
8%
27%
39%
2%
11%
21%
4%
16%
2%
10%
16%
140
25
42
47
4
56%
688
Full scope
Specific scope
Specified procedures
Review scope
Covered by other procedures
Targeted testing identified through our analytics techniques
* CCS earnings, excluding identified items reported by Shell in its quarterly earnings releases and adjusted for an effective tax rate.
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Allocation of performance
materiality to the in-scope
operating units
The level of materiality that we applied in undertaking our audit work at the operating unit level was determined by applying a
percentage of our total performance materiality. This percentage is based on the significance of the operating unit relative to Shell as
a whole and our assessment of the risk of material misstatement at that operating unit. In 2017, the range of materiality applied at
the operating unit level was $40 million to $260 million (2016: $40 million to $220 million). The operating units selected, together
with the ranges of materiality applied, were:
Full scope Segments
Integrated Gas
Upstream
Downstream
Corporate
Full scope Function
Countries
Australia, Qatar
Brazil, Nigeria, UK, USA
Germany, Singapore, USA
UK
Trading and supply
UK, USA
Total full scope
Specific scope Segments
Upstream
Downstream
Corporate
Canada, Kazakhstan, Malaysia, UK
Canada, the Netherlands, Singapore, USA
The Netherlands, UK, USA
Specific scope Function
Trading and supply
Total specific scope
Total full and specific scope
UK, USA
No. of operating units
Range of materiality applied
$ million
4
7
4
1
9
25
7
10
12
13
42
67
80-120
80-120
80-120
80
80-260
60-80
80
40-80
60-260
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Integrated group
team structure
The overall audit strategy is determined by the Senior Statutory Auditor, Allister Wilson. During 2017 he visited five countries (in
year of audit transition, 2016: nine countries) to meet with local Ernst & Young (EY) teams and Shell local management (in some
cases more than once). The Senior Statutory Auditor is supported by 26 segment and function partners and directors (2016: 24),
who are based in the Netherlands and the UK. They are responsible for directing, supervising and reviewing the work of EY
global network firms operating under our instruction (local EY teams) to evaluate whether:
■ the work was performed and documented to a sufficiently high standard;
■ the local EY audit team demonstrated that they had challenged management sufficiently and had executed their audit
procedures with a sufficient level of scepticism; and
■ there is sufficient appropriate audit evidence to support the conclusions reached.
Involvement with
local EY teams
Shell has centralised processes and controls over key areas within a number of BSCs. We have a central team who provide
direct oversight, review, and coordination of our BSC audit teams. Our teams performed centralised testing in the BSCs for
certain accounts, including revenue, cash and payroll. In establishing our overall approach to the group audit we determined the
type of work that needed to be undertaken at each of the operating units or BSCs by the group audit team or by auditors from
other local EY teams.
The group audit team performed procedures directly on 54 of the in-scope operating units (2016: 57). For the operating units
where the work was performed by local EY auditors, we determined the appropriate level of involvement to enable us to
determine that sufficient appropriate audit evidence had been obtained as a basis for our opinion on Shell as a whole.
The group audit team interacted regularly with the local EY teams during each stage of the audit, were responsible for the scope
and direction of the audit process and reviewed key working papers. This, together with the additional procedures performed at
the group level, gave us sufficient appropriate audit evidence for our opinion on Shell’s Consolidated Financial Statements. We
maintained continuous and open dialogue with our local EY teams in addition to holding formal meetings quarterly to ensure that
we were fully aware of their progress and results of their procedures.
Our local EY partners attended our global team meetings in November 2016 and 2017. Also during 2017, the Senior
Statutory Auditor and other group audit partners and directors visited operating units across 10 countries and each of Shell’s
BSCs. These visits included discussing the audit approach with the local EY teams and any issues arising from their work,
meetings with local management, attending planning and closing meetings, and reviewing key audit working papers on risk
areas. The visits also promote deeper engagement with our local EY audit teams, ensuring that a consistent and cohesive audit
approach is adopted that drives a high-quality audit. The countries and the BSC locations visited were as follows:
Countries visited
Australia
Brazil
Germany
Kazakhstan
Malaysia
The Netherlands
UK
USA
Nigeria
Qatar
BSCs
Chennai, India
Glasgow, UK
Krakow, Poland
Kuala Lumpur, Malaysia
Manila, Philippines
8. OUR ASSESSMENT OF KEY AUDIT MATTERS
As Shell’s auditor, we are required to determine – from the matters communicated by us to the AC during the year – those matters that required significant
attention from us in performing our audit of Shell’s 2017 Consolidated Financial Statements. In making this determination we took the following into account:
the risks that we believed were significant to our audit and therefore required special audit consideration;
areas of higher assessed risk of material misstatement that influenced our audit focus;
significant audit judgements relating to areas in Shell’s Consolidated Financial Statements that involved significant management judgement, including
accounting estimates that we identified as having high estimation uncertainty;
the effect on our audit of significant events or transactions that occurred during the period; and
those assessed risks of material misstatement that had the greatest effect on the allocation of resources in the audit and directing the efforts of the audit
■
■
■
■
■
team.
On this basis, we have identified the following key audit matters that, in our professional judgement, were of most significance in our audit of Shell’s 2017
Consolidated Financial Statements. These matters included those that had the greatest effect on: the overall strategy; the allocation of resources in the audit;
and directing the efforts of the audit team. The key audit matters have been addressed in the context of the audit of Shell’s Consolidated Financial Statements
as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
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Allocation of performance
The level of materiality that we applied in undertaking our audit work at the operating unit level was determined by applying a
materiality to the in-scope
percentage of our total performance materiality. This percentage is based on the significance of the operating unit relative to Shell as
operating units
a whole and our assessment of the risk of material misstatement at that operating unit. In 2017, the range of materiality applied at
the operating unit level was $40 million to $260 million (2016: $40 million to $220 million). The operating units selected, together
with the ranges of materiality applied, were:
Countries
No. of operating units
Range of materiality applied
Full scope Segments
Integrated Gas
Upstream
Downstream
Corporate
Full scope Function
Trading and supply
Total full scope
Specific scope Segments
Upstream
Downstream
Corporate
Specific scope Function
Trading and supply
Total specific scope
Total full and specific scope
Australia, Qatar
Brazil, Nigeria, UK, USA
Germany, Singapore, USA
UK
UK, USA
Canada, Kazakhstan, Malaysia, UK
Canada, the Netherlands, Singapore, USA
The Netherlands, UK, USA
UK, USA
4
7
4
1
9
25
7
10
12
13
42
67
$ million
80-120
80-120
80-120
80
80-260
60-80
80
40-80
60-260
Integrated group
team structure
Involvement with
local EY teams
The overall audit strategy is determined by the Senior Statutory Auditor, Allister Wilson. During 2017 he visited five countries (in
year of audit transition, 2016: nine countries) to meet with local Ernst & Young (EY) teams and Shell local management (in some
cases more than once). The Senior Statutory Auditor is supported by 26 segment and function partners and directors (2016: 24),
who are based in the Netherlands and the UK. They are responsible for directing, supervising and reviewing the work of EY
global network firms operating under our instruction (local EY teams) to evaluate whether:
■ the work was performed and documented to a sufficiently high standard;
■ the local EY audit team demonstrated that they had challenged management sufficiently and had executed their audit
procedures with a sufficient level of scepticism; and
■ there is sufficient appropriate audit evidence to support the conclusions reached.
Shell has centralised processes and controls over key areas within a number of BSCs. We have a central team who provide
direct oversight, review, and coordination of our BSC audit teams. Our teams performed centralised testing in the BSCs for
certain accounts, including revenue, cash and payroll. In establishing our overall approach to the group audit we determined the
type of work that needed to be undertaken at each of the operating units or BSCs by the group audit team or by auditors from
other local EY teams.
The group audit team performed procedures directly on 54 of the in-scope operating units (2016: 57). For the operating units
where the work was performed by local EY auditors, we determined the appropriate level of involvement to enable us to
determine that sufficient appropriate audit evidence had been obtained as a basis for our opinion on Shell as a whole.
The group audit team interacted regularly with the local EY teams during each stage of the audit, were responsible for the scope
and direction of the audit process and reviewed key working papers. This, together with the additional procedures performed at
the group level, gave us sufficient appropriate audit evidence for our opinion on Shell’s Consolidated Financial Statements. We
maintained continuous and open dialogue with our local EY teams in addition to holding formal meetings quarterly to ensure that
we were fully aware of their progress and results of their procedures.
Our local EY partners attended our global team meetings in November 2016 and 2017. Also during 2017, the Senior
Statutory Auditor and other group audit partners and directors visited operating units across 10 countries and each of Shell’s
BSCs. These visits included discussing the audit approach with the local EY teams and any issues arising from their work,
meetings with local management, attending planning and closing meetings, and reviewing key audit working papers on risk
areas. The visits also promote deeper engagement with our local EY audit teams, ensuring that a consistent and cohesive audit
approach is adopted that drives a high-quality audit. The countries and the BSC locations visited were as follows:
Countries visited
Australia
Brazil
Germany
Kazakhstan
Malaysia
The Netherlands
Nigeria
Qatar
UK
USA
BSCs
Chennai, India
Glasgow, UK
Krakow, Poland
Kuala Lumpur, Malaysia
Manila, Philippines
8. OUR ASSESSMENT OF KEY AUDIT MATTERS
As Shell’s auditor, we are required to determine – from the matters communicated by us to the AC during the year – those matters that required significant
attention from us in performing our audit of Shell’s 2017 Consolidated Financial Statements. In making this determination we took the following into account:
■
■
■
■
■
the risks that we believed were significant to our audit and therefore required special audit consideration;
areas of higher assessed risk of material misstatement that influenced our audit focus;
significant audit judgements relating to areas in Shell’s Consolidated Financial Statements that involved significant management judgement, including
accounting estimates that we identified as having high estimation uncertainty;
the effect on our audit of significant events or transactions that occurred during the period; and
those assessed risks of material misstatement that had the greatest effect on the allocation of resources in the audit and directing the efforts of the audit
team.
On this basis, we have identified the following key audit matters that, in our professional judgement, were of most significance in our audit of Shell’s 2017
Consolidated Financial Statements. These matters included those that had the greatest effect on: the overall strategy; the allocation of resources in the audit;
and directing the efforts of the audit team. The key audit matters have been addressed in the context of the audit of Shell’s Consolidated Financial Statements
as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
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The table below describes the key audit matters, a summary of our procedures carried out and our key observations that we communicated to the AC. We
presented to the May and December 2017 meetings of the AC the procedures that we planned to undertake in response to the risks that we identified.
Risk
Our response to the risk
Key observations communicated
to the Shell Audit Committee
Our key audit matters
Risk
Our response to the risk
Key observations communicated
to the Shell Audit Committee
The estimation of oil and gas reserves, including reserves used in the calculation of depreciation, depletion and
amortisation (DD&A)
In January 2018, we communicated
to the AC that, based on our testing
performed, we had not identified
any significant errors in the oil and
gas reserves estimates and
concluded that the inputs and
assumptions used to estimate proved
reserves were reasonable.
We also communicated our
conclusion that the changes in the
estimates of reserves used in the
DD&A calculations reflect better the
expected useful life of the field or
facilities.
At December 31, 2017, Shell reported
12,233 million barrels of oil equivalent of proved
developed and undeveloped reserves.
(2016: 13,248 million barrels of oil equivalent).
The estimation and measurement of oil and gas
reserves impacts a number of material elements of the
financial statements including DD&A, impairments, and
decommissioning and restoration provisions. There is
technical uncertainty in assessing reserve quantities
and complex contractual arrangements that determine
Shell’s share of reserves.
Proved reserves estimates, calculated pursuant to SEC
rules, have declined in recent years due to continued
low prices. Their usage in determining DD&A for
certain fields with phased development or where
volumes are not reflective of expected future
production would accelerate depreciation charges in
a way that would not be reflective of their useful life. In
these cases, Shell has used an alternative reserves
base for DD&A purposes so as to reflect better their
expected useful life.
Our reserves team comprises auditors with substantial oil and
gas reserves expertise, valuation experience and relevant
qualifications in energy economics.
We carried out the following procedures:
■ confirmed our understanding of Shell’s oil and gas
reserves estimation process;
■ tested significant controls in Shell’s reserves framework;
■ confirmed that significant additions or reductions in SEC
proved reserves have been made in the period in which
the new information became available;
■ tested Shell’s internal certification process and controls
for technical and commercial experts responsible for
reserves estimation;
■ tested the reasonableness of SEC proved undeveloped
reserves recognised. Where volumes recognised remain
undeveloped for more than five years from the date they
were booked, or where development is not expected for
at least five years, we ensured that Shell was still
working towards development by corroborating with
future development plans, including capital expenditure
plans as appropriate; and
■ where SEC proved developed reserves were not used for
DD&A purposes, we challenged management’s basis
and obtained sufficient and appropriate evidence to
ensure that the reserves base used was reasonable and
better reflected the expected useful life of the field or
facilities.
Our procedures were led by the group audit team, with input
from our teams in Australia, Brazil, Canada, Kazakhstan, the
Netherlands, Nigeria, Norway, Qatar, the UK and USA.
Cross-reference: See the AC Report on page 92 for details on how the AC considered DD&A. Also, see Notes 2 and 8 to the “Consolidated Financial Statements”, and Supplementary information – oil and gas
(unaudited) on page 179.
The recoverable amounts of exploration and production assets, and investments in joint ventures and associates in
Upstream and Integrated Gas segments
At December 31, 2017, Shell recognised
$172 billion of exploration and production assets
We carried out procedures in all full and specific scope
locations as necessary, including testing for indicators of
within property, plant and equipment (PP&E)
(2016: $188 billion). Shell also recognised
investments in joint ventures and associates of
$28 billion (2016: $33 billion), which includes
impairment and validating the appropriateness of the level at
which the testing took place.
We confirmed that Shell’s asset impairment methodology
was appropriate. Our modelling experts tested the integrity of
joint ventures and associates relating to Upstream
the models used.
and Integrated Gas segments.
A sustained low oil and gas price environment could
have a significant impact on the recoverable amounts of
Shell’s Upstream and Integrated Gas assets.
In view of the generally long-lived nature of Shell’s
assets, the most critical assumption in forecasting future
cash flows is management’s view on the long-term oil
and gas price outlook.
Other key inputs used in assessing recoverable amounts
are the discount rate used, future expected production
volumes and capital and operating expenditures. Shell
uses a discount rate that reflects the fact that cash flows
testing.
are adjusted for risk.
prices were used consistently across Shell and that pricing
differentials were reasonable and appropriate.
We engaged our oil and gas valuations team to test the
reasonableness of the discount rate used for impairment
For those assets impaired previously, we evaluated the actual
results versus the assumptions made and whether or not
reversals are required.
For cash flow inputs where impairment tests were undertaken,
we:
We reported to the October 2017
and January 2018 meetings of the
AC that, on the basis of our analysis
of future commodity prices used in
the impairment models versus other
international oil companies and
consensus analysts’ forecasts, there
is strong external evidence to
support the reasonableness of Shell’s
commodity price assumptions – both
We concluded that the impairments
recorded are appropriately
determined. Where impairment tests
were undertaken and no impairment
was recorded, we performed
specific procedures including multi-
dimensional sensitivity analysis on
the key assumptions that drive the
impairment analysis, and concluded
that it is reasonable and supportable
not to record an impairment charge.
For price assumptions, we corroborated future short and long-
term commodity prices to external forecasts and those
adopted by other international oil companies; we confirmed
in the short and long term.
■ confirmed that operating expenditure profiles and capital
costs to complete construction could be supported by
Where potential indicators of
approved operator budgets and management forecasts;
impairment reversals were present,
■ reconciled reserves volumes in the impairment models
we were satisfied that the decisions
and confirmed that the life-of-field assumptions were
not to reverse previously recorded
consistent with those applied in the decommissioning
impairments were supported by
and restoration provision models; and
appropriate evidence.
■ performed sensitivity analyses on certain key variables in
the base case cash flow models to understand the
impact of changes in certain assumptions (including oil
and gas prices, production and operating expenditure
levels).
We assessed the reasonableness of the probability-weighting
applied to the scenario risk factors used in the models and
the basis for the risking of the cash flows applied to each
individual asset. In so doing, we considered the stage of the
life of the asset, country risk and ensured consistency across
similar developments and fields.
Where impairment tests were undertaken, we stress tested the
models using risked discount rates that we considered
reasonable when taking account of the nature of the asset, its
location, its stage of development and associated risks.
The audit procedures over this risk area were performed by
our group audit team as well as our local EY teams in
Australia, Brazil, Canada, Kazakhstan, Malaysia, the
Netherlands, Nigeria, Qatar, the UK and USA, which
covered 79% of PP&E and investments in joint ventures and
associates in Upstream and Integrated Gas segments.
We also performed specified procedures over the
recoverability of PP&E balances in Kazakhstan, the
Netherlands, Norway and the USA which covered an
additional 6% of PP&E in Upstream and Integrated Gas
segments.
Cross-reference: See the AC Report on page 92 for details on how the AC considered impairments. Also, see Notes 2 and 8 to the “Consolidated Financial Statements”.
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The table below describes the key audit matters, a summary of our procedures carried out and our key observations that we communicated to the AC. We
presented to the May and December 2017 meetings of the AC the procedures that we planned to undertake in response to the risks that we identified.
Risk
Our response to the risk
Key observations communicated
to the Shell Audit Committee
The recoverable amounts of exploration and production assets, and investments in joint ventures and associates in
Upstream and Integrated Gas segments
At December 31, 2017, Shell recognised
$172 billion of exploration and production assets
within property, plant and equipment (PP&E)
(2016: $188 billion). Shell also recognised
investments in joint ventures and associates of
$28 billion (2016: $33 billion), which includes
joint ventures and associates relating to Upstream
and Integrated Gas segments.
A sustained low oil and gas price environment could
have a significant impact on the recoverable amounts of
Shell’s Upstream and Integrated Gas assets.
In view of the generally long-lived nature of Shell’s
assets, the most critical assumption in forecasting future
cash flows is management’s view on the long-term oil
and gas price outlook.
Other key inputs used in assessing recoverable amounts
are the discount rate used, future expected production
volumes and capital and operating expenditures. Shell
uses a discount rate that reflects the fact that cash flows
are adjusted for risk.
We reported to the October 2017
and January 2018 meetings of the
AC that, on the basis of our analysis
of future commodity prices used in
the impairment models versus other
international oil companies and
consensus analysts’ forecasts, there
is strong external evidence to
support the reasonableness of Shell’s
commodity price assumptions – both
in the short and long term.
We concluded that the impairments
recorded are appropriately
determined. Where impairment tests
were undertaken and no impairment
was recorded, we performed
specific procedures including multi-
dimensional sensitivity analysis on
the key assumptions that drive the
impairment analysis, and concluded
that it is reasonable and supportable
not to record an impairment charge.
Where potential indicators of
impairment reversals were present,
we were satisfied that the decisions
not to reverse previously recorded
impairments were supported by
appropriate evidence.
We carried out procedures in all full and specific scope
locations as necessary, including testing for indicators of
impairment and validating the appropriateness of the level at
which the testing took place.
We confirmed that Shell’s asset impairment methodology
was appropriate. Our modelling experts tested the integrity of
the models used.
For price assumptions, we corroborated future short and long-
term commodity prices to external forecasts and those
adopted by other international oil companies; we confirmed
prices were used consistently across Shell and that pricing
differentials were reasonable and appropriate.
We engaged our oil and gas valuations team to test the
reasonableness of the discount rate used for impairment
testing.
For those assets impaired previously, we evaluated the actual
results versus the assumptions made and whether or not
reversals are required.
For cash flow inputs where impairment tests were undertaken,
we:
■ confirmed that operating expenditure profiles and capital
costs to complete construction could be supported by
approved operator budgets and management forecasts;
■ reconciled reserves volumes in the impairment models
and confirmed that the life-of-field assumptions were
consistent with those applied in the decommissioning
and restoration provision models; and
■ performed sensitivity analyses on certain key variables in
the base case cash flow models to understand the
impact of changes in certain assumptions (including oil
and gas prices, production and operating expenditure
levels).
We assessed the reasonableness of the probability-weighting
applied to the scenario risk factors used in the models and
the basis for the risking of the cash flows applied to each
individual asset. In so doing, we considered the stage of the
life of the asset, country risk and ensured consistency across
similar developments and fields.
Where impairment tests were undertaken, we stress tested the
models using risked discount rates that we considered
reasonable when taking account of the nature of the asset, its
location, its stage of development and associated risks.
The audit procedures over this risk area were performed by
our group audit team as well as our local EY teams in
Australia, Brazil, Canada, Kazakhstan, Malaysia, the
Netherlands, Nigeria, Qatar, the UK and USA, which
covered 79% of PP&E and investments in joint ventures and
associates in Upstream and Integrated Gas segments.
We also performed specified procedures over the
recoverability of PP&E balances in Kazakhstan, the
Netherlands, Norway and the USA which covered an
additional 6% of PP&E in Upstream and Integrated Gas
segments.
Cross-reference: See the AC Report on page 92 for details on how the AC considered impairments. Also, see Notes 2 and 8 to the “Consolidated Financial Statements”.
Our key audit matters
Risk
Our response to the risk
Key observations communicated
to the Shell Audit Committee
The estimation of oil and gas reserves, including reserves used in the calculation of depreciation, depletion and
amortisation (DD&A)
At December 31, 2017, Shell reported
Our reserves team comprises auditors with substantial oil and
In January 2018, we communicated
12,233 million barrels of oil equivalent of proved
gas reserves expertise, valuation experience and relevant
to the AC that, based on our testing
developed and undeveloped reserves.
(2016: 13,248 million barrels of oil equivalent).
The estimation and measurement of oil and gas
reserves impacts a number of material elements of the
financial statements including DD&A, impairments, and
decommissioning and restoration provisions. There is
technical uncertainty in assessing reserve quantities
and complex contractual arrangements that determine
Shell’s share of reserves.
Proved reserves estimates, calculated pursuant to SEC
rules, have declined in recent years due to continued
low prices. Their usage in determining DD&A for
certain fields with phased development or where
volumes are not reflective of expected future
production would accelerate depreciation charges in
a way that would not be reflective of their useful life. In
these cases, Shell has used an alternative reserves
base for DD&A purposes so as to reflect better their
expected useful life.
qualifications in energy economics.
We carried out the following procedures:
■ confirmed our understanding of Shell’s oil and gas
reserves estimation process;
■ tested significant controls in Shell’s reserves framework;
■ confirmed that significant additions or reductions in SEC
performed, we had not identified
any significant errors in the oil and
gas reserves estimates and
concluded that the inputs and
assumptions used to estimate proved
reserves were reasonable.
proved reserves have been made in the period in which
We also communicated our
the new information became available;
■ tested Shell’s internal certification process and controls
for technical and commercial experts responsible for
reserves estimation;
■ tested the reasonableness of SEC proved undeveloped
facilities.
conclusion that the changes in the
estimates of reserves used in the
DD&A calculations reflect better the
expected useful life of the field or
reserves recognised. Where volumes recognised remain
undeveloped for more than five years from the date they
were booked, or where development is not expected for
at least five years, we ensured that Shell was still
working towards development by corroborating with
future development plans, including capital expenditure
plans as appropriate; and
■ where SEC proved developed reserves were not used for
DD&A purposes, we challenged management’s basis
and obtained sufficient and appropriate evidence to
ensure that the reserves base used was reasonable and
better reflected the expected useful life of the field or
facilities.
Our procedures were led by the group audit team, with input
from our teams in Australia, Brazil, Canada, Kazakhstan, the
Netherlands, Nigeria, Norway, Qatar, the UK and USA.
Cross-reference: See the AC Report on page 92 for details on how the AC considered DD&A. Also, see Notes 2 and 8 to the “Consolidated Financial Statements”, and Supplementary information – oil and gas
(unaudited) on page 179.
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Key observations communicated
to the Shell Audit Committee
In January 2018, we communicated
to the AC that:
■ on the basis of the audit work
performed, we had concluded
that the D&R provisions recorded
are supported by appropriate
audit evidence;
■ changes in D&R provisions
during the year have been
reflected appropriately in the
financial statements; and
■ the discount rate applied by
management is supportable and
lies within an acceptable range.
Risk
Our response to the risk
Estimation of decommissioning and restoration (D&R) provisions
At December 31, 2017, Shell recognised D&R
provisions of $21 billion (2016: $25 billion).
D&R provisions are highly judgemental, as they are
calculated using cost models based on assumptions
that are impacted by future activities and the legislative
environment in which Shell operates.
In auditing the D&R provisions we:
■ identified the cost assumptions that have the most
significant impact on the provisions and tested the
appropriateness of these assumptions using third party
evidence, including rig and vessel rates;
■ engaged our valuations experts to evaluate the
D&R provisions are also affected by changes in the
estimated date on which production will cease.
The cost models are managed at a country level with
certain key assumptions derived centrally. Shell
discounts future estimated D&R costs at 4%
(2016: 4%).
reasonableness of the discount rate applied to the
provisions;
■ audited the integrity of the underlying models, engaging
our modelling team or using a spreadsheet analyser tool
where appropriate;
■ verified the completeness of the cost estimate data by
comparing it with work performed on oil and gas
reserves and testing of PP&E;
■ tested the consistency of, and rationale for, the
contingent factors applied in the cost estimate model,
which are derived from location specific analysis;
■ performed a review to ensure that all key movements
were understood, corroborated and recorded correctly;
■ agreed cost estimates for non-Shell-operated ventures to
information provided by third parties. We investigated any
significant differences between this information and the
amount provided by Shell;
■ tested contingent liabilities for D&R liabilities arising from
assets previously disposed of; and
■ assessed whether D&R movements should be recorded in
the income statement or capitalised by understanding the
reason for the change and by comparing the movement
with the carrying amount of the related asset.
Our full and specific scope audit procedures over D&R
provision were performed by our local EY teams in Australia,
Brazil, Canada, Kazakhstan, Malaysia, Nigeria, Qatar, the
Netherlands, the UK and the USA. These covered 64% of the
decommissioning and other provisions balance. We also
performed specified procedures over these balances in the
Netherlands, Norway, and the USA which covered 11% of the
decommissioning and other provisions balance.
Cross-reference: See the AC Report on page 92 for details on how the AC considered D&R provisions. Also, see Note 18 to the “Consolidated Financial Statements”.
Risk
Our response to the risk
Accounting for assets under Shell’s disposal programme
Key observations communicated
to the Shell Audit Committee
At December 31, 2017, Shell disclosed
$1.0 billion of assets as held for sale
(2016: $0.3 billion). During 2017, Shell received
cash proceeds of $8.8 billion (2016: $2.1 billion)
from the sale of PP&E and businesses.
Our audit procedures for potential disposals focused on
We communicated to the May and
auditing management’s assessment of the likelihood of a sale
July 2017 meetings of the AC that
occurring within 12 months from the year end. As at
the disposal and business
December 31, 2017, there were no material disposals
combination elements of both
involving significant judgements as to whether or not a sale
Canadian Oil Sands and Motiva
Shell’s divestment programme continues and there are
was ‘highly probable’.
The most significant complex disposals in 2017 related to the
discontinuation of the Motiva joint venture and subsequent
At the January 2018 AC meeting,
redistribution of the assets, and the disposal of the Canadian
we confirmed that we had
Oil Sands and concurrent joint acquisition of Marathon Oil
performed a review of all material
transactions were appropriately
accounted for.
Canada Corporation.
a number of assets for which sales and purchase
agreements have been reached and others where
negotiations continue to progress. Shell actively
monitors the progress of each material asset disposal
to assess whether or not the IFRS 5 criteria to be
classified as an Asset Held for Sale (AHFS) are met.
This re-classification may have impairment and/or
disclosure implications.
Our audit procedures on these complex transactions included
as appropriate to each disposal:
■ gaining an understanding of the transaction through
The risk relates to accounting for assets under Shell’s
enquiry and review of contractual arrangements;
disposal programme given the rise in innovative deal
■ testing the tax consequences of the transactions,
structures, where the traditional approach of a clean
including the impact on deferred tax assets recognised;
break is no longer the norm. Examples include the
■ assessing whether the accounting treatment was
retention of certain obligations, and the acquisition of
appropriate, including consideration of alternative views;
new rights and interests. This introduces considerably
■ testing the methodology and the integrity of models used
more complexity in accounting for such deals, as is
evident in the Canadian Oil Sands and Motiva
in the fair value of acquired assets and businesses;
■ testing the appropriateness of the key assumptions,
transactions.
transactions, whether or not
complete, and we were satisfied
that assets disposal transactions
completed during the year were
appropriately accounted for, and
that there were no other material
assets where a sale was highly
probable as at December 31,
2017, that should be classified as
held for sale and therefore tested for
impairment.
including price assumptions and discount rates, used for
the valuation of the re-acquired assets; testing the
measurement of consideration on disposal of the asset,
including deferred and contingent consideration; and the
release of cumulative currency translation differences that
may be triggered by the disposal; and
■ assessing how any retained D&R liabilities should be
accounted for.
The audit procedures were carried out principally by the
group audit team, as well as our US and Canadian audit
teams covering the most significant and complex transactions
that occurred during the year.
Cross-reference: See the AC Report on page 92 for details on how the AC reviewed matters in relation to disposals. Also see Notes 2 and 29 to the “Consolidated Financial Statements”.
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Risk
Our response to the risk
Estimation of decommissioning and restoration (D&R) provisions
Key observations communicated
to the Shell Audit Committee
Risk
Our response to the risk
Accounting for assets under Shell’s disposal programme
At December 31, 2017, Shell disclosed
$1.0 billion of assets as held for sale
(2016: $0.3 billion). During 2017, Shell received
cash proceeds of $8.8 billion (2016: $2.1 billion)
from the sale of PP&E and businesses.
Shell’s divestment programme continues and there are
a number of assets for which sales and purchase
agreements have been reached and others where
negotiations continue to progress. Shell actively
monitors the progress of each material asset disposal
to assess whether or not the IFRS 5 criteria to be
classified as an Asset Held for Sale (AHFS) are met.
This re-classification may have impairment and/or
disclosure implications.
The risk relates to accounting for assets under Shell’s
disposal programme given the rise in innovative deal
structures, where the traditional approach of a clean
break is no longer the norm. Examples include the
retention of certain obligations, and the acquisition of
new rights and interests. This introduces considerably
more complexity in accounting for such deals, as is
evident in the Canadian Oil Sands and Motiva
transactions.
Our audit procedures for potential disposals focused on
auditing management’s assessment of the likelihood of a sale
occurring within 12 months from the year end. As at
December 31, 2017, there were no material disposals
involving significant judgements as to whether or not a sale
was ‘highly probable’.
The most significant complex disposals in 2017 related to the
discontinuation of the Motiva joint venture and subsequent
redistribution of the assets, and the disposal of the Canadian
Oil Sands and concurrent joint acquisition of Marathon Oil
Canada Corporation.
Our audit procedures on these complex transactions included
as appropriate to each disposal:
■ gaining an understanding of the transaction through
enquiry and review of contractual arrangements;
■ testing the tax consequences of the transactions,
including the impact on deferred tax assets recognised;
■ assessing whether the accounting treatment was
appropriate, including consideration of alternative views;
■ testing the methodology and the integrity of models used
in the fair value of acquired assets and businesses;
■ testing the appropriateness of the key assumptions,
including price assumptions and discount rates, used for
the valuation of the re-acquired assets; testing the
measurement of consideration on disposal of the asset,
including deferred and contingent consideration; and the
release of cumulative currency translation differences that
may be triggered by the disposal; and
■ assessing how any retained D&R liabilities should be
accounted for.
The audit procedures were carried out principally by the
group audit team, as well as our US and Canadian audit
teams covering the most significant and complex transactions
that occurred during the year.
Key observations communicated
to the Shell Audit Committee
We communicated to the May and
July 2017 meetings of the AC that
the disposal and business
combination elements of both
Canadian Oil Sands and Motiva
transactions were appropriately
accounted for.
At the January 2018 AC meeting,
we confirmed that we had
performed a review of all material
transactions, whether or not
complete, and we were satisfied
that assets disposal transactions
completed during the year were
appropriately accounted for, and
that there were no other material
assets where a sale was highly
probable as at December 31,
2017, that should be classified as
held for sale and therefore tested for
impairment.
Cross-reference: See the AC Report on page 92 for details on how the AC considered D&R provisions. Also, see Note 18 to the “Consolidated Financial Statements”.
Cross-reference: See the AC Report on page 92 for details on how the AC reviewed matters in relation to disposals. Also see Notes 2 and 29 to the “Consolidated Financial Statements”.
At December 31, 2017, Shell recognised D&R
In auditing the D&R provisions we:
In January 2018, we communicated
provisions of $21 billion (2016: $25 billion).
D&R provisions are highly judgemental, as they are
calculated using cost models based on assumptions
■ identified the cost assumptions that have the most
to the AC that:
significant impact on the provisions and tested the
■ on the basis of the audit work
appropriateness of these assumptions using third party
that are impacted by future activities and the legislative
evidence, including rig and vessel rates;
environment in which Shell operates.
■ engaged our valuations experts to evaluate the
performed, we had concluded
that the D&R provisions recorded
are supported by appropriate
D&R provisions are also affected by changes in the
estimated date on which production will cease.
The cost models are managed at a country level with
certain key assumptions derived centrally. Shell
discounts future estimated D&R costs at 4%
(2016: 4%).
reasonableness of the discount rate applied to the
audit evidence;
provisions;
■ audited the integrity of the underlying models, engaging
our modelling team or using a spreadsheet analyser tool
where appropriate;
■ changes in D&R provisions
during the year have been
reflected appropriately in the
financial statements; and
■ verified the completeness of the cost estimate data by
■ the discount rate applied by
comparing it with work performed on oil and gas
reserves and testing of PP&E;
management is supportable and
lies within an acceptable range.
■ tested the consistency of, and rationale for, the
contingent factors applied in the cost estimate model,
which are derived from location specific analysis;
■ performed a review to ensure that all key movements
were understood, corroborated and recorded correctly;
■ agreed cost estimates for non-Shell-operated ventures to
information provided by third parties. We investigated any
significant differences between this information and the
amount provided by Shell;
■ tested contingent liabilities for D&R liabilities arising from
assets previously disposed of; and
■ assessed whether D&R movements should be recorded in
the income statement or capitalised by understanding the
reason for the change and by comparing the movement
with the carrying amount of the related asset.
Our full and specific scope audit procedures over D&R
provision were performed by our local EY teams in Australia,
Brazil, Canada, Kazakhstan, Malaysia, Nigeria, Qatar, the
Netherlands, the UK and the USA. These covered 64% of the
decommissioning and other provisions balance. We also
performed specified procedures over these balances in the
Netherlands, Norway, and the USA which covered 11% of the
decommissioning and other provisions balance.
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Key observations communicated
to the Shell Audit Committee
We reported our conclusions to
the January 2018 meeting of the
AC that we had challenged the
robustness of the key management
judgements and confirmed that
we were satisfied:
■ as to the existence of DTLs
available for offset in the same
jurisdiction as the DTAs;
■ that where DTAs recognised are
based on income forecast to
arise beyond Shell’s planning
horizon, we consider that there
was sufficient future taxable
profit that is probable to support
the DTAs; however, we noted
that a greater degree of
judgement is required in
recognising DTAs beyond
Shell’s planning horizon; and
■ that tax planning strategies
necessary to justify the
recognition of the DTAs are
reasonable.
We also reported to the AC that the
DTAs were appropriately recognised
and valued at the year end.
Risk
Our response to the risk
Recognition and measurement of deferred tax assets (DTAs)
At December 31, 2017, Shell recognised gross
DTAs totalling $29 billion (2016: $34 billion),
which are recognised within two balance sheet
line items, deferred tax assets and as an offset
against deferred tax liabilities, depending on the
overall tax position in a particular jurisdiction.
A significant proportion of DTA balances are
supported by forecast future taxable profits, which are
derived from Shell’s commodity price assumptions and
business plans.
Estimating DTAs therefore requires significant
judgement, including the timing of reversals of deferred
tax liabilities (DTL) and the availability of future profits
against which tax deductions represented by the DTAs
can be offset.
In some cases, the DTA will be utilised in a period
substantially beyond the period of the operating plan.
Sustained low commodity prices increase the risk to
the recoverability of the DTA due to the fact that
sufficient future taxable profits may not be achieved.
We considered the expected timing of utilisation of the DTA
including the relevant country tax laws that apply to the
utilisation of tax losses. This included the ability to carry tax
losses forward or back and any restrictions arising from ring
fencing tax losses to particular projects.
Our procedures depended on whether or not the DTAs were
supported by the unwinding of taxable temporary differences,
forecast taxable profits or tax planning opportunities that
would be necessary to utilise tax losses.
We assessed whether the forecast timing of the unwinding of
taxable temporary differences were appropriate after
considering the nature of the temporary difference and the
relevant tax law.
For DTAs that are supported by forecast taxable profits or tax
planning opportunities, we:
■ stress tested the commodity price and/or other key
assumptions that underpin Shell’s assessment of forecast
probable taxable profits;
■ determined the extent to which sufficient probable
taxable profits would arise in the period within which the
related losses would be available for utilisation,
considering for example limits on the length of time that
losses can be carried forward (applicable to the USA,
the Netherlands and China in particular) or if losses are
ring fenced for tax purposes (including the UK and
Nigeria); and
■ considered whether the tax balances were calculated
using appropriate, and substantively enacted, tax laws
and rates.
For the tax planning strategies necessary to justify the
recognition of the DTAs, we considered whether or not the
planning was reasonable and in line with the current tax law,
including satisfying ourselves that sufficient profits would be
available in the appropriate periods.
Our audit procedures over the recognition and valuation of
DTAs were performed by our tax specialist teams in
Australia, Brazil, Germany, Nigeria, Singapore, Qatar, the
UK and USA, which covered 53% of the gross DTA balance.
We also performed specified procedures over the
recognition and valuation of DTAs in Canada, China,
Denmark, France, Ireland, Kazakhstan, the Netherlands,
New Zealand, Norway and the UK, which covered an
additional 40% of the gross DTA balance.
Cross-reference: See the AC Report on page 92 for details on how the AC reviewed certain tax matters, in particular the recoverability of deferred tax assets. Also see Notes 2 and 16 to the “Consolidated
Financial Statements”.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
130
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Risk
Our response to the risk
Impact of US tax reform
At December 31, 2017, the net impact of the US
We audited the impact of the US tax reform and engaged
We reported to the January 2018
our US tax specialists to assist in interpreting the impact of the
meeting of the AC that, based on
tax reform is as follows: $2.6 billion net reduction
of DTA balance with a $2.0 billion charge to the
new legislation on Shell.
2017 income statement.
The US tax reform was signed into law on
December 22, 2017. Because the legislation was
enacted prior to December 31, 2017, its impact was
required to be reflected in Shell’s 2017 financial
statements.
The tax reform significantly changes US corporate
income tax law by reducing the corporate income tax
rate from 35% to 21%, creating a territorial tax system
(with a one-time mandatory tax on previously deferred
foreign earnings), broadening the tax base and
allowing for immediate expensing of certain qualified
property.
A key area of judgement and estimation in the
calculation related to the level of profits that are
subject to the transition tax.
Our audit procedures relating to US tax reform included:
■ understanding the legislation and considering its
application to Shell’s circumstances as well as the
■ testing the completeness of Shell’s assessment of the tax
judgements made;
accounting impact;
transition tax;
■ assessing the appropriateness of the key assumptions used
for the calculation of the impact, in particular the one-time
■ testing the methodology and integrity of the models used to
determine the accounting impact; and
■ challenging the appropriateness of the split of the impact
between the income statement and other comprehensive
income.
The audit procedures in relation to this risk were performed
principally by the group audit team and the full scope
component team in the USA.
Cross-reference: See the AC Report on page 92 for details on how the AC reviewed impact of the US tax reform. Also see Notes 2 and 16 to the “Consolidated Financial Statements”.
Revenue recognition relating to unrealised trading gains and losses
Shell’s trading and supply function is integrated within
the Downstream, Integrated Gas and Upstream
segments and is spread across multiple regions. It is
inherently complex and exposes Shell to risks that are
not normally associated with core oil and gas
activities. Whilst trading is not uncommon amongst
In order to address the specific risks associated with Shell’s
We confirmed that:
trading and supply function, our trading audit teams
■ we tested the valuation of
comprised individuals who have significant experience of
auditing both large commodity trading organisations and
financial institutions.
derivative contracts as at
December 31, 2017;
■ our testing – through a
international oil and gas companies, it does require a
Our audit procedures focused on:
robust internal control environment that is
commensurate with that of a financial institution.
■ investigations as to whether or not there were any
breakdowns of trading controls or instances of rogue
In our audit, we have considered the risk of unrealised
trading reported or known or suspected frauds;
trading gains and losses recognised as a result of
■ testing controls across the trading and supply function,
unauthorised trading activity or deliberate misstatement
including IT general and IT application controls;
Key observations communicated
to the Shell Audit Committee
our audit procedures, we were
satisfied with management’s
calculations of the impact of the
US tax reform and the key
judgements related thereto.
We further confirmed to the AC
that we consider the tax
accounting treatment adopted by
management to be consistent with
the legislation on the basis of all
the information that management
could reasonably have been
expected to obtain.
We also highlighted to the AC that,
because the interpretation and
application of the legislation is
untested, it is possible that changes
to Shell’s assessment of the
appropriate tax accounting
treatment could be made as further
legislative guidance is issued.
combination of controls testing
and expanded substantive audit
procedures – satisfied us that
the models used to value
contracts were appropriate for
the purposes of the valuations
included in Shell’s Consolidated
Financial Statements; and
■ the unrealised gains and losses
had been recorded
appropriately.
of Shell’s trading positions.
The deliberate misstatement of Shell’s trading positions
or mis-marking of positions could result in understated
trading losses, overstated trading profits and/or
individual bonuses being manipulated through
inappropriate inter-period profit/loss allocations.
■ independently obtaining confirmation of a sample of
open trading positions with brokers and counterparties,
or performing alternative procedures as necessary;
■ performing valuation testing of derivative positions,
including confirming the appropriateness of price curves
used;
■ performing independent testing of valuation models,
focusing on validating contract terms and key
assumptions; and
■ testing the completeness of the amounts recorded in the
financial statements through procedures to detect
unrecorded liabilities as well as detailed cut-off
procedures around sales, purchases, trade receivables
and trade payables.
The audit procedures to address this risk were performed
principally by the group audit team and the full scope
component team in the USA.
Cross-reference: See Note 19 to the “Consolidated Financial Statements”.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
131
Risk
Our response to the risk
Recognition and measurement of deferred tax assets (DTAs)
We considered the expected timing of utilisation of the DTA
We reported our conclusions to
including the relevant country tax laws that apply to the
the January 2018 meeting of the
utilisation of tax losses. This included the ability to carry tax
AC that we had challenged the
losses forward or back and any restrictions arising from ring
robustness of the key management
fencing tax losses to particular projects.
At December 31, 2017, Shell recognised gross
DTAs totalling $29 billion (2016: $34 billion),
which are recognised within two balance sheet
line items, deferred tax assets and as an offset
against deferred tax liabilities, depending on the
overall tax position in a particular jurisdiction.
A significant proportion of DTA balances are
supported by forecast future taxable profits, which are
derived from Shell’s commodity price assumptions and
business plans.
Estimating DTAs therefore requires significant
judgement, including the timing of reversals of deferred
tax liabilities (DTL) and the availability of future profits
against which tax deductions represented by the DTAs
can be offset.
In some cases, the DTA will be utilised in a period
substantially beyond the period of the operating plan.
Sustained low commodity prices increase the risk to
the recoverability of the DTA due to the fact that
sufficient future taxable profits may not be achieved.
judgements and confirmed that
we were satisfied:
■ as to the existence of DTLs
available for offset in the same
jurisdiction as the DTAs;
■ that where DTAs recognised are
based on income forecast to
arise beyond Shell’s planning
horizon, we consider that there
was sufficient future taxable
profit that is probable to support
the DTAs; however, we noted
that a greater degree of
judgement is required in
recognising DTAs beyond
Shell’s planning horizon; and
■ that tax planning strategies
necessary to justify the
recognition of the DTAs are
reasonable.
We also reported to the AC that the
DTAs were appropriately recognised
and valued at the year end.
Our procedures depended on whether or not the DTAs were
supported by the unwinding of taxable temporary differences,
forecast taxable profits or tax planning opportunities that
would be necessary to utilise tax losses.
We assessed whether the forecast timing of the unwinding of
taxable temporary differences were appropriate after
considering the nature of the temporary difference and the
relevant tax law.
For DTAs that are supported by forecast taxable profits or tax
planning opportunities, we:
■ stress tested the commodity price and/or other key
assumptions that underpin Shell’s assessment of forecast
probable taxable profits;
■ determined the extent to which sufficient probable
taxable profits would arise in the period within which the
related losses would be available for utilisation,
considering for example limits on the length of time that
losses can be carried forward (applicable to the USA,
the Netherlands and China in particular) or if losses are
ring fenced for tax purposes (including the UK and
■ considered whether the tax balances were calculated
using appropriate, and substantively enacted, tax laws
Nigeria); and
and rates.
For the tax planning strategies necessary to justify the
recognition of the DTAs, we considered whether or not the
planning was reasonable and in line with the current tax law,
including satisfying ourselves that sufficient profits would be
available in the appropriate periods.
Our audit procedures over the recognition and valuation of
DTAs were performed by our tax specialist teams in
Australia, Brazil, Germany, Nigeria, Singapore, Qatar, the
UK and USA, which covered 53% of the gross DTA balance.
We also performed specified procedures over the
recognition and valuation of DTAs in Canada, China,
Denmark, France, Ireland, Kazakhstan, the Netherlands,
New Zealand, Norway and the UK, which covered an
additional 40% of the gross DTA balance.
Cross-reference: See the AC Report on page 92 for details on how the AC reviewed certain tax matters, in particular the recoverability of deferred tax assets. Also see Notes 2 and 16 to the “Consolidated
Financial Statements”.
Key observations communicated
to the Shell Audit Committee
Risk
Our response to the risk
Impact of US tax reform
At December 31, 2017, the net impact of the US
tax reform is as follows: $2.6 billion net reduction
of DTA balance with a $2.0 billion charge to the
2017 income statement.
The US tax reform was signed into law on
December 22, 2017. Because the legislation was
enacted prior to December 31, 2017, its impact was
required to be reflected in Shell’s 2017 financial
statements.
The tax reform significantly changes US corporate
income tax law by reducing the corporate income tax
rate from 35% to 21%, creating a territorial tax system
(with a one-time mandatory tax on previously deferred
foreign earnings), broadening the tax base and
allowing for immediate expensing of certain qualified
property.
A key area of judgement and estimation in the
calculation related to the level of profits that are
subject to the transition tax.
We audited the impact of the US tax reform and engaged
our US tax specialists to assist in interpreting the impact of the
new legislation on Shell.
Our audit procedures relating to US tax reform included:
■ understanding the legislation and considering its
application to Shell’s circumstances as well as the
judgements made;
■ testing the completeness of Shell’s assessment of the tax
accounting impact;
■ assessing the appropriateness of the key assumptions used
for the calculation of the impact, in particular the one-time
transition tax;
■ testing the methodology and integrity of the models used to
determine the accounting impact; and
■ challenging the appropriateness of the split of the impact
between the income statement and other comprehensive
income.
The audit procedures in relation to this risk were performed
principally by the group audit team and the full scope
component team in the USA.
Key observations communicated
to the Shell Audit Committee
We reported to the January 2018
meeting of the AC that, based on
our audit procedures, we were
satisfied with management’s
calculations of the impact of the
US tax reform and the key
judgements related thereto.
We further confirmed to the AC
that we consider the tax
accounting treatment adopted by
management to be consistent with
the legislation on the basis of all
the information that management
could reasonably have been
expected to obtain.
We also highlighted to the AC that,
because the interpretation and
application of the legislation is
untested, it is possible that changes
to Shell’s assessment of the
appropriate tax accounting
treatment could be made as further
legislative guidance is issued.
Cross-reference: See the AC Report on page 92 for details on how the AC reviewed impact of the US tax reform. Also see Notes 2 and 16 to the “Consolidated Financial Statements”.
Revenue recognition relating to unrealised trading gains and losses
Shell’s trading and supply function is integrated within
the Downstream, Integrated Gas and Upstream
segments and is spread across multiple regions. It is
inherently complex and exposes Shell to risks that are
not normally associated with core oil and gas
activities. Whilst trading is not uncommon amongst
international oil and gas companies, it does require a
robust internal control environment that is
commensurate with that of a financial institution.
In our audit, we have considered the risk of unrealised
trading gains and losses recognised as a result of
unauthorised trading activity or deliberate misstatement
of Shell’s trading positions.
The deliberate misstatement of Shell’s trading positions
or mis-marking of positions could result in understated
trading losses, overstated trading profits and/or
individual bonuses being manipulated through
inappropriate inter-period profit/loss allocations.
Cross-reference: See Note 19 to the “Consolidated Financial Statements”.
In order to address the specific risks associated with Shell’s
trading and supply function, our trading audit teams
comprised individuals who have significant experience of
auditing both large commodity trading organisations and
financial institutions.
We confirmed that:
■ we tested the valuation of
derivative contracts as at
December 31, 2017;
■ our testing – through a
combination of controls testing
and expanded substantive audit
procedures – satisfied us that
the models used to value
contracts were appropriate for
the purposes of the valuations
included in Shell’s Consolidated
Financial Statements; and
■ the unrealised gains and losses
had been recorded
appropriately.
Our audit procedures focused on:
■ investigations as to whether or not there were any
breakdowns of trading controls or instances of rogue
trading reported or known or suspected frauds;
■ testing controls across the trading and supply function,
including IT general and IT application controls;
■ independently obtaining confirmation of a sample of
open trading positions with brokers and counterparties,
or performing alternative procedures as necessary;
■ performing valuation testing of derivative positions,
including confirming the appropriateness of price curves
used;
■ performing independent testing of valuation models,
focusing on validating contract terms and key
assumptions; and
■ testing the completeness of the amounts recorded in the
financial statements through procedures to detect
unrecorded liabilities as well as detailed cut-off
procedures around sales, purchases, trade receivables
and trade payables.
The audit procedures to address this risk were performed
principally by the group audit team and the full scope
component team in the USA.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
130
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Risk
Our response to the risk
Enhancements to Shell’s system of IT general controls
Key observations communicated
to the Shell Audit Committee
10. MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
In the light of the knowledge and understanding of Shell and the Parent Company, and its environment obtained in the course of the audit, we have not
identified material misstatements in the Strategic Report or the Directors’ Report.
Shell management continued to devote significant
effort in 2017 to enhancing Shell’s system of IT
general controls (ITGCs) following further system
integration and other changes to Shell’s finance
systems and global IT processes.
Our procedures focused on the key IT processes and controls
over IT systems critical to our audit. These included:
management of changes to systems and access to systems;
and IT operations, such as problem and incident
management, and back-up and restore.
Throughout 2017, we
communicated to the AC the
progress of our testing of internal
controls, including the central
testing of ITGCs.
During any period of significant system change, there
is an increased risk to the internal financial control
environment. Consequently, in addition to the inherent
risks associated with auditing the IT systems of a
complex global organisation such as Shell, the audit
team focused its procedures on the following identified
risks:
■ the ongoing migration of legacy BG ERP systems
and processes into Shell’s reporting structure and
chart of accounts;
■ the migration of certain IT activities to an IT hub;
and
■ further standardisation of Shell’s User Access
Management process.
We updated our understanding of Shell’s key IT applications
and IT transitions that impacted our financial statement audits
by carrying out walk-through tests. We identified 130
applications that were critical to our audit and therefore
included in our audit scope. We also assessed the risk
associated with any key business or IT changes and
identified and tested application and IT dependent manual
controls that we considered key to the business processes
related to financial reporting.
Our audit approach involved central testing of ITGCs that we
considered important to the financial statements, including:
■ management of changes to systems;
■ management of access to systems; and
■ management of IT operations.
Cross-reference: See the AC Report on page 92 for details on how the AC reviewed the enhancements to Shell’s system of IT general controls.
In January 2018, we confirmed
that, through a combination of
control testing and substantive
audit procedures, we were
satisfied that we had obtained
sufficient and appropriate
evidence over Shell’s
management of changes to
systems, access to systems and of
IT operations for the purpose of
our financial statement audit.
9. OTHER INFORMATION
The other information comprises the information included in the Annual Report set out on pages 1 to 117, 179 to 198 and 208 to 226 including the Strategic
Report, Governance and Additional Information sections, other than the financial statements and our auditor’s report thereon. The Directors are responsible for
the other information.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this report, we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial
statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of
the other information, we are required to report that fact.
We have nothing to report in this regard.
In this context, we also have nothing to report in regard to our responsibility to specifically address the following items in the other information and to report as
uncorrected material misstatements of the other information where we conclude that those items meet the following conditions:
■ Fair, balanced and understandable set out on page 74 – the statement given by the Directors that they consider the Annual Report and financial
statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess Shell’s performance,
business model and strategy, is materially inconsistent with our knowledge obtained in the audit; or
■ Audit Committee reporting set out on page 90 to 93 – the section describing the work of the AC does not appropriately address matters communicated
by us to the AC; or
■ Directors’ statement of compliance with the UK Corporate Governance Code set out on page 76 – the parts of the Directors’ statement required under
the Listing Rules relating to Shell’s compliance with the UK Corporate Governance Code containing provisions specified for review by the auditor in
accordance with Listing Rule 9.8.10R(2) do not properly disclose a departure from a relevant provision of the UK Corporate Governance Code.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not
the Parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting
■
■
■
visited by us; or
records and returns; or
certain disclosures of Directors’ remuneration specified by law are not made; or
■ we have not received all the information and explanations we require for our audit.
11. RESPONSIBILTIES OF DIRECTORS
As explained more fully in the statement of Directors’ responsibilities set out on page 73, the Directors are responsible for the preparation of the Consolidated
Financial Statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable
the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing Shell and the Parent Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate Shell
or Parent Company or to cease operations, or have no realistic alternative but to do so.
12. AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud
or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISA (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of
these financial statements.
13. EXPLANATION AS TO WHAT EXTENT THE AUDIT WAS CONSIDERED CAPABLE OF DETECTING IRREGULARITIES, INCLUDING FRAUD
The objectives of our audit, in respect to fraud, are; to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain
sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate
responses; and to respond appropriately to fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and
detection of fraud rests with both those charged with governance of the entity and management.
Our approach was as follows:
■ We obtained an understanding of the legal and regulatory frameworks that are applicable to Shell and determined that the most significant are those that
relate to the reporting framework (IFRS, Companies Act 2006, the UK Corporate Governance Code, the US Securities Exchange Act of 1934 and the
Listing Rules of the UK Listing Authority) and the relevant tax compliance regulations in the jurisdictions in which Shell operates. In addition, we concluded
that there are certain significant laws and regulations that may have an effect on the determination of the amounts and disclosures in the financial
statements and those laws and regulations relating to health and safety, employee matters, environmental, and bribery and corruption practices.
■ We understood how Shell is complying with those frameworks by making enquiries of management, internal audit, those responsible for legal and
compliance procedures and the Company Secretary. We corroborated our enquiries through our review of Board minutes, papers provided to the AC
and correspondence received from regulatory bodies and noted that there was no contradictory evidence.
■ We assessed the susceptibility of Shell’s Consolidated Financial Statements to material misstatement, including how fraud might occur, by embedding
forensic specialists into our audit team. Our forensic specialists worked with the group audit team to identify the fraud risks across various parts of the
business. In addition, we utilised internal and external information to perform a fraud risk assessment for each of the countries of operation. We
considered the risk of fraud through management override and, in response, we incorporated data analytics across manual journal entries into our audit
approach. We also considered the possibility of fraudulent or corrupt payments made through third parties and conducted detailed analytical testing on
third party vendors in high-risk jurisdictions. Where instances of risk behaviour patterns were identified through our data analytics, we performed
additional audit procedures to address each identified risk. These procedures included testing of transactions back to source information and were
designed to provide reasonable assurance that the financial statements were free from fraud or error. We also conducted specific audit procedures in
relation to the risk of bribery and corruption across various countries of operation determined by a risk based process.
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Risk
Our response to the risk
Enhancements to Shell’s system of IT general controls
Key observations communicated
to the Shell Audit Committee
10. MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
In the light of the knowledge and understanding of Shell and the Parent Company, and its environment obtained in the course of the audit, we have not
identified material misstatements in the Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
■
■
■
adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not
visited by us; or
the Parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting
records and returns; or
certain disclosures of Directors’ remuneration specified by law are not made; or
■ we have not received all the information and explanations we require for our audit.
11. RESPONSIBILTIES OF DIRECTORS
As explained more fully in the statement of Directors’ responsibilities set out on page 73, the Directors are responsible for the preparation of the Consolidated
Financial Statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable
the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing Shell and the Parent Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate Shell
or Parent Company or to cease operations, or have no realistic alternative but to do so.
12. AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud
or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISA (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of
these financial statements.
13. EXPLANATION AS TO WHAT EXTENT THE AUDIT WAS CONSIDERED CAPABLE OF DETECTING IRREGULARITIES, INCLUDING FRAUD
The objectives of our audit, in respect to fraud, are; to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain
sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate
responses; and to respond appropriately to fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and
detection of fraud rests with both those charged with governance of the entity and management.
Our approach was as follows:
■ We obtained an understanding of the legal and regulatory frameworks that are applicable to Shell and determined that the most significant are those that
relate to the reporting framework (IFRS, Companies Act 2006, the UK Corporate Governance Code, the US Securities Exchange Act of 1934 and the
Listing Rules of the UK Listing Authority) and the relevant tax compliance regulations in the jurisdictions in which Shell operates. In addition, we concluded
that there are certain significant laws and regulations that may have an effect on the determination of the amounts and disclosures in the financial
statements and those laws and regulations relating to health and safety, employee matters, environmental, and bribery and corruption practices.
■ We understood how Shell is complying with those frameworks by making enquiries of management, internal audit, those responsible for legal and
compliance procedures and the Company Secretary. We corroborated our enquiries through our review of Board minutes, papers provided to the AC
and correspondence received from regulatory bodies and noted that there was no contradictory evidence.
■ We assessed the susceptibility of Shell’s Consolidated Financial Statements to material misstatement, including how fraud might occur, by embedding
forensic specialists into our audit team. Our forensic specialists worked with the group audit team to identify the fraud risks across various parts of the
business. In addition, we utilised internal and external information to perform a fraud risk assessment for each of the countries of operation. We
considered the risk of fraud through management override and, in response, we incorporated data analytics across manual journal entries into our audit
approach. We also considered the possibility of fraudulent or corrupt payments made through third parties and conducted detailed analytical testing on
third party vendors in high-risk jurisdictions. Where instances of risk behaviour patterns were identified through our data analytics, we performed
additional audit procedures to address each identified risk. These procedures included testing of transactions back to source information and were
designed to provide reasonable assurance that the financial statements were free from fraud or error. We also conducted specific audit procedures in
relation to the risk of bribery and corruption across various countries of operation determined by a risk based process.
Shell management continued to devote significant
Our procedures focused on the key IT processes and controls
Throughout 2017, we
effort in 2017 to enhancing Shell’s system of IT
over IT systems critical to our audit. These included:
communicated to the AC the
general controls (ITGCs) following further system
management of changes to systems and access to systems;
progress of our testing of internal
integration and other changes to Shell’s finance
and IT operations, such as problem and incident
controls, including the central
systems and global IT processes.
management, and back-up and restore.
testing of ITGCs.
During any period of significant system change, there
is an increased risk to the internal financial control
environment. Consequently, in addition to the inherent
risks associated with auditing the IT systems of a
complex global organisation such as Shell, the audit
team focused its procedures on the following identified
risks:
■ the ongoing migration of legacy BG ERP systems
and processes into Shell’s reporting structure and
■ the migration of certain IT activities to an IT hub;
chart of accounts;
and
■ further standardisation of Shell’s User Access
Management process.
We updated our understanding of Shell’s key IT applications
and IT transitions that impacted our financial statement audits
by carrying out walk-through tests. We identified 130
applications that were critical to our audit and therefore
included in our audit scope. We also assessed the risk
associated with any key business or IT changes and
identified and tested application and IT dependent manual
controls that we considered key to the business processes
related to financial reporting.
Our audit approach involved central testing of ITGCs that we
considered important to the financial statements, including:
■ management of changes to systems;
■ management of access to systems; and
■ management of IT operations.
Cross-reference: See the AC Report on page 92 for details on how the AC reviewed the enhancements to Shell’s system of IT general controls.
In January 2018, we confirmed
that, through a combination of
control testing and substantive
audit procedures, we were
satisfied that we had obtained
sufficient and appropriate
evidence over Shell’s
management of changes to
systems, access to systems and of
IT operations for the purpose of
our financial statement audit.
9. OTHER INFORMATION
the other information.
The other information comprises the information included in the Annual Report set out on pages 1 to 117, 179 to 198 and 208 to 226 including the Strategic
Report, Governance and Additional Information sections, other than the financial statements and our auditor’s report thereon. The Directors are responsible for
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this report, we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial
statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of
the other information, we are required to report that fact.
We have nothing to report in this regard.
In this context, we also have nothing to report in regard to our responsibility to specifically address the following items in the other information and to report as
uncorrected material misstatements of the other information where we conclude that those items meet the following conditions:
■ Fair, balanced and understandable set out on page 74 – the statement given by the Directors that they consider the Annual Report and financial
statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess Shell’s performance,
business model and strategy, is materially inconsistent with our knowledge obtained in the audit; or
■ Audit Committee reporting set out on page 90 to 93 – the section describing the work of the AC does not appropriately address matters communicated
by us to the AC; or
■ Directors’ statement of compliance with the UK Corporate Governance Code set out on page 76 – the parts of the Directors’ statement required under
the Listing Rules relating to Shell’s compliance with the UK Corporate Governance Code containing provisions specified for review by the auditor in
accordance with Listing Rule 9.8.10R(2) do not properly disclose a departure from a relevant provision of the UK Corporate Governance Code.
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■
■
Based on the results of our risk assessment we designed our audit procedures to identify non-compliance with such laws and regulations identified above.
Our procedures involved journal entry testing, with a focus on journals meeting our defined risk criteria based on our understanding of the business;
enquiries of legal counsel, group management, internal audit and all full and specific scope management; review of the volume and nature of complaints
received by the whistleblowing hotline during the year and focused testing, as discussed in the key audit matters section 8 above.
If any instance of non-compliance with laws and regulations were identified, these were communicated to the relevant local EY teams who performed
sufficient and appropriate audit procedures supplemented by audit procedures performed at the group level. Where appropriate we consulted our
forensic specialists.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at
https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
14. OTHER MATTERS WE ARE REQUIRED TO ADDRESS
Following the recommendation of the AC we were re-appointed by the Company’s Annual General Meeting (AGM) on May 23, 2017, as auditor of the
Company to hold office until the conclusion of the next AGM of the Company, and signed an engagement letter on July 25, 2017. Our total uninterrupted
period of engagement is two years covering periods from our appointment through to the period ended December 31, 2017.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to Shell or the Parent Company and we remain independent of Shell and
the Parent Company in conducting the audit.
Our audit opinion is consistent with our additional report to the AC explaining the results of our audit.
/s/ Allister Wilson (Senior Statutory Auditor)
for and on behalf of Ernst & Young LLP,
Statutory Auditor
London
March 14, 2018
1.
2.
The maintenance and integrity of the Shell website are the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors
accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.
Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
The report set out above is included for the purposes of Royal Dutch Shell plc’s 2017 Annual Report and Accounts only and does not form part of
Royal Dutch Shell plc’s Annual Report on Form 20-F for 2017.
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Report of Independent Registered Public Accounting Firm
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF ROYAL DUTCH SHELL PLC
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Royal Dutch Shell plc (the Company) as of December 31, 2017 and 2016, the related
consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the two years in the period ended December 31,
2017, and the related notes (collectively referred to as the Consolidated Financial Statements). In our opinion, the Consolidated Financial Statements present
fairly, in all material respects, the consolidated financial position of the Company at December 31, 2017 and 2016, and the results of its operations and its
cash flows for each of the two years in the period ended December 31, 2017, in conformity with International Financial Reporting Standards (IFRS) as issued
by the International Accounting Standards Board (IASB) and in conformity with IFRS as adopted by the European Union.
As discussed in Note 4 to the Consolidated Financial Statements, in 2016 Royal Dutch Shell plc elected to change the composition of its reportable segments.
We also audited the adjustments to the 2015 Consolidated Financial Statements to retrospectively reflect the change in composition of reportable segments. In
our opinion, such adjustments are appropriate and have been properly applied. We were not engaged to audit, review or apply any procedures to the 2015
Consolidated Financial Statements of the Company other than with respect to the adjustments and, accordingly, we do not express an opinion or any other
form of assurance on the 2015 Consolidated Financial Statements taken as a whole.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal
control over financial reporting as of December 31, 2017, based on criteria established in Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 14, 2018, expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on the company’s financial statements
based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the company in accordance
with the US federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to
assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the Company’s auditor since 2016.
/s/ Ernst & Young LLP
London, United Kingdom
March 14, 2018
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF ROYAL DUTCH SHELL PLC
Opinion on Internal Control over Financial Reporting
We have audited Royal Dutch Shell plc’s (the Company) internal control over financial reporting as of December 31, 2017, based on criteria established in
Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO
criteria). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Consolidated
Financial Statements of the Company, and our report dated March 14, 2018, expressed an unqualified opinion thereon.
on the COSO criteria.
Basis for Opinion
The company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting as set out on
page 82. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the company in accordance with the US federal securities laws
and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or
timely detection of unauthorised acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
London, United Kingdom
March 14, 2018
1.
2.
The maintenance and integrity of the Shell website are the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors
accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.
Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
The reports set out above are included for the purposes of Royal Dutch Shell plc’s 2017 Annual Report on Form 20-F only and do not form part of
Royal Dutch Shell plc’s Annual Report on Accounts for 2017.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
135
■
Based on the results of our risk assessment we designed our audit procedures to identify non-compliance with such laws and regulations identified above.
Our procedures involved journal entry testing, with a focus on journals meeting our defined risk criteria based on our understanding of the business;
enquiries of legal counsel, group management, internal audit and all full and specific scope management; review of the volume and nature of complaints
received by the whistleblowing hotline during the year and focused testing, as discussed in the key audit matters section 8 above.
■
If any instance of non-compliance with laws and regulations were identified, these were communicated to the relevant local EY teams who performed
sufficient and appropriate audit procedures supplemented by audit procedures performed at the group level. Where appropriate we consulted our
forensic specialists.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at
https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
14. OTHER MATTERS WE ARE REQUIRED TO ADDRESS
Following the recommendation of the AC we were re-appointed by the Company’s Annual General Meeting (AGM) on May 23, 2017, as auditor of the
Company to hold office until the conclusion of the next AGM of the Company, and signed an engagement letter on July 25, 2017. Our total uninterrupted
period of engagement is two years covering periods from our appointment through to the period ended December 31, 2017.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to Shell or the Parent Company and we remain independent of Shell and
the Parent Company in conducting the audit.
Our audit opinion is consistent with our additional report to the AC explaining the results of our audit.
/s/ Allister Wilson (Senior Statutory Auditor)
for and on behalf of Ernst & Young LLP,
Statutory Auditor
London
March 14, 2018
1.
2.
The maintenance and integrity of the Shell website are the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors
accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.
Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
The report set out above is included for the purposes of Royal Dutch Shell plc’s 2017 Annual Report and Accounts only and does not form part of
Royal Dutch Shell plc’s Annual Report on Form 20-F for 2017.
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134
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF ROYAL DUTCH SHELL PLC
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Royal Dutch Shell plc (the Company) as of December 31, 2017 and 2016, the related
consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the two years in the period ended December 31,
2017, and the related notes (collectively referred to as the Consolidated Financial Statements). In our opinion, the Consolidated Financial Statements present
fairly, in all material respects, the consolidated financial position of the Company at December 31, 2017 and 2016, and the results of its operations and its
cash flows for each of the two years in the period ended December 31, 2017, in conformity with International Financial Reporting Standards (IFRS) as issued
by the International Accounting Standards Board (IASB) and in conformity with IFRS as adopted by the European Union.
As discussed in Note 4 to the Consolidated Financial Statements, in 2016 Royal Dutch Shell plc elected to change the composition of its reportable segments.
We also audited the adjustments to the 2015 Consolidated Financial Statements to retrospectively reflect the change in composition of reportable segments. In
our opinion, such adjustments are appropriate and have been properly applied. We were not engaged to audit, review or apply any procedures to the 2015
Consolidated Financial Statements of the Company other than with respect to the adjustments and, accordingly, we do not express an opinion or any other
form of assurance on the 2015 Consolidated Financial Statements taken as a whole.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal
control over financial reporting as of December 31, 2017, based on criteria established in Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 14, 2018, expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on the company’s financial statements
based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the company in accordance
with the US federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to
assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2016.
London, United Kingdom
March 14, 2018
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF ROYAL DUTCH SHELL PLC
Opinion on Internal Control over Financial Reporting
We have audited Royal Dutch Shell plc’s (the Company) internal control over financial reporting as of December 31, 2017, based on criteria established in
Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO
criteria). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based
on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Consolidated
Financial Statements of the Company, and our report dated March 14, 2018, expressed an unqualified opinion thereon.
Basis for Opinion
The company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting as set out on
page 82. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the company in accordance with the US federal securities laws
and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or
timely detection of unauthorised acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
London, United Kingdom
March 14, 2018
1.
The maintenance and integrity of the Shell website are the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors
accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.
Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
2.
The reports set out above are included for the purposes of Royal Dutch Shell plc’s 2017 Annual Report on Form 20-F only and do not form part of
Royal Dutch Shell plc’s Annual Report on Accounts for 2017.
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report of independent registered public accounting Firm Continued
Report of Independent Registered Public Accounting Firm
Consolidated Financial Statements
TO THE BOARD OF DIRECTORS AND ROYAL DUTCH SHELL PLC SHAREHOLDERS
In our opinion, the accompanying Consolidated Statement of Income, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of
Changes in Equity, the Consolidated Statement of Cash Flows and the related Notes to the Consolidated Financial Statements for the year ended
December 31, 2015 before the effects of the adjustments to retrospectively reflect the change in the composition of reportable segments described in Note 4
present fairly, in all material respects, the results of operations and cash flows of Royal Dutch Shell plc (the Company) and its subsidiaries (collectively Shell), in
conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board and in conformity with International
Financial Reporting Standards as adopted by the European Union (the 2015 financial statements before the effects of the adjustments discussed in Note 4 are
not presented herein).
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based
on our audit. We conducted our audit of these financial statements, before the effects of the adjustments described above, in accordance with the standards of
the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
We were not engaged to audit, review, or apply any procedures to the adjustments to retrospectively reflect the change in the composition of reportable
segments described in Note 4 and accordingly, we do not express an opinion or any other form of assurance about whether such adjustments are appropriate
and have been properly applied. Those adjustments were audited by other auditors.
/s/ PricewaterhouseCoopers LLP
London, United Kingdom
March 9, 2016
Note that the report set out above is included for the purposes of Royal Dutch Shell plc’s Annual Report on Form 20-F for 2017 only and does not form part of
Royal Dutch Shell plc’s Annual Report and Accounts for 2017.
138 Consolidated Statement of Income
138 Consolidated Statement of Comprehensive Income
139 Consolidated Balance Sheet
140 Consolidated Statement of Changes in Equity
141 Consolidated Statement of Cash Flows
142 Notes to the Consolidated Financial Statements
142 Note 1 Basis of preparation
142 Note 2 Significant accounting policies, judgements and estimates
148 Note 3 Changes to IFRS not yet adopted
149 Note 4 Segment information
151 Note 5 Interest and other income
151 Note 6 Interest expense
152 Note 7 Intangible assets
153 Note 8 Property, plant and equipment
155 Note 9 Joint ventures and associates
156 Note 10 Investments in securities
156 Note 11 Trade and other receivables
157 Note 12 Inventories
157 Note 13 Cash and cash equivalents
157 Note 14 Debt and lease arrangements
160 Note 15 Trade and other payables
160 Note 16 Taxation
163 Note 17 Retirement benefits
166 Note 18 Decommissioning and other provisions
167 Note 19 Financial instruments and other derivative contracts
172 Note 20 Share capital
172 Note 21 Share-based compensation plans and shares held in trust
173 Note 22 Other reserves
175 Note 23 Dividends
175 Note 24 Earnings per share
175 Note 25 Legal proceedings and other contingencies
176 Note 26 Employees
177 Note 27 Directors and Senior Management
177 Note 28 Auditor’s remuneration
178 Note 29 Business combinations
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Report of Independent Registered Public Accounting Firm
Consolidated Financial Statements
Consolidated Financial Statements
TO THE BOARD OF DIRECTORS AND ROYAL DUTCH SHELL PLC SHAREHOLDERS
In our opinion, the accompanying Consolidated Statement of Income, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of
Changes in Equity, the Consolidated Statement of Cash Flows and the related Notes to the Consolidated Financial Statements for the year ended
December 31, 2015 before the effects of the adjustments to retrospectively reflect the change in the composition of reportable segments described in Note 4
present fairly, in all material respects, the results of operations and cash flows of Royal Dutch Shell plc (the Company) and its subsidiaries (collectively Shell), in
conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board and in conformity with International
Financial Reporting Standards as adopted by the European Union (the 2015 financial statements before the effects of the adjustments discussed in Note 4 are
not presented herein).
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based
on our audit. We conducted our audit of these financial statements, before the effects of the adjustments described above, in accordance with the standards of
the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
We were not engaged to audit, review, or apply any procedures to the adjustments to retrospectively reflect the change in the composition of reportable
segments described in Note 4 and accordingly, we do not express an opinion or any other form of assurance about whether such adjustments are appropriate
and have been properly applied. Those adjustments were audited by other auditors.
/s/ PricewaterhouseCoopers LLP
London, United Kingdom
March 9, 2016
Note that the report set out above is included for the purposes of Royal Dutch Shell plc’s Annual Report on Form 20-F for 2017 only and does not form part of
Royal Dutch Shell plc’s Annual Report and Accounts for 2017.
138 Consolidated Statement of Income
138 Consolidated Statement of Comprehensive Income
139 Consolidated Balance Sheet
140 Consolidated Statement of Changes in Equity
141 Consolidated Statement of Cash Flows
142 Notes to the Consolidated Financial Statements
142 Note 1 Basis of preparation
142 Note 2 Significant accounting policies, judgements and estimates
148 Note 3 Changes to IFRS not yet adopted
149 Note 4 Segment information
151 Note 5 Interest and other income
151 Note 6 Interest expense
152 Note 7 Intangible assets
153 Note 8 Property, plant and equipment
155 Note 9 Joint ventures and associates
156 Note 10 Investments in securities
156 Note 11 Trade and other receivables
157 Note 12 Inventories
157 Note 13 Cash and cash equivalents
157 Note 14 Debt and lease arrangements
160 Note 15 Trade and other payables
160 Note 16 Taxation
163 Note 17 Retirement benefits
166 Note 18 Decommissioning and other provisions
167 Note 19 Financial instruments and other derivative contracts
172 Note 20 Share capital
172 Note 21 Share-based compensation plans and shares held in trust
173 Note 22 Other reserves
175 Note 23 Dividends
175 Note 24 Earnings per share
175 Note 25 Legal proceedings and other contingencies
176 Note 26 Employees
177 Note 27 Directors and Senior Management
177 Note 28 Auditor’s remuneration
178 Note 29 Business combinations
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136
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137
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consolidated Financial statements Continued
Consolidated Statement of Income
Revenue
Share of profit of joint ventures and associates
Interest and other income
Total revenue and other income
Purchases
Production and manufacturing expenses
Selling, distribution and administrative expenses
Research and development
Exploration
Depreciation, depletion and amortisation
Interest expense
Total expenditure
Income before taxation
Taxation charge/(credit)
Income for the period
Income attributable to non-controlling interest
Income attributable to Royal Dutch Shell plc shareholders
Basic earnings per share ($)
Diluted earnings per share ($)
Consolidated Statement of Comprehensive Income
Income for the period
Other comprehensive income/(loss), net of tax
Items that may be reclassified to income in later periods:
Currency translation differences
Unrealised gains/(losses) on securities
Cash flow hedging (losses)/gains
Net investment hedging losses
Share of other comprehensive income/(loss) of joint ventures and associates
Total
Items that are not reclassified to income in later periods:
Retirement benefits remeasurements
Other comprehensive income/(loss) for the period
Comprehensive income/(loss) for the period
Comprehensive income attributable to non-controlling interest
Notes
2017
2016
4
9
5
305,179
4,225
2,466
233,591
3,545
2,897
311,870
240,033
223,447
26,652
10,509
922
1,945
26,223
4,042
162,574
28,434
12,101
1,014
2,108
24,993
3,203
293,740
234,427
18,130
4,695
13,435
458
5,606
829
4,777
202
12,977
4,575
1.58
1.56
0.58
0.58
4
6
16
4
24
24
Notes
2017
2016
$ million
2015
264,960
3,527
3,669
272,156
194,644
28,095
11,956
1,093
5,719
26,714
1,888
270,109
2,047
(153)
2,200
261
1,939
0.31
0.30
$ million
2015
13,435
4,777
2,200
22
9
5,156
593
(552 )
—
170
5,367
604
5,971
19,406
578
703
(214 )
(617 )
(2,024 )
(28 )
(2,180 )
(3,817 )
(5,997 )
(1,220 )
154
(7,121)
(707)
61
—
(40)
(7,807 )
4,951
(2,856)
(656)
155
(811)
Comprehensive income/(loss) attributable to Royal Dutch Shell plc shareholders
18,828
(1,374 )
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
138
FinanciaL stateMents and suppLeMents SHELL ANNUAL REPORT AND FORM 20-F 2017
138
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Consolidated Balance Sheet
Notes
Dec 31, 2017
$ million
Dec 31, 2016
Decommissioning and other provisions
129,518
148,939
7
8
9
10
16
17
11
12
11
13
14
15
16
17
18
14
15
16
17
18
20
21
22
311,693
324,706
407,097
411,275
24,180
226,380
27,927
7,222
13,791
2,799
9,394
25,223
49,869
20,312
95,404
73,870
4,428
13,007
13,247
24,966
11,795
56,663
7,250
594
3,465
79,767
209,285
696
(917 )
16,932
177,645
194,356
3,456
197,812
407,097
23,967
236,098
33,255
5,952
14,425
1,456
9,553
21,775
45,664
19,130
86,569
82,992
6,925
15,274
14,130
29,618
9,484
53,417
6,685
455
3,784
73,825
222,764
683
(901)
11,298
175,566
186,646
1,865
188,511
411,275
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Joint ventures and associates
Investments in securities
Deferred tax
Retirement benefits
Trade and other receivables
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilities
Non-current liabilities
Debt
Trade and other payables
Deferred tax
Retirement benefits
Current liabilities
Debt
Trade and other payables
Taxes payable
Retirement benefits
Total liabilities
Equity
Share capital
Shares held in trust
Other reserves
Retained earnings
Non-controlling interest
Total equity
Total liabilities and equity
Signed on behalf of the Board
/s/ Jessica Uhl
Jessica Uhl
Chief Financial Officer
March 14, 2018
Decommissioning and other provisions
Equity attributable to Royal Dutch Shell plc shareholders
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
139
Consolidated Statement of Income
Revenue
Share of profit of joint ventures and associates
Interest and other income
Total revenue and other income
Purchases
Production and manufacturing expenses
Selling, distribution and administrative expenses
Research and development
Exploration
Depreciation, depletion and amortisation
Interest expense
Total expenditure
Income before taxation
Taxation charge/(credit)
Income for the period
Income attributable to non-controlling interest
Income attributable to Royal Dutch Shell plc shareholders
Basic earnings per share ($)
Diluted earnings per share ($)
Consolidated Statement of Comprehensive Income
Income for the period
Other comprehensive income/(loss), net of tax
Items that may be reclassified to income in later periods:
Currency translation differences
Unrealised gains/(losses) on securities
Cash flow hedging (losses)/gains
Net investment hedging losses
Total
Items that are not reclassified to income in later periods:
Retirement benefits remeasurements
Other comprehensive income/(loss) for the period
Comprehensive income/(loss) for the period
Comprehensive income attributable to non-controlling interest
Notes
2017
2016
305,179
233,591
264,960
4
6
26,223
24,993
4,042
3,203
293,740
234,427
270,109
4,225
2,466
3,545
2,897
311,870
240,033
223,447
162,574
26,652
10,509
922
1,945
28,434
12,101
1,014
2,108
18,130
4,695
13,435
458
5,606
829
4,777
202
12,977
4,575
1.58
1.56
0.58
0.58
4
9
5
16
4
24
24
22
Notes
2017
2016
13,435
4,777
5,156
593
(552 )
—
170
703
(214 )
(617 )
(2,024 )
(28 )
604
5,971
19,406
578
(3,817 )
(5,997 )
(1,220 )
154
5,367
(2,180 )
(7,807 )
$ million
2015
3,527
3,669
272,156
194,644
28,095
11,956
1,093
5,719
26,714
1,888
2,047
(153)
2,200
261
1,939
0.31
0.30
$ million
2015
2,200
(7,121)
(707)
61
—
(40)
4,951
(2,856)
(656)
155
(811)
Share of other comprehensive income/(loss) of joint ventures and associates
9
Comprehensive income/(loss) attributable to Royal Dutch Shell plc shareholders
18,828
(1,374 )
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
138
Consolidated Balance Sheet
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Joint ventures and associates
Investments in securities
Deferred tax
Retirement benefits
Trade and other receivables
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilities
Non-current liabilities
Debt
Trade and other payables
Deferred tax
Retirement benefits
Decommissioning and other provisions
Current liabilities
Debt
Trade and other payables
Taxes payable
Retirement benefits
Decommissioning and other provisions
Total liabilities
Equity
Share capital
Shares held in trust
Other reserves
Retained earnings
Equity attributable to Royal Dutch Shell plc shareholders
Non-controlling interest
Total equity
Total liabilities and equity
Signed on behalf of the Board
/s/ Jessica Uhl
Jessica Uhl
Chief Financial Officer
March 14, 2018
Notes
Dec 31, 2017
$ million
Dec 31, 2016
7
8
9
10
16
17
11
12
11
13
14
15
16
17
18
14
15
16
17
18
20
21
22
24,180
226,380
27,927
7,222
13,791
2,799
9,394
311,693
25,223
49,869
20,312
95,404
23,967
236,098
33,255
5,952
14,425
1,456
9,553
324,706
21,775
45,664
19,130
86,569
407,097
411,275
73,870
4,428
13,007
13,247
24,966
82,992
6,925
15,274
14,130
29,618
129,518
148,939
11,795
56,663
7,250
594
3,465
79,767
9,484
53,417
6,685
455
3,784
73,825
209,285
222,764
696
(917 )
16,932
177,645
194,356
3,456
197,812
407,097
683
(901)
11,298
175,566
186,646
1,865
188,511
411,275
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
139
SHELL ANNUAL REPORT AND FORM 20-F 2017 FinanciaL stateMents and suppLeMents
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consolidated Financial statements Continued
Consolidated Statement of Changes in Equity
$ million
Consolidated Statement of Cash Flows
Equity attributable to Royal Dutch Shell plc shareholders
Share capital
(see Note 20)
Shares
held in trust
(see Note 21)
Other
reserves
(see Note 22)
Retained
earnings
Non-
controlling
interest
Total
Total
equity
Notes
2017
13,435
At January 1, 2017
Comprehensive income for the period
Dividends paid (see Note 23)
Scrip dividends (see Note 23)
Share-based compensation
Other changes in non-controlling interest [A]
At December 31, 2017
At January 1, 2016
Comprehensive loss for the period
Dividends paid (see Note 23)
Scrip dividends (see Note 23)
Shares issued
Share-based compensation [B]
Other changes in non-controlling interest [A]
At December 31, 2016
At January 1, 2015
Comprehensive loss for the period
Dividends paid (see Note 23)
Scrip dividends (see Note 23)
Repurchases of shares
Share-based compensation
Other changes in non-controlling interest [A]
683
—
—
13
—
—
696
546
—
—
17
120
—
—
683
540
—
—
7
(1)
—
—
546
(901)
11,298
175,566
186,646 1,865
—
—
—
(16)
—
5,851 12,977 18,828
(15,628 ) (15,628 )
4,751 4,751
(294 )
—
(13)
(204)
—
(74)
53
188,511
578 19,406
(16,034)
(406 )
—
4,751
—
(294)
1,472
53 1,419
(917 ) 16,932 177,645 194,356 3,456 197,812
4,575
(584)
—
(5,949)
—
—
—
(17)
— 33,930
520
—
(17,186 ) 180,100 162,876 1,245 164,121
(1,220)
154
(15,139)
(180 )
—
5,282
— 34,050
—
344
1,073
646
(1,374 )
(14,959) (14,959 )
5,282 5,282
— 34,050
344
427
141
427
(317 )
—
(901) 11,298 175,566 186,646 1,865 188,511
(1,190)
—
—
—
—
606
—
(584)
(14,365 ) 186,981 171,966
(811 )
1,939
(11,972) (11,972 )
2,602 2,602
1
589
501
(2,750)
—
(7)
1
(65)
—
1
48
501
820 172,786
(656)
155
(12,089)
(117 )
—
2,602
—
1
—
589
888
387
At December 31, 2015
[A] Includes in 2017 the non-controlling interest of $1,286 million arising on the acquisition of a 50% controlling interest in Marathon Oil Canada Corporation (see Note 8). The remainder in 2017, and the
amounts in 2016 and 2015, mainly relate to public offerings of limited partner units in Shell Midstream Partners, L.P. The difference between the proceeds after tax and the increase in non-controlling interest,
measured by reference to the carrying amount of the entity’s net assets at the date of each transaction, was recognised in retained earnings.
[B] Includes a reclassification of $534 million between shares held in trust and other reserves, with no impact on total equity, in order to appropriately reflect the carrying amount of shares held in trust at cost.
(17,186 ) 180,100 162,876 1,245 164,121
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
140
FinanciaL stateMents and suppLeMents SHELL ANNUAL REPORT AND FORM 20-F 2017
140
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Income for the period
Adjustment for:
Current tax
Interest expense (net)
Depreciation, depletion and amortisation
Net gains on sale and revaluation of non-current assets and businesses
(Increase)/decrease in inventories
(Increase)/decrease in current receivables
Increase/(decrease) in current payables
Share of profit of joint ventures and associates
Dividends received from joint ventures and associates
Deferred tax, retirement benefits, decommissioning and other provisions
Other
Tax paid
Cash flow from operating activities
Capital expenditure
Acquisition of BG Group plc, net of cash and cash equivalents acquired
29
Investments in joint ventures and associates
Proceeds from sale of property, plant and equipment and businesses
Proceeds from sale of joint ventures and associates
Interest received
Other
Other debt:
New borrowings
Repayments
Interest paid
Change in non-controlling interest
Cash dividends paid to:
Royal Dutch Shell plc shareholders
Non-controlling interest
Repurchases of shares
Shares held in trust: net purchases and dividends received
Cash flow from financing activities
Currency translation differences relating to cash and cash equivalents
Increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at January 1
Cash and cash equivalents at December 31
[A] Includes $2,635 million from the sale of Shell’s interest in Woodside Petroleum Limited (see Note 10).
13
2016
4,777
2,731
2,752
24,993
(2,141)
(5,658)
2,038
(2,669)
(3,545)
3,820
(823)
(1,226)
(4,434)
20,615
(22,116)
(11,421)
(1,330)
2,072
1,565
470
(203)
18,144
(6,710)
(2,938)
1,110
(180)
—
(160)
(771)
(1,503)
(12,622)
31,752
19,130
$ million
2015
2,200
7,058
1,529
26,714
(3,460)
2,827
9,852
(7,158)
(3,527)
4,627
(5,827)
2,648
(7,673)
29,810
(26,131)
—
(896)
4,720
276
288
(664)
21,500
(6,023)
(1,742)
598
(117)
(409)
(39)
3,812
(1,070)
10,145
21,607
31,752
6,591
3,365
26,223
(1,640)
(2,079)
(1,686)
607
(4,225)
4,998
(3,918)
286
(6,307)
35,650
(20,845)
—
(595)
8,808
2,177
724
760
(11,720)
(3,550)
293
(406)
—
(717)
(27,086)
647
1,182
19,130
20,312
23
(10,877)
(9,677)
(9,370)
Cash flow from investing activities
Net decrease in debt with maturity period within three months
1,702[A]
(8,029)
(869)
(30,963)
(22,407)
(360)
(586)
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
141
Consolidated Statement of Changes in Equity
$ million
Consolidated Statement of Cash Flows
At January 1, 2017
Comprehensive income for the period
Dividends paid (see Note 23)
Scrip dividends (see Note 23)
Share-based compensation
Other changes in non-controlling interest [A]
Other changes in non-controlling interest [A]
At December 31, 2017
At January 1, 2016
Comprehensive loss for the period
Dividends paid (see Note 23)
Scrip dividends (see Note 23)
Shares issued
Share-based compensation [B]
At December 31, 2016
At January 1, 2015
Comprehensive loss for the period
Dividends paid (see Note 23)
Scrip dividends (see Note 23)
Repurchases of shares
Share-based compensation
Equity attributable to Royal Dutch Shell plc shareholders
Share capital
held in trust
Shares
Other
reserves
(see Note 20)
(see Note 21)
(see Note 22)
Total
interest
683
(901)
11,298
175,566
186,646 1,865
188,511
Retained
earnings
Non-
controlling
Total
equity
—
—
13
—
—
696
546
—
—
17
120
—
—
—
—
7
(1)
—
—
—
—
—
(16)
—
—
—
—
5,851 12,977 18,828
578 19,406
—
(15,628 ) (15,628 )
(406 )
(16,034)
(13)
4,751 4,751
(204)
—
(74)
53
(294 )
—
—
4,751
(294)
53 1,419
1,472
(917 ) 16,932 177,645 194,356 3,456 197,812
(584)
(17,186 ) 180,100 162,876 1,245 164,121
(5,949)
4,575
(1,374 )
154
(1,220)
—
(14,959) (14,959 )
(180 )
(15,139)
(17)
5,282 5,282
—
5,282
— 33,930
— 34,050
— 34,050
(317 )
—
520
—
141
427
344
427
—
344
646
1,073
683
(901) 11,298 175,566 186,646 1,865 188,511
540
(1,190)
(14,365 ) 186,981 171,966
820 172,786
—
—
—
—
606
—
(2,750)
1,939
(811 )
155
(656)
—
(11,972) (11,972 )
(117 )
(12,089)
(7)
1
(65)
—
2,602 2,602
1
48
501
1
589
501
—
—
—
387
2,602
1
589
888
Other changes in non-controlling interest [A]
At December 31, 2015
[A] Includes in 2017 the non-controlling interest of $1,286 million arising on the acquisition of a 50% controlling interest in Marathon Oil Canada Corporation (see Note 8). The remainder in 2017, and the
amounts in 2016 and 2015, mainly relate to public offerings of limited partner units in Shell Midstream Partners, L.P. The difference between the proceeds after tax and the increase in non-controlling interest,
measured by reference to the carrying amount of the entity’s net assets at the date of each transaction, was recognised in retained earnings.
[B] Includes a reclassification of $534 million between shares held in trust and other reserves, with no impact on total equity, in order to appropriately reflect the carrying amount of shares held in trust at cost.
546
(584)
(17,186 ) 180,100 162,876 1,245 164,121
Income for the period
Adjustment for:
Current tax
Interest expense (net)
Depreciation, depletion and amortisation
Net gains on sale and revaluation of non-current assets and businesses
(Increase)/decrease in inventories
(Increase)/decrease in current receivables
Increase/(decrease) in current payables
Share of profit of joint ventures and associates
Dividends received from joint ventures and associates
Deferred tax, retirement benefits, decommissioning and other provisions
Other
Tax paid
Cash flow from operating activities
Capital expenditure
Acquisition of BG Group plc, net of cash and cash equivalents acquired
Investments in joint ventures and associates
Proceeds from sale of property, plant and equipment and businesses
Proceeds from sale of joint ventures and associates
Interest received
Other
Cash flow from investing activities
Net decrease in debt with maturity period within three months
Other debt:
New borrowings
Repayments
Interest paid
Change in non-controlling interest
Cash dividends paid to:
Royal Dutch Shell plc shareholders
Non-controlling interest
Repurchases of shares
Shares held in trust: net purchases and dividends received
Cash flow from financing activities
Currency translation differences relating to cash and cash equivalents
Increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at January 1
Cash and cash equivalents at December 31
[A] Includes $2,635 million from the sale of Shell’s interest in Woodside Petroleum Limited (see Note 10).
13
Notes
2017
13,435
2016
4,777
2,731
2,752
24,993
(2,141)
(5,658)
2,038
(2,669)
(3,545)
3,820
(823)
(1,226)
(4,434)
20,615
(22,116)
(11,421)
(1,330)
2,072
1,565
470
(203)
(30,963)
(360)
18,144
(6,710)
(2,938)
1,110
(9,677)
(180)
—
(160)
(771)
(1,503)
(12,622)
31,752
19,130
$ million
2015
2,200
7,058
1,529
26,714
(3,460)
2,827
9,852
(7,158)
(3,527)
4,627
(5,827)
2,648
(7,673)
29,810
(26,131)
—
(896)
4,720
276
288
(664)
(22,407)
(586)
21,500
(6,023)
(1,742)
598
(9,370)
(117)
(409)
(39)
3,812
(1,070)
10,145
21,607
31,752
6,591
3,365
26,223
(1,640)
(2,079)
(1,686)
607
(4,225)
4,998
(3,918)
286
(6,307)
35,650
(20,845)
—
(595)
8,808
2,177
724
1,702[A]
(8,029)
(869)
760
(11,720)
(3,550)
293
(10,877)
(406)
—
(717)
(27,086)
647
1,182
19,130
20,312
29
23
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
140
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
141
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Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
1 BASIS OF PREPARATION
The Consolidated Financial Statements of Royal Dutch Shell plc (the Company) and its subsidiaries (collectively referred to as Shell) have been prepared in
accordance with the provisions of the Companies Act 2006 (the Act) and Article 4 of the IAS Regulation, and therefore in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European Union. As applied to Shell, there are no material differences from IFRS as issued by the
International Accounting Standards Board (IASB); therefore, the Consolidated Financial Statements have been prepared in accordance with IFRS as issued by
the IASB.
EXPLORATION COSTS
Hydrocarbon exploration costs are accounted for under the successful efforts method: exploration costs are recognised in income when incurred, except that
exploratory drilling costs, including in respect of operating leases, are included in property, plant and equipment pending determination of proved reserves.
Exploration costs capitalised in respect of exploration wells that are more than 12 months old are written off unless: (a) proved reserves are booked; or
(b) (i) they have found commercially producible quantities of reserves and (ii) they are subject to further exploration or appraisal activity in that either drilling of
additional exploratory wells is under way or firmly planned for the near future or other activities are being undertaken to sufficiently progress the assessing of
As described in the accounting policies in Note 2, the Consolidated Financial Statements have been prepared under the historical cost convention except for
certain items measured at fair value. Those accounting policies have been applied consistently in all periods.
The Consolidated Financial Statements were approved and authorised for issue by the Board of Directors on March 14, 2018.
2 SIGNIFICANT ACCOUNTING POLICIES, JUDGEMENTS AND ESTIMATES
This Note describes Shell’s significant accounting policies, which are those relevant to an understanding of the Consolidated Financial Statements, and
includes the measurement bases used in their preparation. It allows an understanding as to how transactions, other events and conditions are reported. It also
describes: (a) judgements, apart from those involving estimations, that management makes in applying the policies that have the most significant effect on the
amounts recognised in the Consolidated Financial Statements; and (b) estimations, including assumptions about the future, that management makes in applying
the policies. The sources of estimation uncertainty that have a significant risk of a material adjustment to the carrying amounts of assets and liabilities within the
next financial year are specifically identified as a significant estimate.
NATURE OF THE CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Financial Statements are presented in US dollars (dollars) and comprise the financial statements of the Company and its subsidiaries, being
those entities over which the Company has control, either directly or indirectly, through exposure or rights to their variable returns and the ability to affect those
returns through its power over the entities. Information about subsidiaries at December 31, 2017, can be found in Exhibit 8.
Subsidiaries are consolidated from the date on which control is obtained until the date that such control ceases, using consistent accounting policies. All inter-
company balances and transactions, including unrealised profits arising from such transactions, are eliminated. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset transferred. Non-controlling interest represents the proportion of income, other comprehensive
income and net assets in subsidiaries that is not attributable to the Company’s shareholders.
and the fair value less costs to sell.
Depreciation, depletion and amortisation
CURRENCY TRANSLATION
Foreign currency transactions are translated using the exchange rate at the dates of the transactions or valuation where items are re-measured. Foreign
exchange gains and losses resulting from the settlement of such transactions and from the translation at quarter-end exchange rates of monetary assets and
liabilities denominated in foreign currencies (including those in respect of inter-company balances unless related to loans of a long-term investment nature) are
recognised in income, except when recognised in other comprehensive income in respect of cash flow or net investment hedges, and presented within interest
and other income or within purchases where not related to financing. Share capital issued in currencies other than the dollar is translated at the exchange rate
at the date of issue.
On consolidation, assets and liabilities of non-dollar entities are translated to dollars at year-end rates of exchange, while their statements of income, other
comprehensive income and cash flows are translated at quarterly average rates. The resulting translation differences are recognised as currency translation
differences within other comprehensive income. Upon sale of all or part of an interest in, or upon liquidation of, an entity, the appropriate portion of cumulative
currency translation differences related to that entity are generally recognised in income.
REVENUE RECOGNITION
Revenue from sales of oil, natural gas, chemicals and other products is recognised at the fair value of consideration received or receivable, after deducting
sales taxes, excise duties and similar levies, when the significant risks and rewards of ownership have been transferred, which is when title passes to the
customer. For sales by Integrated Gas and Upstream operations, this generally occurs when product is physically transferred into a vessel, pipe or other
delivery mechanism; for sales by refining operations, it is either when product is placed onboard a vessel or offloaded from the vessel, depending on the
contractually agreed terms; and for sales of oil products and chemicals, it is either at the point of delivery or the point of receipt, depending on contractual
conditions.
reserves and the economic and operating viability of the project.
PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS
Recognition
Property, plant and equipment comprise assets owned by Shell, assets held by Shell under finance leases and assets operated by Shell as contractor in PSCs.
They include rights and concessions in respect of properties with proved reserves (proved properties) and with no proved reserves (unproved properties).
Property, plant and equipment, including expenditure on major inspections, and intangible assets are initially recognised in the Consolidated Balance Sheet at
cost where it is probable that they will generate future economic benefits. This includes capitalisation of decommissioning and restoration costs associated with
provisions for asset retirement (see “Provisions”), certain development costs (see “Research and development”) and the effects of associated cash flow hedges
(see “Financial instruments and other derivative contracts”) as applicable. The accounting for exploration costs is described separately (see “Exploration costs”).
Intangible assets include goodwill, liquefied natural gas (LNG) off-take and sales contracts obtained through acquisition, software costs and trademarks. Interest
is capitalised, as an increase in property, plant and equipment, on major capital projects during construction.
Property, plant and equipment and intangible assets are subsequently carried at cost less accumulated depreciation, depletion and amortisation (including any
impairment). Gains and losses on sale are determined by comparing the proceeds with the carrying amounts of assets sold and are recognised in income,
within interest and other income.
An asset is classified as held for sale if its carrying amount will be recovered principally through sale rather than through continuing use, which is when the sale
is highly probable and it is available for immediate sale. Assets classified as held for sale are measured at the lower of the carrying amount upon classification
Property, plant and equipment related to hydrocarbon production activities are in principle depreciated on a unit-of-production basis over the proved
developed reserves of the field concerned, other than assets whose useful lives differ from the lifetime of the field which are depreciated applying the straight-
line method. However, for certain Upstream assets, the use for this purpose of proved developed reserves, which are determined using the SEC-mandated
yearly average oil and gas prices, would result in depreciation charges for these assets which do not reflect the pattern in which their future economic benefits
are expected to be consumed as, for example, it may result in assets with long-term expected lives being depreciated in full within one year. Therefore, in
these instances, other approaches are applied to determine the reserves base for the purpose of calculating depreciation, such as using management’s
expectations of future oil and gas prices rather than yearly average prices, to provide a phasing of periodic depreciation charges that more appropriately
reflects the expected utilisation of the assets concerned.
Rights and concessions in respect of proved properties are depleted on the unit-of-production basis over the total proved reserves of the relevant area. Where
individually insignificant, unproved properties may be grouped and depreciated based on factors such as the average concession term and past experience of
recognising proved reserves.
Property, plant and equipment held under finance leases and capitalised LNG off-take and sales contracts are depreciated or amortised over the term of the
respective contract. Other property, plant and equipment and intangible assets are depreciated or amortised on a straight-line basis over their estimated useful
lives, except for goodwill, which is not amortised. They include refineries and chemical plants (for which the useful life is generally 20 years), retail service
stations (15 years), upgraders (30 years) and major inspection costs, which are depreciated over the estimated period before the next planned major
inspection (three to five years).
On classification of an asset as held for sale, depreciation ceases.
Estimates of the useful lives and residual values of property, plant and equipment and intangible assets are reviewed annually and adjusted if appropriate.
Revenue resulting from hydrocarbon production from properties in which Shell has an interest with partners in joint arrangements is recognised on the basis of
Shell’s working interest (entitlement method). Revenue resulting from the production of oil and natural gas under production-sharing contracts (PSCs) is
recognised for those amounts relating to Shell’s cost recoveries and Shell’s share of the remaining production. Gains and losses on derivative contracts and the
revenue and costs associated with other contracts that are classified as held for trading purposes are reported on a net basis in the Consolidated Statement of
Income. Purchases and sales of hydrocarbons under exchange contracts that are necessary to obtain or reposition feedstocks for refinery operations are
presented net in the Consolidated Statement of Income.
Impairment
value in use.
The carrying amount of goodwill is tested for impairment annually; in addition, assets other than unproved properties (see “Exploration costs”) are tested for
impairment whenever events or changes in circumstances indicate that the carrying amounts for those assets may not be recoverable. On classification as held
for sale, the carrying amounts of property, plant and equipment and intangible assets are also reviewed. If assets are determined to be impaired, the carrying
amounts of those assets are written down to their recoverable amount, which is the higher of fair value less costs to sell (see “Fair value measurements”) and
RESEARCH AND DEVELOPMENT
Development costs that are expected to generate probable future economic benefits are capitalised as intangible assets. All other research and development
expenditure is recognised in income as incurred.
Value in use is determined as the amount of estimated risk-adjusted discounted future cash flows. For this purpose, assets are grouped into cash-generating units
based on separately identifiable and largely independent cash inflows. Estimates of future cash flows used in the evaluation of impairment of assets are made
using management’s forecasts of commodity prices, market supply and demand, product margins and, in the case of exploration and production assets,
expected production volumes. The latter takes into account assessments of field and reservoir performance and includes expectations about both proved
reserves and volumes that are expected to constitute proved reserves in the future (unproved volumes), which are risk-weighted utilising geological, production,
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Notes to the Consolidated Financial Statements
1 BASIS OF PREPARATION
The Consolidated Financial Statements of Royal Dutch Shell plc (the Company) and its subsidiaries (collectively referred to as Shell) have been prepared in
accordance with the provisions of the Companies Act 2006 (the Act) and Article 4 of the IAS Regulation, and therefore in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European Union. As applied to Shell, there are no material differences from IFRS as issued by the
International Accounting Standards Board (IASB); therefore, the Consolidated Financial Statements have been prepared in accordance with IFRS as issued by
the IASB.
As described in the accounting policies in Note 2, the Consolidated Financial Statements have been prepared under the historical cost convention except for
certain items measured at fair value. Those accounting policies have been applied consistently in all periods.
The Consolidated Financial Statements were approved and authorised for issue by the Board of Directors on March 14, 2018.
2 SIGNIFICANT ACCOUNTING POLICIES, JUDGEMENTS AND ESTIMATES
This Note describes Shell’s significant accounting policies, which are those relevant to an understanding of the Consolidated Financial Statements, and
includes the measurement bases used in their preparation. It allows an understanding as to how transactions, other events and conditions are reported. It also
describes: (a) judgements, apart from those involving estimations, that management makes in applying the policies that have the most significant effect on the
amounts recognised in the Consolidated Financial Statements; and (b) estimations, including assumptions about the future, that management makes in applying
the policies. The sources of estimation uncertainty that have a significant risk of a material adjustment to the carrying amounts of assets and liabilities within the
next financial year are specifically identified as a significant estimate.
NATURE OF THE CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Financial Statements are presented in US dollars (dollars) and comprise the financial statements of the Company and its subsidiaries, being
those entities over which the Company has control, either directly or indirectly, through exposure or rights to their variable returns and the ability to affect those
returns through its power over the entities. Information about subsidiaries at December 31, 2017, can be found in Exhibit 8.
Subsidiaries are consolidated from the date on which control is obtained until the date that such control ceases, using consistent accounting policies. All inter-
company balances and transactions, including unrealised profits arising from such transactions, are eliminated. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset transferred. Non-controlling interest represents the proportion of income, other comprehensive
income and net assets in subsidiaries that is not attributable to the Company’s shareholders.
CURRENCY TRANSLATION
Foreign currency transactions are translated using the exchange rate at the dates of the transactions or valuation where items are re-measured. Foreign
exchange gains and losses resulting from the settlement of such transactions and from the translation at quarter-end exchange rates of monetary assets and
liabilities denominated in foreign currencies (including those in respect of inter-company balances unless related to loans of a long-term investment nature) are
recognised in income, except when recognised in other comprehensive income in respect of cash flow or net investment hedges, and presented within interest
and other income or within purchases where not related to financing. Share capital issued in currencies other than the dollar is translated at the exchange rate
at the date of issue.
On consolidation, assets and liabilities of non-dollar entities are translated to dollars at year-end rates of exchange, while their statements of income, other
comprehensive income and cash flows are translated at quarterly average rates. The resulting translation differences are recognised as currency translation
differences within other comprehensive income. Upon sale of all or part of an interest in, or upon liquidation of, an entity, the appropriate portion of cumulative
currency translation differences related to that entity are generally recognised in income.
REVENUE RECOGNITION
Revenue from sales of oil, natural gas, chemicals and other products is recognised at the fair value of consideration received or receivable, after deducting
sales taxes, excise duties and similar levies, when the significant risks and rewards of ownership have been transferred, which is when title passes to the
customer. For sales by Integrated Gas and Upstream operations, this generally occurs when product is physically transferred into a vessel, pipe or other
delivery mechanism; for sales by refining operations, it is either when product is placed onboard a vessel or offloaded from the vessel, depending on the
contractually agreed terms; and for sales of oil products and chemicals, it is either at the point of delivery or the point of receipt, depending on contractual
conditions.
Revenue resulting from hydrocarbon production from properties in which Shell has an interest with partners in joint arrangements is recognised on the basis of
Shell’s working interest (entitlement method). Revenue resulting from the production of oil and natural gas under production-sharing contracts (PSCs) is
recognised for those amounts relating to Shell’s cost recoveries and Shell’s share of the remaining production. Gains and losses on derivative contracts and the
revenue and costs associated with other contracts that are classified as held for trading purposes are reported on a net basis in the Consolidated Statement of
Income. Purchases and sales of hydrocarbons under exchange contracts that are necessary to obtain or reposition feedstocks for refinery operations are
presented net in the Consolidated Statement of Income.
RESEARCH AND DEVELOPMENT
expenditure is recognised in income as incurred.
Development costs that are expected to generate probable future economic benefits are capitalised as intangible assets. All other research and development
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EXPLORATION COSTS
Hydrocarbon exploration costs are accounted for under the successful efforts method: exploration costs are recognised in income when incurred, except that
exploratory drilling costs, including in respect of operating leases, are included in property, plant and equipment pending determination of proved reserves.
Exploration costs capitalised in respect of exploration wells that are more than 12 months old are written off unless: (a) proved reserves are booked; or
(b) (i) they have found commercially producible quantities of reserves and (ii) they are subject to further exploration or appraisal activity in that either drilling of
additional exploratory wells is under way or firmly planned for the near future or other activities are being undertaken to sufficiently progress the assessing of
reserves and the economic and operating viability of the project.
PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS
Recognition
Property, plant and equipment comprise assets owned by Shell, assets held by Shell under finance leases and assets operated by Shell as contractor in PSCs.
They include rights and concessions in respect of properties with proved reserves (proved properties) and with no proved reserves (unproved properties).
Property, plant and equipment, including expenditure on major inspections, and intangible assets are initially recognised in the Consolidated Balance Sheet at
cost where it is probable that they will generate future economic benefits. This includes capitalisation of decommissioning and restoration costs associated with
provisions for asset retirement (see “Provisions”), certain development costs (see “Research and development”) and the effects of associated cash flow hedges
(see “Financial instruments and other derivative contracts”) as applicable. The accounting for exploration costs is described separately (see “Exploration costs”).
Intangible assets include goodwill, liquefied natural gas (LNG) off-take and sales contracts obtained through acquisition, software costs and trademarks. Interest
is capitalised, as an increase in property, plant and equipment, on major capital projects during construction.
Property, plant and equipment and intangible assets are subsequently carried at cost less accumulated depreciation, depletion and amortisation (including any
impairment). Gains and losses on sale are determined by comparing the proceeds with the carrying amounts of assets sold and are recognised in income,
within interest and other income.
An asset is classified as held for sale if its carrying amount will be recovered principally through sale rather than through continuing use, which is when the sale
is highly probable and it is available for immediate sale. Assets classified as held for sale are measured at the lower of the carrying amount upon classification
and the fair value less costs to sell.
Depreciation, depletion and amortisation
Property, plant and equipment related to hydrocarbon production activities are in principle depreciated on a unit-of-production basis over the proved
developed reserves of the field concerned, other than assets whose useful lives differ from the lifetime of the field which are depreciated applying the straight-
line method. However, for certain Upstream assets, the use for this purpose of proved developed reserves, which are determined using the SEC-mandated
yearly average oil and gas prices, would result in depreciation charges for these assets which do not reflect the pattern in which their future economic benefits
are expected to be consumed as, for example, it may result in assets with long-term expected lives being depreciated in full within one year. Therefore, in
these instances, other approaches are applied to determine the reserves base for the purpose of calculating depreciation, such as using management’s
expectations of future oil and gas prices rather than yearly average prices, to provide a phasing of periodic depreciation charges that more appropriately
reflects the expected utilisation of the assets concerned.
Rights and concessions in respect of proved properties are depleted on the unit-of-production basis over the total proved reserves of the relevant area. Where
individually insignificant, unproved properties may be grouped and depreciated based on factors such as the average concession term and past experience of
recognising proved reserves.
Property, plant and equipment held under finance leases and capitalised LNG off-take and sales contracts are depreciated or amortised over the term of the
respective contract. Other property, plant and equipment and intangible assets are depreciated or amortised on a straight-line basis over their estimated useful
lives, except for goodwill, which is not amortised. They include refineries and chemical plants (for which the useful life is generally 20 years), retail service
stations (15 years), upgraders (30 years) and major inspection costs, which are depreciated over the estimated period before the next planned major
inspection (three to five years).
On classification of an asset as held for sale, depreciation ceases.
Estimates of the useful lives and residual values of property, plant and equipment and intangible assets are reviewed annually and adjusted if appropriate.
Impairment
The carrying amount of goodwill is tested for impairment annually; in addition, assets other than unproved properties (see “Exploration costs”) are tested for
impairment whenever events or changes in circumstances indicate that the carrying amounts for those assets may not be recoverable. On classification as held
for sale, the carrying amounts of property, plant and equipment and intangible assets are also reviewed. If assets are determined to be impaired, the carrying
amounts of those assets are written down to their recoverable amount, which is the higher of fair value less costs to sell (see “Fair value measurements”) and
value in use.
Value in use is determined as the amount of estimated risk-adjusted discounted future cash flows. For this purpose, assets are grouped into cash-generating units
based on separately identifiable and largely independent cash inflows. Estimates of future cash flows used in the evaluation of impairment of assets are made
using management’s forecasts of commodity prices, market supply and demand, product margins and, in the case of exploration and production assets,
expected production volumes. The latter takes into account assessments of field and reservoir performance and includes expectations about both proved
reserves and volumes that are expected to constitute proved reserves in the future (unproved volumes), which are risk-weighted utilising geological, production,
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[Note 2 continued]
recovery and economic projections. Cash flow estimates are risk-adjusted to reflect local conditions as appropriate and discounted at a rate based on Shell’s
marginal cost of debt.
JOINT ARRANGEMENTS AND ASSOCIATES
Impairments, except those related to goodwill, are reversed as applicable to the extent that the events or circumstances that triggered the original impairment
have changed.
Impairment losses and reversals are reported within depreciation, depletion and amortisation.
Judgements and estimates
Proved oil and gas reserves
Unit-of-production depreciation, depletion and amortisation charges are principally measured based on management’s estimates of proved developed oil and
gas reserves. Also, exploration drilling costs are capitalised pending the results of further exploration or appraisal activity, which may take several years to
complete and before any related proved reserves can be booked.
Proved reserves are estimated by reference to available geological and engineering data and only include volumes for which access to market is assured with
reasonable certainty. Yearly average oil and gas prices are applied in the determination of proved reserves. Estimates of proved reserves are inherently
imprecise, require the application of judgement and are subject to regular revision, either upward or downward, based on new information such as from the
drilling of additional wells, observation of long-term reservoir performance under producing conditions and changes in economic factors, including product
prices, contract terms or development plans.
Changes to estimates of proved developed reserves affect prospectively the amounts of depreciation, depletion and amortisation charged and, consequently,
the carrying amounts of exploration and production assets. It is expected, however, that in the normal course of business the diversity of the asset portfolio will
limit the effect of such revisions. The outcome of, or assessment of plans for, exploration or appraisal activity may result in the related capitalised exploration
drilling costs being recognised in income in that period.
Judgement is involved in determining when to use an alternative reserves base in order to appropriately reflect the expected utilisation of the assets concerned
(see "Depreciation, depletion and amortisation").
Information about the carrying amounts of exploration and production assets and the amounts charged to income, including depreciation, depletion and
amortisation and the quantitative impact of the use of an alternative reserve base, is presented in Note 8.
Impairment
For the purposes of determining whether impairment of assets has occurred, and the extent of any impairment loss or its reversal, the key assumptions management
uses in estimating risk-adjusted future cash flows for value-in-use measures are future oil and gas prices, expected production volumes and refining margins
appropriate to the local circumstances and environment. These assumptions and the judgements of management that are based on them are subject to change as
new information becomes available. Changes in economic conditions can also affect the rate used to discount future cash flow estimates.
The determination of cash-generating units requires judgement. Changes in this determination could impact the calculation of value in use and therefore the
conclusion on the recoverability of assets’ carrying amounts when performing an impairment test.
Judgement, which is subject to change as new information becomes available, can be required in determining when an asset is classified as held for sale.
A change in that judgement could result in impairment charges affecting income, depending on whether classification requires a write down of the asset to its
fair value less costs to sell.
Significant estimate
Future price assumptions, presented in Note 8, tend to be stable because management does not consider short-term increases or decreases in prices as being
indicative of long-term levels, but they are nonetheless subject to change. Expected production volumes, which comprise proved reserves and unproved
volumes, are used for impairment testing because management believes this to be the most appropriate indicator of expected future cash flows. As discussed in
“Proved oil and gas reserves” above, reserves estimates are inherently imprecise. Furthermore, projections about unproved volumes are based on information
that is necessarily less robust than that available for mature reservoirs. Due to the nature and geographical spread of the business activity in which those assets
are used, it is typically not practicable to estimate the likelihood or extent of impairments under different sets of assumptions for Shell overall.
Changes in assumptions could affect the carrying amounts of assets, and any impairment losses and reversals will affect income.
Information about the carrying amounts of assets and impairments is presented in Notes 7 and 8.
LEASES
Agreements under which payments are made to owners in return for the right to use an asset for a period are accounted for as leases. Leases that transfer
substantially all the risks and rewards of ownership are recognised at the commencement of the lease term as finance leases within property, plant and
equipment and debt at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Finance lease payments are
apportioned between interest expense and repayments of debt. All other leases are classified as operating leases and the cost is recognised in income on a
straight-line basis, except where capitalised as exploration drilling costs (see "Exploration costs").
Arrangements under which Shell has contractually agreed to share control (see “Nature of the Consolidated Financial Statements” for the definition of control)
with another party or parties are joint ventures where the parties have rights to the net assets of the arrangement, or joint operations where the parties have
rights to the assets and obligations for the liabilities relating to the arrangement. Investments in entities over which Shell has the right to exercise significant
influence but neither control nor joint control are classified as associates. Information about incorporated joint arrangements and associates at December 31,
2017, can be found in Exhibit 8.
Investments in joint ventures and associates are accounted for using the equity method, under which the investment is initially recognised at cost and
subsequently adjusted for the Shell share of post-acquisition income less dividends received and the Shell share of other comprehensive income and other
movements in equity, together with any loans of a long-term investment nature. Where necessary, adjustments are made to the financial statements of joint
ventures and associates to bring the accounting policies used into line with those of Shell. In an exchange of assets and liabilities for an interest in a joint
venture, the non-Shell share of any excess of the fair value of the assets and liabilities transferred over the pre-exchange carrying amounts is recognised in
income. Unrealised gains on other transactions between Shell and its joint ventures and associates are eliminated to the extent of Shell’s interest in them;
unrealised losses are treated similarly but may also result in an assessment of whether the asset transferred is impaired.
Shell recognises its assets and liabilities relating to its interests in joint operations, including its share of assets held jointly and liabilities incurred jointly with
other partners.
INVENTORIES
TAXATION
Inventories are stated at cost or net realisable value, whichever is lower. Cost comprises direct purchase costs (including transportation), and associated costs
incurred in bringing inventories to their present condition and location, and is determined using the first-in, first-out (FIFO) method for oil, gas and chemicals and
by the weighted average cost method for materials.
The charge for current tax is calculated based on the income reported by the Company and its subsidiaries, as adjusted for items that are non-taxable or
disallowed and using rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is determined, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying
amounts in the Consolidated Balance Sheet and on unused tax losses and credits carried forward.
Deferred tax assets and liabilities are calculated using the enacted or substantively enacted rates that are expected to apply when an asset is realised or a
liability is settled. They are not recognised where they arise on the initial recognition of goodwill or of an asset or liability in a transaction (other than in a
business combination) that, at the time of the transaction, affects neither accounting nor taxable profit, or in respect of taxable temporary differences associated
with subsidiaries, joint ventures and associates where the reversal of the respective temporary difference can be controlled by Shell and it is probable that it
will not reverse in the foreseeable future.
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the deductible temporary
differences, unused tax losses and credits carried forward can be utilised.
Income taxes are recognised in income except when they relate to items recognised in other comprehensive income, in which case the tax is recognised in
other comprehensive income. Income tax assets and liabilities are presented separately in the Consolidated Balance Sheet except where there is a right of
offset within fiscal jurisdictions and an intention to settle such balances on a net basis.
Judgements and estimates
Tax liabilities are recognised when it is considered probable that there will be a future outflow of funds to a taxing authority. In such cases, provision is made
for the amount that is expected to be settled, where this can be reasonably estimated. A change in estimate of the likelihood of a future outflow and/or in the
expected amount to be settled would be recognised in income in the period in which the change occurs. This requires the application of judgement as to the
ultimate outcome, which can change over time depending on facts and circumstances. Judgements mainly relate to transfer pricing, including inter-company
financing, interpretation of PSCs, expenditure deductible for tax purposes and taxation arising on disposal.
Deferred tax assets are recognised only to the extent it is considered probable that those assets will be recoverable. This involves an assessment of when those
assets are likely to reverse, and a judgement as to whether or not there will be sufficient taxable profits available to offset the assets when they do reverse. This
requires assumptions regarding future profitability and is therefore inherently uncertain. To the extent assumptions regarding future profitability change, there can
be an increase or decrease in the amounts recognised in respect of deferred tax assets as well as in the amounts recognised in income in the period in which
the change occurs.
On December 22, 2017, the US Tax Cuts and Jobs Act (the Act) was enacted. The effects of the Act have been recognised in 2017, as presented in
Note 16, based on current interpretation of the Act and related assumptions. These may be subject to change, for example in the event that further
interpretative guidance on the Act is issued.
Taxation information, including charges and deferred tax assets and liabilities, is presented in Note 16. Income taxes include taxes at higher rates levied on
income from certain Integrated Gas and Upstream activities.
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recovery and economic projections. Cash flow estimates are risk-adjusted to reflect local conditions as appropriate and discounted at a rate based on Shell’s
Impairments, except those related to goodwill, are reversed as applicable to the extent that the events or circumstances that triggered the original impairment
Impairment losses and reversals are reported within depreciation, depletion and amortisation.
marginal cost of debt.
have changed.
Judgements and estimates
Proved oil and gas reserves
Unit-of-production depreciation, depletion and amortisation charges are principally measured based on management’s estimates of proved developed oil and
gas reserves. Also, exploration drilling costs are capitalised pending the results of further exploration or appraisal activity, which may take several years to
complete and before any related proved reserves can be booked.
Proved reserves are estimated by reference to available geological and engineering data and only include volumes for which access to market is assured with
reasonable certainty. Yearly average oil and gas prices are applied in the determination of proved reserves. Estimates of proved reserves are inherently
imprecise, require the application of judgement and are subject to regular revision, either upward or downward, based on new information such as from the
drilling of additional wells, observation of long-term reservoir performance under producing conditions and changes in economic factors, including product
prices, contract terms or development plans.
Changes to estimates of proved developed reserves affect prospectively the amounts of depreciation, depletion and amortisation charged and, consequently,
the carrying amounts of exploration and production assets. It is expected, however, that in the normal course of business the diversity of the asset portfolio will
limit the effect of such revisions. The outcome of, or assessment of plans for, exploration or appraisal activity may result in the related capitalised exploration
drilling costs being recognised in income in that period.
Judgement is involved in determining when to use an alternative reserves base in order to appropriately reflect the expected utilisation of the assets concerned
(see "Depreciation, depletion and amortisation").
Information about the carrying amounts of exploration and production assets and the amounts charged to income, including depreciation, depletion and
amortisation and the quantitative impact of the use of an alternative reserve base, is presented in Note 8.
Impairment
For the purposes of determining whether impairment of assets has occurred, and the extent of any impairment loss or its reversal, the key assumptions management
uses in estimating risk-adjusted future cash flows for value-in-use measures are future oil and gas prices, expected production volumes and refining margins
appropriate to the local circumstances and environment. These assumptions and the judgements of management that are based on them are subject to change as
new information becomes available. Changes in economic conditions can also affect the rate used to discount future cash flow estimates.
The determination of cash-generating units requires judgement. Changes in this determination could impact the calculation of value in use and therefore the
conclusion on the recoverability of assets’ carrying amounts when performing an impairment test.
Judgement, which is subject to change as new information becomes available, can be required in determining when an asset is classified as held for sale.
A change in that judgement could result in impairment charges affecting income, depending on whether classification requires a write down of the asset to its
fair value less costs to sell.
Significant estimate
Future price assumptions, presented in Note 8, tend to be stable because management does not consider short-term increases or decreases in prices as being
indicative of long-term levels, but they are nonetheless subject to change. Expected production volumes, which comprise proved reserves and unproved
volumes, are used for impairment testing because management believes this to be the most appropriate indicator of expected future cash flows. As discussed in
“Proved oil and gas reserves” above, reserves estimates are inherently imprecise. Furthermore, projections about unproved volumes are based on information
that is necessarily less robust than that available for mature reservoirs. Due to the nature and geographical spread of the business activity in which those assets
are used, it is typically not practicable to estimate the likelihood or extent of impairments under different sets of assumptions for Shell overall.
Changes in assumptions could affect the carrying amounts of assets, and any impairment losses and reversals will affect income.
Information about the carrying amounts of assets and impairments is presented in Notes 7 and 8.
LEASES
Agreements under which payments are made to owners in return for the right to use an asset for a period are accounted for as leases. Leases that transfer
substantially all the risks and rewards of ownership are recognised at the commencement of the lease term as finance leases within property, plant and
equipment and debt at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Finance lease payments are
apportioned between interest expense and repayments of debt. All other leases are classified as operating leases and the cost is recognised in income on a
straight-line basis, except where capitalised as exploration drilling costs (see "Exploration costs").
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JOINT ARRANGEMENTS AND ASSOCIATES
Arrangements under which Shell has contractually agreed to share control (see “Nature of the Consolidated Financial Statements” for the definition of control)
with another party or parties are joint ventures where the parties have rights to the net assets of the arrangement, or joint operations where the parties have
rights to the assets and obligations for the liabilities relating to the arrangement. Investments in entities over which Shell has the right to exercise significant
influence but neither control nor joint control are classified as associates. Information about incorporated joint arrangements and associates at December 31,
2017, can be found in Exhibit 8.
Investments in joint ventures and associates are accounted for using the equity method, under which the investment is initially recognised at cost and
subsequently adjusted for the Shell share of post-acquisition income less dividends received and the Shell share of other comprehensive income and other
movements in equity, together with any loans of a long-term investment nature. Where necessary, adjustments are made to the financial statements of joint
ventures and associates to bring the accounting policies used into line with those of Shell. In an exchange of assets and liabilities for an interest in a joint
venture, the non-Shell share of any excess of the fair value of the assets and liabilities transferred over the pre-exchange carrying amounts is recognised in
income. Unrealised gains on other transactions between Shell and its joint ventures and associates are eliminated to the extent of Shell’s interest in them;
unrealised losses are treated similarly but may also result in an assessment of whether the asset transferred is impaired.
Shell recognises its assets and liabilities relating to its interests in joint operations, including its share of assets held jointly and liabilities incurred jointly with
other partners.
INVENTORIES
Inventories are stated at cost or net realisable value, whichever is lower. Cost comprises direct purchase costs (including transportation), and associated costs
incurred in bringing inventories to their present condition and location, and is determined using the first-in, first-out (FIFO) method for oil, gas and chemicals and
by the weighted average cost method for materials.
TAXATION
The charge for current tax is calculated based on the income reported by the Company and its subsidiaries, as adjusted for items that are non-taxable or
disallowed and using rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is determined, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying
amounts in the Consolidated Balance Sheet and on unused tax losses and credits carried forward.
Deferred tax assets and liabilities are calculated using the enacted or substantively enacted rates that are expected to apply when an asset is realised or a
liability is settled. They are not recognised where they arise on the initial recognition of goodwill or of an asset or liability in a transaction (other than in a
business combination) that, at the time of the transaction, affects neither accounting nor taxable profit, or in respect of taxable temporary differences associated
with subsidiaries, joint ventures and associates where the reversal of the respective temporary difference can be controlled by Shell and it is probable that it
will not reverse in the foreseeable future.
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the deductible temporary
differences, unused tax losses and credits carried forward can be utilised.
Income taxes are recognised in income except when they relate to items recognised in other comprehensive income, in which case the tax is recognised in
other comprehensive income. Income tax assets and liabilities are presented separately in the Consolidated Balance Sheet except where there is a right of
offset within fiscal jurisdictions and an intention to settle such balances on a net basis.
Judgements and estimates
Tax liabilities are recognised when it is considered probable that there will be a future outflow of funds to a taxing authority. In such cases, provision is made
for the amount that is expected to be settled, where this can be reasonably estimated. A change in estimate of the likelihood of a future outflow and/or in the
expected amount to be settled would be recognised in income in the period in which the change occurs. This requires the application of judgement as to the
ultimate outcome, which can change over time depending on facts and circumstances. Judgements mainly relate to transfer pricing, including inter-company
financing, interpretation of PSCs, expenditure deductible for tax purposes and taxation arising on disposal.
Deferred tax assets are recognised only to the extent it is considered probable that those assets will be recoverable. This involves an assessment of when those
assets are likely to reverse, and a judgement as to whether or not there will be sufficient taxable profits available to offset the assets when they do reverse. This
requires assumptions regarding future profitability and is therefore inherently uncertain. To the extent assumptions regarding future profitability change, there can
be an increase or decrease in the amounts recognised in respect of deferred tax assets as well as in the amounts recognised in income in the period in which
the change occurs.
On December 22, 2017, the US Tax Cuts and Jobs Act (the Act) was enacted. The effects of the Act have been recognised in 2017, as presented in
Note 16, based on current interpretation of the Act and related assumptions. These may be subject to change, for example in the event that further
interpretative guidance on the Act is issued.
Taxation information, including charges and deferred tax assets and liabilities, is presented in Note 16. Income taxes include taxes at higher rates levied on
income from certain Integrated Gas and Upstream activities.
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RETIREMENT BENEFITS
Benefits in the form of retirement pensions and healthcare and life insurance are provided to certain employees and retirees under defined benefit and defined
contribution plans.
FINANCIAL INSTRUMENTS AND OTHER DERIVATIVE CONTRACTS
Financial assets and liabilities are presented separately in the Consolidated Balance Sheet except where there is a legally enforceable right of offset and Shell
has the intention to settle on a net basis or realise the asset and settle the liability simultaneously.
Obligations under defined benefit plans are calculated annually by independent actuaries using the projected unit credit method, which takes into account
employees’ years of service and, for pensions, average or final pensionable remuneration, and are discounted to their present value using interest rates of high-
quality corporate bonds denominated in the currency in which the benefits will be paid and of a duration consistent with the plan obligations. Where plans
are funded, payments are made to independently managed trusts; assets held by those trusts are measured at fair value. Defined benefit plan surpluses are
recognised as assets to the extent that they are considered recoverable, which is generally by way of a refund or lower future employer contributions.
The amounts recognised in income in respect of defined benefit plans mainly comprise service cost and net interest. Service cost comprises principally the
increase in the present value of the obligation for benefits resulting from employee service during the period (current service cost) and also amounts relating to
past service and settlements or amendments of plans. Plan amendments are changes to benefits and are generally recognised when all legal and regulatory
approvals have been received and the effects have been communicated to members. Net interest is calculated using the net defined benefit liability or asset
matched against the discount rate yield curve at the beginning of each year for each plan. Remeasurements of the net defined benefit liability or asset resulting
from actuarial gains and losses and the return on plan assets excluding the amount recognised in income are recognised in other comprehensive income.
For defined contribution plans, pension expense represents the amount of employer contributions payable for the period.
Significant judgements and estimates
Defined benefit obligations and plan assets, and the resulting liabilities and assets that are recognised, are subject to significant volatility as actuarial
assumptions regarding future outcomes and market values change. Substantial judgement is required in determining the actuarial assumptions, which vary for
the different plans to reflect local conditions but are determined under a common process in consultation with independent actuaries. The assumptions applied
in respect of each plan are reviewed annually and adjusted where necessary to reflect changes in experience and actuarial recommendations.
Information about the amounts reported in respect of defined benefit pension plans, assumptions applicable to the principal plans and their sensitivity to
changes are presented in Note 17.
PROVISIONS
Provisions are recognised at the balance sheet date at management’s best estimate of the expenditure required to settle the present obligation. Non-current
amounts are discounted at a rate intended to reflect the time value of money. The carrying amounts of provisions are regularly reviewed and adjusted for new
facts or changes in law or technology.
Provisions for decommissioning and restoration costs, which arise principally in connection with hydrocarbon production facilities and pipelines, are measured
on the basis of current requirements, technology and price levels; the present value is calculated using amounts discounted over the useful economic life of the
assets. The liability is recognised (together with a corresponding amount as part of the related property, plant and equipment) once an obligation crystallises in
the period when a reasonable estimate can be made. The effects of changes resulting from revisions to the timing or the amount of the original estimate of the
provision are reflected on a prospective basis, generally by adjustment to the carrying amount of the related property, plant and equipment. However, where
there is no related asset, or the change reduces the carrying amount to nil, the effect, or the amount in excess of the reduction in the related asset to nil, is
recognised in income.
Redundancy provisions are recognised when a detailed formal plan identifies the business or part of the business concerned, the location and number of
employees affected, a detailed estimate of the associated costs and an appropriate timeline, and the employees affected have been notified of the plan's
main features.
Other provisions are recognised in income in the period in which an obligation arises and the amount can be reasonably estimated. Provisions are measured
based on current legal requirements and existing technology where applicable. Recognition of any joint and several liability is based on management’s best
estimate of the final pro rata share of the liability. Provisions are determined independently of expected insurance recoveries. Recoveries are recognised when
virtually certain of realisation.
Significant estimates
Estimates of provisions for future decommissioning and restoration costs are recognised are based on current legal and constructive requirements, technology
and price levels. Because actual outflows can differ from estimates due to changes in laws, regulations, public expectations, technology, prices and
conditions, and can take place many years in the future, the carrying amounts of provisions are regularly reviewed and adjusted to take account of such
changes. The discount rate applied is reviewed annually.
Information about decommissioning and restoration provisions is presented in Note 18.
Financial assets
Investments in securities
income.
receivable.
Cash and cash equivalents
Trade receivables
Significant estimate
Financial liabilities
Investments in securities (also referred to as “securities”) comprise equity and debt securities classified on initial recognition as available-for-sale and are carried
at fair value, except where their fair value cannot be measured reliably, in which case they are carried at cost, less any impairment. Unrealised holding gains
and losses other than impairments are recognised in other comprehensive income, except for translation differences arising on foreign currency debt securities,
which are recognised in income. On maturity or sale, net gains and losses previously deferred in accumulated other comprehensive income are recognised in
Interest income on debt securities is recognised in income using the effective interest method. Dividends on equity securities are recognised in income when
Cash and cash equivalents comprise cash at bank and in hand, including offsetting bank overdrafts, short-term bank deposits, money market funds, reverse
repos and similar instruments that have a maturity of three months or less at the date of purchase.
Trade receivables are recognised initially at fair value based on amounts exchanged and subsequently at amortised cost less any impairment.
Receivables from governments may be large and subject to disputes. Recoverability is subject to uncertainty as to the settlement of amounts including tax,
royalty, cost recovery and associated interest. Information about government receivables is presented in Note 11.
Debt and trade payables are recognised initially at fair value based on amounts exchanged, net of transaction costs, and subsequently at amortised cost
except for fixed rate debt subject to fair value hedging which is remeasured for the hedged risk (see below). Interest expense on debt is accounted for using
the effective interest method and, other than interest capitalised, is recognised in income.
Derivative contracts and hedges
Derivative contracts are used in the management of interest rate risk, foreign exchange risk and commodity price risk, and in the management of foreign
currency cash balances. These contracts are recognised at fair value.
Certain derivative contracts qualify and are designated either as a “fair value” hedge of the change in fair value of a recognised asset or liability or an
unrecognised firm commitment or as a “cash flow” hedge of the change in cash flows to be received or paid relating to a recognised asset or liability or a
highly probable forecast transaction.
A change in the fair value of a hedging instrument designated as a fair value hedge is recognised in income, together with the consequential adjustment to the
carrying amount of the hedged item. The effective portion of a change in fair value of a derivative contract designated as a cash flow hedge is recognised in
other comprehensive income until the hedged transaction occurs; any ineffective portion is recognised in income. Where the hedged item is a non-financial
asset or liability, the amount in accumulated other comprehensive income is transferred to the initial carrying amount of the asset or liability (reclassified to the
balance sheet); for other hedged items, the amount in accumulated other comprehensive income is reclassified to income when the hedged transaction affects
income.
The effective portion of a change due to retranslation at quarter-end exchange rates in the carrying amount of debt and the principal amount of derivative
contracts used to hedge net investments in foreign operations is recognised in other comprehensive income until the related investment is sold or liquidated; any
ineffective portion is recognised in income.
All relationships between hedging instruments and hedged items are documented, as well as risk management objectives and strategies for undertaking hedge
transactions. The effectiveness of hedges is also continually assessed and hedge accounting is discontinued when a hedge ceases to be highly effective.
Gains and losses on derivative contracts not qualifying and designated as hedges, including forward sale and purchase contracts for commodities in trading
operations that may be settled by the physical delivery or receipt of the commodity, are recognised in income.
Unless designated as hedging instruments, contracts to sell or purchase non-financial items that can be settled net as if the contracts were financial instruments
and that do not meet expected own use requirements (typically, forward sale and purchase contracts for commodities in trading operations), and contracts that
are or contain written options, are recognised at fair value; associated gains and losses are recognised in income.
Derivatives embedded within contracts that are not already required to be recognised at fair value, and that are not closely related to the host contract in terms
of economic characteristics and risks, are separated from their host contract and recognised at fair value; associated gains and losses are recognised in
income.
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RETIREMENT BENEFITS
contribution plans.
Benefits in the form of retirement pensions and healthcare and life insurance are provided to certain employees and retirees under defined benefit and defined
Obligations under defined benefit plans are calculated annually by independent actuaries using the projected unit credit method, which takes into account
employees’ years of service and, for pensions, average or final pensionable remuneration, and are discounted to their present value using interest rates of high-
quality corporate bonds denominated in the currency in which the benefits will be paid and of a duration consistent with the plan obligations. Where plans
are funded, payments are made to independently managed trusts; assets held by those trusts are measured at fair value. Defined benefit plan surpluses are
recognised as assets to the extent that they are considered recoverable, which is generally by way of a refund or lower future employer contributions.
The amounts recognised in income in respect of defined benefit plans mainly comprise service cost and net interest. Service cost comprises principally the
increase in the present value of the obligation for benefits resulting from employee service during the period (current service cost) and also amounts relating to
past service and settlements or amendments of plans. Plan amendments are changes to benefits and are generally recognised when all legal and regulatory
approvals have been received and the effects have been communicated to members. Net interest is calculated using the net defined benefit liability or asset
matched against the discount rate yield curve at the beginning of each year for each plan. Remeasurements of the net defined benefit liability or asset resulting
from actuarial gains and losses and the return on plan assets excluding the amount recognised in income are recognised in other comprehensive income.
For defined contribution plans, pension expense represents the amount of employer contributions payable for the period.
Significant judgements and estimates
Defined benefit obligations and plan assets, and the resulting liabilities and assets that are recognised, are subject to significant volatility as actuarial
assumptions regarding future outcomes and market values change. Substantial judgement is required in determining the actuarial assumptions, which vary for
the different plans to reflect local conditions but are determined under a common process in consultation with independent actuaries. The assumptions applied
in respect of each plan are reviewed annually and adjusted where necessary to reflect changes in experience and actuarial recommendations.
Information about the amounts reported in respect of defined benefit pension plans, assumptions applicable to the principal plans and their sensitivity to
changes are presented in Note 17.
PROVISIONS
facts or changes in law or technology.
Provisions are recognised at the balance sheet date at management’s best estimate of the expenditure required to settle the present obligation. Non-current
amounts are discounted at a rate intended to reflect the time value of money. The carrying amounts of provisions are regularly reviewed and adjusted for new
Provisions for decommissioning and restoration costs, which arise principally in connection with hydrocarbon production facilities and pipelines, are measured
on the basis of current requirements, technology and price levels; the present value is calculated using amounts discounted over the useful economic life of the
assets. The liability is recognised (together with a corresponding amount as part of the related property, plant and equipment) once an obligation crystallises in
the period when a reasonable estimate can be made. The effects of changes resulting from revisions to the timing or the amount of the original estimate of the
provision are reflected on a prospective basis, generally by adjustment to the carrying amount of the related property, plant and equipment. However, where
there is no related asset, or the change reduces the carrying amount to nil, the effect, or the amount in excess of the reduction in the related asset to nil, is
Redundancy provisions are recognised when a detailed formal plan identifies the business or part of the business concerned, the location and number of
employees affected, a detailed estimate of the associated costs and an appropriate timeline, and the employees affected have been notified of the plan's
Other provisions are recognised in income in the period in which an obligation arises and the amount can be reasonably estimated. Provisions are measured
based on current legal requirements and existing technology where applicable. Recognition of any joint and several liability is based on management’s best
estimate of the final pro rata share of the liability. Provisions are determined independently of expected insurance recoveries. Recoveries are recognised when
recognised in income.
main features.
virtually certain of realisation.
Significant estimates
Estimates of provisions for future decommissioning and restoration costs are recognised are based on current legal and constructive requirements, technology
and price levels. Because actual outflows can differ from estimates due to changes in laws, regulations, public expectations, technology, prices and
conditions, and can take place many years in the future, the carrying amounts of provisions are regularly reviewed and adjusted to take account of such
changes. The discount rate applied is reviewed annually.
Information about decommissioning and restoration provisions is presented in Note 18.
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FINANCIAL INSTRUMENTS AND OTHER DERIVATIVE CONTRACTS
Financial assets and liabilities are presented separately in the Consolidated Balance Sheet except where there is a legally enforceable right of offset and Shell
has the intention to settle on a net basis or realise the asset and settle the liability simultaneously.
Financial assets
Investments in securities
Investments in securities (also referred to as “securities”) comprise equity and debt securities classified on initial recognition as available-for-sale and are carried
at fair value, except where their fair value cannot be measured reliably, in which case they are carried at cost, less any impairment. Unrealised holding gains
and losses other than impairments are recognised in other comprehensive income, except for translation differences arising on foreign currency debt securities,
which are recognised in income. On maturity or sale, net gains and losses previously deferred in accumulated other comprehensive income are recognised in
income.
Interest income on debt securities is recognised in income using the effective interest method. Dividends on equity securities are recognised in income when
receivable.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand, including offsetting bank overdrafts, short-term bank deposits, money market funds, reverse
repos and similar instruments that have a maturity of three months or less at the date of purchase.
Trade receivables
Trade receivables are recognised initially at fair value based on amounts exchanged and subsequently at amortised cost less any impairment.
Significant estimate
Receivables from governments may be large and subject to disputes. Recoverability is subject to uncertainty as to the settlement of amounts including tax,
royalty, cost recovery and associated interest. Information about government receivables is presented in Note 11.
Financial liabilities
Debt and trade payables are recognised initially at fair value based on amounts exchanged, net of transaction costs, and subsequently at amortised cost
except for fixed rate debt subject to fair value hedging which is remeasured for the hedged risk (see below). Interest expense on debt is accounted for using
the effective interest method and, other than interest capitalised, is recognised in income.
Derivative contracts and hedges
Derivative contracts are used in the management of interest rate risk, foreign exchange risk and commodity price risk, and in the management of foreign
currency cash balances. These contracts are recognised at fair value.
Certain derivative contracts qualify and are designated either as a “fair value” hedge of the change in fair value of a recognised asset or liability or an
unrecognised firm commitment or as a “cash flow” hedge of the change in cash flows to be received or paid relating to a recognised asset or liability or a
highly probable forecast transaction.
A change in the fair value of a hedging instrument designated as a fair value hedge is recognised in income, together with the consequential adjustment to the
carrying amount of the hedged item. The effective portion of a change in fair value of a derivative contract designated as a cash flow hedge is recognised in
other comprehensive income until the hedged transaction occurs; any ineffective portion is recognised in income. Where the hedged item is a non-financial
asset or liability, the amount in accumulated other comprehensive income is transferred to the initial carrying amount of the asset or liability (reclassified to the
balance sheet); for other hedged items, the amount in accumulated other comprehensive income is reclassified to income when the hedged transaction affects
income.
The effective portion of a change due to retranslation at quarter-end exchange rates in the carrying amount of debt and the principal amount of derivative
contracts used to hedge net investments in foreign operations is recognised in other comprehensive income until the related investment is sold or liquidated; any
ineffective portion is recognised in income.
All relationships between hedging instruments and hedged items are documented, as well as risk management objectives and strategies for undertaking hedge
transactions. The effectiveness of hedges is also continually assessed and hedge accounting is discontinued when a hedge ceases to be highly effective.
Gains and losses on derivative contracts not qualifying and designated as hedges, including forward sale and purchase contracts for commodities in trading
operations that may be settled by the physical delivery or receipt of the commodity, are recognised in income.
Unless designated as hedging instruments, contracts to sell or purchase non-financial items that can be settled net as if the contracts were financial instruments
and that do not meet expected own use requirements (typically, forward sale and purchase contracts for commodities in trading operations), and contracts that
are or contain written options, are recognised at fair value; associated gains and losses are recognised in income.
Derivatives embedded within contracts that are not already required to be recognised at fair value, and that are not closely related to the host contract in terms
of economic characteristics and risks, are separated from their host contract and recognised at fair value; associated gains and losses are recognised in
income.
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FAIR VALUE MEASUREMENTS
Fair value measurements are estimates of the amounts for which assets or liabilities could be transferred at the measurement date, based on the assumption that
such transfers take place between participants in principal markets and, where applicable, taking highest and best use into account.
Judgements and estimates
Where available, fair value measurements are derived from prices quoted in active markets for identical assets or liabilities. In the absence of such information,
other observable inputs are used to estimate fair value. Inputs derived from external sources are corroborated or otherwise verified, as appropriate. In the
absence of publicly available information, fair value is determined using estimation techniques that take into account market perspectives relevant to the asset
or liability, in as far as they can reasonably be ascertained, based on predominantly unobservable inputs. For derivative contracts where publicly available
information is not available, fair value estimations are generally determined using models and other valuation methods, the key inputs for which include future
prices, volatility, price correlation, counterparty credit risk and market liquidity, as appropriate; for other assets and liabilities, fair value estimations are
generally based on the net present value of expected future cash flows.
SHARE-BASED COMPENSATION PLANS
The fair value of share-based compensation expense arising from the Performance Share Plan (PSP) and the Long-term Incentive Plan (LTIP) – Shell’s main equity-
settled plans – is estimated using a Monte Carlo option pricing model and is recognised in income from the date of grant over the vesting period with a
corresponding increase directly in equity. The model projects and averages the results for a range of potential outcomes for the vesting conditions, the principal
assumptions for which are the share price volatility and dividend yields for Shell and four of its main competitors over the last three years and the last 10 years.
Changes in the fair value of share-based compensation for cash-settled plans are recognised in income with a corresponding change in liabilities.
SHARES HELD IN TRUST
Shares in the Company, which are held by employee share ownership trusts and trust-like entities, are not included in assets but are reflected at cost as a
deduction from equity as shares held in trust.
ACQUISITIONS AND SALES OF INTERESTS IN A BUSINESS
Assets acquired and liabilities assumed when control is obtained over a business, and, with effect from January 1, 2016, when an interest or an additional
interest is acquired in a joint operation which is a business, are recognised at their fair value at the date of the acquisition; the amount of the purchase
consideration above this value is recognised as goodwill. When control is obtained, any non-controlling interest is recognised as the proportionate share of the
identifiable net assets. The acquisition of a non-controlling interest in a subsidiary and the sale of an interest while retaining control are accounted for as
transactions within equity. The difference between the purchase consideration or sale proceeds after tax and the relevant proportion of the non-controlling
interest, measured by reference to the carrying amount of the interest’s net assets at the date of acquisition or sale, is recognised in retained earnings as a
movement in equity attributable to Royal Dutch Shell plc shareholders.
CONSOLIDATED STATEMENT OF INCOME PRESENTATION
Purchases reflect all costs related to the acquisition of inventories and the effects of the changes therein, and include associated costs incurred in conversion
into finished or intermediate products. Production and manufacturing expenses are the costs of operating, maintaining and managing production and
manufacturing assets. Selling, distribution and administrative expenses include direct and indirect costs of marketing and selling products.
3 CHANGES TO IFRS NOT YET ADOPTED
The final version of IFRS 9 Financial Instruments was issued in 2014 and sets out the requirements for recognising and measuring financial assets, financial
liabilities and certain contracts to buy or sell non-financial items. It replaces IAS 39 Financial Instruments: Recognition and Measurement. The adoption of
IFRS 9 in 2018 resulted in a decrease of $83 million in equity at January 1, 2018, mainly representing the recognition of additional provisions for impairment
of receivables under the expected loss model. On a prospective basis, IFRS 9 may facilitate further use of hedge accounting and also results in different
income recognition upon the sale of certain investments in securities.
IFRS 15 Revenue from Contracts with Customers was issued in 2014 and replaces IAS 18 Revenue. It provides a single model of accounting for revenue
arising from contracts with customers based on the identification and satisfaction of performance obligations, and revenue from contracts with customers will be
distinguished from other sources. Shell has adopted IFRS 15 with effect from January 1, 2018, and has elected to apply the modified retrospective transition
approach. Although IFRS 15 does not generally represent a change from Shell’s current practice, the accounting for certain contracts, such as those with
provisional pricing or take-or-pay arrangements, and for underlifts and overlifts, have been identified as areas of potential change. However, these do not
have a significant effect on Shell’s accounting or disclosures, and therefore no transition adjustment will be presented.
IFRS 16 Leases was issued in 2016 to replace IAS 17 Leases and is required to be adopted by 2019. Under the new standard all lease contracts, with
limited exceptions, are recognised in financial statements by way of right of use assets and corresponding lease liabilities. Compared with the existing
accounting for operating leases, it will also impact the classification and timing of expenses and consequently the classification between cash flow from
operating activities and cash flow from financing activities. It is expected that Shell will apply the modified retrospective approach, which would mean that the
cumulative effect of initially applying the standard is recognised at the date of initial application and there is no restatement of comparative information. Shell
will not early adopt IFRS 16. The impact of the adoption of the new standard at January 1, 2019, will be dependent on factors such as Shell’s lease contracts
at that date and the discount rate to be applied in accordance with IFRS 16, and therefore the impact cannot be determined from the disclosure of the
minimum lease payments in accordance with IAS 17 in Note 14. A detailed review of Shell’s contracts is under way to determine the impact of the new
standard.
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4 SEGMENT INFORMATION
Shell is engaged in the principal aspects of the oil and gas industry in more than 70 countries and reports its business through four segments. Segmental
reporting was changed with effect from 2016, in line with a change in the way Shell’s businesses are managed. Since 2016, Shell reports its business
through the segments Integrated Gas (previously part of Upstream), Upstream, Downstream and Corporate. Comparative information was reclassified.
Integrated Gas is engaged in the liquefaction and transportation of gas and the conversion of natural gas to liquids to provide fuels and other products, as
well as projects with an integrated activity – from producing to commercialising gas. Upstream combines the operating segments Upstream, which is engaged
in the exploration for and extraction of crude oil, natural gas and natural gas liquids, and the marketing and transportation of oil and gas, and Oil Sands,
which is engaged in the extraction of bitumen from mined oil sands and conversion into synthetic crude oil. These operating segments have similar economic
characteristics because their earnings are significantly dependent on crude oil and natural gas prices and production volumes, and because their projects
generally require significant investment, are complex and generate revenue for many years. Downstream is engaged in oil products and chemicals
manufacturing and marketing activities. Corporate represents the key support functions, comprising Shell’s holdings and treasury organisation, its self-insurance
activities and its headquarters and central functions. Integrated within the Integrated Gas, Upstream and Downstream segments are Shell’s trading activities,
technical services and technology capability, and functions such as safety and environment. Sales between segments are based on prices generally equivalent
to commercially available prices.
Segment earnings are presented on a current cost of supplies basis (CCS earnings), which is the earnings measure used by the Chief Executive Officer for the
purposes of making decisions about allocating resources and assessing performance. On this basis, the purchase price of volumes sold during the period is
based on the current cost of supplies during the same period after making allowance for the tax effect. CCS earnings therefore exclude the effect of changes in
the oil price on inventory carrying amounts.
Information by segment on a current cost of supplies basis is as follows:
Share of profit/(loss) of joint ventures and associates
Interest and other income
Depreciation, depletion and amortisation charge, of which:
4,965
17,303
3,877
Integrated Gas
Upstream
Downstream
Corporate
5,078
1,551
8,258
(2,416 )
12,471
32,674
7,723
264,731
51
305,179
3,978
32,469
1,714
623
687
1,188
4,248
1,956
154
302
10
248
790
4,118
605
744
385
—
109
2,941
2,409
1,783
(636 )
—
(129 )
437
78
—
—
$ million
Total
4,164
2,466
26,223
4,805
615
4,042
4,346
$ million
Total
Integrated Gas
Upstream
Downstream
Corporate
2,529
(3,674 )
6,588
(1,751 )
3,692
25,282
6,412
201,823
74
233,591
3,908
26,524
1,116
765
222
839
72
—
247
1,254
1,274
—
852
(938 )
1,727
2,244
851
588
38
91
1,008
—
(182 )
442
24
6
—
2,013
(839 )
3,400
2,897
24,993
1,940
38
3,203
485
2017
CCS earnings
Revenue
Third party
Inter-segment
Impairment losses
Impairment reversals
Interest expense
Taxation charge/(credit)
2016
CCS earnings
Revenue
Third party
Inter-segment
Impairment losses
Impairment reversals
Interest expense
Taxation charge/(credit)
Share of profit/(loss) of joint ventures and associates
Interest and other income
Depreciation, depletion and amortisation charge, of which:
4,509
16,779
3,681
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
149
4 SEGMENT INFORMATION
Shell is engaged in the principal aspects of the oil and gas industry in more than 70 countries and reports its business through four segments. Segmental
reporting was changed with effect from 2016, in line with a change in the way Shell’s businesses are managed. Since 2016, Shell reports its business
through the segments Integrated Gas (previously part of Upstream), Upstream, Downstream and Corporate. Comparative information was reclassified.
Integrated Gas is engaged in the liquefaction and transportation of gas and the conversion of natural gas to liquids to provide fuels and other products, as
well as projects with an integrated activity – from producing to commercialising gas. Upstream combines the operating segments Upstream, which is engaged
in the exploration for and extraction of crude oil, natural gas and natural gas liquids, and the marketing and transportation of oil and gas, and Oil Sands,
which is engaged in the extraction of bitumen from mined oil sands and conversion into synthetic crude oil. These operating segments have similar economic
characteristics because their earnings are significantly dependent on crude oil and natural gas prices and production volumes, and because their projects
generally require significant investment, are complex and generate revenue for many years. Downstream is engaged in oil products and chemicals
manufacturing and marketing activities. Corporate represents the key support functions, comprising Shell’s holdings and treasury organisation, its self-insurance
activities and its headquarters and central functions. Integrated within the Integrated Gas, Upstream and Downstream segments are Shell’s trading activities,
technical services and technology capability, and functions such as safety and environment. Sales between segments are based on prices generally equivalent
to commercially available prices.
Segment earnings are presented on a current cost of supplies basis (CCS earnings), which is the earnings measure used by the Chief Executive Officer for the
purposes of making decisions about allocating resources and assessing performance. On this basis, the purchase price of volumes sold during the period is
based on the current cost of supplies during the same period after making allowance for the tax effect. CCS earnings therefore exclude the effect of changes in
the oil price on inventory carrying amounts.
Shares in the Company, which are held by employee share ownership trusts and trust-like entities, are not included in assets but are reflected at cost as a
Information by segment on a current cost of supplies basis is as follows:
ACQUISITIONS AND SALES OF INTERESTS IN A BUSINESS
Assets acquired and liabilities assumed when control is obtained over a business, and, with effect from January 1, 2016, when an interest or an additional
interest is acquired in a joint operation which is a business, are recognised at their fair value at the date of the acquisition; the amount of the purchase
consideration above this value is recognised as goodwill. When control is obtained, any non-controlling interest is recognised as the proportionate share of the
identifiable net assets. The acquisition of a non-controlling interest in a subsidiary and the sale of an interest while retaining control are accounted for as
transactions within equity. The difference between the purchase consideration or sale proceeds after tax and the relevant proportion of the non-controlling
interest, measured by reference to the carrying amount of the interest’s net assets at the date of acquisition or sale, is recognised in retained earnings as a
2017
CCS earnings
Revenue
Third party
Inter-segment
Share of profit/(loss) of joint ventures and associates
Interest and other income
Depreciation, depletion and amortisation charge, of which:
Impairment losses
Impairment reversals
Interest expense
Taxation charge/(credit)
2016
CCS earnings
Revenue
Third party
Inter-segment
Share of profit/(loss) of joint ventures and associates
Interest and other income
Depreciation, depletion and amortisation charge, of which:
Impairment losses
Impairment reversals
Interest expense
Taxation charge/(credit)
Integrated Gas
Upstream
Downstream
Corporate
$ million
Total
5,078
1,551
8,258
(2,416 )
12,471
32,674
3,978
1,714
687
4,965
302
10
248
790
7,723
32,469
623
1,188
17,303
4,118
605
744
2,409
264,731
4,248
1,956
154
3,877
385
—
109
1,783
51
—
(129 )
437
78
—
—
2,941
(636 )
Integrated Gas
Upstream
Downstream
Corporate
305,179
4,164
2,466
26,223
4,805
615
4,042
4,346
$ million
Total
2,529
(3,674 )
6,588
(1,751 )
3,692
25,282
3,908
1,116
765
4,509
72
—
247
1,254
6,412
26,524
222
839
16,779
1,274
—
852
(938 )
201,823
1,727
2,244
851
3,681
588
38
91
1,008
74
—
(182 )
442
24
6
—
2,013
(839 )
233,591
3,400
2,897
24,993
1,940
38
3,203
485
Fair value measurements are estimates of the amounts for which assets or liabilities could be transferred at the measurement date, based on the assumption that
such transfers take place between participants in principal markets and, where applicable, taking highest and best use into account.
FAIR VALUE MEASUREMENTS
Judgements and estimates
Where available, fair value measurements are derived from prices quoted in active markets for identical assets or liabilities. In the absence of such information,
other observable inputs are used to estimate fair value. Inputs derived from external sources are corroborated or otherwise verified, as appropriate. In the
absence of publicly available information, fair value is determined using estimation techniques that take into account market perspectives relevant to the asset
or liability, in as far as they can reasonably be ascertained, based on predominantly unobservable inputs. For derivative contracts where publicly available
information is not available, fair value estimations are generally determined using models and other valuation methods, the key inputs for which include future
prices, volatility, price correlation, counterparty credit risk and market liquidity, as appropriate; for other assets and liabilities, fair value estimations are
generally based on the net present value of expected future cash flows.
SHARE-BASED COMPENSATION PLANS
The fair value of share-based compensation expense arising from the Performance Share Plan (PSP) and the Long-term Incentive Plan (LTIP) – Shell’s main equity-
settled plans – is estimated using a Monte Carlo option pricing model and is recognised in income from the date of grant over the vesting period with a
corresponding increase directly in equity. The model projects and averages the results for a range of potential outcomes for the vesting conditions, the principal
assumptions for which are the share price volatility and dividend yields for Shell and four of its main competitors over the last three years and the last 10 years.
Changes in the fair value of share-based compensation for cash-settled plans are recognised in income with a corresponding change in liabilities.
SHARES HELD IN TRUST
deduction from equity as shares held in trust.
movement in equity attributable to Royal Dutch Shell plc shareholders.
CONSOLIDATED STATEMENT OF INCOME PRESENTATION
Purchases reflect all costs related to the acquisition of inventories and the effects of the changes therein, and include associated costs incurred in conversion
into finished or intermediate products. Production and manufacturing expenses are the costs of operating, maintaining and managing production and
manufacturing assets. Selling, distribution and administrative expenses include direct and indirect costs of marketing and selling products.
3 CHANGES TO IFRS NOT YET ADOPTED
The final version of IFRS 9 Financial Instruments was issued in 2014 and sets out the requirements for recognising and measuring financial assets, financial
liabilities and certain contracts to buy or sell non-financial items. It replaces IAS 39 Financial Instruments: Recognition and Measurement. The adoption of
IFRS 9 in 2018 resulted in a decrease of $83 million in equity at January 1, 2018, mainly representing the recognition of additional provisions for impairment
of receivables under the expected loss model. On a prospective basis, IFRS 9 may facilitate further use of hedge accounting and also results in different
income recognition upon the sale of certain investments in securities.
IFRS 15 Revenue from Contracts with Customers was issued in 2014 and replaces IAS 18 Revenue. It provides a single model of accounting for revenue
arising from contracts with customers based on the identification and satisfaction of performance obligations, and revenue from contracts with customers will be
distinguished from other sources. Shell has adopted IFRS 15 with effect from January 1, 2018, and has elected to apply the modified retrospective transition
approach. Although IFRS 15 does not generally represent a change from Shell’s current practice, the accounting for certain contracts, such as those with
provisional pricing or take-or-pay arrangements, and for underlifts and overlifts, have been identified as areas of potential change. However, these do not
have a significant effect on Shell’s accounting or disclosures, and therefore no transition adjustment will be presented.
IFRS 16 Leases was issued in 2016 to replace IAS 17 Leases and is required to be adopted by 2019. Under the new standard all lease contracts, with
limited exceptions, are recognised in financial statements by way of right of use assets and corresponding lease liabilities. Compared with the existing
accounting for operating leases, it will also impact the classification and timing of expenses and consequently the classification between cash flow from
operating activities and cash flow from financing activities. It is expected that Shell will apply the modified retrospective approach, which would mean that the
cumulative effect of initially applying the standard is recognised at the date of initial application and there is no restatement of comparative information. Shell
will not early adopt IFRS 16. The impact of the adoption of the new standard at January 1, 2019, will be dependent on factors such as Shell’s lease contracts
at that date and the discount rate to be applied in accordance with IFRS 16, and therefore the impact cannot be determined from the disclosure of the
minimum lease payments in accordance with IAS 17 in Note 14. A detailed review of Shell’s contracts is under way to determine the impact of the new
standard.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
148
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
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[Note 4 continued]
2015
CCS earnings
Revenue
Third party
Inter-segment
Share of profit/(loss) of joint ventures and associates
Interest and other income
Depreciation, depletion and amortisation charge, of which:
Impairment losses
Impairment reversals
Interest expense
Taxation charge/(credit)
Reconciliation of CCS earnings to income for the period
CCS earnings
Current cost of supplies adjustment:
Purchases
Taxation
Share of profit of joint ventures and associates
Income for the period
Information by geographical area is as follows:
2017
Third-party revenue, by origin
Intangible assets, property, plant and equipment,
joint ventures and associates at December 31
[A] includes $62,046 million that originated from Singapore.
2016
Integrated Gas
Upstream
Downstream
Corporate
$ million
Total
3,170
(8,833 )
10,243
(425 )
4,155
5 INTEREST AND OTHER INCOME
21,741
4,248
1,471
537
2,597
210
—
106
937
6,739
26,824
491
1,819
20,404
8,536
—
775
(927 )
236,384
1,362
2,215
1,156
3,667
556
3
51
1,639
96
—
(327 )
157
46
27
—
956
(1,156 )
2017
12,471
1,252
(349)
61
964
13,435
2016
3,692
1,284
(344 )
145
1,085
4,777
Asia,
Oceania,
Africa
Europe
USA
Other
Americas
264,960
3,850
3,669
26,714
9,329
3
1,888
493
$ million
2015
4,155
(2,278)
646
(323)
(1,955)
2,200
$ million
Total
100,609
114,683[A]
66,854
23,033
305,179
43,020
122,345
54,294
58,828
278,487
Asia,
Oceania,
Africa
Europe
USA
Other
Americas
$ million
Total
Interest income
Dividend income (from investments in securities)
Net gains on sale and revaluation of non-current assets and businesses
Net foreign exchange (losses)/gains on financing activities
Other
Total
2017
677
375
1,640
(453 )
227
2,466
2016
451
264
2,141
343
(302 )
2,897
$ million
2015
359
456
3,460
(649)
43
3,669
In 2017, net gains on sale of non-current assets and businesses arose mainly in respect of gains on the sale of Upstream assets in the UK and the USA as well
as Downstream assets in Australia and Saudi Arabia, partly offset by a loss on the Motiva transaction (see Note 29). Net foreign exchange losses on
financing activities in 2017 includes a charge of $545 million from the release of cumulative currency translation differences following the restructuring of
funding for our North America businesses.
In 2016, net gains on sale of non-current assets and businesses arose mainly in respect of Upstream assets in North America and Downstream assets in
Denmark and Japan. In addition, in respect of a decrease in Shell’s interest in Woodside Petroleum Limited (Woodside), a revaluation gain of $293 million
was recognised and a gain of $358 million on the related release of cumulative currency translation differences was recognised in net foreign exchange gains
on financing activities. Other mainly relates to the write down of an investment in securities.
In 2015, net gains on sale of non-current assets and businesses arose mainly in respect of interests in Nigeria (Upstream), interests in France and Norway
(Downstream) and an office building in the UK (Corporate).
Other net foreign exchange losses of $47 million in 2017 (2016: $49 million; 2015: $197 million) were included in purchases.
6 INTEREST EXPENSE
Interest incurred and similar charges
Less: interest capitalised
Other net losses/(gains) on fair value hedges of debt
Accretion expense
Total
The rate applied in determining the amount of interest capitalised in 2017 was 3% (2016: 3%; 2015: 3%).
2017
3,448
(622 )
114
1,102
4,042
2016
2,732
(725 )
4
1,192
3,203
$ million
2015
1,832
(839)
(37)
932
1,888
Third-party revenue, by origin
Intangible assets, property, plant and equipment,
joint ventures and associates at December 31
[A] includes $42,533 million that originated from Singapore.
[B] As revised, following reassessment of geographical allocation resulting in an increase of $4,532 million in Asia, Oceania, Africa and a corresponding decrease in USA.
87,635 [A][B]
44,615 [B]
121,618
60,430
43,901
81,573
19,768
233,591
67,371
293,320
2015
Third-party revenue, by origin
Intangible assets, property, plant and equipment,
joint ventures and associates at December 31
[A] includes $46,551 million that originated from Singapore.
Asia,
Oceania,
Africa
USA
95,892 [A]
50,666
Other
Americas
23,179
Europe
95,223
$ million
Total
264,960
33,439
104,949
51,269
29,614
219,271
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
150
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150
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
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2015
CCS earnings
Revenue
Third party
Inter-segment
Impairment losses
Impairment reversals
Interest expense
Taxation charge/(credit)
Share of profit/(loss) of joint ventures and associates
Interest and other income
Depreciation, depletion and amortisation charge, of which:
Integrated Gas
Upstream
Downstream
Corporate
3,170
(8,833 )
10,243
(425 )
4,155
236,384
96
264,960
21,741
4,248
1,471
6,739
26,824
491
537
1,819
2,597
20,404
210
—
106
937
8,536
—
775
(927 )
1,362
2,215
1,156
3,667
556
3
51
—
(327 )
157
46
27
—
956
1,639
(1,156 )
Reconciliation of CCS earnings to income for the period
2017
12,471
1,252
(349)
61
964
13,435
2016
3,692
1,284
(344 )
145
1,085
4,777
5 INTEREST AND OTHER INCOME
Interest income
Dividend income (from investments in securities)
Net gains on sale and revaluation of non-current assets and businesses
Net foreign exchange (losses)/gains on financing activities
Other
Total
2017
677
375
1,640
(453 )
227
2,466
2016
451
264
2,141
343
(302 )
2,897
$ million
2015
359
456
3,460
(649)
43
3,669
In 2017, net gains on sale of non-current assets and businesses arose mainly in respect of gains on the sale of Upstream assets in the UK and the USA as well
as Downstream assets in Australia and Saudi Arabia, partly offset by a loss on the Motiva transaction (see Note 29). Net foreign exchange losses on
financing activities in 2017 includes a charge of $545 million from the release of cumulative currency translation differences following the restructuring of
funding for our North America businesses.
In 2016, net gains on sale of non-current assets and businesses arose mainly in respect of Upstream assets in North America and Downstream assets in
Denmark and Japan. In addition, in respect of a decrease in Shell’s interest in Woodside Petroleum Limited (Woodside), a revaluation gain of $293 million
was recognised and a gain of $358 million on the related release of cumulative currency translation differences was recognised in net foreign exchange gains
on financing activities. Other mainly relates to the write down of an investment in securities.
In 2015, net gains on sale of non-current assets and businesses arose mainly in respect of interests in Nigeria (Upstream), interests in France and Norway
(Downstream) and an office building in the UK (Corporate).
Other net foreign exchange losses of $47 million in 2017 (2016: $49 million; 2015: $197 million) were included in purchases.
6 INTEREST EXPENSE
Asia,
Oceania,
Africa
Europe
USA
Other
Americas
100,609
114,683[A]
66,854
23,033
305,179
43,020
122,345
54,294
58,828
278,487
Interest incurred and similar charges
Less: interest capitalised
Other net losses/(gains) on fair value hedges of debt
Accretion expense
Total
2017
3,448
(622 )
114
1,102
4,042
2016
2,732
(725 )
4
1,192
3,203
$ million
2015
1,832
(839)
(37)
932
1,888
The rate applied in determining the amount of interest capitalised in 2017 was 3% (2016: 3%; 2015: 3%).
$ million
Total
3,850
3,669
26,714
9,329
3
1,888
493
$ million
2015
4,155
(2,278)
646
(323)
(1,955)
2,200
$ million
Total
$ million
Total
CCS earnings
Current cost of supplies adjustment:
Purchases
Taxation
Share of profit of joint ventures and associates
Income for the period
Information by geographical area is as follows:
2017
2016
2015
Third-party revenue, by origin
Intangible assets, property, plant and equipment,
joint ventures and associates at December 31
[A] includes $62,046 million that originated from Singapore.
Third-party revenue, by origin
Intangible assets, property, plant and equipment,
joint ventures and associates at December 31
[A] includes $42,533 million that originated from Singapore.
Third-party revenue, by origin
Intangible assets, property, plant and equipment,
joint ventures and associates at December 31
[A] includes $46,551 million that originated from Singapore.
[B] As revised, following reassessment of geographical allocation resulting in an increase of $4,532 million in Asia, Oceania, Africa and a corresponding decrease in USA.
Asia,
Oceania,
Africa
Europe
81,573
USA
Other
Americas
87,635 [A][B]
44,615 [B]
19,768
233,591
43,901
121,618
60,430
67,371
293,320
Asia,
Oceania,
Africa
Europe
95,223
95,892 [A]
50,666
USA
$ million
Total
264,960
Other
Americas
23,179
33,439
104,949
51,269
29,614
219,271
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
150
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
151
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7 INTANGIBLE ASSETS
8 PROPERTY, PLANT AND EQUIPMENT
2017
Cost
At January 1
Additions
Sales, retirements and other movements
Currency translation differences
At December 31
Depreciation, depletion and amortisation, including impairments
At January 1
Charge for the year
Sales, retirements and other movements
Currency translation differences
At December 31
Carrying amount at December 31
2016
Cost
At January 1
Additions on acquisition of BG
Other additions
Sales, retirements and other movements
Currency translation differences
At December 31
Depreciation, depletion and amortisation, including impairments
At January 1
Charge for the year
Sales, retirements and other movements
Currency translation differences
At December 31
Carrying amount at December 31
Goodwill
LNG off-take
and sales contracts
Other
Total
$ million
2017
13,592
784
(261 )
39
14,154
10,429
—
—
—
10,429
605
—
(136 )
23
492
13,662
1,475
957
—
—
2,432
7,997
5,085
786
37
198
6,106
3,059
612
(241 )
155
3,585
2,521
29,106
1,570
(224 )
237
30,689
5,139
1,569
(377 )
178
6,509
24,180
$ million
Goodwill
LNG off-take
and sales contracts
Other
Total
2016
2,604
10,997
—
(3 )
(6 )
13,592
594
—
—
11
605
12,987
3,271
7,158
—
—
—
10,429
556
919
—
—
1,475
8,954
4,473
607
130
—
(125 )
5,085
2,915
306
(63 )
(99 )
3,059
2,026
10,348
18,762
130
(3 )
(131 )
29,106
4,065
1,225
(63)
(88)
5,139
23,967
Goodwill at December 31, 2017, principally related to the acquisition of BG Group plc (BG) in 2016 (see Note 29), allocated to Integrated Gas
($4,954 million) and Upstream ($6,013 million) at the operating segment level, and to Pennzoil-Quaker State Company, a lubricants business in the
Downstream segment based largely in North America. Information on annual impairment testing is included in Note 8.
Cost
At January 1
Additions
Sales, retirements and other movements
Currency translation differences
At December 31
At January 1
Charge for the year
Sales, retirements and other movements
Currency translation differences
At December 31
Carrying amount at December 31
Depreciation, depletion and amortisation, including impairments
Depreciation, depletion and amortisation, including impairments
Cost
At January 1
Additions on acquisition of BG
Other additions
Sales, retirements and other movements
Currency translation differences
At December 31
At January 1
Charge for the year
Sales, retirements and other movements
Currency translation differences
At December 31
Carrying amount at December 31
has a 20% interest in the AOSP.
(2016: $282 million, as revised).
Exploration and production
Exploration
and evaluation
Manufacturing,
supply and
distribution
Production
Other
Total
302,532
77,286
20,063
425,257
23,575
291,191
86,948
22,355
424,069
25,376
2,319
(4,586)
466
6,363
778
(2,300)
219
15,347
(34,198 )
7,510
8,148
(1,427 )
2,941
133,600
39,673
19,155
(19,615 )
4,385
3,705
(763 )
1,868
1,352
(655)
1,595
9,523
1,016
(701 )
783
5,060
137,525
44,483
10,621
197,689
18,515
153,666
42,465
11,734
226,380
Exploration and production
Exploration
and evaluation
Production
Manufacturing,
supply and
distribution
Other
Total
20,988
361,923
25,376
302,532
77,286
20,063
425,257
27,728
916
1,961
(5,210)
(19)
8,095
828
(2,602)
42
6,363
239,559
54,775
17,304
(3,557 )
(5,549 )
122,586
18,182
(3,326 )
(3,842 )
73,648
314
4,818
(653 )
(841 )
38,158
3,842
(1,696 )
(631 )
62
1,250
(1,545 )
(692)
10,246
916
(1,354)
(285)
9,523
133,600
39,673
19,013
168,932
37,613
10,540
236,098
$ million
27,166
(40,866)
12,512
189,159
24,654
(23,379)
7,255
$ million
56,067
25,333
(10,965 )
(7,101)
179,085
23,768
(8,978)
(4,716 )
189,159
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
152
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Sales, retirements and other movements in 2017 include sales of interests in Canada, the UK and Gabon. In Canada, Shell sold its 60% interest in the
Athabasca Oil Sands Project (AOSP) and its in-situ and undeveloped oil sands interests for a consideration in cash and shares in Canadian Natural Resources
Limited, reported in investments in securities (see Note 10). Separately, Shell acquired a 50% controlling interest in Marathon Oil Canada Corporation, which
The carrying amount at December 31, 2017, included $42,121 million (2016: $45,396 million) of assets under construction. This amount excludes
exploration and evaluation assets. The carrying amount at December 31, 2017, also included $986 million of assets classified as held for sale
The carrying amount of exploration and production assets at December 31, 2017, included rights and concessions in respect of proved and unproved
properties of $14,839 million (2016: $15,610 million). Exploration and evaluation assets principally comprise rights and concessions in respect of unproved
properties and capitalised exploration drilling costs.
The carrying amount of assets at December 31, 2017, for which an alternative reserves base was applied in the calculation of the depreciation charge (see
Note 2), was $18,115 million (2016: $14,784 million). If no alternative reserves base had been used, the pre-tax depreciation charge for the year ended
December 31, 2017, would have been $5,558 million higher (2016: $9,181 million, 2015: $1,022 million).
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
153
Depreciation, depletion and amortisation, including impairments
2017
Cost
At January 1
Additions
Sales, retirements and other movements
Currency translation differences
At December 31
At January 1
Charge for the year
Sales, retirements and other movements
Currency translation differences
At December 31
Carrying amount at December 31
2016
Cost
At January 1
Additions on acquisition of BG
Other additions
Sales, retirements and other movements
Currency translation differences
At December 31
At January 1
Charge for the year
Sales, retirements and other movements
Currency translation differences
At December 31
Carrying amount at December 31
784
(261 )
39
605
—
(136 )
23
492
13,662
2,604
10,997
—
(3 )
(6 )
594
—
—
11
605
12,987
1,475
957
—
—
2,432
7,997
3,059
612
(241 )
155
3,585
2,521
3,271
7,158
—
—
—
4,473
607
130
—
(125 )
556
919
—
—
1,475
8,954
2,915
306
(63 )
(99 )
3,059
2,026
5,139
1,569
(377 )
178
6,509
24,180
$ million
10,348
18,762
130
(3 )
(131 )
4,065
1,225
(63)
(88)
5,139
23,967
Depreciation, depletion and amortisation, including impairments
13,592
10,429
5,085
29,106
Goodwill at December 31, 2017, principally related to the acquisition of BG Group plc (BG) in 2016 (see Note 29), allocated to Integrated Gas
($4,954 million) and Upstream ($6,013 million) at the operating segment level, and to Pennzoil-Quaker State Company, a lubricants business in the
Downstream segment based largely in North America. Information on annual impairment testing is included in Note 8.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
152
7 INTANGIBLE ASSETS
8 PROPERTY, PLANT AND EQUIPMENT
$ million
2017
Goodwill
and sales contracts
LNG off-take
13,592
10,429
Other
Total
—
—
—
5,085
786
37
198
29,106
1,570
(224 )
237
14,154
10,429
6,106
30,689
Cost
At January 1
Additions
Sales, retirements and other movements
Currency translation differences
$ million
Exploration and production
Exploration
and evaluation
25,376
2,319
(4,586)
466
Production
302,532
15,347
(34,198 )
7,510
Manufacturing,
supply and
distribution
Other
Total
77,286
8,148
(1,427 )
2,941
20,063
1,352
(655)
1,595
425,257
27,166
(40,866)
12,512
At December 31
23,575
291,191
86,948
22,355
424,069
Depreciation, depletion and amortisation, including impairments
At January 1
Charge for the year
Sales, retirements and other movements
Currency translation differences
At December 31
Carrying amount at December 31
6,363
778
(2,300)
219
133,600
19,155
(19,615 )
4,385
39,673
3,705
(763 )
1,868
9,523
1,016
(701 )
783
189,159
24,654
(23,379)
7,255
5,060
137,525
44,483
10,621
197,689
18,515
153,666
42,465
11,734
226,380
LNG off-take
Goodwill
and sales contracts
Other
Total
2016
Exploration and production
Cost
At January 1
Additions on acquisition of BG
Other additions
Sales, retirements and other movements
Currency translation differences
At December 31
Depreciation, depletion and amortisation, including impairments
At January 1
Charge for the year
Sales, retirements and other movements
Currency translation differences
At December 31
Carrying amount at December 31
Exploration
and evaluation
27,728
916
1,961
(5,210)
(19)
25,376
8,095
828
(2,602)
42
6,363
19,013
Production
239,559
54,775
17,304
(3,557 )
(5,549 )
302,532
122,586
18,182
(3,326 )
(3,842 )
133,600
168,932
Manufacturing,
supply and
distribution
73,648
314
4,818
(653 )
(841 )
77,286
38,158
3,842
(1,696 )
(631 )
39,673
37,613
$ million
Other
Total
20,988
62
1,250
(1,545 )
(692)
20,063
10,246
916
(1,354)
(285)
9,523
10,540
361,923
56,067
25,333
(10,965 )
(7,101)
425,257
179,085
23,768
(8,978)
(4,716 )
189,159
236,098
Sales, retirements and other movements in 2017 include sales of interests in Canada, the UK and Gabon. In Canada, Shell sold its 60% interest in the
Athabasca Oil Sands Project (AOSP) and its in-situ and undeveloped oil sands interests for a consideration in cash and shares in Canadian Natural Resources
Limited, reported in investments in securities (see Note 10). Separately, Shell acquired a 50% controlling interest in Marathon Oil Canada Corporation, which
has a 20% interest in the AOSP.
The carrying amount at December 31, 2017, included $42,121 million (2016: $45,396 million) of assets under construction. This amount excludes
exploration and evaluation assets. The carrying amount at December 31, 2017, also included $986 million of assets classified as held for sale
(2016: $282 million, as revised).
The carrying amount of exploration and production assets at December 31, 2017, included rights and concessions in respect of proved and unproved
properties of $14,839 million (2016: $15,610 million). Exploration and evaluation assets principally comprise rights and concessions in respect of unproved
properties and capitalised exploration drilling costs.
The carrying amount of assets at December 31, 2017, for which an alternative reserves base was applied in the calculation of the depreciation charge (see
Note 2), was $18,115 million (2016: $14,784 million). If no alternative reserves base had been used, the pre-tax depreciation charge for the year ended
December 31, 2017, would have been $5,558 million higher (2016: $9,181 million, 2015: $1,022 million).
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
153
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[Note 8 continued]
Contractual commitments for the purchase of property, plant and equipment at December 31, 2017, amounted to $4,504 million (2016: $4,825 million).
In addition, Shell has other commitments for future expenditure that, when incurred, are also expected to be recognised as additions to property, plant and
equipment, such as the majority of operating lease payments in respect of drilling and ancillary equipment (see Note 14).
Carrying amount of property, plant and equipment held under finance leases [A]
Exploration and production
Manufacturing, supply and distribution
Other
Total
[A] See Note 14.
Impairments
Impairment losses [A]
Exploration and production
Manufacturing, supply and distribution
Other
Total
Impairment reversals [A]
Exploration and production
Manufacturing, supply and distribution
Other
Total
[A] Presented by segment in Note 4, together with impairment losses and reversals in respect of intangible assets.
Dec 31, 2017
8,399
3,151
272
11,822
$ million
Dec 31, 2016
7,930
3,108
227
11,265
2017
2016
4,187
376
9
4,572
615
—
—
615
1,324
567
40
1,931
—
36
2
38
$ million
2015
8,387
458
165
9,010
—
—
3
3
Impairment losses in 2017 were mainly in Upstream, and principally related to the disposal of interests in Canada and interests in Ireland classified as held for
sale. Impairment losses in 2016 were mainly triggered by asset performance, disposals and project cancellations. They related primarily in Upstream to shale
and deep-water properties in North and South America and in Downstream to disposals and assets held for sale in the refining portfolio. Impairment losses in
2015 were principally in Upstream related to North American shale properties, following revisions to Shell’s long-term oil and gas price outlook, and to
cancelled projects in Alaska and Carmon Creek in Canada.
Income for the period
Other comprehensive
income/(loss) for the period
For impairment testing purposes, the respective carrying amounts of property, plant and equipment and intangible assets were compared with their value in
use. Cash flow projections used in the determination of value in use were made using management’s forecasts of commodity prices, market supply and
demand, product margins and expected production volumes (see Note 2). These cash flows were adjusted for the risks specific to the assets, and therefore
these risks were not included in the determination of the discount rate applied. The nominal pre-tax rate applied in 2017 was 6% (2016: 6%; 2015: 6%).
Oil and gas price assumptions applied for impairment testing are reviewed and, where necessary, adjusted on a periodic basis. Reviews include comparison
with available market data and forecasts that reflect developments in demand such as global economic growth, technology efficiency, policy measures and, in
supply, consideration of investment and resource potential, cost of development of new supply, and behaviour of major resource holders. The near-term
commodity price assumptions applied in impairment testing in 2017 were as follows:
$ million
2015
8,465
3,276
(2,771)
(991)
(144)
7,835
Wells
$ million
4,562
1,647
371
6,580
$ million
2015
Capitalised exploration drilling costs
At January 1
Additions pending determination of proved reserves
Amounts charged to expense
Reclassifications to productive wells on determination of proved reserves
Other movements
At December 31
2017
7,910
1,708
(896 )
(982 )
153
7,893
2016
7,835
1,762
(834 )
(1,187 )
334
7,910
Exploration drilling costs capitalised for periods greater than one year at December 31, 2017, analysed according to the most recent year of activity, are
presented in the table below. They comprise $1,512 million relating to 21 projects where drilling activities were under way or firmly planned for the future
and $5,068 million relating to 42 projects awaiting development concepts.
Between 1 and 5 years
Between 6 and 10 years
Between 11 and 15 years
Total
9 JOINT VENTURES AND ASSOCIATES
Number
49
11
3
63
Projects
$ million
5,782
688
110
6,580
Number
198
122
21
341
Shell share of comprehensive income of joint ventures and associates
Joint
ventures
2017
2016
Joint
Joint
ventures
Associates
Total
ventures Associates
Total
Associates
Total
2,102 2,123
4,225
2,332 1,213 3,545
908 [A] 2,619 3,527
Comprehensive income for the period
2,266 2,129
4,395
2,410 1,107 3,517
835
2,652 3,487
[A] Includes an impairment loss of $837 million as a result of changes in the outlook of a joint venture in the Oceania region.
164
6
170
78
(106 )
(28 )
(73 )
33
(40 )
Carrying amount of interests in joint ventures and associates
Dec 31, 2017
Joint
Joint
ventures
ventures
Associates
Total
Associates
Total
15,052 12,875 27,927 20,555 12,700 33,255
$ million
Dec 31, 2016
Shell’s interest in the Motiva Enterprises LLC (Motiva) joint venture was disposed of in 2017 (see Note 29). The carrying amount at December 31, 2016, was
Net assets
$5,132 million.
Commodity price assumptions [A]
Brent crude oil ($/b)
Henry Hub natural gas ($/MMBtu)
[A] Money of the day.
2018
50
3.00
2019
60
3.00
2020
65
3.25
Transactions with joint ventures and associates
Sales and charges to joint ventures and associates
Purchases and charges from joint ventures and associates
2017
13,121
10,680
2016
24,214
13,859
$ million
2015
36,548
26,440
For periods after 2020, the real terms long-term price assumptions applied were $70 per barrel (/b) (2016: $80/b) for Brent crude oil and
$3.50 per million British thermal units (/MMBtu) (2016: $4.00/MMBtu) for Henry Hub natural gas.
These transactions principally comprise sales and purchases of goods and services in the ordinary course of business. Related balances outstanding at
December 31, 2017, and 2016, are presented in Notes 11 and 15.
Other arrangements in respect of joint ventures and associates
Commitments to make purchases from joint ventures and associates
Commitments to provide debt or equity funding to joint ventures and associates
Dec 31, 2017
78,837
1,216
$ million
Dec 31, 2016
85,333
2,703
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
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Contractual commitments for the purchase of property, plant and equipment at December 31, 2017, amounted to $4,504 million (2016: $4,825 million).
In addition, Shell has other commitments for future expenditure that, when incurred, are also expected to be recognised as additions to property, plant and
equipment, such as the majority of operating lease payments in respect of drilling and ancillary equipment (see Note 14).
Carrying amount of property, plant and equipment held under finance leases [A]
Exploration and production
Manufacturing, supply and distribution
Other
Total
[A] See Note 14.
Impairments
Impairment losses [A]
Exploration and production
Manufacturing, supply and distribution
Impairment reversals [A]
Exploration and production
Manufacturing, supply and distribution
Other
Total
Other
Total
Dec 31, 2017
8,399
3,151
272
11,822
$ million
Dec 31, 2016
7,930
3,108
227
11,265
2017
2016
4,187
1,324
376
9
567
40
4,572
1,931
615
—
—
—
36
2
615
38
$ million
2015
8,387
458
165
9,010
—
—
3
3
[A] Presented by segment in Note 4, together with impairment losses and reversals in respect of intangible assets.
Impairment losses in 2017 were mainly in Upstream, and principally related to the disposal of interests in Canada and interests in Ireland classified as held for
sale. Impairment losses in 2016 were mainly triggered by asset performance, disposals and project cancellations. They related primarily in Upstream to shale
and deep-water properties in North and South America and in Downstream to disposals and assets held for sale in the refining portfolio. Impairment losses in
2015 were principally in Upstream related to North American shale properties, following revisions to Shell’s long-term oil and gas price outlook, and to
cancelled projects in Alaska and Carmon Creek in Canada.
For impairment testing purposes, the respective carrying amounts of property, plant and equipment and intangible assets were compared with their value in
use. Cash flow projections used in the determination of value in use were made using management’s forecasts of commodity prices, market supply and
demand, product margins and expected production volumes (see Note 2). These cash flows were adjusted for the risks specific to the assets, and therefore
these risks were not included in the determination of the discount rate applied. The nominal pre-tax rate applied in 2017 was 6% (2016: 6%; 2015: 6%).
Capitalised exploration drilling costs
At January 1
Additions pending determination of proved reserves
Amounts charged to expense
Reclassifications to productive wells on determination of proved reserves
Other movements
At December 31
2017
7,910
1,708
(896 )
(982 )
153
7,893
2016
7,835
1,762
(834 )
(1,187 )
334
7,910
$ million
2015
8,465
3,276
(2,771)
(991)
(144)
7,835
Exploration drilling costs capitalised for periods greater than one year at December 31, 2017, analysed according to the most recent year of activity, are
presented in the table below. They comprise $1,512 million relating to 21 projects where drilling activities were under way or firmly planned for the future
and $5,068 million relating to 42 projects awaiting development concepts.
Between 1 and 5 years
Between 6 and 10 years
Between 11 and 15 years
Total
9 JOINT VENTURES AND ASSOCIATES
Number
49
11
3
63
Projects
$ million
5,782
688
110
6,580
Number
198
122
21
341
Shell share of comprehensive income of joint ventures and associates
2017
2016
Joint
Associates
Total
ventures Associates
Total
Joint
ventures
Income for the period
Other comprehensive
income/(loss) for the period
Comprehensive income for the period
[A] Includes an impairment loss of $837 million as a result of changes in the outlook of a joint venture in the Oceania region.
2,266 2,129
2,102 2,123
4,395
4,225
164
170
6
2,332 1,213 3,545
Joint
ventures
Associates
Total
908 [A] 2,619 3,527
78
(106 )
(28 )
(73 )
33
(40 )
2,410 1,107 3,517
835
2,652 3,487
Wells
$ million
4,562
1,647
371
6,580
$ million
2015
Oil and gas price assumptions applied for impairment testing are reviewed and, where necessary, adjusted on a periodic basis. Reviews include comparison
with available market data and forecasts that reflect developments in demand such as global economic growth, technology efficiency, policy measures and, in
Net assets
supply, consideration of investment and resource potential, cost of development of new supply, and behaviour of major resource holders. The near-term
Joint
ventures
Associates
Total
Joint
ventures
Associates
Total
15,052 12,875 27,927 20,555 12,700 33,255
commodity price assumptions applied in impairment testing in 2017 were as follows:
Shell’s interest in the Motiva Enterprises LLC (Motiva) joint venture was disposed of in 2017 (see Note 29). The carrying amount at December 31, 2016, was
$5,132 million.
Carrying amount of interests in joint ventures and associates
Dec 31, 2017
$ million
Dec 31, 2016
Commodity price assumptions [A]
Brent crude oil ($/b)
Henry Hub natural gas ($/MMBtu)
[A] Money of the day.
2018
50
3.00
2019
60
3.00
2020
65
3.25
Transactions with joint ventures and associates
Sales and charges to joint ventures and associates
Purchases and charges from joint ventures and associates
2017
13,121
10,680
2016
24,214
13,859
$ million
2015
36,548
26,440
For periods after 2020, the real terms long-term price assumptions applied were $70 per barrel (/b) (2016: $80/b) for Brent crude oil and
$3.50 per million British thermal units (/MMBtu) (2016: $4.00/MMBtu) for Henry Hub natural gas.
These transactions principally comprise sales and purchases of goods and services in the ordinary course of business. Related balances outstanding at
December 31, 2017, and 2016, are presented in Notes 11 and 15.
Other arrangements in respect of joint ventures and associates
Commitments to make purchases from joint ventures and associates
Commitments to provide debt or equity funding to joint ventures and associates
Dec 31, 2017
78,837
1,216
$ million
Dec 31, 2016
85,333
2,703
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
154
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10 INVESTMENTS IN SECURITIES
Investments in securities
Equity securities
Debt securities
Total
At fair value
Measured by reference to prices in active markets for identical assets
Measured using predominantly unobservable inputs
Total
At cost
Total
Dec 31, 2017
$ million
Dec 31, 2016
5,976
1,246
7,222
5,776
1,268
7,044
178
7,222
4,784
1,168
5,952
4,408
1,233
5,641
311
5,952
Inventories at December 31, 2017, include write-downs to net realisable value of $253 million (2016: $566 million).
13 CASH AND CASH EQUIVALENTS
Equity securities at December 31, 2017, principally comprised an 8% interest in Canadian Natural Resources Limited (see Note 8) of $3,506 million and a
15% interest in Malaysia LNG Tiga Sendirian Berhad (Tiga). Shell’s 13% interest in Woodside was disposed of in 2017. Its carrying amount at
December 31, 2016, was $2,516 million. Debt securities principally comprised a portfolio required to be held by Shell’s insurance entities as security for
their activities.
Short-term bank deposits
Money market funds, reverse repos and other cash equivalents
Investments in securities measured using predominantly unobservable inputs [A]
At January 1
Losses recognised in other comprehensive income/(loss)
Other movements
2017
1,233
(108 )
143
$ million
2016
1,625
(333)
(59)
Included in cash and cash equivalents at December 31, 2017, were amounts totalling $120 million (2016: $349 million) subject to currency controls or
other legal restrictions. Information about credit risk is presented in Note 19.
14 DEBT AND LEASE ARRANGEMENTS
At December 31
[A] Based on expected dividend flows, adjusted for country and other risks as appropriate and discounted to their present value. All are equity securities, mainly comprising Shell’s interest in Tiga. If the oil price assumption
used in its valuation were to be decreased by $10 per barrel with no change in other measurement inputs, its carrying amount at December 31, 2017, would decrease by $99 million (2016: $110 million).
1,268
1,233
11 TRADE AND OTHER RECEIVABLES
Trade receivables
Other receivables
Amounts due from joint ventures and associates
Derivative contracts (see Note 19)
Prepayments and deferred charges
Total
Current
30,721
9,036
868
5,304
3,940
49,869
Dec 31, 2017
Non-current
—
5,525
1,327
919
1,623
9,394
$ million
Dec 31, 2016
Non-current
—
5,231
2,510
405
1,407
9,553
Current
25,766
7,556
2,175
5,957
4,210
45,664
The fair value of financial assets included above approximates the carrying amount and, other than the fair value of certain derivative contracts, was
determined from predominantly unobservable inputs.
Other receivables at December 31, 2017, include receivables from certain governments in their capacity as joint arrangement partners, of $2,265 million
(2016: $2,644 million), after provisions for impairments, that are overdue in part or in full. Recoverability and timing thereof is subject to uncertainty, however,
the ultimate risk of default on the carrying amount is considered to be low. Other receivables also include income tax receivable (see Note 16) and other taxes
recoverable.
Provisions for impairments deducted from trade and other receivables amounted to $881 million at December 31, 2017 (2016: $822 million, as revised).
Currency translation differences and foreign exchange gains/(losses)
Overdue trade receivables
Overdue 1–30 days
Overdue 31–180 days
Overdue more than 180 days
Total
Dec 31, 2017
1,154
480
368
2,002
$ million
Dec 31, 2016
747
649
545
1,941
Information about offsetting, collateral and credit risk is presented in Note 19.
Management’s financial strategy is to manage Shell’s assets and liabilities with the aim that, across the business cycle, “cash in” at least equals “cash out”
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
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12 INVENTORIES
Oil, gas and chemicals
Materials
Total
Cash
Total
DEBT
Debt
Short-term debt
Long-term debt due within 1 year
Current debt
Non-current debt
Total
Net debt
At January 1, 2017
Cash flow
Finance lease additions
Other movements
At December 31, 2017
At January 1, 2016
Additions on acquisition of BG
Cash flow
Finance lease additions
Other movements
At December 31, 2016
Dec 31, 2017
22,962
2,261
25,223
$ million
Dec 31, 2016
19,653
2,122
21,775
Dec 31, 2017
4,672
3,996
11,644
20,312
$ million
Dec 31, 2016
3,426
4,084
11,620
19,130
Dec 31, 2017
$ million
Dec 31, 2016
Debt
(excluding
finance lease
Finance
lease
Debt
(excluding
finance lease
liabilities)
Finance
lease
liabilities
liabilities)
liabilities
Total
1,211
—
1,211
1,787
—
9,500
1,084
10,584
6,574
1,123
10,711
1,084
11,795
8,361
1,123
Total
1,787
7,697
9,484
59,430
14,440
73,870
69,256 13,736
82,992
70,141
15,524
85,665
77,617 14,859
92,476
Current
debt
(9,484)
11,942
(56)
(13,717 )
(480)
(11,795 )
(5,530)
(1,544)
5,092
(147 )
(7,438 )
83
(9,484)
Non-current
debt
(82,992 )
(113 )
(1,772 )
13,749
(2,742 )
(73,870 )
(52,849 )
(19,690 )
(16,166 )
(2,581 )
6,687
1,607
(82,992 )
Cash and cash
equivalents
(see Note 13)
19,130
535
—
—
647
20,312
31,752
6,803
(17,922 )
—
—
(1,503 )
19,130
$ million
Net debt
(73,346 )
12,364
(1,828 )
32
(2,575)
(65,353)
(26,627 )
(14,431)
(28,996 )
(2,728 )
(751)
187
(73,346 )
Currency translation differences and foreign exchange gains/(losses)
while maintaining a strong balance sheet.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
157
10 INVESTMENTS IN SECURITIES
Investments in securities
Equity securities
Debt securities
Total
At fair value
Total
At cost
Total
their activities.
At January 1
Other movements
At December 31
Dec 31, 2017
$ million
Dec 31, 2016
5,976
1,246
7,222
5,776
1,268
7,044
178
7,222
2017
1,233
(108 )
143
1,268
4,784
1,168
5,952
4,408
1,233
5,641
311
5,952
$ million
2016
1,625
(333)
(59)
1,233
[A] Based on expected dividend flows, adjusted for country and other risks as appropriate and discounted to their present value. All are equity securities, mainly comprising Shell’s interest in Tiga. If the oil price assumption
used in its valuation were to be decreased by $10 per barrel with no change in other measurement inputs, its carrying amount at December 31, 2017, would decrease by $99 million (2016: $110 million).
11 TRADE AND OTHER RECEIVABLES
Trade receivables
Other receivables
Amounts due from joint ventures and associates
Derivative contracts (see Note 19)
Prepayments and deferred charges
Total
Dec 31, 2017
Non-current
$ million
Dec 31, 2016
Current
Non-current
—
25,766
5,525
1,327
919
1,623
9,394
7,556
2,175
5,957
4,210
45,664
—
5,231
2,510
405
1,407
9,553
Current
30,721
9,036
868
5,304
3,940
49,869
The fair value of financial assets included above approximates the carrying amount and, other than the fair value of certain derivative contracts, was
determined from predominantly unobservable inputs.
Other receivables at December 31, 2017, include receivables from certain governments in their capacity as joint arrangement partners, of $2,265 million
(2016: $2,644 million), after provisions for impairments, that are overdue in part or in full. Recoverability and timing thereof is subject to uncertainty, however,
the ultimate risk of default on the carrying amount is considered to be low. Other receivables also include income tax receivable (see Note 16) and other taxes
recoverable.
Provisions for impairments deducted from trade and other receivables amounted to $881 million at December 31, 2017 (2016: $822 million, as revised).
Overdue trade receivables
Overdue 1–30 days
Overdue 31–180 days
Overdue more than 180 days
Total
Information about offsetting, collateral and credit risk is presented in Note 19.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
156
Dec 31, 2017
1,154
480
368
2,002
$ million
Dec 31, 2016
747
649
545
1,941
12 INVENTORIES
Oil, gas and chemicals
Materials
Total
Dec 31, 2017
22,962
2,261
25,223
$ million
Dec 31, 2016
19,653
2,122
21,775
Measured by reference to prices in active markets for identical assets
Measured using predominantly unobservable inputs
Inventories at December 31, 2017, include write-downs to net realisable value of $253 million (2016: $566 million).
13 CASH AND CASH EQUIVALENTS
Equity securities at December 31, 2017, principally comprised an 8% interest in Canadian Natural Resources Limited (see Note 8) of $3,506 million and a
15% interest in Malaysia LNG Tiga Sendirian Berhad (Tiga). Shell’s 13% interest in Woodside was disposed of in 2017. Its carrying amount at
December 31, 2016, was $2,516 million. Debt securities principally comprised a portfolio required to be held by Shell’s insurance entities as security for
Cash
Short-term bank deposits
Money market funds, reverse repos and other cash equivalents
Total
Dec 31, 2017
4,672
3,996
11,644
20,312
$ million
Dec 31, 2016
3,426
4,084
11,620
19,130
Investments in securities measured using predominantly unobservable inputs [A]
Included in cash and cash equivalents at December 31, 2017, were amounts totalling $120 million (2016: $349 million) subject to currency controls or
other legal restrictions. Information about credit risk is presented in Note 19.
Losses recognised in other comprehensive income/(loss)
14 DEBT AND LEASE ARRANGEMENTS
DEBT
Debt
Short-term debt
Long-term debt due within 1 year
Current debt
Non-current debt
Total
Net debt
At January 1, 2017
Cash flow
Finance lease additions
Other movements
Currency translation differences and foreign exchange gains/(losses)
At December 31, 2017
At January 1, 2016
Additions on acquisition of BG
Cash flow
Finance lease additions
Other movements
Currency translation differences and foreign exchange gains/(losses)
At December 31, 2016
Dec 31, 2017
$ million
Dec 31, 2016
Debt
(excluding
finance lease
liabilities)
Finance
lease
liabilities
1,211
9,500
—
1,084
10,711
59,430
1,084
14,440
Debt
(excluding
finance lease
liabilities)
Finance
lease
liabilities
1,787
6,574
—
1,123
Total
1,787
7,697
8,361
1,123
69,256 13,736
9,484
82,992
Total
1,211
10,584
11,795
73,870
70,141
15,524
85,665
77,617 14,859
92,476
Current
debt
(9,484)
11,942
(56)
(13,717 )
(480)
(11,795 )
(5,530)
(1,544)
5,092
(147 )
(7,438 )
83
(9,484)
Non-current
debt
(82,992 )
(113 )
(1,772 )
13,749
(2,742 )
(73,870 )
(52,849 )
(19,690 )
(16,166 )
(2,581 )
6,687
1,607
(82,992 )
Cash and cash
equivalents
(see Note 13)
19,130
535
—
—
647
20,312
31,752
6,803
(17,922 )
—
—
(1,503 )
19,130
$ million
Net debt
(73,346 )
12,364
(1,828 )
32
(2,575)
(65,353)
(26,627 )
(14,431)
(28,996 )
(2,728 )
(751)
187
(73,346 )
Management’s financial strategy is to manage Shell’s assets and liabilities with the aim that, across the business cycle, “cash in” at least equals “cash out”
while maintaining a strong balance sheet.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
157
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[Note 14 continued]
Gearing, defined as net debt (total debt less cash and cash equivalents) as a percentage of total capital (net debt plus total equity), is a key measure of Shell’s
capital structure. Across the business cycle, management aims to manage gearing within a range of 0-30%. At December 31, 2017, gearing was 24.8%
(2016: 28.0%).
2016
Gearing
Net debt
Total equity
Total capital
Gearing
$ million, except where indicated
Dec 31, 2016
Dec 31, 2017
65,353
197,812
263,165
24.8%
73,346
188,511
261,857
28.0%
Management’s priorities for applying Shell’s cash are the servicing and reduction of debt commitments, payment of dividends, followed by a balance of
capital investment and share buybacks. Management’s policy is to grow the dollar dividend through time, in line with its view of Shell’s underlying earnings
and cash flow.
Shell has access to international debt capital markets via two commercial paper (CP) programmes, a Euro medium-term note (EMTN) programme and a US
universal shelf (US shelf) registration. Issuances under the CP programmes are supported by a committed credit facility and cash.
Borrowing facilities and amounts undrawn
CP programmes
EMTN programme
US shelf registration
Committed credit facility
Dec 31, 2017
Facility
Dec 31, 2016
Dec 31, 2017
$ million
Amount undrawn
Dec 31, 2016
20,000
unlimited
unlimited
8,500
20,000
unlimited
unlimited
7,480
19,659
N/A
N/A
8,500
18,982
N/A
N/A
7,480
Under the CP programmes, Shell can issue debt of up to $10 billion with maturities not exceeding 270 days and $10 billion with maturities not
exceeding 397 days. The EMTN programme is updated each year, most recently in August 2017. No debt was issued under this programme in 2017
(2016: $4,510 million issued). The US shelf registration provides Shell with the flexibility to issue debt securities, ordinary shares, preferred shares and
warrants. The registration is updated every three years and was last updated in December 2017. No debt was issued under this registration in 2017 (2016:
$12,000 million issued). The committed credit facility is available at pre-agreed margins and expires in 2020. The terms and availability are not conditional
on Shell’s financial ratios or its financial credit ratings.
In addition, other subsidiaries have access to undrawn short-term bank facilities totalling $3,409 million at December 31, 2017 (2016: $3,835 million).
[A] Including $5,660 million in respect of drilling and ancillary equipment (see Note 8).
Interest rate swaps have been entered into against certain fixed rate debt affecting the effective interest rate on these balances (see Note 19).
The following tables compare contractual cash flows for debt excluding finance lease liabilities at December 31, with the carrying amount in the Consolidated
Balance Sheet. Contractual amounts reflect the effects of changes in foreign exchange rates; differences from carrying amounts reflect the effects of
discounting, premiums and, where hedge accounting is applied, fair value adjustments. Interest is estimated assuming interest rates applicable to variable rate
debt remain constant and there is no change in aggregate principal amounts of debt other than repayment at scheduled maturity, as reflected in the table.
Commercial paper
Bonds
Bank and other borrowings
Total (excluding interest)
Interest
prices quoted for those securities.
LEASE ARRANGEMENTS
2017
Total
2016
Less than 1 year
Between 1 and 5 years
5 years and later
Less than 1 year
Between 1 and 5 years
5 years and later
Total
Less than
Between
1 and 2
1 year
years
Between
2 and 3
years
1,018
5,943
1,363
8,324
2,236
—
—
8,483
7,964
595
9,078
2,051
358
8,322
1,790
Between
3 and 4
years
—
5,900
302
6,202
1,557
Contractual payments
Difference
Between
4 and 5
5 years
from carrying
Carrying
years
and later
Total
amount
$ million
—
—
1,018
4,902
39,566
72,758
213
5,115
1,423
572
3,403
40,138
77,179
23,230
32,287
amount
1,012
73,079
3,526
77,617
(6)
321
123
438
The fair value of debt excluding finance lease liabilities at December 31, 2017, was $74,650 million (2016: $80,408 million), mainly determined from the
Finance lease liabilities mainly relate to contracts in Upstream and Integrated Gas for floating production, storage and offloading units, subsea equipment and
power generation. Finance lease liabilities are secured on the leased assets. Operating lease contracts are, in Upstream and Integrated Gas, principally for
drilling and ancillary equipment, service vessels, LNG vessels and land and buildings; in Downstream, principally for tankers, storage capacity and retail sites;
and in Corporate, principally for land and buildings.
The future minimum lease payments for finance and operating leases and the present value of future minimum finance lease payments at December 31,
by payment date are as follows:
Future
minimum
lease payments
2,274
8,246
15,043
25,563
Future
minimum
lease payments
2,193
7,727
14,305
24,225
$ million
Finance leases
Operating leases
Present value
of future minimum
lease payments
Future
minimum lease
payments[A]
Interest
1,190
3,887
4,962
10,039
1,084
4,359
10,081
15,524
4,793
12,961
5,715
23,469
$ million
Finance leases
Operating leases
Present value
of future minimum
lease payments
Future
minimum lease
payments[A]
1,123
4,462
9,274
14,859
4,805
13,979
7,214
25,998
Interest
1,070
3,265
5,031
9,366
[A] Including $6,926 million in respect of drilling and ancillary equipment (see Note 8).
Future minimum lease payments at December 31, 2017, are stated before deduction of amounts expected to be received under non-cancellable sub-leases of
$336 million (2016: $418 million) in respect of finance leases and $300 million (2016: $252 million) in respect of operating leases.
Operating lease expense in 2017 was $4,822 million (2016: $5,063 million; 2015: $4,751 million).
Between
Less than 1 and 2
years
1 year
Between
Between
Between
2 and 3
years
3 and 4
years
4 and 5
years
Contractual payments
$ million
Difference
from carrying
amount
Total
Carrying
amount
5 years
and later
—
341
—
—
—
—
341
8,989 8,306 5,900 5,047 4,620 35,037 67,899
36 1,763
1,321
127
180
43
56
5
346
131 68,030
2 1,765
2017
Commercial paper
Bonds
Bank and other borrowings
Total (excluding interest)
Interest
10,651 8,349 6,027 5,103 4,800 35,073 70,003
138 70,141
1,957 1,688 1,457 1,328 1,221 15,293 22,944
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
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158
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(6)
321
123
438
1,018
72,758
3,403
40,138
77,179
23,230
32,287
Difference
from carrying
amount
Total
5 years
and later
—
39,566
572
$ million
Carrying
amount
1,012
73,079
3,526
77,617
Gearing, defined as net debt (total debt less cash and cash equivalents) as a percentage of total capital (net debt plus total equity), is a key measure of Shell’s
capital structure. Across the business cycle, management aims to manage gearing within a range of 0-30%. At December 31, 2017, gearing was 24.8%
2016
Contractual payments
$ million, except where indicated
Dec 31, 2017
Dec 31, 2016
65,353
197,812
263,165
24.8%
73,346
188,511
261,857
28.0%
Commercial paper
Bonds
Bank and other borrowings
Total (excluding interest)
Interest
Between
Between
Between
Between
Less than
1 year
1,018
5,943
1,363
8,324
2,236
1 and 2
years
—
8,483
595
9,078
2,051
2 and 3
years
—
7,964
358
8,322
1,790
3 and 4
years
—
5,900
302
6,202
1,557
4 and 5
years
—
4,902
213
5,115
1,423
The fair value of debt excluding finance lease liabilities at December 31, 2017, was $74,650 million (2016: $80,408 million), mainly determined from the
prices quoted for those securities.
LEASE ARRANGEMENTS
Finance lease liabilities mainly relate to contracts in Upstream and Integrated Gas for floating production, storage and offloading units, subsea equipment and
power generation. Finance lease liabilities are secured on the leased assets. Operating lease contracts are, in Upstream and Integrated Gas, principally for
drilling and ancillary equipment, service vessels, LNG vessels and land and buildings; in Downstream, principally for tankers, storage capacity and retail sites;
and in Corporate, principally for land and buildings.
The future minimum lease payments for finance and operating leases and the present value of future minimum finance lease payments at December 31,
by payment date are as follows:
2017
Less than 1 year
Between 1 and 5 years
5 years and later
Total
[A] Including $5,660 million in respect of drilling and ancillary equipment (see Note 8).
Interest rate swaps have been entered into against certain fixed rate debt affecting the effective interest rate on these balances (see Note 19).
2016
Less than 1 year
Between 1 and 5 years
5 years and later
Total
[A] Including $6,926 million in respect of drilling and ancillary equipment (see Note 8).
Future
minimum
lease payments
Finance leases
Present value
of future minimum
lease payments
Interest
$ million
Operating leases
Future
minimum lease
payments[A]
2,274
8,246
15,043
25,563
1,190
3,887
4,962
10,039
1,084
4,359
10,081
15,524
4,793
12,961
5,715
23,469
Future
minimum
lease payments
Finance leases
Present value
of future minimum
lease payments
Interest
$ million
Operating leases
Future
minimum lease
payments[A]
2,193
7,727
14,305
24,225
1,070
3,265
5,031
9,366
1,123
4,462
9,274
14,859
4,805
13,979
7,214
25,998
Future minimum lease payments at December 31, 2017, are stated before deduction of amounts expected to be received under non-cancellable sub-leases of
$336 million (2016: $418 million) in respect of finance leases and $300 million (2016: $252 million) in respect of operating leases.
Operating lease expense in 2017 was $4,822 million (2016: $5,063 million; 2015: $4,751 million).
(2016: 28.0%).
Gearing
Net debt
Total equity
Total capital
Gearing
and cash flow.
CP programmes
EMTN programme
US shelf registration
Committed credit facility
Management’s priorities for applying Shell’s cash are the servicing and reduction of debt commitments, payment of dividends, followed by a balance of
capital investment and share buybacks. Management’s policy is to grow the dollar dividend through time, in line with its view of Shell’s underlying earnings
Shell has access to international debt capital markets via two commercial paper (CP) programmes, a Euro medium-term note (EMTN) programme and a US
universal shelf (US shelf) registration. Issuances under the CP programmes are supported by a committed credit facility and cash.
Borrowing facilities and amounts undrawn
Facility
$ million
Amount undrawn
Dec 31, 2017
Dec 31, 2016
Dec 31, 2017
Dec 31, 2016
20,000
20,000
19,659
18,982
unlimited
unlimited
unlimited
unlimited
N/A
N/A
8,500
7,480
8,500
N/A
N/A
7,480
Under the CP programmes, Shell can issue debt of up to $10 billion with maturities not exceeding 270 days and $10 billion with maturities not
exceeding 397 days. The EMTN programme is updated each year, most recently in August 2017. No debt was issued under this programme in 2017
(2016: $4,510 million issued). The US shelf registration provides Shell with the flexibility to issue debt securities, ordinary shares, preferred shares and
warrants. The registration is updated every three years and was last updated in December 2017. No debt was issued under this registration in 2017 (2016:
$12,000 million issued). The committed credit facility is available at pre-agreed margins and expires in 2020. The terms and availability are not conditional
on Shell’s financial ratios or its financial credit ratings.
In addition, other subsidiaries have access to undrawn short-term bank facilities totalling $3,409 million at December 31, 2017 (2016: $3,835 million).
The following tables compare contractual cash flows for debt excluding finance lease liabilities at December 31, with the carrying amount in the Consolidated
Balance Sheet. Contractual amounts reflect the effects of changes in foreign exchange rates; differences from carrying amounts reflect the effects of
discounting, premiums and, where hedge accounting is applied, fair value adjustments. Interest is estimated assuming interest rates applicable to variable rate
debt remain constant and there is no change in aggregate principal amounts of debt other than repayment at scheduled maturity, as reflected in the table.
2017
Commercial paper
Bonds
Bank and other borrowings
Total (excluding interest)
Interest
Contractual payments
Between
Between
Between
Between
Less than 1 and 2
2 and 3
3 and 4
4 and 5
5 years
Difference
from carrying
1 year
years
years
years
years
and later
Total
amount
341
—
—
—
—
—
341
5
346
8,989 8,306 5,900 5,047 4,620 35,037 67,899
131 68,030
1,321
43
127
56
180
36 1,763
2 1,765
10,651 8,349 6,027 5,103 4,800 35,073 70,003
138 70,141
1,957 1,688 1,457 1,328 1,221 15,293 22,944
$ million
Carrying
amount
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
158
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15 TRADE AND OTHER PAYABLES
Trade payables
Other payables
Amounts due to joint ventures and associates
Derivative contracts (see Note 19)
Accruals and deferred income
Total
Current
33,196
5,767
2,021
5,253
10,426
56,663
Dec 31, 2017
Non-current
—
3,090
29
981
328
4,428
$ million
Dec 31, 2016
Non-current
—
3,035
26
3,315
549
6,925
Current
28,069
5,007
1,973
6,418
11,950
53,417
The fair value of financial liabilities included above approximates the carrying amount and, other than the fair value of certain derivative contracts, was
determined from predominantly unobservable inputs.
Other payables include amounts due to joint arrangement partners and in respect of other project-related items and cash-settled share-based compensation
plans.
Information about offsetting, collateral and liquidity risk is presented in Note 19.
16 TAXATION
Taxation charge/(credit)
Current tax
Charge in respect of current period
Adjustments in respect of prior periods
Total
Deferred tax
Relating to the origination and reversal of temporary differences, tax losses and credits
Relating to changes in tax rates and legislation
Adjustments in respect of prior periods
Total
Total taxation charge/(credit)
2017
2016
7,204
(613 )
6,591
(4,102 )
2,004
202
(1,896 )
4,695
3,936
(1,205 )
2,731
(2,688 )
(200 )
986
(1,902 )
829
$ million
2015
6,886
172
7,058
(6,833 )
(526)
148
(7,211)
(153)
Adjustments in respect of prior periods relate to events in the current period and reflect the effects of changes in rules, facts or other factors compared with
those used in establishing the current tax position or deferred tax balance in prior periods.
In 2017, deferred tax relating to changes in tax rates and legislation was mainly in respect of the US Tax Cuts and Jobs Act (the Act).
Reconciliation of applicable tax charge/(credit) at statutory tax rates to taxation charge/(credit)
$ million
Income before taxation
Less: share of profit of joint ventures and associates
Income/(loss) before taxation and share of profit of joint ventures and associates
Applicable tax charge/(credit) at statutory tax rates
Adjustments in respect of prior periods
Tax effects of:
Expenses not deductible for tax purposes
Changes in tax rates and legislation (see above)
Income not subject to tax at statutory rates
(Recognition)/derecognition of deferred tax assets
Deductible items not expensed
Taxable income not recognised
Other
Taxation charge/(credit)
2017
18,130
(4,225 )
13,905
4,532
(411 )
2,423
2,004
(1,852 )
(957 )
(584)
251
(711 )
4,695
2016
5,606
(3,545 )
2,061
(344 )
(219 )
2,066
(200 )
(1,740 )
1,575
(516 )
509
(302 )
829
2015
2,047
(3,527 )
(1,480)
930
320
1,452
(526)
(2,597 )
108
(418 )
384
194
(153)
Dec 31, 2017
4,062
3,188
7,250
$ million
Dec 31, 2016
4,082
2,603
6,685
The weighted average of statutory tax rates was 33% in 2017 (2016: (17)%; 2015: (63)%). The rate in 2017 reflects a return to an overall tax charge on a
pre-tax income. The negative rate in 2016 (tax credit on pre-tax income) was mainly due to losses incurred in jurisdictions with a higher weighted average
statutory rate than jurisdictions in which profits were made. The negative rate in 2015 (tax charge on a pre-tax loss) was mainly due to impairment charges,
and other charges related to ceasing activities in Alaska and the Carmon Creek project.
Taxes payable
Income taxes
Total
Sales taxes, excise duties and similar levies
Included in other receivables at December 31, 2017 (see Note 11), was income tax receivable of $933 million (2016: $1,037 million).
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
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The fair value of financial liabilities included above approximates the carrying amount and, other than the fair value of certain derivative contracts, was
determined from predominantly unobservable inputs.
Other payables include amounts due to joint arrangement partners and in respect of other project-related items and cash-settled share-based compensation
Information about offsetting, collateral and liquidity risk is presented in Note 19.
15 TRADE AND OTHER PAYABLES
Trade payables
Other payables
Amounts due to joint ventures and associates
Derivative contracts (see Note 19)
Accruals and deferred income
Total
plans.
16 TAXATION
Taxation charge/(credit)
Charge in respect of current period
Adjustments in respect of prior periods
Current tax
Total
Deferred tax
Relating to changes in tax rates and legislation
Adjustments in respect of prior periods
Total
Total taxation charge/(credit)
Dec 31, 2017
Non-current
$ million
Dec 31, 2016
Current
Non-current
—
28,069
3,090
29
981
328
5,007
1,973
6,418
11,950
4,428
53,417
—
3,035
26
3,315
549
6,925
Current
33,196
5,767
2,021
5,253
10,426
56,663
2017
2016
7,204
(613 )
6,591
(4,102)
2,004
202
(1,896 )
4,695
3,936
(1,205 )
2,731
(2,688 )
(200 )
986
(1,902 )
829
$ million
2015
6,886
172
7,058
(6,833 )
(526)
148
(7,211)
(153)
Adjustments in respect of prior periods relate to events in the current period and reflect the effects of changes in rules, facts or other factors compared with
those used in establishing the current tax position or deferred tax balance in prior periods.
In 2017, deferred tax relating to changes in tax rates and legislation was mainly in respect of the US Tax Cuts and Jobs Act (the Act).
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
160
Reconciliation of applicable tax charge/(credit) at statutory tax rates to taxation charge/(credit)
Income before taxation
Less: share of profit of joint ventures and associates
Income/(loss) before taxation and share of profit of joint ventures and associates
Applicable tax charge/(credit) at statutory tax rates
Adjustments in respect of prior periods
Tax effects of:
Expenses not deductible for tax purposes
Changes in tax rates and legislation (see above)
Income not subject to tax at statutory rates
(Recognition)/derecognition of deferred tax assets
Deductible items not expensed
Taxable income not recognised
Other
Taxation charge/(credit)
2017
18,130
(4,225 )
13,905
4,532
(411 )
2,423
2,004
(1,852 )
(957 )
(584)
251
(711 )
4,695
2016
5,606
(3,545 )
2,061
(344 )
(219 )
2,066
(200 )
(1,740 )
1,575
(516 )
509
(302 )
829
$ million
2015
2,047
(3,527 )
(1,480)
930
320
1,452
(526)
(2,597 )
108
(418 )
384
194
(153)
The weighted average of statutory tax rates was 33% in 2017 (2016: (17)%; 2015: (63)%). The rate in 2017 reflects a return to an overall tax charge on a
pre-tax income. The negative rate in 2016 (tax credit on pre-tax income) was mainly due to losses incurred in jurisdictions with a higher weighted average
statutory rate than jurisdictions in which profits were made. The negative rate in 2015 (tax charge on a pre-tax loss) was mainly due to impairment charges,
and other charges related to ceasing activities in Alaska and the Carmon Creek project.
Taxes payable
Income taxes
Sales taxes, excise duties and similar levies
Total
Dec 31, 2017
4,062
3,188
7,250
$ million
Dec 31, 2016
4,082
2,603
6,685
Relating to the origination and reversal of temporary differences, tax losses and credits
Included in other receivables at December 31, 2017 (see Note 11), was income tax receivable of $933 million (2016: $1,037 million).
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
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[Note 16 continued]
Deferred tax
At January 1, 2017
Deferred tax assets
Deferred tax liabilities
Recognised in the year
Recognised in income
Other movements
Currency translation differences
At December 31, 2017
Deferred tax assets
Deferred tax liabilities
At January 1, 2016
Deferred tax assets
Deferred tax liabilities
Recognised in the year
Additions on acquisition of BG
Recognised in income
Other movements
Currency translation differences
At December 31, 2016
Deferred tax assets
Deferred tax liabilities
Decommissioning
and other
provisions
Total
Losses
carried
forward
Property,
plant and
equipment
Retirement
benefits
14,425
(15,274 )
2,944
4,789
12,179
3,816
(6,607 )
(23,846 )
3,817
654
(849 )
7,733
15,995
(30,453 )
4,471
1,896
(584)
321
1,633
13,791
(13,007 )
784
(1,853)
33
269
(1,551)
3,679
2,503
6,182
(3,221)
(763)
553
(3,431)
6,626
964
(662 )
(622)
(876)
153
6,928
(1,345 )
1,032
11,765
799
12,564
(7,698 )
(15,827 )
3,347
(221)
(23,525 )
3,126
11,033
(8,976 )
3,674
5,307
7,688
3,806
(6,651 )
(17,664 )
3,461
309
2,057
8,981
11,494
(24,315 )
3,770
(5,163 ) [A]
1,902
610
(255 )
(2,906 )
14,425
(15,274 )
(849 )
702
(1,445 )
94
(599)
(1,248 )
2,944
4,789
7,733
1,624
3,566
(229)
(460)
4,501
(7,310 )
144
199
829
(6,138 )
39
33
738
(109)
701
12,179
3,816
15,995
(6,607 )
(23,846 )
3,817
654
(30,453 )
4,471
$ million
Other
2,092
(687)
1,405
966
58
8
2,698
(261 )
2,437
2,861
(734 )
2,127
(218 )
(396 )
(192 )
84
(722 )
2,092
(687)
1,405
[A] Comprising deferred tax assets and liabilities of $3,278 million and $8,441 million respectively.
The table above takes into consideration the offsetting of deferred tax assets and deferred tax liabilities within the same tax jurisdiction. The overall deferred tax
position in a particular tax jurisdiction determines if a deferred tax balance is presented within deferred tax assets or deferred tax liabilities. Accordingly,
certain deferred tax assets are presented within deferred tax liabilities, and certain deferred tax liabilities within deferred tax assets.
Other movements in deferred tax assets and liabilities principally relate to acquisitions, sales of non-current assets and businesses, and amounts recognised in
other comprehensive income, which in 2017 include amounts in respect of the Act.
Retirement benefits in the Consolidated Balance Sheet:
Before taking into consideration the offsetting described above, the amount of deferred tax assets dependent on future taxable profits not arising from the
reversal of existing deferred tax liabilities, and which relate to tax jurisdictions where Shell has suffered a loss in the current or preceding year, was
$12,452 million at December 31, 2017 (2016: $11,896 million). It is considered probable based on business forecasts that such profits will be available.
Unrecognised deductible temporary differences, unused tax losses and credits carried forward amounted to $34,773 million at December 31, 2017
(2016: $39,589 million) including amounts of $28,016 million (2016: $31,669 million) that are subject to time limits for utilisation of five years or later or
are not time limited.
Retained earnings of subsidiaries, joint ventures and associates amounted to $223,746 million at December 31, 2017 (2016: $211,075 million). Provision
has been made for withholding and other taxes that would become payable on the distribution of these earnings only to the extent that either Shell does not
control the relevant entity or it is expected that these earnings will be remitted in the foreseeable future. For a significant majority of the retained earnings no
provision has been made, because either distribution would not be subject to tax or is not expected in the foreseeable future.
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17 RETIREMENT BENEFITS
Retirement benefits are provided through a number of funded and unfunded defined benefit plans and defined contribution plans, the most significant of which
are in the Netherlands, UK and USA. Benefits comprise principally pensions; retirement healthcare and life insurance are also provided in certain countries.
Retirement benefit expense is presented principally within production and manufacturing expenses and selling, distribution and administrative expenses in the
Consolidated Statement of Income. Interest income on plan assets is calculated using the same rate as that applied to the related defined benefit obligations
Retirement benefit expense
Defined benefit plans:
Current service cost, net of plan participants’ contributions
Interest expense on obligations
Interest income on plan assets
Other
Total
Defined contribution plans
Total retirement benefit expense
for each plan to determine interest expense.
Remeasurements
Actuarial gains/(losses) on obligations:
Due to changes in demographic assumptions
Due to changes in financial assumptions [A]
Due to experience adjustments
Total
Return on plan assets in excess of interest income
Other movements
Total remeasurements
[A] Mainly in the discount rates applied.
Defined benefit plans
Obligations
Plan assets
Net liability
Non-current assets
Non-current liabilities
Current liabilities
Total
2017
2016
1,500
2,309
(2,019 )
(404 )
1,386
429
1,815
1,527
2,643
(2,358 )
(116 )
1,696
485
2,181
2017
2016
933
(4,495 )
37
(3,525 )
4,942
50
1,467
809
(11,391 )
642
(9,940 )
5,106
18
(4,816 )
$ million
2015
1,855
2,944
(2,495 )
207
2,511
473
2,984
$ million
2015
(517)
6,381
121
5,985
298
55
6,338
Dec 31, 2017
(104,285 )
93,243
(11,042 )
2,799
(13,247 )
(594 )
(11,042 )
$ million
Dec 31, 2016
(94,405 )
81,276
(13,129)
1,456
(14,130)
(455)
(13,129)
Experience adjustments arise from differences between the actuarial assumptions made in respect of the year and actual outcomes.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
163
Deferred tax
At January 1, 2017
Deferred tax assets
Deferred tax liabilities
Recognised in the year
Recognised in income
Other movements
At December 31, 2017
Deferred tax assets
Deferred tax liabilities
At January 1, 2016
Deferred tax assets
Deferred tax liabilities
Currency translation differences
Recognised in the year
Additions on acquisition of BG
Recognised in income
Other movements
Currency translation differences
At December 31, 2016
Deferred tax assets
Deferred tax liabilities
Decommissioning
and other
provisions
Total
Losses
carried
forward
Property,
plant and
equipment
Retirement
benefits
Other
14,425
2,944
12,179
(6,607 )
3,817
2,092
(15,274 )
(849 )
4,789
3,816
(23,846 )
654
(687)
7,733
15,995
(30,453 )
4,471
1,405
1,896
(584)
321
1,633
(1,853)
(3,221)
6,626
33
269
(763)
553
964
(662 )
(622)
(876)
153
966
58
8
(1,551)
(3,431)
6,928
(1,345 )
1,032
13,791
(13,007 )
784
3,679
2,503
6,182
11,765
(7,698 )
3,347
799
(15,827 )
(221)
12,564
(23,525 )
3,126
2,698
(261 )
2,437
11,033
3,674
7,688
(6,651 )
3,461
2,861
5,307
3,806
(17,664 )
309
(734 )
8,981
11,494
(24,315 )
3,770
2,127
(8,976 )
2,057
(5,163 ) [A]
1,902
610
(255 )
(2,906 )
702
(1,445 )
94
(599)
1,624
3,566
(229)
(460)
(7,310 )
144
199
829
(1,248 )
4,501
(6,138 )
39
33
738
(109)
701
14,425
(15,274 )
(849 )
2,944
4,789
7,733
12,179
(6,607 )
3,817
3,816
(23,846 )
654
15,995
(30,453 )
4,471
(218 )
(396 )
(192 )
84
(722 )
2,092
(687)
1,405
[A] Comprising deferred tax assets and liabilities of $3,278 million and $8,441 million respectively.
The table above takes into consideration the offsetting of deferred tax assets and deferred tax liabilities within the same tax jurisdiction. The overall deferred tax
position in a particular tax jurisdiction determines if a deferred tax balance is presented within deferred tax assets or deferred tax liabilities. Accordingly,
certain deferred tax assets are presented within deferred tax liabilities, and certain deferred tax liabilities within deferred tax assets.
Other movements in deferred tax assets and liabilities principally relate to acquisitions, sales of non-current assets and businesses, and amounts recognised in
other comprehensive income, which in 2017 include amounts in respect of the Act.
Before taking into consideration the offsetting described above, the amount of deferred tax assets dependent on future taxable profits not arising from the
reversal of existing deferred tax liabilities, and which relate to tax jurisdictions where Shell has suffered a loss in the current or preceding year, was
$12,452 million at December 31, 2017 (2016: $11,896 million). It is considered probable based on business forecasts that such profits will be available.
Unrecognised deductible temporary differences, unused tax losses and credits carried forward amounted to $34,773 million at December 31, 2017
(2016: $39,589 million) including amounts of $28,016 million (2016: $31,669 million) that are subject to time limits for utilisation of five years or later or
are not time limited.
Retained earnings of subsidiaries, joint ventures and associates amounted to $223,746 million at December 31, 2017 (2016: $211,075 million). Provision
has been made for withholding and other taxes that would become payable on the distribution of these earnings only to the extent that either Shell does not
control the relevant entity or it is expected that these earnings will be remitted in the foreseeable future. For a significant majority of the retained earnings no
provision has been made, because either distribution would not be subject to tax or is not expected in the foreseeable future.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
162
$ million
17 RETIREMENT BENEFITS
Retirement benefits are provided through a number of funded and unfunded defined benefit plans and defined contribution plans, the most significant of which
are in the Netherlands, UK and USA. Benefits comprise principally pensions; retirement healthcare and life insurance are also provided in certain countries.
Retirement benefit expense
Defined benefit plans:
Current service cost, net of plan participants’ contributions
Interest expense on obligations
Interest income on plan assets
Other
Total
Defined contribution plans
Total retirement benefit expense
2017
2016
1,500
2,309
(2,019 )
(404 )
1,386
429
1,815
1,527
2,643
(2,358 )
(116 )
1,696
485
2,181
$ million
2015
1,855
2,944
(2,495 )
207
2,511
473
2,984
Retirement benefit expense is presented principally within production and manufacturing expenses and selling, distribution and administrative expenses in the
Consolidated Statement of Income. Interest income on plan assets is calculated using the same rate as that applied to the related defined benefit obligations
for each plan to determine interest expense.
Remeasurements
Actuarial gains/(losses) on obligations:
Due to changes in demographic assumptions
Due to changes in financial assumptions [A]
Due to experience adjustments
Total
Return on plan assets in excess of interest income
Other movements
Total remeasurements
[A] Mainly in the discount rates applied.
2017
2016
933
(4,495 )
37
(3,525 )
4,942
50
1,467
809
(11,391 )
642
(9,940 )
5,106
18
(4,816 )
Experience adjustments arise from differences between the actuarial assumptions made in respect of the year and actual outcomes.
Defined benefit plans
Obligations
Plan assets
Net liability
Retirement benefits in the Consolidated Balance Sheet:
Non-current assets
Non-current liabilities
Current liabilities
Total
Dec 31, 2017
(104,285 )
93,243
(11,042 )
2,799
(13,247 )
(594 )
(11,042 )
$ million
2015
(517)
6,381
121
5,985
298
55
6,338
$ million
Dec 31, 2016
(94,405 )
81,276
(13,129)
1,456
(14,130)
(455)
(13,129)
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
163
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[Note 17 continued]
Defined benefit plan obligations
At January 1
Current service cost
Interest expense
Actuarial losses
Benefit payments
Other movements
Currency translation differences
At December 31
Comprising:
Funded pension plans
Weighted average duration
Unfunded pension plans
Weighted average duration
Other unfunded plans
Weighted average duration
[A] Includes additions to obligations on acquisition of BG of $1,958 million.
Defined benefit plan assets
At January 1
Return on plan assets (in excess of interest income)
Interest income
Employer contributions
Plan participants’ contributions
Benefit payments
Other movements
Currency translation differences
At December 31
Comprising:
Quoted in active markets:
Equities
Debt securities
Real estate
Investment funds
Other
Other:
Equities
Debt securities
Real estate
Investment funds
Other
$ million, except where indicated
2017
94,405
1,550
2,309
3,525
(4,579)
(949)
8,024
104,285
94,903
19 years
4,824
12 years
4,558
13 years
2016
89,426
1,585
2,643
9,940
(3,847)
1,006 [A]
(6,348)
94,405
85,357
18 years
4,463
11 years
4,585
13 years
Rate of increase in pensionable remuneration
Rate of increase in pensions in payment
Rate of increase in healthcare costs
Discount rate for pension plans
Discount rate for healthcare plans
Expected age at death for persons aged 60:
$ million, except where indicated
2017
2016
Men
Women
87 years
89 years
87 years
-1 year to +1 year
(1,906) to 2,022
(1,743) to 1,797
89 years
-1 year to +1 year
(1,720) to 1,828
(1,484) to 1,530
81,276
4,942
2,019
1,804
50
(4,294)
(245)
7,691
93,243
32%
45%
1%
1%
1%
7%
3%
6%
3%
1%
80,851
5,106
2,358
1,341
58
(3,560)
1,211 [A]
(6,089)
81,276
29%
46%
1%
1%
1%
9%
3%
6%
2%
2%
The principal assumptions applied in determining the present value of defined benefit obligations and their bases were as follows:
■ rates of increase in pensionable remuneration, pensions in payment and healthcare costs: historical experience and management’s long-term expectation;
■ discount rates: prevailing long-term AA corporate bond yields, chosen to match the currency and duration of the relevant obligation; and
■ mortality rates: published standard mortality tables for the individual countries concerned adjusted for Shell experience where statistically significant.
The weighted averages for those assumptions and related sensitivity information at December 31 are presented below. Sensitivity information indicates by how
much the defined benefit obligations would increase or decrease if a given assumption were to increase or decrease with no change in other assumptions.
$ million, except where indicated
Effect of using alternative assumptions
Assumptions used
Increase/(decrease) in defined benefit obligations
2017
2016
Range of assumptions
2017
2016
5%
2%
7%
3%
4%
5%
2%
7%
3%
4%
-1% to +1%
(2,150) to 2,782
(1,895) to 2,504
-1% to +1% (10,120) to 12,662
(8,850) to 11,271
-1% to +1%
(451) to 551
(455) to 555
-1% to +1% 19,042 to (14,567) 16,904 to (12,912)
-1% to +1%
599 to (483)
662 to (528)
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
165
[A] Includes additions to plan assets on acquisition of BG of $2,194 million.
Long-term investment strategies of plans are generally determined by the relevant pension plan trustees using a structured asset liability modelling approach to
define the asset mix that best meets the objectives of optimising returns within agreed risk levels while maintaining adequate funding levels.
Employer contributions to defined benefit pension plans are set by local trustees based on actuarial valuations in accordance with local regulations and are
estimated to be $1.0 billion in 2018.
Additional contributions to the Netherlands defined benefit pension plan would be required if the 12-month rolling average local funding percentage falls
below 105% for six months or more. At the most recent (2017) funding valuation the local funding percentage was above this level. There are no set minimum
statutory funding requirements for the UK plans. Under an agreement with the trustee of the main UK defined benefit plan, Shell will provide additional
contributions if the funding position falls below a certain level. For the US plans, under the Pension Protection Act there are minimum required contribution
levels; forecast contributions are expected to exceed these.
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164
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[A] Includes additions to obligations on acquisition of BG of $1,958 million.
Defined benefit plan assets
At January 1
Return on plan assets (in excess of interest income)
At January 1
Current service cost
Interest expense
Actuarial losses
Benefit payments
Other movements
At December 31
Comprising:
Currency translation differences
Funded pension plans
Weighted average duration
Unfunded pension plans
Weighted average duration
Other unfunded plans
Weighted average duration
Interest income
Employer contributions
Plan participants’ contributions
Currency translation differences
Benefit payments
Other movements
At December 31
Comprising:
Quoted in active markets:
Equities
Debt securities
Real estate
Investment funds
Other
Other:
Equities
Debt securities
Real estate
Investment funds
Other
2017
94,405
1,550
2,309
3,525
(4,579)
(949)
8,024
104,285
94,903
19 years
4,824
12 years
4,558
13 years
2017
81,276
4,942
2,019
1,804
50
(4,294)
(245)
7,691
93,243
32%
45%
1%
1%
1%
7%
3%
6%
3%
1%
2016
89,426
1,585
2,643
9,940
(3,847)
1,006 [A]
(6,348)
94,405
85,357
18 years
4,463
11 years
4,585
13 years
2016
80,851
5,106
2,358
1,341
58
(3,560)
(6,089)
81,276
1,211 [A]
29%
46%
1%
1%
1%
9%
3%
6%
2%
2%
[A] Includes additions to plan assets on acquisition of BG of $2,194 million.
Long-term investment strategies of plans are generally determined by the relevant pension plan trustees using a structured asset liability modelling approach to
define the asset mix that best meets the objectives of optimising returns within agreed risk levels while maintaining adequate funding levels.
Employer contributions to defined benefit pension plans are set by local trustees based on actuarial valuations in accordance with local regulations and are
estimated to be $1.0 billion in 2018.
Additional contributions to the Netherlands defined benefit pension plan would be required if the 12-month rolling average local funding percentage falls
below 105% for six months or more. At the most recent (2017) funding valuation the local funding percentage was above this level. There are no set minimum
statutory funding requirements for the UK plans. Under an agreement with the trustee of the main UK defined benefit plan, Shell will provide additional
contributions if the funding position falls below a certain level. For the US plans, under the Pension Protection Act there are minimum required contribution
levels; forecast contributions are expected to exceed these.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
164
Defined benefit plan obligations
$ million, except where indicated
The principal assumptions applied in determining the present value of defined benefit obligations and their bases were as follows:
■ rates of increase in pensionable remuneration, pensions in payment and healthcare costs: historical experience and management’s long-term expectation;
■ discount rates: prevailing long-term AA corporate bond yields, chosen to match the currency and duration of the relevant obligation; and
■ mortality rates: published standard mortality tables for the individual countries concerned adjusted for Shell experience where statistically significant.
The weighted averages for those assumptions and related sensitivity information at December 31 are presented below. Sensitivity information indicates by how
much the defined benefit obligations would increase or decrease if a given assumption were to increase or decrease with no change in other assumptions.
Rate of increase in pensionable remuneration
Rate of increase in pensions in payment
Rate of increase in healthcare costs
Discount rate for pension plans
Discount rate for healthcare plans
Expected age at death for persons aged 60:
$ million, except where indicated
Effect of using alternative assumptions
Assumptions used
Increase/(decrease) in defined benefit obligations
2017
2016
Range of assumptions
2017
2016
5%
2%
7%
3%
4%
5%
2%
7%
3%
4%
(1,895) to 2,504
-1% to +1%
(2,150) to 2,782
(8,850) to 11,271
-1% to +1% (10,120) to 12,662
-1% to +1%
(455) to 555
(451) to 551
-1% to +1% 19,042 to (14,567) 16,904 to (12,912)
662 to (528)
599 to (483)
-1% to +1%
$ million, except where indicated
Men
Women
87 years
89 years
87 years
89 years
-1 year to +1 year
-1 year to +1 year
(1,906) to 2,022
(1,720) to 1,828
(1,743) to 1,797
(1,484) to 1,530
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
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19 FINANCIAL INSTRUMENTS AND OTHER DERIVATIVE CONTRACTS
Financial instruments and other derivative contracts in the Consolidated Balance Sheet comprise investments in securities (see Note 10), cash and cash
equivalents (see Note 13), debt (see Note 14) and certain amounts reported within trade and other receivables (see Note 11) and trade and other payables
In the normal course of business, financial instruments of various kinds are used for the purposes of managing exposure to interest rate, foreign exchange and
commodity price movements.
Treasury standards are applicable to all subsidiaries and each subsidiary is required to adopt a treasury policy consistent with these standards. These policies
cover: financing structure; interest rate and foreign exchange risk management; insurance; counterparty risk management; and use of derivative contracts.
Wherever possible, treasury operations are carried out through specialist regional organisations without removing from each subsidiary the responsibility to
formulate and implement appropriate treasury policies.
Apart from forward foreign exchange contracts to meet known commitments, the use of derivative contracts by most subsidiaries is not permitted by their
Other than in exceptional cases, the use of external derivative contracts is confined to specialist trading and central treasury organisations that have
appropriate skills, experience, supervision, control and reporting systems.
Shell’s operations expose it to market, credit and liquidity risk, as described below.
Market risk is the possibility that changes in interest rates, foreign exchange rates or the prices of crude oil, natural gas, LNG, refined products, chemical
feedstocks, power and carbon-emission rights will adversely affect the value of assets, liabilities or expected future cash flows.
treasury policy.
Market risk
Interest rate risk
Most debt is raised from central borrowing programmes. Shell’s policy continues to be to have debt principally denominated in dollars and to maintain a
largely floating interest rate exposure profile; however, Shell has issued a significant amount of fixed rate debt in recent years, taking advantage of historically
low interest rates available in US debt markets. As a result, a substantial portion of the debt portfolio at December 31, 2017, is at fixed rates and this reduces
Shell’s exposure to the dollar LIBOR interest rate.
The financing of most subsidiaries is structured on a floating-rate basis and, except in special cases, further interest rate risk management is discouraged.
On the basis of the floating rate net debt position at December 31, 2017, (both issued and hedged), and assuming other factors (principally foreign
exchange rates and commodity prices) remained constant and that no further interest rate management action was taken, an increase in interest rates of 1%
would have decreased 2017 income before taxation by $174 million (2016: $210 million, based on the floating rate position at December 31, 2016).
The carrying amounts and maturities of debt and borrowing facilities are presented in Note 14. Interest expense is presented in Note 6.
18 DECOMMISSIONING AND OTHER PROVISIONS
Decommissioning
and restoration
Other
Total
RISKS
$ million
(see Note 15), which include derivative contracts.
At January 1, 2017
Current
Non-current
Additions
Amounts charged against provisions
Accretion expense
Disposals
Remeasurements and other movements
Currency translation differences
At December 31, 2017
Current
Non-current
At January 1, 2016
Current
Non-current
Additions on acquisition of BG
Other additions
Amounts charged against provisions
Accretion expense
Disposals
Remeasurements and other movements
Currency translation differences
At December 31, 2016
Current
Non-current
797
24,368
25,165
1,168
(491)
897
(2,807) [A]
(4,245)
897
(4,581)
817
19,767
20,584
1,239
23,008
24,247
3,965
976 [C]
(880)
1,013
(478)[C]
(2,528) [C]
(1,150)
918
797
24,368
25,165
2,987
5,250
8,237
2,630
(2,325)
141
(95)
(1,021)
280
(390)
2,648
5,199
7,847
2,826
3,140
5,966
1,577 [B]
4,793 [C][D]
(2,562)
103
(80) [C]
(1,410) [C]
(150)
2,271
2,987
5,250
8,237
3,784
29,618
33,402
3,798
(2,816)
1,038
(2,902)
(5,266)
1,177
(4,971)
3,465
24,966
28,431
4,065
26,148
30,213
5,542
5,769
(3,442)
1,116
(558)
(3,938)
(1,300)
3,189
3,784
29,618
33,402
[A] Mainly related to interests in the UK and Canada.
[B] Includes $950 million representing the fair value of contingent liabilities assumed, mainly in relation to litigation costs.
[C] As revised, to align with current year presentation.
[D] Mainly relating to onerous contracts and redundancy costs (see Note 26).
.
The amount and timing of settlement in respect of these provisions are uncertain and dependent on various factors that are not always within management’s
control. The discount rate applied at December 31, 2017 was 4% (2016: 4%).
Reviews of estimated future decommissioning and restoration costs and the discount rate applied are carried out annually. In 2017, the review identified cost
reductions from more efficient execution of decommissioning and restoration activities such as onshore demolition, supply chain improvements, learning from
other industries and application of technologies. In 2017, there was a decrease of $3,980 million (2016: $2,361 million) in the provision resulting from
changes in cost estimates, reported within remeasurements and other movements.
Of the decommissioning and restoration provision at December 31, 2017, an estimated $3,896 million is expected to be utilised between one to five years,
$3,449 million within six to 10 years, and the remainder in later periods.
Other provisions principally comprise amounts recognised in respect of environmental costs ($1,505 million at December 31, 2017; 2016: $1,482 million),
litigation costs, redundancy costs, employee benefits and onerous contracts.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
166
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166
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18 DECOMMISSIONING AND OTHER PROVISIONS
At January 1, 2017
Current
Non-current
Additions
Amounts charged against provisions
Accretion expense
Disposals
Remeasurements and other movements
Currency translation differences
At December 31, 2017
Current
Non-current
At January 1, 2016
Current
Non-current
Additions on acquisition of BG
Other additions
Amounts charged against provisions
Accretion expense
Disposals
Remeasurements and other movements
Currency translation differences
At December 31, 2016
Current
Non-current
Decommissioning
and restoration
$ million
Other
Total
(2,807) [A]
797
24,368
25,165
1,168
(491)
897
(4,245)
897
(4,581)
817
19,767
20,584
1,239
23,008
24,247
3,965
976 [C]
(880)
1,013
(478)[C]
(2,528) [C]
(1,150)
918
797
24,368
25,165
2,987
5,250
8,237
2,630
(2,325)
141
(95)
(1,021)
280
(390)
2,648
5,199
7,847
2,826
3,140
5,966
1,577 [B]
4,793 [C][D]
(2,562)
103
(80) [C]
(1,410) [C]
(150)
2,271
2,987
5,250
8,237
3,784
29,618
33,402
3,798
(2,816)
1,038
(2,902)
(5,266)
1,177
(4,971)
3,465
24,966
28,431
4,065
26,148
30,213
5,542
5,769
(3,442)
1,116
(558)
(3,938)
(1,300)
3,189
3,784
29,618
33,402
[A] Mainly related to interests in the UK and Canada.
[B] Includes $950 million representing the fair value of contingent liabilities assumed, mainly in relation to litigation costs.
[C] As revised, to align with current year presentation.
[D] Mainly relating to onerous contracts and redundancy costs (see Note 26).
.
The amount and timing of settlement in respect of these provisions are uncertain and dependent on various factors that are not always within management’s
control. The discount rate applied at December 31, 2017 was 4% (2016: 4%).
Reviews of estimated future decommissioning and restoration costs and the discount rate applied are carried out annually. In 2017, the review identified cost
reductions from more efficient execution of decommissioning and restoration activities such as onshore demolition, supply chain improvements, learning from
other industries and application of technologies. In 2017, there was a decrease of $3,980 million (2016: $2,361 million) in the provision resulting from
changes in cost estimates, reported within remeasurements and other movements.
Of the decommissioning and restoration provision at December 31, 2017, an estimated $3,896 million is expected to be utilised between one to five years,
$3,449 million within six to 10 years, and the remainder in later periods.
Other provisions principally comprise amounts recognised in respect of environmental costs ($1,505 million at December 31, 2017; 2016: $1,482 million),
litigation costs, redundancy costs, employee benefits and onerous contracts.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
166
19 FINANCIAL INSTRUMENTS AND OTHER DERIVATIVE CONTRACTS
Financial instruments and other derivative contracts in the Consolidated Balance Sheet comprise investments in securities (see Note 10), cash and cash
equivalents (see Note 13), debt (see Note 14) and certain amounts reported within trade and other receivables (see Note 11) and trade and other payables
(see Note 15), which include derivative contracts.
RISKS
In the normal course of business, financial instruments of various kinds are used for the purposes of managing exposure to interest rate, foreign exchange and
commodity price movements.
Treasury standards are applicable to all subsidiaries and each subsidiary is required to adopt a treasury policy consistent with these standards. These policies
cover: financing structure; interest rate and foreign exchange risk management; insurance; counterparty risk management; and use of derivative contracts.
Wherever possible, treasury operations are carried out through specialist regional organisations without removing from each subsidiary the responsibility to
formulate and implement appropriate treasury policies.
Apart from forward foreign exchange contracts to meet known commitments, the use of derivative contracts by most subsidiaries is not permitted by their
treasury policy.
Other than in exceptional cases, the use of external derivative contracts is confined to specialist trading and central treasury organisations that have
appropriate skills, experience, supervision, control and reporting systems.
Shell’s operations expose it to market, credit and liquidity risk, as described below.
Market risk
Market risk is the possibility that changes in interest rates, foreign exchange rates or the prices of crude oil, natural gas, LNG, refined products, chemical
feedstocks, power and carbon-emission rights will adversely affect the value of assets, liabilities or expected future cash flows.
Interest rate risk
Most debt is raised from central borrowing programmes. Shell’s policy continues to be to have debt principally denominated in dollars and to maintain a
largely floating interest rate exposure profile; however, Shell has issued a significant amount of fixed rate debt in recent years, taking advantage of historically
low interest rates available in US debt markets. As a result, a substantial portion of the debt portfolio at December 31, 2017, is at fixed rates and this reduces
Shell’s exposure to the dollar LIBOR interest rate.
The financing of most subsidiaries is structured on a floating-rate basis and, except in special cases, further interest rate risk management is discouraged.
On the basis of the floating rate net debt position at December 31, 2017, (both issued and hedged), and assuming other factors (principally foreign
exchange rates and commodity prices) remained constant and that no further interest rate management action was taken, an increase in interest rates of 1%
would have decreased 2017 income before taxation by $174 million (2016: $210 million, based on the floating rate position at December 31, 2016).
The carrying amounts and maturities of debt and borrowing facilities are presented in Note 14. Interest expense is presented in Note 6.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
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[Note 19 continued]
Foreign exchange risk
Many of the markets in which Shell operates are priced, directly or indirectly, in dollars. As a result, the functional currency of most Integrated Gas and
Upstream entities and those with significant cross-border business is the dollar. For Downstream entities, the functional currency is typically the local currency.
Consequently, Shell is exposed to varying levels of foreign exchange risk when an entity enters into transactions that are not denominated in its functional
currency, when foreign currency monetary assets and liabilities are translated at the balance sheet date and as a result of holding net investments in operations
that are not dollar-functional. Each entity is required to adopt treasury policies that are designed to measure and manage its foreign exchange exposures by
reference to its functional currency.
Foreign exchange gains and losses arise in the normal course of business from the recognition of receivables and payables and other monetary items in
currencies other than an entity’s functional currency. Foreign exchange risk may also arise in connection with capital expenditure. For major projects, an
assessment is made at the final investment decision stage whether to hedge any resulting exposure.
Assuming other factors (principally interest rates and commodity prices) remained constant and that no further foreign exchange risk management action were
taken, a 10% appreciation against the dollar at December 31 of the main currencies to which Shell is exposed would have the following effects:
10% appreciation against the dollar of:
Canadian dollar
Euro
Australian dollar
Sterling
Increase/(decrease)
in income before taxation
2016
2017
$ million
Increase in net assets
2016
2017
(43 )
130
(24 )
(77)
(53)
(75)
45
(141 )
1,111
1,086
786
632
1,666
845
669
549
The above sensitivity information was calculated by reference to carrying amounts of assets and liabilities at December 31 only. The effect on income before
taxation arises in connection with monetary balances denominated in currencies other than an entity’s functional currency; the effect on net assets arises
principally from the translation of assets and liabilities of entities that are not dollar-functional.
Foreign exchange gains and losses included in income are presented in Note 5.
Commodity price risk
Certain subsidiaries have a mandate to trade crude oil, natural gas, LNG, refined products, chemical feedstocks, power and carbon-emission rights, and to
use commodity derivative contracts (forwards, futures, swaps and options) as a means of managing price and timing risks arising from this trading activity. In
effecting these transactions, the entities concerned operate within procedures and policies designed to ensure that risks, including those relating to the default
of counterparties, are managed within authorised limits.
Risk management systems are used for recording and valuing instruments. Commodity price risk exposure is monitored, and the acceptable level of exposure
determined, by market risk committees. There is regular reviewing of mandated trading limits by senior management, daily monitoring of market risk exposure
using value-at-risk (VAR) techniques, daily monitoring of trading positions against limits, and marking-to-fair value of trading exposures with a department
independent of traders reviewing the market values applied. Although trading losses can and do occur, the nature of the trading portfolio and its management
are considered adequate mitigants against the risk of significant losses.
VAR techniques based on variance/covariance or Monte Carlo simulation models are used to make a statistical assessment of the market risk arising from
possible future changes in market values over a 24-hour period and within a 95% confidence level. The calculation of potential changes in fair value takes into
account positions, the history of price movements and the correlation of these price movements. Models are regularly reviewed against actual fair value
movements to ensure integrity is maintained. The VAR year-end positions in respect of commodities traded in active markets, which are presented in the table
below, are calculated on a diversified basis in order to reflect the effect of offsetting risk within combined portfolios.
Value-at-risk (pre-tax)
Global oil
North America gas and power
Europe gas and power
Carbon-emission rights
Dec 31, 2017
25
11
3
1
$ million
Dec 31, 2016
29
12
2
3
Credit risk
Policies are in place to ensure that sales of products are made to customers with appropriate creditworthiness. These policies include detailed credit analysis
and monitoring of trading partners against counterparty credit limits. Credit information is regularly shared between business and finance functions, with
dedicated teams in place to quickly identify and respond to cases of credit deterioration. Mitigation measures are defined and implemented for high-risk
business partners and customers, and include shortened payment terms, collateral or other security posting and vigorous collections. In addition, policies limit
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
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the amount of credit exposure to any individual financial institution. There are no material concentrations of credit risk, with individual customers or
geographically, and there has been no significant level of counterparty default in recent years.
Surplus cash is invested in a range of short-dated, secure and liquid instruments including short-term bank deposits, money market funds, reverse repos and
similar instruments. The portfolio of these investments is diversified to avoid concentrating risk in any one instrument, country or counterparty. Management
monitors the investments regularly and adjusts the investment portfolio in light of new market information where necessary to ensure credit risk is effectively
In commodity trading, counterparty credit risk is managed within a framework of credit limits with utilisation being regularly reviewed. Credit risk exposure is
monitored and the acceptable level is determined by a credit committee. Credit checks are performed by a department independent of traders, and are
undertaken before contractual commitment. Where appropriate, netting arrangements, credit insurance, prepayments and collateral are used to manage
Shell routinely enters into offsetting, master netting and similar arrangements with trading and other counterparties to manage credit risk. Where there is a
legally enforceable right of offset under such arrangements and Shell has the intention to settle on a net basis or realise the asset and settle the liability
simultaneously, the net asset or liability is recognised in the Consolidated Balance Sheet, otherwise assets and liabilities are presented gross. These amounts,
as presented net and gross within trade and other receivables and trade and other payables in the Consolidated Balance Sheet at December 31, were as
Gross amounts
before offset
Amounts
offset
Cash collateral
Other offsetting
received/pledged
instruments
Net amounts
Amounts offset
Net amounts
as presented
Amounts not offset
$ million
Within trade receivables
Within derivative contracts
Liabilities:
Within trade payables
Within derivative contracts
10,642
6,987
10,442
7,315
6,486
2,387
6,486
2,392
4,156
4,600
3,956
4,923
42
186
41
300
51
2,326
51
2,326
4,063
2,088
3,864
2,297
$ million
diversified.
specific risks.
follows:
2017
Assets:
2016
Assets:
Gross amounts
before offset
Amounts
offset
Cash collateral
Other offsetting
received/pledged
instruments
Net amounts
Amounts offset
Net amounts
as presented
Amounts not offset
9,844
6,309
9,489
9,434
6,539
2,197
6,535
2,197
3,305
4,112
2,954
7,237
1
107
—
86
12
3,292
2,126 [A]
1,879 [A]
12
2,942
2,126 [A]
5,025 [A]
Amounts not offset principally relate to contracts where the intention to settle on a net basis was not clearly established at December 31.
The carrying amount of financial assets pledged as collateral for liabilities or contingent liabilities at December 31, 2017, presented within trade and other
receivables, was $1,890 million (2016: $1,815 million). The carrying amount of collateral held at December 31, 2017, presented within trade and other
payables, was $282 million (2016: $173 million). Collateral mainly relates to initial margins held with commodity exchanges and over-the-counter
Liquidity risk is the risk that suitable sources of funding for Shell’s business activities may not be available. Management believes that it has access to sufficient
debt funding sources (capital markets), and to undrawn committed borrowing facilities to meet foreseeable requirements. Information about borrowing facilities
Within trade receivables
Within derivative contracts
Liabilities:
Within trade payables
Within derivative contracts
[A] As revised.
counterparty variation margins.
Liquidity risk
is presented in Note 14.
DERIVATIVE CONTRACTS AND HEDGES
related hedged items.
Derivative contracts are used principally as hedging instruments, however, because hedge accounting is not always applied, movements in the carrying
amounts of derivative contracts that are recognised in income are not always matched in the same period by the recognition of the income effects of the
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
169
Foreign exchange risk
Many of the markets in which Shell operates are priced, directly or indirectly, in dollars. As a result, the functional currency of most Integrated Gas and
Upstream entities and those with significant cross-border business is the dollar. For Downstream entities, the functional currency is typically the local currency.
Consequently, Shell is exposed to varying levels of foreign exchange risk when an entity enters into transactions that are not denominated in its functional
currency, when foreign currency monetary assets and liabilities are translated at the balance sheet date and as a result of holding net investments in operations
that are not dollar-functional. Each entity is required to adopt treasury policies that are designed to measure and manage its foreign exchange exposures by
reference to its functional currency.
Foreign exchange gains and losses arise in the normal course of business from the recognition of receivables and payables and other monetary items in
currencies other than an entity’s functional currency. Foreign exchange risk may also arise in connection with capital expenditure. For major projects, an
assessment is made at the final investment decision stage whether to hedge any resulting exposure.
Assuming other factors (principally interest rates and commodity prices) remained constant and that no further foreign exchange risk management action were
taken, a 10% appreciation against the dollar at December 31 of the main currencies to which Shell is exposed would have the following effects:
10% appreciation against the dollar of:
Canadian dollar
Euro
Australian dollar
Sterling
Increase/(decrease)
in income before taxation
$ million
Increase in net assets
2017
2016
2017
2016
(43 )
130
(24 )
(77)
(53)
(75)
45
(141 )
1,111
1,086
786
632
1,666
845
669
549
The above sensitivity information was calculated by reference to carrying amounts of assets and liabilities at December 31 only. The effect on income before
taxation arises in connection with monetary balances denominated in currencies other than an entity’s functional currency; the effect on net assets arises
principally from the translation of assets and liabilities of entities that are not dollar-functional.
Foreign exchange gains and losses included in income are presented in Note 5.
Commodity price risk
Certain subsidiaries have a mandate to trade crude oil, natural gas, LNG, refined products, chemical feedstocks, power and carbon-emission rights, and to
use commodity derivative contracts (forwards, futures, swaps and options) as a means of managing price and timing risks arising from this trading activity. In
effecting these transactions, the entities concerned operate within procedures and policies designed to ensure that risks, including those relating to the default
of counterparties, are managed within authorised limits.
Risk management systems are used for recording and valuing instruments. Commodity price risk exposure is monitored, and the acceptable level of exposure
determined, by market risk committees. There is regular reviewing of mandated trading limits by senior management, daily monitoring of market risk exposure
using value-at-risk (VAR) techniques, daily monitoring of trading positions against limits, and marking-to-fair value of trading exposures with a department
independent of traders reviewing the market values applied. Although trading losses can and do occur, the nature of the trading portfolio and its management
are considered adequate mitigants against the risk of significant losses.
VAR techniques based on variance/covariance or Monte Carlo simulation models are used to make a statistical assessment of the market risk arising from
possible future changes in market values over a 24-hour period and within a 95% confidence level. The calculation of potential changes in fair value takes into
account positions, the history of price movements and the correlation of these price movements. Models are regularly reviewed against actual fair value
movements to ensure integrity is maintained. The VAR year-end positions in respect of commodities traded in active markets, which are presented in the table
below, are calculated on a diversified basis in order to reflect the effect of offsetting risk within combined portfolios.
Value-at-risk (pre-tax)
Global oil
North America gas and power
Europe gas and power
Carbon-emission rights
Credit risk
Dec 31, 2017
25
11
3
1
$ million
Dec 31, 2016
29
12
2
3
Policies are in place to ensure that sales of products are made to customers with appropriate creditworthiness. These policies include detailed credit analysis
and monitoring of trading partners against counterparty credit limits. Credit information is regularly shared between business and finance functions, with
dedicated teams in place to quickly identify and respond to cases of credit deterioration. Mitigation measures are defined and implemented for high-risk
business partners and customers, and include shortened payment terms, collateral or other security posting and vigorous collections. In addition, policies limit
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
168
the amount of credit exposure to any individual financial institution. There are no material concentrations of credit risk, with individual customers or
geographically, and there has been no significant level of counterparty default in recent years.
Surplus cash is invested in a range of short-dated, secure and liquid instruments including short-term bank deposits, money market funds, reverse repos and
similar instruments. The portfolio of these investments is diversified to avoid concentrating risk in any one instrument, country or counterparty. Management
monitors the investments regularly and adjusts the investment portfolio in light of new market information where necessary to ensure credit risk is effectively
diversified.
In commodity trading, counterparty credit risk is managed within a framework of credit limits with utilisation being regularly reviewed. Credit risk exposure is
monitored and the acceptable level is determined by a credit committee. Credit checks are performed by a department independent of traders, and are
undertaken before contractual commitment. Where appropriate, netting arrangements, credit insurance, prepayments and collateral are used to manage
specific risks.
Shell routinely enters into offsetting, master netting and similar arrangements with trading and other counterparties to manage credit risk. Where there is a
legally enforceable right of offset under such arrangements and Shell has the intention to settle on a net basis or realise the asset and settle the liability
simultaneously, the net asset or liability is recognised in the Consolidated Balance Sheet, otherwise assets and liabilities are presented gross. These amounts,
as presented net and gross within trade and other receivables and trade and other payables in the Consolidated Balance Sheet at December 31, were as
follows:
2017
Assets:
Within trade receivables
Within derivative contracts
Liabilities:
Within trade payables
Within derivative contracts
2016
Assets:
Within trade receivables
Within derivative contracts
Liabilities:
Within trade payables
Within derivative contracts
[A] As revised.
Gross amounts
before offset
Amounts
offset
Net amounts
as presented
Cash collateral
received/pledged
Other offsetting
instruments
Net amounts
Amounts offset
Amounts not offset
$ million
10,642
6,987
10,442
7,315
6,486
2,387
6,486
2,392
4,156
4,600
3,956
4,923
42
186
41
300
51
2,326
51
2,326
4,063
2,088
3,864
2,297
$ million
Gross amounts
before offset
Amounts
offset
Amounts offset
Net amounts
as presented
Cash collateral
received/pledged
Amounts not offset
Other offsetting
instruments
Net amounts
9,844
6,309
9,489
9,434
6,539
2,197
6,535
2,197
3,305
4,112
2,954
7,237
1
107
—
86
12
2,126 [A]
3,292
1,879 [A]
12
2,126 [A]
2,942
5,025 [A]
Amounts not offset principally relate to contracts where the intention to settle on a net basis was not clearly established at December 31.
The carrying amount of financial assets pledged as collateral for liabilities or contingent liabilities at December 31, 2017, presented within trade and other
receivables, was $1,890 million (2016: $1,815 million). The carrying amount of collateral held at December 31, 2017, presented within trade and other
payables, was $282 million (2016: $173 million). Collateral mainly relates to initial margins held with commodity exchanges and over-the-counter
counterparty variation margins.
Liquidity risk
Liquidity risk is the risk that suitable sources of funding for Shell’s business activities may not be available. Management believes that it has access to sufficient
debt funding sources (capital markets), and to undrawn committed borrowing facilities to meet foreseeable requirements. Information about borrowing facilities
is presented in Note 14.
DERIVATIVE CONTRACTS AND HEDGES
Derivative contracts are used principally as hedging instruments, however, because hedge accounting is not always applied, movements in the carrying
amounts of derivative contracts that are recognised in income are not always matched in the same period by the recognition of the income effects of the
related hedged items.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
169
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[Note 19 continued]
Carrying amounts, maturities and hedges
The carrying amounts of derivative contracts at December 31 (see Notes 11 and 15), designated and not designated as hedging instruments for hedge
accounting purposes, were as follows:
The contractual maturities of derivative liabilities at December 31 compare with their carrying amounts in the Consolidated Balance Sheet as follows:
Assets
Liabilities
38
—
3
—
—
41
—
22
483
—
—
505
6,321
6,362
3,387 6,346
9,733
(3,371)
Total
199
591
891
4,428
125
Designated
Not
designated
Total
Designated
Not
designated
Designated
Not
designated
Total
Designated
Not
designated
$ million
Net
(183)
(166)
(200)
501
37
(11)
$ million
Total
174
358
3,786
5,230
185
Net
(121)
111
(3,503)
250
(108 )
15
469
280
5,480
77
53
469
283
5,480
77
136
10
3,241
38
348
545
— 5,230
—
185
16
403
208
4,929
162
16
425
691
4,929
162
165
—
815
34
591
76
— 4,428
—
125
5,718
6,223
980 5,254
6,234
Assets
Liabilities
2017
Interest rate swaps
Forward foreign exchange contracts
Currency swaps and options
Commodity derivatives
Other contracts
Total
2016
Interest rate swaps
Forward foreign exchange contracts
Currency swaps and options
Commodity derivatives
Other contracts
Total
2017
Forward foreign exchange contracts
Currency swaps and options
Commodity derivatives
Other contracts
Total
[A] Mainly related to the effect of discounting.
2016
Forward foreign exchange contracts
Currency swaps and options
Commodity derivatives
Other contracts
Total
[A] Mainly related to the effect of discounting.
Fair value measurements
Interest rate swaps
Forward foreign exchange contracts
Currency swaps and options
Commodity derivatives
Other contracts
Total
2016
Interest rate swaps
Forward foreign exchange contracts
Currency swaps and options
Commodity derivatives
Other contracts
Total
Contractual maturities
$ million
Less than
1 year
315
541
3,002
146
Between
1 and 2
Between
2 and 3
Between
3 and 4
Between
4 and 5
5 years
from carrying
Carrying
Difference
years
years
years
years
and later
Total
amount[A]
amount
37
343
754
115
14
140
305
56
3
304
122
18
2
(39)
332
259
194
879 2,401
(1,510)
591
891
74
1
263 4,520
3
339
(92) 4,428
(15)
324
4,004 1,249
515
447
271 1,106 7,592
(1,358) 6,234
Contractual maturities
$ million
Less than
Between
1 and 2
Between
2 and 3
Between
3 and 4
Between
4 and 5
5 years
from carrying
Carrying
Difference
1 year
years
years
years
years
and later
Total
amount[A]
amount
341
97
1,062 1,269
3,889
95
706
130
56
831
344
102
—
372
111
53
(27)
—
467
(109)
358
701 3,762 7,997
(4,211) 3,786
47
20
204 5,301
3
403
(71) 5,230
(44)
359
5,387 2,202 1,333
536
741 3,969 14,168
(4,435) 9,733
Prices in active
markets for identical
assets/liabilities
Other
observable
inputs
Unobservable
inputs
—
—
—
36
—
36
—
—
—
12
(2 )
10
(183 )
(166 )
(200 )
302
(97 )
(344 )
(121 )
111
(3,503 )
(153 )
(183 )
(3,849 )
$ million
Total
(183)
(166)
(200)
501
37
(11)
$ million
Total
(121)
111
(3,503)
250
(108 )
(3,371)
—
—
—
163
134
297
—
—
—
391
77
468
Prices in active
markets for identical
assets/liabilities
Other
observable
inputs
Unobservable
inputs
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
171
Net losses before tax on derivative contracts, excluding realised commodity contracts and those accounted for as hedges, were $1,321 million in 2017
(2016: $414 million gains; 2015: $4,107 million gains).
In 2015, certain cash and cash equivalents and forward foreign exchange contracts were designated as cash flow hedges of a significant portion of the
forecast cash consideration for the acquisition of BG (see Note 29). Losses of $411 million were recognised in other comprehensive income in 2016
(2015: $537 million) and the accumulated losses were reclassified to the balance sheet in 2016 (see Note 22).
2017
The net carrying amounts of derivative contracts held at December 31, categorised according to the predominant source and nature of inputs used in
determining the fair value of each contract, were as follows:
In addition, certain contracts, mainly to hedge price risk relating to forecast commodity transactions which mature in 2018-2020, were designated in cash
flow hedging relationships. In 2017, $29 million net losses for ineffectiveness were recognised in income (2016: $nil; 2015: $1 million net gains). The net
carrying amount of commodity derivative contracts designated as cash flow hedging instruments at December 31, 2017, was a liability of $620 million
(2016: $115 million), and was presented after the offset of related margin balances maintained with exchanges.
Certain interest rate and currency swaps were designated in fair value hedges, principally in respect of debt for which the net carrying amount of the related
derivative contracts, net of accrued interest, at December 31, 2017, was a liability of $826 million (2016: $3,472 million).
In 2016, debt and currency swaps were designated as hedges of net investments in foreign operations, relating to the foreign exchange risk arising between
certain intermediate holding companies and their subsidiaries. The total carrying amount of the hedging instruments at December 31, 2016, was a net liability
of $5,381 million. On January 1, 2017, these were de-designated as hedges following changes in the functional currency of certain entities to the US dollar.
In the course of trading operations, certain contracts are entered into for delivery of commodities that are accounted for as derivatives. The resulting price
exposures are managed by entering into related derivative contracts. These contracts are managed on a fair value basis and the maximum exposure to
liquidity risk is the undiscounted fair value of derivative liabilities.
For a minority of commodity derivative contracts, carrying amounts cannot be derived from quoted market prices or other observable inputs, in which case fair
value is estimated using valuation techniques such as Black-Scholes, option spread models and extrapolation using quoted spreads with assumptions
developed internally based on observable market activity.
Other contracts include certain contracts that are held to sell or purchase commodities and others containing embedded derivatives, which are required to be
recognised at fair value because of pricing or delivery conditions, even though they were entered into to meet operational requirements. These contracts are
expected to mature in 2018-2025, with certain contracts having early termination rights (for either party). Valuations are derived from quoted market prices for
the next six years and, thereafter, from forward gas price formulae used in similar contracts. Future gas price assumptions are the most significant input to this
model, and a decrease at December 31, 2017, of 10% in the projected gas price would, assuming other inputs remained unchanged, increase income
before taxation by $30 million (2016: $33 million).
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
170
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5 years
and later
Between
4 and 5
years
Between
4 and 5
years
Difference
from carrying
amount[A]
Between
1 and 2
years
Between
2 and 3
years
Between
3 and 4
years
Contractual maturities
$ million
Contractual maturities
$ million
14
140
305
56
515
3
304
122
18
447
259
(1,510)
Carrying
amount
591
891
(92) 4,428
324
(15)
(1,358) 6,234
Less than
1 year
315
541
3,002
146
37
343
754
115
4,004 1,249
2
194
74
1
Total
(39)
332
879 2,401
263 4,520
339
271 1,106 7,592
3
Less than
1 year
Between
1 and 2
years
Between
2 and 3
years
Between
3 and 4
years
341
97
1,062 1,269
706
3,889
130
95
56
831
344
102
5,387 2,202 1,333
—
372
111
53
536
The carrying amounts of derivative contracts at December 31 (see Notes 11 and 15), designated and not designated as hedging instruments for hedge
The contractual maturities of derivative liabilities at December 31 compare with their carrying amounts in the Consolidated Balance Sheet as follows:
2017
Forward foreign exchange contracts
Currency swaps and options
Commodity derivatives
Other contracts
Total
[A] Mainly related to the effect of discounting.
2016
Forward foreign exchange contracts
Currency swaps and options
Commodity derivatives
Other contracts
Total
[A] Mainly related to the effect of discounting.
Carrying amounts, maturities and hedges
accounting purposes, were as follows:
2017
Interest rate swaps
Forward foreign exchange contracts
Currency swaps and options
Commodity derivatives
Other contracts
Total
2016
Interest rate swaps
Forward foreign exchange contracts
Currency swaps and options
Commodity derivatives
Other contracts
Total
Designated
designated
Total
Designated
Assets
Liabilities
Not
16
403
208
Not
designated
16
425
691
165
34
—
591
815
76
Total
199
591
891
4,929
4,929
— 4,428
4,428
162
162
—
125
125
505
5,718
6,223
980 5,254
6,234
Designated
designated
Total
Designated
Assets
Liabilities
Not
designated
53
469
136
38
10
348
Total
174
358
Not
15
469
280
283
3,241
545
3,786
(3,503)
5,480
5,480
— 5,230
5,230
77
77
—
185
185
41
6,321
6,362
3,387 6,346
9,733
(3,371)
—
22
483
—
—
38
—
3
—
—
$ million
Net
(183)
(166)
(200)
501
37
(11)
Net
(121)
111
250
(108 )
$ million
In addition, certain contracts, mainly to hedge price risk relating to forecast commodity transactions which mature in 2018-2020, were designated in cash
flow hedging relationships. In 2017, $29 million net losses for ineffectiveness were recognised in income (2016: $nil; 2015: $1 million net gains). The net
carrying amount of commodity derivative contracts designated as cash flow hedging instruments at December 31, 2017, was a liability of $620 million
(2016: $115 million), and was presented after the offset of related margin balances maintained with exchanges.
Certain interest rate and currency swaps were designated in fair value hedges, principally in respect of debt for which the net carrying amount of the related
derivative contracts, net of accrued interest, at December 31, 2017, was a liability of $826 million (2016: $3,472 million).
In 2016, debt and currency swaps were designated as hedges of net investments in foreign operations, relating to the foreign exchange risk arising between
certain intermediate holding companies and their subsidiaries. The total carrying amount of the hedging instruments at December 31, 2016, was a net liability
of $5,381 million. On January 1, 2017, these were de-designated as hedges following changes in the functional currency of certain entities to the US dollar.
In the course of trading operations, certain contracts are entered into for delivery of commodities that are accounted for as derivatives. The resulting price
exposures are managed by entering into related derivative contracts. These contracts are managed on a fair value basis and the maximum exposure to
liquidity risk is the undiscounted fair value of derivative liabilities.
For a minority of commodity derivative contracts, carrying amounts cannot be derived from quoted market prices or other observable inputs, in which case fair
value is estimated using valuation techniques such as Black-Scholes, option spread models and extrapolation using quoted spreads with assumptions
developed internally based on observable market activity.
Other contracts include certain contracts that are held to sell or purchase commodities and others containing embedded derivatives, which are required to be
recognised at fair value because of pricing or delivery conditions, even though they were entered into to meet operational requirements. These contracts are
expected to mature in 2018-2025, with certain contracts having early termination rights (for either party). Valuations are derived from quoted market prices for
the next six years and, thereafter, from forward gas price formulae used in similar contracts. Future gas price assumptions are the most significant input to this
model, and a decrease at December 31, 2017, of 10% in the projected gas price would, assuming other inputs remained unchanged, increase income
before taxation by $30 million (2016: $33 million).
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
170
Net losses before tax on derivative contracts, excluding realised commodity contracts and those accounted for as hedges, were $1,321 million in 2017
(2016: $414 million gains; 2015: $4,107 million gains).
Fair value measurements
The net carrying amounts of derivative contracts held at December 31, categorised according to the predominant source and nature of inputs used in
determining the fair value of each contract, were as follows:
In 2015, certain cash and cash equivalents and forward foreign exchange contracts were designated as cash flow hedges of a significant portion of the
forecast cash consideration for the acquisition of BG (see Note 29). Losses of $411 million were recognised in other comprehensive income in 2016
(2015: $537 million) and the accumulated losses were reclassified to the balance sheet in 2016 (see Note 22).
2017
Interest rate swaps
Forward foreign exchange contracts
Currency swaps and options
Commodity derivatives
Other contracts
Total
2016
Interest rate swaps
Forward foreign exchange contracts
Currency swaps and options
Commodity derivatives
Other contracts
Total
Prices in active
markets for identical
assets/liabilities
Other
observable
inputs
Unobservable
inputs
—
—
—
36
—
36
(183 )
(166 )
(200 )
302
(97 )
(344 )
—
—
—
163
134
297
Prices in active
markets for identical
assets/liabilities
Other
observable
inputs
Unobservable
inputs
—
—
—
12
(2 )
10
(121 )
111
(3,503 )
(153 )
(183 )
(3,849 )
—
—
—
391
77
468
$ million
Total
(183)
(166)
(200)
501
37
(11)
$ million
Total
(121)
111
(3,503)
250
(108 )
(3,371)
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
171
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Total
—
(27)
467
701 3,762 7,997
204 5,301
403
3
741 3,969 14,168
47
20
(109)
Carrying
amount
358
(4,211) 3,786
(71) 5,230
359
(44)
(4,435) 9,733
Difference
from carrying
amount[A]
5 years
and later
[Note 19 continued]
Net carrying amounts of derivative contracts measured using predominantly unobservable inputs
At January 1
Net losses recognised in revenue
Purchases
Sales
Recategorisations (net)
Currency translation differences
At December 31
2017
468
(248 )
(252 )
562
(248 )
15
297
$ million
2016
607
(361)
(227 )
428
56
(35)
468
Included in net losses recognised in revenue in 2017 were unrealised net gains totalling $39 million relating to assets and liabilities held at December 31,
2017 (2016: $333 million).
20 SHARE CAPITAL
Issued and fully paid ordinary shares of €0.07 each [A]
Number of shares
Nominal value ($ million)
At January 1, 2017
Scrip dividends
At December 31, 2017
At January 1, 2016
Scrip dividends
Shares issued (see Note 29)
At December 31, 2016
[A] Share capital at December 31, 2017, and 2016, also included 50,000 issued and fully paid sterling deferred shares of £1 each.
B
4,428,903,813 3,745,486,731
—
4,597,136,050 3,745,486,731
3,990,921,569 2,440,410,614
—
219,253,936
218,728,308 1,305,076,117
4,428,903,813 3,745,486,731
168,232,237
A
A
374
13
387
340
17
17
374
B
309
—
309
206
—
103
309
Total
683
13
696
546
17
120
683
At the Company’s Annual General Meeting (AGM) on May 23, 2017, the Board was authorised to allot ordinary shares in the Company, and to grant rights
to subscribe for or to convert any security into ordinary shares in the Company, up to an aggregate nominal amount of €190 million (representing
2,714 million ordinary shares of €0.07 each), and to list such shares or rights on any stock exchange. This authority expires at the earlier of the close of
business on August 23, 2018, and the end of the AGM to be held in 2018, unless previously renewed, revoked or varied by the Company in a general
meeting.
21 SHARE-BASED COMPENSATION PLANS AND SHARES HELD IN TRUST
Share-based compensation expense
Equity-settled plans
Cash-settled plans
Total
2017
422
380
802
2016
488
205
693
$ million
2015
621
129
750
The principal share-based employee compensation plans are the PSP and LTIP. Awards of shares and American Depository Shares (ADSs) of the Company
under the PSP and LTIP are granted upon certain conditions to eligible employees. The actual amount of shares that may vest ranges from 0% to 200% of the
awards, depending on the outcomes of prescribed performance conditions over a three-year period beginning on January 1 of the award year. Shares and
ADSs vest for nil consideration.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
172
172
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Other plans offer employees opportunities to acquire shares and ADSs of the Company or receive cash benefits measured by reference to the Company’s
Shell employee share ownership trusts and trust-like entities purchase the Company’s shares in the open market to meet delivery commitments under employee
share plans. At December 31, 2017, they held 15.2 million A shares (2016: 13.1 million), 2.9 million B shares (2016: 6.2 million) and 5.9 million A ADSs
Other reserves attributable to Royal Dutch Shell plc shareholders
Share awards under the PSP and LTIP
At January 1, 2017
Granted
Vested
Forfeited
Granted
Vested
At December 31, 2017
At January 1, 2016
At December 31, 2016
share price.
(2016: 4.9 million).
22 OTHER RESERVES
At January 1, 2017
Other comprehensive income attributable
to Royal Dutch Shell plc shareholders
Scrip dividends
Share-based compensation
At December 31, 2017
At January 1, 2016
Other comprehensive loss attributable
to Royal Dutch Shell plc shareholders
Scrip dividends
Shares issued
Share-based compensation
At December 31, 2016
At January 1, 2015
Other comprehensive loss attributable
to Royal Dutch Shell plc shareholders
Scrip dividends
Repurchases of shares
Share-based compensation
At December 31, 2015
Number of A shares
Number of B shares
Number of A ADSs
remaining contractual
(million)
(million)
(million)
Weighted average
life (years)
1.0
36
10
(12 )
(1 )
33
36
11
(11 )
36
12
4
(4)
—
12
12
4
(4)
12
10
3
(4 )
—
9
10
3
(3 )
10
0.9
1.0
1.0
$ million
Accumulated
other
Share
Capital
premium
redemption
Share plan
comprehensive
reserve
154
reserve
84
reserve
income
Total
1,644
(27,895)
11,298
—
—
—
154
154
—
—
—
—
—
—
—
84
84
—
—
—
—
84
5,851
5,851
—
—
(204 )
—
—
1,440
(22,044)
1,658
(22,480)
(13 )
(204 )
16,932
(17,186 )
—
—
—
(14 )
(5,949)
(5,949)
—
—
534
(17 )
33,930
520
Merger
reserve
37,311
—
(13)
—
37,298
3,398
—
(17)
—
33,930
37,311
154
1,644
(27,895)
11,298
3,405
154
83
1,723
(19,730)
(14,365 )
—
(7)
—
—
—
—
—
—
—
—
1
—
—
—
—
(65 )
(2,750)
(2,750 )
—
—
—
(7 )
1
(65)
3,398
154
84
1,658
(22,480)
(17,186 )
Net losses recognised in revenue
At January 1
Purchases
Sales
Recategorisations (net)
Currency translation differences
At December 31
2017 (2016: $333 million).
20 SHARE CAPITAL
At January 1, 2017
Scrip dividends
At December 31, 2017
At January 1, 2016
Scrip dividends
Shares issued (see Note 29)
At December 31, 2016
meeting.
Equity-settled plans
Cash-settled plans
Total
Included in net losses recognised in revenue in 2017 were unrealised net gains totalling $39 million relating to assets and liabilities held at December 31,
Issued and fully paid ordinary shares of €0.07 each [A]
2017
468
(248 )
(252 )
562
(248 )
15
297
2016
607
(361)
(227 )
428
56
(35)
468
Total
683
13
696
546
17
120
683
Number of shares
Nominal value ($ million)
A
B
A
4,428,903,813 3,745,486,731
374
168,232,237
—
4,597,136,050 3,745,486,731
3,990,921,569 2,440,410,614
219,253,936
—
218,728,308 1,305,076,117
13
387
340
17
17
4,428,903,813 3,745,486,731
374
B
309
—
309
206
—
103
309
[A] Share capital at December 31, 2017, and 2016, also included 50,000 issued and fully paid sterling deferred shares of £1 each.
At the Company’s Annual General Meeting (AGM) on May 23, 2017, the Board was authorised to allot ordinary shares in the Company, and to grant rights
to subscribe for or to convert any security into ordinary shares in the Company, up to an aggregate nominal amount of €190 million (representing
2,714 million ordinary shares of €0.07 each), and to list such shares or rights on any stock exchange. This authority expires at the earlier of the close of
business on August 23, 2018, and the end of the AGM to be held in 2018, unless previously renewed, revoked or varied by the Company in a general
21 SHARE-BASED COMPENSATION PLANS AND SHARES HELD IN TRUST
Share-based compensation expense
2017
422
380
802
2016
488
205
693
$ million
2015
621
129
750
The principal share-based employee compensation plans are the PSP and LTIP. Awards of shares and American Depository Shares (ADSs) of the Company
under the PSP and LTIP are granted upon certain conditions to eligible employees. The actual amount of shares that may vest ranges from 0% to 200% of the
awards, depending on the outcomes of prescribed performance conditions over a three-year period beginning on January 1 of the award year. Shares and
ADSs vest for nil consideration.
Net carrying amounts of derivative contracts measured using predominantly unobservable inputs
$ million
Share awards under the PSP and LTIP
Number of A shares
(million)
Number of B shares
(million)
Weighted average
remaining contractual
life (years)
At January 1, 2017
Granted
Vested
Forfeited
At December 31, 2017
At January 1, 2016
Granted
Vested
At December 31, 2016
36
10
(12 )
(1 )
33
36
11
(11 )
36
Number of A ADSs
(million)
10
12
4
(4)
—
12
12
4
(4)
12
3
(4 )
—
9
10
3
(3 )
10
1.0
0.9
1.0
1.0
Other plans offer employees opportunities to acquire shares and ADSs of the Company or receive cash benefits measured by reference to the Company’s
share price.
Shell employee share ownership trusts and trust-like entities purchase the Company’s shares in the open market to meet delivery commitments under employee
share plans. At December 31, 2017, they held 15.2 million A shares (2016: 13.1 million), 2.9 million B shares (2016: 6.2 million) and 5.9 million A ADSs
(2016: 4.9 million).
22 OTHER RESERVES
Other reserves attributable to Royal Dutch Shell plc shareholders
At January 1, 2017
Other comprehensive income attributable
to Royal Dutch Shell plc shareholders
Scrip dividends
Share-based compensation
At December 31, 2017
At January 1, 2016
Other comprehensive loss attributable
to Royal Dutch Shell plc shareholders
Scrip dividends
Shares issued
Share-based compensation
At December 31, 2016
At January 1, 2015
Other comprehensive loss attributable
to Royal Dutch Shell plc shareholders
Scrip dividends
Repurchases of shares
Share-based compensation
At December 31, 2015
Merger
reserve
37,311
—
(13)
—
37,298
3,398
—
(17)
33,930
—
37,311
Share
premium
reserve
154
—
—
—
154
154
—
—
—
—
154
Capital
redemption
reserve
84
—
—
—
84
84
—
—
—
—
84
Accumulated
other
comprehensive
income
Share plan
reserve
1,644
(27,895)
11,298
$ million
Total
—
—
(204 )
1,440
5,851
—
—
(22,044)
1,658
(22,480)
—
—
—
(14 )
(5,949)
—
—
534
1,644
(27,895)
5,851
(13 )
(204 )
16,932
(17,186 )
(5,949)
(17 )
33,930
520
11,298
3,405
154
83
1,723
(19,730)
(14,365 )
—
(7)
—
—
3,398
—
—
—
—
154
—
—
1
—
84
—
—
—
(65 )
1,658
(2,750)
—
—
—
(22,480)
(2,750 )
(7 )
1
(65)
(17,186 )
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
172
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
173
SHELL ANNUAL REPORT AND FORM 20-F 2017 FinanciaL stateMents and suppLeMents
173
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[Note 22 continued]
The merger reserve and share premium reserve were established as a consequence of the Company becoming the single parent company of Royal Dutch
Petroleum Company and The “Shell” Transport and Trading Company, p.l.c., now The Shell Transport and Trading Company Limited, in 2005. The increase
in the merger reserve in 2016 in respect of the shares issued represents the difference between the fair value and the nominal value of the shares issued for the
acquisition of BG (see Note 29). The capital redemption reserve was established in connection with repurchases of shares of the Company. The share plan
reserve is in respect of equity-settled share-based compensation plans (see Note 21). The movement represents the net of the charge for the year and the
release as a result of vested awards and is after deduction of tax of $11 million in 2017 (2016: $nil; 2015: $nil).
Accumulated other comprehensive income comprises the following:
Accumulated other comprehensive income attributable to Royal Dutch Shell plc shareholders
$ million
At January 1, 2017
Recognised in other comprehensive income
Reclassified to income
Reclassified to the balance sheet
Tax on amounts recognised/reclassified
Total, net of tax
Share of joint ventures and associates
Other comprehensive income/(loss) for the period
Less: non-controlling interest
Attributable to Royal Dutch Shell plc shareholders
At December 31, 2017
At January 1, 2016
Recognised in other comprehensive income
Reclassified to income
Reclassified to the balance sheet
Tax on amounts recognised/reclassified
Total, net of tax
Share of joint ventures and associates
Other comprehensive loss for the period
Less: non-controlling interest
Attributable to Royal Dutch Shell plc shareholders
Reclassification in respect of shares held in trust
At December 31, 2016
At January 1, 2015
Recognised in other comprehensive income
Reclassified to income
Tax on amounts recognised/reclassified
Total, net of tax
Share of joint ventures and associates
Other comprehensive (loss)/income for the period
Less: non-controlling interest
Attributable to Royal Dutch Shell plc shareholders
At December 31, 2015
[A] Includes losses of $2,024 million arising on net investment hedges.
[B] Mainly relating to the acquisition of BG.
Currency
translation
differences
(13,831 )
4,513
610
—
33
5,156
53
5,209
(113 )
5,096
(8,735 )
(12,940 )
(1,023 ) [A]
(277 )
—
(21 )
(1,321 )
(154 )
(1,475 )
50
(1,425 )
534
(13,831 )
(5,931)
(7,170)
47
2
(7,121)
2
(7,119)
110
(7,009)
(12,940 )
Unrealised
gains/(losses)
on securities
1,321
796
(211)
—
8
593
55
648
—
648
1,969
1,409
(204)
1
—
(11)
(214)
126
(88)
—
(88)
—
1,321
2,112
(650)
(61)
4
(707)
4
(703)
—
(703)
Cash flow
hedging
gains/(losses)
(144 )
(467 )
(87 )
(18 )
20
Retirement
benefits
remeasurements
(15,241 )
1,467
—
—
(863 )
(552 )
63
(489 )
—
(489 )
(633 )
473
(727 )
(939 )
1,044 [B]
5
(617 )
—
(617 )
—
(617 )
—
(144 )
458
698
(610 )
(27 )
61
(46 )
15
—
15
604
(1 )
603
(7 )
596
(14,645 )
(11,422 )
(4,816 )
—
—
999
(3,817 )
—
(3,817 )
(2 )
(3,819 )
—
(15,241 )
(16,369 )
6,338
—
(1,387 )
4,951
—
4,951
(4 )
Total
(27,895 )
6,309
312
(18 )
(802 )
5,801
170
5,971
(120 )
5,851
(22,044 )
(22,480 )
(6,770)
(1,215 )
1,044
972
(5,969)
(28 )
(5,997 )
48
(5,949)
534
(27,895 )
(19,730 )
(784)
(624 )
(1,408 )
(2,816 )
(40 )
(2,856 )
106
1,409
473
(11,422 )
(22,480 )
4,947
(2,750 )
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
174
FinanciaL stateMents and suppLeMents SHELL ANNUAL REPORT AND FORM 20-F 2017
174
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23 DIVIDENDS
Interim dividends
A shares
Total – A shares
B shares
Total – B shares
Total
Cash: $1.88 per share (2016: $1.88; 2015: $1.88)
Scrip: $1.88 per share (2016: $1.88; 2015: $1.88)
Cash: $1.88 per share (2016: $1.88; 2015: $1.88)
Scrip: $1.88 per share (2016: $1.88; 2015: $1.88)
2017
2016
4,919
3,558
8,477
5,958
1,193
7,151
4,545
3,491
8,036
5,132
1,791
6,923
$ million
2015
5,203
2,154
7,357
4,167
448
4,615
15,628
14,959
11,972
In addition, on February 1, 2018, the Directors announced a further interim dividend in respect of 2017 of $0.47 per A share and $0.47 per B share. The
total dividend is estimated to be $3,921 million and is payable on March 26, 2018, to shareholders on the register at February 16, 2018. The Scrip
Dividend Programme has been cancelled with effect from the fourth quarter 2017 interim dividend.
Dividends on A shares are by default paid in euros, although holders may elect to receive dividends in sterling. Dividends on B shares are by default paid in
sterling, although holders may elect to receive dividends in euros. Dividends on ADSs are paid in dollars.
24 EARNINGS PER SHARE
Income attributable to Royal Dutch Shell plc shareholders ($ million)
Weighted average number of A and B shares used as the basis for determining:
Basic earnings per share (million)
Diluted earnings per share (million)
2017
2016
12,977
4,575
2015
1,939
8,223.4
8,299.0
7,833.7
7,891.7
6,320.3
6,393.8
Basic earnings per share are calculated by dividing the income attributable to Royal Dutch Shell plc shareholders for the year by the weighted average number
of A and B shares outstanding during the year. The weighted average number of shares outstanding excludes shares held in trust.
Diluted earnings per share are based on the same income figures. The weighted average number of shares outstanding during the year is increased by dilutive
shares related to share-based compensation plans.
Earnings per share are identical for A and B shares.
25 LEGAL PROCEEDINGS AND OTHER CONTINGENCIES
GENERAL
In the ordinary course of business, Shell subsidiaries are subject to a number of contingencies arising from litigation and claims brought by governmental,
including tax authorities, and private parties. The operations and earnings of Shell subsidiaries continue, from time to time, to be affected to varying degrees
by political, legislative, fiscal and regulatory developments, including those relating to the protection of the environment and indigenous groups in the countries
in which they operate. The industries in which Shell subsidiaries are engaged are also subject to physical risks of various types.
The amounts claimed in relation to such events and, if such claims against Shell were successful, the costs of implementing the remedies sought in the various
cases could be substantial. Based on information available to date and taking into account that in some cases it is not practicable to estimate the possible
magnitude or timing of any resultant payments, management believes that the foregoing are not expected to have a material adverse impact on Shell’s
Consolidated Financial Statements. However, there remains a high degree of uncertainty around these contingencies, as well as their potential effect on future
operations, earnings, cash flows and Shell’s financial condition.
PESTICIDE LITIGATION
Shell Oil Company (SOC), along with other agricultural chemical pesticide manufacturers and distributors, has been sued by public and quasi-public water
purveyors alleging responsibility for groundwater contamination caused by applications of chemical pesticides. Most of these lawsuits assert various theories of
strict liability and seek to recover actual damages, including water well treatment and remediation costs. All of the suits assert claims for punitive damages.
There are approximately 35 such cases pending. Based on the claims asserted and SOC’s track record with regard to amounts paid to resolve varying claims,
management does not expect that the outcome of these lawsuits pending at December 31, 2017, will have a material adverse impact on Shell. However,
there remains a high degree of uncertainty regarding the potential outcome of some of these pending lawsuits, as well as their potential effect on future
operations, earnings, cash flows and Shell’s financial condition.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
175
The merger reserve and share premium reserve were established as a consequence of the Company becoming the single parent company of Royal Dutch
Petroleum Company and The “Shell” Transport and Trading Company, p.l.c., now The Shell Transport and Trading Company Limited, in 2005. The increase
in the merger reserve in 2016 in respect of the shares issued represents the difference between the fair value and the nominal value of the shares issued for the
acquisition of BG (see Note 29). The capital redemption reserve was established in connection with repurchases of shares of the Company. The share plan
reserve is in respect of equity-settled share-based compensation plans (see Note 21). The movement represents the net of the charge for the year and the
release as a result of vested awards and is after deduction of tax of $11 million in 2017 (2016: $nil; 2015: $nil).
Accumulated other comprehensive income comprises the following:
Accumulated other comprehensive income attributable to Royal Dutch Shell plc shareholders
$ million
Unrealised
gains/(losses)
on securities
Cash flow
hedging
gains/(losses)
remeasurements
At January 1, 2017
Recognised in other comprehensive income
Reclassified to income
Reclassified to the balance sheet
Tax on amounts recognised/reclassified
Total, net of tax
Share of joint ventures and associates
Other comprehensive income/(loss) for the period
Less: non-controlling interest
Attributable to Royal Dutch Shell plc shareholders
At December 31, 2017
At January 1, 2016
Recognised in other comprehensive income
Reclassified to income
Reclassified to the balance sheet
Tax on amounts recognised/reclassified
Total, net of tax
Share of joint ventures and associates
Other comprehensive loss for the period
Less: non-controlling interest
Attributable to Royal Dutch Shell plc shareholders
Reclassification in respect of shares held in trust
At December 31, 2016
At January 1, 2015
Recognised in other comprehensive income
Reclassified to income
Tax on amounts recognised/reclassified
Total, net of tax
Share of joint ventures and associates
Other comprehensive (loss)/income for the period
Less: non-controlling interest
Attributable to Royal Dutch Shell plc shareholders
At December 31, 2015
[A] Includes losses of $2,024 million arising on net investment hedges.
[B] Mainly relating to the acquisition of BG.
Currency
translation
differences
(13,831 )
4,513
610
—
33
5,156
53
5,209
(113 )
5,096
(8,735 )
(12,940 )
(1,023 ) [A]
(277 )
—
(21 )
(1,321 )
(154 )
(1,475 )
50
(1,425 )
534
(13,831 )
(5,931)
(7,170)
47
2
(7,121)
2
(7,119)
110
(7,009)
(12,940 )
Retirement
benefits
(15,241 )
1,467
—
—
(863 )
604
(1 )
603
(7 )
596
(14,645 )
(11,422 )
(4,816 )
—
—
999
(3,817 )
—
—
(15,241 )
(16,369 )
6,338
—
(1,387 )
4,951
—
Total
(27,895 )
6,309
312
(18 )
(802 )
5,801
170
5,971
(120 )
5,851
(22,044 )
(22,480 )
(6,770)
(1,215 )
1,044
972
(5,969)
(28 )
534
(27,895 )
(19,730 )
(784)
(624 )
(1,408 )
(2,816 )
(40 )
(3,817 )
(5,997 )
(2 )
48
(3,819 )
(5,949)
648
—
648
1,321
796
(211)
—
8
593
55
1,969
1,409
(204)
1
—
(11)
(214)
126
(88)
—
(88)
—
1,321
2,112
(650)
(61)
4
(707)
4
(703)
—
(703)
1,044 [B]
(144 )
(467 )
(87 )
(18 )
20
(552 )
63
(489 )
—
(489 )
(633 )
473
(727 )
(939 )
5
(617 )
—
(617 )
—
(617 )
—
(144 )
458
698
(610 )
(27 )
61
(46 )
15
—
15
4,951
(2,856 )
(4 )
106
4,947
(2,750 )
1,409
473
(11,422 )
(22,480 )
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
174
23 DIVIDENDS
Interim dividends
A shares
Cash: $1.88 per share (2016: $1.88; 2015: $1.88)
Scrip: $1.88 per share (2016: $1.88; 2015: $1.88)
Total – A shares
B shares
Cash: $1.88 per share (2016: $1.88; 2015: $1.88)
Scrip: $1.88 per share (2016: $1.88; 2015: $1.88)
Total – B shares
Total
2017
2016
4,919
3,558
8,477
5,958
1,193
7,151
4,545
3,491
8,036
5,132
1,791
6,923
$ million
2015
5,203
2,154
7,357
4,167
448
4,615
15,628
14,959
11,972
In addition, on February 1, 2018, the Directors announced a further interim dividend in respect of 2017 of $0.47 per A share and $0.47 per B share. The
total dividend is estimated to be $3,921 million and is payable on March 26, 2018, to shareholders on the register at February 16, 2018. The Scrip
Dividend Programme has been cancelled with effect from the fourth quarter 2017 interim dividend.
Dividends on A shares are by default paid in euros, although holders may elect to receive dividends in sterling. Dividends on B shares are by default paid in
sterling, although holders may elect to receive dividends in euros. Dividends on ADSs are paid in dollars.
24 EARNINGS PER SHARE
Income attributable to Royal Dutch Shell plc shareholders ($ million)
Weighted average number of A and B shares used as the basis for determining:
Basic earnings per share (million)
Diluted earnings per share (million)
2017
2016
12,977
4,575
2015
1,939
8,223.4
8,299.0
7,833.7
7,891.7
6,320.3
6,393.8
Basic earnings per share are calculated by dividing the income attributable to Royal Dutch Shell plc shareholders for the year by the weighted average number
of A and B shares outstanding during the year. The weighted average number of shares outstanding excludes shares held in trust.
Diluted earnings per share are based on the same income figures. The weighted average number of shares outstanding during the year is increased by dilutive
shares related to share-based compensation plans.
Earnings per share are identical for A and B shares.
25 LEGAL PROCEEDINGS AND OTHER CONTINGENCIES
GENERAL
In the ordinary course of business, Shell subsidiaries are subject to a number of contingencies arising from litigation and claims brought by governmental,
including tax authorities, and private parties. The operations and earnings of Shell subsidiaries continue, from time to time, to be affected to varying degrees
by political, legislative, fiscal and regulatory developments, including those relating to the protection of the environment and indigenous groups in the countries
in which they operate. The industries in which Shell subsidiaries are engaged are also subject to physical risks of various types.
The amounts claimed in relation to such events and, if such claims against Shell were successful, the costs of implementing the remedies sought in the various
cases could be substantial. Based on information available to date and taking into account that in some cases it is not practicable to estimate the possible
magnitude or timing of any resultant payments, management believes that the foregoing are not expected to have a material adverse impact on Shell’s
Consolidated Financial Statements. However, there remains a high degree of uncertainty around these contingencies, as well as their potential effect on future
operations, earnings, cash flows and Shell’s financial condition.
PESTICIDE LITIGATION
Shell Oil Company (SOC), along with other agricultural chemical pesticide manufacturers and distributors, has been sued by public and quasi-public water
purveyors alleging responsibility for groundwater contamination caused by applications of chemical pesticides. Most of these lawsuits assert various theories of
strict liability and seek to recover actual damages, including water well treatment and remediation costs. All of the suits assert claims for punitive damages.
There are approximately 35 such cases pending. Based on the claims asserted and SOC’s track record with regard to amounts paid to resolve varying claims,
management does not expect that the outcome of these lawsuits pending at December 31, 2017, will have a material adverse impact on Shell. However,
there remains a high degree of uncertainty regarding the potential outcome of some of these pending lawsuits, as well as their potential effect on future
operations, earnings, cash flows and Shell’s financial condition.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
175
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[Note 25 continued]
CLIMATE CHANGE LITIGATION
Municipalities in California and New York have filed nine lawsuits against oil and gas companies, including Royal Dutch Shell plc. The plaintiffs seek damages for
claimed harm to their public and private infrastructure from rising sea levels allegedly due to climate change caused by the defendants’ fossil fuel products.
Management believes the outcome of these matters should be resolved in a manner favourable to Shell, however, there remains a high degree of uncertainty
regarding the ultimate outcome of these lawsuits, as well as their potential effect on future operations, earnings, cash flows and Shell’s financial condition.
NIGERIAN LITIGATION
Shell subsidiaries and associates operating in Nigeria are parties to various environmental and contractual disputes brought in the courts of Nigeria, England
and the Netherlands. These disputes are at different stages in litigation, including at the appellate stage, where judgements have been rendered against Shell
entities. If taken at face value, the aggregate amount of these judgements could be seen as material. Management, however, believes that the outcomes of
these matters will ultimately be resolved in a manner favourable to Shell. However, there remains a high degree of uncertainty regarding these cases, as well
as their potential effect on future operations, earnings, cash flows and Shell’s financial condition.
The authorities in various countries are investigating Shell Nigeria Exploration and Production Company Ltd.’s (SNEPCO’s) investment in Nigerian oil block
OPL 245 and the 2011 settlement of litigation pertaining to that block with regard to potential anti-bribery, anti-corruption and anti-money laundering laws. On
January 27, 2017, the Nigeria Federal High Court issued an Interim Order of Attachment for OPL 245, pending the conclusion of the investigation. SNEPCO
applied for and was granted a discharge of this order on constitutional and procedural grounds. Also in Nigeria, in March 2017, criminal charges alleging
official corruption and conspiracy to commit official corruption were filed against SNEPCO, one current Shell employee and third parties including ENI SpA
and one of its subsidiaries. Those proceedings are ongoing. In March 2017, parties alleging to be shareholders of Malabu Oil and Gas Company Ltd. filed
an action to challenge the 2011 settlement and the award of OPL 245 to SNEPCO and an ENI SpA subsidiary by the Federal Government of Nigeria. Those
proceedings are also ongoing. On February 14, 2017, Royal Dutch Shell plc received a notice of request for indictment from the Milan public prosecutor with
respect to this matter. On December 20, 2017, Royal Dutch Shell plc along with four former Shell employees including one former executive were remanded
to trial in Milan. On March 5, 2018, the Court of Milan declared that the first hearing is scheduled for May 14, 2018. Based on Shell’s review of the
Prosecutor of Milan's file and all of the information and facts currently available to Shell, management does not believe that there is a basis to convict Shell.
Furthermore, management is not aware of any evidence to convict any former or current Shell employee. Investigations by authorities in other jurisdictions are
ongoing.
However, there remains a high degree of uncertainty around these contingencies, as well as their potential effect on future operations, earnings, cash flows
and Shell’s financial condition. Accordingly, at this time, it is not practicable to estimate the magnitude and timing of any possible obligations or payments.
Any violation of the US Foreign Corrupt Practices Act or other relevant anti-bribery, anti-corruption or anti-money laundering legislation could have a material
adverse effect on Royal Dutch Shell plc’s earnings, cash flows and financial condition.
26 EMPLOYEES
Employee costs
Remuneration
Social security contributions
Retirement benefits (see Note 17)
Share-based compensation (see Note 21)
Total
[A] In addition, there were redundancy costs of $1,441 million.
Average employee numbers
Integrated Gas
Upstream
Downstream
Corporate [A]
Total
[A] Includes all employees working in business service centres irrespective of the segment they support.
2017
10,855
844
1,815
802
14,316
2016[A]
11,985
867
2,181
693
15,726
2017
2016
11
18
40
17
86
13
22
40
17
92
$ million
2015
12,558
830
2,984
750
17,122
Thousand
2015
13
22
43
15
93
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
176
FinanciaL stateMents and suppLeMents SHELL ANNUAL REPORT AND FORM 20-F 2017
176
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Emoluments comprise salaries and fees, annual bonuses (for the period for which performance is assessed) and other benefits. The value of released awards
under long-term incentive plans for the period is in respect of the performance period ending in that year. In 2017, retirement benefits were accrued in respect
of qualifying services under defined benefit plans by three Directors.
Further information on the remuneration of the Directors can be found in the Directors’ Remuneration Report on pages 94-117.
27 DIRECTORS AND SENIOR MANAGEMENT
Remuneration of Directors of the Company
.
Emoluments
Value of released awards under long-term incentive plans
Employer contributions to pension plans
Directors and Senior Management expense
Short-term benefits
Retirement benefits
Share-based compensation
Termination and related amounts
Total
2017
11
5
1
2016
10
8
1
2017
2016
23
3
17
3
46
21
3
15
4
43
$ million
2015
12
1
1
$ million
2015
21
4
19
—
44
Directors and Senior Management comprise members of the Executive Committee and the Non-executive Directors of the Company.
Short-term benefits comprise salaries and fees, annual bonuses delivered in cash and shares (for the period for which performance is assessed), other benefits
and employer social security contributions. Prior to 2017, these included the 50% of annual bonuses delivered in cash, and share-based compensation
included the appropriate proportion of the deferred element (under the Deferred Bonus Plan). Following shareholder approval at the 2017 AGM, the Deferred
Bonus Plan has been removed and 50% of the bonus is delivered in shares subject to a three-year holding period.
28 AUDITOR’S REMUNERATION
Fees in respect of the audit of the Consolidated and Parent Company
Financial Statements, including audit of consolidation returns
Other audit fees, principally in respect of audits of accounts of subsidiaries
Total audit fees
Audit-related fees [A]
Total
Fees in respect of other non-audit services [B]
2017
2016
$ million
2015
27
21
48
4
1
53
32
17
49
2
1
52
5
46
51
2
—
53
[A] Categorised as fees for audit services for US reporting purposes. Aggregate audit fees for US reporting purposes amounted to $52 million in 2017 (2016: $51 million; 2015: $53 million).
[B] Categorised as all other fees for US reporting purposes and mainly related to agreed-upon-procedures.
In addition, the auditor provided audit services to retirement benefit plans for employees of subsidiaries. Remuneration amounted to $1 million in 2017
(2016: $1 million; 2015: $1 million).
With effect from 2016, Ernst & Young LLP (EY) was appointed as auditor of the Company, replacing PricewaterhouseCoopers LLP (PwC). Auditor’s
remuneration for 2017 and 2016 relates to EY and for 2015 to PwC. From 2016, fees in respect of the audit of the Consolidated Financial Statements
include audit of consolidation returns carried out locally that was previously included within other audit fees.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
177
CLIMATE CHANGE LITIGATION
Municipalities in California and New York have filed nine lawsuits against oil and gas companies, including Royal Dutch Shell plc. The plaintiffs seek damages for
claimed harm to their public and private infrastructure from rising sea levels allegedly due to climate change caused by the defendants’ fossil fuel products.
Management believes the outcome of these matters should be resolved in a manner favourable to Shell, however, there remains a high degree of uncertainty
regarding the ultimate outcome of these lawsuits, as well as their potential effect on future operations, earnings, cash flows and Shell’s financial condition.
NIGERIAN LITIGATION
Shell subsidiaries and associates operating in Nigeria are parties to various environmental and contractual disputes brought in the courts of Nigeria, England
and the Netherlands. These disputes are at different stages in litigation, including at the appellate stage, where judgements have been rendered against Shell
entities. If taken at face value, the aggregate amount of these judgements could be seen as material. Management, however, believes that the outcomes of
these matters will ultimately be resolved in a manner favourable to Shell. However, there remains a high degree of uncertainty regarding these cases, as well
as their potential effect on future operations, earnings, cash flows and Shell’s financial condition.
The authorities in various countries are investigating Shell Nigeria Exploration and Production Company Ltd.’s (SNEPCO’s) investment in Nigerian oil block
OPL 245 and the 2011 settlement of litigation pertaining to that block with regard to potential anti-bribery, anti-corruption and anti-money laundering laws. On
January 27, 2017, the Nigeria Federal High Court issued an Interim Order of Attachment for OPL 245, pending the conclusion of the investigation. SNEPCO
applied for and was granted a discharge of this order on constitutional and procedural grounds. Also in Nigeria, in March 2017, criminal charges alleging
official corruption and conspiracy to commit official corruption were filed against SNEPCO, one current Shell employee and third parties including ENI SpA
and one of its subsidiaries. Those proceedings are ongoing. In March 2017, parties alleging to be shareholders of Malabu Oil and Gas Company Ltd. filed
an action to challenge the 2011 settlement and the award of OPL 245 to SNEPCO and an ENI SpA subsidiary by the Federal Government of Nigeria. Those
proceedings are also ongoing. On February 14, 2017, Royal Dutch Shell plc received a notice of request for indictment from the Milan public prosecutor with
respect to this matter. On December 20, 2017, Royal Dutch Shell plc along with four former Shell employees including one former executive were remanded
to trial in Milan. On March 5, 2018, the Court of Milan declared that the first hearing is scheduled for May 14, 2018. Based on Shell’s review of the
Prosecutor of Milan's file and all of the information and facts currently available to Shell, management does not believe that there is a basis to convict Shell.
Furthermore, management is not aware of any evidence to convict any former or current Shell employee. Investigations by authorities in other jurisdictions are
ongoing.
However, there remains a high degree of uncertainty around these contingencies, as well as their potential effect on future operations, earnings, cash flows
and Shell’s financial condition. Accordingly, at this time, it is not practicable to estimate the magnitude and timing of any possible obligations or payments.
Any violation of the US Foreign Corrupt Practices Act or other relevant anti-bribery, anti-corruption or anti-money laundering legislation could have a material
adverse effect on Royal Dutch Shell plc’s earnings, cash flows and financial condition.
27 DIRECTORS AND SENIOR MANAGEMENT
.
Remuneration of Directors of the Company
Emoluments
Value of released awards under long-term incentive plans
Employer contributions to pension plans
2017
11
5
1
2016
10
8
1
$ million
2015
12
1
1
Emoluments comprise salaries and fees, annual bonuses (for the period for which performance is assessed) and other benefits. The value of released awards
under long-term incentive plans for the period is in respect of the performance period ending in that year. In 2017, retirement benefits were accrued in respect
of qualifying services under defined benefit plans by three Directors.
Further information on the remuneration of the Directors can be found in the Directors’ Remuneration Report on pages 94-117.
Directors and Senior Management expense
Short-term benefits
Retirement benefits
Share-based compensation
Termination and related amounts
Total
2017
2016
23
3
17
3
46
21
3
15
4
43
$ million
2015
21
4
19
—
44
Directors and Senior Management comprise members of the Executive Committee and the Non-executive Directors of the Company.
Short-term benefits comprise salaries and fees, annual bonuses delivered in cash and shares (for the period for which performance is assessed), other benefits
and employer social security contributions. Prior to 2017, these included the 50% of annual bonuses delivered in cash, and share-based compensation
included the appropriate proportion of the deferred element (under the Deferred Bonus Plan). Following shareholder approval at the 2017 AGM, the Deferred
Bonus Plan has been removed and 50% of the bonus is delivered in shares subject to a three-year holding period.
28 AUDITOR’S REMUNERATION
2017
2016
$ million
2015
2017
2016[A]
10,855
11,985
844
1,815
802
867
2,181
693
14,316
15,726
17,122
Fees in respect of the audit of the Consolidated and Parent Company
Financial Statements, including audit of consolidation returns
Other audit fees, principally in respect of audits of accounts of subsidiaries
Total audit fees
Audit-related fees [A]
Fees in respect of other non-audit services [B]
27
21
48
4
1
32
17
49
2
1
Total
[A] Categorised as fees for audit services for US reporting purposes. Aggregate audit fees for US reporting purposes amounted to $52 million in 2017 (2016: $51 million; 2015: $53 million).
[B] Categorised as all other fees for US reporting purposes and mainly related to agreed-upon-procedures.
53
52
5
46
51
2
—
53
2017
2016
11
18
40
17
86
13
22
40
17
92
In addition, the auditor provided audit services to retirement benefit plans for employees of subsidiaries. Remuneration amounted to $1 million in 2017
(2016: $1 million; 2015: $1 million).
With effect from 2016, Ernst & Young LLP (EY) was appointed as auditor of the Company, replacing PricewaterhouseCoopers LLP (PwC). Auditor’s
remuneration for 2017 and 2016 relates to EY and for 2015 to PwC. From 2016, fees in respect of the audit of the Consolidated Financial Statements
include audit of consolidation returns carried out locally that was previously included within other audit fees.
26 EMPLOYEES
Employee costs
Remuneration
Social security contributions
Retirement benefits (see Note 17)
Share-based compensation (see Note 21)
Total
[A] In addition, there were redundancy costs of $1,441 million.
Average employee numbers
Integrated Gas
Upstream
Downstream
Corporate [A]
Total
[A] Includes all employees working in business service centres irrespective of the segment they support.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
176
$ million
2015
12,558
830
2,984
750
Thousand
2015
13
22
43
15
93
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
177
SHELL ANNUAL REPORT AND FORM 20-F 2017 FinanciaL stateMents and suppLeMents
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29 BUSINESS COMBINATIONS
MOTIVA TRANSACTION
On May 1, 2017, Shell and Saudi Refining Inc. (SRI) completed the separation of assets, liabilities and businesses of Motiva, a 50:50 joint venture. Shell
assumed sole ownership of two refineries, 11 distribution terminals and certain Shell-branded fuel retail markets in the USA. The transaction enables Shell to
combine the assets retained from the joint venture with other Shell Downstream assets in North America, in line with its strategy to deliver increased cash and
returns through simpler and highly integrated businesses. It was accounted for as a disposal of Shell’s 50% interest in Motiva and a subsequent business
acquisition.
The fair value of Shell’s interest in the joint venture on May 1, 2017, was $3,847 million, based on Shell’s assessment. This fair value was used, for
accounting purposes, as the consideration recognised for the disposal. The loss on sale of $546 million comprised the excess of $28 million of the
consideration above the carrying amount of Shell’s interest in the joint venture (including associated deferred tax liabilities) of $3,819 million, less a non-cash
tax charge of $574 million which crystallised upon the disposal.
The fair value of $3,847 million also served as the purchase consideration for the net assets acquired. As set out below, goodwill of $355 million was
recognised on the acquisition, being the excess of the purchase consideration over the fair value of the net assets acquired and $957 million received in cash
from SRI. The fair value of net assets acquired was based on an independent valuation using cash flow projections based on the historical performance of the
newly acquired assets, forecasted pricing for various related commodities and existing business plan information. The fair value of Shell’s interest in the joint
venture, the fair value of the net assets acquired, and therefore the resultant goodwill, remain provisional although no significant adjustments are expected.
Goodwill recognised
Fair value of Shell’s interest in the Motiva joint venture
Less: cash received
Less: fair value of net assets acquired
Intangible assets
Property, plant and equipment
Inventories
Other assets
Debt (non-current)
Trade and other payables (non-current)
Deferred tax (non-current liabilities)
Retirement benefits (non-current liabilities)
Decommissioning and other provisions (non-current)
Current liabilities
Total fair value of net assets acquired
Goodwill
$ million
3,847
957
656
2,685
927
94
(115 )
(65)
(318 )
(975)
(132)
(222)
2,535
355
The cash inflow from this transaction of $887 million was included within proceeds from sale of joint ventures and associates in the Consolidated
Statement of Cash Flows, being the net effect of the $957 million cash received from SRI and a payment by Shell of $70 million to SRI in respect of the
transfer of certain retirement benefit liabilities.
ACQUISITION OF BG GROUP PLC
On February 15, 2016, the Company acquired all the voting rights in BG Group plc (BG) by means of a Scheme of Arrangement under Part 26 of the Act for
a purchase consideration of $54,034 million. This included cash of $19,036 million and the fair value ($34,050 million) of 218.7 million A shares and
1,305.1 million B shares issued in exchange for all BG shares. The fair value of the shares issued was calculated using the market price of the Company’s A
and B shares of 1,545.0 and 1,538.5 pence respectively on the London Stock Exchange at its opening of business on February 15, 2016.
In 2016, goodwill of $10,997 million was recognised on the acquisition, being the excess of the purchase consideration over the fair value of net assets
acquired. The net asset fair values, in line with accounting standards, were determined, where applicable, and particularly in respect of property, plant and
equipment and intangible assets, by reference to oil and gas prices as reflected in the prevailing market view on the day of completion, as well as using
estimates of proved oil and gas reserves and unproved volumes including timing of production, discount rates and exchange rates. Oil and gas prices were
based on the forward price curve for the first two years, and for subsequent years based on the market consensus price view.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
178
FinanciaL stateMents and suppLeMents SHELL ANNUAL REPORT AND FORM 20-F 2017
178
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Supplementary information – oil and gas (unaudited)
The information set out on pages 179-198 is referred to as “unaudited” as a means of clarifying that it is not covered by the audit opinion of the independent
registered public accounting firm that has audited and reported on the “Consolidated Financial Statements”.
PROVED RESERVES
Proved reserves estimates are calculated pursuant to the US Securities and Exchange Commission (SEC) Rules and the Financial Accounting Standard Board’s
Topic 932. Proved reserves can be either developed or undeveloped. The definitions used are in accordance with the SEC Rule 4-10 (a) of Regulation S-X.
We include proved reserves associated with future production that will be consumed in operations.
Proved reserves shown are net of any quantities of crude oil or natural gas that are expected to be (or could be) taken as royalties in kind. Proved reserves
outside North America include quantities that will be settled as royalties in cash. Proved reserves include certain quantities of crude oil or natural gas that will
be produced under arrangements that involve Shell subsidiaries, joint ventures and associates in risks and rewards but do not transfer title of the product to
those entities.
of oil equivalent basis.
natural gas.
Subsidiaries’ proved reserves at December 31, 2017, were divided into 80% developed and 20% undeveloped on a barrel of oil equivalent basis. For the
Shell share of joint ventures and associates, the proved reserves at December 31, 2017, were divided into 91% developed and 9% undeveloped on a barrel
Proved reserves are recognised under various forms of contractual agreements. Shell’s proved reserves volumes at December 31, 2017, present in agreements
such as production-sharing contracts (PSC), tax/variable royalty contracts or other forms of economic entitlement contracts, where the Shell share of reserves
can vary with commodity prices, were 1,941 million barrels of crude oil and natural gas liquids, and 12,588 thousand million standard cubic feet (scf) of
Proved reserves cannot be measured exactly because estimation of reserves involves subjective judgement (see “Risk factors” on page 13 and our “Proved
reserves assurance process” below). These estimates remain subject to revision and are unaudited supplementary information.
PROVED RESERVES ASSURANCE PROCESS
A central group of reserves experts, who on average have around 29 years’ experience in the oil and gas industry, undertake the primary assurance of the
proved reserves bookings. This group of experts is part of the Resources Assurance and Reporting (RAR) organisation within Shell. A Vice President with
32 years’ experience in the oil and gas industry currently heads the RAR organisation. He is a member of the Society of Petroleum Engineers and holds a BA in
mathematics from Oxford University and a MEng in Petroleum Engineering from Heriot Watt University. The RAR organisation reports directly to an Executive
Vice President of Finance, who is a member of the Upstream Reserves Committee (URC). The URC is a multidisciplinary committee consisting of senior
representatives from the Finance, Legal, Projects & Technology and Upstream organisations. The URC reviews and endorses all major (larger than 20 million
barrels of oil equivalent) proved reserves bookings and endorses the total aggregated proved reserves. Final approval of all proved reserves bookings remains
with Shell’s Executive Committee. The Internal Audit function also provides secondary assurance through audits of the control framework.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
179
Supplementary information – oil and gas (unaudited)
Supplementary information – oil and gas (unaudited)
The information set out on pages 179-198 is referred to as “unaudited” as a means of clarifying that it is not covered by the audit opinion of the independent
registered public accounting firm that has audited and reported on the “Consolidated Financial Statements”.
PROVED RESERVES
Proved reserves estimates are calculated pursuant to the US Securities and Exchange Commission (SEC) Rules and the Financial Accounting Standard Board’s
Topic 932. Proved reserves can be either developed or undeveloped. The definitions used are in accordance with the SEC Rule 4-10 (a) of Regulation S-X.
We include proved reserves associated with future production that will be consumed in operations.
Proved reserves shown are net of any quantities of crude oil or natural gas that are expected to be (or could be) taken as royalties in kind. Proved reserves
outside North America include quantities that will be settled as royalties in cash. Proved reserves include certain quantities of crude oil or natural gas that will
be produced under arrangements that involve Shell subsidiaries, joint ventures and associates in risks and rewards but do not transfer title of the product to
those entities.
Subsidiaries’ proved reserves at December 31, 2017, were divided into 80% developed and 20% undeveloped on a barrel of oil equivalent basis. For the
Shell share of joint ventures and associates, the proved reserves at December 31, 2017, were divided into 91% developed and 9% undeveloped on a barrel
of oil equivalent basis.
Proved reserves are recognised under various forms of contractual agreements. Shell’s proved reserves volumes at December 31, 2017, present in agreements
such as production-sharing contracts (PSC), tax/variable royalty contracts or other forms of economic entitlement contracts, where the Shell share of reserves
can vary with commodity prices, were 1,941 million barrels of crude oil and natural gas liquids, and 12,588 thousand million standard cubic feet (scf) of
natural gas.
Proved reserves cannot be measured exactly because estimation of reserves involves subjective judgement (see “Risk factors” on page 13 and our “Proved
reserves assurance process” below). These estimates remain subject to revision and are unaudited supplementary information.
PROVED RESERVES ASSURANCE PROCESS
A central group of reserves experts, who on average have around 29 years’ experience in the oil and gas industry, undertake the primary assurance of the
proved reserves bookings. This group of experts is part of the Resources Assurance and Reporting (RAR) organisation within Shell. A Vice President with
32 years’ experience in the oil and gas industry currently heads the RAR organisation. He is a member of the Society of Petroleum Engineers and holds a BA in
mathematics from Oxford University and a MEng in Petroleum Engineering from Heriot Watt University. The RAR organisation reports directly to an Executive
Vice President of Finance, who is a member of the Upstream Reserves Committee (URC). The URC is a multidisciplinary committee consisting of senior
representatives from the Finance, Legal, Projects & Technology and Upstream organisations. The URC reviews and endorses all major (larger than 20 million
barrels of oil equivalent) proved reserves bookings and endorses the total aggregated proved reserves. Final approval of all proved reserves bookings remains
with Shell’s Executive Committee. The Internal Audit function also provides secondary assurance through audits of the control framework.
29 BUSINESS COMBINATIONS
MOTIVA TRANSACTION
On May 1, 2017, Shell and Saudi Refining Inc. (SRI) completed the separation of assets, liabilities and businesses of Motiva, a 50:50 joint venture. Shell
assumed sole ownership of two refineries, 11 distribution terminals and certain Shell-branded fuel retail markets in the USA. The transaction enables Shell to
combine the assets retained from the joint venture with other Shell Downstream assets in North America, in line with its strategy to deliver increased cash and
returns through simpler and highly integrated businesses. It was accounted for as a disposal of Shell’s 50% interest in Motiva and a subsequent business
acquisition.
The fair value of Shell’s interest in the joint venture on May 1, 2017, was $3,847 million, based on Shell’s assessment. This fair value was used, for
accounting purposes, as the consideration recognised for the disposal. The loss on sale of $546 million comprised the excess of $28 million of the
consideration above the carrying amount of Shell’s interest in the joint venture (including associated deferred tax liabilities) of $3,819 million, less a non-cash
tax charge of $574 million which crystallised upon the disposal.
The fair value of $3,847 million also served as the purchase consideration for the net assets acquired. As set out below, goodwill of $355 million was
recognised on the acquisition, being the excess of the purchase consideration over the fair value of the net assets acquired and $957 million received in cash
from SRI. The fair value of net assets acquired was based on an independent valuation using cash flow projections based on the historical performance of the
newly acquired assets, forecasted pricing for various related commodities and existing business plan information. The fair value of Shell’s interest in the joint
venture, the fair value of the net assets acquired, and therefore the resultant goodwill, remain provisional although no significant adjustments are expected.
Goodwill recognised
Fair value of Shell’s interest in the Motiva joint venture
Less: cash received
Less: fair value of net assets acquired
Intangible assets
Property, plant and equipment
Inventories
Other assets
Debt (non-current)
Trade and other payables (non-current)
Deferred tax (non-current liabilities)
Retirement benefits (non-current liabilities)
Decommissioning and other provisions (non-current)
Current liabilities
Total fair value of net assets acquired
Goodwill
transfer of certain retirement benefit liabilities.
ACQUISITION OF BG GROUP PLC
The cash inflow from this transaction of $887 million was included within proceeds from sale of joint ventures and associates in the Consolidated
Statement of Cash Flows, being the net effect of the $957 million cash received from SRI and a payment by Shell of $70 million to SRI in respect of the
On February 15, 2016, the Company acquired all the voting rights in BG Group plc (BG) by means of a Scheme of Arrangement under Part 26 of the Act for
a purchase consideration of $54,034 million. This included cash of $19,036 million and the fair value ($34,050 million) of 218.7 million A shares and
1,305.1 million B shares issued in exchange for all BG shares. The fair value of the shares issued was calculated using the market price of the Company’s A
and B shares of 1,545.0 and 1,538.5 pence respectively on the London Stock Exchange at its opening of business on February 15, 2016.
In 2016, goodwill of $10,997 million was recognised on the acquisition, being the excess of the purchase consideration over the fair value of net assets
acquired. The net asset fair values, in line with accounting standards, were determined, where applicable, and particularly in respect of property, plant and
equipment and intangible assets, by reference to oil and gas prices as reflected in the prevailing market view on the day of completion, as well as using
estimates of proved oil and gas reserves and unproved volumes including timing of production, discount rates and exchange rates. Oil and gas prices were
based on the forward price curve for the first two years, and for subsequent years based on the market consensus price view.
$ million
3,847
957
656
2,685
927
94
(115 )
(65)
(318 )
(975)
(132)
(222)
2,535
355
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
178
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
179
SHELL ANNUAL REPORT AND FORM 20-F 2017 FinanciaL stateMents and suppLeMents
179
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CRUDE OIL, NATURAL GAS LIQUIDS, SYNTHETIC CRUDE OIL AND BITUMEN
Shell subsidiaries’ proved reserves of crude oil, natural gas liquids (NGLs), synthetic crude oil and bitumen at the end of the year; their share of the proved
reserves of joint ventures and associates at the end of the year; and the changes in such reserves during the year are set out on pages 181-183. Significant
changes in these proved reserves are discussed below.
PROVED RESERVES 2017-2016
Shell subsidiaries
Europe
The net increase of 61 million barrels in revisions and reclassifications resulted from field performance studies and development activities in Denmark, Norway
and the UK. The sale of minerals in place of 50 million barrels occurred in the UK.
Shell subsidiaries
At January 1
Asia
The net increase of 153 million barrels in revisions and reclassifications was mainly in Oman and Malaysia. The increase of 95 million barrels in extensions
and discoveries was in Kazakhstan and Malaysia.
USA
The net increase of 235 million barrels in revisions and reclassifications resulted from field performance studies and development activities in respect of Stones
and Mars in the Gulf of Mexico, and the Delaware Permian Basin. The increase of 242 million barrels in extensions and discoveries was in the Delaware
Permian Basin, Appomattox and Vicksburg in the Gulf of Mexico.
Canada
The sale of minerals in place of 1,992 million barrels in synthetic crude oil resulted from the sale of our 60% interest in the Athabasca Oil Sands Project
(AOSP) and our in-situ and undeveloped oil sands interests. The purchase of minerals in place of 664 million barrels in synthetic crude oil resulted from the
separate acquisition of a 50% controlling interest in Marathon Oil Canada Corporation, which has a 20% interest in the AOSP.
Shell share of joint ventures and associates
Asia
The net increase of 76 million barrels in revisions and reclassifications was mainly in Brunei.
PROVED RESERVES 2016-2015
Shell subsidiaries
Acquisition of BG Group plc
Purchases of minerals in place included 1,205 million barrels additions on acquisition of BG Group plc (BG), notably 85 million barrels in Europe,
175 million barrels in Asia and 931 million barrels in South America.
Asia
The net increase of 100 million barrels in revisions and reclassifications mainly related to Malaysia and Russia.
Canada
The increase of 96 million barrels in synthetic crude oil extensions and discoveries was in the Muskeg River Mine.
South America
The net increase of 86 million barrels in revisions and reclassifications was mainly due to a transfer of contingent resource to proved reserves in Brazil.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
180
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Proved developed and undeveloped reserves 2017
Europe
Asia Oceania
Africa
USA
North America
South
Canada America
Oil and
Oil and
Oil and
Oil and
Oil and
Oil and
Synthetic
Oil and
Oil and
Synthetic
NGL
NGL
NGL
NGL
NGL
NGL
crude oil Bitumen
NGL
NGL
crude oil Bitumen
products
Million barrels
Total
All
Revisions and reclassifications
61 153
13
23 235
8
(3 )
2
38 531
(3 )
2
530
435 1,386 128 529 491
18 2,014
2 992 3,979 2,014
2 5,995
Improved recovery
—
35 — —
38 —
— — —
73
Extensions and discoveries
—
95 — — 242
7
— —
30 374
Purchases of minerals in place
— — — —
2 —
664 — —
2
664 —
Sales of minerals in place
(50 ) — —
(14) — — (1,992 )
(2) —
(64 ) (1,992 )
(2 )
(2,058)
— —
— —
73
374
666
(90 ) (187 )
(9 )
(75) (109)
(11 )
(34 )
(2)
(114 ) (595 )
(34 )
(2 )
(631 )
356 1,482 132 463 899
22
649 — 946 4,300
649 — 4,949
Production [A]
At December 31
Shell share of joint ventures
and associates
At January 1
7 256 — — — —
— — — 263
Revisions and reclassifications
6
76 — — — —
— — —
82
Improved recovery
Extensions and discoveries
—
—
3 — — — —
— — —
1 — — — —
— — —
3
1
Purchases of minerals in place
— — — — — —
— — — —
Sales of minerals in place
— — — — — —
— — — —
Production
At December 31
(1 )
(35 ) — — — —
— — —
(36 )
12 301 — — — —
— — — 313
— —
Total
368 1,783 132 463 899
22
649 — 946 4,613
649 — 5,262
— —
— —
— —
— —
— —
— —
— —
263
82
3
1
—
—
(36 )
313
Reserves attributable to
non-controlling interest in Shell
subsidiaries at December 31
[A] Included 1 million barrels consumed in operations for synthetic crude oil.
— — — — — —
325 — — —
325 —
325
Proved developed reserves 2017
Million barrels
Europe
Asia Oceania
Africa
USA
North America
South
Canada America
Oil and
Oil and
Oil and
Oil and
Oil and
Oil and
Synthetic
Oil and
Oil and
Synthetic
NGL
NGL
NGL
NGL
NGL
NGL
crude oil Bitumen
NGL
NGL
crude oil Bitumen
products
257 1,184
36 461 437
14 1,387
2 543 2,932 1,387
2 4,321
250 1,364
46 373 569
21
649 — 651 3,274 649 — 3,923
At December 31
11 253 — — — —
— — — 264 — —
4 215 — — — —
— — — 219 — —
Proved undeveloped reserves 2017
Million barrels
Europe Asia Oceania Africa
USA
Canada America
Oil and
Oil and
Oil and
Oil and
Oil and
Oil and
Synthetic
Oil and
Oil and
Synthetic
NGL
NGL
NGL
NGL
NGL
NGL
crude oil Bitumen
NGL
NGL
crude oil Bitumen
products
North America
South
178 202
106 118
92
86
68
54
4 627 — 449 1,047 627 — 1,674
90 330
1 — — 295 1,026 — — 1,026
Shell subsidiaries
At January 1
At December 31
Shell share of joint ventures
and associates
At January 1
Shell subsidiaries
At January 1
At December 31
Shell share of joint ventures
and associates
At January 1
At December 31
1 48 — — — — — — —
49 — —
3 41 — — — — — — —
44 — —
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
181
Total
All
219
264
Total
All
44
49
CRUDE OIL, NATURAL GAS LIQUIDS, SYNTHETIC CRUDE OIL AND BITUMEN
Shell subsidiaries’ proved reserves of crude oil, natural gas liquids (NGLs), synthetic crude oil and bitumen at the end of the year; their share of the proved
reserves of joint ventures and associates at the end of the year; and the changes in such reserves during the year are set out on pages 181-183. Significant
changes in these proved reserves are discussed below.
PROVED RESERVES 2017-2016
Shell subsidiaries
Europe
The net increase of 61 million barrels in revisions and reclassifications resulted from field performance studies and development activities in Denmark, Norway
and the UK. The sale of minerals in place of 50 million barrels occurred in the UK.
The net increase of 153 million barrels in revisions and reclassifications was mainly in Oman and Malaysia. The increase of 95 million barrels in extensions
and discoveries was in Kazakhstan and Malaysia.
The net increase of 235 million barrels in revisions and reclassifications resulted from field performance studies and development activities in respect of Stones
and Mars in the Gulf of Mexico, and the Delaware Permian Basin. The increase of 242 million barrels in extensions and discoveries was in the Delaware
Permian Basin, Appomattox and Vicksburg in the Gulf of Mexico.
Asia
USA
Canada
The sale of minerals in place of 1,992 million barrels in synthetic crude oil resulted from the sale of our 60% interest in the Athabasca Oil Sands Project
(AOSP) and our in-situ and undeveloped oil sands interests. The purchase of minerals in place of 664 million barrels in synthetic crude oil resulted from the
separate acquisition of a 50% controlling interest in Marathon Oil Canada Corporation, which has a 20% interest in the AOSP.
Shell share of joint ventures and associates
Asia
The net increase of 76 million barrels in revisions and reclassifications was mainly in Brunei.
PROVED RESERVES 2016-2015
Shell subsidiaries
Acquisition of BG Group plc
Asia
Canada
South America
Purchases of minerals in place included 1,205 million barrels additions on acquisition of BG Group plc (BG), notably 85 million barrels in Europe,
175 million barrels in Asia and 931 million barrels in South America.
The net increase of 100 million barrels in revisions and reclassifications mainly related to Malaysia and Russia.
The increase of 96 million barrels in synthetic crude oil extensions and discoveries was in the Muskeg River Mine.
The net increase of 86 million barrels in revisions and reclassifications was mainly due to a transfer of contingent resource to proved reserves in Brazil.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
180
Proved developed and undeveloped reserves 2017
Europe
Oil and
NGL
Oil and
Asia Oceania
Oil and
NGL
NGL
Africa
Oil and
NGL
USA
Oil and
NGL
North America
South
Canada America
Million barrels
Total
Oil and
NGL
Synthetic
crude oil Bitumen
Oil and
Oil and
NGL
NGL
Synthetic
crude oil Bitumen
All
products
Shell subsidiaries
At January 1
Revisions and reclassifications
Improved recovery
Extensions and discoveries
Purchases of minerals in place
Sales of minerals in place
Production [A]
At December 31
Shell share of joint ventures
and associates
At January 1
Revisions and reclassifications
Improved recovery
Extensions and discoveries
Purchases of minerals in place
Sales of minerals in place
Production
At December 31
Total
435 1,386 128 529 491
61 153
23 235
—
—
— — — —
13
35 — —
95 — — 242
8
38 —
7
2 —
(14) — — (1,992 )
(114 ) (595 )
(34 )
(75) (109)
649 — 946 4,300
2 5,995
2 992 3,979 2,014
18 2,014
530
(3 )
(3 )
2
2
— — —
— —
73
— —
— —
374
664 —
666
(2,058 )
(2 )
(64 ) (1,992 )
(631 )
(2 )
(34 )
649 — 4,949
664 — —
(2) —
(2)
38 531
73
30 374
2
(11 )
22
(50 ) — —
(9 )
(90 ) (187 )
356 1,482 132 463 899
7 256 — — — —
76 — — — —
6
—
3 — — — —
—
1 — — — —
— — — — — —
— — — — — —
(35 ) — — — —
12 301 — — — —
22
368 1,783 132 463 899
(1 )
— — — 263
— — —
82
— — —
3
— — —
1
— — — —
— — — —
— — —
(36 )
— — — 313
649 — 946 4,613
— —
— —
— —
— —
— —
— —
— —
— —
263
82
3
1
—
—
(36 )
313
649 — 5,262
Reserves attributable to
non-controlling interest in Shell
subsidiaries at December 31
[A] Included 1 million barrels consumed in operations for synthetic crude oil.
— — — — — —
325 — — —
325 —
325
Proved developed reserves 2017
Europe
Oil and
NGL
Oil and
Asia Oceania
Oil and
NGL
NGL
North America
South
Canada America
Million barrels
Total
Oil and
NGL
Synthetic
crude oil Bitumen
Oil and
Oil and
NGL
NGL
Synthetic
crude oil Bitumen
All
products
Africa
Oil and
NGL
USA
Oil and
NGL
Shell subsidiaries
At January 1
At December 31
Shell share of joint ventures
and associates
At January 1
At December 31
257 1,184
250 1,364
36 461 437
46 373 569
14 1,387
21
2 4,321
649 — 651 3,274 649 — 3,923
2 543 2,932 1,387
4 215 — — — —
11 253 — — — —
— — — 219 — —
— — — 264 — —
219
264
Proved undeveloped reserves 2017
Million barrels
Europe Asia Oceania Africa
Oil and
Oil and
NGL
Oil and
NGL
NGL
NGL
Oil and
USA
Oil and
NGL
North America
South
Canada America
Oil and
NGL
Synthetic
crude oil Bitumen
Oil and
Oil and
NGL
NGL
Synthetic
crude oil Bitumen
Total
All
products
178 202
106 118
92
86
68
54
90 330
4 627 — 449 1,047 627 — 1,674
1 — — 295 1,026 — — 1,026
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
181
SHELL ANNUAL REPORT AND FORM 20-F 2017 FinanciaL stateMents and suppLeMents
3 41 — — — — — — —
1 48 — — — — — — —
44 — —
49 — —
44
49
181
Shell subsidiaries
At January 1
At December 31
Shell share of joint ventures
and associates
At January 1
At December 31
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21/03/2018 15:34:23
[Crude oil, natural gas liquids, synthetic crude oil and bitumen continued]
Proved developed and undeveloped reserves 2016
Million barrels
Proved developed and undeveloped reserves 2015
Million barrels
Europe
Oil and
NGL
Oil and
Asia Oceania
Oil and
NGL
NGL
Africa
Oil and
NGL
USA
Oil and
NGL
North America
South
Canada America
Total
Europe
Asia Oceania
Africa
USA
North America
South
Canada America
Oil and
NGL
Synthetic
crude oil Bitumen
Oil and
Oil and
NGL
NGL
Synthetic
crude oil Bitumen
All
products
Oil and
Oil and
Oil and
Oil and
Oil and
Oil and
Synthetic
Oil and
Oil and
Synthetic
NGL
NGL
NGL
NGL
NGL
NGL
crude oil Bitumen
NGL
NGL
crude oil Bitumen
products
Shell subsidiaries
At January 1
Revisions and reclassifications
Improved recovery
Extensions and discoveries
Purchases of minerals in place
Sales of minerals in place
Production [A]
417 1,286 126 579 560
24 100
17
—
—
85 175
21
9
22 — —
4 — —
2
3
2 —
20
6
14 — —
(2 )
(5)
(11 )
(85) (103)
3 4,990
56 3,046 1,941
3
22 1,941
297
4
33
86 260
33
4
24 — —
— — —
24
96 — —
96 —
126
30
— — 931 1,207 — — 1,207
— — —
(12 )
(637 )
(5)
(56)
(12 ) — —
(5 )
(56 )
(81 ) (576 )
(5 ) — — —
(86 ) (201 )
(9 )
At December 31
435 1,386 128 529 491
18 2,014
2 992 3,979 2,014
2 5,995
Shell share of joint ventures
and associates
At January 1
Revisions and reclassifications
Improved recovery
Extensions and discoveries
Purchases of minerals in place
Sales of minerals in place
Production
At December 31
Total
(3 )
11 290
1
12 — — —
(11 ) — — —
— — — — — —
—
1 — — — —
— — — — — —
— — — — — —
(1 ) — — —
(1 )
7 256 — — — —
(36 )
— — — 313 — —
(13 ) — —
— — —
— — — — — —
— — —
1 — —
— — — — — —
— — — — — —
— — —
(38 ) — —
— — — 263 — —
2 992 4,242 2,014
313
(13 )
—
1
—
—
(38 )
263
442 1,642 128 529 491
18 2,014
2 6,258
Reserves attributable to
non-controlling interest in Shell
subsidiaries at December 31
[A] Included 2 million barrels consumed in operations for synthetic crude oil.
— — —
Proved developed reserves 2016
Europe
Oil and
NGL
Asia Oceania
Oil and
NGL
Oil and
NGL
Africa
Oil and
NGL
USA
Oil and
NGL
North America
South
Canada America
Million barrels
Total
Oil and
NGL
Synthetic
crude oil Bitumen
Oil and
NGL
Oil and
NGL
Synthetic
crude oil Bitumen
All
products
4 — —
— — —
4 — —
4
— — —
7 — —
— — —
7 — —
7
Shell subsidiaries
At January 1
At December 31
Shell share of joint ventures
and associates
At January 1
At December 31
220 972
257 1,184
36 437 455
36 461 437
20 1,405
14 1,387
3
44 2,184 1,405
2 543 2,932 1,387
3 3,592
2 4,321
9 — — —
5 204
4 215 — — — —
— — — 218 — —
— — — 219 — —
218
219
At December 31
5 204
9 — — —
— — — 218 — —
22 222
10 — — —
— — — 254 — —
Proved undeveloped reserves 2016
Million barrels
Proved undeveloped reserves 2015
Million barrels
Europe Asia Oceania Africa
Oil and
Oil and
NGL
Oil and
NGL
NGL
NGL
Oil and
USA
Oil and
NGL
North America
South
Canada America
Oil and
NGL
Synthetic
crude oil Bitumen
Oil and
Oil and
NGL
NGL
Synthetic
crude oil Bitumen
Total
All
products
Shell subsidiaries
At January 1
At December 31
Shell share of joint ventures
and associates
At January 1
At December 31
197 314
178 202
90 142 105
54
68
92
2 536 —
12 862 536 — 1,398
4 627 — 449 1,047 627 — 1,674
3 — — — — — —
6 86
3 41 — — — — — — —
95 — —
44 — —
95
44
At December 31
6 86
3 — — — — — —
95 — —
95
7 154
2 — — — — — — 163 — —
163
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
182
FinanciaL stateMents and suppLeMents SHELL ANNUAL REPORT AND FORM 20-F 2017
182
Shell Annual Report_Master Template.indd 182
21/03/2018 15:34:27
Shell subsidiaries
At January 1
Revisions and reclassifications
(97 ) 149
6
50
(61)
(25 )
204 (420 )
7
29 204 (420)
(187)
579 1,306 128 691 711
44 1,763 428
63 3,522 1,763 428 5,713
Improved recovery
— — — —
4 —
— — —
4 — —
Extensions and discoveries
— — — —
10
12
26 — —
22
26 —
Purchases of minerals in place
— — — — — —
— — — — — —
Sales of minerals in place
— — —
(76) — —
— — —
(76 ) — —
(65 ) (169 )
(8 )
(86) (104 )
(9 )
(52)
(14 ) (455 )
(52 )
(5)
(512)
417 1,286 126 579 560
22 1,941
56 3,046 1,941
3 4,990
(5 )
3
Production [A]
At December 31
Shell share of joint ventures
and associates
At January 1
29 376
12 — — —
— — — 417 — —
Revisions and reclassifications
(17 )
(49 )
1 — — —
— — —
(65 ) — —
Improved recovery
— — — — — —
— — — — — —
Extensions and discoveries
— — — — — —
— — — — — —
Purchases of minerals in place
— —
2 — — —
— — —
2 — —
Sales of minerals in place
— — — — — —
— — — — — —
Production
At December 31
(1 )
(37 )
(3 ) — — —
— — —
(41 ) — —
(41)
11 290
12 — — —
— — — 313 — —
313
Total
428 1,576 138 579 560
22 1,941
3
56 3,359 1,941
3 5,303
Reserves attributable to
non-controlling interest in Shell
subsidiaries at December 31
[A] Included 2 million barrels consumed in operations for synthetic crude oil.
Proved developed reserves 2015
Million barrels
Europe Asia Oceania Africa
USA
North America
South
Canada America
Oil and
Oil and
Oil and
Oil and
Oil and
Oil and
Synthetic
Oil and
Oil and
Synthetic
NGL
NGL
NGL
NGL
NGL
NGL
crude oil Bitumen
NGL
NGL
crude oil Bitumen
products
350 947
41 534 494
26 1,273
51 2,443 1,273
9 3,725
220 972
36 437 455
20 1,405
44 2,184 1,405
3 3,592
9
3
Shell subsidiaries
At January 1
At December 31
Shell share of joint ventures
and associates
At January 1
Shell subsidiaries
At January 1
At December 31
Shell share of joint ventures
and associates
At January 1
Europe Asia Oceania
Africa
USA
North America
South
Canada America
Oil and
Oil and
Oil and
Oil and
Oil and
Oil and
Synthetic
Oil and
Oil and
Synthetic
NGL
NGL
NGL
NGL
NGL
NGL
crude oil Bitumen
NGL
NGL
crude oil Bitumen
products
229 359
87 157 217
18 490 419
12 1,079 490 419 1,988
197 314
90 142 105
2 536 —
12 862 536 — 1,398
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
183
Total
All
4
48
—
(76)
417
(65)
—
—
2
—
Total
All
254
218
Total
All
6
10
22
Oil and
NGL
Proved developed and undeveloped reserves 2016
Million barrels
Proved developed and undeveloped reserves 2015
North America
South
Canada America
Million barrels
Total
Oil and
NGL
Synthetic
crude oil Bitumen
Oil and
Oil and
NGL
NGL
Synthetic
crude oil Bitumen
All
products
Europe
Oil and
NGL
Asia Oceania
Oil and
NGL
Africa
Oil and
NGL
USA
Oil and
NGL
Shell subsidiaries
At January 1
Revisions and reclassifications
Improved recovery
Extensions and discoveries
Purchases of minerals in place
Sales of minerals in place
Production [A]
(97 ) 149
579 1,306 128 691 711
(61)
44 1,763 428
204 (420 )
(25 )
50
— — — —
4 —
— — — —
12
— — — — — —
— — —
(76) — —
(9 )
(86) (104 )
(8 )
63 3,522 1,763 428 5,713
(187)
29 204 (420)
7
4 — —
— — —
4
26 — —
26 —
48
— — — — — —
—
(76 ) — —
— — —
(76)
(512)
(5)
(52 )
(5 )
(52)
(14 ) (455 )
(65 ) (169 )
At December 31
417 1,286 126 579 560
22 1,941
3
56 3,046 1,941
3 4,990
Shell share of joint ventures
and associates
At January 1
Revisions and reclassifications
Improved recovery
Extensions and discoveries
Purchases of minerals in place
Sales of minerals in place
Production
At December 31
Total
(17 )
29 376
(49 )
12 — — —
1 — — —
— — — — — —
— — — — — —
— —
2 — — —
— — — — — —
(3 ) — — —
12 — — —
11 290
(37 )
(1 )
— — — 417 — —
— — —
(65 ) — —
— — — — — —
— — — — — —
— — —
2 — —
— — — — — —
— — —
(41 ) — —
— — — 313 — —
417
(65)
—
—
2
—
(41)
313
428 1,576 138 579 560
22 1,941
3
56 3,359 1,941
3 5,303
Reserves attributable to
non-controlling interest in Shell
subsidiaries at December 31
[A] Included 2 million barrels consumed in operations for synthetic crude oil.
— — —
7 — —
— — —
7 — —
7
Million barrels
Proved developed reserves 2015
Europe Asia Oceania Africa
Oil and
Oil and
NGL
Oil and
NGL
NGL
NGL
Oil and
North America
South
Canada America
Million barrels
Total
Oil and
NGL
Synthetic
crude oil Bitumen
Oil and
Oil and
NGL
NGL
Synthetic
crude oil Bitumen
All
products
USA
Oil and
NGL
Proved undeveloped reserves 2016
Million barrels
Proved undeveloped reserves 2015
Million barrels
Shell subsidiaries
At January 1
At December 31
Shell share of joint ventures
and associates
At January 1
At December 31
350 947
220 972
41 534 494
36 437 455
26 1,273
20 1,405
9
3
51 2,443 1,273
44 2,184 1,405
9 3,725
3 3,592
22 222
5 204
10 — — —
9 — — —
— — — 254 — —
— — — 218 — —
254
218
Europe
Asia Oceania
Africa
USA
North America
South
Canada America
Oil and
Oil and
Oil and
Oil and
Oil and
Oil and
Synthetic
Oil and
Oil and
Synthetic
NGL
NGL
NGL
NGL
NGL
NGL
crude oil Bitumen
NGL
NGL
crude oil Bitumen
products
Shell subsidiaries
At January 1
417 1,286 126 579 560
22 1,941
56 3,046 1,941
3 4,990
Revisions and reclassifications
24 100
9
21
17
3
33
86 260
33
4
297
Improved recovery
—
22 — —
2 —
— — —
24 — —
24
Extensions and discoveries
—
4 — —
20
6
96 — —
30
96 —
126
Purchases of minerals in place
85 175
2
14 — —
— — 931 1,207 — — 1,207
Sales of minerals in place
(5 ) — — —
(5)
(2 )
— — —
(12 ) — —
(12 )
3
4
(86 ) (201 )
(9 )
(85) (103)
(11 )
(56)
(5)
(81 ) (576 )
(56 )
(5 )
(637 )
435 1,386 128 529 491
18 2,014
2 992 3,979 2,014
2 5,995
Production [A]
At December 31
Shell share of joint ventures
and associates
At January 1
11 290
12 — — —
— — — 313 — —
Revisions and reclassifications
(3 )
1
(11 ) — — —
— — —
(13 ) — —
Improved recovery
— — — — — —
— — — — — —
Extensions and discoveries
—
1 — — — —
— — —
1 — —
Purchases of minerals in place
— — — — — —
— — — — — —
Sales of minerals in place
— — — — — —
— — — — — —
Production
At December 31
(1 )
(36 )
(1 ) — — —
— — —
(38 ) — —
(38 )
7 256 — — — —
— — — 263 — —
263
Total
442 1,642 128 529 491
18 2,014
2 992 4,242 2,014
2 6,258
— — —
4 — —
— — —
4 — —
4
Reserves attributable to
non-controlling interest in Shell
subsidiaries at December 31
[A] Included 2 million barrels consumed in operations for synthetic crude oil.
Proved developed reserves 2016
Europe
Asia Oceania
Africa
USA
North America
South
Canada America
Oil and
Oil and
Oil and
Oil and
Oil and
Oil and
Synthetic
Oil and
Oil and
Synthetic
NGL
NGL
NGL
NGL
NGL
NGL
crude oil Bitumen
NGL
NGL
crude oil Bitumen
products
220 972
36 437 455
20 1,405
3
44 2,184 1,405
3 3,592
257 1,184
36 461 437
14 1,387
2 543 2,932 1,387
2 4,321
At December 31
4 215 — — — —
— — — 219 — —
5 204
9 — — —
— — — 218 — —
Europe Asia Oceania Africa
USA
North America
South
Canada America
Oil and
Oil and
Oil and
Oil and
Oil and
Oil and
Synthetic
Oil and
Oil and
Synthetic
NGL
NGL
NGL
NGL
NGL
NGL
crude oil Bitumen
NGL
NGL
crude oil Bitumen
products
197 314
90 142 105
2 536 —
12 862 536 — 1,398
178 202
92
68
54
4 627 — 449 1,047 627 — 1,674
At December 31
3 41 — — — — — — —
44 — —
6 86
3 — — — — — —
95 — —
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
182
Shell subsidiaries
At January 1
At December 31
Shell share of joint ventures
and associates
At January 1
Shell subsidiaries
At January 1
At December 31
Shell share of joint ventures
and associates
At January 1
Total
All
313
(13 )
—
1
—
—
Total
All
218
219
Total
All
95
44
Shell subsidiaries
At January 1
At December 31
Shell share of joint ventures
and associates
At January 1
At December 31
229 359
197 314
87 157 217
90 142 105
18 490 419
2 536 —
12 1,079 490 419 1,988
12 862 536 — 1,398
7 154
6 86
2 — — — — — — 163 — —
95 — —
3 — — — — — —
163
95
Europe Asia Oceania
Oil and
Oil and
Oil and
NGL
North America
South
Canada America
Oil and
NGL
Synthetic
crude oil Bitumen
Africa
Oil and
NGL
USA
Oil and
NGL
Synthetic
crude oil Bitumen
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
Total
All
products
Oil and
Oil and
NGL
NGL
NGL
NGL
183
SHELL ANNUAL REPORT AND FORM 20-F 2017 FinanciaL stateMents and suppLeMents
Shell Annual Report_Master Template.indd 183
183
21/03/2018 15:34:32
NATURAL GAS
Shell subsidiaries’ proved reserves of natural gas at the end of the year, their share of the proved reserves of joint ventures and associates at the end of the
year, and the changes in such reserves during the year are set out on pages 186-188. Significant changes in these proved reserves are discussed below.
Volumes are not adjusted to standard heat content. Apart from integrated projects, volumes of gas are reported on an “as-sold” basis. The price used to
calculate future revenue and cash flows from proved gas reserves is the contract price or the 12-month average on “as-sold” volumes. Volumes associated with
integrated projects are those measured at a designated transfer point between the upstream and downstream portions of the integrated project. Natural gas
volumes are converted into oil equivalent using a factor of 5,800 scf per barrel.
PROVED RESERVES 2017-2016
Shell subsidiaries
Europe
The sale of minerals in place of 224 thousand million scf was mainly the UK fields: Elgin-Franklin, Everest, J-Area, Lomond and Erskine.
Asia
The net increase of 979 thousand million scf in revisions and reclassifications resulted from field performance updates and development activities in Kazakhstan
and Malaysia. The increase of 549 thousand million scf in extensions and discoveries was mainly in China and Kazakhstan.
Oceania
The net decrease of 574 thousand million scf in revisions and reclassifications resulted from field performance updates and development activities. There was
a decrease of 958 thousand million scf in the Surat Basin (Australia) and an increase of 384 thousand million scf from Jansz-lo, Prelude, Gorgon (all Australia)
and Maui (New Zealand). The purchases of minerals in place of 204 thousand million scf were in the Surat Basin.
Africa
The net increase of 287 thousand million scf in revisions and reclassifications resulted from field performance updates and development activities, mainly in
Kolo Creek in Nigeria.
USA
The net increase of 958 thousand million scf in revisions and reclassifications resulted from field performance updates and development activities in Tioga, East
Texas and North Louisiana and the Delaware Permian Basin. The increase of 1,163 thousand million scf in extensions and discoveries was mainly in Tioga,
the Delaware Permian Basin, Appomattox and Kaikias.
Canada
The net increase of 412 thousand million scf in revisions and reclassifications resulted from field performance studies and development activities in
Groundbirch, Waterton and Fox Creek. The increase of 205 thousand million scf in extensions and discoveries was in Groundbirch and Fox Creek.
Shell share of joint ventures and associates
Europe
The net decrease of 1,027 thousand million scf in revisions and reclassifications was mainly in the Netherlands, due to further reassessment of Groningen
compression.
Asia
The net increase of 652 thousand million scf in revisions and reclassifications resulted from field performance studies and development activities in Brunei and
Russia.
PROVED RESERVES 2016-2015
Shell subsidiaries
Acquisition of BG
Purchases of minerals in place included 7,111 thousand million scf additions on acquisition of BG, notably 419 thousand million scf in Europe,
576 thousand million scf in Asia, 3,904 thousand million scf in Oceania, 327 thousand million scf in Africa, 151 thousand million scf in the USA and
1,734 thousand million scf in South America.
The net increase of 554 thousand million scf in revisions and reclassifications was mainly due to technical revisions in Kazakhstan and Thailand, and
an increased PSC entitlement share in Qatar.
The purchase of minerals in place of 426 thousand million scf, excluding the increase on acquisition of BG (see above), was from the acquisition of a further
interest in the Jansz-Io field in Australia.
The increase of 200 thousand million scf in extensions and discoveries was in shale.
Shell share of joint ventures and associates
The net decrease of 636 thousand million scf in revisions and reclassifications was mainly due to a reassessment of Groningen compression in the
Asia
Oceania
USA
Europe
Netherlands.
Oceania
The net decrease of 464 thousand million scf in revisions and reclassifications was due to the change of accounting classification for
Woodside Petroleum Limited in Australia.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
184
FinanciaL stateMents and suppLeMents SHELL ANNUAL REPORT AND FORM 20-F 2017
184
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
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NATURAL GAS
Shell subsidiaries’ proved reserves of natural gas at the end of the year, their share of the proved reserves of joint ventures and associates at the end of the
year, and the changes in such reserves during the year are set out on pages 186-188. Significant changes in these proved reserves are discussed below.
Volumes are not adjusted to standard heat content. Apart from integrated projects, volumes of gas are reported on an “as-sold” basis. The price used to
calculate future revenue and cash flows from proved gas reserves is the contract price or the 12-month average on “as-sold” volumes. Volumes associated with
integrated projects are those measured at a designated transfer point between the upstream and downstream portions of the integrated project. Natural gas
volumes are converted into oil equivalent using a factor of 5,800 scf per barrel.
PROVED RESERVES 2017-2016
Shell subsidiaries
Europe
The sale of minerals in place of 224 thousand million scf was mainly the UK fields: Elgin-Franklin, Everest, J-Area, Lomond and Erskine.
The net increase of 979 thousand million scf in revisions and reclassifications resulted from field performance updates and development activities in Kazakhstan
and Malaysia. The increase of 549 thousand million scf in extensions and discoveries was mainly in China and Kazakhstan.
The net decrease of 574 thousand million scf in revisions and reclassifications resulted from field performance updates and development activities. There was
a decrease of 958 thousand million scf in the Surat Basin (Australia) and an increase of 384 thousand million scf from Jansz-lo, Prelude, Gorgon (all Australia)
and Maui (New Zealand). The purchases of minerals in place of 204 thousand million scf were in the Surat Basin.
The net increase of 287 thousand million scf in revisions and reclassifications resulted from field performance updates and development activities, mainly in
Kolo Creek in Nigeria.
The net increase of 958 thousand million scf in revisions and reclassifications resulted from field performance updates and development activities in Tioga, East
Texas and North Louisiana and the Delaware Permian Basin. The increase of 1,163 thousand million scf in extensions and discoveries was mainly in Tioga,
the Delaware Permian Basin, Appomattox and Kaikias.
The net increase of 412 thousand million scf in revisions and reclassifications resulted from field performance studies and development activities in
Groundbirch, Waterton and Fox Creek. The increase of 205 thousand million scf in extensions and discoveries was in Groundbirch and Fox Creek.
Shell share of joint ventures and associates
The net decrease of 1,027 thousand million scf in revisions and reclassifications was mainly in the Netherlands, due to further reassessment of Groningen
Asia
Oceania
Africa
USA
Canada
Europe
compression.
Asia
Russia.
The net increase of 652 thousand million scf in revisions and reclassifications resulted from field performance studies and development activities in Brunei and
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
184
PROVED RESERVES 2016-2015
Shell subsidiaries
Acquisition of BG
Purchases of minerals in place included 7,111 thousand million scf additions on acquisition of BG, notably 419 thousand million scf in Europe,
576 thousand million scf in Asia, 3,904 thousand million scf in Oceania, 327 thousand million scf in Africa, 151 thousand million scf in the USA and
1,734 thousand million scf in South America.
Asia
The net increase of 554 thousand million scf in revisions and reclassifications was mainly due to technical revisions in Kazakhstan and Thailand, and
an increased PSC entitlement share in Qatar.
Oceania
The purchase of minerals in place of 426 thousand million scf, excluding the increase on acquisition of BG (see above), was from the acquisition of a further
interest in the Jansz-Io field in Australia.
USA
The increase of 200 thousand million scf in extensions and discoveries was in shale.
Shell share of joint ventures and associates
Europe
The net decrease of 636 thousand million scf in revisions and reclassifications was mainly due to a reassessment of Groningen compression in the
Netherlands.
Oceania
The net decrease of 464 thousand million scf in revisions and reclassifications was due to the change of accounting classification for
Woodside Petroleum Limited in Australia.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
185
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[Natural gas continued]
Proved developed and undeveloped reserves 2017
Thousand million standard cubic feet
North America
South
Proved developed and undeveloped reserves 2016
Thousand million standard cubic feet
North America
South
Europe
Asia
Oceania
Africa
USA
Canada
America
Total
Europe
Asia
Oceania
Africa
USA
Canada
America
Total
(227 )
(345 )
(454 )
(574)
(845 )
(703 )
19
(224 )
(616 )
27
—
5,125 4,964
—
—
—
—
At December 31
3,100 11,822 7,978 2,082 2,569 1,272 1,501 30,324
844 1,650 29,259
45 2,304
412
—
—
140
6 1,925
205
277
43
(248 )
(6 )
(3,333 )
(226 )
Shell subsidiaries
At January 1
Revisions and reclassifications
Improved recovery
Extensions and discoveries
Purchases of minerals in place
Sales of minerals in place
Production [A]
Shell share of joint ventures and associates
At January 1
Revisions and reclassifications
Improved recovery
Extensions and discoveries
Purchases of minerals in place
Sales of minerals in place
Production [B]
At December 31
Total
197
—
2
—
675
3,741 11,073 9,051 2,225
958
287
—
74
— 1,163
—
3
(7 )
(11 )
(293 )
(423 )
979
66
549
—
—
—
—
204
—
6,497 4,754
652
(1,027 )
1
11
—
—
— 11,282
—
—
—
(366 )
—
—
1
—
—
11
—
—
—
—
—
—
—
—
(820 )
— 10,108
—
8,225 16,786 7,997 2,082 2,569 1,272 1,501 40,432
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
31
9
—
—
—
—
(21 )
Shell subsidiaries
At January 1
Revisions and reclassifications
Improved recovery
Extensions and discoveries
Purchases of minerals in place
Sales of minerals in place
Production [A]
At December 31
Improved recovery
Extensions and discoveries
Purchases of minerals in place
Sales of minerals in place
Production [B]
At December 31
Total
3,848 10,692 5,411 2,236
754
955
43 23,939
92
—
4
554
(177 )
10
162
—
—
51
—
2
(95 )
—
41
—
200
180
66
—
3
532
10
551
419
576 4,330
327
151
— 1,734 7,537
(7)
(615)
—
—
—
(7 )
(63 )
—
(77)
(921 )
(513 )
(391)
(328 )
(269 )
(196 )
(3,233)
3,741 11,073 9,051 2,225
675
844 1,650 29,259
—
—
—
—
—
35
—
—
—
—
—
—
(405 )
(447 )
(40 )
6,497 4,754
31
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— 13,436
—
(1,297 )
—
—
—
—
—
—
35
—
—
(892)
— 11,282
10,238 15,827 9,082 2,225
675
844 1,650 40,541
Shell share of joint ventures and associates
At January 1
7,538 5,363
535
Revisions and reclassifications
(636)
(197 )
(464 )
Reserves attributable to non-controlling interest in
Shell subsidiaries at December 31
[A] Included 197 thousand million standard cubic feet consumed in operations.
[B] Included 44 thousand million standard cubic feet consumed in operations.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
187
Reserves attributable to non-controlling interest in
Shell subsidiaries at December 31
[A] Included 215 thousand million standard cubic feet consumed in operations.
[B] Included 41 thousand million standard cubic feet consumed in operations.
Proved developed reserves 2017
—
2
—
—
—
—
—
2
—
3
—
2
—
—
—
5
Thousand million standard cubic feet
North America
South
Proved developed reserves 2016
Thousand million standard cubic feet
North America
South
Europe
Asia
Oceania
Africa
USA
Canada
America
Total
Europe
Asia
Oceania
Africa
USA
Canada
America
Total
Shell subsidiaries
At January 1
At December 31
Shell share of joint ventures and associates
3,437 10,569 3,966 1,618
563
2,978 11,460 5,026 1,493 1,652
458 1,172 21,783
859 1,225 24,693
At January 1
At December 31
5,240 4,110
5,055 4,275
31
19
—
—
—
—
—
—
— 9,381
— 9,349
Shell subsidiaries
At January 1
At December 31
At January 1
At December 31
Shell share of joint ventures and associates
3,471 9,920 1,234 1,386
572
636
37 17,256
3,437 10,569 3,966 1,618
563
458 1,172 21,783
5,933 4,301
420
5,240 4,110
31
—
—
—
—
—
—
— 10,654
— 9,381
Proved undeveloped reserves 2017
Shell subsidiaries
At January 1
At December 31
Shell share of joint ventures and associates
Europe
Asia
Oceania
Africa
USA
Canada
America
Total
Europe
Asia
Oceania
Africa
USA
Canada
America
Total
Thousand million standard cubic feet
North America
South
Proved undeveloped reserves 2016
Thousand million standard cubic feet
North America
South
304
122
504 5,085
362 2,952
607
589
112
917
386
413
478 7,476
276 5,631
At January 1
At December 31
1,257
70
644
689
—
—
—
—
—
—
—
—
— 1,901
—
759
Shell subsidiaries
At January 1
At December 31
At January 1
At December 31
Shell share of joint ventures and associates
377
304
772 4,177
504 5,085
850
607
182
319
6 6,683
112
386
478 7,476
1,605 1,062
115
1,257
644
—
—
—
—
—
—
—
— 2,782
— 1,901
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
186
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Proved developed and undeveloped reserves 2017
Proved developed and undeveloped reserves 2016
Thousand million standard cubic feet
North America
South
Thousand million standard cubic feet
North America
South
Europe
Asia
Oceania
Africa
USA
Canada
America
Total
Europe
Asia
Oceania
Africa
USA
Canada
America
Total
(921 )
(513 )
(391)
92
—
4
419
(7)
(615)
Shell subsidiaries
At January 1
Revisions and reclassifications
Improved recovery
Extensions and discoveries
Purchases of minerals in place
Sales of minerals in place
Production [A]
754
(95 )
—
200
151
(7 )
(328 )
955
41
—
180
43 23,939
532
66
—
10
551
3
— 1,734 7,537
(77)
(63 )
(3,233)
(269 )
—
(196 )
(177 )
3,848 10,692 5,411 2,236
51
—
2
327
—
554
—
10
—
162
576 4,330
—
—
Shell share of joint ventures and associates
At January 1
6,497 4,754
31
Revisions and reclassifications
(1,027 )
652
3,741 11,073 9,051 2,225
675
844 1,650 29,259
197
979
(574)
287
958
412
45 2,304
—
2
—
(224 )
(616 )
66
549
—
—
—
—
204
—
—
74
—
—
140
— 1,163
205
6 1,925
3
(11 )
43
(6 )
27
—
277
(248 )
(845 )
(703 )
(293 )
(226 )
(227 )
(3,333 )
—
(7 )
(423 )
—
—
—
—
1
11
—
—
9
—
—
—
—
(345 )
(454 )
(21 )
5,125 4,964
19
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— 11,282
—
—
—
—
—
—
(366 )
1
11
—
—
(820 )
— 10,108
—
2
—
—
—
—
—
2
Shell subsidiaries
At January 1
Revisions and reclassifications
Improved recovery
Extensions and discoveries
Purchases of minerals in place
Sales of minerals in place
Production [A]
At December 31
Improved recovery
Extensions and discoveries
Purchases of minerals in place
Sales of minerals in place
Production [B]
At December 31
Total
Reserves attributable to non-controlling interest in
Shell subsidiaries at December 31
[A] Included 215 thousand million standard cubic feet consumed in operations.
[B] Included 41 thousand million standard cubic feet consumed in operations.
Proved developed reserves 2017
Shell subsidiaries
At January 1
At December 31
At January 1
At December 31
Shell share of joint ventures and associates
Proved undeveloped reserves 2017
Shell subsidiaries
At January 1
At December 31
At January 1
At December 31
Shell share of joint ventures and associates
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
186
3,100 11,822 7,978 2,082 2,569 1,272 1,501 30,324
At December 31
3,741 11,073 9,051 2,225
675
844 1,650 29,259
8,225 16,786 7,997 2,082 2,569 1,272 1,501 40,432
Total
Shell share of joint ventures and associates
At January 1
Revisions and reclassifications
Improved recovery
Extensions and discoveries
Purchases of minerals in place
Sales of minerals in place
Production [B]
At December 31
(636)
(197 )
535
(464 )
7,538 5,363
—
—
—
—
—
—
—
—
—
—
—
—
10,238 15,827 9,082 2,225
—
—
—
—
(40 )
—
35
—
—
6,497 4,754
31
(447 )
(405 )
—
—
—
—
—
—
—
—
675
—
—
—
—
—
—
—
—
— 13,436
—
(1,297 )
—
—
—
35
—
—
—
—
—
(892)
— 11,282
844 1,650 40,541
Reserves attributable to non-controlling interest in
Shell subsidiaries at December 31
[A] Included 197 thousand million standard cubic feet consumed in operations.
[B] Included 44 thousand million standard cubic feet consumed in operations.
—
3
—
2
—
—
—
5
Europe
Asia
Oceania
Africa
USA
Canada
America
Total
Europe
Asia
Oceania
Africa
USA
Canada
America
Total
Thousand million standard cubic feet
North America
South
Proved developed reserves 2016
Thousand million standard cubic feet
North America
South
3,437 10,569 3,966 1,618
563
458 1,172 21,783
2,978 11,460 5,026 1,493 1,652
859 1,225 24,693
Shell subsidiaries
At January 1
At December 31
Shell share of joint ventures and associates
3,471 9,920 1,234 1,386
3,437 10,569 3,966 1,618
572
563
636
37 17,256
458 1,172 21,783
5,240 4,110
5,055 4,275
31
19
—
—
—
—
—
—
— 9,381
— 9,349
At January 1
At December 31
5,933 4,301
5,240 4,110
420
31
—
—
—
—
—
—
— 10,654
— 9,381
Europe
Asia
Oceania
Africa
USA
Canada
America
Total
Europe
Asia
Oceania
Africa
USA
Canada
America
Total
Thousand million standard cubic feet
North America
South
Proved undeveloped reserves 2016
Thousand million standard cubic feet
North America
South
304
122
504 5,085
362 2,952
607
589
112
386
478 7,476
917
413
276 5,631
Shell subsidiaries
At January 1
At December 31
Shell share of joint ventures and associates
377
304
772 4,177
504 5,085
850
607
182
112
319
386
6 6,683
478 7,476
1,257
644
70
689
—
—
—
—
—
—
—
—
— 1,901
—
759
At January 1
At December 31
1,605 1,062
644
1,257
115
—
—
—
—
—
—
—
— 2,782
— 1,901
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
187
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[Natural gas continued]
Proved developed and undeveloped reserves 2015
Thousand million standard cubic feet
North America
South
Europe
Asia
Oceania
Africa
USA
Canada
America
Total
Shell subsidiaries
At January 1
Revisions and reclassifications
Improved recovery
Extensions and discoveries
Purchases of minerals in place
Sales of minerals in place
Production [A]
4,430 10,071 5,575 2,621 1,561 1,611
(581 )
—
175
2
—
(252 )
1,385
—
—
—
—
(587 )
1
59
—
(5 )
(275 )
(61)
—
—
—
(19 )
(502 )
41
—
—
—
—
5
—
4
—
(115 )
(279)
(764)
(205)
48 25,917
213
11
—
1
—
238
—
2
—
(139)
(2,293)
(16)
At December 31
3,848 10,692 5,411 2,236
754
955
43 23,939
Shell share of joint ventures and associates
At January 1
Revisions and reclassifications
Improved recovery
Extensions and discoveries
Purchases of minerals in place
Sales of minerals in place
Production [B]
At December 31
Total
(214)
7,866 6,030
92
6
11
—
—
—
—
—
—
—
—
—
—
11,386 16,055 5,946 2,236
503
23
—
—
84
—
(75)
—
—
—
—
7,538 5,363
535
(437 )
(453)
—
—
—
—
—
—
—
—
754
—
—
—
—
—
—
—
—
955
— 14,399
—
(99)
—
6
—
11
—
84
—
—
—
(965)
— 13,436
43 37,375
Reserves attributable to non-controlling interest in
Shell subsidiaries at December 31
[A] Included 145 thousand million standard cubic feet consumed in operations.
[B] Included 55 thousand million standard cubic feet consumed in operations.
Proved developed reserves 2015
—
2
—
3
—
—
—
5
Thousand million standard cubic feet
North America
South
Shell subsidiaries
At January 1
At December 31
Shell share of joint ventures and associates
Europe
Asia
Oceania
Africa
USA
Canada
America
Total
3,774 9,114 1,398 1,162
3,471 9,920 1,234 1,386
1,275
572
939
636
42 17,704
37 17,256
At January 1
At December 31
6,386 4,501
5,933 4,301
433
420
—
—
—
—
—
—
— 11,320
— 10,654
Proved undeveloped reserves 2015
Shell subsidiaries
At January 1
At December 31
Shell share of joint ventures and associates
Europe
Asia
Oceania
Africa
USA
Canada
America
Total
Thousand million standard cubic feet
North America
South
656
377
957 4,177 1,459
850
772 4,177
286
182
672
319
6 8,213
6 6,683
At January 1
At December 31
1,480 1,529
1,605 1,062
70
115
—
—
—
—
—
—
— 3,079
— 2,782
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
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STANDARDISED MEASURE OF DISCOUNTED FUTURE CASH FLOWS
The SEC Form 20-F requires the disclosure of a standardised measure of discounted future net cash flows, relating to proved reserves quantities and based
on a 12-month unweighted arithmetic average sales price, calculated on a first-day-of-the-month basis, with cost factors based on those at the end of each
year, currently enacted tax rates and a 10% annual discount factor. In our view, the information so calculated does not provide a reliable measure of future
cash flows from proved reserves, nor does it permit a realistic comparison to be made of one entity with another because the assumptions used cannot reflect
the varying circumstances within each entity. In addition, a substantial but unknown proportion of future real cash flows from oil and gas production activities is
expected to derive from reserves which have already been discovered, but which cannot yet be regarded as proved.
STANDARDISED MEASURE OF DISCOUNTED FUTURE CASH FLOWS RELATING TO PROVED RESERVES AT DECEMBER 31
2017 – Shell subsidiaries
Future cash inflows
Future production costs
Future development costs
Future tax expenses
Future net cash flows
North America
South
$ million
Europe
Asia
Oceania
Africa
USA
Canada
America
Total
34,902 94,535
51,052
29,276 49,389 32,576 50,620
342,350
15,672 30,894
18,264
11,496 29,505 20,242 30,924
156,997
7,852 12,558
14,062
4,920 14,200
5,115
6,210
64,917
5,747 18,048
1,169
9,064
2,177
2,509
4,888
43,602
5,631 33,035
17,557
3,796
3,507
4,710
8,598
76,834
Effect of discounting cash flows at 10%
825 15,115
5,773
(9)
(796 )
3,077
2,325
26,310
Standardised measure of discounted
future net cash flows
Non-controlling interest included
—
1
—
—
—
870
—
871
4,806 17,920
11,784
3,805
4,303
1,633
6,273
50,524
2017 – Shell share of joint ventures and associates
Europe
Asia
Oceania
Africa
USA
Canada
America
Total
North America
South
Future cash inflows
Future production costs
Future development costs
Future tax expenses
Future net cash flows
22,725 37,954
17,442 17,592
1,051
7,605
1,803
5,172
2,429
7,585
69
54
64
—
(49)
(14)
Effect of discounting cash flows at 10%
1,008
1,862
Standardised measure of discounted
future net cash flows
1,421
5,723
(35) [A]
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
[A] While proved reserves are economically producible at the 2017 yearly average price, the standardised measure of discounted future net cash flows was negative for those proved reserves at December 31,
2017, due to addition of overhead, tax and abandonment costs and ongoing commitments post production of proved reserves.
$ million
—
—
—
—
—
—
—
60,748
35,088
8,720
6,975
9,965
2,856
7,109
2016 – Shell subsidiaries
Future cash inflows
Future production costs
Future development costs
Future tax expenses
Future net cash flows
North America
South
$ million
Europe
Asia
Oceania
Africa
USA
Canada
America
Total
33,837 71,019
49,872
26,422
20,239
71,652 41,999
315,040
17,276 25,793
22,842
12,302
17,114
54,966 21,780
172,073
11,630 12,481
16,795
7,894
11,948 15,053
81,334
824 9,059
4,107 23,686
561
1,327 3,700
22,632
(5,330 )
3,411 1,466
39,001
5,533
5,427
3,160
1,734
8,501
2,889
Effect of discounting cash flows at 10%
351 10,663
(231)
(3,423 )
2,129
(1,095 )
11,283
Standardised measure of discounted
future net cash flows
Non-controlling interest included
—
—
—
(65) [A]
—
—
—
(65)
[A] While proved reserves are economically producible at the 2016 yearly average price, the standardised measure of discounted future net cash flows was negative for those proved reserves at December 31,
2016, due to addition of overhead, tax and abandonment costs and ongoing commitments post production of proved reserves.
3,756 13,023
5,612
3,391
(1,907 )
[A] 1,282 2,561
27,718
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
189
Proved developed and undeveloped reserves 2015
Europe
Asia
Oceania
Africa
USA
Canada
America
Total
Thousand million standard cubic feet
North America
South
Shell subsidiaries
At January 1
Revisions and reclassifications
Improved recovery
Extensions and discoveries
Purchases of minerals in place
Sales of minerals in place
Production [A]
At December 31
At January 1
Revisions and reclassifications
Improved recovery
Extensions and discoveries
Purchases of minerals in place
Sales of minerals in place
Production [B]
At December 31
Total
Shell share of joint ventures and associates
Reserves attributable to non-controlling interest in
Shell subsidiaries at December 31
[A] Included 145 thousand million standard cubic feet consumed in operations.
[B] Included 55 thousand million standard cubic feet consumed in operations.
Proved developed reserves 2015
4,430 10,071 5,575 2,621 1,561 1,611
48 25,917
(61)
1,385
(587 )
(581 )
11
213
—
—
—
(19 )
(502 )
—
—
—
—
41
—
—
—
—
5
—
4
—
(115 )
(279)
1
—
59
175
—
(5 )
2
—
—
—
—
—
238
1
2
(139)
(764)
(205)
(275 )
(252 )
(16)
(2,293)
3,848 10,692 5,411 2,236
754
955
43 23,939
7,866 6,030
503
92
(214)
6
11
—
—
—
—
—
—
23
—
—
84
—
(437 )
(453)
(75)
7,538 5,363
535
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— 14,399
—
—
—
—
—
—
(99)
6
11
84
—
(965)
— 13,436
11,386 16,055 5,946 2,236
754
955
43 37,375
—
2
—
3
—
—
—
5
Shell subsidiaries
At January 1
At December 31
At January 1
At December 31
Shell share of joint ventures and associates
Proved undeveloped reserves 2015
Shell subsidiaries
At January 1
At December 31
At January 1
At December 31
Shell share of joint ventures and associates
Europe
Asia
Oceania
Africa
USA
Canada
America
Total
Thousand million standard cubic feet
North America
South
3,774 9,114 1,398 1,162
1,275
939
42 17,704
3,471 9,920 1,234 1,386
572
636
37 17,256
6,386 4,501
5,933 4,301
433
420
—
—
—
—
—
—
— 11,320
— 10,654
Europe
Asia
Oceania
Africa
USA
Canada
America
Total
Thousand million standard cubic feet
North America
South
656
377
957 4,177 1,459
286
672
6 8,213
772 4,177
850
182
319
6 6,683
1,480 1,529
70
1,605 1,062
115
—
—
—
—
—
—
— 3,079
— 2,782
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
188
STANDARDISED MEASURE OF DISCOUNTED FUTURE CASH FLOWS
The SEC Form 20-F requires the disclosure of a standardised measure of discounted future net cash flows, relating to proved reserves quantities and based
on a 12-month unweighted arithmetic average sales price, calculated on a first-day-of-the-month basis, with cost factors based on those at the end of each
year, currently enacted tax rates and a 10% annual discount factor. In our view, the information so calculated does not provide a reliable measure of future
cash flows from proved reserves, nor does it permit a realistic comparison to be made of one entity with another because the assumptions used cannot reflect
the varying circumstances within each entity. In addition, a substantial but unknown proportion of future real cash flows from oil and gas production activities is
expected to derive from reserves which have already been discovered, but which cannot yet be regarded as proved.
STANDARDISED MEASURE OF DISCOUNTED FUTURE CASH FLOWS RELATING TO PROVED RESERVES AT DECEMBER 31
2017 – Shell subsidiaries
Europe
Asia
Oceania
Africa
USA
Canada
America
Total
North America
South
$ million
Future cash inflows
Future production costs
Future development costs
Future tax expenses
34,902 94,535
15,672 30,894
7,852 12,558
5,747 18,048
51,052
18,264
14,062
1,169
29,276 49,389 32,576 50,620
11,496 29,505 20,242 30,924
6,210
4,888
4,920 14,200
2,177
9,064
5,115
2,509
342,350
156,997
64,917
43,602
Future net cash flows
Effect of discounting cash flows at 10%
5,631 33,035
825 15,115
17,557
5,773
3,796
(9)
3,507
(796 )
4,710
3,077
8,598
2,325
76,834
26,310
Standardised measure of discounted
future net cash flows
Non-controlling interest included
4,806 17,920
—
1
11,784
—
3,805
—
4,303
—
1,633
870
6,273
—
50,524
871
2017 – Shell share of joint ventures and associates
Europe
Asia
Oceania
Future cash inflows
Future production costs
Future development costs
Future tax expenses
22,725 37,954
17,442 17,592
7,605
5,172
1,051
1,803
Future net cash flows
Effect of discounting cash flows at 10%
2,429
1,008
7,585
1,862
69
54
64
—
(49)
(14)
Africa
—
—
—
—
—
—
$ million
North America
South
USA
—
—
—
—
—
—
Canada
—
—
—
—
—
—
America
—
—
—
—
—
—
Total
60,748
35,088
8,720
6,975
9,965
2,856
Standardised measure of discounted
future net cash flows
7,109
[A] While proved reserves are economically producible at the 2017 yearly average price, the standardised measure of discounted future net cash flows was negative for those proved reserves at December 31,
2017, due to addition of overhead, tax and abandonment costs and ongoing commitments post production of proved reserves.
1,421
(35) [A]
5,723
—
—
—
—
2016 – Shell subsidiaries
North America
South
$ million
Future cash inflows
Future production costs
Future development costs
Future tax expenses
Europe
Asia
Oceania
Africa
USA
Canada
America
Total
33,837 71,019
17,276 25,793
11,630 12,481
824 9,059
49,872
22,842
16,795
1,734
26,422
12,302
5,533
5,427
20,239
17,114
7,894
561
71,652 41,999
54,966 21,780
11,948 15,053
1,327 3,700
315,040
172,073
81,334
22,632
Future net cash flows
Effect of discounting cash flows at 10%
4,107 23,686
351 10,663
8,501
2,889
3,160
(231)
(5,330 )
(3,423 )
3,411 1,466
(1,095 )
2,129
39,001
11,283
Standardised measure of discounted
future net cash flows
(65)
Non-controlling interest included
[A] While proved reserves are economically producible at the 2016 yearly average price, the standardised measure of discounted future net cash flows was negative for those proved reserves at December 31,
2016, due to addition of overhead, tax and abandonment costs and ongoing commitments post production of proved reserves.
[A] 1,282 2,561
—
—
3,756 13,023
—
—
5,612
—
27,718
3,391
(65) [A]
(1,907 )
—
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
189
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[Standardised measure of discounted future cash flows continued]
2016 – Shell share of joint ventures and associates
Europe
Asia
Oceania
Future cash inflows
Future production costs
Future development costs
Future tax expenses
26,224 28,000
18,163 14,060
7,588
3,280
1,367
2,526
Future net cash flows
Effect of discounting cash flows at 10%
4,168
2,363
3,072
692
Standardised measure of discounted
future net cash flows
1,805
2,380
88
65
41
—
(18)
(9)
(9)
Africa
—
—
—
—
—
—
—
2015 – Shell subsidiaries
North America
Canada
—
—
—
—
—
—
$ million
Total
54,312
32,288
8,996
5,806
7,222
3,046
South
America
—
—
—
—
—
—
—
—
4,176
USA
—
—
—
—
—
—
—
North America
South
$ million
Future cash inflows
Future production costs
Future development costs
Future tax expenses
Future net cash flows
Effect of discounting cash flows at 10%
Europe
Asia
Oceania
Africa
USA
Canada
America
Total
46,910 83,549
21,526 25,494
12,003 12,730
7,660 15,926
36,644
11,690
12,987
1,407
35,856
17,470
6,344
6,357
5,721 29,399
10,560
5,685
1,870 14,181
5,894
1,372
28,755
21,480
10,930
864
(4,519 )
(2,394 )
81,957 2,264
60,449 1,728
898
17,983
86
1,099
2,426
2,241
(448 )
(221)
315,935
159,837
73,875
33,399
48,824
22,943
Standardised measure of discounted
future net cash flows
4,666
—
Non-controlling interest included
(150)
[A] While proved reserves are economically producible at the 2015 yearly average price, the standardised measure of discounted future net cash flows was negative for those proved reserves at December 31,
2015, due to addition of overhead, tax and abandonment costs.
3,851 15,218
—
(2,125 ) [A]
—
(227 ) [A]
—
185
—
4,313
25,881
(149) [A]
(1 )
2015 – Shell share of joint ventures and associates
Europe
Asia
Oceania
Future cash inflows
Future production costs
Future development costs
Future tax expenses
45,488 43,271
27,279 19,566
7,449
6,384
1,513
4,121
Future net cash flows
Effect of discounting cash flows at 10%
12,575
9,597
9,872
3,393
5,261
1,055
492
1,121
2,593
1,087
Africa
—
—
—
—
—
—
Standardised measure of discounted
future net cash flows
2,978
6,479
1,506
—
North America
Canada
—
—
—
—
—
—
$ million
Total
94,020
47,900
9,454
11,626
25,040
14,077
South
America
—
—
—
—
—
—
—
—
10,963
USA
—
—
—
—
—
—
—
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
190
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CHANGE IN STANDARDISED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO PROVED RESERVES
2017
At January 1
Net changes in prices and production costs
Revisions of previous reserves estimates
Extensions, discoveries and improved recovery
Purchases and sales of minerals in place
Development cost related to future production
Sales and transfers of oil and gas, net of production costs
Development cost incurred during the year
Accretion of discount
Net change in income tax
At December 31
2016
At January 1
Net changes in prices and production costs
Revisions of previous reserves estimates
Extensions, discoveries and improved recovery
Purchases and sales of minerals in place
Development cost related to future production
Sales and transfers of oil and gas, net of production costs
Development cost incurred during the year
Accretion of discount
Net change in income tax
At December 31
2015
At January 1
Net changes in prices and production costs
Revisions of previous reserves estimates
Extensions, discoveries and improved recovery
Purchases and sales of minerals in place
Development cost related to future production
Sales and transfers of oil and gas, net of production costs
Development cost incurred during the year
Accretion of discount
Net change in income tax
At December 31
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
191
Shell share
of joint ventures
and associates
4,176
3,952
1,931
79
—
461
(3,652 )
536
630
(1,004 )
7,109
Shell share
of joint ventures
and associates
10,963
(6,942 )
(1,328 )
(17 )
—
(150 )
(3,087 )
854
1,363
2,520
4,176
Shell share
of joint ventures
and associates
23,344
(19,098 )
(1,255 )
7
218
927
(4,383 )
1,463
3,188
6,552
10,963
$ million
Total
31,894
38,142
15,700
3,980
(2,068)
(4,362)
(31,196 )
14,798
4,474
(13,729)
57,633
$ million
Total
36,844
(28,448 )
4,847
1,251
24,279
(15,477 )
(22,744)
16,257
5,739
9,346
31,894
$ million
Total
101,971
(143,064)
6,417
304
(1,488)
5,256
(23,313)
19,281
17,025
54,455
36,844
Shell
subsidiaries
27,718
34,190
13,769
3,901
(2,068 )
(4,823 )
(27,544 )
14,262
3,844
(12,725 )
50,524
Shell
subsidiaries
25,881
(21,506 )
6,175
1,268
24,279
(15,327 )
(19,657 )
15,403
4,376
6,826
27,718
Shell
subsidiaries
78,627
(123,966 )
7,672
297
(1,706 )
4,329
(18,930 )
17,818
13,837
47,903
25,881
CHANGE IN STANDARDISED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO PROVED RESERVES
Europe
Asia
Oceania
Africa
USA
Canada
America
Total
2017
North America
South
At January 1
Net changes in prices and production costs
Revisions of previous reserves estimates
Extensions, discoveries and improved recovery
Purchases and sales of minerals in place
Development cost related to future production
Sales and transfers of oil and gas, net of production costs
Development cost incurred during the year
Accretion of discount
Net change in income tax
At December 31
2016
At January 1
Net changes in prices and production costs
Revisions of previous reserves estimates
Extensions, discoveries and improved recovery
Purchases and sales of minerals in place
Development cost related to future production
Sales and transfers of oil and gas, net of production costs
Development cost incurred during the year
Accretion of discount
Net change in income tax
At December 31
2015
At January 1
Net changes in prices and production costs
Revisions of previous reserves estimates
Extensions, discoveries and improved recovery
Purchases and sales of minerals in place
Development cost related to future production
Sales and transfers of oil and gas, net of production costs
Development cost incurred during the year
Accretion of discount
Net change in income tax
At December 31
Shell share
of joint ventures
and associates
4,176
3,952
1,931
79
—
461
(3,652 )
536
630
(1,004 )
7,109
Shell share
of joint ventures
and associates
10,963
(6,942 )
(1,328 )
(17 )
—
(150 )
(3,087 )
854
1,363
2,520
4,176
Shell share
of joint ventures
and associates
23,344
(19,098 )
(1,255 )
7
218
927
(4,383 )
1,463
3,188
6,552
10,963
$ million
Total
31,894
38,142
15,700
3,980
(2,068)
(4,362)
(31,196 )
14,798
4,474
(13,729)
57,633
$ million
Total
36,844
(28,448 )
4,847
1,251
24,279
(15,477 )
(22,744)
16,257
5,739
9,346
31,894
$ million
Total
101,971
(143,064)
6,417
304
(1,488)
5,256
(23,313)
19,281
17,025
54,455
36,844
Shell
subsidiaries
27,718
34,190
13,769
3,901
(2,068 )
(4,823 )
(27,544 )
14,262
3,844
(12,725 )
50,524
Shell
subsidiaries
25,881
(21,506 )
6,175
1,268
24,279
(15,327 )
(19,657 )
15,403
4,376
6,826
27,718
Shell
subsidiaries
78,627
(123,966 )
7,672
297
(1,706 )
4,329
(18,930 )
17,818
13,837
47,903
25,881
2016 – Shell share of joint ventures and associates
Future cash inflows
Future production costs
Future development costs
Future tax expenses
Future net cash flows
26,224 28,000
18,163 14,060
1,367
7,588
2,526
3,280
4,168
3,072
Effect of discounting cash flows at 10%
2,363
692
Standardised measure of discounted
future net cash flows
1,805
2,380
88
65
41
—
(18)
(9)
(9)
—
—
—
—
—
—
—
$ million
—
—
—
—
—
—
—
54,312
32,288
8,996
5,806
7,222
3,046
4,176
$ million
$ million
—
—
—
—
—
—
94,020
47,900
9,454
11,626
25,040
14,077
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2015 – Shell subsidiaries
Future cash inflows
Future production costs
Future development costs
Future tax expenses
Future net cash flows
North America
South
Europe
Asia
Oceania
Africa
USA
Canada
America
Total
46,910 83,549
36,644
35,856
28,755
81,957 2,264
315,935
21,526 25,494
11,690
17,470
21,480
60,449 1,728
159,837
12,003 12,730
12,987
6,344
10,930
17,983
7,660 15,926
1,407
6,357
864
1,099
5,721 29,399
10,560
5,685
(4,519 )
(2,394)
2,426
2,241
898
86
(448 )
(221)
73,875
33,399
48,824
22,943
Effect of discounting cash flows at 10%
1,870 14,181
5,894
1,372
Standardised measure of discounted
future net cash flows
Non-controlling interest included
—
(1 )
—
(149) [A]
—
—
—
(150)
[A] While proved reserves are economically producible at the 2015 yearly average price, the standardised measure of discounted future net cash flows was negative for those proved reserves at December 31,
3,851 15,218
4,666
4,313
(2,125 ) [A]
185
(227 ) [A]
25,881
2015, due to addition of overhead, tax and abandonment costs.
2015 – Shell share of joint ventures and associates
Europe
Asia
Oceania
Africa
USA
Canada
America
Total
North America
South
Future cash inflows
Future production costs
Future development costs
Future tax expenses
Future net cash flows
45,488 43,271
27,279 19,566
1,513
7,449
4,121
6,384
12,575
9,872
5,261
1,055
492
1,121
2,593
1,087
Effect of discounting cash flows at 10%
9,597
3,393
Standardised measure of discounted
future net cash flows
2,978
6,479
1,506
—
—
10,963
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
190
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
191
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OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES CAPITALISED COSTS
The aggregate amount of property, plant and equipment and intangible assets, excluding goodwill, relating to oil and gas exploration and production
activities, and the aggregate amount of the related depreciation, depletion and amortisation at December 31, are shown in the tables below.
SHELL SUBSIDIARIES
Cost
Proved properties [A]
Unproved properties
Support equipment and facilities
Depreciation, depletion and amortisation
Proved properties [A]
Unproved properties
Support equipment and facilities
Net capitalised costs
[A] Includes capitalised asset decommissioning and restoration costs and related depreciation.
SHELL SHARE OF JOINT VENTURES AND ASSOCIATES
Cost
Proved properties [A]
Unproved properties
Support equipment and facilities
Depreciation, depletion and amortisation
Proved properties [A]
Unproved properties
Support equipment and facilities
Net capitalised costs
[A] Includes capitalised asset decommissioning and restoration costs and related depreciation.
2017
276,002
23,707
6,112
305,821
132,823
5,193
3,436
141,452
164,369
2017
42,370
2,657
4,452
49,479
31,844
20
3,142
35,006
14,473
$ million
2016
286,509
25,582
6,418
318,509
129,243
6,569
3,245
139,057
179,452
$ million
2016
40,773
2,992
4,383
48,148
28,712
20
3,054
31,786
16,362
OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES COSTS INCURRED
Costs incurred during the year in oil and gas property acquisition, exploration and development activities, whether capitalised or charged to income currently,
are shown in the tables below. Finance leases are excluded. Development costs include capitalised asset decommissioning and restoration costs (including
increases or decreases arising from changes to cost estimates or to the discount rate applied to the obligations) and exclude costs of acquiring support
equipment and facilities, but include depreciation thereon.
SHELL SUBSIDIARIES
2017
Acquisition of properties
Proved
Unproved
Exploration
Development
[A] Comprises Canada, Honduras and Mexico.
Europe
Asia
Oceania
Africa
USA
Other[A]
America
Total
North America
South
$ million
—
—
329
776
—
12
135
840
—
—
38
2,493
10
18
138
371
— 2,246
19
57
320
235
600
722 1,671
141
1,354
4,123
2,275
548
2,829
10,996
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
192
FinanciaL stateMents and suppLeMents SHELL ANNUAL REPORT AND FORM 20-F 2017
192
[A] Including $44,127 million of related costs incurred on acquisition of BG. The comparatives have been amended to conform with the current year presentation.
[B] Comprises Canada, Honduras and Mexico.
2016 [A]
Acquisition of properties
Proved
Unproved
Exploration
Development
2015
Acquisition of properties
Proved
Unproved
Exploration
Development
[A] Comprises Canada and Mexico.
2017
Exploration
Development
2016
Exploration
Development
2015
Exploration
Development
Europe
Asia
Oceania
Africa
USA
Other[B]
America
Total
North America
South
$ million
1,978
4,709
6,917
280
338
—
400
2
34
926
357
132
—
28,803
43,465
87
20
102
848
247
1,043
415
574
3,051
2,289
1,982
3,352
1,087
3,497
701
1,788
14,696
Europe
Asia
Oceania
Africa
USA
Other[A] America
Total
North America
South
$ million
2
1
360
3
1
—
—
—
—
2
135
86
30
—
10
93
177
822
198
376 3,433
554
542 6,285
3,777
2,703 3,760 2,829 5,720 1,747
80 20,616
Europe
3
(22) [A]
Asia
82
660
Oceania
Africa
USA
Canada
America
8
58
—
—
—
—
—
—
—
—
North America
South
Europe
33
99
Asia
57
2,173
Oceania
Africa
USA
Canada
America
101
273
—
—
—
—
—
—
—
—
North America
South
$ million
Total
93
696
$ million
Total
191
2,545
$ million
Europe
Asia
Oceania
Africa
USA
Canada
America
40
132
254 2,434
125
854
—
—
—
—
—
—
Total
297
—
— 3,542
North America
South
SHELL SHARE OF JOINT VENTURES AND ASSOCIATES
Joint ventures and associates did not incur costs in the acquisition of oil and gas properties in 2017, 2016 or 2015.
[A] Includes a revision of decommissioning and restoration provisions.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
193
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OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES CAPITALISED COSTS
The aggregate amount of property, plant and equipment and intangible assets, excluding goodwill, relating to oil and gas exploration and production
activities, and the aggregate amount of the related depreciation, depletion and amortisation at December 31, are shown in the tables below.
2016 [A]
Acquisition of properties
Europe
Asia
Oceania
Africa
USA
Other[B]
America
Total
North America
South
$ million
132,823
129,243
2017
276,002
23,707
6,112
305,821
5,193
3,436
141,452
164,369
2017
42,370
2,657
4,452
49,479
31,844
20
3,142
35,006
14,473
$ million
2016
286,509
25,582
6,418
318,509
6,569
3,245
139,057
179,452
$ million
2016
40,773
2,992
4,383
48,148
28,712
20
3,054
31,786
16,362
Net capitalised costs
[A] Includes capitalised asset decommissioning and restoration costs and related depreciation.
SHELL SHARE OF JOINT VENTURES AND ASSOCIATES
SHELL SUBSIDIARIES
Cost
Proved properties [A]
Unproved properties
Support equipment and facilities
Depreciation, depletion and amortisation
Proved properties [A]
Unproved properties
Support equipment and facilities
Cost
Proved properties [A]
Unproved properties
Support equipment and facilities
Depreciation, depletion and amortisation
Proved properties [A]
Unproved properties
Support equipment and facilities
SHELL SUBSIDIARIES
2017
Acquisition of properties
Proved
Unproved
Exploration
Development
[A] Comprises Canada, Honduras and Mexico.
Europe
Asia
Oceania
Africa
USA
Other[A]
America
Total
North America
South
$ million
—
—
329
776
—
12
135
—
—
38
10
18
— 2,246
141
320
19
57
2,275
548
138
1,354
235
600
2,829
840
2,493
371
4,123
722 1,671
10,996
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
192
Net capitalised costs
[A] Includes capitalised asset decommissioning and restoration costs and related depreciation.
OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES COSTS INCURRED
Costs incurred during the year in oil and gas property acquisition, exploration and development activities, whether capitalised or charged to income currently,
are shown in the tables below. Finance leases are excluded. Development costs include capitalised asset decommissioning and restoration costs (including
increases or decreases arising from changes to cost estimates or to the discount rate applied to the obligations) and exclude costs of acquiring support
equipment and facilities, but include depreciation thereon.
2016
Exploration
Development
2015
Exploration
Development
Proved
Unproved
132
87
1,043
Exploration
Development
3,497
[A] Including $44,127 million of related costs incurred on acquisition of BG. The comparatives have been amended to conform with the current year presentation.
[B] Comprises Canada, Honduras and Mexico.
1,978
280
338
2,289
4,709
—
400
1,982
926
357
247
1,087
6,917
2
34
3,352
—
20
415
701
28,803
102
574
1,788
43,465
848
3,051
14,696
2015
Acquisition of properties
Proved
Unproved
Exploration
Development
[A] Comprises Canada and Mexico.
Europe
Asia
Oceania
Africa
USA
Other[A] America
Total
North America
South
$ million
2
1
360
3,777
3
1
822
86
30
554
2,703 3,760 2,829 5,720 1,747
2
135
376 3,433
—
—
198
—
—
—
10
93
177
542 6,285
80 20,616
SHELL SHARE OF JOINT VENTURES AND ASSOCIATES
Joint ventures and associates did not incur costs in the acquisition of oil and gas properties in 2017, 2016 or 2015.
2017
Exploration
Development
[A] Includes a revision of decommissioning and restoration provisions.
Europe
3
(22) [A]
Asia
82
660
Oceania
8
58
Africa
—
—
North America
South
USA
Canada
America
—
—
—
—
—
—
Europe
Asia
Oceania
33
99
57
2,173
101
273
Africa
—
—
North America
South
USA
Canada
America
—
—
—
—
—
—
Europe
Asia
Oceania
Africa
USA
Canada
America
Total
40
132
254 2,434
125
854
—
—
—
—
—
—
—
297
— 3,542
North America
South
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
193
SHELL ANNUAL REPORT AND FORM 20-F 2017 FinanciaL stateMents and suppLeMents
Shell Annual Report_Master Template.indd 193
$ million
Total
93
696
$ million
Total
191
2,545
$ million
193
21/03/2018 15:34:49
OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES EARNINGS
The results of operations for oil and gas producing activities are shown in the tables below. Taxes other than income tax include cash-paid royalties to
governments outside North America.
SHELL SHARE OF JOINT VENTURES AND ASSOCIATES
Oceania included Shell’s 14% share of Woodside from January 2015 to April 2016, when its accounting classification was changed from an associate to an
investment in securities. Woodside is a publicly-listed company on the Australian Securities Exchange for which we have limited access to data; accordingly,
SHELL SUBSIDIARIES
2017
Revenue
Europe
Asia
Oceania
Africa
USA
Other[A]
America
Total
North America
South
$ million
Asia
Oceania
Africa
USA
Canada America
North America
South
$ million
Third parties
Sales between businesses
1,193
7,120
2,708
9,061
1,414
2,400
1,872
3,218
1,080
689
5,119 2,938 5,245
339
9,295
35,101
Total
8,313
11,769
3,814
5,090
6,199 3,277 5,934
44,396
Production costs excluding taxes
Taxes other than income tax
Exploration
Depreciation, depletion and amortisation
Other costs/(income)
Earnings before taxation
Taxation charge/(credit)
Earnings after taxation
[A] Comprises Canada, Honduras and Mexico.
2016
Revenue
2,509
89
243
2,560
(157 )
3,069
1,689
2,469
556
245
2,892
1,073
4,534
2,969
1,110
119
42
1,777
(382)
1,148
(202)
1,365
287
129
1,863
145
1,301
(361 )
98
868
2,558 1,571 1,218
1 1,691
276
3,410 3,886 3,374
469
114 1,050
142
(849 )
(3,373 )
363 (1,486 )
(1,094)
(294)
12,800
2,841
1,945
19,762
2,312
4,736
2,678
1,380
1,565
1,350
1,662
(1,212 )
(1,887 )
(800)
2,058
Asia
Oceania
Africa
USA
Canada America
Europe
Asia
Oceania
Africa
USA
Other[A]
America
Total
North America
South
$ million
Third parties
Sales between businesses
969
5,816
2,656
7,284
1,069
1,438
1,380
3,138
643
476
3,960 3,789 2,980
41
7,234
28,405
Total
6,785
9,940
2,507
4,518
4,603 3,830 3,456
35,639
Production costs excluding taxes
Taxes other than income tax
Exploration
Depreciation, depletion and amortisation
Other costs/(income)
Earnings before taxation
Taxation (credit)/charge
Earnings after taxation
[A] Comprises Canada, Honduras and Mexico.
2015
Revenue
Third parties
Sales between businesses
2,565
66
250
3,270
1,925
(1,291)
(311)
2,212
421
408
3,304
1,606
1,989
1,918
805
83
70
1,130
(700 )
1,119
559
(980)
71
560
1,468
194
356
2,018
356
70
438
3,348 2,230
—
291
865
790
295
4,372 1,953 2,881
(173 )
680
40
126
431
(305 )
(3,665 )
(1,351 )
(1,324 )
(377 )
(1,202 )
(1,032 )
(2,314 )
(947 )
(170 )
North America
South
13,493
1,624
2,108
18,928
3,734
(4,248 )
(163 )
(4,085 )
$ million
Europe
Asia
Oceania
Africa
USA
Other[A]
America
Total
Depreciation, depletion and amortisation
1,463
1,114
1,866 2,577 1,202 1,174
5,707 8,040
53
418 3,737 4,941 4,045
567
85 7,524
535 27,423
Total
7,573 10,617 1,620 4,911 5,508 4,098
620 34,947
Production costs excluding taxes
Taxes other than income tax
Exploration
Depreciation, depletion and amortisation
Other costs/(income)
Earnings before taxation
Taxation charge/(credit)
Earnings after taxation
[A] Comprises Canada and Mexico.
2,490 2,163
435
128
261 1,255
2,769 3,047
779 1,465
541 1,570 3,039 2,612
—
79
347
115
195
164
161 3,336
478 1,733 6,259 6,570
668 2,172
226
(1,441 )
343 12,758
63 1,167
347 5,719
687 21,543
232 4,101
1,146 2,252
418 2,516
65 2,541
866
429
(7,873 ) (7,420 )
(2,907 ) (1,815 )
(1,052 ) (10,341)
(215 )
278
728
(264)
(364 ) 1,675
(4,966 ) (5,605 )
(1,330 ) (10,126 )
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
195
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
194
FinanciaL stateMents and suppLeMents SHELL ANNUAL REPORT AND FORM 20-F 2017
194
Shell Annual Report_Master Template.indd 194
21/03/2018 15:34:51
the numbers are estimated.
2017
Third-party revenue
Total
Production costs excluding taxes
Taxes other than income tax
Exploration
Depreciation, depletion and amortisation
Other costs/(income)
Earnings before taxation
Taxation charge
Earnings after taxation
2016
Third-party revenue
Total
Production costs excluding taxes
Taxes other than income tax
Exploration
Depreciation, depletion and amortisation
Other costs/(income)
Earnings before taxation
Taxation charge
Earnings after taxation
[A] As revised.
2015
Third-party revenue
Total
Production costs excluding taxes
Taxes other than income tax
Exploration
Other costs/(income)
Earnings before taxation
Taxation charge
Earnings after taxation
[A] As revised.
Europe
1,646
1,646
337
631
188
(83)
566
173
393
7
Europe
1,705
1,705
383[A]
706
36
208
(11)[A]
383
91
292
Europe
2,764
2,764
414[A]
1,253
21
196
189[A]
691
237
454
4,503
4,503
1,654
729
705
57
511
847
197
650
3,708
3,708
1,663
705
456
25
401
458
23
435
5,177
5,177
745
877
20
580
1,492
242
1,250
58
58
93
4
4
40
(60)
(23)
—
(23)
197
197
123
7
27
237
(28)
(169)
8
(177)
632
632
215
31
42
11
(781)
19
(800)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
North America
South
$ million
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Total
6,207
6,207
1,159
1,340
68
1,882
368
1,390
370
1,020
Total
5,610
5,610
1,211
1,169
88
2,108
362
672
122
550
Total
8,573
8,573
1,374
2,161
83
2,773
780
1,402
498
904
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Asia
Oceania
Africa
USA
Canada America
North America
South
$ million
OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES EARNINGS
The results of operations for oil and gas producing activities are shown in the tables below. Taxes other than income tax include cash-paid royalties to
SHELL SHARE OF JOINT VENTURES AND ASSOCIATES
Oceania included Shell’s 14% share of Woodside from January 2015 to April 2016, when its accounting classification was changed from an associate to an
investment in securities. Woodside is a publicly-listed company on the Australian Securities Exchange for which we have limited access to data; accordingly,
the numbers are estimated.
governments outside North America.
SHELL SUBSIDIARIES
2017
Revenue
Third parties
Total
Production costs excluding taxes
Taxes other than income tax
Exploration
Other costs/(income)
Earnings before taxation
Taxation charge/(credit)
Earnings after taxation
[A] Comprises Canada, Honduras and Mexico.
2016
Revenue
Third parties
Total
Production costs excluding taxes
Taxes other than income tax
Exploration
Other costs/(income)
Earnings before taxation
Taxation (credit)/charge
Earnings after taxation
[A] Comprises Canada, Honduras and Mexico.
2015
Revenue
Third parties
Total
Production costs excluding taxes
Taxes other than income tax
Exploration
Other costs/(income)
Earnings before taxation
Taxation charge/(credit)
Earnings after taxation
[A] Comprises Canada and Mexico.
Sales between businesses
7,120
9,061
2,400
3,218
5,119 2,938 5,245
35,101
1,193
2,708
1,414
1,872
1,080
339
689
9,295
Europe
Asia
Oceania
Africa
USA
Other[A]
America
Total
Depreciation, depletion and amortisation
2,560
2,892
1,777
1,863
3,410 3,886 3,374
19,762
8,313
11,769
3,814
5,090
6,199 3,277 5,934
44,396
2,509
2,469
1,110
1,365
2,558 1,571 1,218
12,800
89
243
556
245
119
42
287
129
98
1 1,691
2,841
868
142
276
1,945
(157 )
1,073
(382)
145
114 1,050
469
2,312
3,069
4,534
1,148
1,301
(849 )
(3,373 )
(1,094)
4,736
1,689
2,969
(202)
(361 )
363 (1,486 )
(294)
2,678
1,380
1,565
1,350
1,662
(1,212 )
(1,887 )
(800)
2,058
Europe
Asia
Oceania
Africa
USA
Other[A]
America
Total
North America
South
$ million
6,785
9,940
2,507
4,518
4,603 3,830 3,456
35,639
2,565
2,212
805
1,468
3,348 2,230
865
13,493
66
250
421
408
83
70
70
—
790
1,624
438
291
295
2,108
1,925
1,606
(700 )
40
680
(173 )
3,734
(1,291)
1,989
1,119
(3,665 )
(1,324 )
(1,202)
(4,248 )
(311)
1,918
(980)
71
559
560
(1,351 )
(2,314 )
(377 )
(1,032)
(163 )
(947 )
(170 )
(4,085 )
194
356
356
126
431
(305 )
Europe
Asia
Oceania
Africa
USA
Other[A]
America
Total
North America
South
$ million
Sales between businesses
5,816
7,284
1,438
3,138
3,960 3,789 2,980
28,405
969
2,656
1,069
1,380
643
41
476
7,234
Depreciation, depletion and amortisation
3,270
3,304
1,130
2,018
4,372 1,953 2,881
18,928
Sales between businesses
5,707 8,040
418 3,737 4,941 4,045
535 27,423
1,866 2,577 1,202 1,174
567
53
85 7,524
Depreciation, depletion and amortisation
2,769 3,047
478 1,733 6,259 6,570
687 21,543
7,573 10,617 1,620 4,911 5,508 4,098
620 34,947
2,490 2,163
541 1,570 3,039 2,612
343 12,758
128
435
261 1,255
115
195
347
79
—
63 1,167
161 3,336
164
347 5,719
779 1,465
226
(1,441)
668 2,172
232 4,101
1,146 2,252
65 2,541
(7,873 ) (7,420 )
(1,052 ) (10,341)
418 2,516
429
866
(2,907 ) (1,815 )
278
(215 )
728
(264)
(364 ) 1,675
(4,966 ) (5,605 )
(1,330 ) (10,126 )
North America
South
$ million
2017
Third-party revenue
Total
Production costs excluding taxes
Taxes other than income tax
Exploration
Depreciation, depletion and amortisation
Other costs/(income)
Earnings before taxation
Taxation charge
Earnings after taxation
2016
Third-party revenue
Total
Production costs excluding taxes
Taxes other than income tax
Exploration
Depreciation, depletion and amortisation
Other costs/(income)
Earnings before taxation
Taxation charge
Earnings after taxation
[A] As revised.
2015
Third-party revenue
Total
Production costs excluding taxes
Taxes other than income tax
Exploration
Depreciation, depletion and amortisation
Other costs/(income)
Earnings before taxation
Taxation charge
Earnings after taxation
[A] As revised.
Europe
1,646
1,646
337
631
7
188
(83)
566
173
393
Europe
1,705
1,705
383[A]
706
36
208
(11)[A]
383
91
292
Europe
2,764
2,764
414[A]
1,253
21
196
189[A]
691
237
454
Asia
4,503
4,503
729
705
57
1,654
511
847
197
650
Oceania
58
58
93
4
4
40
(60)
(23)
—
(23)
Asia
Oceania
3,708
3,708
705
456
25
1,663
401
458
23
435
197
197
123
7
27
237
(28)
(169)
8
(177)
Asia
Oceania
5,177
5,177
745
877
20
1,463
580
1,492
242
1,250
632
632
215
31
42
1,114
11
(781)
19
(800)
Africa
—
—
—
—
—
—
—
—
—
—
Africa
—
—
—
—
—
—
—
—
—
—
Africa
—
—
—
—
—
—
—
—
—
—
North America
South
Canada America
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
North America
South
Canada America
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
USA
—
—
—
—
—
—
—
—
—
—
USA
—
—
—
—
—
—
—
—
—
—
North America
South
USA
—
—
—
—
—
—
—
—
—
—
Canada America
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$ million
Total
6,207
6,207
1,159
1,340
68
1,882
368
1,390
370
1,020
$ million
Total
5,610
5,610
1,211
1,169
88
2,108
362
672
122
550
$ million
Total
8,573
8,573
1,374
2,161
83
2,773
780
1,402
498
904
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
194
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
195
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[Oil and gas exploration and production activities earnings continued]
ACREAGE AND WELLS
The tables below reflect acreage and wells of Shell subsidiaries, joint ventures and associates. The term “gross” refers to the total activity in which Shell
subsidiaries, joint ventures and associates have an interest. The term “net” refers to the sum of the fractional interests owned by Shell subsidiaries plus the Shell
share of joint ventures and associates’ fractional interests. Net data below are rounded to the nearest whole number.
Number of net productive wells and dry holes drilled
Productive
Productive
Productive
2016
Dry
2015
Dry
2017
Dry
Oil and gas acreage (at December 31)
2017
2016
Thousand acres
2015
Europe [A]
Asia
Oceania
Africa
North America – USA
North America – Canada
South America
Total
[A] Includes Greenland.
Developed
Undeveloped
Developed
Undeveloped
Developed
Undeveloped
Gross
Net
Gross
Net
Gross
Net
Gross
Net Gross
Net
Gross
Net
6,463 2,071 14,119
6,556
25,975 9,139 35,305 18,730 26,003
1,939
3,296 1,255 22,406 13,985
5,083
4,663 1,938 33,453 20,811
6,187
2,197
9,199
822
2,315
18,216
58,463
37,876
41,517
10,241 7,152 2,194 14,623
36,298 25,581 9,181 36,658
24,109 2,041
530 51,740
29,152 4,650 2,071 40,435
7,732
22,995
16,975
27,058
1,936 1,134 2,718
1,937
2,002
1,197
4,151
2,577 1,659 1,158 5,033
4,262
953
1,302
651 16,714 15,005
6,196
606 9,338
976
1,315
670
547
26,149
17,759
19,402 1,227
100
14,643
745 32,706
52 7,851
25,716
3,621
44,588 16,794 134,053 82,851 43,874 16,947 204,131 136,422 42,410 15,931 189,046 108,359
Number of productive wells [A] (at December 31)
Oil
Gross
Net Gross
2017
Gas
Net
Gross
Oil
Net
2016
Gas
Gross
Net Gross
Oil
Net
Gross
2015
Gas
Net
Europe
Asia
Oceania
Africa
North America – USA
North America – Canada
South America
303 1,235 392 1,215
1,156
344 1,229 392
9,410 3,132 711 283 9,261 3,141 656 263 8,271 2,853 334 190
— 624 234
86
— 3,257 1,734
289 191 127
— 3,499 1,926
155 180 122
321 1,232 403 1,272
—
380
—
821
—
662
334 129
15,408 7,817 1,636 717 15,532 7,892 3,046 2,136 15,331 7,893 2,522 2,403
—
111
— 892 794
32
55
47
283
73
283 941 781
26
50
28
286
25
286 1,209 1,059
2
15
7
Total
[A] The number of productive wells with multiple completions (more than one formation producing into the same well bore) at December 31, 2017, was 1,946 gross (761 net); 2016: 1,721 gross, corrected
from 1,754 (686 net, corrected from 691); 2015:1,778 gross, corrected from 1,811 (755 net, corrected from 760).
26,465 11,454 8,208 4,266 27,026 11,954 9,373 5,470 26,006 11,725 6,054 4,366
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
196
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52
—
3
2
2
9
30
6
5
312
63
24
237
56
1
698
1
5
—
3
6
5
—
20
—
4
—
3
—
1
—
8
—
2
—
4
40
—
—
46
10
265
184
15
137
50
3
664
—
4
—
2
2
—
—
8
1
—
—
—
—
—
—
1
1
—
—
5
35
73
—
114
10
252
2
24
433
20
3
744
2
11
3
—
8
5
1
30
—
2
—
—
—
2
1
5
2017
Net
11
25
17
27
138
5
20
243
[A] Productive wells are wells with proved reserves allocated. Exploratory wells in the process of drilling are excluded and presented separately below.
Number of wells in the process of exploratory drilling [A]
Wells in the process of
drilling at January 1 and
allocated proved
Wells in the process
of drilling at January 1
At January 1
reserves during the year
Gross
25 [B]
96 [C]
198
45 [D]
178
39 [E]
51
632
Net
12
38 [C]
65
27
126
39 [E]
28 [F]
Gross
(4)
(24)
(4)
(3)
(86)
(29)
(19)
and determined as
dry during the year
New wells in the process
of drilling at December 31
At December 31
Gross
Net
Gross
Net
(1)
(13)
(2)
(2)
(47)
(29)
(14)
Gross
(2 )
(15 )
(148 )
(6 )
(9 )
(6 )
(4 )
Net
(1 )
(5 )
(48 )
(3 )
(8 )
(6 )
(2 )
3
14
4
6
1
18
1
5
2
5
1
8
22
71
50
42
5
46
131
67
214
[A] Wells in the process of drilling includes exploratory wells pending further evaluation.
335
(169)
(108)
(190 )
(73)
177
89
450
North America – USA
North America – Canada
South America
Exploratory [A]
Europe
Asia
Oceania
Africa
Total
Development
Europe
Asia
Oceania
Africa
North America – USA
North America – Canada
South America
Total
Europe
Asia
Oceania
Africa
North America – USA
North America – Canada
South America
Total
[B] Corrected from 26.
[C] Corrected from 94 gross (37 net).
[D] Corrected from 46.
[E] Corrected from 11 gross (11 net).
[F] Corrected from 27.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
197
Oil and gas acreage (at December 31)
2017
2016
Thousand acres
2015
Europe [A]
Asia
Oceania
Africa
North America – USA
North America – Canada
South America
Total
[A] Includes Greenland.
Europe
Asia
Oceania
Africa
North America – USA
North America – Canada
South America
Total
Developed
Undeveloped
Developed
Undeveloped
Developed
Undeveloped
Gross
Net
Gross
Net
Gross
Net
Gross
Net Gross
Net
Gross
Net
6,463 2,071 14,119
6,187
6,556
18,216
10,241 7,152 2,194 14,623
7,732
25,975 9,139 35,305 18,730 26,003
58,463
36,298 25,581 9,181 36,658
22,995
3,296 1,255 22,406 13,985
1,939
822
37,876
24,109 2,041
530 51,740
16,975
4,663 1,938 33,453 20,811
5,083
2,315
41,517
29,152 4,650 2,071 40,435
27,058
1,936 1,134 2,718
1,937
2,002
1,197
4,151
2,577 1,659 1,158 5,033
4,262
953
651 16,714 15,005
976
26,149
19,402 1,227
745 32,706
25,716
1,302
606 9,338
6,196
1,315
17,759
14,643
100
52 7,851
3,621
44,588 16,794 134,053 82,851 43,874 16,947 204,131 136,422 42,410 15,931 189,046 108,359
2,197
9,199
670
547
Oil
2017
Gas
Net
2016
Gas
Oil
Net
Oil
Net
2015
Gas
Net
Gross
Net Gross
Gross
Gross
Net Gross
Gross
1,156
303 1,235 392 1,215
321 1,232 403 1,272
344 1,229 392
9,410 3,132 711 283 9,261 3,141 656 263 8,271 2,853 334 190
—
— 3,499 1,926
—
— 3,257 1,734
—
— 624 234
380
155 180 122
662
289 191 127
821
334 129
86
15,408 7,817 1,636 717 15,532 7,892 3,046 2,136 15,331 7,893 2,522 2,403
—
— 892 794
283
283 941 781
286
286 1,209 1,059
111
47
55
32
73
28
50
26
25
15
7
2
26,465 11,454 8,208 4,266 27,026 11,954 9,373 5,470 26,006 11,725 6,054 4,366
Number of productive wells [A] (at December 31)
[A] The number of productive wells with multiple completions (more than one formation producing into the same well bore) at December 31, 2017, was 1,946 gross (761 net); 2016: 1,721 gross, corrected
from 1,754 (686 net, corrected from 691); 2015:1,778 gross, corrected from 1,811 (755 net, corrected from 760).
ACREAGE AND WELLS
The tables below reflect acreage and wells of Shell subsidiaries, joint ventures and associates. The term “gross” refers to the total activity in which Shell
subsidiaries, joint ventures and associates have an interest. The term “net” refers to the sum of the fractional interests owned by Shell subsidiaries plus the Shell
share of joint ventures and associates’ fractional interests. Net data below are rounded to the nearest whole number.
Number of net productive wells and dry holes drilled
Productive
2017
Dry
Productive
2016
Dry
Productive
2015
Dry
Exploratory [A]
Europe
Asia
Oceania
Africa
North America – USA
North America – Canada
South America
Total
Development
Europe
Asia
Oceania
Africa
North America – USA
North America – Canada
South America
—
3
2
2
9
30
6
52
5
312
63
24
237
56
1
1
5
—
3
6
5
—
20
—
4
—
3
—
1
—
8
—
2
—
4
40
—
—
46
10
265
184
15
137
50
3
—
4
—
2
2
—
—
8
1
—
—
—
—
—
—
1
1
—
—
5
35
73
—
114
10
252
2
24
433
20
3
744
2
11
3
—
8
5
1
30
—
2
—
—
—
2
1
5
Total
664
[A] Productive wells are wells with proved reserves allocated. Exploratory wells in the process of drilling are excluded and presented separately below.
698
Number of wells in the process of exploratory drilling [A]
2017
Wells in the process of
drilling at January 1 and
allocated proved
reserves during the year
Net
Gross
Wells in the process
of drilling at January 1
and determined as
dry during the year
Net
Gross
At January 1
Gross
Net
New wells in the process
of drilling at December 31
Net
Gross
At December 31
Net
Gross
Europe
Asia
Oceania
Africa
North America – USA
North America – Canada
South America
25 [B]
96 [C]
198
45 [D]
12
38 [C]
65
27
178
126
39 [E]
51
39 [E]
28 [F]
(4)
(24)
(4)
(3)
(86)
(29)
(19)
632
Total
[A] Wells in the process of drilling includes exploratory wells pending further evaluation.
[B] Corrected from 26.
[C] Corrected from 94 gross (37 net).
[D] Corrected from 46.
[E] Corrected from 11 gross (11 net).
[F] Corrected from 27.
335
(169)
(1)
(13)
(2)
(2)
(47)
(29)
(14)
(2 )
(15 )
(148 )
(6 )
(9 )
(6 )
(4 )
(1 )
(5 )
(48 )
(3 )
(8 )
(6 )
(2 )
3
14
4
6
1
5
2
5
22
71
50
42
131
67
214
1
18
1
8
5
46
(108)
(190 )
(73)
177
89
450
11
25
17
27
138
5
20
243
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
196
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
197
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[Acreage and wells continued]
Parent Company Financial Statements
Number of wells in the process of development drilling
At January 1
2017
At December 31
(United States).
The Parent Company Financial Statements have not been audited in accordance with the standards of the Public Company Accounting Oversight Board
Europe
Asia
Oceania
Africa
North America – USA
North America – Canada
South America
Total
Gross
17
35
5
8
14
3
9
91
Net
6
11
1
3
11
2
2
36
Gross
7
75
1
—
144
21
12
260
Net
2
29
—
—
97
18
3
149
In addition to the present activities mentioned above, the following recovery methods are operational in the following countries: water flooding (Brazil
(including water alternating gas), Brunei, Denmark, Malaysia, Nigeria, Norway, Oman, Russia, the UK and the USA); gas injection (Brunei, Kazakhstan,
Malaysia, Nigeria and Oman); steam injection (Canada, the Netherlands, Oman and the USA), and polymer flooding (Oman).
200
200
200
201
201
Statement of Income
Statement of Comprehensive Income
Balance Sheet
Statement of Changes in Equity
Statement of Cash Flows
202 Notes to the Parent Company Financial Statements
202 Note 1 Basis of preparation
202 Note 2 Significant accounting policies
203 Note 3 Interest and other income/expense
203 Note 4 Investments in subsidiaries
203 Note 5 Accounts payable and accrued liabilities
203 Note 6 Taxation
204 Note 7 Financial instruments
204 Note 8 Share capital
206 Note 9 Other reserves
206 Note 10 Dividends
206 Note 11 Legal proceedings and other contingencies
206 Note 12 Directors and Senior Management
206 Note 13 Related parties
207 Note 14 Auditor’s remuneration
207 Note 15 Acquisition of BG Group plc
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
198
FinanciaL stateMents and suppLeMents SHELL ANNUAL REPORT AND FORM 20-F 2017
198
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
199
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Parent Company Financial Statements
Parent Company Financial Statements
Number of wells in the process of development drilling
At January 1
2017
At December 31
The Parent Company Financial Statements have not been audited in accordance with the standards of the Public Company Accounting Oversight Board
(United States).
Europe
Asia
Oceania
Africa
North America – USA
North America – Canada
South America
Total
Gross
17
35
5
8
14
3
9
91
Net
6
11
1
3
11
2
2
36
Gross
7
75
1
—
144
21
12
260
Net
2
29
—
—
97
18
3
149
In addition to the present activities mentioned above, the following recovery methods are operational in the following countries: water flooding (Brazil
(including water alternating gas), Brunei, Denmark, Malaysia, Nigeria, Norway, Oman, Russia, the UK and the USA); gas injection (Brunei, Kazakhstan,
Malaysia, Nigeria and Oman); steam injection (Canada, the Netherlands, Oman and the USA), and polymer flooding (Oman).
Statement of Income
Statement of Comprehensive Income
Balance Sheet
Statement of Changes in Equity
Statement of Cash Flows
200
200
200
201
201
202 Notes to the Parent Company Financial Statements
202 Note 1 Basis of preparation
202 Note 2 Significant accounting policies
203 Note 3 Interest and other income/expense
203 Note 4 Investments in subsidiaries
203 Note 5 Accounts payable and accrued liabilities
203 Note 6 Taxation
204 Note 7 Financial instruments
204 Note 8 Share capital
206 Note 9 Other reserves
206 Note 10 Dividends
206 Note 11 Legal proceedings and other contingencies
206 Note 12 Directors and Senior Management
206 Note 13 Related parties
207 Note 14 Auditor’s remuneration
207 Note 15 Acquisition of BG Group plc
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
198
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
199
SHELL ANNUAL REPORT AND FORM 20-F 2017 FinanciaL stateMents and suppLeMents
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199
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parent company Financial statements Continued
Statement of Income
Dividend income
Interest and other income
Administrative expenses
Interest and other expense
Income before taxation
Taxation (credit)/charge
Income for the period
[A] Includes BG acquisition costs
Statement of Comprehensive Income
Income for the period
Comprehensive income for the period
Balance Sheet
Assets
Non-current assets
Investments in subsidiaries
Deferred tax
Current assets
Amounts due from subsidiaries
Cash and cash equivalents
Total assets
Liabilities
Non-current liabilities
Accounts payable and accrued liabilities
Current liabilities
Accounts payable and accrued liabilities
Total liabilities
Equity
Share capital
Other reserves
Retained earnings
Total equity
Total liabilities and equity
Signed on behalf of the Board
/s/ Jessica Uhl
Jessica Uhl
Chief Financial Officer
March 14, 2018
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
200
FinanciaL stateMents and suppLeMents SHELL ANNUAL REPORT AND FORM 20-F 2017
200
Notes
3
3
6
2017
10,958
49
(53)
(26)
10,928
(23)
10,951
2017
10,951
10,951
Notes
Dec 31, 2017
$ million
2016
14,132
612
(488) [A]
(25)
14,231
26
14,205
$ million
2016
14,205
14,205
$ million
Dec 31, 2016
4
6
13
5
5
8
9
256,882
598
257,480
256,583
352
256,935
5,022
3
5,025
4,680
2
4,682
262,505
261,617
332
332
4,333
4,333
4,665
696
235,366
21,778
257,840
262,505
224
224
4,049
4,049
4,273
683
235,573
21,088
257,344
261,617
Statement of Changes in Equity
At January 1, 2017
Comprehensive income for the period
Dividends paid
Scrip dividends
Share-based compensation
At December 31, 2017
At January 1, 2016
Dividends paid
Scrip dividends
Shares issued
Share-based compensation
At December 31, 2016
Comprehensive income for the period
Statement of Cash Flows
Income for the period
Adjustment for:
Dividend income
Tax
Interest income
Interest and other expense
Share-based compensation
(Increase)/decrease in working capital
Cash flow from operating activities
Acquisition of BG Group plc
Dividends received
Interest received
Share-based compensation
Cash flow from investing activities
Cash dividends paid
Interest and other expense paid
Cash flow from financing activities
Increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at January 1
Cash and cash equivalents at December 31
Notes
Share
capital
Other
reserves
Retained
earnings
683
235,573
21,088
257,344
10
10
9
10
10
8
9
—
—
13
—
—
—
(13 )
(194 )
10,951
(15,628 )
4,751
616
696
235,366
21,778
257,840
546
201,674
16,045
218,265
—
—
17
—
—
14,205
14,205
(14,959 )
(14,959)
(17 )
5,282
5,282
120
33,930
—
34,050
—
(14 )
515
501
683
235,573
21,088
257,344
Notes
2017
10,951
(10,958 )
(14,132)
15
10
(23 )
(24 )
26
25
(333 )
(336 )
—
10,958
24
258
11,240
(10,877 )
(26 )
(10,903 )
1
2
3
$ million
Total
equity
10,951
(15,628 )
4,751
422
$ million
2016
14,205
26
(17)
25
21
13,868
13,996
(19,036 )
14,132
17
130
(4,757)
(9,677)
(25)
(9,702)
(463)
465
2
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
201
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Notes
3
3
6
2017
10,958
49
(53)
(26)
$ million
2016
14,132
612
(488) [A]
(25)
10,928
14,231
(23)
26
10,951
14,205
2017
10,951
10,951
$ million
2016
14,205
14,205
$ million
4
6
256,882
256,583
598
352
257,480
256,935
13
5,022
3
5,025
262,505
261,617
332
332
4,333
4,333
4,665
5
5
8
9
696
235,366
21,778
257,840
262,505
683
235,573
21,088
257,344
261,617
4,680
2
4,682
224
224
4,049
4,049
4,273
Statement of Income
Dividend income
Interest and other income
Administrative expenses
Interest and other expense
Income before taxation
Taxation (credit)/charge
Income for the period
[A] Includes BG acquisition costs
Statement of Comprehensive Income
Income for the period
Comprehensive income for the period
Balance Sheet
Assets
Non-current assets
Investments in subsidiaries
Deferred tax
Current assets
Amounts due from subsidiaries
Cash and cash equivalents
Total assets
Liabilities
Non-current liabilities
Accounts payable and accrued liabilities
Current liabilities
Accounts payable and accrued liabilities
Total liabilities
Equity
Share capital
Other reserves
Retained earnings
Total equity
Total liabilities and equity
/s/ Jessica Uhl
Jessica Uhl
Chief Financial Officer
March 14, 2018
Signed on behalf of the Board
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
200
Statement of Changes in Equity
At January 1, 2017
Comprehensive income for the period
Dividends paid
Scrip dividends
Share-based compensation
At December 31, 2017
At January 1, 2016
Comprehensive income for the period
Dividends paid
Scrip dividends
Shares issued
Share-based compensation
At December 31, 2016
Notes
Dec 31, 2017
Dec 31, 2016
Statement of Cash Flows
Notes
Share
capital
10
10
9
10
10
8
9
683
—
—
13
—
696
546
—
—
17
120
—
683
Notes
Other
reserves
235,573
—
—
(13 )
(194 )
Retained
earnings
21,088
10,951
(15,628 )
4,751
616
235,366
21,778
201,674
—
—
(17 )
33,930
(14 )
16,045
14,205
(14,959 )
5,282
—
515
$ million
Total
equity
257,344
10,951
(15,628 )
4,751
422
257,840
218,265
14,205
(14,959)
5,282
34,050
501
235,573
21,088
257,344
Income for the period
Adjustment for:
Dividend income
Tax
Interest income
Interest and other expense
Share-based compensation
(Increase)/decrease in working capital
Cash flow from operating activities
Acquisition of BG Group plc
Dividends received
Interest received
Share-based compensation
Cash flow from investing activities
Cash dividends paid
Interest and other expense paid
Cash flow from financing activities
Increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at January 1
Cash and cash equivalents at December 31
15
10
2017
10,951
(10,958 )
(23 )
(24 )
26
25
(333 )
(336 )
—
10,958
24
258
11,240
(10,877 )
(26 )
(10,903 )
1
2
3
$ million
2016
14,205
(14,132)
26
(17)
25
21
13,868
13,996
(19,036 )
14,132
17
130
(4,757)
(9,677)
(25)
(9,702)
(463)
465
2
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
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Notes to the Parent Company Financial Statements
Notes to the Parent Company Financial Statements
1 BASIS OF PREPARATION
The Financial Statements of Royal Dutch Shell plc (the Company) have been prepared in accordance with the provisions of the Companies Act 2006 (the Act)
and with International Financial Reporting Standards (IFRS) as adopted by the European Union. As applied to the Company, there are no material differences
from IFRS as issued by the International Accounting Standards Board (IASB); therefore, the Financial Statements have been prepared in accordance with IFRS
as issued by the IASB.
As described in the accounting policies in Note 2, the Financial Statements have been prepared under the historical cost convention except for certain items
measured at fair value. Those accounting policies have been applied consistently in all periods presented.
The Financial Statements were approved and authorised for issue by the Board of Directors on March 14, 2018.
The preparation of financial statements in conformity with IFRS requires the use of certain accounting estimates. It also requires management to exercise its
judgement in the process of applying the Company’s accounting policies. Actual results may differ from those estimates.
The financial results of the Company are included in the Consolidated Financial Statements on pages 137-178. The financial results of the Company
incorporate the results of the Dividend Access Trust (the Trust), the financial statements of which are presented on pages 213-216.
The Company’s principal activity is being the parent company for Shell, as described in Note 1 to the Consolidated Financial Statements.
Interest and other income
Interest income
Foreign exchange gains
Interest and other expense
Interest expense
Other expense
Total
Total
2 SIGNIFICANT ACCOUNTING POLICIES
The Company’s accounting policies follow those of Shell as set out in Note 2 to the Consolidated Financial Statements. The following are Company-specific
policies and changes to IFRS not yet adopted.
4 INVESTMENTS IN SUBSIDIARIES
PRESENTATION AND FUNCTIONAL CURRENCY
The Company’s presentation and functional currency is US dollars (dollars).
INVESTMENTS
Investments in subsidiaries are stated at cost, net of any impairment. For the purposes of determining whether impairment of investments in subsidiaries has
occurred, and the extent of any impairment loss or its reversal, the key assumptions management uses in estimating risk-adjusted future cash flows for value-in-
use measures include future oil and gas prices, expected production volumes and refining margins appropriate to the local circumstances and environment.
These assumptions and the judgements of management that are based on them are subject to change as new information becomes available. Cash flow
estimates are risk-adjusted to reflect local conditions as appropriate and discounted at a rate based on Shell's marginal cost of debt. Changes in economic
conditions can also affect the rate used to discount future cash flow estimates. Future price assumptions are presented in Note 8 to the Consolidated Financial
Statements.
The original cost of the Company’s investment in Royal Dutch Petroleum Company (Royal Dutch) was based on the fair value of the shares transferred to the
Company by the former shareholders of Royal Dutch in exchange for A shares in the Company during the public exchange offer in 2005. The original cost of
the Company’s investment in The “Shell” Transport and Trading Company, p.l.c., now The Shell Transport and Trading Company Limited (Shell Transport), was
the fair value of the shares held by the former shareholders of The “Shell” Transport and Trading Company, p.l.c. transferred in consideration for the issuance
of B shares as part of the Scheme of Arrangement in 2005. The Company’s investments in Royal Dutch and Shell Transport now represent an investment in
Shell Petroleum N.V. (Shell Petroleum); this change had no impact on the cost of investments in subsidiaries.
DIVIDEND INCOME
Dividends are recognised on a paid basis unless the dividend has been confirmed by a general meeting of Shell Petroleum, in which case income is
recognised on the date at which receipt is deemed virtually certain.
SHARE-BASED COMPENSATION PLANS
The fair value of share-based compensation for equity-settled plans granted to employees of subsidiaries under the Company’s plans is recognised as an
investment in subsidiaries from the date of grant over the vesting period with a corresponding increase in equity. Changes in the fair value of share-based
compensation for cash-settled plans relating to employees of subsidiaries are recognised as an investment in subsidiaries with a corresponding change in
liabilities. In the year of vesting of a plan, the costs for the actual deliveries are charged to the relevant employing subsidiaries. This is recognised as a
realisation of the investment originally booked. If the actual vesting costs are higher than the cumulatively recognised share-based compensation charge, the
difference is recognised in income.
See Note 21 to the Consolidated Financial Statements for information on the Company’s principal plan.
TAXATION
The Company is tax-resident in the Netherlands. For the assessment of corporate income tax in the Netherlands, the Company and certain of its subsidiaries
form a fiscal unit, in respect of which the Company recognises any current tax receivable or payable (and deferred tax asset or liability) for the fiscal unit as a
whole to the extent such balances have been settled between the Company and other members of the fiscal unit at the balance sheet date.
The Company’s tax charge or credit recognised in income is calculated at the statutory tax rate prevailing in the Netherlands for current tax and statutory tax
rate substantively enacted in the Netherlands for deferred tax.
CHANGES TO IFRS NOT YET ADOPTED
The adoption of IFRS 9 Financial Instruments in 2018 has been assessed and does not have a significant effect on the Company’s accounting or disclosures.
See Note 3 to the Consolidated Financial Statements for information on changes to IFRS not yet adopted for Shell.
3 INTEREST AND OTHER INCOME/EXPENSE
2017
24
25
49
(26)
—
(26)
2017
256,583
—
779
(480)
$ million
2016
17
595
612
(19)
(6)
(25)
$ million
2016
203,066
53,118 [A]
645
(246)
256,882
256,583
At January 1
Additions
At December 31
[A] See Note 15.
Share-based compensation
Recovery of vested share-based compensation
5 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Amounts due to subsidiaries (see Note 13)
Accruals and other liabilities
Withholding tax payable
Unclaimed dividends
Total
6 TAXATION
Taxation (credit)/charge
Deferred tax
Relating to the origination and reversal of temporary differences
Adjustments in respect of prior periods
Taxation (credit)/charge
Accruals and other liabilities are principally in respect of cash-settled share-based compensation.
$ million
Dec 31, 2016
Dec 31, 2017
Current
Non-current
Current
Non-current
3,859
318
153
3
—
332
—
—
3,593
302
152
2
4,333
332
4,049
—
224
—
—
224
2017
—
(23 )
(23 )
$ million
2016
24
2
26
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
203
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
202
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Notes to the Parent Company Financial Statements
1 BASIS OF PREPARATION
The Financial Statements of Royal Dutch Shell plc (the Company) have been prepared in accordance with the provisions of the Companies Act 2006 (the Act)
and with International Financial Reporting Standards (IFRS) as adopted by the European Union. As applied to the Company, there are no material differences
from IFRS as issued by the International Accounting Standards Board (IASB); therefore, the Financial Statements have been prepared in accordance with IFRS
as issued by the IASB.
As described in the accounting policies in Note 2, the Financial Statements have been prepared under the historical cost convention except for certain items
measured at fair value. Those accounting policies have been applied consistently in all periods presented.
The Financial Statements were approved and authorised for issue by the Board of Directors on March 14, 2018.
The preparation of financial statements in conformity with IFRS requires the use of certain accounting estimates. It also requires management to exercise its
judgement in the process of applying the Company’s accounting policies. Actual results may differ from those estimates.
The financial results of the Company are included in the Consolidated Financial Statements on pages 137-178. The financial results of the Company
incorporate the results of the Dividend Access Trust (the Trust), the financial statements of which are presented on pages 213-216.
The Company’s principal activity is being the parent company for Shell, as described in Note 1 to the Consolidated Financial Statements.
The Company’s accounting policies follow those of Shell as set out in Note 2 to the Consolidated Financial Statements. The following are Company-specific
2 SIGNIFICANT ACCOUNTING POLICIES
policies and changes to IFRS not yet adopted.
PRESENTATION AND FUNCTIONAL CURRENCY
The Company’s presentation and functional currency is US dollars (dollars).
INVESTMENTS
Statements.
Investments in subsidiaries are stated at cost, net of any impairment. For the purposes of determining whether impairment of investments in subsidiaries has
occurred, and the extent of any impairment loss or its reversal, the key assumptions management uses in estimating risk-adjusted future cash flows for value-in-
use measures include future oil and gas prices, expected production volumes and refining margins appropriate to the local circumstances and environment.
These assumptions and the judgements of management that are based on them are subject to change as new information becomes available. Cash flow
estimates are risk-adjusted to reflect local conditions as appropriate and discounted at a rate based on Shell's marginal cost of debt. Changes in economic
conditions can also affect the rate used to discount future cash flow estimates. Future price assumptions are presented in Note 8 to the Consolidated Financial
The original cost of the Company’s investment in Royal Dutch Petroleum Company (Royal Dutch) was based on the fair value of the shares transferred to the
Company by the former shareholders of Royal Dutch in exchange for A shares in the Company during the public exchange offer in 2005. The original cost of
the Company’s investment in The “Shell” Transport and Trading Company, p.l.c., now The Shell Transport and Trading Company Limited (Shell Transport), was
the fair value of the shares held by the former shareholders of The “Shell” Transport and Trading Company, p.l.c. transferred in consideration for the issuance
of B shares as part of the Scheme of Arrangement in 2005. The Company’s investments in Royal Dutch and Shell Transport now represent an investment in
Shell Petroleum N.V. (Shell Petroleum); this change had no impact on the cost of investments in subsidiaries.
DIVIDEND INCOME
Dividends are recognised on a paid basis unless the dividend has been confirmed by a general meeting of Shell Petroleum, in which case income is
recognised on the date at which receipt is deemed virtually certain.
SHARE-BASED COMPENSATION PLANS
The fair value of share-based compensation for equity-settled plans granted to employees of subsidiaries under the Company’s plans is recognised as an
investment in subsidiaries from the date of grant over the vesting period with a corresponding increase in equity. Changes in the fair value of share-based
compensation for cash-settled plans relating to employees of subsidiaries are recognised as an investment in subsidiaries with a corresponding change in
liabilities. In the year of vesting of a plan, the costs for the actual deliveries are charged to the relevant employing subsidiaries. This is recognised as a
realisation of the investment originally booked. If the actual vesting costs are higher than the cumulatively recognised share-based compensation charge, the
difference is recognised in income.
See Note 21 to the Consolidated Financial Statements for information on the Company’s principal plan.
TAXATION
The Company is tax-resident in the Netherlands. For the assessment of corporate income tax in the Netherlands, the Company and certain of its subsidiaries
form a fiscal unit, in respect of which the Company recognises any current tax receivable or payable (and deferred tax asset or liability) for the fiscal unit as a
whole to the extent such balances have been settled between the Company and other members of the fiscal unit at the balance sheet date.
The Company’s tax charge or credit recognised in income is calculated at the statutory tax rate prevailing in the Netherlands for current tax and statutory tax
rate substantively enacted in the Netherlands for deferred tax.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
202
CHANGES TO IFRS NOT YET ADOPTED
The adoption of IFRS 9 Financial Instruments in 2018 has been assessed and does not have a significant effect on the Company’s accounting or disclosures.
See Note 3 to the Consolidated Financial Statements for information on changes to IFRS not yet adopted for Shell.
3 INTEREST AND OTHER INCOME/EXPENSE
Interest and other income
Interest income
Foreign exchange gains
Total
Interest and other expense
Interest expense
Other expense
Total
4 INVESTMENTS IN SUBSIDIARIES
At January 1
Additions
Share-based compensation
Recovery of vested share-based compensation
At December 31
[A] See Note 15.
2017
24
25
49
(26)
—
(26)
2017
256,583
—
779
(480)
256,882
$ million
2016
17
595
612
(19)
(6)
(25)
$ million
2016
203,066
53,118 [A]
645
(246)
256,583
5 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Amounts due to subsidiaries (see Note 13)
Accruals and other liabilities
Withholding tax payable
Unclaimed dividends
Total
Dec 31, 2017
Current
Non-current
3,859
318
153
3
4,333
—
332
—
—
332
$ million
Dec 31, 2016
Non-current
—
224
—
—
224
Current
3,593
302
152
2
4,049
Accruals and other liabilities are principally in respect of cash-settled share-based compensation.
6 TAXATION
Taxation (credit)/charge
Deferred tax
Relating to the origination and reversal of temporary differences
Adjustments in respect of prior periods
Taxation (credit)/charge
2017
—
(23 )
(23 )
$ million
2016
24
2
26
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
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[Note 6 continued]
Reconciliation of applicable tax charge at statutory tax rate to taxation (credit)/charge
Income before taxation
Applicable tax charge at the statutory tax rate of 25.0% (2016: 25.0%)
Adjustments in respect of prior periods
Tax effects of:
Income not subject to tax at statutory rates
Expenses not deductible for tax purposes
Other
Taxation (credit)/charge
Taxes payable are reported within accounts payable and accrued liabilities (see Note 5).
Deferred tax assets
At January 1
Recognised in income
Other movements
At December 31
2017
10,928
2,732
(23 )
(2,744 )
6
6
(23 )
2017
352
23
223
598
$ million
2016
14,231
3,558
2
(3,681 )
112
35
26
$ million
2016
438
(26)
(60)
352
Deferred tax assets are recognised in respect of credits carried forward and for an amount of $476 million at December 31, 2017 (2016: $271 million) in
respect of tax losses, which are available for relief against future taxable profits for up to nine years from the year in which the losses were incurred.
7 FINANCIAL INSTRUMENTS
Financial assets and liabilities in the Company’s Balance Sheet comprise cash and cash equivalents, amounts due from subsidiaries (see Note 13) and certain
amounts reported within accounts payable and accrued liabilities (see Note 5). The fair value of financial assets and liabilities at December 31, 2017, and
2016, approximates their carrying amount.
Information on financial risk management is presented in Note 19 to the Consolidated Financial Statements. Foreign currency derivatives are used by the
Company to manage foreign exchange risk, which arises when certain transactions are denominated in a currency that is not the Company’s functional
currency. There were no derivative financial instruments held at December 31, 2017, or 2016.
8 SHARE CAPITAL
Issued and fully paid ordinary shares of €0.07 each [A]
Number of shares
At January 1, 2017
Scrip dividends
At December 31, 2017
At January 1, 2016
Scrip dividends
Shares issued (see Note 15)
At December 31, 2016
[A] Share capital at December 31, 2017, and 2016, also included 50,000 issued and fully paid sterling deferred shares of £1 each.
A
4,428,903,813
168,232,237
4,597,136,050
3,990,921,569
219,253,936
218,728,308
4,428,903,813
B
3,745,486,731
—
3,745,486,731
2,440,410,614
—
1,305,076,117
3,745,486,731
A
374
13
387
340
17
17
374
Nominal value ($ million)
Total
683
13
696
546
17
120
683
B
309
—
309
206
—
103
309
At the Company’s Annual General Meeting (AGM) on May 23, 2017, the Board was authorised to allot ordinary shares in the Company, and to grant rights
to subscribe for or to convert any security into ordinary shares in the Company, up to an aggregate nominal amount of €190 million (representing
2,714 million ordinary shares of €0.07 each), and to list such shares or rights on any stock exchange. This authority expires at the earlier of the close of
business on August 23, 2018, and the end of the AGM to be held in 2018, unless previously renewed, revoked or varied by the Company in a general
meeting.
B shares rank equally in all respects with A shares except for the dividend access mechanism described below. The Company, Shell Transport and BG Group
plc, now BG Group Limited (BG), can procure the termination of the dividend access mechanism at any time. Upon such termination, B shares will form one
class with A shares ranking equally in all respects and A and B shares will be known as ordinary shares without further distinction.
The sterling deferred shares are redeemable only at the discretion of the Company for £1 each and carry no voting rights. There are no further rights to
participate in profits or assets, including the right to receive dividends. Upon winding up or liquidation, the shares carry a right to repayment of paid-up
nominal value, ranking ahead of A and B shares.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
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For information on the number of shares in the Company held by Shell employee share ownership trusts and trust-like entities to meet delivery commitments
under employee share plans, see Note 21 to the Consolidated Financial Statements.
DIVIDEND ACCESS MECHANISM FOR B SHARES
General
Dividends paid on A shares have a Dutch source for tax purposes and are subject to Dutch withholding tax.
It is the expectation and the intention, although there can be no certainty, that holders of B shares will receive dividends through the dividend access
mechanism. Any dividends paid on the dividend access shares will have a UK source for UK and Dutch tax purposes. There will be no Dutch withholding tax
on such dividends. From April 2016, there were changes to the taxation of dividends for individual shareholders resident in the UK. The dividend tax credit
was abolished, and a tax-free dividend allowance introduced.
Description of dividend access mechanism
Shell Transport and BG have each issued a dividend access share to Computershare Trustees (Jersey) Limited as Trustee. Pursuant to a declaration of trust, the
Trustee will hold any dividends paid in respect of the dividend access shares on trust for the holders of B shares and will arrange for prompt disbursement of
such dividends to holders of B shares. Interest and other income earned on unclaimed dividends will be for the account of Shell Transport and BG and any
dividends which are unclaimed after 12 years will revert to Shell Transport and BG, as appropriate. Holders of B shares will not have any interest in either
dividend access share and will not have any rights against Shell Transport and BG as issuers of the dividend access shares. The only assets held on trust for
the benefit of the holders of B shares will be dividends paid to the Trustee in respect of the dividend access shares.
The declaration and payment of dividends on the dividend access shares will require board action by Shell Transport and BG (as applicable) and will be
subject to any applicable limitations in law or in the Shell Transport or BG (as appropriate) articles of association in effect. In no event will the aggregate
amount of the dividend paid by Shell Transport and BG under the dividend access mechanism for a particular period exceed the aggregate of the dividend
announced by the Board of the Company on B shares in respect of the same period (after giving effect to currency conversions).
In particular, under their respective articles of association, Shell Transport and BG are each only able to pay a dividend on their respective dividend access
shares which represents a proportional amount of the aggregate of any dividend announced by the Company on the B shares in respect of the relevant
period, where such proportions are calculated by reference to, in the case of Shell Transport, the number of B shares in existence prior to completion of the
Company’s acquisition of BG (the Acquisition) and, in the case of BG, the number of B shares issued as part of the Acquisition, in each case as against the
total number of B shares in issue immediately following completion of the Acquisition.
Operation of the dividend access mechanism
If, in connection with the announcement of a dividend by the Company on B shares, the Board of Shell Transport and/or the Board of BG elects to declare
and pay a dividend on their respective dividend access shares to the Trustee, the holders of B shares will be beneficially entitled to receive their share of those
dividends pursuant to the declaration of trust (and arrangements will be made to ensure that the dividend is paid in the same currency in which they would
have received a dividend from the Company).
If any amount is paid by Shell Transport or BG by way of a dividend on the dividend access shares and paid by the Trustee to any holder of B shares, the dividend
which the Company would otherwise pay on B shares will be reduced by an amount equal to the amount paid to such holders of B shares by the Trustee.
The Company will have a full and unconditional obligation, in the event that the Trustee does not pay an amount to holders of B shares on a cash dividend
payment date (even if that amount has been paid to the Trustee), to pay immediately the dividend announced on B shares. The right of holders of B shares to
receive distributions from the Trustee will be reduced by an amount equal to the amount of any payment actually made by the Company on account of any
dividend on B shares.
If for any reason no dividend is paid on the dividend access shares, holders of B shares will only receive dividends from the Company directly. Any payment
by the Company will be subject to Dutch withholding tax (unless an exemption is obtained under Dutch law or under the provisions of an applicable tax treaty).
The Dutch tax treatment of dividends paid under the dividend access mechanism has been confirmed by the Dutch Revenue Service in an agreement
(“vaststellingsovereenkomst”) with the Company and N.V. Koninklijke Nederlandsche Petroleum Maatschappij (Royal Dutch Petroleum Company) dated
October 26, 2004, as supplemented and amended by an agreement between the same parties dated April 25, 2005, and a final settlement agreement in
connection with the Acquisition dated November 9, 2015. The agreements state, among other things, that dividend distributions on the dividend access
shares by Shell Transport and/or BG will not be subject to Dutch withholding tax provided that the dividend access mechanism is structured and operated
substantially as set out above.
The Company may not extend the dividend access mechanism to any future issuances of B shares without prior consultation with the Dutch Revenue Service.
Accordingly, the Company would not expect to issue additional B shares unless confirmation from the Dutch Revenue Service was obtained or the Company
were to determine that the continued operation of the dividend access mechanism was unnecessary. Any further issue of B shares is subject to advance
consultation with the Dutch Revenue Service.
The dividend access mechanism may be suspended or terminated at any time by the Company’s Directors or the Directors of Shell Transport or BG, for any
reason and without financial recompense. This might, for instance, occur in response to changes in relevant tax legislation.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
205
Reconciliation of applicable tax charge at statutory tax rate to taxation (credit)/charge
For information on the number of shares in the Company held by Shell employee share ownership trusts and trust-like entities to meet delivery commitments
under employee share plans, see Note 21 to the Consolidated Financial Statements.
DIVIDEND ACCESS MECHANISM FOR B SHARES
General
Dividends paid on A shares have a Dutch source for tax purposes and are subject to Dutch withholding tax.
It is the expectation and the intention, although there can be no certainty, that holders of B shares will receive dividends through the dividend access
mechanism. Any dividends paid on the dividend access shares will have a UK source for UK and Dutch tax purposes. There will be no Dutch withholding tax
on such dividends. From April 2016, there were changes to the taxation of dividends for individual shareholders resident in the UK. The dividend tax credit
was abolished, and a tax-free dividend allowance introduced.
Description of dividend access mechanism
Shell Transport and BG have each issued a dividend access share to Computershare Trustees (Jersey) Limited as Trustee. Pursuant to a declaration of trust, the
Trustee will hold any dividends paid in respect of the dividend access shares on trust for the holders of B shares and will arrange for prompt disbursement of
such dividends to holders of B shares. Interest and other income earned on unclaimed dividends will be for the account of Shell Transport and BG and any
dividends which are unclaimed after 12 years will revert to Shell Transport and BG, as appropriate. Holders of B shares will not have any interest in either
dividend access share and will not have any rights against Shell Transport and BG as issuers of the dividend access shares. The only assets held on trust for
the benefit of the holders of B shares will be dividends paid to the Trustee in respect of the dividend access shares.
The declaration and payment of dividends on the dividend access shares will require board action by Shell Transport and BG (as applicable) and will be
subject to any applicable limitations in law or in the Shell Transport or BG (as appropriate) articles of association in effect. In no event will the aggregate
amount of the dividend paid by Shell Transport and BG under the dividend access mechanism for a particular period exceed the aggregate of the dividend
announced by the Board of the Company on B shares in respect of the same period (after giving effect to currency conversions).
In particular, under their respective articles of association, Shell Transport and BG are each only able to pay a dividend on their respective dividend access
shares which represents a proportional amount of the aggregate of any dividend announced by the Company on the B shares in respect of the relevant
period, where such proportions are calculated by reference to, in the case of Shell Transport, the number of B shares in existence prior to completion of the
Company’s acquisition of BG (the Acquisition) and, in the case of BG, the number of B shares issued as part of the Acquisition, in each case as against the
total number of B shares in issue immediately following completion of the Acquisition.
Operation of the dividend access mechanism
If, in connection with the announcement of a dividend by the Company on B shares, the Board of Shell Transport and/or the Board of BG elects to declare
and pay a dividend on their respective dividend access shares to the Trustee, the holders of B shares will be beneficially entitled to receive their share of those
dividends pursuant to the declaration of trust (and arrangements will be made to ensure that the dividend is paid in the same currency in which they would
have received a dividend from the Company).
If any amount is paid by Shell Transport or BG by way of a dividend on the dividend access shares and paid by the Trustee to any holder of B shares, the dividend
which the Company would otherwise pay on B shares will be reduced by an amount equal to the amount paid to such holders of B shares by the Trustee.
The Company will have a full and unconditional obligation, in the event that the Trustee does not pay an amount to holders of B shares on a cash dividend
payment date (even if that amount has been paid to the Trustee), to pay immediately the dividend announced on B shares. The right of holders of B shares to
receive distributions from the Trustee will be reduced by an amount equal to the amount of any payment actually made by the Company on account of any
dividend on B shares.
If for any reason no dividend is paid on the dividend access shares, holders of B shares will only receive dividends from the Company directly. Any payment
by the Company will be subject to Dutch withholding tax (unless an exemption is obtained under Dutch law or under the provisions of an applicable tax treaty).
The Dutch tax treatment of dividends paid under the dividend access mechanism has been confirmed by the Dutch Revenue Service in an agreement
(“vaststellingsovereenkomst”) with the Company and N.V. Koninklijke Nederlandsche Petroleum Maatschappij (Royal Dutch Petroleum Company) dated
October 26, 2004, as supplemented and amended by an agreement between the same parties dated April 25, 2005, and a final settlement agreement in
connection with the Acquisition dated November 9, 2015. The agreements state, among other things, that dividend distributions on the dividend access
shares by Shell Transport and/or BG will not be subject to Dutch withholding tax provided that the dividend access mechanism is structured and operated
substantially as set out above.
The Company may not extend the dividend access mechanism to any future issuances of B shares without prior consultation with the Dutch Revenue Service.
Accordingly, the Company would not expect to issue additional B shares unless confirmation from the Dutch Revenue Service was obtained or the Company
were to determine that the continued operation of the dividend access mechanism was unnecessary. Any further issue of B shares is subject to advance
consultation with the Dutch Revenue Service.
The dividend access mechanism may be suspended or terminated at any time by the Company’s Directors or the Directors of Shell Transport or BG, for any
reason and without financial recompense. This might, for instance, occur in response to changes in relevant tax legislation.
(2,744 )
(3,681 )
2017
10,928
2,732
(23 )
6
6
(23 )
2017
352
23
223
598
$ million
2016
14,231
3,558
2
112
35
26
$ million
2016
438
(26)
(60)
352
Income before taxation
Applicable tax charge at the statutory tax rate of 25.0% (2016: 25.0%)
Adjustments in respect of prior periods
Tax effects of:
Income not subject to tax at statutory rates
Expenses not deductible for tax purposes
Other
Taxation (credit)/charge
Taxes payable are reported within accounts payable and accrued liabilities (see Note 5).
Deferred tax assets
At January 1
Recognised in income
Other movements
At December 31
8 SHARE CAPITAL
At January 1, 2017
Scrip dividends
At December 31, 2017
At January 1, 2016
Scrip dividends
Shares issued (see Note 15)
At December 31, 2016
Deferred tax assets are recognised in respect of credits carried forward and for an amount of $476 million at December 31, 2017 (2016: $271 million) in
respect of tax losses, which are available for relief against future taxable profits for up to nine years from the year in which the losses were incurred.
7 FINANCIAL INSTRUMENTS
2016, approximates their carrying amount.
Financial assets and liabilities in the Company’s Balance Sheet comprise cash and cash equivalents, amounts due from subsidiaries (see Note 13) and certain
amounts reported within accounts payable and accrued liabilities (see Note 5). The fair value of financial assets and liabilities at December 31, 2017, and
Information on financial risk management is presented in Note 19 to the Consolidated Financial Statements. Foreign currency derivatives are used by the
Company to manage foreign exchange risk, which arises when certain transactions are denominated in a currency that is not the Company’s functional
currency. There were no derivative financial instruments held at December 31, 2017, or 2016.
Issued and fully paid ordinary shares of €0.07 each [A]
Number of shares
Nominal value ($ million)
A
4,428,903,813
3,745,486,731
168,232,237
4,597,136,050
3,745,486,731
3,990,921,569
2,440,410,614
219,253,936
218,728,308
1,305,076,117
4,428,903,813
3,745,486,731
B
—
—
A
374
13
387
340
17
17
374
B
309
—
309
206
—
103
309
Total
683
13
696
546
17
120
683
[A] Share capital at December 31, 2017, and 2016, also included 50,000 issued and fully paid sterling deferred shares of £1 each.
At the Company’s Annual General Meeting (AGM) on May 23, 2017, the Board was authorised to allot ordinary shares in the Company, and to grant rights
to subscribe for or to convert any security into ordinary shares in the Company, up to an aggregate nominal amount of €190 million (representing
2,714 million ordinary shares of €0.07 each), and to list such shares or rights on any stock exchange. This authority expires at the earlier of the close of
business on August 23, 2018, and the end of the AGM to be held in 2018, unless previously renewed, revoked or varied by the Company in a general
meeting.
B shares rank equally in all respects with A shares except for the dividend access mechanism described below. The Company, Shell Transport and BG Group
plc, now BG Group Limited (BG), can procure the termination of the dividend access mechanism at any time. Upon such termination, B shares will form one
class with A shares ranking equally in all respects and A and B shares will be known as ordinary shares without further distinction.
The sterling deferred shares are redeemable only at the discretion of the Company for £1 each and carry no voting rights. There are no further rights to
participate in profits or assets, including the right to receive dividends. Upon winding up or liquidation, the shares carry a right to repayment of paid-up
nominal value, ranking ahead of A and B shares.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
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FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
205
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9 OTHER RESERVES
At January 1, 2017
Scrip dividends
Share-based compensation
At December 31, 2017
At January 1, 2016
Scrip dividends
Shares issued (see Note 15)
Share-based compensation
At December 31, 2016
Merger
reserve
234,244
(13 )
—
234,231
200,331
(17 )
33,930
—
234,244
Share
premium
reserve
154
—
—
154
154
—
—
—
154
Capital
redemption
reserve
84
—
—
84
84
—
—
—
84
Share
plan
reserve
1,091
—
(194 )
897
1,105
—
—
(14 )
1,091
$ million
Total
235,573
(13)
(194)
235,366
201,674
(17)
33,930
(14)
235,573
The merger reserve was established as a consequence of the Company becoming the single parent company of Royal Dutch and Shell Transport and
represented the difference between the cost of the investment in those companies and the nominal value of shares issued in exchange for those investments as
required by the prevailing legislation at that time, section 131 of the Companies Act 1985. The increase in the merger reserve in 2016 in respect of the
shares issued represents the difference between the fair value and the nominal value of the shares issued for the Acquisition (see Note 15).
On January 6, 2006, loan notes were converted into 4,827,974 A shares. The difference between the carrying value of the loan notes and the nominal
value of the new shares issued was credited to the share premium reserve. The capital redemption reserve was established in connection with repurchases of
shares of the Company. The share plan reserve is in respect of equity-settled share-based compensation plans (see Note 21 to the Consolidated Financial
Statements) and share-based compensation for the year is the net of the charge to equity and the release as a result of vested awards.
10 DIVIDENDS
See Note 23 to the Consolidated Financial Statements.
11 LEGAL PROCEEDINGS AND OTHER CONTINGENCIES
See Note 25 to the Consolidated Financial Statements.
12 DIRECTORS AND SENIOR MANAGEMENT
See Note 27 to the Consolidated Financial Statements for the remuneration of Directors of the Company. In 2017, the Company recognised $25 million
(2016: $22 million) in administrative expenses for the compensation of Directors and Senior Management.
13 RELATED PARTIES
Information about the Company’s subsidiaries, and whether these are held directly or indirectly, and other related undertakings (all of which are held
indirectly), at December 31, 2017, is set out in Exhibit 8.
Shell Petroleum
Shell Treasury Centre Limited
Shell Treasury Luxembourg Sarl
Other
Total
Amounts due from subsidiaries
$ million
Amounts due to subsidiaries
(see Note 5)
2017
4,502
518
—
2
5,022
2016
4,201
476
—
3
4,680
2017
672
—
3,164
23
3,859
2016
409
—
3,163
21
3,593
The amount due from Shell Petroleum, which is denominated in dollars, is repayable on demand. Interest is calculated at US LIBOR less 0.058% (2016:
US LIBOR less 0.103%) and interest income in 2017 was $19 million (2016: $12 million).
The amount due from Shell Treasury Centre Limited (STCL) comprises call deposits in dollars, sterling and euros. Interest is calculated at US LIBOR less 0.058%
(2016: US LIBOR less 0.103%) on dollar balances, at GBP LIBOR less 0.137% (2016: GBP LIBOR less 0.137%) on sterling balances and at Euro Overnight
Index Average (EONIA) less 0.1% (2016: EONIA less 0.1%) on euro balances, unless this results in a negative interest rate in which case no interest is
earned. Interest income in 2017 from STCL was $5 million (2016: $4 million).
The net amount due to Shell Treasury Luxembourg Sarl at December 31, 2017, which is repayable on demand, comprises an interest-bearing receivable of
€1,289 million (2016: €1,183 million) and an interest-bearing payable of $4,707 million (2016: $4,408 million). Interest on euro balances is calculated at
EONIA less 0.1% (2016: EONIA less 0.1%) unless this results in a negative interest rate in which case no interest is earned. Interest on dollar balances is
calculated at US LIBOR (2016: US LIBOR). Net interest expense on these balances in 2017 was $26 million (2016: $19 million).
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
206
FinanciaL stateMents and suppLeMents SHELL ANNUAL REPORT AND FORM 20-F 2017
206
OTHER TRANSACTIONS AND BALANCES
contracts at December 31, 2017, or 2016.
The Company enters into forward and spot foreign currency contracts with Treasury companies, which are subsidiaries. There were no open foreign currency
The Company settles general and administrative expenses of the Trust, including the auditor’s remuneration.
The Company has guaranteed contractual payments totalling $58,527 million at December 31, 2017 (2016: $61,684 million), and related interest,
in respect of listed debt issued by Shell International Finance B.V.
14 AUDITOR’S REMUNERATION
See Note 28 to the Consolidated Financial Statements.
15 ACQUISITION OF BG GROUP PLC
On February 15, 2016, the Company acquired all the voting rights in BG Group plc by means of a Scheme of Arrangement under Part 26 of the Act, via the
issuance of 218.7 million A shares and 1,305.1 million B shares with a fair value of $34,050 million and cash payments of $19,036 million in exchange
for all BG Group plc shares. The fair value of the shares issued was calculated using the market price of the Company’s A and B shares of 1,545.0 and
1,538.5 pence respectively on the London Stock Exchange at its opening of business on February 15, 2016. The cash payments were funded by amounts
previously held on deposit with Shell Petroleum. In September 2016, the Company’s shares in BG Group Limited (formerly BG Group plc) were exchanged for
an increased investment in Shell Petroleum.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
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9 OTHER RESERVES
At January 1, 2017
Scrip dividends
Share-based compensation
At December 31, 2017
At January 1, 2016
Scrip dividends
Shares issued (see Note 15)
Share-based compensation
At December 31, 2016
Merger
reserve
234,244
(13 )
—
234,231
(17 )
33,930
—
234,244
Share
premium
reserve
Capital
redemption
reserve
154
—
—
154
—
—
—
154
84
—
—
84
—
—
—
84
Share
plan
reserve
1,091
—
(194 )
897
—
—
(14 )
$ million
Total
235,573
(13)
(194)
235,366
33,930
(17)
(14)
1,091
235,573
200,331
154
84
1,105
201,674
OTHER TRANSACTIONS AND BALANCES
The Company enters into forward and spot foreign currency contracts with Treasury companies, which are subsidiaries. There were no open foreign currency
contracts at December 31, 2017, or 2016.
The Company settles general and administrative expenses of the Trust, including the auditor’s remuneration.
The Company has guaranteed contractual payments totalling $58,527 million at December 31, 2017 (2016: $61,684 million), and related interest,
in respect of listed debt issued by Shell International Finance B.V.
14 AUDITOR’S REMUNERATION
See Note 28 to the Consolidated Financial Statements.
15 ACQUISITION OF BG GROUP PLC
On February 15, 2016, the Company acquired all the voting rights in BG Group plc by means of a Scheme of Arrangement under Part 26 of the Act, via the
issuance of 218.7 million A shares and 1,305.1 million B shares with a fair value of $34,050 million and cash payments of $19,036 million in exchange
for all BG Group plc shares. The fair value of the shares issued was calculated using the market price of the Company’s A and B shares of 1,545.0 and
1,538.5 pence respectively on the London Stock Exchange at its opening of business on February 15, 2016. The cash payments were funded by amounts
previously held on deposit with Shell Petroleum. In September 2016, the Company’s shares in BG Group Limited (formerly BG Group plc) were exchanged for
an increased investment in Shell Petroleum.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
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The merger reserve was established as a consequence of the Company becoming the single parent company of Royal Dutch and Shell Transport and
represented the difference between the cost of the investment in those companies and the nominal value of shares issued in exchange for those investments as
required by the prevailing legislation at that time, section 131 of the Companies Act 1985. The increase in the merger reserve in 2016 in respect of the
shares issued represents the difference between the fair value and the nominal value of the shares issued for the Acquisition (see Note 15).
On January 6, 2006, loan notes were converted into 4,827,974 A shares. The difference between the carrying value of the loan notes and the nominal
value of the new shares issued was credited to the share premium reserve. The capital redemption reserve was established in connection with repurchases of
shares of the Company. The share plan reserve is in respect of equity-settled share-based compensation plans (see Note 21 to the Consolidated Financial
Statements) and share-based compensation for the year is the net of the charge to equity and the release as a result of vested awards.
10 DIVIDENDS
See Note 23 to the Consolidated Financial Statements.
11 LEGAL PROCEEDINGS AND OTHER CONTINGENCIES
See Note 25 to the Consolidated Financial Statements.
12 DIRECTORS AND SENIOR MANAGEMENT
See Note 27 to the Consolidated Financial Statements for the remuneration of Directors of the Company. In 2017, the Company recognised $25 million
(2016: $22 million) in administrative expenses for the compensation of Directors and Senior Management.
13 RELATED PARTIES
indirectly), at December 31, 2017, is set out in Exhibit 8.
Information about the Company’s subsidiaries, and whether these are held directly or indirectly, and other related undertakings (all of which are held
Shell Petroleum
Shell Treasury Centre Limited
Shell Treasury Luxembourg Sarl
Other
Total
$ million
Amounts due to subsidiaries
(see Note 5)
Amounts due from subsidiaries
2017
4,502
518
—
2
2016
4,201
476
—
3
2017
672
—
3,164
23
5,022
4,680
3,859
2016
409
—
3,163
21
3,593
The amount due from Shell Petroleum, which is denominated in dollars, is repayable on demand. Interest is calculated at US LIBOR less 0.058% (2016:
US LIBOR less 0.103%) and interest income in 2017 was $19 million (2016: $12 million).
The amount due from Shell Treasury Centre Limited (STCL) comprises call deposits in dollars, sterling and euros. Interest is calculated at US LIBOR less 0.058%
(2016: US LIBOR less 0.103%) on dollar balances, at GBP LIBOR less 0.137% (2016: GBP LIBOR less 0.137%) on sterling balances and at Euro Overnight
Index Average (EONIA) less 0.1% (2016: EONIA less 0.1%) on euro balances, unless this results in a negative interest rate in which case no interest is
earned. Interest income in 2017 from STCL was $5 million (2016: $4 million).
The net amount due to Shell Treasury Luxembourg Sarl at December 31, 2017, which is repayable on demand, comprises an interest-bearing receivable of
€1,289 million (2016: €1,183 million) and an interest-bearing payable of $4,707 million (2016: $4,408 million). Interest on euro balances is calculated at
EONIA less 0.1% (2016: EONIA less 0.1%) unless this results in a negative interest rate in which case no interest is earned. Interest on dollar balances is
calculated at US LIBOR (2016: US LIBOR). Net interest expense on these balances in 2017 was $26 million (2016: $19 million).
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
206
Independent Auditor’s Report to Computershare Trustees (Jersey)
Independent Auditor’s Report to Computershare Trustees (Jersey)
Limited as Trustee of the Royal Dutch Shell Dividend Access Trust and
Limited as Trustee of the Royal Dutch Shell Dividend Access Trust
the Board of Directors of Royal Dutch Shell plc
and the Board of Directors of Royal Dutch Shell plc
Opinion on the Financial Statements
We have audited the non-statutory financial statements of the Royal Dutch Shell Dividend Access Trust (the Financial Statements) for the year ended
December 31, 2017, which comprise the Statement of Income, the Statement of Comprehensive Income, the Balance Sheet, the Statement of Changes in
Equity, the Statement of Cash Flows and the related Notes 1 to 8. The financial reporting framework that has been applied in their preparation is International
Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and IFRS as issued by the International Accounting Standards Board (IASB).
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud
or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at
https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
these financial statements.
/s/ Ernst & Young LLP
London
March 14, 2018
1.
The maintenance and integrity of the Shell website are the responsibility of the Directors of Royal Dutch Shell plc; the work carried out by the auditors does not involve
consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the Financial Statements since they were
initially presented on the website.
2.
Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
The report set out above is included for the purposes of Royal Dutch Shell plc’s Annual Report and Accounts for 2017 only and does not form part of
Royal Dutch Shell plc’s Annual Report on Form 20-F for 2017.
In our opinion, the Financial Statements:
■
■
give a true and fair view of the Royal Dutch Shell Divided Access Trust’s (the Trust) affairs as at December 31, 2017, and of its income for the year then
ended; and
have been properly prepared both in accordance with IFRS as adopted by the EU and IFRS as issued by the IASB.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)). Our responsibilities under those standards are further
described in the “Auditor’s responsibilities for the audit of the financial statements” section of our report below. We are independent of the Trust in accordance
with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the Financial Reporting Council’s Ethical Standards,
and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Use of our report
This report is made solely to the Trustee of the Royal Dutch Shell Dividend Access Trust (the Trustee) and the Board of Directors of Royal Dutch Shell plc. (the
Directors), as a body, in accordance with our engagement letter. Our audit work has been undertaken so that we might state to the Trustee and the Directors
those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Trust and the Trustee and the Directors as a body, for our audit work, for this report, or for the opinions we have
formed.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
■
■
the Trustee’s use of the going concern basis of accounting in the preparation of the Financial Statements is not appropriate; or
the Trustee has not disclosed in the Financial Statements any identified material uncertainties that may cast significant doubt about the Trust’s ability to
continue to adopt the going concern basis of accounting for a period of at least twelve months from the date of approval of the Financial Statements.
Other information
The other information comprises the information included in the annual report, other than the Financial Statements and our auditor’s report thereon.
The Directors are responsible for the other information.
Our opinion on the Financial Statements does not cover the other information and, we do not express any form of assurance conclusion thereon.
In connection with our audit of the Financial Statements, our responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the Financial Statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the
Financial Statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material
misstatement of the other information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of the Trustee
The Trustee is responsible for the preparation of the Financial Statements and for being satisfied that they give a true and fair view, and for such internal control
as the Trustee determines is necessary to enable the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error.
In preparing the Financial Statements, the Trustee is responsible for assessing the Trust’s ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless the Trustee either intends to liquidate the Trust or to cease operations,
or have no realistic alternative but to do so. The Trustee is also required to: present fairly the financial position, financial performance and cash flows of the
Trust; select suitable accounting policies in accordance with IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors and then apply them
consistently; present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
make judgements that are reasonable; provide additional disclosures when compliance with the specific requirements in IFRS as adopted by the EU and as
issued by the IASB is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Trust’s financial position
and financial performance; and state whether the Financial Statements have been prepared in accordance with IFRS as adopted by the EU and as issued by
the IASB.
208
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
FinanciaL stateMents and suppLeMents SHELL ANNUAL REPORT AND FORM 20-F 2017
208
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FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
209
Opinion on the Financial Statements
We have audited the non-statutory financial statements of the Royal Dutch Shell Dividend Access Trust (the Financial Statements) for the year ended
December 31, 2017, which comprise the Statement of Income, the Statement of Comprehensive Income, the Balance Sheet, the Statement of Changes in
Equity, the Statement of Cash Flows and the related Notes 1 to 8. The financial reporting framework that has been applied in their preparation is International
Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and IFRS as issued by the International Accounting Standards Board (IASB).
In our opinion, the Financial Statements:
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud
or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of
these financial statements.
give a true and fair view of the Royal Dutch Shell Divided Access Trust’s (the Trust) affairs as at December 31, 2017, and of its income for the year then
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at
https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
/s/ Ernst & Young LLP
London
March 14, 2018
1.
2.
The maintenance and integrity of the Shell website are the responsibility of the Directors of Royal Dutch Shell plc; the work carried out by the auditors does not involve
consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the Financial Statements since they were
initially presented on the website.
Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
The report set out above is included for the purposes of Royal Dutch Shell plc’s Annual Report and Accounts for 2017 only and does not form part of
Royal Dutch Shell plc’s Annual Report on Form 20-F for 2017.
Independent Auditor’s Report to Computershare Trustees (Jersey)
Limited as Trustee of the Royal Dutch Shell Dividend Access Trust
and the Board of Directors of Royal Dutch Shell plc
ended; and
Basis for opinion
Use of our report
■
■
■
■
have been properly prepared both in accordance with IFRS as adopted by the EU and IFRS as issued by the IASB.
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)). Our responsibilities under those standards are further
described in the “Auditor’s responsibilities for the audit of the financial statements” section of our report below. We are independent of the Trust in accordance
with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the Financial Reporting Council’s Ethical Standards,
and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
This report is made solely to the Trustee of the Royal Dutch Shell Dividend Access Trust (the Trustee) and the Board of Directors of Royal Dutch Shell plc. (the
Directors), as a body, in accordance with our engagement letter. Our audit work has been undertaken so that we might state to the Trustee and the Directors
those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Trust and the Trustee and the Directors as a body, for our audit work, for this report, or for the opinions we have
formed.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
the Trustee’s use of the going concern basis of accounting in the preparation of the Financial Statements is not appropriate; or
the Trustee has not disclosed in the Financial Statements any identified material uncertainties that may cast significant doubt about the Trust’s ability to
continue to adopt the going concern basis of accounting for a period of at least twelve months from the date of approval of the Financial Statements.
Other information
The Directors are responsible for the other information.
The other information comprises the information included in the annual report, other than the Financial Statements and our auditor’s report thereon.
Our opinion on the Financial Statements does not cover the other information and, we do not express any form of assurance conclusion thereon.
In connection with our audit of the Financial Statements, our responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the Financial Statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the
Financial Statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material
misstatement of the other information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of the Trustee
The Trustee is responsible for the preparation of the Financial Statements and for being satisfied that they give a true and fair view, and for such internal control
as the Trustee determines is necessary to enable the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error.
In preparing the Financial Statements, the Trustee is responsible for assessing the Trust’s ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless the Trustee either intends to liquidate the Trust or to cease operations,
or have no realistic alternative but to do so. The Trustee is also required to: present fairly the financial position, financial performance and cash flows of the
Trust; select suitable accounting policies in accordance with IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors and then apply them
consistently; present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
make judgements that are reasonable; provide additional disclosures when compliance with the specific requirements in IFRS as adopted by the EU and as
issued by the IASB is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Trust’s financial position
and financial performance; and state whether the Financial Statements have been prepared in accordance with IFRS as adopted by the EU and as issued by
the IASB.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
208
SHELL ANNUAL REPORT AND FORM 20-F 2017 FinanciaL stateMents and suppLeMents
209
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
209
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Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or
timely detection of unauthorised acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
London, United Kingdom
March 14, 2018
1.
The maintenance and integrity of the Shell website are the responsibility of the Directors of Royal Dutch Shell plc; the work carried out by the auditors does not involve
consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were
initially presented on the website.
2.
Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
The reports set out above are included for the purposes of Royal Dutch Shell plc’s Annual Report on Form 20-F for 2017 only and do not form part of
Royal Dutch Shell plc’s Annual Report and Accounts for 2017.
TO COMPUTERSHARE TRUSTEES (JERSEY) LIMITED AS TRUSTEE OF THE ROYAL DUTCH SHELL DIVIDEND ACCESS
TRUST AND THE BOARD OF DIRECTORS AND SHAREHOLDERS OF ROYAL DUTCH SHELL PLC
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Royal Dutch Shell Dividend Access Trust (the Trust) as of December 31, 2017, and 2016, the related
statements of income, comprehensive income, changes in equity and cash flows, for each of the two years in the period ended December 31, 2017, and the
related notes (collectively referred to as the Financial Statements). In our opinion, the Financial Statements present fairly, in all material respects, the financial
position of the Trust at December 31, 2017, and 2016, and the results of its operations and its cash flows for each of the two years in the period ended
December 31, 2017, in conformity with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board and in
conformity with IFRS as adopted by the European Union.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Trust’s internal
control over financial reporting as of December 31, 2017, based on criteria established in Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 14, 2018, expressed an unqualified opinion
thereon.
Basis for Opinion
These financial statements are the responsibility of the Trustee of the Trust (the Trustee) and the management of Royal Dutch Shell plc (the Management). Our
responsibility is to express an opinion on the Trust’s Financial Statements based on our audits. We are a public accounting firm registered with the PCAOB
and are required to be independent with respect to the Trust in accordance with the US federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to
assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by the Trustee and Management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We have served as the Trust’s auditor since 2016.
London, United Kingdom
March 14, 2018
TO COMPUTERSHARE TRUSTEES (JERSEY) LIMITED AS TRUSTEE OF THE ROYAL DUTCH SHELL DIVIDEND ACCESS
TRUST AND THE BOARD OF DIRECTORS AND SHAREHOLDERS OF ROYAL DUTCH SHELL PLC
Opinion on Internal Control over Financial Reporting
We have audited the Royal Dutch Shell Dividend Access Trust’s (the Trust) internal control over financial reporting as of December 31, 2017, based on criteria
established in Internal Control— Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework),
(the COSO criteria). In our opinion, the Trust maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,
based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Financial
Statements of the Trust, and our report dated March 14, 2018, expressed an unqualified opinion thereon.
Basis for Opinion
The Trustee of the Trust (the Trustee) and the management of Royal Dutch Shell plc (the Management) are responsible for maintaining effective internal control
over financial reporting and for their assessment of the effectiveness of internal control over financial reporting included in the accompanying Trustee’s and
Management’s report on internal control over financial reporting as set out on page 82. Our responsibility is to express an opinion on the Trust’s internal
control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with
respect to the Trust in accordance with the US federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
210
FinanciaL stateMents and suppLeMents SHELL ANNUAL REPORT AND FORM 20-F 2017
210
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
211
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Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or
timely detection of unauthorised acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
London, United Kingdom
March 14, 2018
1.
2.
The maintenance and integrity of the Shell website are the responsibility of the Directors of Royal Dutch Shell plc; the work carried out by the auditors does not involve
consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were
initially presented on the website.
Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
The reports set out above are included for the purposes of Royal Dutch Shell plc’s Annual Report on Form 20-F for 2017 only and do not form part of
Royal Dutch Shell plc’s Annual Report and Accounts for 2017.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
211
SHELL ANNUAL REPORT AND FORM 20-F 2017 FinanciaL stateMents and suppLeMents
Shell Annual Report_Master Template.indd 211
211
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TO COMPUTERSHARE TRUSTEES (JERSEY) LIMITED AS TRUSTEE OF THE ROYAL DUTCH SHELL DIVIDEND ACCESS
TRUST AND THE BOARD OF DIRECTORS AND SHAREHOLDERS OF ROYAL DUTCH SHELL PLC
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Royal Dutch Shell Dividend Access Trust (the Trust) as of December 31, 2017, and 2016, the related
statements of income, comprehensive income, changes in equity and cash flows, for each of the two years in the period ended December 31, 2017, and the
related notes (collectively referred to as the Financial Statements). In our opinion, the Financial Statements present fairly, in all material respects, the financial
position of the Trust at December 31, 2017, and 2016, and the results of its operations and its cash flows for each of the two years in the period ended
December 31, 2017, in conformity with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board and in
conformity with IFRS as adopted by the European Union.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Trust’s internal
control over financial reporting as of December 31, 2017, based on criteria established in Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 14, 2018, expressed an unqualified opinion
thereon.
Basis for Opinion
These financial statements are the responsibility of the Trustee of the Trust (the Trustee) and the management of Royal Dutch Shell plc (the Management). Our
responsibility is to express an opinion on the Trust’s Financial Statements based on our audits. We are a public accounting firm registered with the PCAOB
and are required to be independent with respect to the Trust in accordance with the US federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to
assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by the Trustee and Management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the Trust’s auditor since 2016.
/s/ Ernst & Young LLP
London, United Kingdom
March 14, 2018
TO COMPUTERSHARE TRUSTEES (JERSEY) LIMITED AS TRUSTEE OF THE ROYAL DUTCH SHELL DIVIDEND ACCESS
TRUST AND THE BOARD OF DIRECTORS AND SHAREHOLDERS OF ROYAL DUTCH SHELL PLC
Opinion on Internal Control over Financial Reporting
We have audited the Royal Dutch Shell Dividend Access Trust’s (the Trust) internal control over financial reporting as of December 31, 2017, based on criteria
established in Internal Control— Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework),
(the COSO criteria). In our opinion, the Trust maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,
based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Financial
Statements of the Trust, and our report dated March 14, 2018, expressed an unqualified opinion thereon.
Basis for Opinion
the PCAOB.
The Trustee of the Trust (the Trustee) and the management of Royal Dutch Shell plc (the Management) are responsible for maintaining effective internal control
over financial reporting and for their assessment of the effectiveness of internal control over financial reporting included in the accompanying Trustee’s and
Management’s report on internal control over financial reporting as set out on page 82. Our responsibility is to express an opinion on the Trust’s internal
control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with
respect to the Trust in accordance with the US federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion.
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
210
report of independent registered public accounting Firm Continued
Report of Independent Registered Public Accounting Firm
Royal Dutch Shell Dividend Access Trust Financial Statements
TO COMPUTERSHARE TRUSTEES (JERSEY) LIMITED AS TRUSTEE OF THE ROYAL DUTCH SHELL DIVIDEND ACCESS
TRUST AND THE BOARD OF DIRECTORS AND SHAREHOLDERS OF ROYAL DUTCH SHELL PLC
In our opinion, the accompanying Statement of Income, the Statement of Comprehensive Income, the Statement of Changes in Equity, the Statement of Cash
Flows, and the related Notes to the Royal Dutch Shell Dividend Access Trust Financial Statements for the year ended December 31, 2015 present fairly, in all
material respects, the results of operations and cash flows of the Royal Dutch Shell Dividend Access Trust (the Trust) in conformity with International Financial
Reporting Standards as issued by the International Accounting Standards Board and in conformity with International Financial Reporting Standards as adopted
by the European Union.
These financial statements are the responsibility of the Trustee and management of Royal Dutch Shell plc. Our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers CI LLP
Jersey, Channel Islands
March 9, 2016
Note that the report set out above is included for the purposes of Royal Dutch Shell plc’s Annual Report on Form 20-F for 2017 only and does not form part of
Royal Dutch Shell plc’s Annual Report and Accounts for 2017.
216 Notes to the Royal Dutch Shell Dividend Access Trust Financial Statements
Statement of Income
Statement of Comprehensive Income
214 Balance Sheet
Statement of Changes in Equity
Statement of Cash Flows
214
214
215
215
216 Note 1 The Trust
216 Note 2 Basis of preparation
216 Note 3 Significant accounting policies
216 Note 4 Unclaimed dividends
216 Note 5 Capital account
216 Note 6 Distributions made
216 Note 7 Related parties
216 Note 8 Auditor’s remuneration
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
212
FinanciaL stateMents and suppLeMents SHELL ANNUAL REPORT AND FORM 20-F 2017
212
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
213
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Report of Independent Registered Public Accounting Firm
Royal Dutch Shell Dividend Access Trust Financial Statements
Royal Dutch Shell Dividend Access Trust Financial Statements
TO COMPUTERSHARE TRUSTEES (JERSEY) LIMITED AS TRUSTEE OF THE ROYAL DUTCH SHELL DIVIDEND ACCESS
TRUST AND THE BOARD OF DIRECTORS AND SHAREHOLDERS OF ROYAL DUTCH SHELL PLC
In our opinion, the accompanying Statement of Income, the Statement of Comprehensive Income, the Statement of Changes in Equity, the Statement of Cash
Flows, and the related Notes to the Royal Dutch Shell Dividend Access Trust Financial Statements for the year ended December 31, 2015 present fairly, in all
material respects, the results of operations and cash flows of the Royal Dutch Shell Dividend Access Trust (the Trust) in conformity with International Financial
Reporting Standards as issued by the International Accounting Standards Board and in conformity with International Financial Reporting Standards as adopted
by the European Union.
These financial statements are the responsibility of the Trustee and management of Royal Dutch Shell plc. Our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers CI LLP
Jersey, Channel Islands
March 9, 2016
Note that the report set out above is included for the purposes of Royal Dutch Shell plc’s Annual Report on Form 20-F for 2017 only and does not form part of
Royal Dutch Shell plc’s Annual Report and Accounts for 2017.
Statement of Changes in Equity
Statement of Cash Flows
Statement of Income
Statement of Comprehensive Income
214
214
214 Balance Sheet
215
215
216 Notes to the Royal Dutch Shell Dividend Access Trust Financial Statements
216 Note 1 The Trust
216 Note 2 Basis of preparation
216 Note 3 Significant accounting policies
216 Note 4 Unclaimed dividends
216 Note 5 Capital account
216 Note 6 Distributions made
216 Note 7 Related parties
216 Note 8 Auditor’s remuneration
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
212
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
213
SHELL ANNUAL REPORT AND FORM 20-F 2017 FinanciaL stateMents and suppLeMents
213
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royal dutch shell dividend access trust Financial statements Continued
Statement of Income
Dividend income
Income before taxation and for the period
Statement of Comprehensive Income
Income for the period
Comprehensive income for the period
Balance Sheet
Assets
Current assets
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Unclaimed dividends
Total liabilities
Equity
Capital account
Revenue account
Total equity
Total liabilities and equity
Signed on behalf of Computershare Trustees (Jersey) Limited
as Trustee of the Royal Dutch Shell Dividend Access Trust
/s/ Karen Kurys
Karen Kurys
March 14, 2018
/s/ Martin Fish
Martin Fish
2017
4,567
4,567
2016
3,879
3,879
2017
4,567
4,567
2016
3,879
3,879
£ million
2015
2,726
2,726
£ million
2015
2,726
2,726
Notes
Dec 31, 2017
£ million
Dec 31, 2016
4
5
2
2
2
2
—
—
—
2
2
2
2
2
—
—
—
2
Statement of Changes in Equity
At January 1, 2017
Comprehensive income for the period
Distributions made
At December 31, 2017
At January 1, 2016
Comprehensive income for the period
Distributions made
At December 31, 2016
At January 1, 2015
Comprehensive income for the period
Distributions made
At December 31, 2015
Statement of Cash Flows
Income for the period
Adjustment for:
Dividends received
Cash flow from operating activities
Dividends received
Cash flow from investing activities
Cash distributions made
Cash flow from financing activities
Change in cash and cash equivalents
Cash and cash equivalents at January 1
Cash and cash equivalents at December 31
Notes
Capital
account
Revenue
account
—
4,567
(4,567 )
—
—
3,879
(3,879 )
—
—
2,726
(2,726 )
—
—
—
—
—
—
—
—
—
—
—
—
—
6
6
6
2017
2016
4,567
3,879
(4,567 )
(3,879 )
—
4,567
4,567
(4,567 )
(4,567 )
—
2
2
—
3,879
3,879
(3,879 )
(3,879 )
—
2
2
£ million
Total
equity
—
4,567
(4,567)
3,879
(3,879)
—
—
—
—
2,726
(2,726 )
—
£ million
2015
2,726
(2,726 )
—
2,726
2,726
(2,725 )
(2,725 )
1
1
2
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
214
FinanciaL stateMents and suppLeMents SHELL ANNUAL REPORT AND FORM 20-F 2017
214
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
215
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Statement of Income
Dividend income
Income before taxation and for the period
Statement of Comprehensive Income
Income for the period
Comprehensive income for the period
Balance Sheet
Assets
Current assets
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Unclaimed dividends
Total liabilities
Equity
Capital account
Revenue account
Total equity
Total liabilities and equity
/s/ Karen Kurys
Karen Kurys
March 14, 2018
Signed on behalf of Computershare Trustees (Jersey) Limited
as Trustee of the Royal Dutch Shell Dividend Access Trust
/s/ Martin Fish
Martin Fish
Notes
Dec 31, 2017
Dec 31, 2016
2017
4,567
4,567
2016
3,879
3,879
2017
4,567
4,567
2016
3,879
3,879
4
5
2
2
2
2
—
—
—
2
£ million
2015
2,726
2,726
£ million
2015
2,726
2,726
£ million
2
2
2
2
—
—
—
2
Statement of Changes in Equity
At January 1, 2017
Comprehensive income for the period
Distributions made
At December 31, 2017
At January 1, 2016
Comprehensive income for the period
Distributions made
At December 31, 2016
At January 1, 2015
Comprehensive income for the period
Distributions made
At December 31, 2015
Statement of Cash Flows
Income for the period
Adjustment for:
Dividends received
Cash flow from operating activities
Dividends received
Cash flow from investing activities
Cash distributions made
Cash flow from financing activities
Change in cash and cash equivalents
Cash and cash equivalents at January 1
Cash and cash equivalents at December 31
Notes
Capital
account
6
6
6
—
—
—
—
—
—
—
—
—
—
—
—
Revenue
account
—
4,567
(4,567 )
—
—
3,879
(3,879 )
—
—
2,726
(2,726 )
—
2017
2016
4,567
3,879
(4,567 )
—
4,567
4,567
(4,567 )
(4,567 )
—
2
2
(3,879 )
—
3,879
3,879
(3,879 )
(3,879 )
—
2
2
£ million
Total
equity
—
4,567
(4,567)
—
—
3,879
(3,879)
—
—
2,726
(2,726 )
—
£ million
2015
2,726
(2,726 )
—
2,726
2,726
(2,725 )
(2,725 )
1
1
2
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
214
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
215
SHELL ANNUAL REPORT AND FORM 20-F 2017 FinanciaL stateMents and suppLeMents
Shell Annual Report_Master Template.indd 215
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Notes to the Royal Dutch Shell Dividend Access Trust Financial
Notes to the Royal Dutch Shell Dividend Access Trust Financial
Statements
Statements
Additional Information
Shareholder information
1 THE TRUST
The Royal Dutch Shell Dividend Access Trust (the Trust) was established on May 19, 2005, by The “Shell” Transport and Trading Company, p.l.c., now The
Shell Transport and Trading Company Limited (Shell Transport), and Royal Dutch Shell plc (the Company). The Trust is governed by the applicable laws of
England and Wales and is resident and domiciled in Jersey. The Trust is not subject to taxation. The Trustee of the Trust is Computershare Trustees (Jersey)
Limited, registration number 92182 (the Trustee), Queensway House, Hilgrove Street, St Helier, Jersey, JE1 1ES. The Trust was established as part of a
dividend access mechanism.
Shell Transport and BG Group plc, now BG Group Limited (BG), have each issued a dividend access share to the Trustee. Following the announcement of a
dividend by the Company on the B shares, Shell Transport and BG may declare a dividend on their dividend access shares.
The primary purposes of the Trust are to receive, on behalf of the B shareholders of the Company and in accordance with their respective holdings of B shares
in the Company, any amounts paid by way of dividend on the dividend access shares and to pay such amounts to the B shareholders on the same pro rata
basis. The Trust is not subject to significant market risk, credit risk or liquidity risk.
The Trust shall not endure for a period in excess of 80 years from May 19, 2005, being the date on which the Trust Deed was executed.
2 BASIS OF PREPARATION
The Financial Statements of the Trust have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European
Union. As applied to the Trust, there are no material differences from IFRS as issued by the International Accounting Standards Board (IASB); therefore, the
Financial Statements have been prepared in accordance with IFRS as issued by the IASB.
The Financial Statements have been prepared under the historical cost convention. The accounting policies described in Note 3 have been applied
consistently in all periods presented.
The Financial Statements were approved and authorised for issue by the Trustee on March 14, 2018.
The financial results of the Trust are included in the Consolidated and Parent Company Financial Statements on pages 137-178 and pages 199-207
respectively.
3 SIGNIFICANT ACCOUNTING POLICIES
The Trust’s accounting policies follow those of Shell as set out in Note 2 to the Consolidated Financial Statements. The following are Trust-specific policies.
PRESENTATION AND FUNCTIONAL CURRENCY
The Trust’s presentation and functional currency is sterling. The Trust’s dividend income and dividends paid are principally in sterling.
DIVIDEND INCOME
Dividends on the dividend access shares are recognised on a paid basis unless the dividend has been confirmed by a general meeting of Shell Transport or
BG, in which case income is recognised on the date on which receipt is deemed virtually certain.
DISTRIBUTIONS MADE
Amounts are recorded as distributed once a wire transfer or cheque is issued. To the extent that cheques expire or are returned unpresented, the Trust records a
liability for unclaimed dividends and a corresponding amount of cash.
4 UNCLAIMED DIVIDENDS
Unclaimed dividends of £2,302,549 (2016: £1,972,676) include any dividend cheque payments that have not been presented within 12 months, have
expired or have been returned unpresented.
5 CAPITAL ACCOUNT
The capital account is represented by the dividend access share of 25 pence settled in the Trust by Shell Transport and the dividend access share of 10 pence
settled in the Trust by BG.
6 DISTRIBUTIONS MADE
Distributions are made to the B shareholders of the Company in accordance with the Trust Deed. See Note 23 to the Consolidated Financial Statements for
information about dividends per share. Any wire transfers that are not completed are replaced by cheques.
7 RELATED PARTIES
The Trust received dividend income of £2,970 million (2016: £2,533 million; 2015: £2,726 million) in respect of the dividend access share from Shell
Transport and £1,597 million (2016: £1,346 million) in respect of the dividend access share from BG. The Trust made distributions of £4,567 million
(2016: £3,879 million; 2015: £2,726 million) to the B shareholders of the Company.
The Company pays the general and administrative expenses of the Trust, including the auditor’s remuneration.
8 AUDITOR’S REMUNERATION
Auditor’s remuneration for 2017 audit services was £33,750 (2016: £33,750; 2015: £33,750).
Royal Dutch Shell plc (the Company) was incorporated in England and
SHARE CAPITAL
Wales on February 5, 2002, as a private company under the Companies
The issued and fully paid share capital of the Company at February 16,
Act 1985, as amended. On October 27, 2004, the Company was re-
2018, was as follows:
registered as a public company limited by shares and changed its name from
Forthdeal Limited to Royal Dutch Shell plc. The Company is registered at
Companies House, Cardiff, under company number 4366849, and at the
Chamber of Commerce, The Hague, under company number 34179503.
The Legal Entity Identifier (LEI) issued by the London Stock Exchange is
Share capital
21380068P1DRHMJ8KU70. The business address for the Directors and
Ordinary shares of €0.07 each
Senior Management is Carel van Bylandtlaan 30, 2596 HR, The Hague,
The Netherlands.
Issued and fully paid
Number
Nominal value
A shares
B shares
4,597,136,050 €321,799,524
3,745,486,731 €262,184,071
Sterling deferred shares of £1 each
50,000
£50,000
The Directors may only allot new ordinary shares if they have authority from
shareholders to do so. The Company seeks to renew this authority annually at
its Annual General Meeting (AGM). Under the resolution passed at the
Company’s 2017 AGM, the Directors were granted authority to allot
ordinary shares up to an aggregate nominal amount equivalent to
approximately one-third of the issued ordinary share capital of the Company
(in line with the guidelines issued by institutional investors).
The following is a summary of the material terms of the Company’s ordinary
shares, including brief descriptions of the provisions contained in the Articles
of Association (the Articles) and applicable laws of England and Wales in
effect on the date of this document. This summary does not purport to include
complete statements of these provisions:
■ upon issuance, A and B shares are fully paid and free from all liens,
equities, charges, encumbrances and other interest of the Company and
■ all A and B shares rank equally for all dividends and distributions on
not subject to calls of any kind;
ordinary share capital; and
■ A and B shares are admitted to the Official List of the UK Listing Authority
and to trading on the market for listed securities of the London Stock
Exchange. A and B shares are also admitted to trading on Euronext
Amsterdam. A and B ADSs are listed on the New York Stock Exchange.
At December 31, 2017, trusts and trust-like entities holding shares for the
benefit of employee share plans of Shell held (directly and indirectly)
30 million shares of the Company with an aggregate market value of
$998 million and an aggregate nominal value of €2 million.
The Company is resident in the Netherlands for Dutch and UK tax purposes
and its primary objective is to carry on the business of a holding company. It
is not directly or indirectly owned or controlled by another corporation or by
any government and does not know of any arrangements that may result in a
change of control of the Company.
NATURE OF TRADING MARKET
The Company has two classes of ordinary shares: A and B shares. The
principal trading market for A shares is Euronext Amsterdam and the principal
trading market for B shares is the London Stock Exchange. Ordinary shares
are traded in registered form.
A and B American Depositary Shares (ADSs) are listed on the New York
Stock Exchange [A]. A depositary receipt is a certificate that evidences ADSs.
Depositary receipts are issued, cancelled and exchanged at the office of The
Bank of New York Mellon, 101 Barclay Street, New York, NY 10286,
USA, as depositary (the Depositary) under a deposit agreement between the
Company, the Depositary and the holders of ADSs. Each ADS represents two
€0.07 shares of Royal Dutch Shell plc deposited under the agreement. More
information relating to ADSs is given on page 221.
[A] At February 16, 2018, 478,067,812 A ADSs and 307,432,534 B ADSs were outstanding,
representing 21% and 16% of the respective share capital class, held by 5,700 and 925 holders of
record with an address in the USA, respectively. In addition to holders of ADSs, at February 16, 2018,
35,338 A shares and 1,034,164 B shares of €0.07 each were outstanding, representing 0.001%
and 0.027% of the respective share capital class, held by 331 and 3,178 holders of record registered
with an address in the USA, respectively.
Listin information
g
Ticker symbol London
Ticker symbol Amsterdam
Ticker symbol New York (ADS [A])
ISIN Code
CUSIP
SEDOL Number London
SEDOL Number Euronext
Weighting on FTSE at 31/12/17
Weighting on AEX at 31/12/17
€0.07 each.
A shares
RDSA
RDSA
RDS.A
B shares
RDSB
RDSB
RDS.B
GB00B03MLX29 GB00B03MM408
G7690A100
G7690A118
B03MLX2
B09CBL4
4.87%
15.92%
B03MM40
B09CBN6
5.79%
not included
[A] Each A ADS represents two A shares of €0.07 each and each B ADS represents two B shares of
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
217
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
216
FinanciaL stateMents and suppLeMents SHELL ANNUAL REPORT AND FORM 20-F 2017
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Notes to the Royal Dutch Shell Dividend Access Trust Financial
Statements
1 THE TRUST
The Royal Dutch Shell Dividend Access Trust (the Trust) was established on May 19, 2005, by The “Shell” Transport and Trading Company, p.l.c., now The
Shell Transport and Trading Company Limited (Shell Transport), and Royal Dutch Shell plc (the Company). The Trust is governed by the applicable laws of
England and Wales and is resident and domiciled in Jersey. The Trust is not subject to taxation. The Trustee of the Trust is Computershare Trustees (Jersey)
Limited, registration number 92182 (the Trustee), Queensway House, Hilgrove Street, St Helier, Jersey, JE1 1ES. The Trust was established as part of a
dividend access mechanism.
Shell Transport and BG Group plc, now BG Group Limited (BG), have each issued a dividend access share to the Trustee. Following the announcement of a
dividend by the Company on the B shares, Shell Transport and BG may declare a dividend on their dividend access shares.
The primary purposes of the Trust are to receive, on behalf of the B shareholders of the Company and in accordance with their respective holdings of B shares
in the Company, any amounts paid by way of dividend on the dividend access shares and to pay such amounts to the B shareholders on the same pro rata
basis. The Trust is not subject to significant market risk, credit risk or liquidity risk.
The Trust shall not endure for a period in excess of 80 years from May 19, 2005, being the date on which the Trust Deed was executed.
2 BASIS OF PREPARATION
The Financial Statements of the Trust have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European
Union. As applied to the Trust, there are no material differences from IFRS as issued by the International Accounting Standards Board (IASB); therefore, the
Financial Statements have been prepared in accordance with IFRS as issued by the IASB.
The Financial Statements have been prepared under the historical cost convention. The accounting policies described in Note 3 have been applied
consistently in all periods presented.
The Financial Statements were approved and authorised for issue by the Trustee on March 14, 2018.
The financial results of the Trust are included in the Consolidated and Parent Company Financial Statements on pages 137-178 and pages 199-207
respectively.
3 SIGNIFICANT ACCOUNTING POLICIES
The Trust’s accounting policies follow those of Shell as set out in Note 2 to the Consolidated Financial Statements. The following are Trust-specific policies.
PRESENTATION AND FUNCTIONAL CURRENCY
The Trust’s presentation and functional currency is sterling. The Trust’s dividend income and dividends paid are principally in sterling.
Dividends on the dividend access shares are recognised on a paid basis unless the dividend has been confirmed by a general meeting of Shell Transport or
BG, in which case income is recognised on the date on which receipt is deemed virtually certain.
Amounts are recorded as distributed once a wire transfer or cheque is issued. To the extent that cheques expire or are returned unpresented, the Trust records a
liability for unclaimed dividends and a corresponding amount of cash.
Unclaimed dividends of £2,302,549 (2016: £1,972,676) include any dividend cheque payments that have not been presented within 12 months, have
DIVIDEND INCOME
DISTRIBUTIONS MADE
4 UNCLAIMED DIVIDENDS
expired or have been returned unpresented.
5 CAPITAL ACCOUNT
settled in the Trust by BG.
6 DISTRIBUTIONS MADE
The capital account is represented by the dividend access share of 25 pence settled in the Trust by Shell Transport and the dividend access share of 10 pence
Distributions are made to the B shareholders of the Company in accordance with the Trust Deed. See Note 23 to the Consolidated Financial Statements for
information about dividends per share. Any wire transfers that are not completed are replaced by cheques.
7 RELATED PARTIES
The Trust received dividend income of £2,970 million (2016: £2,533 million; 2015: £2,726 million) in respect of the dividend access share from Shell
Transport and £1,597 million (2016: £1,346 million) in respect of the dividend access share from BG. The Trust made distributions of £4,567 million
(2016: £3,879 million; 2015: £2,726 million) to the B shareholders of the Company.
The Company pays the general and administrative expenses of the Trust, including the auditor’s remuneration.
8 AUDITOR’S REMUNERATION
Auditor’s remuneration for 2017 audit services was £33,750 (2016: £33,750; 2015: £33,750).
FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017
216
Additional Information
additional information
Shareholder information
Shareholder information
Royal Dutch Shell plc (the Company) was incorporated in England and
Wales on February 5, 2002, as a private company under the Companies
Act 1985, as amended. On October 27, 2004, the Company was re-
registered as a public company limited by shares and changed its name from
Forthdeal Limited to Royal Dutch Shell plc. The Company is registered at
Companies House, Cardiff, under company number 4366849, and at the
Chamber of Commerce, The Hague, under company number 34179503.
The Legal Entity Identifier (LEI) issued by the London Stock Exchange is
21380068P1DRHMJ8KU70. The business address for the Directors and
Senior Management is Carel van Bylandtlaan 30, 2596 HR, The Hague,
The Netherlands.
The Company is resident in the Netherlands for Dutch and UK tax purposes
and its primary objective is to carry on the business of a holding company. It
is not directly or indirectly owned or controlled by another corporation or by
any government and does not know of any arrangements that may result in a
change of control of the Company.
NATURE OF TRADING MARKET
The Company has two classes of ordinary shares: A and B shares. The
principal trading market for A shares is Euronext Amsterdam and the principal
trading market for B shares is the London Stock Exchange. Ordinary shares
are traded in registered form.
A and B American Depositary Shares (ADSs) are listed on the New York
Stock Exchange [A]. A depositary receipt is a certificate that evidences ADSs.
Depositary receipts are issued, cancelled and exchanged at the office of The
Bank of New York Mellon, 101 Barclay Street, New York, NY 10286,
USA, as depositary (the Depositary) under a deposit agreement between the
Company, the Depositary and the holders of ADSs. Each ADS represents two
€0.07 shares of Royal Dutch Shell plc deposited under the agreement. More
information relating to ADSs is given on page 221.
[A] At February 16, 2018, 478,067,812 A ADSs and 307,432,534 B ADSs were outstanding,
representing 21% and 16% of the respective share capital class, held by 5,700 and 925 holders of
record with an address in the USA, respectively. In addition to holders of ADSs, at February 16, 2018,
35,338 A shares and 1,034,164 B shares of €0.07 each were outstanding, representing 0.001%
and 0.027% of the respective share capital class, held by 331 and 3,178 holders of record registered
with an address in the USA, respectively.
Listin information
g
A shares
RDSA
RDSA
RDS.A
B shares
RDSB
Ticker symbol London
RDSB
Ticker symbol Amsterdam
RDS.B
Ticker symbol New York (ADS [A])
GB00B03MLX29 GB00B03MM408
ISIN Code
G7690A118
G7690A100
CUSIP
B03MM40
B03MLX2
SEDOL Number London
B09CBN6
B09CBL4
SEDOL Number Euronext
4.87%
5.79%
Weighting on FTSE at 31/12/17
Weighting on AEX at 31/12/17
not included
15.92%
[A] Each A ADS represents two A shares of €0.07 each and each B ADS represents two B shares of
€0.07 each.
SHARE CAPITAL
The issued and fully paid share capital of the Company at February 16,
2018, was as follows:
Share capital
Issued and fully paid
Number
Nominal value
Ordinary shares of €0.07 each
A shares
B shares
Sterling deferred shares of £1 each
4,597,136,050 €321,799,524
3,745,486,731 €262,184,071
£50,000
50,000
The Directors may only allot new ordinary shares if they have authority from
shareholders to do so. The Company seeks to renew this authority annually at
its Annual General Meeting (AGM). Under the resolution passed at the
Company’s 2017 AGM, the Directors were granted authority to allot
ordinary shares up to an aggregate nominal amount equivalent to
approximately one-third of the issued ordinary share capital of the Company
(in line with the guidelines issued by institutional investors).
The following is a summary of the material terms of the Company’s ordinary
shares, including brief descriptions of the provisions contained in the Articles
of Association (the Articles) and applicable laws of England and Wales in
effect on the date of this document. This summary does not purport to include
complete statements of these provisions:
■ upon issuance, A and B shares are fully paid and free from all liens,
equities, charges, encumbrances and other interest of the Company and
not subject to calls of any kind;
■ all A and B shares rank equally for all dividends and distributions on
ordinary share capital; and
■ A and B shares are admitted to the Official List of the UK Listing Authority
and to trading on the market for listed securities of the London Stock
Exchange. A and B shares are also admitted to trading on Euronext
Amsterdam. A and B ADSs are listed on the New York Stock Exchange.
At December 31, 2017, trusts and trust-like entities holding shares for the
benefit of employee share plans of Shell held (directly and indirectly)
30 million shares of the Company with an aggregate market value of
$998 million and an aggregate nominal value of €2 million.
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SIGNIFICANT SHAREHOLDINGS
The Company’s A and B shares have identical voting rights, and accordingly the Company’s major shareholders do not have different voting rights.
The following tables show the dividends on each class of share and each class of ADS for the years 2013-2017.
SIGNIFICANT DIRECT SHAREHOLDINGS
Direct holdings of 3% or more of A and B shares combined held by registered members representing the interests of underlying investors at December 31,
2017, are given below.
Direct shareholdings
Euroclear Nederland
BNY (Nominees) Limited
Chase Nominees Limited
State Street Nominees Limited (OM02)
A shares
B shares
Number
%
Number
%
Number
2,012,545,344
787,847,266
85,008,779
129,034,595
43.78 14,824,206
17.14 597,789,774
1.85 245,221,731
2.81 160,840,178
0.40 2,027,369,550
15.96 1,385,637,040
6.55 330,230,510
4.29 289,874,773
SIGNIFICANT INDIRECT SHAREHOLDINGS
Interests of investors with 3% or more of A and B shares combined at December 31, 2017, are given below.
Indirect shareholdings
BlackRock, Inc.
The Capital Group Companies, Inc.
The Vanguard Group, Inc.
Number
A shares
%
B shares
Number
%
Number
361,174,730
68,717,359
148,617,903
7.86 261,634,575
1.49 375,623,767
3.23 118,899,011
6.99 622,809,305
10.03 444,341,126
3.17 267,516,914
Total
%
24.30
16.61
3.96
3.47
Total
%
7.47
5.33
3.21
NOTIFICATION OF MAJOR SHAREHOLDINGS
As at December 31, 2017, the Company had been notified by the following investor of its interests in the Company’s shares pursuant to Disclosure Guidance
and Transparency Rule (DTR) 5.
Total announced in respect of the year
1.88
1.88
1.88
DIVIDENDS
A and B shares
A shares
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Total announced in respect of the year
Amount paid during the year
[A] Euro equivalent, rounded to the nearest euro cent.
B shares
Amount paid during the year
[A] Sterling equivalent.
A and B ADSs
1.59
1.65
1.72
1.70
1.53
1.42
2017
0.47
0.47
0.47
0.47
2017
0.42
0.39
0.40
0.38
2017
37.12
36.28
35.02
33.91
2017
0.94
0.94
0.94
0.94
2016
0.47
0.47
0.47
0.47
2016
0.42
0.42
0.44
0.44
2016
32.98
35.27
37.16
38.64
2016
0.94
0.94
0.94
0.94
2014
0.47
0.47
0.47
0.47
2014
0.35
0.36
0.38
0.43
2015
0.47
0.47
0.47
0.47
1.88
2015
0.42
0.42
0.43
0.42
1.69
1.71
2015
30.75
30.92
31.07
32.78
2014
28.03
29.09
30.16
31.20
Pence [A]
2013
28.99
28.67
27.51
26.88
2015
0.94
0.94
0.94
0.94
3.76
3.76
2014
0.94
0.94
0.94
0.94
3.76
3.72
$
2013
0.45
0.45
0.45
0.45
1.80
€ [A]
2013
0.34
0.34
0.33
0.32
1.34
1.34
$
2013
0.90
0.90
0.90
0.90
3.60
3.56
Total announced in respect of the year
142.33
144.05
125.52
118.48
112.05
147.06
138.19
123.94
114.16
113.96
BlackRock, Inc. [A]
[A] The Company received numerous notifications from BlackRock, Inc. during 2017. The information given is derived from the most recent notification.
[B] Excludes financial instruments according to Art. 13(1)(a) of Directive 2004/109/EC (DTR 5.3.1.1 (a)) and financial instruments with similar economic effect according to Art. 13(1)(b) of Directive
2004/109/EC (DTR 5.3.1.1 (b)).
Investor
Number
A shares
%
B shares
Number
%
Number
6.10 218,422,847
5.83 495,468,404
Total[B]
%
5.97
277,045,557
The Company did not receive any further notifications pursuant to DTR 5 in the period from December 31, 2017, to February 16, 2018 (being a date not
more than one month prior to the date of the Company’s Notice of Annual General Meeting).
Total announced in respect of the year
Amount paid during the year
3.76
3.76
3.76
3.76
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
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SIGNIFICANT SHAREHOLDINGS
SIGNIFICANT DIRECT SHAREHOLDINGS
2017, are given below.
Direct shareholdings
Euroclear Nederland
BNY (Nominees) Limited
Chase Nominees Limited
Direct holdings of 3% or more of A and B shares combined held by registered members representing the interests of underlying investors at December 31,
A shares
B shares
Number
%
Number
%
Number
2,012,545,344
43.78 14,824,206
0.40 2,027,369,550
787,847,266
17.14 597,789,774
15.96 1,385,637,040
85,008,779
1.85 245,221,731
6.55 330,230,510
State Street Nominees Limited (OM02)
129,034,595
2.81 160,840,178
4.29 289,874,773
SIGNIFICANT INDIRECT SHAREHOLDINGS
Interests of investors with 3% or more of A and B shares combined at December 31, 2017, are given below.
Indirect shareholdings
BlackRock, Inc.
361,174,730
7.86 261,634,575
6.99 622,809,305
The Capital Group Companies, Inc.
68,717,359
1.49 375,623,767
10.03 444,341,126
The Vanguard Group, Inc.
148,617,903
3.23 118,899,011
3.17 267,516,914
Number
Number
%
Number
A shares
%
B shares
NOTIFICATION OF MAJOR SHAREHOLDINGS
As at December 31, 2017, the Company had been notified by the following investor of its interests in the Company’s shares pursuant to Disclosure Guidance
Total
%
24.30
16.61
3.96
3.47
Total
%
7.47
5.33
3.21
and Transparency Rule (DTR) 5.
Investor
Number
Number
%
Number
B shares
Total[B]
%
A shares
%
BlackRock, Inc. [A]
277,045,557
6.10 218,422,847
5.83 495,468,404
5.97
[A] The Company received numerous notifications from BlackRock, Inc. during 2017. The information given is derived from the most recent notification.
[B] Excludes financial instruments according to Art. 13(1)(a) of Directive 2004/109/EC (DTR 5.3.1.1 (a)) and financial instruments with similar economic effect according to Art. 13(1)(b) of Directive
2004/109/EC (DTR 5.3.1.1 (b)).
The Company did not receive any further notifications pursuant to DTR 5 in the period from December 31, 2017, to February 16, 2018 (being a date not
more than one month prior to the date of the Company’s Notice of Annual General Meeting).
The Company’s A and B shares have identical voting rights, and accordingly the Company’s major shareholders do not have different voting rights.
DIVIDENDS
The following tables show the dividends on each class of share and each class of ADS for the years 2013-2017.
A and B shares
Q1
Q2
Q3
Q4
Total announced in respect of the year
A shares
Q1
Q2
Q3
Q4
Total announced in respect of the year
Amount paid during the year
[A] Euro equivalent, rounded to the nearest euro cent.
B shares
Q1
Q2
Q3
Q4
Total announced in respect of the year
Amount paid during the year
[A] Sterling equivalent.
A and B ADSs
Q1
Q2
Q3
Q4
Total announced in respect of the year
Amount paid during the year
2017
0.47
0.47
0.47
0.47
1.88
2017
0.42
0.39
0.40
0.38
1.59
1.65
2016
0.47
0.47
0.47
0.47
1.88
2016
0.42
0.42
0.44
0.44
1.72
1.70
2015
0.47
0.47
0.47
0.47
1.88
2015
0.42
0.42
0.43
0.42
1.69
1.71
2014
0.47
0.47
0.47
0.47
1.88
2014
0.35
0.36
0.38
0.43
1.53
1.42
$
2013
0.45
0.45
0.45
0.45
1.80
€ [A]
2013
0.34
0.34
0.33
0.32
1.34
1.34
2017
37.12
36.28
35.02
33.91
2016
32.98
35.27
37.16
38.64
142.33
144.05
2015
30.75
30.92
31.07
32.78
125.52
2014
28.03
29.09
30.16
31.20
118.48
Pence [A]
2013
28.99
28.67
27.51
26.88
112.05
147.06
138.19
123.94
114.16
113.96
2017
0.94
0.94
0.94
0.94
3.76
3.76
2016
0.94
0.94
0.94
0.94
3.76
3.76
2015
0.94
0.94
0.94
0.94
3.76
3.76
2014
0.94
0.94
0.94
0.94
3.76
3.72
$
2013
0.90
0.90
0.90
0.90
3.60
3.56
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shareholder information Continued
HIGH, LOW AND YEAR-END SHARE PRICES
The following tables show the high, low and year-end prices, taken directly from the respective securities exchange, of the Company’s registered ordinary
shares:
■ of €0.07 nominal value on the London Stock Exchange;
■ of €0.07 nominal value on Euronext Amsterdam; and
■ in the form of ADSs on the New York Stock Exchange (ADSs do not have a nominal value).
Annual share prices
2013
2014
2015
2016
2017
2013
2014
2015
2016
2017
Quarterly share prices
2016
Q1
Q2
Q3
Q4
2017
Q1
Q2
Q3
Q4
Monthly share prices
2017
September
October
November
December
2018
January
February
High €
27.06
31.13
29.59
26.39
28.25
Euronext Amsterdam
A shares
Year-end €
Low €
23.40
24.30
19.58
16.53
22.73
25.91
27.66
21.10
25.99
27.77
London Stock Exchange
B shares
High pence
Low pence
Year-end pence
2,375
2,614
2,315
2,359
2,513
2,070
1,985
1,423
1,261
2,037
2,280
2,233
1,543
2,354
2,509
High $
73.00
83.42
67.16
56.29
66.92
High $
75.18
88.13
70.15
58.49
68.48
New York Stock Exchange
A ADSs
Low $
Year-end $
62.65
60.84
43.26
35.80
50.32
71.27
66.95
45.79
54.38
66.71
New York Stock Exchange
B ADSs
Low $
Year-end $
65.02
62.11
43.51
35.96
53.10
75.11
69.56
46.04
57.97
68.29
Euronext Amsterdam
A shares
London Stock Exchange
B shares
High €
Low €
High pence
Low pence
New York Stock Exchange
A ADSs
Low $
High $
New York Stock Exchange
B ADSs
High $
Low $
22.29
24.78
25.40
26.39
26.87
25.66
25.71
28.25
16.53
20.33
20.81
22.17
23.53
22.83
22.73
25.55
1,757
2,062
2,163
2,359
2,404
2,254
2,307
2,513
1,261
1,634
1,869
2,006
2,137
2,037
2,039
2,299
50.32
55.22
56.29
54.98
56.39
56.26
60.66
66.92
35.80
46.42
46.57
48.07
50.32
51.08
52.44
60.05
50.78
56.92
57.88
58.49
59.56
58.53
62.61
68.48
35.96
47.08
49.56
50.94
53.46
53.10
53.56
61.69
Euronext Amsterdam
A shares
High €
Low €
London Stock Exchange
B shares
Low pence
High pence
New York Stock Exchange
A ADSs
Low $
High $
New York Stock Exchange
B ADSs
High $
Low $
25.71
27.00
28.25
28.05
23.09
25.55
25.93
26.74
29.15
28.23
27.65
24.20
2,307
2,431
2,513
2,510
2,617
2,482
2,134
2,299
2,355
2,353
2,480
2,247
60.66
63.28
65.83
66.92
72.43
69.69
54.95
60.05
61.46
63.10
62.61
65.60
67.40
68.48
66.91
61.02
74.60
71.00
56.44
61.69
63.45
64.56
68.49
61.92
METHOD OF HOLDING SHARES OR AN INTEREST IN
FEES PAID BY HOLDERS OF ADSs
SHARES
The Depositary collects its fees for delivery and surrender of ADSs directly
There are several ways in which Royal Dutch Shell plc registered shares or an
from investors depositing shares or surrendering ADSs for the purpose of
interest in these shares can be held, including:
withdrawal or from intermediaries acting for them. The Depositary collects
fees for making distributions to investors by deducting those fees from the
■ directly as registered shares either in uncertificated form or in certificated
amounts distributed or by selling a portion of distributable property to pay the
form in a shareholder’s own name;
fees. The Depositary may generally refuse to provide fee-attracting services
■ indirectly through Euroclear Nederland (in respect of which the Dutch
until its fees for those services are paid. See page 222.
Securities Giro Act (“Wet giraal effectenverkeer”) is applicable);
■ through the Royal Dutch Shell Corporate Nominee; and
REIMBURSEMENTS TO THE COMPANY
■ as a direct or indirect holder of either an A or a B ADS with the
The Bank of New York Mellon, as Depositary, has agreed to reimburse the
Depositary.
AMERICAN DEPOSITARY SHARES
Company for expenses it incurs that are related maintenance expenses of the
ADS programme. The Depositary has agreed to reimburse the Company for
its continuing annual stock exchange listing fees. The Depositary has also
The Depositary is the registered shareholder of the shares underlying the A or
agreed to pay certain legal expenses and the standard out-of-pocket
B ADSs and enjoys the rights of a shareholder under the Articles. Holders of
maintenance costs for the ADSs, which consist of the expenses of postage
ADSs will not have shareholder rights. The rights of the holder of an A or a B
and envelopes for mailing annual and interim financial reports, printing and
ADS are specified in the respective Depositary agreements with the
distributing dividend cheques, electronic filing of US federal tax information,
Depositary and are summarised below.
mailing required tax forms, stationery, postage, facsimile and telephone calls.
It has also agreed to reimburse the Company annually for certain costs
The Depositary will receive all cash dividends and other cash distributions
associated with the AGM, investor relationship programmes and special
made on the deposited shares underlying the ADSs and, where possible and
investor relations promotional activities. There are limits on the amount of
on a reasonable basis, will distribute such dividends and distributions to
expenses for which the Depositary will reimburse the Company, but the
holders of ADSs. Rights to purchase additional shares will also be made
amount of reimbursement available to the Company is not necessarily tied to
available to the Depositary who may make such rights available to holders of
the amount of fees the Depositary collects from investors. From January 1,
ADSs. All other distributions made on the Company’s shares will be
2017, to February 16, 2018, the Company received $2,165,198 from the
distributed by the Depositary in any means that the Depositary thinks is
Depositary.
equitable and practical. The Depositary may deduct its fees and expenses
and the amount of any taxes owed from any payments to holders and it may
SCRIP DIVIDEND PROGRAMME
sell a holder’s deposited shares to pay any taxes owed. The Depositary is not
The Company operated a Scrip Dividend Programme until the third quarter of
responsible if it decides that it is unlawful or impractical to make a distribution
2017 which enabled shareholders to increase their shareholding by choosing
available to holders of ADSs.
to receive new shares instead of cash dividends (if approved by the Board).
Only new A shares were issued under the programme, including to
The Depositary will notify holders of ADSs of shareholders’ meetings of the
shareholders who hold B shares. More information can be found at
Company and will arrange to deliver voting materials to such holders of ADSs
www.shell.com/scrip.
if requested by the Company. Upon request by a holder, the Depositary will
endeavour to appoint such holder as proxy in respect of such holder’s
DIVIDEND REINVESTMENT PLAN
deposited shares entitling such holder to attend and vote at shareholders’
With effect from the fourth quarter 2017 interim dividend, the Dividend
meetings. Holders of ADSs may also instruct the Depositary to vote their
Reinvestment Plan (DRIP) provided by Equiniti Financial Services Limited (EFSL),
deposited securities and the Depositary will try, as far as practical and lawful,
part of the same group of companies as Royal Dutch Shell plc’s Registrar,
to vote deposited shares in accordance with such instructions. The Company
Equiniti, was reintroduced. More information can be found
cannot ensure that holders will receive voting materials or otherwise learn of
at www.shareview.co.uk/info/drip or by contacting Equiniti.
an upcoming shareholders’ meeting in time to ensure that holders can instruct
the Depositary to vote their shares.
The dividend reinvestment options offered by ABN AMRO Bank N.V. and
The Bank of New York Mellon were also reintroduced at this time. More
Upon payment of appropriate fees, expenses and taxes: (i) shareholders may
information can be found by contacting the relevant provider.
deposit their shares with the Depositary and receive the corresponding class
and amount of ADSs; and (ii) holders of ADSs may surrender their ADSs to the
Depositary and have the corresponding class and amount of shares credited
to their account.
Further, subject to certain limitations, holders may, at any time, cancel ADSs
and withdraw their underlying shares or have the corresponding class and
amount of shares credited to their account. The Depositary may also deliver
ADSs prior to deposit of the underlying securities subject to certain conditions,
including, without limitation, that such pre-released ADSs are fully
collateralised and that the underlying securities are assigned to and held for
the account of the Depositary.
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HIGH, LOW AND YEAR-END SHARE PRICES
The following tables show the high, low and year-end prices, taken directly from the respective securities exchange, of the Company’s registered ordinary
shares:
■ of €0.07 nominal value on the London Stock Exchange;
■ of €0.07 nominal value on Euronext Amsterdam; and
■ in the form of ADSs on the New York Stock Exchange (ADSs do not have a nominal value).
Annual share prices
Quarterly share prices
Euronext Amsterdam
London Stock Exchange
New York Stock Exchange
New York Stock Exchange
A shares
B shares
High €
Low €
High pence
Low pence
High $
High $
2013
2014
2015
2016
2017
2013
2014
2015
2016
2017
2016
2017
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Monthly share prices
2017
September
October
November
December
2018
January
February
New York Stock Exchange
Low $
Year-end $
Euronext Amsterdam
A shares
Year-end €
High €
27.06
31.13
29.59
26.39
28.25
Low €
23.40
24.30
19.58
16.53
22.73
25.91
27.66
21.10
25.99
27.77
2,375
2,614
2,315
2,359
2,513
2,070
1,985
1,423
1,261
2,037
2,280
2,233
1,543
2,354
2,509
High $
73.00
83.42
67.16
56.29
66.92
High $
75.18
88.13
70.15
58.49
68.48
62.65
60.84
43.26
35.80
50.32
65.02
62.11
43.51
35.96
53.10
London Stock Exchange
B shares
New York Stock Exchange
High pence
Low pence
Year-end pence
Low $
Year-end $
22.29
24.78
25.40
26.39
26.87
25.66
25.71
28.25
16.53
20.33
20.81
22.17
23.53
22.83
22.73
25.55
25.71
27.00
28.25
28.05
23.09
25.55
25.93
26.74
29.15
27.65
28.23
24.20
1,757
2,062
2,163
2,359
2,404
2,254
2,307
2,513
2,307
2,431
2,513
2,510
2,617
2,482
1,261
1,634
1,869
2,006
2,137
2,037
2,039
2,299
2,134
2,299
2,355
2,353
2,480
2,247
50.32
55.22
56.29
54.98
56.39
56.26
60.66
66.92
60.66
63.28
65.83
66.92
72.43
69.69
A ADSs
Low $
35.80
50.78
46.42
56.92
46.57
57.88
48.07
58.49
50.32
59.56
51.08
58.53
52.44
62.61
60.05
68.48
A ADSs
Low $
54.95
62.61
60.05
65.60
61.46
67.40
63.10
68.48
66.91
74.60
61.02
71.00
Euronext Amsterdam
London Stock Exchange
New York Stock Exchange
New York Stock Exchange
A shares
B shares
High €
Low €
High pence
Low pence
High $
High $
A ADSs
71.27
66.95
45.79
54.38
66.71
B ADSs
75.11
69.56
46.04
57.97
68.29
B ADSs
Low $
35.96
47.08
49.56
50.94
53.46
53.10
53.56
61.69
B ADSs
Low $
56.44
61.69
63.45
64.56
68.49
61.92
FEES PAID BY HOLDERS OF ADSs
The Depositary collects its fees for delivery and surrender of ADSs directly
from investors depositing shares or surrendering ADSs for the purpose of
withdrawal or from intermediaries acting for them. The Depositary collects
fees for making distributions to investors by deducting those fees from the
amounts distributed or by selling a portion of distributable property to pay the
fees. The Depositary may generally refuse to provide fee-attracting services
until its fees for those services are paid. See page 222.
REIMBURSEMENTS TO THE COMPANY
The Bank of New York Mellon, as Depositary, has agreed to reimburse the
Company for expenses it incurs that are related maintenance expenses of the
ADS programme. The Depositary has agreed to reimburse the Company for
its continuing annual stock exchange listing fees. The Depositary has also
agreed to pay certain legal expenses and the standard out-of-pocket
maintenance costs for the ADSs, which consist of the expenses of postage
and envelopes for mailing annual and interim financial reports, printing and
distributing dividend cheques, electronic filing of US federal tax information,
mailing required tax forms, stationery, postage, facsimile and telephone calls.
It has also agreed to reimburse the Company annually for certain costs
associated with the AGM, investor relationship programmes and special
investor relations promotional activities. There are limits on the amount of
expenses for which the Depositary will reimburse the Company, but the
amount of reimbursement available to the Company is not necessarily tied to
the amount of fees the Depositary collects from investors. From January 1,
2017, to February 16, 2018, the Company received $2,165,198 from the
Depositary.
SCRIP DIVIDEND PROGRAMME
The Company operated a Scrip Dividend Programme until the third quarter of
2017 which enabled shareholders to increase their shareholding by choosing
to receive new shares instead of cash dividends (if approved by the Board).
Only new A shares were issued under the programme, including to
shareholders who hold B shares. More information can be found at
www.shell.com/scrip.
DIVIDEND REINVESTMENT PLAN
With effect from the fourth quarter 2017 interim dividend, the Dividend
Reinvestment Plan (DRIP) provided by Equiniti Financial Services Limited (EFSL),
part of the same group of companies as Royal Dutch Shell plc’s Registrar,
Equiniti, was reintroduced. More information can be found
at www.shareview.co.uk/info/drip or by contacting Equiniti.
The dividend reinvestment options offered by ABN AMRO Bank N.V. and
The Bank of New York Mellon were also reintroduced at this time. More
information can be found by contacting the relevant provider.
METHOD OF HOLDING SHARES OR AN INTEREST IN
SHARES
There are several ways in which Royal Dutch Shell plc registered shares or an
interest in these shares can be held, including:
■ directly as registered shares either in uncertificated form or in certificated
form in a shareholder’s own name;
■ indirectly through Euroclear Nederland (in respect of which the Dutch
Securities Giro Act (“Wet giraal effectenverkeer”) is applicable);
■ through the Royal Dutch Shell Corporate Nominee; and
■ as a direct or indirect holder of either an A or a B ADS with the
Depositary.
AMERICAN DEPOSITARY SHARES
The Depositary is the registered shareholder of the shares underlying the A or
B ADSs and enjoys the rights of a shareholder under the Articles. Holders of
ADSs will not have shareholder rights. The rights of the holder of an A or a B
ADS are specified in the respective Depositary agreements with the
Depositary and are summarised below.
The Depositary will receive all cash dividends and other cash distributions
made on the deposited shares underlying the ADSs and, where possible and
on a reasonable basis, will distribute such dividends and distributions to
holders of ADSs. Rights to purchase additional shares will also be made
available to the Depositary who may make such rights available to holders of
ADSs. All other distributions made on the Company’s shares will be
distributed by the Depositary in any means that the Depositary thinks is
equitable and practical. The Depositary may deduct its fees and expenses
and the amount of any taxes owed from any payments to holders and it may
sell a holder’s deposited shares to pay any taxes owed. The Depositary is not
responsible if it decides that it is unlawful or impractical to make a distribution
available to holders of ADSs.
The Depositary will notify holders of ADSs of shareholders’ meetings of the
Company and will arrange to deliver voting materials to such holders of ADSs
if requested by the Company. Upon request by a holder, the Depositary will
endeavour to appoint such holder as proxy in respect of such holder’s
deposited shares entitling such holder to attend and vote at shareholders’
meetings. Holders of ADSs may also instruct the Depositary to vote their
deposited securities and the Depositary will try, as far as practical and lawful,
to vote deposited shares in accordance with such instructions. The Company
cannot ensure that holders will receive voting materials or otherwise learn of
an upcoming shareholders’ meeting in time to ensure that holders can instruct
the Depositary to vote their shares.
Upon payment of appropriate fees, expenses and taxes: (i) shareholders may
deposit their shares with the Depositary and receive the corresponding class
and amount of ADSs; and (ii) holders of ADSs may surrender their ADSs to the
Depositary and have the corresponding class and amount of shares credited
to their account.
Further, subject to certain limitations, holders may, at any time, cancel ADSs
and withdraw their underlying shares or have the corresponding class and
amount of shares credited to their account. The Depositary may also deliver
ADSs prior to deposit of the underlying securities subject to certain conditions,
including, without limitation, that such pre-released ADSs are fully
collateralised and that the underlying securities are assigned to and held for
the account of the Depositary.
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DUTCH CAPITAL GAINS TAXATION
CAPITAL GAINS TAX
Capital gains on the sale of shares of a Dutch tax-resident company by a US
For the purposes of UK capital gains tax, the market values [A] of the shares
holder are generally not subject to taxation by the Netherlands unless the US
of the former public parent companies of the Royal Dutch/Shell Group at the
holder has a permanent establishment therein and the capital gain is derived
relevant dates were:
from the sale of shares that are part of the business property of the permanent
establishment.
Royal Dutch Petroleum Company
(N.V. Koninklijke Nederlandsche
Petroleum Maatschappij) which ceased
to exist on December 21, 2005
The “Shell” Transport and Trading
Company, p.l.c. which delisted on
July 19, 2005
March 31, 1982
July 20, 2005
£
1.1349
17.6625
1.4502 Not applicable
[A] Restated where applicable to reflect all capitalisation issues since the relevant date. This includes the
change in the capital structure in 2005, when Royal Dutch Shell plc became the single parent company
of Royal Dutch Petroleum Company and of The “Shell” Transport and Trading Company, p.l.c., now
The Shell Transport and Trading Company Limited, and one share in Royal Dutch Petroleum Company
was exchanged for two Royal Dutch Shell plc A shares and one share in The “Shell” Transport and
Trading Company, p.l.c. was exchanged for 0.287333066 Royal Dutch Shell plc B shares.
DUTCH SUCCESSION DUTY AND GIFT TAXES
Shares of a Dutch tax-resident company held by an individual who is not a
resident or a deemed resident of the Netherlands will generally not be subject
to succession duty in the Netherlands on the individual’s death.
A gift of shares of a Dutch tax-resident company by an individual who is not a
resident or a deemed resident of the Netherlands is generally not subject to
Dutch gift tax.
UK STAMP DUTY AND STAMP DUTY RESERVE TAX
Sales or transfers of the Company’s ordinary shares within a clearance
service (such as Euroclear Nederland) or of the Company’s ADSs within the
ADS depositary receipts system will not give rise to a stamp duty reserve tax
(SDRT) liability and should not in practice require the payment of UK stamp
duty.
The transfer of the Company’s ordinary shares to a clearance service (such as
Euroclear Nederland) or to an issuer of depositary shares (such as ADSs) will
generally give rise to a UK stamp duty or SDRT liability at the rate of 1.5% of
consideration given or, if none, of the value of the shares. A sale of the
Company’s ordinary shares that are not held within a clearance service (for
example, settled through the UK’s CREST system of paperless transfers) will
generally be subject to UK stamp duty or SDRT at the rate of 0.5% of the
amount of the consideration, normally paid by the purchaser.
shareholder information Continued
Persons depositing or withdrawing shares must pay:
$5.00 or less per 100 ADSs (or portion of 100 ADSs)
Registration and transfer fees
Expenses of the Depositary
For:
Issuance of ADSs, including those resulting from a distribution of shares, rights
or other property;
Cancellation of ADSs for the purpose of their withdrawal, including if the
deposit agreement terminates; and
Distribution of securities to holders of deposited securities by the Depositary to
ADS registered holders.
Registration and transfer of shares on the share register to or from the name of
the Depositary or its agent when they deposit or withdraw shares.
Cable, telex and facsimile transmissions (when expressly provided in the
deposit agreement); and
Converting foreign currency into dollars.
Taxes and other governmental charges the Depositary or the custodian has to
pay on any ADS or share underlying an ADS, for example, share transfer
taxes, stamp duty or withholding taxes
As necessary.
EXCHANGE CONTROLS AND OTHER LIMITATIONS
AFFECTING SECURITY HOLDERS
Other than restrictions affecting those individuals, entities, government bodies,
corporations or agencies that are subject to European Union (EU) sanctions,
for example, regarding Syria, and those sanctions adopted by the
government of the UK, and the general EU prohibition to transfer funds to and
from North Korea, we are not aware of any other legislative or other legal
provision currently in force in the UK, the Netherlands or arising under the
Articles restricting remittances to holders of the Company’s ordinary shares
who are non-residents of the UK, or affecting the import or export of capital.
TAXATION
GENERAL
The Company is incorporated in England and Wales and tax-resident in the
Netherlands. As a tax resident of the Netherlands, it is generally required by
Dutch law to withhold tax at a rate of 15% on dividends on its ordinary
shares and ADSs, subject to the provisions of any applicable tax convention
or domestic law. Based on a policy statement issued by the Ministry of
Finance of the Netherlands on April 29, 2016, (which has been formalised
in law), and depending on their particular circumstances, non-Dutch tax-
resident holders may be entitled to a full or partial refund of Dutch withholding
tax. The following sets forth the operation of other provisions on dividends on
the Company’s various ordinary shares and ADSs to UK and US holders, as
well as certain other tax rules pertinent to holders. Holders should consult their
own tax adviser if they are uncertain as to the tax treatment of any dividend.
DIVIDENDS PAID ON THE DIVIDEND ACCESS SHARES
There is no Dutch withholding tax on dividends on B shares or B ADSs,
provided that such dividends are paid on the dividend access shares pursuant
to the dividend access mechanism (see “Dividend access mechanism for B
shares” on page 86). Dividends paid on the dividend access shares are
treated as UK-source for tax purposes and there is no UK withholding tax on
them. From April 2016, there were changes to the taxation of dividends for
individual shareholders resident in the UK. The dividend tax credit was
abolished, and a tax-free dividend allowance introduced.
In 2017, all dividends with respect to B shares and B ADSs were paid on the
dividend access shares pursuant to the dividend access mechanism.
DUTCH WITHHOLDING TAX
When Dutch withholding tax applies on dividends paid to a US holder (that
is, dividends on A shares or A ADSs, or on B shares or B ADSs that are not
paid on the dividend access shares pursuant to the dividend access
mechanism), the US holder will be subject to Dutch withholding tax at the rate
of 15%. A US holder who is entitled to the benefits of the 1992 Double
Taxation Convention (the Convention) between the USA and the Netherlands
as amended by the protocol signed on March 8, 2004, will be entitled to a
reduction in the Dutch withholding tax, either by way of a full or a partial
exemption at source or by way of a partial refund or a credit as follows:
■ if the US holder is an exempt pension trust as described in article 35 of the
Convention, or an exempt organisation as described in article 36 thereof,
the US holder will be exempt from Dutch withholding tax; or
■ if the US holder is a company that holds directly at least 10% of the voting
power in the Company, the US holder will be subject to Dutch withholding
tax at a rate not exceeding 5%.
In general, the entire dividend (including any amount withheld) will be
dividend income to the US holder and the withholding tax will be treated as
a foreign income tax that is eligible for credit against the US holder’s income
tax liability or a deduction subject to certain limitations. A “US holder”
includes, but is not limited to, a citizen or resident of the USA, or a
corporation or other entity organised under the laws of the USA or any of its
political subdivisions.
When Dutch withholding tax applies on dividends paid to UK tax-resident
holders (that is, dividends on A shares or A ADSs, or on B shares or B ADSs
that are not paid on the dividend access shares pursuant to the dividend
access mechanism), the dividend will typically be subject to withholding tax
at a rate of 15%. Such UK tax-resident holder may be entitled to a credit (not
repayable) for withholding tax against their UK tax liability. However, certain
corporate shareholders are, subject to conditions, exempt from UK tax on
dividends. Withholding tax suffered cannot be offset against such exempt
dividends. UK tax-resident holders should also be entitled to claim a refund of
one-third of the Dutch withholding tax from the Dutch tax authorities in reliance
on the tax convention between the Netherlands and the UK. Pension plans
meeting certain defined criteria can, however, be entitled to claim a full
refund or exemption at source of the dividend tax withheld. Also, UK tax-
resident corporate shareholders holding at least a 5% shareholding and
meeting other defined criteria are exempted at source from dividend tax.
For holders who are tax-resident in any other country, the availability of a
whole or partial exemption or refund of Dutch withholding tax is governed by
Dutch tax law and/or the tax convention, if any, between the Netherlands
and the country of the holder’s residence.
There may be other grounds on which holders who are tax-resident in the UK,
the USA or any other country can obtain a full or partial refund of the Dutch
withholding tax, depending on their particular circumstances; see “Taxation:
General” above.
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CAPITAL GAINS TAX
For the purposes of UK capital gains tax, the market values [A] of the shares
of the former public parent companies of the Royal Dutch/Shell Group at the
relevant dates were:
March 31, 1982
£
July 20, 2005
Royal Dutch Petroleum Company
(N.V. Koninklijke Nederlandsche
Petroleum Maatschappij) which ceased
to exist on December 21, 2005
The “Shell” Transport and Trading
Company, p.l.c. which delisted on
July 19, 2005
1.4502 Not applicable
[A] Restated where applicable to reflect all capitalisation issues since the relevant date. This includes the
change in the capital structure in 2005, when Royal Dutch Shell plc became the single parent company
of Royal Dutch Petroleum Company and of The “Shell” Transport and Trading Company, p.l.c., now
The Shell Transport and Trading Company Limited, and one share in Royal Dutch Petroleum Company
was exchanged for two Royal Dutch Shell plc A shares and one share in The “Shell” Transport and
Trading Company, p.l.c. was exchanged for 0.287333066 Royal Dutch Shell plc B shares.
1.1349
17.6625
DUTCH CAPITAL GAINS TAXATION
Capital gains on the sale of shares of a Dutch tax-resident company by a US
holder are generally not subject to taxation by the Netherlands unless the US
holder has a permanent establishment therein and the capital gain is derived
from the sale of shares that are part of the business property of the permanent
establishment.
DUTCH SUCCESSION DUTY AND GIFT TAXES
Shares of a Dutch tax-resident company held by an individual who is not a
resident or a deemed resident of the Netherlands will generally not be subject
to succession duty in the Netherlands on the individual’s death.
A gift of shares of a Dutch tax-resident company by an individual who is not a
resident or a deemed resident of the Netherlands is generally not subject to
Dutch gift tax.
UK STAMP DUTY AND STAMP DUTY RESERVE TAX
Sales or transfers of the Company’s ordinary shares within a clearance
service (such as Euroclear Nederland) or of the Company’s ADSs within the
ADS depositary receipts system will not give rise to a stamp duty reserve tax
(SDRT) liability and should not in practice require the payment of UK stamp
duty.
The transfer of the Company’s ordinary shares to a clearance service (such as
Euroclear Nederland) or to an issuer of depositary shares (such as ADSs) will
generally give rise to a UK stamp duty or SDRT liability at the rate of 1.5% of
consideration given or, if none, of the value of the shares. A sale of the
Company’s ordinary shares that are not held within a clearance service (for
example, settled through the UK’s CREST system of paperless transfers) will
generally be subject to UK stamp duty or SDRT at the rate of 0.5% of the
amount of the consideration, normally paid by the purchaser.
Persons depositing or withdrawing shares must pay:
For:
$5.00 or less per 100 ADSs (or portion of 100 ADSs)
Issuance of ADSs, including those resulting from a distribution of shares, rights
Registration and transfer fees
Expenses of the Depositary
or other property;
Cancellation of ADSs for the purpose of their withdrawal, including if the
deposit agreement terminates; and
Distribution of securities to holders of deposited securities by the Depositary to
ADS registered holders.
Registration and transfer of shares on the share register to or from the name of
the Depositary or its agent when they deposit or withdraw shares.
Cable, telex and facsimile transmissions (when expressly provided in the
deposit agreement); and
Converting foreign currency into dollars.
Taxes and other governmental charges the Depositary or the custodian has to
As necessary.
pay on any ADS or share underlying an ADS, for example, share transfer
taxes, stamp duty or withholding taxes
EXCHANGE CONTROLS AND OTHER LIMITATIONS
AFFECTING SECURITY HOLDERS
Other than restrictions affecting those individuals, entities, government bodies,
reduction in the Dutch withholding tax, either by way of a full or a partial
exemption at source or by way of a partial refund or a credit as follows:
corporations or agencies that are subject to European Union (EU) sanctions,
■ if the US holder is an exempt pension trust as described in article 35 of the
for example, regarding Syria, and those sanctions adopted by the
Convention, or an exempt organisation as described in article 36 thereof,
government of the UK, and the general EU prohibition to transfer funds to and
the US holder will be exempt from Dutch withholding tax; or
from North Korea, we are not aware of any other legislative or other legal
■ if the US holder is a company that holds directly at least 10% of the voting
provision currently in force in the UK, the Netherlands or arising under the
power in the Company, the US holder will be subject to Dutch withholding
Articles restricting remittances to holders of the Company’s ordinary shares
tax at a rate not exceeding 5%.
who are non-residents of the UK, or affecting the import or export of capital.
TAXATION
GENERAL
In general, the entire dividend (including any amount withheld) will be
dividend income to the US holder and the withholding tax will be treated as
a foreign income tax that is eligible for credit against the US holder’s income
The Company is incorporated in England and Wales and tax-resident in the
tax liability or a deduction subject to certain limitations. A “US holder”
Netherlands. As a tax resident of the Netherlands, it is generally required by
includes, but is not limited to, a citizen or resident of the USA, or a
Dutch law to withhold tax at a rate of 15% on dividends on its ordinary
corporation or other entity organised under the laws of the USA or any of its
shares and ADSs, subject to the provisions of any applicable tax convention
political subdivisions.
or domestic law. Based on a policy statement issued by the Ministry of
Finance of the Netherlands on April 29, 2016, (which has been formalised
When Dutch withholding tax applies on dividends paid to UK tax-resident
in law), and depending on their particular circumstances, non-Dutch tax-
holders (that is, dividends on A shares or A ADSs, or on B shares or B ADSs
resident holders may be entitled to a full or partial refund of Dutch withholding
that are not paid on the dividend access shares pursuant to the dividend
tax. The following sets forth the operation of other provisions on dividends on
access mechanism), the dividend will typically be subject to withholding tax
the Company’s various ordinary shares and ADSs to UK and US holders, as
at a rate of 15%. Such UK tax-resident holder may be entitled to a credit (not
well as certain other tax rules pertinent to holders. Holders should consult their
repayable) for withholding tax against their UK tax liability. However, certain
own tax adviser if they are uncertain as to the tax treatment of any dividend.
corporate shareholders are, subject to conditions, exempt from UK tax on
DIVIDENDS PAID ON THE DIVIDEND ACCESS SHARES
dividends. Withholding tax suffered cannot be offset against such exempt
dividends. UK tax-resident holders should also be entitled to claim a refund of
There is no Dutch withholding tax on dividends on B shares or B ADSs,
one-third of the Dutch withholding tax from the Dutch tax authorities in reliance
provided that such dividends are paid on the dividend access shares pursuant
on the tax convention between the Netherlands and the UK. Pension plans
to the dividend access mechanism (see “Dividend access mechanism for B
meeting certain defined criteria can, however, be entitled to claim a full
shares” on page 86). Dividends paid on the dividend access shares are
refund or exemption at source of the dividend tax withheld. Also, UK tax-
treated as UK-source for tax purposes and there is no UK withholding tax on
resident corporate shareholders holding at least a 5% shareholding and
them. From April 2016, there were changes to the taxation of dividends for
meeting other defined criteria are exempted at source from dividend tax.
individual shareholders resident in the UK. The dividend tax credit was
abolished, and a tax-free dividend allowance introduced.
For holders who are tax-resident in any other country, the availability of a
whole or partial exemption or refund of Dutch withholding tax is governed by
In 2017, all dividends with respect to B shares and B ADSs were paid on the
Dutch tax law and/or the tax convention, if any, between the Netherlands
dividend access shares pursuant to the dividend access mechanism.
and the country of the holder’s residence.
DUTCH WITHHOLDING TAX
There may be other grounds on which holders who are tax-resident in the UK,
When Dutch withholding tax applies on dividends paid to a US holder (that
the USA or any other country can obtain a full or partial refund of the Dutch
is, dividends on A shares or A ADSs, or on B shares or B ADSs that are not
withholding tax, depending on their particular circumstances; see “Taxation:
paid on the dividend access shares pursuant to the dividend access
General” above.
mechanism), the US holder will be subject to Dutch withholding tax at the rate
of 15%. A US holder who is entitled to the benefits of the 1992 Double
Taxation Convention (the Convention) between the USA and the Netherlands
as amended by the protocol signed on March 8, 2004, will be entitled to a
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Non-GAAP measures reconciliations
In accordance with our General Business Principles and Code of Conduct,
Shell seeks to comply with all applicable international trade laws including
applicable sanctions and embargoes.
The activities listed below have been conducted outside the USA by non-US
affiliates of Royal Dutch Shell plc. None of the payments disclosed below
were made in US dollars, nor are any of the balances disclosed below held
in US dollars; however, for disclosure purposes, all have been converted into
US dollars at the appropriate exchange rate. We do not believe that any of
the transactions or activities listed below violated US sanctions.
At December 31, 2017, we have a receivable of $10.5 million outstanding
with the National Iranian Oil Company (NIOC) associated with our previous
upstream activities conducted prior to the imposition of European Union
sanctions.
In 2017, we agreed to extend the term of a memorandum of understanding
and a separate confidentiality agreement, each originally signed in 2016,
with NIOC to cover a joint review of a number of oil and gas opportunities.
In April 2017, we entered into a confidentiality and restricted use agreement
with the National Petrochemical Company (NPC) regarding a potential
midstream opportunity in Iran. In August 2017, we signed an amendment to
extend the term of a non-binding letter of intent that was signed in 2016 with
NPC to cover a joint review of opportunities in the Iranian petrochemicals
sector. In August 2017, we entered into a technology licence agreement with
Petrochemical Industries Design and Engineering Company (PIDEC) to provide
licence and engineering services to Abadan Oil Refinery Company (AORC)
in relation to Cansolv sulphur dioxide (SO2) scrubbing technology, as well as
a separate end-user licence agreement with AORC for a continuing licence
for the Cansolv SO2 technology once PIDEC’s work at Abadan has been
completed. In addition, a separate agreement was signed at the same time
between Shell, the Iran branch of Shell Development B.V. (SDI) and PIDEC,
for the arrangement of payments due under the licence and engineering
agreement to be made to SDI in Iran. There was no gross revenue or net
profit associated with these agreements.
$212 million and net profit of $3.4 million. In 2017, we purchased oil
cargoes from NIOC, which were subsequently sold to a Shell refinery,
resulting in gross revenue of $221 million and net profit of $7.5 million.
Freight and ancillary services pertaining to these cargoes, amounting to
approximately $11 million and $3 million, have not been settled with NIOC
and National Iranian Tanker Company, respectively. Shell may consider
future business opportunities with NIOC, including the purchase and trading
of oil, however no opportunities are currently being contemplated.
In 2017, we paid $13 for a 2013 corporate income tax claim, $84 in
stamp duty in relation to a 2008/2009 value-added tax claim and $818 for
a 2013 value-added tax claim to the Iranian Ministry of Finance, through our
Iranian accountant Bayat Rayan. There was no gross revenue or net profit
associated with these transactions.
In 2017, we paid $7,579 to the Iranian Civil Aviation Authority for the
clearance of overflight permits for Shell aircraft over Iranian airspace. There
was no gross revenue or net profit associated with these transactions. On
occasion, our aircraft may be routed over Iran and therefore these payments
may continue in the future.
In 2017, Shell employees met with Iranian officials in Iran. In relation to these
travelling Shell employees, $21,411 was paid to Iranian authorities for visas,
airport services and exit fees; $187 was paid to Bimeh Insurance Company
for travel insurance; $5,637 was paid to Iranian airlines for flight tickets; and
$298 was paid to Iranian hotels. We also discovered $224 in travel visa
costs in relation to 2016 that were not previously disclosed. We also paid
$127 to the Iranian embassy in the Netherlands to ratify documents. In
addition, we paid $28,099 in conference registration fees for conferences in
Iran attended by Shell employees. The conferences attended were the
Petroleum Conference – Iran 2017; the Iran Renewable Energy Commercial
Conference; the Iranian Petroleum and Energy Club Congress and Exhibition;
and the Iran Petrochemical Forum. There was no gross revenue or net profit
associated with these transactions. We expect to continue discussions with
Iranian officials and therefore similar payments may continue in the future.
In December 2016, we entered into a technology licence agreement with
Hamedan Ibn Sina Petrochemical Company for a Shell ethylene process, and
during 2017 this generated gross revenue of $6.3 million and a net profit of
$0.2 million. Hamedan Ibn Sina Petrochemical Company payments were
made into our account at Karafarin Bank.
In 2017, we provided downstream retail services to the Iranian Embassy in
Argentina. This transaction generated gross revenue of $441 and an
estimated net profit of $63. We have no contractual agreement with this
embassy.
In 2017, we received gross revenue of $236,602 into our account at
Karafarin Bank from Bank Mellat in relation to advisory services provided to
Marun Petrochemical Company, pursuant to an advisory agreement entered
into in June 2017. No net profit was associated with these services in 2017.
In 2017, two oil cargoes, which we purchased from NIOC in December
2016, were subsequently sold to a Shell refinery, resulting in gross revenue of
We maintain accounts with Karafarin Bank where our cash deposits (balance
of $8.4 million at December 31, 2017) generated non-taxable interest
income of $0.4 million in 2017, and we paid $450 in bank charges.
We have made payments amounting to $1.2 million through our account in
Karafarin Bank to a variety of non-sanctioned parties. We made a bank
transfer of $1,164 to test the ability to transfer funds from our Karafarin Bank
account to Syndicate Bank in India.
These non-GAAP measures, also known as alternative performance measures,
Organic capital investment includes capital expenditure and new finance
are financial measures other than those defined in International Financial
leases of existing subsidiaries, investments in existing joint ventures and
Reporting Standards which Shell considers provide useful information.
associates, and exploration expense (excluding well write-offs). Inorganic
EARNINGS ON A CURRENT COST OF SUPPLIES BASIS
Segment earnings are presented on a current cost of supplies basis (CCS
earnings), which is the earnings measure used by the Chief Executive Officer
for the purposes of making decisions about allocating resources and
assessing performance. On this basis, the purchase price of volumes sold
during the period is based on the current cost of supplies during the same
Organic capital investment
period after making allowance for the tax effect. CCS earnings therefore
exclude the effect of changes in the oil price on inventory carrying amounts.
The current cost of supplies adjustment does not impact Cash flow from
operating activities in the “Consolidated Statement of Cash Flows”.
Inorganic capital investment
Total capital investment
DIVESTMENTS
capital investment includes investments related to the acquisition of businesses,
investments in new joint ventures and associates, and new acreage.
Organic and inorganic capital investment
$ million
2017
2016
2015
22,177
26,913 28,403
1,829 52,964
458
24,006
79,877 28,861
Reconciliation of CCS earnings to income
for the period
Divestments is a measure used to monitor the progress of our divestment
programme. This measure comprises proceeds from sale of property, plant
2017
2016
2015
$ million
and equipment and businesses, joint ventures and associates, and other
Integrated Gas, Upstream and Downstream investments, adjusted onto an
Earnings on a current cost of supplies
basis (CCS earnings)
12,471 3,692 4,155
Attributable to non-controlling interest
(390 )
(159)
(313)
accruals basis and for any share consideration received or contingent
consideration initially recognised upon the related divestment, as well as
proceeds from sale of interests in entities while retaining control (for example,
proceeds from sale of interests in Shell Midstream Partners, L.P.).
Royal Dutch Shell plc shareholders
12,977 4,575 1,939
Earnings on a current cost of supplies
basis attributable to
Royal Dutch Shell plc shareholders
Current cost of supplies adjustment
Non-controlling interest
Income attributable to
Non-controlling interest
Income for the period
12,081 3,533 3,842
964 1,085 (1,955)
(68 )
(43)
52
458 202
261
13,435 4,777 2,200
Divestments reconciliation
$ million
2017
2016
2015
Proceeds from sale of property,
plant and equipment and businesses [A] 8,808
2,072 4,720
Proceeds from sale of joint ventures
and associates [A]
2,177
1,565
276
Share and contingent consideration [B]
3,046
275
—
Proceeds from sale of interests in entities
while retaining control [C]
CAPITAL INVESTMENT
Capital investment is a measure used to make decisions about allocating
resources and assessing performance.
Capital investment reconciliation
$ million
2017
2016
2015
Capital expenditure [A]
20,845 22,116 26,131
Other
Divestments
Of which
Integrated Gas
Upstream
Downstream
Corporate
278
1,108
3,031 [D]
(36)
595
(51)
17,340
4,984 5,540
3,077
352
269
11,542
1,726 2,478
2,703
2,889 2,282
18
17
511
excluding exploration wells written off
1,048 1,274 2,948
— 52,904
—
595 1,330
896
[A] Included within Cash flow from investing activities in the “Consolidated Statement of Cash Flows”.
[B] With effect from 2017, this is valued at the date of the related divestment, instead of when these
shares are disposed of or the contingent consideration is realised. There is also no impact on
divestments as a result of any revaluation. Comparative information, which only affects the Upstream
segment in 2016, has been adjusted. In 2017, it mainly comprises $2,829 million for shares in
Canadian Natural Resources Limited received as partial consideration in the oil sands divestment (see
Note 8 to the “Consolidated Financial Statements” on page 153).
[C] Included within “Change in non-controlling interest” in Cash flow from financing activities in the
1,074 2,343
91
“Consolidated Statement of Cash Flows”.
[D] Includes proceeds of $2,635 million from the sale of shares in Woodside Petroleum Limited.
Capital investment related to the
acquisition of BG Group plc
Investments in joint ventures
and associates [A]
Exploration expense,
Finance leases
Other
Capital investment
Of which
Integrated Gas
Upstream
Downstream
Corporate
444
(90 ) (1,205)
24,006 79,877 28,861
3,827 26,214 5,178
13,648 47,507 18,349
6,416 6,057 5,119
115
99
215
[A] Included within Cash flow from investing activities in the “Consolidated Statement of Cash Flows”.
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Non-GAAP measures reconciliations
In accordance with our General Business Principles and Code of Conduct,
$212 million and net profit of $3.4 million. In 2017, we purchased oil
Shell seeks to comply with all applicable international trade laws including
cargoes from NIOC, which were subsequently sold to a Shell refinery,
applicable sanctions and embargoes.
resulting in gross revenue of $221 million and net profit of $7.5 million.
Freight and ancillary services pertaining to these cargoes, amounting to
The activities listed below have been conducted outside the USA by non-US
approximately $11 million and $3 million, have not been settled with NIOC
affiliates of Royal Dutch Shell plc. None of the payments disclosed below
and National Iranian Tanker Company, respectively. Shell may consider
were made in US dollars, nor are any of the balances disclosed below held
future business opportunities with NIOC, including the purchase and trading
in US dollars; however, for disclosure purposes, all have been converted into
of oil, however no opportunities are currently being contemplated.
US dollars at the appropriate exchange rate. We do not believe that any of
the transactions or activities listed below violated US sanctions.
In 2017, we paid $13 for a 2013 corporate income tax claim, $84 in
At December 31, 2017, we have a receivable of $10.5 million outstanding
a 2013 value-added tax claim to the Iranian Ministry of Finance, through our
with the National Iranian Oil Company (NIOC) associated with our previous
Iranian accountant Bayat Rayan. There was no gross revenue or net profit
upstream activities conducted prior to the imposition of European Union
associated with these transactions.
stamp duty in relation to a 2008/2009 value-added tax claim and $818 for
sanctions.
In 2017, we agreed to extend the term of a memorandum of understanding
clearance of overflight permits for Shell aircraft over Iranian airspace. There
and a separate confidentiality agreement, each originally signed in 2016,
was no gross revenue or net profit associated with these transactions. On
with NIOC to cover a joint review of a number of oil and gas opportunities.
occasion, our aircraft may be routed over Iran and therefore these payments
In 2017, we paid $7,579 to the Iranian Civil Aviation Authority for the
In April 2017, we entered into a confidentiality and restricted use agreement
may continue in the future.
with the National Petrochemical Company (NPC) regarding a potential
midstream opportunity in Iran. In August 2017, we signed an amendment to
In 2017, Shell employees met with Iranian officials in Iran. In relation to these
extend the term of a non-binding letter of intent that was signed in 2016 with
travelling Shell employees, $21,411 was paid to Iranian authorities for visas,
NPC to cover a joint review of opportunities in the Iranian petrochemicals
airport services and exit fees; $187 was paid to Bimeh Insurance Company
sector. In August 2017, we entered into a technology licence agreement with
for travel insurance; $5,637 was paid to Iranian airlines for flight tickets; and
Petrochemical Industries Design and Engineering Company (PIDEC) to provide
$298 was paid to Iranian hotels. We also discovered $224 in travel visa
licence and engineering services to Abadan Oil Refinery Company (AORC)
costs in relation to 2016 that were not previously disclosed. We also paid
in relation to Cansolv sulphur dioxide (SO2) scrubbing technology, as well as
$127 to the Iranian embassy in the Netherlands to ratify documents. In
a separate end-user licence agreement with AORC for a continuing licence
addition, we paid $28,099 in conference registration fees for conferences in
for the Cansolv SO2 technology once PIDEC’s work at Abadan has been
Iran attended by Shell employees. The conferences attended were the
completed. In addition, a separate agreement was signed at the same time
Petroleum Conference – Iran 2017; the Iran Renewable Energy Commercial
between Shell, the Iran branch of Shell Development B.V. (SDI) and PIDEC,
Conference; the Iranian Petroleum and Energy Club Congress and Exhibition;
for the arrangement of payments due under the licence and engineering
and the Iran Petrochemical Forum. There was no gross revenue or net profit
agreement to be made to SDI in Iran. There was no gross revenue or net
associated with these transactions. We expect to continue discussions with
profit associated with these agreements.
Iranian officials and therefore similar payments may continue in the future.
In December 2016, we entered into a technology licence agreement with
In 2017, we provided downstream retail services to the Iranian Embassy in
Hamedan Ibn Sina Petrochemical Company for a Shell ethylene process, and
Argentina. This transaction generated gross revenue of $441 and an
during 2017 this generated gross revenue of $6.3 million and a net profit of
estimated net profit of $63. We have no contractual agreement with this
$0.2 million. Hamedan Ibn Sina Petrochemical Company payments were
embassy.
made into our account at Karafarin Bank.
In 2017, we received gross revenue of $236,602 into our account at
of $8.4 million at December 31, 2017) generated non-taxable interest
Karafarin Bank from Bank Mellat in relation to advisory services provided to
income of $0.4 million in 2017, and we paid $450 in bank charges.
Marun Petrochemical Company, pursuant to an advisory agreement entered
We have made payments amounting to $1.2 million through our account in
into in June 2017. No net profit was associated with these services in 2017.
Karafarin Bank to a variety of non-sanctioned parties. We made a bank
transfer of $1,164 to test the ability to transfer funds from our Karafarin Bank
We maintain accounts with Karafarin Bank where our cash deposits (balance
In 2017, two oil cargoes, which we purchased from NIOC in December
account to Syndicate Bank in India.
2016, were subsequently sold to a Shell refinery, resulting in gross revenue of
These non-GAAP measures, also known as alternative performance measures,
are financial measures other than those defined in International Financial
Reporting Standards which Shell considers provide useful information.
EARNINGS ON A CURRENT COST OF SUPPLIES BASIS
Segment earnings are presented on a current cost of supplies basis (CCS
earnings), which is the earnings measure used by the Chief Executive Officer
for the purposes of making decisions about allocating resources and
assessing performance. On this basis, the purchase price of volumes sold
during the period is based on the current cost of supplies during the same
period after making allowance for the tax effect. CCS earnings therefore
exclude the effect of changes in the oil price on inventory carrying amounts.
The current cost of supplies adjustment does not impact Cash flow from
operating activities in the “Consolidated Statement of Cash Flows”.
Reconciliation of CCS earnings to income
for the period
2017
2016
$ million
2015
Earnings on a current cost of supplies
basis (CCS earnings)
Attributable to non-controlling interest
Earnings on a current cost of supplies
basis attributable to
Royal Dutch Shell plc shareholders
Current cost of supplies adjustment
Non-controlling interest
Income attributable to
Royal Dutch Shell plc shareholders
Non-controlling interest
Income for the period
12,471 3,692 4,155
(313)
(390 )
(159)
12,081 3,533 3,842
964 1,085 (1,955)
52
(68 )
(43)
12,977 4,575 1,939
261
458 202
13,435 4,777 2,200
CAPITAL INVESTMENT
Capital investment is a measure used to make decisions about allocating
resources and assessing performance.
Capital investment reconciliation
Capital expenditure [A]
Capital investment related to the
acquisition of BG Group plc
Investments in joint ventures
and associates [A]
Exploration expense,
excluding exploration wells written off
Finance leases
Other
Capital investment
Of which
Integrated Gas
Upstream
Downstream
Corporate
2017
2016
$ million
2015
20,845 22,116 26,131
— 52,904
—
595 1,330
896
1,048 1,274 2,948
91
1,074 2,343
(90 ) (1,205)
444
24,006 79,877 28,861
3,827 26,214 5,178
13,648 47,507 18,349
6,416 6,057 5,119
215
115
99
Organic capital investment includes capital expenditure and new finance
leases of existing subsidiaries, investments in existing joint ventures and
associates, and exploration expense (excluding well write-offs). Inorganic
capital investment includes investments related to the acquisition of businesses,
investments in new joint ventures and associates, and new acreage.
Organic and inorganic capital investment
2017
$ million
2015
2016
Organic capital investment
Inorganic capital investment
Total capital investment
22,177
1,829 52,964
24,006
26,913 28,403
458
79,877 28,861
DIVESTMENTS
Divestments is a measure used to monitor the progress of our divestment
programme. This measure comprises proceeds from sale of property, plant
and equipment and businesses, joint ventures and associates, and other
Integrated Gas, Upstream and Downstream investments, adjusted onto an
accruals basis and for any share consideration received or contingent
consideration initially recognised upon the related divestment, as well as
proceeds from sale of interests in entities while retaining control (for example,
proceeds from sale of interests in Shell Midstream Partners, L.P.).
Divestments reconciliation
2017
2016
$ million
2015
Proceeds from sale of property,
plant and equipment and businesses [A] 8,808
Proceeds from sale of joint ventures
and associates [A]
Share and contingent consideration [B]
Proceeds from sale of interests in entities
while retaining control [C]
Other
2,177
3,046
278
3,031 [D]
2,072 4,720
1,565
275
1,108
(36)
276
—
595
(51)
Divestments
Of which
Integrated Gas
Upstream
Downstream
Corporate
17,340
4,984 5,540
3,077
11,542
2,703
18
352
269
1,726 2,478
2,889 2,282
511
17
[A] Included within Cash flow from investing activities in the “Consolidated Statement of Cash Flows”.
[B] With effect from 2017, this is valued at the date of the related divestment, instead of when these
shares are disposed of or the contingent consideration is realised. There is also no impact on
divestments as a result of any revaluation. Comparative information, which only affects the Upstream
segment in 2016, has been adjusted. In 2017, it mainly comprises $2,829 million for shares in
Canadian Natural Resources Limited received as partial consideration in the oil sands divestment (see
Note 8 to the “Consolidated Financial Statements” on page 153).
[C] Included within “Change in non-controlling interest” in Cash flow from financing activities in the
“Consolidated Statement of Cash Flows”.
[D] Includes proceeds of $2,635 million from the sale of shares in Woodside Petroleum Limited.
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
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225
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[A] Included within Cash flow from investing activities in the “Consolidated Statement of Cash Flows”.
non-gaap measures reconciliations Continued
Index to the Exhibits
OPERATING EXPENSES
Operating expenses is a measure of Shell’s cost management performance,
comprising items from the “Consolidated Statement of Income” as follows.
Operating expenses
Production and manufacturing expenses
Selling, distribution and
administrative expenses
Research and development
2017
2016
$ million
2015
26,652 28,434 28,095
10,509 12,101 11,956
1,093
38,083 41,549 41,144
922 1,014
Total
Of which
Integrated Gas
Upstream
Downstream
Corporate
5,471 6,479
4,088
12,656 14,501 15,740
19,583 19,681 20,816
500
373
888
RETURN ON AVERAGE CAPITAL EMPLOYED
Return on average capital employed (ROACE) measures the efficiency of our
utilisation of the capital that we employ. In this calculation, ROACE is defined
as income for the period, adjusted for after-tax interest expense, as a
percentage of the average capital employed for the period. Capital
employed consists of total equity, current debt and non-current debt.
Calculation of return on average capital
employed
2017
2016
$ million
2015
Income for the period
Interest expense after tax
Income before interest expense
Capital employed – opening
13,435 4,777
2,995 2,730
16,430 7,507
2,200
2,030
4,230
280,988 222,500 218,326
Capital employed – closing
283,477 280,988 222,500
Capital employed – average
ROACE
282,233 251,744 220,413
1.9%
5.8%
3.0%
FREE CASH FLOW
Free cash flow is used to evaluate cash available for financing activities,
including dividend payments, after investment in maintaining and growing our
business. It is defined as follows.
Free cash flow
Cash flow from operating activities
Cash flow from investing activities
Free cash flow
2016
2017
$ million
2015
35,650 20,615 29,810
(8,029) (30,963) (22,407)
7,403
27,621 (10,348)
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
226
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Exhibit No. Description
Page
1.1
Memorandum of Association of Royal Dutch Shell plc, together with a special resolution of Royal Dutch Shell plc dated May 18,
2010, (incorporated by reference to Exhibit 4.12 to the Registration Statement on Form F-3 (No. 333-177588) of Royal Dutch Shell
plc filed with the US Securities and Exchange Commission on October 28, 2011).
1.2
Articles of Association of Royal Dutch Shell plc, together with a special resolution of Royal Dutch Shell plc dated May 18, 2010,
(incorporated by reference to Exhibit 4.11 to the Registration Statement on Form F-3 (No. 333-177588) of Royal Dutch Shell plc filed
with the US Securities and Exchange Commission on October 28, 2011).
2.1
Amended and Restated Dividend Access Trust Deed dated December 22, 2015, (incorporated by reference to Exhibit 2 to the
Annual Report for the fiscal year ended December 31, 2015, on Form 20-F (File No. 001-32575) of Royal Dutch Shell plc filed with
the US Securities and Exchange Commission on March 10, 2016).
4.1
Shell Provident Fund Regulations and Trust Agreement, as amended (incorporated by reference to Exhibit 4.7 to the Post-Effective
Amendment to Registration Statement on Form S-8 (No. 333-126715) of Royal Dutch Shell plc filed with the US Securities and
Exchange Commission on June 18, 2007).
4.2
Form of Director Indemnity Agreement (incorporated by reference to Exhibit 4.3 to the Annual Report for the fiscal year ended
December 31, 2005, on Form 20-F (File No. 001-32575) of Royal Dutch Shell plc filed with the US Securities and Exchange
Commission on March 13, 2006).
4.3
Senior Debt Securities Indenture dated June 27, 2006, among Shell International Finance B.V., as issuer, Royal Dutch Shell plc, as
guarantor, and Deutsche Bank Trust Company Americas, as trustee (incorporated by reference to Exhibit 4.3 to the Registration
Statement on Form F-3 (No. 333-126726) of Royal Dutch Shell plc filed with the US Securities and Exchange Commission on July
20, 2005, amended from then to be dated as of June 27, 2006, and with the parties’ signatures).
4.4
Form of contract of employment for Executive Directors (incorporated by reference to Exhibit 4.5 to the Annual Report for fiscal year
ended December 31, 2013, on Form 20-F (File No. 001-32575) of Royal Dutch Shell plc filed with the US Securities and Exchange
Commission on March 13, 2014).
4.5
Form of Letter of appointments for Non-executive Directors (incorporated by reference to Exhibit 4.11 to the Annual Report for fiscal
year ended December 31, 2006, on Form 20-F (File No. 001-32575) of Royal Dutch Shell plc filed with the US Securities and
Calculation of Return on Average Capital Employed (ROACE) (incorporated by reference to page 226 herein).
Calculation of gearing (incorporated by reference to page 22 and Note 14 to the Consolidated Financial Statements on page 158
Exchange Commission on March 13, 2007).
Calculation of Ratio of Earnings to Fixed Charges.
herein).
Significant Shell subsidiaries at December 31, 2017.
Section 302 Certification of Royal Dutch Shell plc.
Section 302 Certification of Royal Dutch Shell plc.
Section 906 Certification of Royal Dutch Shell plc.
Consent of Ernst & Young LLP, London, United Kingdom.
7.1
7.2
7.3
8.1
12.1
12.2
13.1
99.1
99.2
99.3
99.4
101
Consent of PricewaterhouseCoopers LLP, London, United Kingdom.
Consent of Ernst & Young LLP, London, United Kingdom, relating to the Royal Dutch Shell Dividend Access Trust.
Consent of PricewaterhouseCoopers CI LLP, Jersey, Channel Islands, relating to the Royal Dutch Shell Dividend Access Trust.
Interactive data files.
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OPERATING EXPENSES
Operating expenses is a measure of Shell’s cost management performance,
comprising items from the “Consolidated Statement of Income” as follows.
Operating expenses
2017
2016
2015
$ million
Production and manufacturing expenses
26,652 28,434 28,095
Selling, distribution and
administrative expenses
Research and development
Total
Of which
Integrated Gas
Upstream
Downstream
Corporate
10,509 12,101 11,956
922 1,014
1,093
38,083 41,549 41,144
5,471 6,479
4,088
12,656 14,501 15,740
19,583 19,681 20,816
373
888
500
RETURN ON AVERAGE CAPITAL EMPLOYED
Return on average capital employed (ROACE) measures the efficiency of our
utilisation of the capital that we employ. In this calculation, ROACE is defined
as income for the period, adjusted for after-tax interest expense, as a
percentage of the average capital employed for the period. Capital
employed consists of total equity, current debt and non-current debt.
Calculation of return on average capital
employed
Income for the period
Interest expense after tax
$ million
2017
2016
2015
13,435 4,777
2,200
2,995 2,730
2,030
Income before interest expense
16,430 7,507
4,230
Capital employed – opening
280,988 222,500 218,326
Capital employed – closing
283,477 280,988 222,500
Capital employed – average
282,233 251,744 220,413
ROACE
5.8%
3.0%
1.9%
FREE CASH FLOW
Free cash flow is used to evaluate cash available for financing activities,
including dividend payments, after investment in maintaining and growing our
business. It is defined as follows.
Free cash flow
2017
2016
2015
$ million
Cash flow from operating activities
35,650 20,615 29,810
Cash flow from investing activities
(8,029) (30,963) (22,407)
Free cash flow
27,621 (10,348)
7,403
Index to the Exhibits
Index to the Exhibits
Exhibit No. Description
1.1
Memorandum of Association of Royal Dutch Shell plc, together with a special resolution of Royal Dutch Shell plc dated May 18,
Page
2010, (incorporated by reference to Exhibit 4.12 to the Registration Statement on Form F-3 (No. 333-177588) of Royal Dutch Shell
plc filed with the US Securities and Exchange Commission on October 28, 2011).
1.2
Articles of Association of Royal Dutch Shell plc, together with a special resolution of Royal Dutch Shell plc dated May 18, 2010,
(incorporated by reference to Exhibit 4.11 to the Registration Statement on Form F-3 (No. 333-177588) of Royal Dutch Shell plc filed
with the US Securities and Exchange Commission on October 28, 2011).
2.1
Amended and Restated Dividend Access Trust Deed dated December 22, 2015, (incorporated by reference to Exhibit 2 to the
Annual Report for the fiscal year ended December 31, 2015, on Form 20-F (File No. 001-32575) of Royal Dutch Shell plc filed with
the US Securities and Exchange Commission on March 10, 2016).
4.1
Shell Provident Fund Regulations and Trust Agreement, as amended (incorporated by reference to Exhibit 4.7 to the Post-Effective
Amendment to Registration Statement on Form S-8 (No. 333-126715) of Royal Dutch Shell plc filed with the US Securities and
Exchange Commission on June 18, 2007).
4.2
Form of Director Indemnity Agreement (incorporated by reference to Exhibit 4.3 to the Annual Report for the fiscal year ended
December 31, 2005, on Form 20-F (File No. 001-32575) of Royal Dutch Shell plc filed with the US Securities and Exchange
Commission on March 13, 2006).
4.3
Senior Debt Securities Indenture dated June 27, 2006, among Shell International Finance B.V., as issuer, Royal Dutch Shell plc, as
guarantor, and Deutsche Bank Trust Company Americas, as trustee (incorporated by reference to Exhibit 4.3 to the Registration
Statement on Form F-3 (No. 333-126726) of Royal Dutch Shell plc filed with the US Securities and Exchange Commission on July
20, 2005, amended from then to be dated as of June 27, 2006, and with the parties’ signatures).
4.4
Form of contract of employment for Executive Directors (incorporated by reference to Exhibit 4.5 to the Annual Report for fiscal year
ended December 31, 2013, on Form 20-F (File No. 001-32575) of Royal Dutch Shell plc filed with the US Securities and Exchange
Commission on March 13, 2014).
4.5
7.1
7.2
7.3
8.1
12.1
12.2
13.1
99.1
99.2
99.3
99.4
101
Form of Letter of appointments for Non-executive Directors (incorporated by reference to Exhibit 4.11 to the Annual Report for fiscal
year ended December 31, 2006, on Form 20-F (File No. 001-32575) of Royal Dutch Shell plc filed with the US Securities and
Exchange Commission on March 13, 2007).
Calculation of Ratio of Earnings to Fixed Charges.
Calculation of Return on Average Capital Employed (ROACE) (incorporated by reference to page 226 herein).
Calculation of gearing (incorporated by reference to page 22 and Note 14 to the Consolidated Financial Statements on page 158
herein).
Significant Shell subsidiaries at December 31, 2017.
Section 302 Certification of Royal Dutch Shell plc.
Section 302 Certification of Royal Dutch Shell plc.
Section 906 Certification of Royal Dutch Shell plc.
Consent of Ernst & Young LLP, London, United Kingdom.
Consent of PricewaterhouseCoopers LLP, London, United Kingdom.
Consent of Ernst & Young LLP, London, United Kingdom, relating to the Royal Dutch Shell Dividend Access Trust.
Consent of PricewaterhouseCoopers CI LLP, Jersey, Channel Islands, relating to the Royal Dutch Shell Dividend Access Trust.
Interactive data files.
E1
E2
E21
E22
E23
E24
E25
E26
E27
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Signatures
Signatures
Exhibit 7.1
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorised the undersigned to sign the
Annual Report on Form 20-F on its behalf.
Royal Dutch Shell plc
/s/ Ben van Beurden
Ben van Beurden
Chief Executive Officer
March 14, 2018
Calculation of ratio of earnings to fixed charges
Pre-tax income from continuing operations before income
from equity investees
Total fixed charges
Distributed income from equity investees
Interest capitalised
Total earnings
Interest expensed and capitalised
Interest within rental expense
Total fixed charges
Ratio of earnings to fixed charges
2017
2016
2015
2014
13,905
4,270
4,998
(622)
22,551
3,562
708
2,061
3,508
3,820
(725)
8,664
2,736
772
4,270
3,508
2,495
5.28
2.47
1.93
(1,480 )
22,198
26,317
4,803
30,456
34,382
2,495
4,627
(839 )
2,113
6,902
(757)
1,795
1,522
700
591
2,113
14.41
$ million
2013
1,710
7,117
(762)
1,412
298
1,710
20.11
For the purposes of the table above, earnings consist of pre-tax income from continuing operations (before adjustment for non-controlling interest) plus fixed
charges (excluding capitalised interest) less undistributed income of joint ventures and associates. Fixed charges consist of expensed and capitalised interest
(excluding accretion expense) plus interest within rental expenses (for operating leases).
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
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228
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Signatures
Royal Dutch Shell plc
/s/ Ben van Beurden
Ben van Beurden
Chief Executive Officer
March 14, 2018
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorised the undersigned to sign the
Annual Report on Form 20-F on its behalf.
Calculation of ratio of earnings to fixed charges
Exhibit 7.1
Exhibit 7.1
Pre-tax income from continuing operations before income
from equity investees
Total fixed charges
Distributed income from equity investees
Interest capitalised
Total earnings
Interest expensed and capitalised
Interest within rental expense
Total fixed charges
Ratio of earnings to fixed charges
2017
2016
2015
2014
13,905
4,270
4,998
(622)
22,551
3,562
708
4,270
5.28
2,061
3,508
3,820
(725)
8,664
2,736
772
3,508
2.47
(1,480 )
2,495
4,627
(839 )
22,198
2,113
6,902
(757)
4,803
30,456
1,795
700
2,495
1.93
1,522
591
2,113
14.41
$ million
2013
26,317
1,710
7,117
(762)
34,382
1,412
298
1,710
20.11
For the purposes of the table above, earnings consist of pre-tax income from continuing operations (before adjustment for non-controlling interest) plus fixed
charges (excluding capitalised interest) less undistributed income of joint ventures and associates. Fixed charges consist of expensed and capitalised interest
(excluding accretion expense) plus interest within rental expenses (for operating leases).
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
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Exhibit 8.1
Exhibit 8.1
SIGNIFICANT SUBSIDIARIES AND OTHER RELATED UNDERTAKINGS (AUDITED)
Significant subsidiaries and other related undertakings at December 31, 2017, are set out below. Significant subsidiaries are shaded and each meets the
threshold specified under rule 1-02(w) of Regulation S-X. Shell’s percentage of share capital is shown to the nearest whole number. All subsidiaries have been
included in the “Consolidated Financial Statements” on pages 137-178, and those held directly by the Company are marked with the footnote [a]. A number
of the entities listed are dormant or not yet operational. Entities that are proportionately consolidated are identified by the footnote [b]. Shell-owned shares are
ordinary (voting) shares unless identified with one of the following annotations against the company name: [c] Membership interest; [d] Partnership capital; [e]
Non-redeemable; [f] Ordinary, Membership interest; [g] Ordinary, Non-redeemable; [h] Ordinary, Partnership capital; [i] Ordinary, Redeemable; [j]
Ordinary, Redeemable, Non-redeemable; and [k] Redeemable, Non-redeemable.
Company by country of incorporation
Address of registered office
ARGENTINA
Deheza S.A.I.C.F. e I.
Av. Pte. Roque Sáenz Pena 788, 4th floor, Buenos Aires, 1383
Energina Compañía Argentina de Petróleo S.A.
Av. Pte. Roque Sáenz Pena 788, 4th floor, Buenos Aires, 1383
Estación Lima S.A.
O & G Developments Ltd S.A.
Av. Pte. Roque Sáenz Pena 788, 4th floor, Buenos Aires, 1383
Av. Pte. Roque Sáenz Pena 788, 4th floor, Buenos Aires, 1383
Shell Compañía Argentina de Petróleo S.A.
Av. Pte. Roque Sáenz Pena 788, 4th floor, Buenos Aires, 1383
Shell Gas S.A.
AUSTRALIA
A.C.N. 081 118 292 Pty Limited
Arrow Energy Holdings Pty Ltd
Austen & Butta Pty Ltd
Av. Pte. Roque Sáenz Pena 788, 4th floor, Buenos Aires, 1383
Level 30, 275 George Street, Brisbane, QLD 4000
Level 39, 111 Eagle Street, Brisbane, QLD 4000
Shell House, 562 Wellington Street, Perth, WA 6000
Australian Oil & Gas Corporation Pty Ltd
Level 30, 275 George Street, Brisbane, QLD 4000
BC 789 Holdings Pty Ltd
BG CPS Pty Limited
BG Pacific Holdings Pty Ltd
BNG (Surat) Pty Ltd
Condamine 1 Pty Ltd
Condamine 2 Pty Ltd
Condamine 3 Pty Ltd
Condamine 4 Pty Ltd
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Condamine Power Station Pty Ltd
Level 30, 275 George Street, Brisbane, QLD 4000
Fuelink Pty Ltd
Interstate Pipelines Pty Limited
Monash Energy Pty Ltd
New South Oil Pty Ltd
North West Shelf LNG Pty Ltd
OME Resources Australia Pty Ltd
Shell House, 562 Wellington Street, Perth, WA 6000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 14, 390 St Kilda Road, South Melbourne, VIC, 3004
Level 30, 275 George Street, Brisbane, QLD 4000
Shell House, 562 Wellington Street, Perth, WA 6000
Level 30, 275 George Street, Brisbane, QLD 4000
Petroleum Exploration Australia Pty Limited
Level 30, 275 George Street, Brisbane, QLD 4000
Petroleum Resources (Thailand) Pty. Limited
Level 30, 275 George Street, Brisbane, QLD 4000
Provident & Pensions Holdings Proprietary Limited
Shell House, 562 Wellington Street, Perth, WA 6000
Pure Energy Resources Pty Limited
Level 30, 275 George Street, Brisbane, QLD 4000
QCLNG Operating Company Pty Ltd [i]
Level 30, 275 George Street, Brisbane, QLD 4000
QCLNG Pty Ltd
QGC (B7) Pty Ltd
QGC (Exploration) Pty Ltd
QGC (Infrastructure) Pty Ltd
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
QGC Common Facilities Company Pty Ltd
Level 30, 275 George Street, Brisbane, QLD 4000
QGC Holdings 2 Pty Ltd
QGC Holdings 3 Pty Ltd
QGC Holdings 4 Pty Ltd
QGC Holdings 5 Pty Ltd
QGC Holdings 6 Pty Ltd
QGC Holdings 7 Pty Ltd
QGC Holdings 8 Pty Ltd
QGC Holdings 9 Pty Ltd
QGC Midstream Holdings Pty Ltd
QGC Midstream Investments Pty Ltd
QGC Midstream Land Pty Ltd
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
QGC Midstream Limited Partnership
Level 42, Bourke Place, 600 Bourke Street, Melbourne, VIC 3000
QGC Midstream Services Pty Ltd
QGC Northern Forestry Pty Ltd
QGC Pty Limited
QGC Sales Qld Pty Ltd
QGC Train 1 Pty Ltd
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
e2
additionaL inForMation SHELL ANNUAL REPORT AND FORM 20-F 2017
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
E2
%
100
100
100
100
100
100
100
50
100
100
100
100
100
100
100
100
100
100
100
100
100
50
100
100
100
100
100
100
100
75
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
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Company by country of incorporation
Address of registered office
QGC Train 1 Tolling Pty Ltd
QGC Train 1 UJV Manager Pty Ltd
QGC Train 2 Pty Ltd
QGC Train 2 Tolling No.2 Pty Ltd
QGC Train 2 Tolling Pty Ltd
QGC Train 2 UJV Manager Pty Ltd
QGC Upstream Holdings Pty Ltd
QGC Upstream Finance Pty Ltd
QGC Upstream Investments Pty Ltd
QGC Upstream Limited Partnership
Queensland Gas Company Pty Ltd
Roma Petroleum Pty Limited
SASF Pty Ltd
SGA (Queensland) Pty Ltd
Sgai Pty Limited
Shell Australia FLNG Pty Ltd
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 42, Bourke Place, 600 Bourke Street, Melbourne, VIC 3000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Shell House, 562 Wellington Street, Perth, WA 6000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Shell House, 562 Wellington Street, Perth, WA 6000
Shell Australia Lubricants Production Pty Ltd
Shell House, 562 Wellington Street, Perth, WA 6000
Shell Australia Pty Ltd
Shell House, 562 Wellington Street, Perth, WA 6000
Shell Australia Services Company Pty Ltd
Shell House, 562 Wellington Street, Perth, WA 6000
Shell Custodian Pty Ltd
Shell Development (PSC19) Pty Ltd
Shell Development (PSC20) Pty Ltd
Shell Energy Australia Pty Ltd
Shell House, 562 Wellington Street, Perth, WA 6000
Shell House, 562 Wellington Street, Perth, WA 6000
Shell House, 562 Wellington Street, Perth, WA 6000
Level 30, 275 George Street, Brisbane, QLD 4000
Shell Energy Holdings Australia Limited
Shell House, 562 Wellington Street, Perth, WA 6000
Shell Energy Investments Australia Pty Ltd
Shell House, 562 Wellington Street, Perth, WA 6000
Shell Global Solutions Australia Pty Ltd
Shell House, 562 Wellington Street, Perth, WA 6000
Shell Tankers Australia Pty Ltd
Shell House, 562 Wellington Street, Perth, WA 6000
Starzap Pty Ltd
Sunshine 685 Pty Limited
Sunshine Gas Pty Limited
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Trident LNG Shipping Services Pty Ltd
Shell House, 562 Wellington Street, Perth, WA 6000
Trident Shipping Services Pty Ltd
Shell House, 562 Wellington Street, Perth, WA 6000
Walloons Coal Seam Gas Company Pty Limited [i]
Level 30, 275 George Street, Brisbane, QLD 4000
Innsbrucker Bundesstrasse 95, Salzburg, 5020
Tech Gate, Donau-City-Str. 1, Vienna, 1220
Tech Gate, Donau-City-Str. 1, Vienna, 1220
Schulhof 6/1, Vienna, 1010
AUSTRIA
Salzburg Fuelling GmbH
Shell Austria Gesellschaft mbH
Shell Brazil Holding GmbH
Shell China Holding GmbH
BAHAMAS
BARBADOS
TBG Tanklager Betriebsgesellschaft m.b.H.
Rettenlackstrasse 3, Salzburg, 5020
Transalpine Ölleitung in Österreich GmbH
Kienburg 11, Matrei in Osttirol, 9971
Shell E & P Ireland Offshore Inc.
P.O. Box N4805, St. Andrew's Court, Frederick Street Steps, Nassau
Shell Trinidad and Tobago Resources SRL
One Welches, Welches, St. Thomas, BB22025
Shell Western Supply and Trading Limited
Mahogany Court, Wildey Business Park, Wildey, St. Michael, BB11000
BELGIUM
Belgian Shell S.A.
New Market Belgium
BERMUDA
CRI Catalyst Company Belgium N.V.
Pantserschipstraat 331, Gent, 9000
Ethyleen Pijpleiding Maatschappij (Belgie) N.V.
Kantersteen 47, Brussels, 1000
Cantersteen 47, Brussels, 1000
Cantersteen 47, Brussels, 1000
Egypt LNG Shipping Limited
Clarendon House, 2 Church Street, Hamilton, HM 11
Gas Investments & Services Company Limited
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
Kuwait Shell Limited
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
Pecten Middle East Services Company Limited
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
Pecten Somalia Company Limited
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
Qatar Shell GTL Limited
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
Sakhalin Energy Investment Company Ltd
Clarendon House, 2 Church Street, Third Floor, Hamilton, HM 11
Shell Australia Natural Gas Shipping Limited
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
Shell Bermuda (Overseas) Limited
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
Shell Caribbean & Central America Ltd
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
Shell Deepwater Borneo Limited
Shell EP International Limited
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
Shell Exploration and Production Guyana Limited
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
Shell Holdings (Bermuda) Limited
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
Shell International Trading Middle East Limited
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
Shell Markets (Middle East) Limited
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
Shell Mexico Exploration and Production Investment Limited
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
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100
100
100
100
100
100
100
100
100
100
100
75
33
100
100
100
50
19
100
100
100
100
100
100
100
25
85
100
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28
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100
Exhibit 8.1
SIGNIFICANT SUBSIDIARIES AND OTHER RELATED UNDERTAKINGS (AUDITED)
Significant subsidiaries and other related undertakings at December 31, 2017, are set out below. Significant subsidiaries are shaded and each meets the
threshold specified under rule 1-02(w) of Regulation S-X. Shell’s percentage of share capital is shown to the nearest whole number. All subsidiaries have been
included in the “Consolidated Financial Statements” on pages 137-178, and those held directly by the Company are marked with the footnote [a]. A number
of the entities listed are dormant or not yet operational. Entities that are proportionately consolidated are identified by the footnote [b]. Shell-owned shares are
ordinary (voting) shares unless identified with one of the following annotations against the company name: [c] Membership interest; [d] Partnership capital; [e]
Non-redeemable; [f] Ordinary, Membership interest; [g] Ordinary, Non-redeemable; [h] Ordinary, Partnership capital; [i] Ordinary, Redeemable; [j]
Ordinary, Redeemable, Non-redeemable; and [k] Redeemable, Non-redeemable.
Company by country of incorporation
Address of registered office
ARGENTINA
Deheza S.A.I.C.F. e I.
Energina Compañía Argentina de Petróleo S.A.
Av. Pte. Roque Sáenz Pena 788, 4th floor, Buenos Aires, 1383
Estación Lima S.A.
O & G Developments Ltd S.A.
Av. Pte. Roque Sáenz Pena 788, 4th floor, Buenos Aires, 1383
Av. Pte. Roque Sáenz Pena 788, 4th floor, Buenos Aires, 1383
Shell Compañía Argentina de Petróleo S.A.
Av. Pte. Roque Sáenz Pena 788, 4th floor, Buenos Aires, 1383
Av. Pte. Roque Sáenz Pena 788, 4th floor, Buenos Aires, 1383
Av. Pte. Roque Sáenz Pena 788, 4th floor, Buenos Aires, 1383
Australian Oil & Gas Corporation Pty Ltd
Level 30, 275 George Street, Brisbane, QLD 4000
Shell Gas S.A.
AUSTRALIA
A.C.N. 081 118 292 Pty Limited
Arrow Energy Holdings Pty Ltd
Austen & Butta Pty Ltd
BC 789 Holdings Pty Ltd
BG CPS Pty Limited
BG Pacific Holdings Pty Ltd
BNG (Surat) Pty Ltd
Condamine 1 Pty Ltd
Condamine 2 Pty Ltd
Condamine 3 Pty Ltd
Condamine 4 Pty Ltd
Fuelink Pty Ltd
Interstate Pipelines Pty Limited
Monash Energy Pty Ltd
New South Oil Pty Ltd
North West Shelf LNG Pty Ltd
OME Resources Australia Pty Ltd
QCLNG Pty Ltd
QGC (B7) Pty Ltd
QGC (Exploration) Pty Ltd
QGC (Infrastructure) Pty Ltd
QGC Holdings 2 Pty Ltd
QGC Holdings 3 Pty Ltd
QGC Holdings 4 Pty Ltd
QGC Holdings 5 Pty Ltd
QGC Holdings 6 Pty Ltd
QGC Holdings 7 Pty Ltd
QGC Holdings 8 Pty Ltd
QGC Holdings 9 Pty Ltd
QGC Midstream Holdings Pty Ltd
QGC Midstream Investments Pty Ltd
QGC Midstream Land Pty Ltd
QGC Midstream Services Pty Ltd
QGC Northern Forestry Pty Ltd
QGC Pty Limited
QGC Sales Qld Pty Ltd
QGC Train 1 Pty Ltd
Condamine Power Station Pty Ltd
Level 30, 275 George Street, Brisbane, QLD 4000
Petroleum Exploration Australia Pty Limited
Level 30, 275 George Street, Brisbane, QLD 4000
Petroleum Resources (Thailand) Pty. Limited
Level 30, 275 George Street, Brisbane, QLD 4000
Provident & Pensions Holdings Proprietary Limited
Shell House, 562 Wellington Street, Perth, WA 6000
Pure Energy Resources Pty Limited
Level 30, 275 George Street, Brisbane, QLD 4000
QCLNG Operating Company Pty Ltd [i]
Level 30, 275 George Street, Brisbane, QLD 4000
QGC Common Facilities Company Pty Ltd
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 39, 111 Eagle Street, Brisbane, QLD 4000
Shell House, 562 Wellington Street, Perth, WA 6000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Shell House, 562 Wellington Street, Perth, WA 6000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 14, 390 St Kilda Road, South Melbourne, VIC, 3004
Level 30, 275 George Street, Brisbane, QLD 4000
Shell House, 562 Wellington Street, Perth, WA 6000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
QGC Midstream Limited Partnership
Level 42, Bourke Place, 600 Bourke Street, Melbourne, VIC 3000
Company by country of incorporation
Address of registered office
QGC Train 1 Tolling Pty Ltd
QGC Train 1 UJV Manager Pty Ltd
QGC Train 2 Pty Ltd
QGC Train 2 Tolling No.2 Pty Ltd
QGC Train 2 Tolling Pty Ltd
QGC Train 2 UJV Manager Pty Ltd
QGC Upstream Holdings Pty Ltd
QGC Upstream Finance Pty Ltd
QGC Upstream Investments Pty Ltd
QGC Upstream Limited Partnership
Queensland Gas Company Pty Ltd
Roma Petroleum Pty Limited
SASF Pty Ltd
SGA (Queensland) Pty Ltd
Sgai Pty Limited
Shell Australia FLNG Pty Ltd
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 42, Bourke Place, 600 Bourke Street, Melbourne, VIC 3000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Shell House, 562 Wellington Street, Perth, WA 6000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Shell House, 562 Wellington Street, Perth, WA 6000
Shell Australia Lubricants Production Pty Ltd
Shell House, 562 Wellington Street, Perth, WA 6000
Shell Australia Pty Ltd
Shell House, 562 Wellington Street, Perth, WA 6000
Shell Australia Services Company Pty Ltd
Shell House, 562 Wellington Street, Perth, WA 6000
Shell Custodian Pty Ltd
Shell Development (PSC19) Pty Ltd
Shell Development (PSC20) Pty Ltd
Shell Energy Australia Pty Ltd
Shell House, 562 Wellington Street, Perth, WA 6000
Shell House, 562 Wellington Street, Perth, WA 6000
Shell House, 562 Wellington Street, Perth, WA 6000
Level 30, 275 George Street, Brisbane, QLD 4000
Shell Energy Holdings Australia Limited
Shell House, 562 Wellington Street, Perth, WA 6000
Shell Energy Investments Australia Pty Ltd
Shell House, 562 Wellington Street, Perth, WA 6000
Shell Global Solutions Australia Pty Ltd
Shell House, 562 Wellington Street, Perth, WA 6000
Shell Tankers Australia Pty Ltd
Shell House, 562 Wellington Street, Perth, WA 6000
Starzap Pty Ltd
Sunshine 685 Pty Limited
Sunshine Gas Pty Limited
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Level 30, 275 George Street, Brisbane, QLD 4000
Trident LNG Shipping Services Pty Ltd
Shell House, 562 Wellington Street, Perth, WA 6000
Trident Shipping Services Pty Ltd
Shell House, 562 Wellington Street, Perth, WA 6000
Walloons Coal Seam Gas Company Pty Limited [i]
Level 30, 275 George Street, Brisbane, QLD 4000
AUSTRIA
Salzburg Fuelling GmbH
Shell Austria Gesellschaft mbH
Shell Brazil Holding GmbH
Shell China Holding GmbH
Innsbrucker Bundesstrasse 95, Salzburg, 5020
Tech Gate, Donau-City-Str. 1, Vienna, 1220
Tech Gate, Donau-City-Str. 1, Vienna, 1220
Schulhof 6/1, Vienna, 1010
TBG Tanklager Betriebsgesellschaft m.b.H.
Rettenlackstrasse 3, Salzburg, 5020
Transalpine Ölleitung in Österreich GmbH
Kienburg 11, Matrei in Osttirol, 9971
BAHAMAS
Shell E & P Ireland Offshore Inc.
P.O. Box N4805, St. Andrew's Court, Frederick Street Steps, Nassau
BARBADOS
Shell Trinidad and Tobago Resources SRL
One Welches, Welches, St. Thomas, BB22025
Shell Western Supply and Trading Limited
Mahogany Court, Wildey Business Park, Wildey, St. Michael, BB11000
BELGIUM
Belgian Shell S.A.
Cantersteen 47, Brussels, 1000
CRI Catalyst Company Belgium N.V.
Pantserschipstraat 331, Gent, 9000
Ethyleen Pijpleiding Maatschappij (Belgie) N.V.
Kantersteen 47, Brussels, 1000
New Market Belgium
BERMUDA
Cantersteen 47, Brussels, 1000
Egypt LNG Shipping Limited
Clarendon House, 2 Church Street, Hamilton, HM 11
Gas Investments & Services Company Limited
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
Kuwait Shell Limited
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
Pecten Middle East Services Company Limited
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
Pecten Somalia Company Limited
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
Qatar Shell GTL Limited
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
Sakhalin Energy Investment Company Ltd
Clarendon House, 2 Church Street, Third Floor, Hamilton, HM 11
Shell Australia Natural Gas Shipping Limited
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
Shell Bermuda (Overseas) Limited
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
Shell Caribbean & Central America Ltd
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
Shell Deepwater Borneo Limited
Shell EP International Limited
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
Shell Exploration and Production Guyana Limited
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
Shell Holdings (Bermuda) Limited
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
Shell International Trading Middle East Limited
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
Shell Markets (Middle East) Limited
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
Shell Mexico Exploration and Production Investment Limited
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
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ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
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Company by country of incorporation
Address of registered office
Shell Offshore Central Gabon Ltd
Shell Oman Trading Limited
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
Shell Overseas Holdings (Oman) Limited
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
Shell Petroleum (Malaysia) Ltd
Shell Saudi Arabia (Refining) Limited
Shell South Syria Exploration Limited
Shell Trading (M.E.) Private Limited
Shell Trust (Bermuda) Limited
Shell Trust (U.K. Property) Limited
Solen Insurance Limited
Solen Life Insurance Limited
Tacoma Company Limited
BRAZIL
BG Comercio e Importacao Ltda.
BG do Brasil Ltda.
BG Petroleo & Gas Brasil Ltda
Fusus Comercio e Participacoes Ltda.
Icolub - Industria de Lubrificantes S.A.
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
Av. República do Chile 330, 23o andar, Torre 2, Centro, Rio de Janeiro, 20031-170
Av. República do Chile 330, 23o andar, Torre 2, sala 2309, Centro, Rio de Janeiro, 20031-170
Av. República do Chile 330, 23o andar, Torre 2, sala 2309, Centro, Rio de Janeiro, 20031-170
Calcada das Orquideas 40, 1 E 2 Andares, Centro Comercial 1, Alphaville, Barueri - SP, 06453-017
Praia Intendente Bittencourt, 2 (Parte), Ilha do Governador, Rio de Janeiro, 21930-030
Pecten do Brasil Servicos de Petroleo Ltda
Av.das Americas 4200, Bloco 6, 4th Floor (parte), Barra da Tijuca, Rio de Janeiro, 22640-102
Raizen Combustíveis S.A.
Raizen Energia S.A.
Seapos Ltda.
Shell Brasil Participações Ltda.
Shell Brasil Petroleo Ltda.
Shell Energy do Brasil Ltda
BRUNEI
Victor Civita, 77, Block 1, Edifice: Rio Office Park, 4 floor, Barra da Tijuca, Rio de Janeiro, 22775-044
Av. Brigadeiro Faria Lima, 4100, 11th floor, part V, Itaim Bibi, São Paulo, 04538-132
Av.das Americas 4200, Bloco 6, sala 301 (parte), Barra da Tijuca, Rio de Janeiro, 22640-102
Av. Brigadeiro Faria Lima 3311, Conj 81 Sala 02, Itam Bibi, São Paulo, 04538-133
Av.das Americas 4200, Bloco 6, salas 101,201,301,401,501,601, Barra da Tijuca, Rio de Janeiro, 22640-102
Av.das Americas 4200, Bloco 6, sala 501 (parte), Barra da Tijuca, Rio de Janeiro, 22640-102
Brunei LNG Sendirian Berhad
Lumut, Seria, KC2935
Brunei Shell Marketing Company Sendirian Berhad
Brunei Shell Petroleum Company, Sendirian Berhad, Seria, KB2933
Brunei Shell Petroleum Company Sendirian Berhad
Jalan Utara, Panaga, Seria, KB2933
Brunei Shell Tankers Sendirian Berhad
Jalan Utara, Panaga, Seria, KB2933
Shell Borneo Sendirian Berhad
c/o BSP Head Office, NDCO Block, Ground Floor, Jalan Utara, Panaga Seria, KB2933
BULGARIA
Shell Bulgaria Ead
CAMBODIA
48, Sitnyakovo Blvd., Serdika Offices, 8th floor, Sofia, 1505
Angkor Resources Co Ltd
Office No. 186 C, Street 155 Sangkat Toul Tumpoung I, Khan Chamkamorn, Phnom Penh
CANADA
10084751 Canada Limited
1745844 Alberta Ltd.
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
3095381 Nova Scotia Company
1959 Upper Water Street, Suite 1100, Halifax, Nova Scotia, B3J 3E5
6581528 Canada Ltd.
7026609 Canada Inc.
7645929 Canada Limited
Alberta Products Pipe Line Ltd.
BG Canada Ltd.
BlackRock Ventures Inc.
BR Oil Sands Corporation
Cansolv Technologies Inc.
Coral Cibola Canada Inc.
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
5305 McCall Way N.E., Calgary, Alberta, T2E 7N7
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
Criterion Catalysts & Technologies Canada, Inc.
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
FP Solutions Corporation
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
LNG Canada Development Inc. [b]
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
Sable Offshore Energy Inc.
1701 Hollis Street, Suite 1400, Halifax, Nova Scotia, B3J 3M8
SCL Pipeline Inc.
SFJ Inc.
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
199 Bay Street, Suite 5300, Commerce Court West, Toronto, Ontario, M5L 1B9
Shell Americas Funding (Canada) Limited
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
Shell Canada Energy [c]
Shell Canada Exploration [c]
Shell Canada Limited
Shell Canada OP Inc.
Shell Canada Products
Shell Canada Resources [c]
Shell Canada Services Limited
Shell Chemicals Canada [c]
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
Shell Energy Merchants Canada Inc.
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
Shell Energy North America (Canada) Inc.
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
Shell Global Solutions Canada Inc.
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
Shell Quebec Limitée
Shell Trading Canada [c]
400 boul de Maisonneuve Ouest, Montreal, Quebec, H3A 1L4
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
%
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50
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25
50
50
25
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49
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50
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20
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33
50
33
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100
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100
100
100
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100
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100
Company by country of incorporation
Address of registered office
Sun-Canadian Pipe Line Company Limited
830 Highway No. 6 North, Flamborough, Ontario, L0R 2H0
Trans-Northern Pipelines Inc.
45 Vogel Road, Suite 310, Richmond Hill, Ontario, L4B 3P6
CAYMAN ISLANDS
Beryl North Sea Limited
Sterling Trust (Cayman) Limited, Whitehall House, 238 North Church Street, P.O. Box 1043, George Town, KY1-
BG Egypt S.A.
5th Floor, Bermuda House, Dr Roy's Drive, George Town, Grand Cayman, KY1-1102
BG Exploration and Production India Limited
Floor 4, Willow House, Cricket Square, George Town, P.O. Box 268, Grand Cayman, KY1-1104
Gas Resources Limited
Schiehallion Oil & Gas Limited
Caribbean Management Ltd, 5th Floor, Bermuda House, 36C Dr Roy's Drive, Grand Cayman, KY1- 1102
Sterling Trust (Cayman) Limited, Whitehall House, 238 North Church Street, P.O. Box 1043, George Town, KY1-
Shell Bolivia Corporation
Shell North Sea Holdings Limited
CHINA
PricewaterhouseCoopers Services, Strathvale House, P.O. Box 258, Grand Cayman, KY1-1104
Maples Corporate Services Limited, Ugland House, P.O. Box 309, Grand Cayman, KY1-1104
Beijing Shell Petroleum Company Ltd.
Unit 1101-1104, level 11, Building 1, No. 19 Chaoyang Park Road, Chaoyang District, Beijing, 100125
Cansolv Technologies (Beijing) Company Limited
Unit 09, Level 31 No. 16 Building, No. 1 Jian Guo Men Wai Avenue, Chaoyang District, Beijing, 100004
Chongqing Doyen Shell Petroleum and Chemical Co. Ltd.
No. 196, Shuang Yuan Street, Beibei Zone, Chongqing, 400700
CNOOC and Shell Petrochemicals Company Limited
Dayawan Petrochemical Industrial Park, Huizhou, Guangdong, 516086
Hangzhou Natural Gas Company Limited
10/F, Meiqi Mansion, No. 30 Tianmushan Road, Hangzhou, 310007
Infineum (China) Co. Ltd.
No. 1 Dongxin Road, Jiangsu Yangtze River International, Chemical Industry Park, Zhangjiagang, Jiangsu
Shell (Beijing) Real Estate Consulting Ltd.
Unit 01, 32/F, No. 16 Building, No. 1 Courtyard Jian Guo Men Wai Avenue, Chaoyang District, Beijing, 100004
Shell (China) Limited
30/F Unit 01-02, No. 16 Building, No. 1 Courtyard, Jian Guo Men Wai Avenue, Chaoyang District, Beijing,
1102
1102
100004
Shell (China) Projects & Technology Limited
Unit 01 - 08, Level 31, No. 16 Building, No. 1 Jian Guo Men Wai Avenue, Chaoyang District, Beijing, 100004
Shell (Shanghai) Petroleum Company Limited
Room 522, The British Road No. 38, China (Shanghai) Pilot Free Trade Zone, Shanghai, 200131
Shell (Shanghai) Technology Limited
Building 4, Jin Chuang Building, No. 4560, Jin Ke Road, Pilot Free Trade Zone, Shanghai
Shell (Tianjin) Lubricants Company Limited
North to Gang Bei Road and east to Hai Gang Road, Nangang Industrial Zone, Tianjin Economic-Technological
Development Area, Tianjin, 300280
Shell (Tianjin) Oil and Petrochemical Company Limited
No. 286 Nansan Road, Tianjin Harbour, Nanjiang Development Zone, Tanggu District, Tianjin, 300452
Shell (Zhejiang) Petroleum Trading Limited
No. 1 Wangjiaba, Xinmiaozhi Village, Puyuan Town, Tongxiang, Jiaxing, Zhejiang, 314502
Shell (Zhuhai) Lubricants Company Limited
Nanjin Wan, Gaolan Dao, Zhuhai Harbour Industrial Zone, Guangdong, 519050
Shell Energy (China) Limited
Room 530, 5th Floor, Building 1, No. 239 Gang'ao Road, China (Shanghai) Free Trade Zone, Shanghai, 200137
Shell North China Petroleum Group Co., Ltd.
5th Floor, Administrative Commission Building, Wuqing Development Area, No. 18 Fuyuan Road, Wuqing District,
Shell Road Solutions (Zhenjiang) Co. Ltd
Dagang District, New Zone, Zhenjiang, Jiangsu, 212132
Shell Road Solutions Xinyue (Foshan) Co. Ltd.
Baisha, Hekou, Sanshui District, Foshan, Guangdong, 528133
Tianjin, 300203
Sinopec and Shell (Jiangsu) Petroleum Marketing Company Limited No. 100, Xingang Dadao, Nanjing Economic and Technological Development Zone, Nanjing, Jiangsu, 210000
Suzhou Liyuan Retail Site Management Co., Ltd.
No. 358 Zhuhui Road, Suzhou, 215000
Yanchang and Shell (Guangdong) Petroleum Co., Ltd.
39th Floor as Planning-designed (41st Floor as Self-designated), Leatop Plaza, No. 32 East Zhujiang Road, Zhujiang
Yanchang and Shell (Sichuan) Petroleum Company Limited
23F, Yanlord Square, Section 2, Renmin South Road, Chengdu, Sichuan, 610016
Yanchang and Shell Petroleum Company Limited
Room 1801 Building B, 18F City Gateway, No. 1 Jinye Road, Hi-Tech Zone, Xi'an, 710075
Yueyang Sinopec and Shell Coal Gasification Company Limited Qilishan, Yueyang, Hunan, 414003
Zhejiang Shell Fuels Company Limited
Room 2103, North Tower, Yefeng Modern Center, No. 161, Shaoxing Road, Xiacheng District, Hangzhou City
New Town, Tianhe District, Guangzhou
Zhejiang Shell Oil and Petrochemical Company Limited
The Port of Zhapu, Jiaxing Municipality, Zhejiang, 314201
(Zhejiang Province), 310004
C.I. Shell Comercializadora Colombia, S.A.S
Calle 100 No. 7 - 33, Piso 20, Edificio "Capital Tower", Bogotá, 452
Shell Colombia S.A.
Calle 90 No. 19 - 41, Oficina 702- Edificio Quantum, Bogotá, 452
Unión Temporal Bloque Sin Off 7
Calle 100 No. 7 - 33, Piso 20, Edificio "Capital Tower", Bogotá, 452
Branstone (International) Limited [i]
Bermuda House, Tutakimoa Road, Rarotonga
14, Blvd Carde, Imm. Les Heveas, Plateau, Abidjan, BP V 194
Rosneft-Shell Caspian Ventures Limited [g]
8 Michalaki Karaoli Street, Anemomylos Office Building, 4th Floor, Office 401, Nicosia, 1095
COLOMBIA
COOK ISLANDS
CÔTE D'IVOIRE
Cote d'Ivoire GNL
CYPRUS
CZECH REPUBLIC
Shell Czech Republic A.S.
DENMARK
A/S Dansk Shell
EGYPT
Shell EP Holdingselskab Danmark ApS
Midtermolen 3, 4, Copenhagen, 2100
Shell Olie-og Gasudvinding Danmark Pipelines ApS
Midtermolen 3, 4, Copenhagen, 2100
Antala Staska 2027/77, Praha 4, 140 00
Egeskovvej 265, Fredericia, 7000
Alam El Shawish Petroleum Company [b]
127 Abdel Aziz Fahmy St., Heliopolis, P.O. Box 5958, Cairo, 5958
Badr Petroleum Company [b]
Burullus Gas Company S.A.E. [b]
127 Abdel Aziz Fahmy St., Heliopolis, P.O. Box 5958, Cairo, 5958
28 Road 270, Maadi, Cairo
El Behera Natural Gas Liquefaction Company S.A.E.
City of Rashid, El Behera Governorate
IDKU Natural Gas Liquefaction Company S.A.E.
City of Rashid, El Behera Governorate
Obaiyed Petroleum Company [b]
127 Abdel Aziz Fahmy St., Heliopolis, P.O. Box 5958, Cairo, 5958
Rashid Petroleum Company S.A.E. [b]
38 Street No. 270, Maadi, Cairo
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ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
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Shell Petroleum (Malaysia) Ltd
Shell Saudi Arabia (Refining) Limited
Shell South Syria Exploration Limited
Shell Trading (M.E.) Private Limited
Shell Trust (Bermuda) Limited
Shell Trust (U.K. Property) Limited
Solen Insurance Limited
Solen Life Insurance Limited
Tacoma Company Limited
BRAZIL
BG Comercio e Importacao Ltda.
BG do Brasil Ltda.
BG Petroleo & Gas Brasil Ltda
Fusus Comercio e Participacoes Ltda.
Icolub - Industria de Lubrificantes S.A.
Raizen Combustíveis S.A.
Raizen Energia S.A.
Seapos Ltda.
Shell Brasil Participações Ltda.
Shell Brasil Petroleo Ltda.
Shell Energy do Brasil Ltda
BRUNEI
BULGARIA
Shell Bulgaria Ead
CAMBODIA
CANADA
10084751 Canada Limited
1745844 Alberta Ltd.
6581528 Canada Ltd.
7026609 Canada Inc.
7645929 Canada Limited
Alberta Products Pipe Line Ltd.
BG Canada Ltd.
BlackRock Ventures Inc.
BR Oil Sands Corporation
Cansolv Technologies Inc.
Coral Cibola Canada Inc.
SCL Pipeline Inc.
SFJ Inc.
Shell Canada Energy [c]
Shell Canada Exploration [c]
Shell Canada Limited
Shell Canada OP Inc.
Shell Canada Products
Shell Canada Resources [c]
Shell Canada Services Limited
Shell Chemicals Canada [c]
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
5305 McCall Way N.E., Calgary, Alberta, T2E 7N7
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
Criterion Catalysts & Technologies Canada, Inc.
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
FP Solutions Corporation
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
LNG Canada Development Inc. [b]
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
Sable Offshore Energy Inc.
1701 Hollis Street, Suite 1400, Halifax, Nova Scotia, B3J 3M8
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
199 Bay Street, Suite 5300, Commerce Court West, Toronto, Ontario, M5L 1B9
Shell Energy Merchants Canada Inc.
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
Shell Energy North America (Canada) Inc.
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
Shell Global Solutions Canada Inc.
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
Shell Quebec Limitée
Shell Trading Canada [c]
400 boul de Maisonneuve Ouest, Montreal, Quebec, H3A 1L4
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
%
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33
50
33
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100
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100
100
Company by country of incorporation
Address of registered office
Shell Offshore Central Gabon Ltd
Shell Oman Trading Limited
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
Shell Overseas Holdings (Oman) Limited
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
3rd Floor Continental Building, 25 Church Street, Hamilton, HM 12
Company by country of incorporation
Address of registered office
Sun-Canadian Pipe Line Company Limited
830 Highway No. 6 North, Flamborough, Ontario, L0R 2H0
Trans-Northern Pipelines Inc.
45 Vogel Road, Suite 310, Richmond Hill, Ontario, L4B 3P6
CAYMAN ISLANDS
Beryl North Sea Limited
Sterling Trust (Cayman) Limited, Whitehall House, 238 North Church Street, P.O. Box 1043, George Town, KY1-
1102
BG Egypt S.A.
5th Floor, Bermuda House, Dr Roy's Drive, George Town, Grand Cayman, KY1-1102
BG Exploration and Production India Limited
Floor 4, Willow House, Cricket Square, George Town, P.O. Box 268, Grand Cayman, KY1-1104
Gas Resources Limited
Schiehallion Oil & Gas Limited
Caribbean Management Ltd, 5th Floor, Bermuda House, 36C Dr Roy's Drive, Grand Cayman, KY1- 1102
Sterling Trust (Cayman) Limited, Whitehall House, 238 North Church Street, P.O. Box 1043, George Town, KY1-
Shell Bolivia Corporation
Shell North Sea Holdings Limited
CHINA
1102
PricewaterhouseCoopers Services, Strathvale House, P.O. Box 258, Grand Cayman, KY1-1104
Maples Corporate Services Limited, Ugland House, P.O. Box 309, Grand Cayman, KY1-1104
Av. República do Chile 330, 23o andar, Torre 2, Centro, Rio de Janeiro, 20031-170
Av. República do Chile 330, 23o andar, Torre 2, sala 2309, Centro, Rio de Janeiro, 20031-170
Av. República do Chile 330, 23o andar, Torre 2, sala 2309, Centro, Rio de Janeiro, 20031-170
Beijing Shell Petroleum Company Ltd.
Unit 1101-1104, level 11, Building 1, No. 19 Chaoyang Park Road, Chaoyang District, Beijing, 100125
Cansolv Technologies (Beijing) Company Limited
Unit 09, Level 31 No. 16 Building, No. 1 Jian Guo Men Wai Avenue, Chaoyang District, Beijing, 100004
Chongqing Doyen Shell Petroleum and Chemical Co. Ltd.
No. 196, Shuang Yuan Street, Beibei Zone, Chongqing, 400700
Calcada das Orquideas 40, 1 E 2 Andares, Centro Comercial 1, Alphaville, Barueri - SP, 06453-017
CNOOC and Shell Petrochemicals Company Limited
Dayawan Petrochemical Industrial Park, Huizhou, Guangdong, 516086
Praia Intendente Bittencourt, 2 (Parte), Ilha do Governador, Rio de Janeiro, 21930-030
Hangzhou Natural Gas Company Limited
10/F, Meiqi Mansion, No. 30 Tianmushan Road, Hangzhou, 310007
Pecten do Brasil Servicos de Petroleo Ltda
Av.das Americas 4200, Bloco 6, 4th Floor (parte), Barra da Tijuca, Rio de Janeiro, 22640-102
Infineum (China) Co. Ltd.
No. 1 Dongxin Road, Jiangsu Yangtze River International, Chemical Industry Park, Zhangjiagang, Jiangsu
Victor Civita, 77, Block 1, Edifice: Rio Office Park, 4 floor, Barra da Tijuca, Rio de Janeiro, 22775-044
Shell (Beijing) Real Estate Consulting Ltd.
Unit 01, 32/F, No. 16 Building, No. 1 Courtyard Jian Guo Men Wai Avenue, Chaoyang District, Beijing, 100004
Av. Brigadeiro Faria Lima, 4100, 11th floor, part V, Itaim Bibi, São Paulo, 04538-132
Av.das Americas 4200, Bloco 6, sala 301 (parte), Barra da Tijuca, Rio de Janeiro, 22640-102
Av. Brigadeiro Faria Lima 3311, Conj 81 Sala 02, Itam Bibi, São Paulo, 04538-133
Shell (China) Limited
30/F Unit 01-02, No. 16 Building, No. 1 Courtyard, Jian Guo Men Wai Avenue, Chaoyang District, Beijing,
100004
Shell (China) Projects & Technology Limited
Unit 01 - 08, Level 31, No. 16 Building, No. 1 Jian Guo Men Wai Avenue, Chaoyang District, Beijing, 100004
Av.das Americas 4200, Bloco 6, salas 101,201,301,401,501,601, Barra da Tijuca, Rio de Janeiro, 22640-102
Shell (Shanghai) Petroleum Company Limited
Room 522, The British Road No. 38, China (Shanghai) Pilot Free Trade Zone, Shanghai, 200131
Av.das Americas 4200, Bloco 6, sala 501 (parte), Barra da Tijuca, Rio de Janeiro, 22640-102
Shell (Shanghai) Technology Limited
Building 4, Jin Chuang Building, No. 4560, Jin Ke Road, Pilot Free Trade Zone, Shanghai
Shell (Tianjin) Lubricants Company Limited
North to Gang Bei Road and east to Hai Gang Road, Nangang Industrial Zone, Tianjin Economic-Technological
Brunei LNG Sendirian Berhad
Lumut, Seria, KC2935
Development Area, Tianjin, 300280
Brunei Shell Marketing Company Sendirian Berhad
Brunei Shell Petroleum Company, Sendirian Berhad, Seria, KB2933
Shell (Tianjin) Oil and Petrochemical Company Limited
No. 286 Nansan Road, Tianjin Harbour, Nanjiang Development Zone, Tanggu District, Tianjin, 300452
Brunei Shell Petroleum Company Sendirian Berhad
Jalan Utara, Panaga, Seria, KB2933
Brunei Shell Tankers Sendirian Berhad
Jalan Utara, Panaga, Seria, KB2933
Shell (Zhejiang) Petroleum Trading Limited
No. 1 Wangjiaba, Xinmiaozhi Village, Puyuan Town, Tongxiang, Jiaxing, Zhejiang, 314502
Shell (Zhuhai) Lubricants Company Limited
Nanjin Wan, Gaolan Dao, Zhuhai Harbour Industrial Zone, Guangdong, 519050
Shell Borneo Sendirian Berhad
c/o BSP Head Office, NDCO Block, Ground Floor, Jalan Utara, Panaga Seria, KB2933
Shell Energy (China) Limited
Room 530, 5th Floor, Building 1, No. 239 Gang'ao Road, China (Shanghai) Free Trade Zone, Shanghai, 200137
Shell North China Petroleum Group Co., Ltd.
5th Floor, Administrative Commission Building, Wuqing Development Area, No. 18 Fuyuan Road, Wuqing District,
Angkor Resources Co Ltd
Office No. 186 C, Street 155 Sangkat Toul Tumpoung I, Khan Chamkamorn, Phnom Penh
Shell Road Solutions Xinyue (Foshan) Co. Ltd.
Baisha, Hekou, Sanshui District, Foshan, Guangdong, 528133
48, Sitnyakovo Blvd., Serdika Offices, 8th floor, Sofia, 1505
Tianjin, 300203
Shell Road Solutions (Zhenjiang) Co. Ltd
Dagang District, New Zone, Zhenjiang, Jiangsu, 212132
Sinopec and Shell (Jiangsu) Petroleum Marketing Company Limited No. 100, Xingang Dadao, Nanjing Economic and Technological Development Zone, Nanjing, Jiangsu, 210000
Suzhou Liyuan Retail Site Management Co., Ltd.
No. 358 Zhuhui Road, Suzhou, 215000
Yanchang and Shell (Guangdong) Petroleum Co., Ltd.
39th Floor as Planning-designed (41st Floor as Self-designated), Leatop Plaza, No. 32 East Zhujiang Road, Zhujiang
3095381 Nova Scotia Company
1959 Upper Water Street, Suite 1100, Halifax, Nova Scotia, B3J 3E5
New Town, Tianhe District, Guangzhou
Shell Americas Funding (Canada) Limited
400 4th Avenue S.W., Calgary, Alberta, T2P 0J4
Rosneft-Shell Caspian Ventures Limited [g]
8 Michalaki Karaoli Street, Anemomylos Office Building, 4th Floor, Office 401, Nicosia, 1095
Yanchang and Shell (Sichuan) Petroleum Company Limited
23F, Yanlord Square, Section 2, Renmin South Road, Chengdu, Sichuan, 610016
Yanchang and Shell Petroleum Company Limited
Room 1801 Building B, 18F City Gateway, No. 1 Jinye Road, Hi-Tech Zone, Xi'an, 710075
Yueyang Sinopec and Shell Coal Gasification Company Limited Qilishan, Yueyang, Hunan, 414003
Zhejiang Shell Fuels Company Limited
Room 2103, North Tower, Yefeng Modern Center, No. 161, Shaoxing Road, Xiacheng District, Hangzhou City
Zhejiang Shell Oil and Petrochemical Company Limited
The Port of Zhapu, Jiaxing Municipality, Zhejiang, 314201
(Zhejiang Province), 310004
COLOMBIA
C.I. Shell Comercializadora Colombia, S.A.S
Calle 100 No. 7 - 33, Piso 20, Edificio "Capital Tower", Bogotá, 452
Shell Colombia S.A.
Calle 90 No. 19 - 41, Oficina 702- Edificio Quantum, Bogotá, 452
Unión Temporal Bloque Sin Off 7
Calle 100 No. 7 - 33, Piso 20, Edificio "Capital Tower", Bogotá, 452
COOK ISLANDS
Branstone (International) Limited [i]
Bermuda House, Tutakimoa Road, Rarotonga
CÔTE D'IVOIRE
Cote d'Ivoire GNL
CYPRUS
14, Blvd Carde, Imm. Les Heveas, Plateau, Abidjan, BP V 194
CZECH REPUBLIC
Shell Czech Republic A.S.
DENMARK
A/S Dansk Shell
Antala Staska 2027/77, Praha 4, 140 00
Egeskovvej 265, Fredericia, 7000
Shell EP Holdingselskab Danmark ApS
Midtermolen 3, 4, Copenhagen, 2100
Shell Olie-og Gasudvinding Danmark Pipelines ApS
Midtermolen 3, 4, Copenhagen, 2100
EGYPT
Alam El Shawish Petroleum Company [b]
127 Abdel Aziz Fahmy St., Heliopolis, P.O. Box 5958, Cairo, 5958
Badr Petroleum Company [b]
Burullus Gas Company S.A.E. [b]
127 Abdel Aziz Fahmy St., Heliopolis, P.O. Box 5958, Cairo, 5958
28 Road 270, Maadi, Cairo
El Behera Natural Gas Liquefaction Company S.A.E.
City of Rashid, El Behera Governorate
IDKU Natural Gas Liquefaction Company S.A.E.
City of Rashid, El Behera Governorate
Obaiyed Petroleum Company [b]
127 Abdel Aziz Fahmy St., Heliopolis, P.O. Box 5958, Cairo, 5958
Rashid Petroleum Company S.A.E. [b]
38 Street No. 270, Maadi, Cairo
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49
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49
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65
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13
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Company by country of incorporation
Address of registered office
Shell Egypt Trading
Shell Lubricants Egypt
Business View Building, No. 79, 90 Street (South), Fifth Settlement- New Cairo, Cairo, 11835
Business View Building, No. 79, 90 Street (South), Fifth Settlement- New Cairo, Cairo, 11835
Sitra Petroleum Company [b]
127 Abdel Aziz Fahmy St., Heliopolis, P.O. Box 5958, Cairo, 5958
The Egyptian LNG Company S.A.E.
City of Rashid, El Behera Governorate
The Egyptian Operating Company for Natural Gas Liquefaction
City of Rashid, El Behera Governorate
Projects S.A.E.
Tiba Petroleum Company [b]
West Sitra Petroleum Company [b]
FINLAND
127 Abdel Aziz Fahmy St., Heliopolis, P.O. Box 5958, Cairo, 5958
127 Abdel Aziz Fahmy St., Heliopolis, P.O. Box 5958, Cairo, 5958
Shell Aviation Finland Oy
Ayritie 12 A, Vantaa, 01510
FRANCE
Avitair SAS
Immeuble "Les portes de la Défense", 307 Rue d'Estienne d'Orves, Colombes, 92708
Groupement d'Exploitation du Dépôt de Réception Chennevières
Chemin de Livry, Dépôt de Chennevières, Chennevières-lès-Louvres, 95380
[b] [c]
Groupement Pétrolier Aviation SNC
Aéroport Roissy Charles de Gaulle, Zone de Frêt 1, 3 Rue des Vignes, Tremblay-en-France, 93290
Infineum France
Service Aviation Paris (G.I.E.)
Shell Retraites SAS
Chemin départemental 54, Berre-L'Etang, 13130
Orly Sud No. 144 - Bat. 438, Orly Aerogares, 94541
Immeuble "Les portes de la Défense", 307 Rue d'Estienne d'Orves, Colombes, 92708
Société de Gestion Mobilière et Immobilière SAS
Immeuble "Les portes de la Défense", 307 Rue d'Estienne d'Orves, Colombes, 92708
Société des Pétroles Shell SAS
Ste du Pipeline Sud Européen S.A.
The New Motion France SAS
GERMANY
Immeuble "Les portes de la Défense", 307 Rue d'Estienne d'Orves, Colombes, 92708
7-9, Rue des Freres Morane, Paris Cedex 15, 75738
15 Avenue du Centre, Guyancourt, 78280
AGES Maut System GmbH & Co. KG
Berghausener Straße 96, Langenfeld, 40764
BEB Erdgas und Erdoel GmbH & Co. KG [b]
Riethorst 12, Hannover, 30659
BEB Holding GmbH [b]
Caffamacherreihe 5, Hamburg, 20355
Carissa Einzelhandel- und Tankstellenservice GmbH & Co. KG Willinghusener Weg 5 D-E, Oststeinbek, 22113
Carissa Verwaltungsgesellschaft mbH
CRI Catalyst Leuna GmbH
CRI Deutschland GmbH
Deutsche Infineum GmbH & Co. KG
Deutsche Shell GmbH
Deutsche Shell Holding GmbH
Deutsche Transalpine Oelleitung GmbH
Erdoel-Raffinerie Deurag-Nerag GmbH
Suhrenkamp 71 - 77, Hamburg, 22335
Am Haupttor, Bau 8322, Leuna, 06237
Am Haupttor, Bau 8322, Leuna, 06237
Neusser Landstraße 16, Köln, 50735
Suhrenkamp 71 - 77, Hamburg, 22335
Suhrenkamp 71 - 77, Hamburg, 22335
Paul Wassermann Str. 3, Munchen, 81829
Riethorst 12, Hannover, 30659
euroShell Deutschland GmbH & Co. KG
Suhrenkamp 71 - 77, Hamburg, 22335
euroShell Deutschland Verwaltungsgesellschaft mbH
Suhrenkamp 71 - 77, Hamburg, 22335
FBG Ferngasbeteiligungsgesellschaft mbH
Suhrenkamp 71 - 77, Hamburg, 22335
H2 Mobility Deutschland GmbH and Co. KG
Linienstrasse 160, Berlin, 10115
HPRDS und SPNV Deutschland Oil GmbH & Co. KG
Suhrenkamp 71 - 77, Hamburg, 22335
HPRDS und SPNV Deutschland Verwaltungsges. mbH
Suhrenkamp 71 - 77, Hamburg, 22335
Infineum Deutschland Verwaltungsgesellschaft mbH
Neusser Landstraße 16, Köln, 50735
Mineraloelraffinerie Oberrhein Verwaltungs GmbH
DEA-Scholven-Str., Karlsruhe, 76187
Nord-West Oelleitung GmbH [b]
Zum Oelhafen 207, Wilhelmshaven, 26384
Oberrheinische Mineraloelwerke GmbH [b]
DEA-Scholven-Str., Karlsruhe, 76187
PCK Raffinerie GmbH [b]
Rheinland Kraftstoff GmbH
Passower Chaussee 111, Schwedt/Oder, 16303
Auf dem Schollbruch 24-26, Gelsenkirchen, 45899
Rhein-Main-Rohrleitungstransportgesellschaft mbH [b]
Godorfer Hauptstrasse 186, Köln, 50997
Shell Algeria Zerafa GmbH
Shell Deutschland Additive GmbH
Shell Deutschland Oil GmbH
Shell Energy Deutschland GmbH
Suhrenkamp 71 - 77, Hamburg, 22335
Suhrenkamp 71 - 77, Hamburg, 22335
Suhrenkamp 71 - 77, Hamburg, 22335
Suhrenkamp 71 - 77, Hamburg, 22335
Shell Erdgas Beteiligungsgesellschaft mbH
Suhrenkamp 71 - 77, Hamburg, 22335
Shell Erdgas Marketing GmbH & Co. KG
Suhrenkamp 71 - 77, Hamburg, 22335
Shell Erdoel und Erdgas Exploration GmbH
Suhrenkamp 71 - 77, Hamburg, 22335
Shell Exploration and Development Libya GmbH I
Suhrenkamp 71 - 77, Hamburg, 22335
Shell Exploration and Production Colombia GmbH
Suhrenkamp 71 - 77, Hamburg, 22335
Shell Exploration and Production Libya GmbH
Suhrenkamp 71 - 77, Hamburg, 22335
Shell Exploration et Production du Maroc GmbH
Suhrenkamp 71 - 77, Hamburg, 22335
Shell Exploration New Ventures One GmbH
Suhrenkamp 71 - 77, Hamburg, 22335
Shell Exploration und Produktion Deutschland GmbH
Suhrenkamp 71 - 77, Hamburg, 22335
Shell Global Solutions (Deutschland) GmbH
Hohe-Schaar-Straße 36, Hamburg, 21107
Shell Grundstücksgesellschaft Wesseling GmbH & Co. KG
Suhrenkamp 71 - 77, Hamburg, 22335
Shell Hydrogen Deutschland GmbH
Shell Tunisia El Jem GmbH
Shell Tunisia Kairouan GmbH
Shell Tunisia Offshore GmbH
Suhrenkamp 71 - 77, Hamburg, 22335
Suhrenkamp 71 - 77, Hamburg, 22335
Suhrenkamp 71 - 77, Hamburg, 22335
Suhrenkamp 71 - 77, Hamburg, 22335
Shell Verwaltungsgesellschaft für Erdgasbeteiligungen mbH
Suhrenkamp 71 - 77, Hamburg, 22335
SPNV Deutschland Beteiligungsges. mbH
Suhrenkamp 71 - 77, Hamburg, 22335
The New Motion Deutschland GmbH
c/o Mindspace, Friedrichstraße 68, Berlin, 10117
%
100
100
50
36
36
26
50
100
100
11
20
50
33
100
100
100
21
100
25
50
50
100
100
100
100
50
100
100
19
50
100
100
100
28
100
90
50
32
20
42
38
100
63
100
100
100
100
100
75
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Company by country of incorporation
Address of registered office
Shell LNG Gibraltar Limited
57/63 Line Wall Road, P.O. Box 199, Gibraltar
Attiki Natural Gas Distribution Company S.A.
11 Sofokli Venizelou Ave. & Serron Str, 141 23 Lykovryssi, Athens, 104 47
Shell & MOH Aviation Fuels A.E.
151 Kifisias Ave., Marousi, Athens, 15124
GIBRALTAR
GREECE
GREENLAND
Shell Greenland A/S
GUAM
Shell Guam Inc.
HONG KONG
AFSC Management Limited
AFSC Operations Limited
AFSC Refuelling Limited
Branstone Company Limited
Fulmart Limited
Hong Kong Response Limited
Ocean Century Tf Limited [i]
Shell Hong Kong Limited
Shell Korea Limited
Shell Macau Limited
HUNGARY
INDIA
Aqqusinersuaq 48A, P.O. Box 1728, Nuuk, 3900
643 Chalan San Antonio, Suite 100, Tamuning, GU 96911
3 Scenic Road, Chek Lap Kok, Lantau
3 Scenic Road, Chek Lap Kok, Lantau
3 Scenic Road, Chek Lap Kok, Lantau
35/F AIA Kowloon Tower, Landmark East, 100 How Ming Street, Kwun Tong (Kowloon)
35/F AIA Kowloon Tower, Landmark East, 100 How Ming Street, Kwun Tong (Kowloon)
Esso Tsing Yi Terminal, Lot 46 Tsing Yi Road, Tsing Yi Island, New Territories
35/F AIA Kowloon Tower, Landmark East, 100 How Ming Street, Kwun Tong (Kowloon)
35/F AIA Kowloon Tower, Landmark East, 100 How Ming Street, Kwun Tong (Kowloon)
35/F AIA Kowloon Tower, Landmark East, 100 How Ming Street, Kwun Tong (Kowloon)
35/F AIA Kowloon Tower, Landmark East, 100 How Ming Street, Kwun Tong (Kowloon)
Shell Developments (HK) Limited [i]
35/F AIA Kowloon Tower, Landmark East, 100 How Ming Street, Kwun Tong (Kowloon)
Shell Hungary Trading close Company Limited by shares
Bocskai út 134-146., Budapest, 1113
BG India Energy Private Limited
3-C World Trade Tower, New Barakhamba Lane, New Delhi, 110001
BG India Energy Services Private Limited
3-C World Trade Tower, New Barakhamba Lane, New Delhi, 110001
BG India Energy Solutions Private Limited
3-C World Trade Tower, New Barakhamba Lane, New Delhi, 110001
BG LNG Regas India Private Limited
3-C World Trade Tower, New Barakhamba Lane, New Delhi, 110001
Hazira LNG Private Limited
Hazira Port Private Limited
Mahanagar Gas Limited
101-103 Abhijeet-II, Mithakhali Circle, Ahmedabad 380 006, Gujarat, 380006
101-103 Abhijeet-II, Mithakhali Circle, Ahmedabad 380 006, Gujarat, 380006
MGL House, G-33 Block, Bandra-Kurla Complex, Bandra (East), Mumbai, 400051
Pennzoil Quaker State India Limited
Plot No. T-5, MIDC, Taloja Industrial Area, Tal-Panvel, Raigad District, Maharashtra (Mumbai), 410208
Shell Energy Marketing and Trading India Private Limited [b]
Ikeva Venture and Knowledge Advisory, Services Pvt Ltd, Level 1, MB Towers, Road no 10, Banjara Hills, Hyderabad,
Shell India Markets Private Limited
2nd floor, Campus 4A, RMZ Millenia Business Park, 143 Dr MG Road, Kandanchavady, Perungudi, Chennai,
500034
600096
Shell MRPL Aviation Fuels and Services Limited
102, Prestige Sigma, Vittal Mallya Road, Bangalore, 560001
Talavera Office Park 22-26th Floor, Jl. Letjen. TB Simatupang Kav. 22-26, Jakarta Selatan, Jakarta, 12430
Talavera Office Park 22-26th Floor, Jl. Letjen. TB Simatupang Kav. 22-26, Jakarta Selatan, Jakarta, 12430
Talavera Office Park 22-26th Floor, Jl. Letjen. TB Simatupang Kav. 22-26, Jakarta Selatan, Jakarta, 12430
Talavera Office Park 22-26th Floor, Jl. Letjen. TB Simatupang Kav. 22-26, Jakarta Selatan, Jakarta, 12430
INDONESIA
PT. Gresik Distribution Terminal
PT. Shell Indonesia
PT. Shell Manufacturing Indonesia
PT. Shell Solar Indonesia
IRAQ
IRELAND
Shell E&P Ireland Limited
ISLE OF MAN
Petrolon Europe Limited
Petrolon International Limited
ITALY
Alle S.R.L.
Aquila S.p.A.
BG Italia Power S.p.A.
Brindisi LNG S.p.A.
Infineum Italia S.R.L.
Shell Energy Italia S.R.L.
Shell Italia E&P S.p.A.
Shell Italia Holding S.p.A.
Shell Italia Oil Products S.R.L.
Basrah Gas Company
Khor Al Zubair, Basrah
Asiatic Petroleum Company (Dublin) Limited
Embassy House, Herbert Park Lane, Ballsbridge, Dublin, D04 H6Y0
Irish Shell Trust Designated Activity Company
Embassy House, Herbert Park Lane, Ballsbridge, Dublin, D04 H6Y0
Shell and Topaz Aviation Ireland Limited
Suite 7 Northwood House, Northwood Business Park, Santry, Dublin, 9
Embassy House, Herbert Park Lane, Ballsbridge, Dublin, D04 H6Y0
Shell Marine Personnel (I.O.M.) Limited
Euromanx House, Freeport, Ballasalla, IM9 2AP
Shell Ship Management Limited
Euromanx House, Freeport, Ballasalla, IM9 2AP
Fort Anne, Douglas, IM1 5PD
Fort Anne, Douglas, IM1 5PD
Via Vittor Pisani 16, Milano, 20124
Via Vittor Pisani 16, Milano, 20124
Via Tortona 25, Milano, 20144
Via Tortona 25, Milano, 20144
Strada di Scorrimento 2, Vado Ligure (SA), 17047
Via Vittor Pisani 16, Milano, 20124
Piazza dell'Indipendenza 11/B, Rome, 00185
Via Vittor Pisani 16, Milano, 20124
Via Vittor Pisani 16, Milano, 20124
Shell International Exploration and Development Italia S.p.A.
Piazza dell'Indipendenza 11/B, Rome, 00185
Societa Italiana per l'Oleodotto Transalpino S.p.A.
Via Muggia #1, San Dorligo della Valle, Trieste, 34147
Societa' Oleodotti Meridionali S.p.A.
Via Emilia 1, San Donato Milanese, 20097
%
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49
51
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100
11
11
11
100
100
25
100
100
100
100
100
100
100
100
100
100
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74
32
100
100
100
50
100
100
100
100
44
100
100
50
100
100
100
100
100
100
100
100
100
50
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100
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19
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E7
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Company by country of incorporation
Address of registered office
Company by country of incorporation
Address of registered office
Shell Egypt Trading
Shell Lubricants Egypt
Business View Building, No. 79, 90 Street (South), Fifth Settlement- New Cairo, Cairo, 11835
Business View Building, No. 79, 90 Street (South), Fifth Settlement- New Cairo, Cairo, 11835
GIBRALTAR
Shell LNG Gibraltar Limited
57/63 Line Wall Road, P.O. Box 199, Gibraltar
Sitra Petroleum Company [b]
127 Abdel Aziz Fahmy St., Heliopolis, P.O. Box 5958, Cairo, 5958
GREECE
Attiki Natural Gas Distribution Company S.A.
11 Sofokli Venizelou Ave. & Serron Str, 141 23 Lykovryssi, Athens, 104 47
Shell & MOH Aviation Fuels A.E.
151 Kifisias Ave., Marousi, Athens, 15124
GREENLAND
Shell Greenland A/S
GUAM
Shell Guam Inc.
HONG KONG
AFSC Management Limited
AFSC Operations Limited
AFSC Refuelling Limited
Branstone Company Limited
Fulmart Limited
Hong Kong Response Limited
Ocean Century Tf Limited [i]
Aqqusinersuaq 48A, P.O. Box 1728, Nuuk, 3900
643 Chalan San Antonio, Suite 100, Tamuning, GU 96911
3 Scenic Road, Chek Lap Kok, Lantau
3 Scenic Road, Chek Lap Kok, Lantau
3 Scenic Road, Chek Lap Kok, Lantau
35/F AIA Kowloon Tower, Landmark East, 100 How Ming Street, Kwun Tong (Kowloon)
35/F AIA Kowloon Tower, Landmark East, 100 How Ming Street, Kwun Tong (Kowloon)
Esso Tsing Yi Terminal, Lot 46 Tsing Yi Road, Tsing Yi Island, New Territories
35/F AIA Kowloon Tower, Landmark East, 100 How Ming Street, Kwun Tong (Kowloon)
Shell Developments (HK) Limited [i]
35/F AIA Kowloon Tower, Landmark East, 100 How Ming Street, Kwun Tong (Kowloon)
Shell Hong Kong Limited
Shell Korea Limited
Shell Macau Limited
HUNGARY
35/F AIA Kowloon Tower, Landmark East, 100 How Ming Street, Kwun Tong (Kowloon)
35/F AIA Kowloon Tower, Landmark East, 100 How Ming Street, Kwun Tong (Kowloon)
35/F AIA Kowloon Tower, Landmark East, 100 How Ming Street, Kwun Tong (Kowloon)
Shell Hungary Trading close Company Limited by shares
Bocskai út 134-146., Budapest, 1113
INDIA
BG India Energy Private Limited
3-C World Trade Tower, New Barakhamba Lane, New Delhi, 110001
BG India Energy Services Private Limited
3-C World Trade Tower, New Barakhamba Lane, New Delhi, 110001
BG India Energy Solutions Private Limited
3-C World Trade Tower, New Barakhamba Lane, New Delhi, 110001
BG LNG Regas India Private Limited
3-C World Trade Tower, New Barakhamba Lane, New Delhi, 110001
Hazira LNG Private Limited
Hazira Port Private Limited
Mahanagar Gas Limited
101-103 Abhijeet-II, Mithakhali Circle, Ahmedabad 380 006, Gujarat, 380006
101-103 Abhijeet-II, Mithakhali Circle, Ahmedabad 380 006, Gujarat, 380006
MGL House, G-33 Block, Bandra-Kurla Complex, Bandra (East), Mumbai, 400051
Pennzoil Quaker State India Limited
Plot No. T-5, MIDC, Taloja Industrial Area, Tal-Panvel, Raigad District, Maharashtra (Mumbai), 410208
Shell Energy Marketing and Trading India Private Limited [b]
Ikeva Venture and Knowledge Advisory, Services Pvt Ltd, Level 1, MB Towers, Road no 10, Banjara Hills, Hyderabad,
Shell India Markets Private Limited
2nd floor, Campus 4A, RMZ Millenia Business Park, 143 Dr MG Road, Kandanchavady, Perungudi, Chennai,
Shell MRPL Aviation Fuels and Services Limited
102, Prestige Sigma, Vittal Mallya Road, Bangalore, 560001
600096
500034
INDONESIA
PT. Gresik Distribution Terminal
PT. Shell Indonesia
PT. Shell Manufacturing Indonesia
PT. Shell Solar Indonesia
IRAQ
Basrah Gas Company
IRELAND
Talavera Office Park 22-26th Floor, Jl. Letjen. TB Simatupang Kav. 22-26, Jakarta Selatan, Jakarta, 12430
Talavera Office Park 22-26th Floor, Jl. Letjen. TB Simatupang Kav. 22-26, Jakarta Selatan, Jakarta, 12430
Talavera Office Park 22-26th Floor, Jl. Letjen. TB Simatupang Kav. 22-26, Jakarta Selatan, Jakarta, 12430
Talavera Office Park 22-26th Floor, Jl. Letjen. TB Simatupang Kav. 22-26, Jakarta Selatan, Jakarta, 12430
Khor Al Zubair, Basrah
Asiatic Petroleum Company (Dublin) Limited
Embassy House, Herbert Park Lane, Ballsbridge, Dublin, D04 H6Y0
Irish Shell Trust Designated Activity Company
Embassy House, Herbert Park Lane, Ballsbridge, Dublin, D04 H6Y0
Shell and Topaz Aviation Ireland Limited
Suite 7 Northwood House, Northwood Business Park, Santry, Dublin, 9
Shell E&P Ireland Limited
ISLE OF MAN
Petrolon Europe Limited
Petrolon International Limited
Embassy House, Herbert Park Lane, Ballsbridge, Dublin, D04 H6Y0
Fort Anne, Douglas, IM1 5PD
Fort Anne, Douglas, IM1 5PD
Shell Marine Personnel (I.O.M.) Limited
Euromanx House, Freeport, Ballasalla, IM9 2AP
Shell Ship Management Limited
Euromanx House, Freeport, Ballasalla, IM9 2AP
ITALY
Alle S.R.L.
Aquila S.p.A.
BG Italia Power S.p.A.
Brindisi LNG S.p.A.
Infineum Italia S.R.L.
Shell Energy Italia S.R.L.
Via Vittor Pisani 16, Milano, 20124
Via Vittor Pisani 16, Milano, 20124
Via Tortona 25, Milano, 20144
Via Tortona 25, Milano, 20144
Strada di Scorrimento 2, Vado Ligure (SA), 17047
Via Vittor Pisani 16, Milano, 20124
Shell International Exploration and Development Italia S.p.A.
Piazza dell'Indipendenza 11/B, Rome, 00185
Shell Italia E&P S.p.A.
Shell Italia Holding S.p.A.
Shell Italia Oil Products S.R.L.
Piazza dell'Indipendenza 11/B, Rome, 00185
Via Vittor Pisani 16, Milano, 20124
Via Vittor Pisani 16, Milano, 20124
Societa Italiana per l'Oleodotto Transalpino S.p.A.
Via Muggia #1, San Dorligo della Valle, Trieste, 34147
Societa' Oleodotti Meridionali S.p.A.
Via Emilia 1, San Donato Milanese, 20097
The Egyptian LNG Company S.A.E.
City of Rashid, El Behera Governorate
The Egyptian Operating Company for Natural Gas Liquefaction
City of Rashid, El Behera Governorate
Projects S.A.E.
Tiba Petroleum Company [b]
West Sitra Petroleum Company [b]
127 Abdel Aziz Fahmy St., Heliopolis, P.O. Box 5958, Cairo, 5958
127 Abdel Aziz Fahmy St., Heliopolis, P.O. Box 5958, Cairo, 5958
Shell Aviation Finland Oy
Ayritie 12 A, Vantaa, 01510
FINLAND
FRANCE
Avitair SAS
[b] [c]
Infineum France
Service Aviation Paris (G.I.E.)
Shell Retraites SAS
Société des Pétroles Shell SAS
Ste du Pipeline Sud Européen S.A.
The New Motion France SAS
GERMANY
Groupement d'Exploitation du Dépôt de Réception Chennevières
Chemin de Livry, Dépôt de Chennevières, Chennevières-lès-Louvres, 95380
Immeuble "Les portes de la Défense", 307 Rue d'Estienne d'Orves, Colombes, 92708
Groupement Pétrolier Aviation SNC
Aéroport Roissy Charles de Gaulle, Zone de Frêt 1, 3 Rue des Vignes, Tremblay-en-France, 93290
Société de Gestion Mobilière et Immobilière SAS
Immeuble "Les portes de la Défense", 307 Rue d'Estienne d'Orves, Colombes, 92708
Chemin départemental 54, Berre-L'Etang, 13130
Orly Sud No. 144 - Bat. 438, Orly Aerogares, 94541
Immeuble "Les portes de la Défense", 307 Rue d'Estienne d'Orves, Colombes, 92708
Immeuble "Les portes de la Défense", 307 Rue d'Estienne d'Orves, Colombes, 92708
7-9, Rue des Freres Morane, Paris Cedex 15, 75738
15 Avenue du Centre, Guyancourt, 78280
AGES Maut System GmbH & Co. KG
Berghausener Straße 96, Langenfeld, 40764
BEB Erdgas und Erdoel GmbH & Co. KG [b]
Riethorst 12, Hannover, 30659
BEB Holding GmbH [b]
Caffamacherreihe 5, Hamburg, 20355
Carissa Einzelhandel- und Tankstellenservice GmbH & Co. KG Willinghusener Weg 5 D-E, Oststeinbek, 22113
Carissa Verwaltungsgesellschaft mbH
CRI Catalyst Leuna GmbH
CRI Deutschland GmbH
Deutsche Infineum GmbH & Co. KG
Deutsche Shell GmbH
Deutsche Shell Holding GmbH
Deutsche Transalpine Oelleitung GmbH
Erdoel-Raffinerie Deurag-Nerag GmbH
Suhrenkamp 71 - 77, Hamburg, 22335
Am Haupttor, Bau 8322, Leuna, 06237
Am Haupttor, Bau 8322, Leuna, 06237
Neusser Landstraße 16, Köln, 50735
Suhrenkamp 71 - 77, Hamburg, 22335
Suhrenkamp 71 - 77, Hamburg, 22335
Paul Wassermann Str. 3, Munchen, 81829
Riethorst 12, Hannover, 30659
euroShell Deutschland GmbH & Co. KG
Suhrenkamp 71 - 77, Hamburg, 22335
euroShell Deutschland Verwaltungsgesellschaft mbH
Suhrenkamp 71 - 77, Hamburg, 22335
FBG Ferngasbeteiligungsgesellschaft mbH
Suhrenkamp 71 - 77, Hamburg, 22335
H2 Mobility Deutschland GmbH and Co. KG
Linienstrasse 160, Berlin, 10115
HPRDS und SPNV Deutschland Oil GmbH & Co. KG
Suhrenkamp 71 - 77, Hamburg, 22335
HPRDS und SPNV Deutschland Verwaltungsges. mbH
Suhrenkamp 71 - 77, Hamburg, 22335
Infineum Deutschland Verwaltungsgesellschaft mbH
Neusser Landstraße 16, Köln, 50735
Mineraloelraffinerie Oberrhein Verwaltungs GmbH
DEA-Scholven-Str., Karlsruhe, 76187
Nord-West Oelleitung GmbH [b]
Zum Oelhafen 207, Wilhelmshaven, 26384
Oberrheinische Mineraloelwerke GmbH [b]
DEA-Scholven-Str., Karlsruhe, 76187
Rhein-Main-Rohrleitungstransportgesellschaft mbH [b]
Godorfer Hauptstrasse 186, Köln, 50997
PCK Raffinerie GmbH [b]
Rheinland Kraftstoff GmbH
Shell Algeria Zerafa GmbH
Shell Deutschland Additive GmbH
Shell Deutschland Oil GmbH
Shell Energy Deutschland GmbH
Passower Chaussee 111, Schwedt/Oder, 16303
Auf dem Schollbruch 24-26, Gelsenkirchen, 45899
Suhrenkamp 71 - 77, Hamburg, 22335
Suhrenkamp 71 - 77, Hamburg, 22335
Suhrenkamp 71 - 77, Hamburg, 22335
Suhrenkamp 71 - 77, Hamburg, 22335
Shell Erdgas Beteiligungsgesellschaft mbH
Suhrenkamp 71 - 77, Hamburg, 22335
Shell Erdgas Marketing GmbH & Co. KG
Suhrenkamp 71 - 77, Hamburg, 22335
Shell Erdoel und Erdgas Exploration GmbH
Suhrenkamp 71 - 77, Hamburg, 22335
Shell Exploration and Development Libya GmbH I
Suhrenkamp 71 - 77, Hamburg, 22335
Shell Exploration and Production Colombia GmbH
Suhrenkamp 71 - 77, Hamburg, 22335
Shell Exploration and Production Libya GmbH
Suhrenkamp 71 - 77, Hamburg, 22335
Shell Exploration et Production du Maroc GmbH
Suhrenkamp 71 - 77, Hamburg, 22335
Shell Exploration New Ventures One GmbH
Suhrenkamp 71 - 77, Hamburg, 22335
Shell Exploration und Produktion Deutschland GmbH
Suhrenkamp 71 - 77, Hamburg, 22335
Shell Global Solutions (Deutschland) GmbH
Hohe-Schaar-Straße 36, Hamburg, 21107
Shell Grundstücksgesellschaft Wesseling GmbH & Co. KG
Suhrenkamp 71 - 77, Hamburg, 22335
Shell Hydrogen Deutschland GmbH
Shell Tunisia El Jem GmbH
Shell Tunisia Kairouan GmbH
Shell Tunisia Offshore GmbH
Suhrenkamp 71 - 77, Hamburg, 22335
Suhrenkamp 71 - 77, Hamburg, 22335
Suhrenkamp 71 - 77, Hamburg, 22335
Suhrenkamp 71 - 77, Hamburg, 22335
Shell Verwaltungsgesellschaft für Erdgasbeteiligungen mbH
Suhrenkamp 71 - 77, Hamburg, 22335
SPNV Deutschland Beteiligungsges. mbH
Suhrenkamp 71 - 77, Hamburg, 22335
The New Motion Deutschland GmbH
c/o Mindspace, Friedrichstraße 68, Berlin, 10117
%
100
100
50
36
36
26
50
100
100
11
20
50
33
100
100
100
21
100
25
50
50
100
100
100
100
50
100
100
19
50
100
100
100
28
100
90
50
32
20
42
38
100
63
100
100
100
100
100
75
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
%
51
49
51
100
100
11
11
11
100
100
25
100
100
100
100
100
100
100
100
100
100
74
74
32
100
100
100
50
100
100
100
100
44
100
100
50
100
100
100
100
100
100
100
100
100
50
100
100
100
100
100
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Company by country of incorporation
Address of registered office
JAPAN
Brunei Energy Services Company Ltd.
1-8-2 Marunouchi, Chiyoda-ku, Tokyo, 100-0005
Japan Chemtech Ltd.
3-2 Daiba 2-Chome, Minato-Ku, Tokyo, 135-8074
Sakhalin LNG Services Company Ltd.
2-3, Kanda, Awaji-cho, Chiyoda-ku, Tokyo, 101-0063
Shell Chemicals Japan Ltd.
Shell Japan Limited
Shell Japan Trading Ltd.
JERSEY
Morzine Limited
3-2 Daiba 2-Chome, Minato-Ku, Tokyo, 135-8074
16F Pacific Century Place, 1-11-1, Marunouchi, Chiyoda-ku, Tokyo, 100-6216
3-2 Daiba 2-Chome, Minato-Ku, Tokyo, 135-8074
Ogier House, The Esplanade, St. Helier, JE4 9WG
Shell Service Station Properties Limited
Queensway House, Hilgrove Street, St. Helier, JE1 1ES
LUXEMBOURG
Shell Finance Luxembourg Sarl
Shell Luxembourgeoise Sarl
Shell Treasury Luxembourg Sarl
MACAU
7, Rue de l'Industrie, Bertrange, Luxembourg, L-8069
7, Rue de l'Industrie, Bertrange, Luxembourg, L-8005
7, Rue de l'Industrie, Bertrange, Luxembourg, L-8069
Shell Macau Petroleum Company Limited
876 Avenida da Amizade, Edificio Marina Gardens, Room 310, 3rd Floor
MALAYSIA
Bonuskad Loyalty Sdn. Bhd. [i]
Level 8, Symphony House, Block D13, Pusat Dagangan Dana 1, Jalan PJU 1A/46, Petaling Jaya/Selangor Darul Ehsan,
47301
IOT Management Sdn. Bhd.
Lot 7689 and Lot 7690, Section 64, Kuching Town Land District, Jalan Pending, Kuching, Sarawak, 93450
Kebabangan Petroleum Operating Company Sdn. Bhd. [b]
Suite 13.03, 13 Floor, Menara Tan & Tan, 207 Tun Razak, Kuala Lumpur/Federal Territory, 50400
P S Pipeline Sendirian Berhad
P S Terminal Sendirian Berhad
Pertini Vista Sdn. Bhd.
Provista Ventures Sdn. Bhd.
Sarawak Shell Berhad
Level 30, Tower 1, Petronas Twin Towers, KLCC, Kuala Lumpur/Federal Territory, 50088
Lot 6.05, Level 6, KPMG Tower, 8 First Avenue Bandar Utama, Petaling Jaya/Selangor Darul Ehsan, 47800
Lot 6.05, Level 6, KPMG Tower, 8 First Avenue Bandar Utama, Petaling Jaya/Selangor Darul Ehsan, 47800
Lot 6.05, Level 6, KPMG Tower, 8 First Avenue Bandar Utama, Petaling Jaya/Selangor Darul Ehsan, 47800
Lot 6.05, Level 6, KPMG Tower, 8 First Avenue Bandar Utama, Petaling Jaya/Selangor Darul Ehsan, 47800
Shell Business Service Centre Sdn. Bhd.
Lot 6.05, Level 6, KPMG Tower, 8 First Avenue Bandar Utama, Petaling Jaya/Selangor Darul Ehsan, 47800
Shell Global Solutions (Malaysia) Sdn. Bhd.
Lot 6.05, Level 6, KPMG Tower, 8 First Avenue Bandar Utama, Petaling Jaya/Selangor Darul Ehsan, 47800
Shell Malaysia Trading Sendirian Berhad
Lot 6.05, Level 6, KPMG Tower, 8 First Avenue Bandar Utama, Petaling Jaya/Selangor Darul Ehsan, 47800
Shell MDS (Malaysia) Sendirian Berhad
Lot 6.05, Level 6, KPMG Tower, 8 First Avenue Bandar Utama, Petaling Jaya/Selangor Darul Ehsan, 47800
Shell New Ventures Malaysia Sdn. Bhd. [i]
Lot 6.05, Level 6, KPMG Tower, 8 First Avenue Bandar Utama, Petaling Jaya/Selangor Darul Ehsan, 47800
Shell People Services Asia Sdn. Bhd.
Shell Sabah Selatan Sendirian Berhad
Shell Timur Sdn. Bhd.
Lot 6.05, Level 6, KPMG Tower, 8 First Avenue Bandar Utama, Petaling Jaya/Selangor Darul Ehsan, 47800
Lot 6.05, Level 6, KPMG Tower, 8 First Avenue Bandar Utama, Petaling Jaya/Selangor Darul Ehsan, 47800
Lot 6.05, Level 6, KPMG Tower, 8 First Avenue Bandar Utama, Petaling Jaya/Selangor Darul Ehsan, 47800
Shell Treasury Malaysia (L) Limited
Kensington Gardens, No. U1317, Lot 7616, Jalan Jumidar Buyong, Labuan F.T., 87000
Tanjung Manis Oil Terminal Management Sdn. Bhd.
Lot 7689 and Lot 7690, Section 64, Kuching Town Land District, Jalan Pending, Kuching, Sarawak, 93450
MAURITIUS
BG Mauritius LNG Holdings Ltd
BG Mumbai Holdings Limited
6th Floor, Tower A, 1 Cybercity, Ebene, 72201
6th Floor, Tower A, 1 Cybercity, Ebene, 72201
Pennzoil Products International Company
33 Edith Cavell Street, Port Louis, 11324
MEXICO
BG Group Mexico Exploration, S.A. de C.V.
Paseo de las Palmas 425, Piso 3, Colonia Lomas de Chapultepec, Ciudad de México, 11000
BG Group Mexico Services, S.A. de C.V.
Paseo de las Palmas 425, Piso 3, Colonia Lomas de Chapultepec, Ciudad de México, 11000
Gas Del Litoral, S. de R.L. de C.V.
Paseo de las Palmas 425, Piso 3, Colonia Lomas de Chapultepec, Ciudad de México, 11000
Shell Exploración y Extracción de México, S.A. de C.V.
Paseo de las Palmas 425, Piso 3, Colonia Lomas de Chapultepec, Ciudad de México, 11000
Shell México Gas Natural, S. de R.L. de C.V.
Paseo de las Palmas 425, Piso 3, Colonia Lomas de Chapultepec, Ciudad de México, 11000
Shell México, S.A. de C.V.
Paseo de las Palmas 425, Piso 3, Colonia Lomas de Chapultepec, Ciudad de México, 11000
Shell Servicios México, S.A. de C.V.
Paseo de las Palmas 425, Piso 3, Colonia Lomas de Chapultepec, Ciudad de México, 11000
Shell Trading México, S. de R.L. de C.V.
Paseo de las Palmas 425, Piso 3, Colonia Lomas de Chapultepec, Ciudad de México, 11000
MONGOLIA
BGMEP, LLC
NETHERLANDS
Suite 403, Floor 4, New Century Plaza, Chinggis Avenue, 1st Khoroo, Sukhbaatar, Ulaanbaatar
Amsterdam Schiphol Pijpleiding Beheer B.V.
Amsterdamseweg 55, 1182 GP Amstelveen, P.O. Box 75650, Luchthaven Schiphol, 1118 ZS
Attiki Gas B.V.
B.R.E. B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Lelystad, Deventer, 7425 SB
B.V. Dordtsche Petroleum Maatschappij
Carel van Bylandtlaan 30, The Hague, 2596 HR
B.V. Petroleum Assurantie Maatschappij
Carel van Bylandtlaan 30, The Hague, 2596 HR
BG Gas Atlantic Holdings B.V.
BG Gas Brazil E&P 12 B.V.
BG Gas Brazil Holdings B.V.
BG Gas Brazilian Investment B.V.
BG Gas Global Holdings B.V.
BG Gas International B.V.
BG Gas International Holdings B.V.
BG Gas Netherlands Holdings B.V.
BG Gas Sao Paulo Investments B.V.
BJS Oil Operations B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
BJSA Exploration and Production B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Caspi Meruerty Operating Company B.V.
Prins Bernhardplein 200, 1097JB Amsterdam, Amsterdam, 1077 XX
%
25
30
50
100
100
53
33
100
100
100
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100
33
7
30
50
35
100
100
100
100
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72
100
100
100
70
100
14
100
100
100
100
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75
100
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100
100
100
100
40
100
100
100
100
100
100
100
100
100
100
100
100
100
80
100
40
Company by country of incorporation
Address of registered office
Chosun Shell B.V.
Cicerone Holding B.V.
ELLBA B.V. [b]
ELLBA C.V. [b] [d]
Euroshell Cards B.V.
Gasterra B.V.
Guara B.V.
Infineum Holdings B.V.
Integral Investments B.V.
Jordan Oil Shale Company B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Herikerbergweg 238, Amsterdam, 1101 CM
Vondelingenweg 601, Vondelingenplaat, Rotterdam, 3196 KK
Vondelingenweg 601, Vondelingenplaat, Rotterdam, 3196 KK
Weena 70, Rotterdam, 3012 CM
P.O. Box 477, Groningen, 9700 AL
Weena 722, Rotterdam, 3014 DA
Herikerbergweg 238, Amsterdam, 1101 CM
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Karachaganak Petroleum Operating B.V.
Strawinskylaan 1725, Amsterdam, 1077 XX
Libra Oil & Gas B.V.
Weena 762, Rotterdam, 3014 DA
LNG Shipping Operation Services Netherlands B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Loyalty Management Netherlands B.V.
Polaris Avenue 81, P.O. Box 2047, 2130 GE, Hoofddorp, 2132 JH
Maasvlakte Olie Terminal C.V. [d]
Europaweg 975, Maasvlakte, Rotterdam, 3199 LC
Multi Tank Card B.V.
Antareslaan 39, P.O. Box 3068, 2130 KB, Hoofddorp, 2132 JE
N.V. Rotterdam-Rijn Pijpleiding Maatschappij [b]
Butaanweg 215, Vondelingplaat-Rotterdam, 3196 KC
Nederlandse Aardolie Maatschappij B.V.
Schepersmaat 2, Assen, 9405 TA
Netherlands Alng Holding Company B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Rub' Al-Khali Gas Development B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Salym Petroleum Development N.V. [b]
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Asset Management Company B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Business Development Central Asia B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Caspian B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Caspian Pipeline Holdings B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Downstream Services International B.V.
Weena 70, Rotterdam, 3012 CM
Shell E and P Offshore Services B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
2e Havenstraat 5b, Ijmuiden, 1976 CE
2e Havenstraat 5b, Ijmuiden, 1976 CE
Tjalke de Boerstrjitte 24, Balk, 8561 EL
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Weena 70, Rotterdam, 3012 CM
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Noordzeewind B.V.
Noordzeewind C.V. [d]
Paqell B.V.
Raffinaderij Shell Mersin N.V.
RESCO B.V.
Shell Abu Dhabi B.V.
Shell Additives Holdings (I) B.V.
Shell Additives Holdings (II) B.V.
Shell and Vivo Lubricants B.V.
Shell Bab Gas Development B.V.
Shell Brazil Holding B.V.
Shell Chemicals Europe B.V.
Shell Chemicals Ventures B.V. [k]
Shell China B.V.
Shell China Holdings B.V.
Shell Deepwater Tanzania B.V.
Shell Development Iran B.V.
Shell Egypt N.V. [e]
Shell Energy Europe B.V.
Shell EP Holdings (EE&ME) B.V.
Shell EP Middle East Holdings B.V.
Shell EP Russia Investments (III) B.V.
Shell EP Russia Investments (V) B.V.
Shell EP Somalia B.V.
Shell EP Wells Equipment Services B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (78) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (79) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (82) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (83) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (84) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (85) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (86) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (87) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (88) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (89) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (90) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (91) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (XL) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (LI) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (LVII) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (LIX) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (LX) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
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ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
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additionaL inForMation SHELL ANNUAL REPORT AND FORM 20-F 2017
Shell Annual Report_Master Template.indd 8
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%
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100
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50
50
25
30
50
100
100
29
20
100
40
16
30
56
50
50
50
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100
100
100
100
50
100
100
100
50
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100
100
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100
100
100
100
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100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Company by country of incorporation
Address of registered office
JAPAN
Brunei Energy Services Company Ltd.
1-8-2 Marunouchi, Chiyoda-ku, Tokyo, 100-0005
Japan Chemtech Ltd.
3-2 Daiba 2-Chome, Minato-Ku, Tokyo, 135-8074
Sakhalin LNG Services Company Ltd.
2-3, Kanda, Awaji-cho, Chiyoda-ku, Tokyo, 101-0063
3-2 Daiba 2-Chome, Minato-Ku, Tokyo, 135-8074
16F Pacific Century Place, 1-11-1, Marunouchi, Chiyoda-ku, Tokyo, 100-6216
3-2 Daiba 2-Chome, Minato-Ku, Tokyo, 135-8074
Shell Service Station Properties Limited
Queensway House, Hilgrove Street, St. Helier, JE1 1ES
Ogier House, The Esplanade, St. Helier, JE4 9WG
7, Rue de l'Industrie, Bertrange, Luxembourg, L-8069
7, Rue de l'Industrie, Bertrange, Luxembourg, L-8005
7, Rue de l'Industrie, Bertrange, Luxembourg, L-8069
Shell Chemicals Japan Ltd.
Shell Japan Limited
Shell Japan Trading Ltd.
JERSEY
Morzine Limited
LUXEMBOURG
Shell Finance Luxembourg Sarl
Shell Luxembourgeoise Sarl
Shell Treasury Luxembourg Sarl
MACAU
MALAYSIA
Shell Macau Petroleum Company Limited
876 Avenida da Amizade, Edificio Marina Gardens, Room 310, 3rd Floor
Bonuskad Loyalty Sdn. Bhd. [i]
Level 8, Symphony House, Block D13, Pusat Dagangan Dana 1, Jalan PJU 1A/46, Petaling Jaya/Selangor Darul Ehsan,
47301
IOT Management Sdn. Bhd.
Lot 7689 and Lot 7690, Section 64, Kuching Town Land District, Jalan Pending, Kuching, Sarawak, 93450
Kebabangan Petroleum Operating Company Sdn. Bhd. [b]
Suite 13.03, 13 Floor, Menara Tan & Tan, 207 Tun Razak, Kuala Lumpur/Federal Territory, 50400
P S Pipeline Sendirian Berhad
P S Terminal Sendirian Berhad
Pertini Vista Sdn. Bhd.
Provista Ventures Sdn. Bhd.
Sarawak Shell Berhad
Level 30, Tower 1, Petronas Twin Towers, KLCC, Kuala Lumpur/Federal Territory, 50088
Lot 6.05, Level 6, KPMG Tower, 8 First Avenue Bandar Utama, Petaling Jaya/Selangor Darul Ehsan, 47800
Lot 6.05, Level 6, KPMG Tower, 8 First Avenue Bandar Utama, Petaling Jaya/Selangor Darul Ehsan, 47800
Lot 6.05, Level 6, KPMG Tower, 8 First Avenue Bandar Utama, Petaling Jaya/Selangor Darul Ehsan, 47800
Lot 6.05, Level 6, KPMG Tower, 8 First Avenue Bandar Utama, Petaling Jaya/Selangor Darul Ehsan, 47800
Shell Business Service Centre Sdn. Bhd.
Lot 6.05, Level 6, KPMG Tower, 8 First Avenue Bandar Utama, Petaling Jaya/Selangor Darul Ehsan, 47800
Shell Global Solutions (Malaysia) Sdn. Bhd.
Lot 6.05, Level 6, KPMG Tower, 8 First Avenue Bandar Utama, Petaling Jaya/Selangor Darul Ehsan, 47800
Shell Malaysia Trading Sendirian Berhad
Lot 6.05, Level 6, KPMG Tower, 8 First Avenue Bandar Utama, Petaling Jaya/Selangor Darul Ehsan, 47800
Shell MDS (Malaysia) Sendirian Berhad
Lot 6.05, Level 6, KPMG Tower, 8 First Avenue Bandar Utama, Petaling Jaya/Selangor Darul Ehsan, 47800
Shell New Ventures Malaysia Sdn. Bhd. [i]
Lot 6.05, Level 6, KPMG Tower, 8 First Avenue Bandar Utama, Petaling Jaya/Selangor Darul Ehsan, 47800
Shell People Services Asia Sdn. Bhd.
Shell Sabah Selatan Sendirian Berhad
Shell Timur Sdn. Bhd.
Lot 6.05, Level 6, KPMG Tower, 8 First Avenue Bandar Utama, Petaling Jaya/Selangor Darul Ehsan, 47800
Lot 6.05, Level 6, KPMG Tower, 8 First Avenue Bandar Utama, Petaling Jaya/Selangor Darul Ehsan, 47800
Lot 6.05, Level 6, KPMG Tower, 8 First Avenue Bandar Utama, Petaling Jaya/Selangor Darul Ehsan, 47800
Shell Treasury Malaysia (L) Limited
Kensington Gardens, No. U1317, Lot 7616, Jalan Jumidar Buyong, Labuan F.T., 87000
Tanjung Manis Oil Terminal Management Sdn. Bhd.
Lot 7689 and Lot 7690, Section 64, Kuching Town Land District, Jalan Pending, Kuching, Sarawak, 93450
MAURITIUS
BG Mauritius LNG Holdings Ltd
BG Mumbai Holdings Limited
MEXICO
Pennzoil Products International Company
33 Edith Cavell Street, Port Louis, 11324
6th Floor, Tower A, 1 Cybercity, Ebene, 72201
6th Floor, Tower A, 1 Cybercity, Ebene, 72201
BG Group Mexico Exploration, S.A. de C.V.
Paseo de las Palmas 425, Piso 3, Colonia Lomas de Chapultepec, Ciudad de México, 11000
BG Group Mexico Services, S.A. de C.V.
Paseo de las Palmas 425, Piso 3, Colonia Lomas de Chapultepec, Ciudad de México, 11000
Gas Del Litoral, S. de R.L. de C.V.
Paseo de las Palmas 425, Piso 3, Colonia Lomas de Chapultepec, Ciudad de México, 11000
Shell Exploración y Extracción de México, S.A. de C.V.
Paseo de las Palmas 425, Piso 3, Colonia Lomas de Chapultepec, Ciudad de México, 11000
Shell México Gas Natural, S. de R.L. de C.V.
Paseo de las Palmas 425, Piso 3, Colonia Lomas de Chapultepec, Ciudad de México, 11000
Shell México, S.A. de C.V.
Paseo de las Palmas 425, Piso 3, Colonia Lomas de Chapultepec, Ciudad de México, 11000
Shell Servicios México, S.A. de C.V.
Paseo de las Palmas 425, Piso 3, Colonia Lomas de Chapultepec, Ciudad de México, 11000
Shell Trading México, S. de R.L. de C.V.
Paseo de las Palmas 425, Piso 3, Colonia Lomas de Chapultepec, Ciudad de México, 11000
Amsterdam Schiphol Pijpleiding Beheer B.V.
Amsterdamseweg 55, 1182 GP Amstelveen, P.O. Box 75650, Luchthaven Schiphol, 1118 ZS
Suite 403, Floor 4, New Century Plaza, Chinggis Avenue, 1st Khoroo, Sukhbaatar, Ulaanbaatar
B.V. Dordtsche Petroleum Maatschappij
Carel van Bylandtlaan 30, The Hague, 2596 HR
B.V. Petroleum Assurantie Maatschappij
Carel van Bylandtlaan 30, The Hague, 2596 HR
MONGOLIA
BGMEP, LLC
NETHERLANDS
Attiki Gas B.V.
B.R.E. B.V.
BG Gas Atlantic Holdings B.V.
BG Gas Brazil E&P 12 B.V.
BG Gas Brazil Holdings B.V.
BG Gas Brazilian Investment B.V.
BG Gas Global Holdings B.V.
BG Gas International B.V.
BG Gas International Holdings B.V.
BG Gas Netherlands Holdings B.V.
BG Gas Sao Paulo Investments B.V.
BJS Oil Operations B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Lelystad, Deventer, 7425 SB
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
BJSA Exploration and Production B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Caspi Meruerty Operating Company B.V.
Prins Bernhardplein 200, 1097JB Amsterdam, Amsterdam, 1077 XX
%
25
30
50
100
100
53
33
100
100
100
100
100
33
7
30
50
35
100
100
100
100
100
100
72
100
100
100
70
100
14
100
100
100
100
100
75
100
100
100
100
100
100
40
100
100
100
100
100
100
100
100
100
100
100
100
100
80
100
40
Company by country of incorporation
Address of registered office
Chosun Shell B.V.
Cicerone Holding B.V.
ELLBA B.V. [b]
ELLBA C.V. [b] [d]
Euroshell Cards B.V.
Gasterra B.V.
Guara B.V.
Infineum Holdings B.V.
Integral Investments B.V.
Jordan Oil Shale Company B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Herikerbergweg 238, Amsterdam, 1101 CM
Vondelingenweg 601, Vondelingenplaat, Rotterdam, 3196 KK
Vondelingenweg 601, Vondelingenplaat, Rotterdam, 3196 KK
Weena 70, Rotterdam, 3012 CM
P.O. Box 477, Groningen, 9700 AL
Weena 722, Rotterdam, 3014 DA
Herikerbergweg 238, Amsterdam, 1101 CM
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Karachaganak Petroleum Operating B.V.
Strawinskylaan 1725, Amsterdam, 1077 XX
Libra Oil & Gas B.V.
Weena 762, Rotterdam, 3014 DA
LNG Shipping Operation Services Netherlands B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Loyalty Management Netherlands B.V.
Polaris Avenue 81, P.O. Box 2047, 2130 GE, Hoofddorp, 2132 JH
Maasvlakte Olie Terminal C.V. [d]
Europaweg 975, Maasvlakte, Rotterdam, 3199 LC
Multi Tank Card B.V.
Antareslaan 39, P.O. Box 3068, 2130 KB, Hoofddorp, 2132 JE
N.V. Rotterdam-Rijn Pijpleiding Maatschappij [b]
Butaanweg 215, Vondelingplaat-Rotterdam, 3196 KC
Nederlandse Aardolie Maatschappij B.V.
Schepersmaat 2, Assen, 9405 TA
Netherlands Alng Holding Company B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Noordzeewind B.V.
Noordzeewind C.V. [d]
Paqell B.V.
Raffinaderij Shell Mersin N.V.
RESCO B.V.
2e Havenstraat 5b, Ijmuiden, 1976 CE
2e Havenstraat 5b, Ijmuiden, 1976 CE
Tjalke de Boerstrjitte 24, Balk, 8561 EL
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Rub' Al-Khali Gas Development B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Salym Petroleum Development N.V. [b]
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Abu Dhabi B.V.
Shell Additives Holdings (I) B.V.
Shell Additives Holdings (II) B.V.
Shell and Vivo Lubricants B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Asset Management Company B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Bab Gas Development B.V.
Shell Brazil Holding B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Business Development Central Asia B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Caspian B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Caspian Pipeline Holdings B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Chemicals Europe B.V.
Shell Chemicals Ventures B.V. [k]
Shell China B.V.
Shell China Holdings B.V.
Shell Deepwater Tanzania B.V.
Shell Development Iran B.V.
Weena 70, Rotterdam, 3012 CM
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Downstream Services International B.V.
Weena 70, Rotterdam, 3012 CM
Shell E and P Offshore Services B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Egypt N.V. [e]
Shell Energy Europe B.V.
Shell EP Holdings (EE&ME) B.V.
Shell EP Middle East Holdings B.V.
Shell EP Russia Investments (III) B.V.
Shell EP Russia Investments (V) B.V.
Shell EP Somalia B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell EP Wells Equipment Services B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (78) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (79) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (82) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (83) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (84) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (85) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (86) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (87) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (88) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (89) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (90) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (91) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (XL) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (LI) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (LVII) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (LIX) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (LX) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
%
100
51
50
50
100
25
30
50
100
100
29
20
100
40
16
30
56
50
100
50
50
50
100
100
100
50
100
100
100
50
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
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ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
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SHELL ANNUAL REPORT AND FORM 20-F 2017 additionaL inForMation
e9
Company by country of incorporation
Address of registered office
Shell Exploration and Production (LXI) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (LXII) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (LXIII) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (LXIV) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (LXV) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (LXVI) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (LXVII) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (LXXI) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (LXXIV) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (LXXV) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production Holdings B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production Investments B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production Services (RF) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production South Africa B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production Ukraine I B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production Ukraine Investments (I) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production Ukraine Investments (II) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production Ukraine Investments (IV) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration Company (RF) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration Company (West) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration Company B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration Venture Services B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Finance (Netherlands) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Gas & Power Developments B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Gas (LPG) Holdings B.V.
Shell Gas B.V.
Shell Gas Iraq B.V.
Shell Gas Nigeria B.V.
Shell Gas Venezuela B.V.
Shell Generating (Holding) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Global Solutions (Eastern Europe) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Global Solutions International B.V.
Kessler Park 1, Rijswijk, 2288 GS
Shell Global Solutions Services B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Information Technology International B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell International B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell International Exploration and Production B.V.
Carel van Bylandtlaan 16, The Hague, 2596 HR
Shell International Finance B.V. [a]
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Internationale Research Maatschappij B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Internet Ventures B.V.
Shell Iraq B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Iraq Petroleum Development B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Iraq Services B.V.
Shell Kazakhstan B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Kazakhstan Development B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Kuwait Exploration and Production B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell LNG Port Spain B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Lubricants Supply Company B.V.
Weena 70, Rotterdam, 3012 CM
Shell Manufacturing Services B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Mozambique B.V.
Shell MSPO 2 Holding B.V.
Shell Namibia Upstream B.V.
Shell Nanhai B.V.
Shell Nederland B.V.
Shell Nederland Chemie B.V. [i]
Shell Nederland Raffinaderij B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Vondelingenweg 601, Vondelingenplaat, Rotterdam, 3196 KK
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Chemieweg 25, P.O. Box 6060, Moerdijk, 4780 LN
Vondelingenweg 601, Vondelingenplaat, Rotterdam, 3196 KK
Shell Nederland Verkoopmaatschappij B.V.
Weena 70, Rotterdam, 3012 CM
Shell Nusantara Trading B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Offshore (Personnel) Services B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Offshore North Gabon B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Offshore Services B.V.
Shell OKLNG Holdings B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Olie - OG Gasudvinding Danmark B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Olie OG Gas Holding B.V. [k]
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Oman Exploration and Production B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Overseas Investments B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Pensioenbureau Nederland B.V.
Postbus 157, The Hague, 2501 CD
Shell Petroleum N.V. [a]
Shell Philippines Exploration B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
%
100
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100
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100
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100
100
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100
100
100
100
100
100
100
100
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100
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100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Company by country of incorporation
Address of registered office
Shell Project Development (VIII) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell RDS Holding B.V.
Shell Sakhalin Holdings B.V.
Shell Sakhalin Services B.V.
Shell Salym Development B.V.
Shell Services Oman B.V.
Shell Shared Services (Asia) B.V.
Shell South Africa Upstream B.V.
Shell TapUp B.V.
Shell Technology Ventures B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Hofplein 20, Rotterdam, 3032 AC
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Technology Ventures Fund 1 B.V.
Teleportboulevard 140, Amsterdam, 1043 EJ
Shell Technology Ventures Investments B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Trademark Management B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Trading Rotterdam B.V.
Shell Trading Russia B.V.
Shell Upstream Albania B.V.
Weena 70, Rotterdam, 3012 CM
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Upstream Development B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Upstream Indonesia Services B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Upstream Spain B.V.
Shell Upstream Turkey B.V.
Shell Western LNG B.V.
Shell Windenergy Netherlands B.V.
Shell Windenergy NZW I B.V.
Snijders Olie B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Weena 70, Rotterdam, 3012 CM
Syria Shell Petroleum Development B.V. [j]
Carel van Bylandtlaan 30, The Hague, 2596 HR
Tamba B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Tankstation Exploitatie Maatschappij Holding B.V.
Weena 70, Rotterdam, 3012 CM
Waalbrug Exploitatie Maatschappij B.V.
Henri Berssenbruggestraat 9, Deventer, 7425 SB
Rigakade 20, Amsterdam, 1013 BC
Wilhelminatoren, Wilhelminaplein 14, Rotterdam, 3072
Oosterhorn 36, Farmsum, 9936 HD
The New Motion B.V.
Tupi B.V.
Zeolyst C.V.
NEW ZEALAND
Energy Finance NZ Limited
Energy Holdings Offshore Limited
Energy Infrastructure Limited
Energy Petroleum Holdings Limited
Energy Petroleum Taranaki Limited
Maui Development Limited
Shell Energy Asia Limited
Shell Exploration NZ Ltd [i]
Shell GSB Limited
Shell Investments NZ Limited
Shell New Zealand (2011) Limited [i]
Shell New Zealand Pensions Limited
Shell Taranaki Limited
Southern Petroleum No Liability
NICARAGUA
NIGERIA
Energy Petroleum Investments Limited [i]
Level 10, ASB Tower, 2 Hunter Street, P.O. Box 1873, Wellington, 6011
Shell (Petroleum Mining) Company Limited
Level 10, ASB Tower, 2 Hunter Street, P.O. Box 1873, Wellington, 6011
Level 10, ASB Tower, 2 Hunter Street, P.O. Box 1873, Wellington, 6011
Level 10, ASB Tower, 2 Hunter Street, P.O. Box 1873, Wellington, 6011
Level 10, ASB Tower, 2 Hunter Street, P.O. Box 1873, Wellington, 6011
Level 10, ASB Tower, 2 Hunter Street, P.O. Box 1873, Wellington, 6011
Level 10, ASB Tower, 2 Hunter Street, P.O. Box 1873, Wellington, 6011
Level 10, ASB Tower, 2 Hunter Street, P.O. Box 1873, Wellington, 6011
Level 10, ASB Tower, 2 Hunter Street, P.O. Box 1873, Wellington, 6011
Level 10, ASB Tower, 2 Hunter Street, P.O. Box 1873, Wellington, 6011
Level 10, ASB Tower, 2 Hunter Street, P.O. Box 1873, Wellington, 6011
Level 10, ASB Tower, 2 Hunter Street, P.O. Box 1873, Wellington, 6011
Level 10, ASB Tower, 2 Hunter Street, P.O. Box 1873, Wellington, 6011
Level 10, ASB Tower, 2 Hunter Street, P.O. Box 1873, Wellington, 6011
Level 10, ASB Tower, 2 Hunter Street, P.O. Box 1873, Wellington, 6011
Level 10, ASB Tower, 2 Hunter Street, P.O. Box 1873, Wellington, 6011
Taranaki Offshore Petroleum Company of New Zealand
Level 10, ASB Tower, 2 Hunter Street, P.O. Box 1873, Wellington, 6011
Compañía Química Nicaragüense S.A.
Hospital Militar, 1C al Norte 10, VRS Oeste Cas Bolonia, Managua
All on Partnerships for Energy Access Limited by Guarantee
44 Bourdillon Road, Ikoyi, Lagos
BG Exploration and Production Nigeria Limited
Eko Nominees Limited, 252E Muri Okunola Street, Victoria Island, Lagos
BG Upstream A Nigeria Limited
Delta Business Development Limited
Nigeria LNG Limited
NLNG Ship Manning Limited
Eko Nominees Limited, 252E Muri Okunola Street, Victoria Island, Lagos
Freeman House, 21/22 Marina, P.M.B. 2418, Lagos
Corporate Office, Intels Aba Road Estate, Km16 Aba Expressway, Port Harcourt, 500211
Corporate Office, Intels Aba Road Estate, Km16 Aba Expressway, Port Harcourt, 500211
Shell Exploration and Production Africa Limited
Freeman House, 21/22 Marina, P.M.B. 2418, Lagos
Shell Nigeria Closed Pension Fund Administrator Ltd
Freeman House, 21/22 Marina, P.M.B. 2418, Lagos
Shell Nigeria Exploration and Production Company Ltd
Freeman House, 21/22 Marina, P.M.B. 2418, Lagos
Shell Nigeria Exploration and Production Delta Limited
Freeman House, 21/22 Marina, P.M.B. 2418, Lagos
Shell Nigeria Exploration and Production Echo Limited
Freeman House, 21/22 Marina, P.M.B. 2418, Lagos
Shell Nigeria Exploration Properties Alpha Limited
Freeman House, 21/22 Marina, P.M.B. 2418, Lagos
Shell Nigeria Exploration Properties Beta Limited
Freeman House, 21/22 Marina, P.M.B. 2418, Lagos
Shell Nigeria Exploration Properties Charlie Limited
Freeman House, 21/22 Marina, P.M.B. 2418, Lagos
Shell Nigeria Gas Ltd (SNG)
Freeman House, 21/22 Marina, P.M.B. 2418, Lagos
Shell Nigeria Infrastructure Development Limited
Freeman House, 21/22 Marina, P.M.B. 2418, Lagos
Shell Nigeria Offshore Prospecting Limited
Freeman House, 21/22 Marina, P.M.B. 2418, Lagos
%
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100
52
100
100
100
100
100
100
100
100
100
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100
100
100
65
50
100
100
25
100
50
100
100
100
100
100
100
84
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
26
20
100
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100
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100
100
100
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
E10
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
E11
e10
additionaL inForMation SHELL ANNUAL REPORT AND FORM 20-F 2017
Shell Annual Report_Master Template.indd 10
21/03/2018 15:35:27
Company by country of incorporation
Address of registered office
Shell Exploration and Production (LXI) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (LXII) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (LXIII) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (LXIV) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (LXV) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (LXVI) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (LXVII) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (LXXI) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (LXXIV) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production (LXXV) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production Holdings B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production Investments B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production Services (RF) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production South Africa B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production Ukraine I B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production Ukraine Investments (I) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production Ukraine Investments (II) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration and Production Ukraine Investments (IV) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration Company (RF) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration Company (West) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration Company B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Exploration Venture Services B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Finance (Netherlands) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Gas & Power Developments B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Gas (LPG) Holdings B.V.
Shell Gas B.V.
Shell Gas Iraq B.V.
Shell Gas Nigeria B.V.
Shell Gas Venezuela B.V.
Shell Generating (Holding) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Global Solutions (Eastern Europe) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Global Solutions International B.V.
Kessler Park 1, Rijswijk, 2288 GS
Shell Global Solutions Services B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Information Technology International B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell International B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell International Exploration and Production B.V.
Carel van Bylandtlaan 16, The Hague, 2596 HR
Shell International Finance B.V. [a]
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Internationale Research Maatschappij B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Internet Ventures B.V.
Shell Iraq B.V.
Shell Iraq Services B.V.
Shell Kazakhstan B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Iraq Petroleum Development B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Kazakhstan Development B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Kuwait Exploration and Production B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell LNG Port Spain B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Lubricants Supply Company B.V.
Weena 70, Rotterdam, 3012 CM
Shell Manufacturing Services B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Mozambique B.V.
Shell MSPO 2 Holding B.V.
Shell Namibia Upstream B.V.
Shell Nanhai B.V.
Shell Nederland B.V.
Shell Nederland Chemie B.V. [i]
Shell Nederland Raffinaderij B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Vondelingenweg 601, Vondelingenplaat, Rotterdam, 3196 KK
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Chemieweg 25, P.O. Box 6060, Moerdijk, 4780 LN
Vondelingenweg 601, Vondelingenplaat, Rotterdam, 3196 KK
Shell Nederland Verkoopmaatschappij B.V.
Weena 70, Rotterdam, 3012 CM
Shell Nusantara Trading B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Offshore (Personnel) Services B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Offshore North Gabon B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Offshore Services B.V.
Shell OKLNG Holdings B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Olie - OG Gasudvinding Danmark B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Olie OG Gas Holding B.V. [k]
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Oman Exploration and Production B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Overseas Investments B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Pensioenbureau Nederland B.V.
Postbus 157, The Hague, 2501 CD
Shell Petroleum N.V. [a]
Shell Philippines Exploration B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
%
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100
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100
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100
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100
100
100
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100
100
100
100
100
100
100
100
100
100
100
Company by country of incorporation
Address of registered office
Shell Project Development (VIII) B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell RDS Holding B.V.
Shell Sakhalin Holdings B.V.
Shell Sakhalin Services B.V.
Shell Salym Development B.V.
Shell Services Oman B.V.
Shell Shared Services (Asia) B.V.
Shell South Africa Upstream B.V.
Shell TapUp B.V.
Shell Technology Ventures B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Hofplein 20, Rotterdam, 3032 AC
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Technology Ventures Fund 1 B.V.
Teleportboulevard 140, Amsterdam, 1043 EJ
Shell Technology Ventures Investments B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Trademark Management B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Trading Rotterdam B.V.
Shell Trading Russia B.V.
Shell Upstream Albania B.V.
Weena 70, Rotterdam, 3012 CM
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Upstream Development B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Upstream Indonesia Services B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Shell Upstream Spain B.V.
Shell Upstream Turkey B.V.
Shell Western LNG B.V.
Shell Windenergy Netherlands B.V.
Shell Windenergy NZW I B.V.
Snijders Olie B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Carel van Bylandtlaan 30, The Hague, 2596 HR
Weena 70, Rotterdam, 3012 CM
Syria Shell Petroleum Development B.V. [j]
Carel van Bylandtlaan 30, The Hague, 2596 HR
Tamba B.V.
Carel van Bylandtlaan 30, The Hague, 2596 HR
Tankstation Exploitatie Maatschappij Holding B.V.
Weena 70, Rotterdam, 3012 CM
The New Motion B.V.
Tupi B.V.
Rigakade 20, Amsterdam, 1013 BC
Wilhelminatoren, Wilhelminaplein 14, Rotterdam, 3072
Waalbrug Exploitatie Maatschappij B.V.
Henri Berssenbruggestraat 9, Deventer, 7425 SB
Zeolyst C.V.
NEW ZEALAND
Energy Finance NZ Limited
Energy Holdings Offshore Limited
Energy Infrastructure Limited
Energy Petroleum Holdings Limited
Oosterhorn 36, Farmsum, 9936 HD
Level 10, ASB Tower, 2 Hunter Street, P.O. Box 1873, Wellington, 6011
Level 10, ASB Tower, 2 Hunter Street, P.O. Box 1873, Wellington, 6011
Level 10, ASB Tower, 2 Hunter Street, P.O. Box 1873, Wellington, 6011
Level 10, ASB Tower, 2 Hunter Street, P.O. Box 1873, Wellington, 6011
Energy Petroleum Investments Limited [i]
Level 10, ASB Tower, 2 Hunter Street, P.O. Box 1873, Wellington, 6011
Energy Petroleum Taranaki Limited
Maui Development Limited
Level 10, ASB Tower, 2 Hunter Street, P.O. Box 1873, Wellington, 6011
Level 10, ASB Tower, 2 Hunter Street, P.O. Box 1873, Wellington, 6011
Shell (Petroleum Mining) Company Limited
Level 10, ASB Tower, 2 Hunter Street, P.O. Box 1873, Wellington, 6011
Shell Energy Asia Limited
Shell Exploration NZ Ltd [i]
Shell GSB Limited
Shell Investments NZ Limited
Shell New Zealand (2011) Limited [i]
Shell New Zealand Pensions Limited
Shell Taranaki Limited
Southern Petroleum No Liability
Level 10, ASB Tower, 2 Hunter Street, P.O. Box 1873, Wellington, 6011
Level 10, ASB Tower, 2 Hunter Street, P.O. Box 1873, Wellington, 6011
Level 10, ASB Tower, 2 Hunter Street, P.O. Box 1873, Wellington, 6011
Level 10, ASB Tower, 2 Hunter Street, P.O. Box 1873, Wellington, 6011
Level 10, ASB Tower, 2 Hunter Street, P.O. Box 1873, Wellington, 6011
Level 10, ASB Tower, 2 Hunter Street, P.O. Box 1873, Wellington, 6011
Level 10, ASB Tower, 2 Hunter Street, P.O. Box 1873, Wellington, 6011
Level 10, ASB Tower, 2 Hunter Street, P.O. Box 1873, Wellington, 6011
Taranaki Offshore Petroleum Company of New Zealand
Level 10, ASB Tower, 2 Hunter Street, P.O. Box 1873, Wellington, 6011
NICARAGUA
Compañía Química Nicaragüense S.A.
Hospital Militar, 1C al Norte 10, VRS Oeste Cas Bolonia, Managua
NIGERIA
All on Partnerships for Energy Access Limited by Guarantee
44 Bourdillon Road, Ikoyi, Lagos
BG Exploration and Production Nigeria Limited
Eko Nominees Limited, 252E Muri Okunola Street, Victoria Island, Lagos
BG Upstream A Nigeria Limited
Delta Business Development Limited
Nigeria LNG Limited
NLNG Ship Manning Limited
Eko Nominees Limited, 252E Muri Okunola Street, Victoria Island, Lagos
Freeman House, 21/22 Marina, P.M.B. 2418, Lagos
Corporate Office, Intels Aba Road Estate, Km16 Aba Expressway, Port Harcourt, 500211
Corporate Office, Intels Aba Road Estate, Km16 Aba Expressway, Port Harcourt, 500211
Shell Exploration and Production Africa Limited
Freeman House, 21/22 Marina, P.M.B. 2418, Lagos
Shell Nigeria Closed Pension Fund Administrator Ltd
Freeman House, 21/22 Marina, P.M.B. 2418, Lagos
Shell Nigeria Exploration and Production Company Ltd
Freeman House, 21/22 Marina, P.M.B. 2418, Lagos
Shell Nigeria Exploration and Production Delta Limited
Freeman House, 21/22 Marina, P.M.B. 2418, Lagos
Shell Nigeria Exploration and Production Echo Limited
Freeman House, 21/22 Marina, P.M.B. 2418, Lagos
Shell Nigeria Exploration Properties Alpha Limited
Freeman House, 21/22 Marina, P.M.B. 2418, Lagos
Shell Nigeria Exploration Properties Beta Limited
Freeman House, 21/22 Marina, P.M.B. 2418, Lagos
Shell Nigeria Exploration Properties Charlie Limited
Freeman House, 21/22 Marina, P.M.B. 2418, Lagos
Shell Nigeria Gas Ltd (SNG)
Freeman House, 21/22 Marina, P.M.B. 2418, Lagos
Shell Nigeria Infrastructure Development Limited
Freeman House, 21/22 Marina, P.M.B. 2418, Lagos
Shell Nigeria Offshore Prospecting Limited
Freeman House, 21/22 Marina, P.M.B. 2418, Lagos
%
100
100
100
100
100
100
100
100
100
100
52
100
100
100
100
100
100
100
100
100
100
100
100
100
65
50
100
100
25
100
50
100
100
100
100
100
100
84
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
26
20
100
100
100
100
100
100
100
100
100
100
100
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
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ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
E11
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SHELL ANNUAL REPORT AND FORM 20-F 2017 additionaL inForMation
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Company by country of incorporation
Address of registered office
Shell Nigeria Oil Products Limited (SNOP)
Freeman House, 21/22 Marina, P.M.B. 2418, Lagos
Shell Nigeria Ultra Deep Limited
Freeman House, 21/22 Marina, P.M.B. 2418, Lagos
Shell Nigeria Upstream Ventures Limited
Freeman House, 21/22 Marina, P.M.B. 2418, Lagos
Shell Thrift & Loan Fund Trustees Nig Ltd
Freeman House, 21/22 Marina, P.M.B. 2418, Lagos
The Shell Petroleum Development Company of Nigeria Limited
Shell Industrial Area, Port Harcourt, Rivers State, P.O. Box 263, Port Harcourt
NORWAY
A/S Norske Shell
Aviation Fuelling Services Norway AS
Gasnor AS
Ormen Lange Eiendom DA
Shell Marine Products AS
Vestprosess DA
OMAN
Oman LNG LLC
Petroleum Development Oman LLC
Shell Development Oman LLC
Tankvegen 1, Tananger, 4056
Karenslyst Allé 2, Oslo, 0278
Helganesvegen 59, Karmoy, 4262 Avalsnes
Nyhamna, Aukra, 6480
Karenslyst Allé 2, Oslo, 0278
Forusbeen 50, Stavanger, 4035
P.O. Box 560, Mina Al Fahal, Muscat, 116
P.O. Box 81, Mina Al Fahal, Muscat, 113
P.O. Box 74, Mina Al Fahal, Muscat, 116
Shell Oman Marketing Company SAOG
P.O. Box 38, Mina Al Fahal, Muscat, 116
PAKISTAN
Pak Arab Pipeline Company Limited
House No. 2-B, Nazimuddin Road, F-8/1, Islamabad, 75400
Pakistan Refinery Limited
Shell Pakistan Limited
PERU
Shell GNL Peru S.A.C.
Shell Operaciones Peru S.A.C.
PHILIPPINES
Korangi Creek Road, P.O. Box 4612, Karachi, 75190
Shell House, 6 Ch. Khaliquzzaman Road, Karachi, 75530
Calle Dean Valdivia 111, Oficina 802, San Isidro, Lima, Lima 27
Calle Dean Valdivia 111, Oficina 802, San Isidro, Lima, Lima 27
Bonifacio Gas Corporation
2nd Floor, Bonifacio Tech. Center, 31st Street cor. 2nd Avenue, Crescent Park West, Bonifacio Global City, Taguig,
Metro Manila
First Philippine Industrial Corporation
6F, Rockwell Business Center Tower, Ortigas Avenue, Pasig City, 1605
Kamayan Realty Corporation
Pilipinas Shell Petroleum Corporation
Shell Chemicals Philippines, Inc.
NDC Bldg., 116 Tordesillas St., Salcedo Village, Makati City, Metro Manila, 1227
Shellhouse, 156 Valero Street, Salcedo Village, Brgy. Bel-Air, Makati City, Metro Manila, 1227
Shellhouse, 156 Valero Street, Salcedo Village, Brgy. Bel-Air, Makati City, Metro Manila, 1227
Shell Gas and Energy Philippines Corporation
Shellhouse, 156 Valero Street, Salcedo Village, Brgy. Bel-Air, Makati City, Metro Manila, 1227
Shell Gas Trading (Asia Pacific), Inc.
Shell Solar Philippines Corporation
Tabangao Realty, Inc.
POLAND
Shell Polska Sp. z o.o.
PORTUGAL
Subic Bay Free Port Zone, Olangapo City, 2200
Shellhouse, 156 Valero Street, Salcedo Village, Brgy. Bel-Air, Makati City, Metro Manila, 1227
Shellhouse, 156 Valero Street, Salcedo Village, Brgy. Bel-Air, Makati City, Metro Manila, 1227
ul. Bitwy Warszawskiej 1920 r. nr 7A, Warsaw, 02-366
Shell Madeira Praia Formosa
Av. dos Combatentes da Grande Guerra nº 17, Freguesia de S. Juliao, Setúbal, 2900-329
PUERTO RICO
BG Puerto Rico, Inc.
403 Munoz Rivera Avenue, (Hato Rey), San Juan, 00918-3345
Station Managers of Puerto Rico, Inc.
P.O. Box 186, Yabucoa, PR 00767-0186
QATAR
Qatar Liquefied Gas Company Limited (4)
P.O. Box 22666, Doha
Qatar Shell Research & Technology Centre QSTP-LLC
Qatar Science & Technology Park Tech1, Office 101, P.O. Box 3747, Doha
Qatar Shell Service Company W.L.L.
Al Mirqab Tower, West Bay, P.O. Box 3747, Doha
RUSSIA
Khanty-Mansiysk Petroleum Alliance Closed Joint Stock Company
24 A Yakubovicha ul., Saint Petersburg, 190000
[b]
Limited Liability Company "Shell Neftegaz Development (IV)"
Novinsky blvd, 31, Moscow, 123242
Limited Liability Company "Shell Neftegaz Development (V)"
Novinsky blvd, 31, Moscow, 123242
Limited Liability Company “Shell Neft”
24 Bld D Smolnaya street, Moscow, 125445
Syriaga Neftegaz Development
Novinsky blvd, 31, Moscow, 123242
SAINT KITTS AND NEVIS
Shell Oil & Gas (Malaysia) LLC
Morning Star Holdings Limited, Main Street, Suite 556, Charlestown, Nevis, West Indies
SAINT LUCIA
BG Atlantic 1 Holdings Limited
BG Atlantic 2/3 Holdings Limited
BG Atlantic 4 Holdings Limited
BG Central Holdings Limited
BG West Indies No. 2 Limited
SAUDI ARABIA
Mercury Court, Choc Estate, Castries
Mercury Court, Choc Estate, Castries
Mercury Court, Choc Estate, Castries
Mercury Court, Choc Estate, Castries
Mercury Court, Choc Estate, Castries
Al Jomaih and Shell Lubricating Oil Co.Ltd.
P.O. Box 41467, Riyadh, 11521
Peninsular Aviation Services Company Limited
P.O. Box 6369, Jeddah, 21442
Saudi Aramco Shell Refinery Company [b]
P.O. Box 10088, Madinat Al-Jubail Al-Sinaiyah, Al Jubail, 31961
Shell Global Solutions Saudi Arabia LLC
P.O. Box 16996, Riyadh, 11474
SINGAPORE
BG Asia Pacific Holdings Pte. Limited
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
BG Asia Pacific Services Pte. Ltd.
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
%
100
100
100
99
100
100
50
100
18
100
8
30
34
100
49
20
32
76
100
100
24
40
22
55
100
100
100
100
40
100
100
100
100
30
100
100
50
100
100
100
100
90
100
100
100
100
100
50
25
50
100
100
100
Company by country of incorporation
Address of registered office
BG Exploration & Production Myanmar Pte. Ltd.
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
BG Insurance Company (Singapore) Pte Ltd
10 Collyer Quay, #10-01 Ocean Financial Centre, Singapore, 049315
CRI/Criterion Marketing Asia Pacific Pte Ltd
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
QPI and Shell Petrochemicals (Singapore) Pte Ltd
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
50 Gul Road, Singapore, 629351
31 International Business Park, #04-08, Creative Resource, Singapore, 609921
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
Einsteinova 23, Bratislava, 851 01
Bravnicarjeva ulica 13, Ljubljana, 1000
Shell Integrated Gas Thailand Pte.Limited
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
Shell International Shipping Services (Pte) Ltd
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
Shell Tankers (Singapore) Private Limited
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
Sirius Well Manufacturing Services Pte. Ltd.
83 Clemenceau Avenue #04-00, Singapore, 239920
Bituguard Southern Africa (Pty) Ltd
Blendcor (Pty) Ltd. [b]
Sekelo Oil Trading (Pty) Limited
Twickenham, The Campus, 57 Sloan Street, Epsom Downs, Bryanston, 2021
Honshu Road, Durban, 4001
Suite OE/1, The Nautica, The Waterclub, Beach Road, Granger Bay, Cape Town, 8001
Shell & BP South African Petroleum Refineries (Pty) Limited [b]
Reunion, Durban, 4001
Shell Downstream South Africa (Pty) Ltd
Twickenham, The Campus, 57 Sloan Street, Epsom Downs, Bryanston, 2021
Shell Global Customer Services Centre CA
Media City, 10 Rua Vasco Da Gama, Cape Town, 8001
Shell South Africa Energy (Pty) Ltd
Twickenham, The Campus, 57 Sloan Street, Epsom Downs, Bryanston, 2021
Shell South Africa Exploration (Pty) Limited
Twickenham, The Campus, 57 Sloan Street, Epsom Downs, Bryanston, 2021
Shell South Africa Holdings (Pty) Ltd
Twickenham, The Campus, 57 Sloan Street, Epsom Downs, Bryanston, 2021
Suite OE/2, The Nautica, The Waterclub, Beach Road, Granger Bay, Cape Town, 8001
Hankook Shell Oil Company
No 250, Sinsun-ro, Nam-gu, Busan, 48561
Hyundai and Shell Base Oil Co., Ltd
640-6, Daejuk-ri, Daesan-eup, Seosan-shi, Chungchongnam-do, 356-713
Shell (Sudan) Petroleum Development Company Limited
Shell House, P.O. Box 320, Khartoum
BG Myanmar Pte. Ltd.
BG Oil Marketing Pte Ltd
Ellba Eastern (Pte) Ltd
Fuelng Pte. Ltd
Infineum Singapore Pte Ltd
Shell Chemicals Seraya Pte. Ltd.
Shell Eastern Petroleum (Pte) Ltd [i]
Shell Eastern Trading (Pte) Ltd [i]
Shell Gas Marketing Pte. Ltd.
Shell India Ventures Pte. Ltd.
Shell Myanmar Energy Pte. Ltd.
Shell Myanmar Petroleum Pte. Ltd.
Shell Pulau Moa Pte Ltd
Shell Seraya Pioneer (Pte) Ltd
Shell Singapore Trustees (Pte) Ltd
Shell Treasury Centre East (Pte) Ltd
Singapore Lube Park Pte. Ltd. [b]
SLOVAKIA
SLOVENIA
SHELL Slovakia s.r.o.
Shell Adria d.o.o.
SOUTH AFRICA
STISA (Pty) Limited
SOUTH KOREA
BG Energy Iberian Holdings, S.L.
Shell & Disa Aviation España, S.L.
Shell España, S.A.
Shell Spain LNG, S.A.U.
SPAIN
SUDAN
SWEDEN
A Flygbranslehantering Aktiebolag
BG International Services AB
Gothenburgh Fuelling Company AB
Malmoe Fuelling Services AB
Shell Aviation Sweden AB
Stockholm Fuelling Services AB
SWITZERLAND
Bully 1 (Switzerland) GmbH
Bully 2 (Switzerland) GmbH
Saraco SA
Shell (Switzerland) AG
Shell Brands International AG
Shell Corporate Services Switzerland AG
Shell Finance Switzerland AG
Shell Holdings Switzerland AG
Shell Lubricants Switzerland AG
Shell Trading Switzerland AG
Shell Treasury Company Switzerland AG
Paseo de la Castellana, 257-6º, Madrid, 28046
Rio Bullaque, 2, Madrid, 28034
Paseo de la Castellana, 257-6º, Madrid, 28046
Paseo de la Castellana, 257-6º, Madrid, 28046
P.O. Box 135, Stockholm-Arlanda, 190 46
Deloitte, P.O. Box 450, Ostersund, 831 26
P.O. Box 2154, Gothenburg, 438 14
Sturup Flygplats, P.O. Box 22, Malmoe, 230 32
Gustavslundsvagen 22, Bromma, 16751
P.O. Box 85, Stockholm-Arlanda, 190 45
Dorfstrasse 19a, Baar, 6340
Dorfstrasse 19a, Baar, 6340
Route de Pré-Bois 17, Cointrin, 1216
Baarermatte, Baar, 6340
Baarermatte, Baar, 6340
Baarermatte, Baar, 6340
Baarermatte, Baar, 6340
Baarermatte, Baar, 6340
Steigerhubelstrasse 8, Bern, 3008
Baarermatte, Baar, 6340
Baarermatte, Baar, 6340
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
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%
100
100
100
100
100
100
50
50
51
100
100
100
100
100
100
100
100
100
100
100
100
100
100
44
50
100
100
36
36
43
36
72
100
100
100
100
72
54
40
100
50
100
100
100
25
100
33
33
100
25
50
50
20
100
100
100
100
100
100
100
100
Company by country of incorporation
Address of registered office
Shell Nigeria Oil Products Limited (SNOP)
Freeman House, 21/22 Marina, P.M.B. 2418, Lagos
Shell Nigeria Ultra Deep Limited
Freeman House, 21/22 Marina, P.M.B. 2418, Lagos
Shell Nigeria Upstream Ventures Limited
Freeman House, 21/22 Marina, P.M.B. 2418, Lagos
Shell Thrift & Loan Fund Trustees Nig Ltd
Freeman House, 21/22 Marina, P.M.B. 2418, Lagos
The Shell Petroleum Development Company of Nigeria Limited
Shell Industrial Area, Port Harcourt, Rivers State, P.O. Box 263, Port Harcourt
Tankvegen 1, Tananger, 4056
Karenslyst Allé 2, Oslo, 0278
Helganesvegen 59, Karmoy, 4262 Avalsnes
Nyhamna, Aukra, 6480
Karenslyst Allé 2, Oslo, 0278
Forusbeen 50, Stavanger, 4035
P.O. Box 560, Mina Al Fahal, Muscat, 116
P.O. Box 81, Mina Al Fahal, Muscat, 113
P.O. Box 74, Mina Al Fahal, Muscat, 116
NORWAY
A/S Norske Shell
Aviation Fuelling Services Norway AS
Gasnor AS
Ormen Lange Eiendom DA
Shell Marine Products AS
Vestprosess DA
OMAN
Oman LNG LLC
Petroleum Development Oman LLC
Shell Development Oman LLC
PAKISTAN
Pakistan Refinery Limited
Shell Pakistan Limited
PERU
Shell GNL Peru S.A.C.
Shell Operaciones Peru S.A.C.
PHILIPPINES
Kamayan Realty Corporation
Pilipinas Shell Petroleum Corporation
Shell Chemicals Philippines, Inc.
Shell Gas Trading (Asia Pacific), Inc.
Shell Solar Philippines Corporation
Tabangao Realty, Inc.
POLAND
PORTUGAL
PUERTO RICO
BG Puerto Rico, Inc.
QATAR
RUSSIA
[b]
SAINT KITTS AND NEVIS
SAINT LUCIA
BG Atlantic 1 Holdings Limited
BG Atlantic 2/3 Holdings Limited
BG Atlantic 4 Holdings Limited
BG Central Holdings Limited
BG West Indies No. 2 Limited
SAUDI ARABIA
Shell Oman Marketing Company SAOG
P.O. Box 38, Mina Al Fahal, Muscat, 116
Pak Arab Pipeline Company Limited
House No. 2-B, Nazimuddin Road, F-8/1, Islamabad, 75400
Korangi Creek Road, P.O. Box 4612, Karachi, 75190
Shell House, 6 Ch. Khaliquzzaman Road, Karachi, 75530
Calle Dean Valdivia 111, Oficina 802, San Isidro, Lima, Lima 27
Calle Dean Valdivia 111, Oficina 802, San Isidro, Lima, Lima 27
Bonifacio Gas Corporation
2nd Floor, Bonifacio Tech. Center, 31st Street cor. 2nd Avenue, Crescent Park West, Bonifacio Global City, Taguig,
First Philippine Industrial Corporation
6F, Rockwell Business Center Tower, Ortigas Avenue, Pasig City, 1605
Metro Manila
Shell Gas and Energy Philippines Corporation
Shellhouse, 156 Valero Street, Salcedo Village, Brgy. Bel-Air, Makati City, Metro Manila, 1227
NDC Bldg., 116 Tordesillas St., Salcedo Village, Makati City, Metro Manila, 1227
Shellhouse, 156 Valero Street, Salcedo Village, Brgy. Bel-Air, Makati City, Metro Manila, 1227
Shellhouse, 156 Valero Street, Salcedo Village, Brgy. Bel-Air, Makati City, Metro Manila, 1227
Subic Bay Free Port Zone, Olangapo City, 2200
Shellhouse, 156 Valero Street, Salcedo Village, Brgy. Bel-Air, Makati City, Metro Manila, 1227
Shellhouse, 156 Valero Street, Salcedo Village, Brgy. Bel-Air, Makati City, Metro Manila, 1227
Shell Polska Sp. z o.o.
ul. Bitwy Warszawskiej 1920 r. nr 7A, Warsaw, 02-366
Shell Madeira Praia Formosa
Av. dos Combatentes da Grande Guerra nº 17, Freguesia de S. Juliao, Setúbal, 2900-329
Station Managers of Puerto Rico, Inc.
P.O. Box 186, Yabucoa, PR 00767-0186
403 Munoz Rivera Avenue, (Hato Rey), San Juan, 00918-3345
Qatar Liquefied Gas Company Limited (4)
P.O. Box 22666, Doha
Qatar Shell Research & Technology Centre QSTP-LLC
Qatar Science & Technology Park Tech1, Office 101, P.O. Box 3747, Doha
Qatar Shell Service Company W.L.L.
Al Mirqab Tower, West Bay, P.O. Box 3747, Doha
Khanty-Mansiysk Petroleum Alliance Closed Joint Stock Company
24 A Yakubovicha ul., Saint Petersburg, 190000
Limited Liability Company "Shell Neftegaz Development (IV)"
Novinsky blvd, 31, Moscow, 123242
Limited Liability Company "Shell Neftegaz Development (V)"
Novinsky blvd, 31, Moscow, 123242
Limited Liability Company “Shell Neft”
24 Bld D Smolnaya street, Moscow, 125445
Syriaga Neftegaz Development
Novinsky blvd, 31, Moscow, 123242
Shell Oil & Gas (Malaysia) LLC
Morning Star Holdings Limited, Main Street, Suite 556, Charlestown, Nevis, West Indies
Mercury Court, Choc Estate, Castries
Mercury Court, Choc Estate, Castries
Mercury Court, Choc Estate, Castries
Mercury Court, Choc Estate, Castries
Mercury Court, Choc Estate, Castries
Al Jomaih and Shell Lubricating Oil Co.Ltd.
P.O. Box 41467, Riyadh, 11521
Peninsular Aviation Services Company Limited
P.O. Box 6369, Jeddah, 21442
Saudi Aramco Shell Refinery Company [b]
P.O. Box 10088, Madinat Al-Jubail Al-Sinaiyah, Al Jubail, 31961
Shell Global Solutions Saudi Arabia LLC
P.O. Box 16996, Riyadh, 11474
SINGAPORE
BG Asia Pacific Holdings Pte. Limited
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
BG Asia Pacific Services Pte. Ltd.
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
%
100
100
100
99
100
100
50
100
18
100
8
30
34
100
49
20
32
76
100
100
24
40
22
55
100
100
100
100
40
100
100
100
100
30
100
100
50
100
100
100
100
90
100
100
100
100
100
50
25
50
100
100
100
Company by country of incorporation
Address of registered office
BG Exploration & Production Myanmar Pte. Ltd.
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
BG Insurance Company (Singapore) Pte Ltd
10 Collyer Quay, #10-01 Ocean Financial Centre, Singapore, 049315
BG Myanmar Pte. Ltd.
BG Oil Marketing Pte Ltd
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
CRI/Criterion Marketing Asia Pacific Pte Ltd
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
Ellba Eastern (Pte) Ltd
Fuelng Pte. Ltd
Infineum Singapore Pte Ltd
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
50 Gul Road, Singapore, 629351
31 International Business Park, #04-08, Creative Resource, Singapore, 609921
QPI and Shell Petrochemicals (Singapore) Pte Ltd
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
Shell Chemicals Seraya Pte. Ltd.
Shell Eastern Petroleum (Pte) Ltd [i]
Shell Eastern Trading (Pte) Ltd [i]
Shell Gas Marketing Pte. Ltd.
Shell India Ventures Pte. Ltd.
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
Shell Integrated Gas Thailand Pte.Limited
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
Shell International Shipping Services (Pte) Ltd
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
Shell Myanmar Energy Pte. Ltd.
Shell Myanmar Petroleum Pte. Ltd.
Shell Pulau Moa Pte Ltd
Shell Seraya Pioneer (Pte) Ltd
Shell Singapore Trustees (Pte) Ltd
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
Shell Tankers (Singapore) Private Limited
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
Shell Treasury Centre East (Pte) Ltd
Singapore Lube Park Pte. Ltd. [b]
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
The Metropolis Tower 1, 9 North Buona Vista Drive, #07-01, Singapore, 138588
Sirius Well Manufacturing Services Pte. Ltd.
83 Clemenceau Avenue #04-00, Singapore, 239920
SLOVAKIA
SHELL Slovakia s.r.o.
SLOVENIA
Shell Adria d.o.o.
SOUTH AFRICA
Einsteinova 23, Bratislava, 851 01
Bravnicarjeva ulica 13, Ljubljana, 1000
Bituguard Southern Africa (Pty) Ltd
Blendcor (Pty) Ltd. [b]
Sekelo Oil Trading (Pty) Limited
Twickenham, The Campus, 57 Sloan Street, Epsom Downs, Bryanston, 2021
Honshu Road, Durban, 4001
Suite OE/1, The Nautica, The Waterclub, Beach Road, Granger Bay, Cape Town, 8001
Shell & BP South African Petroleum Refineries (Pty) Limited [b]
Reunion, Durban, 4001
Shell Downstream South Africa (Pty) Ltd
Twickenham, The Campus, 57 Sloan Street, Epsom Downs, Bryanston, 2021
Shell Global Customer Services Centre CA
Media City, 10 Rua Vasco Da Gama, Cape Town, 8001
Shell South Africa Energy (Pty) Ltd
Twickenham, The Campus, 57 Sloan Street, Epsom Downs, Bryanston, 2021
Shell South Africa Exploration (Pty) Limited
Twickenham, The Campus, 57 Sloan Street, Epsom Downs, Bryanston, 2021
Shell South Africa Holdings (Pty) Ltd
Twickenham, The Campus, 57 Sloan Street, Epsom Downs, Bryanston, 2021
STISA (Pty) Limited
SOUTH KOREA
Suite OE/2, The Nautica, The Waterclub, Beach Road, Granger Bay, Cape Town, 8001
Hankook Shell Oil Company
No 250, Sinsun-ro, Nam-gu, Busan, 48561
Hyundai and Shell Base Oil Co., Ltd
640-6, Daejuk-ri, Daesan-eup, Seosan-shi, Chungchongnam-do, 356-713
SPAIN
BG Energy Iberian Holdings, S.L.
Shell & Disa Aviation España, S.L.
Shell España, S.A.
Shell Spain LNG, S.A.U.
SUDAN
Paseo de la Castellana, 257-6º, Madrid, 28046
Rio Bullaque, 2, Madrid, 28034
Paseo de la Castellana, 257-6º, Madrid, 28046
Paseo de la Castellana, 257-6º, Madrid, 28046
Shell (Sudan) Petroleum Development Company Limited
Shell House, P.O. Box 320, Khartoum
SWEDEN
A Flygbranslehantering Aktiebolag
BG International Services AB
Gothenburgh Fuelling Company AB
Malmoe Fuelling Services AB
Shell Aviation Sweden AB
Stockholm Fuelling Services AB
SWITZERLAND
Bully 1 (Switzerland) GmbH
Bully 2 (Switzerland) GmbH
Saraco SA
Shell (Switzerland) AG
Shell Brands International AG
Shell Corporate Services Switzerland AG
Shell Finance Switzerland AG
Shell Holdings Switzerland AG
Shell Lubricants Switzerland AG
Shell Trading Switzerland AG
Shell Treasury Company Switzerland AG
P.O. Box 135, Stockholm-Arlanda, 190 46
Deloitte, P.O. Box 450, Ostersund, 831 26
P.O. Box 2154, Gothenburg, 438 14
Sturup Flygplats, P.O. Box 22, Malmoe, 230 32
Gustavslundsvagen 22, Bromma, 16751
P.O. Box 85, Stockholm-Arlanda, 190 45
Dorfstrasse 19a, Baar, 6340
Dorfstrasse 19a, Baar, 6340
Route de Pré-Bois 17, Cointrin, 1216
Baarermatte, Baar, 6340
Baarermatte, Baar, 6340
Baarermatte, Baar, 6340
Baarermatte, Baar, 6340
Baarermatte, Baar, 6340
Steigerhubelstrasse 8, Bern, 3008
Baarermatte, Baar, 6340
Baarermatte, Baar, 6340
%
100
100
100
100
100
100
50
50
51
100
100
100
100
100
100
100
100
100
100
100
100
100
100
44
50
100
100
36
36
43
36
72
100
100
100
100
72
54
40
100
50
100
100
100
25
100
33
33
100
25
50
50
20
100
100
100
100
100
100
100
100
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
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SHELL ANNUAL REPORT AND FORM 20-F 2017 additionaL inForMation
e13
Company by country of incorporation
Address of registered office
SOGEP Sociéte Genevoise des Pétroles SA
Route de Vernier 132, Vernier, 1214
Solen Versicherungen AG
Baarermatte, Baar, 6340
Stazioni Autostradali Bellinzona SA
Autostrada A2 (direzione Gottardo), Hotel Bellinzona Sud, Monte Carasso, 6513
UBAG - Unterflurbetankungsanlage Flughafen Zürich AG
Zwüscheteich, Rümlang, 8153
SYRIA
Al Badiah Petroleum Company
Al Furat Petroleum Company
TAIWAN
CPC Shell Lubricants Co. Ltd
Shell Taiwan Limited
TANZANIA
Damascus New Sham Western Dummar, Island No 1 - Property 2299, P.O. Box 7660, Damascus
Damascus New Sham Western Dummar, Island No 1 - Property 2299, P.O. Box 7660, Damascus
No 2, Tso-Nan Road, Nan-Tze District, P.O. Box 25-30, Kaohsiung, 811
International Trade Building, Room 2001, 20th Floor, 333, Keelung Road Section 1, Taipei, 110
Fahari Gas Marketing Company Limited
1st Floor Kilwa House, Plot 369, Toure Drive, Oyster Bay, P.O. Box 105833, Dar es Salaam
Mzalendo Gas Processing Company Limited
1st Floor Kilwa House, Plot 369, Toure Drive, Oyster Bay, P.O. Box 105833, Dar es Salaam
Ruvuma Pipeline Company Limited
1st Floor Kilwa House, Plot 369, Toure Drive, Oyster Bay, P.O. Box 105833, Dar es Salaam
Shell Tanzania Limited
Tanzania LNG Limited
THAILAND
De Ocean Plaza, 3rd Floor, Plot 400, Toure Drive, Masaki, P.O. Box 9404, Dar es Salaam
1st Floor Kilwa House, Plot 369, Toure Drive, Oyster Bay, P.O. Box 105833, Dar es Salaam
Pattanadhorn Company Limited
10 Soonthornkosa Road, Klongtoey, Bangkok, 10110
Sahapanichkijphun Company Limited
10 Soonthornkosa Road, Klongtoey, Bangkok, 10110
Shell Global Solutions (Thailand) Limited
10 Soonthornkosa Road, Klongtoey, Bangkok, 10110
Shell Global Solutions Holdings (Thailand) Limited
10 Soonthornkosa Road, Klongtoey, Bangkok, 10110
Thai Energy Company Limited
Unitas Company Limited
TRINIDAD AND TOBAGO
BG 2/3 Investments Limited
Point Fortin LNG Exports Limited
Shell Gas Supply Trinidad Limited
Shell LNG T&T Ltd
Shell Manatee Limited
10 Soonthornkosa Road, Klongtoey, Bangkok, 10110
10 Soonthornkosa Road, Klongtoey, Bangkok, 10110
5 Saint Clair Avenue, Saint Clair, Port of Spain
5 Saint Clair Avenue, Saint Clair, Port of Spain
5 Saint Clair Avenue, Saint Clair, Port of Spain
5 Saint Clair Avenue, Saint Clair, Port of Spain
5 Saint Clair Avenue, Saint Clair, Port of Spain
Shell Trinidad Central Block Limited
5 Saint Clair Avenue, Saint Clair, Port of Spain
Shell Trinidad Ltd
Shell Energy House, 5 St. Clair Avenue, Point Lisas, Port of Spain
The International School of Port of Spain Limited
1 International Drive, Westmoorings
TRINLING Limited
TUNISIA
5 Saint Clair Avenue, Saint Clair, Port of Spain
Amilcar Petroleum Operations S.A.
Immeuble Mezghenni, Rue Windermere BP36, Les Berges du Lac, Tunis, 1053
Shell Tunisia LPG S.A.
Tunisian Processing S.A.
TURKEY
Ambarli Depolama Hizmetleri Ltd. Sti.
Cekisan Depolama Hizmetleri Ltd. Sti.
Marmara Depoculuk Hizmetleri A.S.
Samsun Akaryakit ve Depolama A.S.
Shell & Turcas Petrol A.S.
Shell Enerji A.S.
Shell Petrol A.S.
UKRAINE
Immeuble Rue du Lac Windermere, Les Berges du Lac, Tunis, 1053
Immeuble Rue du Lac Windermere, Les Berges du Lac, Tunis, 1053
Yakuplu Mah. Gencosman Cad. No:7, Beylikduzu, Istanbul, 34524
Yakuplu Mah. Gencosman Cad. No:3, Beylikduzu, Istanbul, 34524
Sultankoy Mahallesi Maltepe Sokak No:66, Marmara Ereglisi, Tekirdag, 59750
Dilovasi Organize Sanayi Bolgesi 1.Kisim 1004 Sokak No:10, Dilovasi, Kocaeli
Gulbahar Mah.Salih Tozan Sok., Karamancilar Is Merkezi B Blok No:18, Esentepe, Sisli, Istanbul, 34394
Gulbahar Mah.Salih Tozan Sok., Karamancilar Is Merkezi B Blok No:18, Esentepe, Sisli, Istanbul, 34394
Gulbahar Mah.Salih Tozan Sok., Karamancilar Is Merkezi B Blok No:18, Esentepe, Sisli, Istanbul, 34394
Shell Ukraine Exploration and Production I LLC
4 Mykoly Grinchenka street, Kiev, 03038
UNITED ARAB EMIRATES
ADNOC Gas Processing
P.O. Box 665, Abu Dhabi
Emdad Aviation Fuel Storage FZCO
Emdad Aviation Fuel Storage FZCO, P.O. Box 261781, Jebel Ali, Dubai
Sharjah Fuelling Services Company Ltd.
P.O. Box 4225, Sharjah, 4225
UK
Alie Investments Limited
Angkor Shell Limited
Autogas Limited
BG Aruba Limited
BG Atlantic Finance Limited
BG Central Holdings Limited
BG Central Investments Limited
BG CSB2 Limited
BG Cyprus Limited
BG Delta Limited
BG Employee Shares Trustees Limited
BG Energy Capital Plc
BG Energy Holdings Limited
BG Energy Marketing Limited
BG Energy Trading Limited
BG Equatorial Guinea Limited
BG Exploration and Production Limited
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Athena House, Athena Drive, Tachbrook Park, Warwick, CV34 6RL
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
%
34
100
50
20
22
20
51
100
53
53
53
100
100
42
42
48
49
100
42
100
63
100
100
100
100
100
25
100
50
100
100
35
35
32
35
70
100
70
100
15
32
49
100
100
50
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Company by country of incorporation
Address of registered office
50 Lothian Road, Festival Square, Edinburgh, EH3 9WJ
BG Finance Investments Limited
BG Gas Marketing Limited
BG Gas Services Limited
BG Gas Supply (UK) Limited
BG General Holdings Limited
BG General Investments
BG General Partner Limited
BG Global Employee Resources Limited
BG Global Energy Limited
BG Great Britain Limited
BG Group Company Secretaries Limited
BG Group Employee Benefit Trust Limited
BG Group Employee Shares Trustees Limited
BG Group Healthcare Trustee Limited
BG Group Limited
BG Group Pension Trustees Limited
BG Group Trustees Limited
BG Intellectual Property Limited
BG International Limited
BG Iran Limited
BG Karachaganak Limited
BG Karachaganak Trading Limited
BG Kenya L10A Limited
BG Kenya L10B Limited
BG LNG Investments Limited
BG LNG Transport No.5 Limited
BG Mongolia Holdings Limited
BG Netherlands
BG Netherlands Financing Unlimited
BG Norge Exploration Limited
BG Norge Limited
BG North Investments Limited
BG North Sea Holdings Limited
BG OKLNG Limited
BG Omikron Limited
BG Overseas Holdings Limited
BG Overseas Investments Limited
BG Overseas Limited
BG Rosetta Limited
BG Singapore Limited
BG South Asia LNG Limited
BG South East Asia Limited
BG Subsea Well Project Limited
BG Tanzania Holdings Limited
BG Thailand Limited
BG Trinidad LNG Limited
BG UK Capital II Limited
BG UK Capital Limited
BG UK Holdings Limited
Brazil Shipping I Limited
Brazil Shipping II Limited
British Pipeline Agency Limited
CRI Catalyst Company Europe Limited
CRI/Criterion Catalyst Company Limited
Dragon LNG Group Limited
Eastham Refinery Limited [b]
Enterprise Oil Limited
Enterprise Oil Middle East Limited
Enterprise Oil Norge Limited
Enterprise Oil Operations Limited
Enterprise Oil U.K. Limited
Farepilot Limited
Framecroft Limited
Gainrace Limited
Glossop Limited
GOGB Limited
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
8 York Road, London, SE1 7NA
8 York Road, London, SE1 7NA
8 York Road, London, SE1 7NA
8 York Road, London, SE1 7NA
8 York Road, London, SE1 7NA
8 York Road, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
8 York Road, London, SE1 7NA
8 York Road, London, SE1 7NA
8 York Road, London, SE1 7NA
BG Pension Funding Scottish Limited Partnership [l]
50 Lothian Road, Festival Square, Edinburgh, EH3 9WJ
5-7 Alexandra Road, Hemel Hempstead, Herts, HP2 5BS
Main Road, Waterston, Milford Haven, Pembrokeshire, SA73 1DR
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
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E15
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additionaL inForMation SHELL ANNUAL REPORT AND FORM 20-F 2017
Shell Annual Report_Master Template.indd 14
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Gatwick Airport Storage and Hydrant Company Limited
8 York Road, London, SE1 7NA
Heathrow Airport Fuel Company Limited
Building 1204, Sandringham Road, Heathrow Airport, Hounslow, Middlesex, TW6 3SH
Heathrow Hydrant Operating Company Limited
Building 1204, Sandringham Road, Heathrow Airport, Hounslow, Middlesex, TW6 3SH
[l] Established by BG Group plc and the BG Trustee in 2013 as part of funding agreements associated with the BG pension scheme. Under the exemption conferred by Regulation 7 of the Partnerships (Accounts) Regulations 2008, the accounts of
this partnership have not been appended to Shell’s Consolidated Financial Statements and have not been filed at the Companies House.
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
100
100
50
50
100
100
100
100
100
87
100
100
13
100
100
14
10
Company by country of incorporation
Address of registered office
SOGEP Sociéte Genevoise des Pétroles SA
Route de Vernier 132, Vernier, 1214
Solen Versicherungen AG
Baarermatte, Baar, 6340
Stazioni Autostradali Bellinzona SA
Autostrada A2 (direzione Gottardo), Hotel Bellinzona Sud, Monte Carasso, 6513
UBAG - Unterflurbetankungsanlage Flughafen Zürich AG
Zwüscheteich, Rümlang, 8153
Damascus New Sham Western Dummar, Island No 1 - Property 2299, P.O. Box 7660, Damascus
Damascus New Sham Western Dummar, Island No 1 - Property 2299, P.O. Box 7660, Damascus
No 2, Tso-Nan Road, Nan-Tze District, P.O. Box 25-30, Kaohsiung, 811
International Trade Building, Room 2001, 20th Floor, 333, Keelung Road Section 1, Taipei, 110
Fahari Gas Marketing Company Limited
1st Floor Kilwa House, Plot 369, Toure Drive, Oyster Bay, P.O. Box 105833, Dar es Salaam
Mzalendo Gas Processing Company Limited
1st Floor Kilwa House, Plot 369, Toure Drive, Oyster Bay, P.O. Box 105833, Dar es Salaam
Ruvuma Pipeline Company Limited
1st Floor Kilwa House, Plot 369, Toure Drive, Oyster Bay, P.O. Box 105833, Dar es Salaam
De Ocean Plaza, 3rd Floor, Plot 400, Toure Drive, Masaki, P.O. Box 9404, Dar es Salaam
1st Floor Kilwa House, Plot 369, Toure Drive, Oyster Bay, P.O. Box 105833, Dar es Salaam
Pattanadhorn Company Limited
10 Soonthornkosa Road, Klongtoey, Bangkok, 10110
Sahapanichkijphun Company Limited
10 Soonthornkosa Road, Klongtoey, Bangkok, 10110
Shell Global Solutions (Thailand) Limited
10 Soonthornkosa Road, Klongtoey, Bangkok, 10110
Shell Global Solutions Holdings (Thailand) Limited
10 Soonthornkosa Road, Klongtoey, Bangkok, 10110
10 Soonthornkosa Road, Klongtoey, Bangkok, 10110
10 Soonthornkosa Road, Klongtoey, Bangkok, 10110
5 Saint Clair Avenue, Saint Clair, Port of Spain
5 Saint Clair Avenue, Saint Clair, Port of Spain
5 Saint Clair Avenue, Saint Clair, Port of Spain
5 Saint Clair Avenue, Saint Clair, Port of Spain
5 Saint Clair Avenue, Saint Clair, Port of Spain
Shell Trinidad Central Block Limited
5 Saint Clair Avenue, Saint Clair, Port of Spain
Shell Trinidad Ltd
Shell Energy House, 5 St. Clair Avenue, Point Lisas, Port of Spain
The International School of Port of Spain Limited
1 International Drive, Westmoorings
5 Saint Clair Avenue, Saint Clair, Port of Spain
Amilcar Petroleum Operations S.A.
Immeuble Mezghenni, Rue Windermere BP36, Les Berges du Lac, Tunis, 1053
Immeuble Rue du Lac Windermere, Les Berges du Lac, Tunis, 1053
Immeuble Rue du Lac Windermere, Les Berges du Lac, Tunis, 1053
Yakuplu Mah. Gencosman Cad. No:7, Beylikduzu, Istanbul, 34524
Yakuplu Mah. Gencosman Cad. No:3, Beylikduzu, Istanbul, 34524
Sultankoy Mahallesi Maltepe Sokak No:66, Marmara Ereglisi, Tekirdag, 59750
Dilovasi Organize Sanayi Bolgesi 1.Kisim 1004 Sokak No:10, Dilovasi, Kocaeli
Gulbahar Mah.Salih Tozan Sok., Karamancilar Is Merkezi B Blok No:18, Esentepe, Sisli, Istanbul, 34394
Gulbahar Mah.Salih Tozan Sok., Karamancilar Is Merkezi B Blok No:18, Esentepe, Sisli, Istanbul, 34394
Gulbahar Mah.Salih Tozan Sok., Karamancilar Is Merkezi B Blok No:18, Esentepe, Sisli, Istanbul, 34394
Shell Ukraine Exploration and Production I LLC
4 Mykoly Grinchenka street, Kiev, 03038
Emdad Aviation Fuel Storage FZCO
Emdad Aviation Fuel Storage FZCO, P.O. Box 261781, Jebel Ali, Dubai
Sharjah Fuelling Services Company Ltd.
P.O. Box 4225, Sharjah, 4225
Athena House, Athena Drive, Tachbrook Park, Warwick, CV34 6RL
SYRIA
TAIWAN
Al Badiah Petroleum Company
Al Furat Petroleum Company
CPC Shell Lubricants Co. Ltd
Shell Taiwan Limited
TANZANIA
Shell Tanzania Limited
Tanzania LNG Limited
THAILAND
Thai Energy Company Limited
Unitas Company Limited
TRINIDAD AND TOBAGO
BG 2/3 Investments Limited
Point Fortin LNG Exports Limited
Shell Gas Supply Trinidad Limited
Shell LNG T&T Ltd
Shell Manatee Limited
TRINLING Limited
TUNISIA
Shell Tunisia LPG S.A.
Tunisian Processing S.A.
TURKEY
Ambarli Depolama Hizmetleri Ltd. Sti.
Cekisan Depolama Hizmetleri Ltd. Sti.
Marmara Depoculuk Hizmetleri A.S.
Samsun Akaryakit ve Depolama A.S.
Shell & Turcas Petrol A.S.
Shell Enerji A.S.
Shell Petrol A.S.
UKRAINE
UNITED ARAB EMIRATES
ADNOC Gas Processing
UK
Alie Investments Limited
Angkor Shell Limited
Autogas Limited
BG Aruba Limited
BG Atlantic Finance Limited
BG Central Holdings Limited
BG Central Investments Limited
BG CSB2 Limited
BG Cyprus Limited
BG Delta Limited
BG Energy Capital Plc
BG Energy Holdings Limited
BG Energy Marketing Limited
BG Energy Trading Limited
BG Equatorial Guinea Limited
BG Employee Shares Trustees Limited
BG Exploration and Production Limited
P.O. Box 665, Abu Dhabi
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
100
%
34
50
20
22
20
51
100
53
53
53
100
100
42
42
48
49
100
42
100
63
100
100
100
100
100
25
100
50
100
100
35
35
32
35
70
100
70
100
15
32
49
100
100
50
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Company by country of incorporation
Address of registered office
BG Finance Investments Limited
BG Gas Marketing Limited
BG Gas Services Limited
BG Gas Supply (UK) Limited
BG General Holdings Limited
BG General Investments
BG General Partner Limited
BG Global Employee Resources Limited
BG Global Energy Limited
BG Great Britain Limited
BG Group Company Secretaries Limited
BG Group Employee Benefit Trust Limited
BG Group Employee Shares Trustees Limited
BG Group Healthcare Trustee Limited
BG Group Limited
BG Group Pension Trustees Limited
BG Group Trustees Limited
BG Intellectual Property Limited
BG International Limited
BG Iran Limited
BG Karachaganak Limited
BG Karachaganak Trading Limited
BG Kenya L10A Limited
BG Kenya L10B Limited
BG LNG Investments Limited
BG LNG Transport No.5 Limited
BG Mongolia Holdings Limited
BG Netherlands
BG Netherlands Financing Unlimited
BG Norge Exploration Limited
BG Norge Limited
BG North Investments Limited
BG North Sea Holdings Limited
BG OKLNG Limited
BG Omikron Limited
BG Overseas Holdings Limited
BG Overseas Investments Limited
BG Overseas Limited
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
50 Lothian Road, Festival Square, Edinburgh, EH3 9WJ
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
BG Pension Funding Scottish Limited Partnership [l]
50 Lothian Road, Festival Square, Edinburgh, EH3 9WJ
BG Rosetta Limited
BG Singapore Limited
BG South Asia LNG Limited
BG South East Asia Limited
BG Subsea Well Project Limited
BG Tanzania Holdings Limited
BG Thailand Limited
BG Trinidad LNG Limited
BG UK Capital II Limited
BG UK Capital Limited
BG UK Holdings Limited
Brazil Shipping I Limited
Brazil Shipping II Limited
British Pipeline Agency Limited
CRI Catalyst Company Europe Limited
CRI/Criterion Catalyst Company Limited
Dragon LNG Group Limited
Eastham Refinery Limited [b]
Enterprise Oil Limited
Enterprise Oil Middle East Limited
Enterprise Oil Norge Limited
Enterprise Oil Operations Limited
Enterprise Oil U.K. Limited
Farepilot Limited
Framecroft Limited
Gainrace Limited
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
5-7 Alexandra Road, Hemel Hempstead, Herts, HP2 5BS
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Main Road, Waterston, Milford Haven, Pembrokeshire, SA73 1DR
8 York Road, London, SE1 7NA
8 York Road, London, SE1 7NA
8 York Road, London, SE1 7NA
8 York Road, London, SE1 7NA
8 York Road, London, SE1 7NA
8 York Road, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
8 York Road, London, SE1 7NA
Gatwick Airport Storage and Hydrant Company Limited
8 York Road, London, SE1 7NA
Glossop Limited
GOGB Limited
8 York Road, London, SE1 7NA
8 York Road, London, SE1 7NA
Heathrow Airport Fuel Company Limited
Building 1204, Sandringham Road, Heathrow Airport, Hounslow, Middlesex, TW6 3SH
Heathrow Hydrant Operating Company Limited
Building 1204, Sandringham Road, Heathrow Airport, Hounslow, Middlesex, TW6 3SH
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
100
100
50
50
100
100
100
100
100
87
100
100
13
100
100
14
10
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
E14
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
E15
[l] Established by BG Group plc and the BG Trustee in 2013 as part of funding agreements associated with the BG pension scheme. Under the exemption conferred by Regulation 7 of the Partnerships (Accounts) Regulations 2008, the accounts of
this partnership have not been appended to Shell’s Consolidated Financial Statements and have not been filed at the Companies House.
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SHELL ANNUAL REPORT AND FORM 20-F 2017 additionaL inForMation
e15
Company by country of incorporation
Holaw (619) Limited
International Inland Waterways, Limited
Address of registered office
Shell Centre, London, SE1 7NA
8 York Road, London, SE1 7NA
Karachaganak Project Development Limited [b]
Shell Centre, London, SE1 7NA
Khmer Shell Limited
Kite Power Systems Limited
Lensbury Limited
Shell Centre, London, SE1 7NA
146 New London Road, Chelmsford, Essex, CM2 0AW
Broom Road, Teddington, Middlesex, TW11 9NU
Manchester Airport Storage and Hydrant Company Limited
50 Broadway, London, SW1H 0BL
Maritime Association for Risk Mitigation & Safety Limited
Shell Centre, London, SE1 7NA
Methane Services Limited
Murphy Schiehallion Limited
Octane Holdings Limited
Octane Properties Limited
Private Oil Holdings Oman Limited
Sabah Shell Petroleum Company Limited
Saxon Oil Limited
Saxon Oil Miller Limited
Schooner Trustees Limited
SELAP Limited
SF Investment Management Limited
Shell Aircraft Limited
Shell Arabia Car Service Limited
Shell Aviation Limited
Shell Benin Upstream Ltd
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
8 York Road, London, SE1 7NA
Shell Centre, London, SE1 7NA
8 York Road, London, SE1 7NA
8 York Road, London, SE1 7NA
Shell Centre, London, SE1 7NA
8 York Road, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Business Development Middle East Limited
Shell Centre, London, SE1 7NA
Shell Caribbean Investments Limited
Shell Centre, London, SE1 7NA
Shell Chemical Company of Eastern Africa Limited
Shell Centre, London, SE1 7NA
Shell Chemicals (Hellas) Limited
Shell Chemicals Limited
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Chemicals Support Services Asia Limited
Shell Centre, London, SE1 7NA
Shell Chemicals U.K. Limited
Shell Centre, London, SE1 7NA
Shell China Exploration and Production Company Limited
Shell Centre, London, SE1 7NA
Shell Clair UK Limited
Shell Club Corringham Limited
Shell Company (Hellas) Limited
Shell Company (Pacific Islands) Limited
Shell Corporate Director Limited
Shell Corporate Secretary Limited
Shell Direct (U.K.) Limited
Shell Distributor (Holdings) Limited
Shell Employee Benefits Trustee Limited
Shell Energy Europe Limited
Shell Energy Investments Limited
Shell Energy Supply UK LTD.
Shell EP Offshore Ventures Limited
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Exploration and Production Oman Limited
Shell Centre, London, SE1 7NA
Shell Exploration and Production Tanzania Limited
Shell Centre, London, SE1 7NA
Shell Gas Holdings (Malaysia) Limited
Shell Hasdrubal Limited
Shell Holdings (U.K.) Limited
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Information Technology International Limited
8 York Road, London, SE1 7NA
Shell International Gas Limited
Shell International Limited
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell International Petroleum Company Limited
Shell Centre, London, SE1 7NA
Shell International Trading and Shipping Company Limited
80 Strand, London, WC2R 0ZA
Shell Malaysia Limited
Shell Marine Products Limited
Shell Overseas Holdings Limited
Shell Overseas Services Limited
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Pension Reserve Company (SIPF) Limited
Shell Centre, London, SE1 7NA
Shell Pension Reserve Company (SOCPF) Limited
Shell Centre, London, SE1 7NA
Shell Pension Reserve Company (UK) Limited
Shell Pensions Trust Limited
Shell Property Company Limited
Shell QGC Holdings Limited [i]
Shell QGC Midstream 2 Limited
Shell QGC Midstream 1 Limited [i]
Shell QGC Upstream 2 Limited
Shell QGC Upstream 1 Limited
Shell Research Limited
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
%
100
100
38
100
34
100
25
100
100
100
100
100
85
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Company by country of incorporation
Shell Response Limited
Address of registered office
80 Strand, London, WC2R 0ZA
Shell Shared Service Centre - Glasgow Limited
Shell Centre, London, SE1 7NA
Shell Subsidiary Distributors Pension Trustee Limited
Shell Centre, London, SE1 7NA
Shell Supplementary Pension Plan Trustees Limited
Shell Centre, London, SE1 7NA
3 Savoy Place, London, WC2R 0DX
Shell Tankers (U.K.) Limited
Shell Trading International Limited
Shell Treasury Centre Limited
Shell Treasury Dollar Company Limited
Shell Treasury Euro Company Limited
Shell Treasury UK Limited
Shell Trinidad 5(A) Limited
Shell Trinidad and Tobago Limited
Shell Trinidad Block E Limited
Shell Trustee Solutions Limited
Shell Tunisia Upstream Limited
Shell U.K. Limited
Shell U.K. North Atlantic Limited
Shell U.K. Oil Products Limited
Shell Upstream Overseas Services (I) Limited
Shell Ventures New Zealand Limited
Shell Ventures U.K. Limited
Shell Windenergy Limited
Shell-Mex and B.P. Limited
Stansted Fuelling Company Limited
STT (Das Beneficiary) Limited [a]
Synthetic Chemicals (Northern) Limited
Telegraph Service Stations Limited
1 Altens Farm Road, Nigg, Aberdeen, AB12 3FY
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
8 York Road, London, SE1 7NA
8 York Road, London, SE1 7NA
Exxonmobil House, Ermyn Way, Leatherhead, KT22 8UX
C/O Jag Shaw Baker, Berners House, 47-48 Berners Street, London, W1T 3NF
The Anglo-Saxon Petroleum Company Limited
Shell Centre, London, SE1 7NA
The Asiatic Petroleum Company Limited
Shell Centre, London, SE1 7NA
The Consolidated Petroleum Company Limited
Shell Centre, London, SE1 7NA
The Consolidated Petroleum Supply Company Limited
Shell Centre, London, SE1 7NA
The Mexican Eagle Oil Company Limited
8 York Road, London, SE1 7NA
The New Motion EVSE Limited
The Shell Company (W.I.) Limited
The Shell Company of Hong Kong Limited
The Shell Company of India Limited
The Shell Company of Nigeria Limited
The Shell Company of Thailand Limited
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
The Shell Company of The Philippines Limited
Shell Centre, London, SE1 7NA
The Shell Company of Turkey Limited
The Shell Company of West Africa Limited
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
The Shell Marketing Company of Borneo Limited
Shell Centre, London, SE1 7NA
The Shell Petroleum Company Limited
Shell Centre, London, SE1 7NA
The Shell Transport and Trading Company Limited
Shell Centre, London, SE1 7NA
Thermocomfort Limited
UK Shell Pension Plan Trust Limited
8 York Road, London, SE1 7NA
Shell Centre, London, SE1 7NA
United Kingdom Oil Pipelines Limited [b]
5-7 Alexandra Road, Hemel Hempstead, Herts, HP2 5BS
Walton-Gatwick Pipeline Company Limited [b]
5-7 Alexandra Road, Hemel Hempstead, Herts, HP2 5BS
West London Pipeline and Storage Limited [b]
5-7 Alexandra Road, Hemel Hempstead, Herts, HP2 5BS
Wonderbill Limited
Woodlea Limited
URUGUAY
BG (Uruguay) S.A.
Dinarel S.A.
Gasoducto Cruz del Sur S.A.
USA
Aera Energy LLC [b]
Aera Energy Services Company
Airbiquity Inc.
Atlantic 1 Holdings LLC [c]
Atlantic 2/3 Holdings LLC [c]
Atlantic 4 Holdings LLC [c]
Au Energy, LLC
Baconton Power LLC [c]
Bengal Pipeline Company LLC
BG Alaska E&P, Inc.
BG Brasilia, LLC
BG Energy Finance, Inc.
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
La Cumparsita, 1373 4th Floor, Montevideo, 11200
La Cumparsita, 1373 4th Floor, Montevideo, 11200
La Cumparsita, 1373 4th Floor, Montevideo, 11200
10000 Ming Avenue, Bakersfield, CA 93311
10000 Ming Avenue, Bakersfield, CA 93311
1011 Western Avenue, Suite 600, Seattle, WA 98104
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
41805 Albrae Street, Fremont, CA, 94538
1499 38th Boulevard N.W., Cairo, GA 31728
1185 Sanctuary Parkway, Suite 100, Alpharetta, GA 30009
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Amberjack Pipeline Company LLC
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
60
14
100
100
100
100
100
50
50
100
100
100
100
100
100
100
75
100
100
100
100
100
100
100
48
52
38
87
100
100
50
40
52
50
26
63
46
58
51
50
35
31
100
100
100
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
E16
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
E17
e16
additionaL inForMation SHELL ANNUAL REPORT AND FORM 20-F 2017
Shell Annual Report_Master Template.indd 16
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Company by country of incorporation
Holaw (619) Limited
International Inland Waterways, Limited
Address of registered office
Shell Centre, London, SE1 7NA
8 York Road, London, SE1 7NA
Karachaganak Project Development Limited [b]
Shell Centre, London, SE1 7NA
Khmer Shell Limited
Kite Power Systems Limited
Lensbury Limited
Shell Centre, London, SE1 7NA
146 New London Road, Chelmsford, Essex, CM2 0AW
Broom Road, Teddington, Middlesex, TW11 9NU
Manchester Airport Storage and Hydrant Company Limited
50 Broadway, London, SW1H 0BL
Maritime Association for Risk Mitigation & Safety Limited
Shell Centre, London, SE1 7NA
Methane Services Limited
Murphy Schiehallion Limited
Octane Holdings Limited
Octane Properties Limited
Private Oil Holdings Oman Limited
Sabah Shell Petroleum Company Limited
Saxon Oil Limited
Saxon Oil Miller Limited
Schooner Trustees Limited
SELAP Limited
SF Investment Management Limited
Shell Aircraft Limited
Shell Arabia Car Service Limited
Shell Aviation Limited
Shell Benin Upstream Ltd
Shell Clair UK Limited
Shell Club Corringham Limited
Shell Company (Hellas) Limited
Shell Company (Pacific Islands) Limited
Shell Corporate Director Limited
Shell Corporate Secretary Limited
Shell Direct (U.K.) Limited
Shell Distributor (Holdings) Limited
Shell Employee Benefits Trustee Limited
Shell Energy Europe Limited
Shell Energy Investments Limited
Shell Energy Supply UK LTD.
Shell EP Offshore Ventures Limited
Shell Gas Holdings (Malaysia) Limited
Shell Hasdrubal Limited
Shell Holdings (U.K.) Limited
Shell International Gas Limited
Shell International Limited
Shell Malaysia Limited
Shell Marine Products Limited
Shell Overseas Holdings Limited
Shell Overseas Services Limited
Shell Pensions Trust Limited
Shell Property Company Limited
Shell QGC Holdings Limited [i]
Shell QGC Midstream 2 Limited
Shell QGC Midstream 1 Limited [i]
Shell QGC Upstream 2 Limited
Shell QGC Upstream 1 Limited
Shell Research Limited
Shell Business Development Middle East Limited
Shell Centre, London, SE1 7NA
Shell Caribbean Investments Limited
Shell Centre, London, SE1 7NA
Shell Chemical Company of Eastern Africa Limited
Shell Centre, London, SE1 7NA
Shell Chemicals (Hellas) Limited
Shell Chemicals Limited
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Chemicals Support Services Asia Limited
Shell Centre, London, SE1 7NA
Shell Chemicals U.K. Limited
Shell Centre, London, SE1 7NA
Shell China Exploration and Production Company Limited
Shell Centre, London, SE1 7NA
Shell Exploration and Production Oman Limited
Shell Centre, London, SE1 7NA
Shell Exploration and Production Tanzania Limited
Shell Centre, London, SE1 7NA
Shell Information Technology International Limited
8 York Road, London, SE1 7NA
Shell International Petroleum Company Limited
Shell Centre, London, SE1 7NA
Shell International Trading and Shipping Company Limited
80 Strand, London, WC2R 0ZA
Shell Pension Reserve Company (SIPF) Limited
Shell Centre, London, SE1 7NA
Shell Pension Reserve Company (SOCPF) Limited
Shell Centre, London, SE1 7NA
Shell Pension Reserve Company (UK) Limited
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
8 York Road, London, SE1 7NA
Shell Centre, London, SE1 7NA
8 York Road, London, SE1 7NA
8 York Road, London, SE1 7NA
Shell Centre, London, SE1 7NA
8 York Road, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
%
100
100
38
100
34
100
25
100
100
100
100
100
85
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Company by country of incorporation
Shell Response Limited
Address of registered office
80 Strand, London, WC2R 0ZA
Shell Shared Service Centre - Glasgow Limited
Shell Centre, London, SE1 7NA
Shell Subsidiary Distributors Pension Trustee Limited
Shell Centre, London, SE1 7NA
Shell Supplementary Pension Plan Trustees Limited
Shell Centre, London, SE1 7NA
Shell Tankers (U.K.) Limited
Shell Trading International Limited
Shell Treasury Centre Limited
Shell Treasury Dollar Company Limited
Shell Treasury Euro Company Limited
Shell Treasury UK Limited
Shell Trinidad 5(A) Limited
Shell Trinidad and Tobago Limited
Shell Trinidad Block E Limited
Shell Trustee Solutions Limited
Shell Tunisia Upstream Limited
Shell U.K. Limited
Shell U.K. North Atlantic Limited
Shell U.K. Oil Products Limited
Shell Upstream Overseas Services (I) Limited
Shell Ventures New Zealand Limited
Shell Ventures U.K. Limited
Shell Windenergy Limited
Shell-Mex and B.P. Limited
Stansted Fuelling Company Limited
STT (Das Beneficiary) Limited [a]
Synthetic Chemicals (Northern) Limited
Telegraph Service Stations Limited
3 Savoy Place, London, WC2R 0DX
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
1 Altens Farm Road, Nigg, Aberdeen, AB12 3FY
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Exxonmobil House, Ermyn Way, Leatherhead, KT22 8UX
Shell Centre, London, SE1 7NA
8 York Road, London, SE1 7NA
8 York Road, London, SE1 7NA
The Anglo-Saxon Petroleum Company Limited
Shell Centre, London, SE1 7NA
The Asiatic Petroleum Company Limited
Shell Centre, London, SE1 7NA
The Consolidated Petroleum Company Limited
Shell Centre, London, SE1 7NA
The Consolidated Petroleum Supply Company Limited
Shell Centre, London, SE1 7NA
The Mexican Eagle Oil Company Limited
8 York Road, London, SE1 7NA
The New Motion EVSE Limited
The Shell Company (W.I.) Limited
The Shell Company of Hong Kong Limited
The Shell Company of India Limited
The Shell Company of Nigeria Limited
The Shell Company of Thailand Limited
C/O Jag Shaw Baker, Berners House, 47-48 Berners Street, London, W1T 3NF
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
The Shell Company of The Philippines Limited
Shell Centre, London, SE1 7NA
The Shell Company of Turkey Limited
The Shell Company of West Africa Limited
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
The Shell Marketing Company of Borneo Limited
Shell Centre, London, SE1 7NA
The Shell Petroleum Company Limited
Shell Centre, London, SE1 7NA
The Shell Transport and Trading Company Limited
Shell Centre, London, SE1 7NA
Thermocomfort Limited
UK Shell Pension Plan Trust Limited
8 York Road, London, SE1 7NA
Shell Centre, London, SE1 7NA
United Kingdom Oil Pipelines Limited [b]
5-7 Alexandra Road, Hemel Hempstead, Herts, HP2 5BS
Walton-Gatwick Pipeline Company Limited [b]
5-7 Alexandra Road, Hemel Hempstead, Herts, HP2 5BS
West London Pipeline and Storage Limited [b]
5-7 Alexandra Road, Hemel Hempstead, Herts, HP2 5BS
Wonderbill Limited
Woodlea Limited
URUGUAY
BG (Uruguay) S.A.
Dinarel S.A.
Gasoducto Cruz del Sur S.A.
USA
Aera Energy LLC [b]
Aera Energy Services Company
Airbiquity Inc.
Shell Centre, London, SE1 7NA
Shell Centre, London, SE1 7NA
La Cumparsita, 1373 4th Floor, Montevideo, 11200
La Cumparsita, 1373 4th Floor, Montevideo, 11200
La Cumparsita, 1373 4th Floor, Montevideo, 11200
10000 Ming Avenue, Bakersfield, CA 93311
10000 Ming Avenue, Bakersfield, CA 93311
1011 Western Avenue, Suite 600, Seattle, WA 98104
Amberjack Pipeline Company LLC
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Atlantic 1 Holdings LLC [c]
Atlantic 2/3 Holdings LLC [c]
Atlantic 4 Holdings LLC [c]
Au Energy, LLC
Baconton Power LLC [c]
Bengal Pipeline Company LLC
BG Alaska E&P, Inc.
BG Brasilia, LLC
BG Energy Finance, Inc.
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
41805 Albrae Street, Fremont, CA, 94538
1499 38th Boulevard N.W., Cairo, GA 31728
1185 Sanctuary Parkway, Suite 100, Alpharetta, GA 30009
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
60
14
100
100
100
100
100
50
50
100
100
100
100
100
100
100
75
100
100
100
100
100
100
100
48
52
38
87
100
100
50
40
52
50
26
63
46
58
51
50
35
31
100
100
100
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
E16
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
E17
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SHELL ANNUAL REPORT AND FORM 20-F 2017 additionaL inForMation
e17
Company by country of incorporation
Address of registered office
BG Energy Merchants, LLC
BG Exploration America, Inc.
BG Gulf Coast LNG, LLC
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
BG Lake Charles Operations, LLC
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
BG LNG Services, LLC
BG LNG Trading, LLC
BG North America, LLC
BG Production Company (PA), LLC
BG Production Company (WV), LLC
BG US Gathering Company, LLC
BG US Production Company, LLC
BG US Services, Inc.
Brazil Crude Services, LLC
Brazos Wind Ventures, LLC [c]
Caesar Oil Pipeline Company, LLC
Colbea Enterprises, LLC
Colonial Pipeline Company
Colorado Wind Ventures, LLC
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
2050 Plainfield Pike, Cranston, RI 02921
P.O. Box 1624, Alpharetta, GA 30009-9934
825 Ne Multnomah, Portland, OR 97232
Concha Chemical Pipeline LLC [c]
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Crestwood Permian Basin LLC
CRI Catalyst Company LP [d]
CRI Sales and Services Inc.
CRI U.S. LP [d]
CRI Zeolites Inc.
CRI/Criterion, Inc.
811 Main Street, Suite 3400, Houston, TX 77002
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Criterion Catalyst Company
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Criterion Catalysts & Technologies L.P. [d]
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Deer Park Refining Limited Partnership [b] [c]
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Endymion Oil Pipeline Company, LLC
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Enterprise Oil North America Inc.
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
EPP LLC
Equilon Enterprises LLC [c]
2441 High Timbers Drive, Suite 220, The Woodlands, TX 77380
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
EXCO Appalachia Midstream, LLC
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
EXCO Resources (PA), LLC [b]
Explorer Pipeline Company
Gaviota Terminal Company [d]
Infineum USA Inc.
Infineum USA L.P.
Jiffy Lube International, Inc.
Lake Charles Exports, LLC
Laurentide E&P, LLC
LOCAP LLC
LOOP LLC
Maple Power Holdings LLC
Mars Oil Pipeline Company LLC [d]
Mattox Pipeline Company LLC [c]
Mertvyi Kultuk LLC
Motiva Company
MP2 Energy LLC [d]
MP2 Energy NE LLC
MP2 Energy NY LLC
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
P.O. Box 2650, Tulsa, OK 74101
(Mail address) 910 Louisiana Street, Houston, TX 77002
1900 East Linden Avenue, Linden, NJ 07036
Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington, DE 19808
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
111 Veterans Blvd, Suite 600, Metarie, LA 70005
137 Northpark Blvd., Covington, LA 70433
Bechtel Enterprises, P.O. Box 193965, San Francisco, CA, 94119-3965
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
2441 High Timbers Drive, Suite 220, The Woodlands, TX 77380
2441 High Timbers Drive, Suite 220, The Woodlands, TX 77380
2441 High Timbers Drive, Suite 220, The Woodlands, TX 77380
MP2 Energy Retail Holdings LLC
2441 High Timbers Drive, Suite 220, The Woodlands, TX 77380
MP2 Energy Texas LLC
MP2 Generation LLC
2441 High Timbers Drive, Suite 220, The Woodlands, TX 77380
2441 High Timbers Drive, Suite 220, The Woodlands, TX 77380
MP2 Mesquite Creek Wind LLC
2441 High Timbers Drive, Suite 220, The Woodlands, TX 77380
Mpower2 LLC
Nedpower Mount Storm LLC [f]
Noble Assurance Company
Odyssey Pipeline L.L.C. [c]
Oryx Caspian Pipeline, L.L.C. [c]
Pacwest Energy, LLC.
Pecten Arabian Company
2441 High Timbers Drive, Suite 220, The Woodlands, TX 77380
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
C T Corporation System, 1999 Bryan Street, Suite 900, Dallas, TX 75201
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
3450 E. Commercial Ct., Meridian, ID 83642
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Pecten Brazil Exploration Company
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Pecten Midstream LLC [c]
Pecten Orient Company
Pecten Orient Company LLC [c]
Pecten Producing Company
Pecten Trading Company
Pecten Victoria Company
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
%
100
100
100
100
100
100
100
100
100
100
100
100
100
50
15
50
13
50
100
24
100
100
100
100
100
100
100
51
5
100
100
100
50
50
32
20
50
50
100
80
100
20
46
68
35
79
100
100
100
100
100
100
100
100
100
100
50
100
34
100
50
100
100
48
100
100
100
100
100
Company by country of incorporation
Address of registered office
Pecten Yemen Masila Company
Pelican Transmission, LLC [c]
Pennzoil-Quaker State Company
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Pennzoil-Quaker State International Corporation
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Pennzoil-Quaker State Nominee Company
The Corporation Trust Company of Nevada, 311 South Division Street, Carson City, NV 89703
Peru LNG Company LLC [c]
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Poseidon Oil Pipeline Company, LLC
Corporation Service Company, 1013 Center Road, Wilmington, DE 19805
Power Limited Partnership [d]
Proteus Oil Pipeline Company, LLC
Quaker State Investment Corporation
RDK Ventures, LLC
Rilette Springs, LLC
S T Exchange, Inc.
Salamander Inc.
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
4080 West Jonathan Moore Pike, Columbus, IN 47201
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
RK Caspian Shipping Company, LLC [c]
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
San Pablo Bay Pipeline Company LLC [c]
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Sand Dollar Pipeline LLC [c]
SCOGI GP [d]
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell (US) Gas & Power M&T Holdings, Inc.
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell Broadwater Holdings LLC
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell California Pipeline Company LLC [c]
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell Catalysts Ventures Inc.
Shell Chemical Appalachia LLC [c]
Shell Chemical LP [h]
Shell Chemicals Arabia LLC [c]
Shell Communications, Inc.
Shell Deepwater Royalties Inc.
Shell Downstream Inc.
Shell Energy Company
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell Energy Holding GP LLC [c]
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell Energy North America (US), L.P. [d]
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell Energy Resources Company
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell EP Holdings Inc.
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell Expatriate Employment US Inc.
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell Exploration & Production Company
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell Exploration Company Inc.
Shell Frontier Oil & Gas Inc.
Shell Gas Gathering Corp. #2
Shell Global Solutions (US) Inc.
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell GOM Pipeline Company LLC [c]
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell Gulf of Mexico Inc.
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell Information Technology International Inc.
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell International Exploration and Production Inc.
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell Leasing Company
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell Marine Products (US) Company
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell Midstream LP Holdings LLC [c]
Shell Midstream Operating LLC [c]
Shell Midstream Partners GP LLC [c]
Shell Midstream Partners, L.P. [h]
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell NA Gas & Power Holding Company
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell NA LNG LLC [c]
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell North America Gas & Power Services Company
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell Offshore and Chemical Investments Inc.
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell Offshore Inc.
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell Offshore Response Company LLC [c]
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell Oil Company
Shell Oil Company Investments Inc.
Shell Oil Products Company LLC [c]
Shell Onshore Ventures Inc.
Shell Petroleum Inc.
Shell Pipeline Company LP [d]
Shell Pipeline GP LLC [c]
Shell Rail Operations Company
Shell RSC Company
Shell Thailand E&P Inc.
Shell Trademark Management Inc.
Shell Trading (US) Company
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell Technology Ventures LLC [c]
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell Trading North America Company
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
%
100
100
100
100
100
20
17
100
5
100
50
100
100
100
100
100
48
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
48
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48
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100
100
100
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100
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100
100
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
E18
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
E19
e18
additionaL inForMation SHELL ANNUAL REPORT AND FORM 20-F 2017
Shell Annual Report_Master Template.indd 18
21/03/2018 15:35:30
Company by country of incorporation
Address of registered office
Company by country of incorporation
Address of registered office
BG Lake Charles Operations, LLC
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Pennzoil-Quaker State International Corporation
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Pennzoil-Quaker State Nominee Company
The Corporation Trust Company of Nevada, 311 South Division Street, Carson City, NV 89703
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Pecten Yemen Masila Company
Pelican Transmission, LLC [c]
Pennzoil-Quaker State Company
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Peru LNG Company LLC [c]
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Poseidon Oil Pipeline Company, LLC
Corporation Service Company, 1013 Center Road, Wilmington, DE 19805
Power Limited Partnership [d]
Proteus Oil Pipeline Company, LLC
Quaker State Investment Corporation
RDK Ventures, LLC
Rilette Springs, LLC
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
4080 West Jonathan Moore Pike, Columbus, IN 47201
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
RK Caspian Shipping Company, LLC [c]
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
S T Exchange, Inc.
Salamander Inc.
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
San Pablo Bay Pipeline Company LLC [c]
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Sand Dollar Pipeline LLC [c]
SCOGI GP [d]
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Concha Chemical Pipeline LLC [c]
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell (US) Gas & Power M&T Holdings, Inc.
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell Broadwater Holdings LLC
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell California Pipeline Company LLC [c]
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell Catalysts Ventures Inc.
Shell Chemical Appalachia LLC [c]
Shell Chemical LP [h]
Shell Chemicals Arabia LLC [c]
Shell Communications, Inc.
Shell Deepwater Royalties Inc.
Shell Downstream Inc.
Shell Energy Company
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Enterprise Oil North America Inc.
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell Energy Holding GP LLC [c]
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
2441 High Timbers Drive, Suite 220, The Woodlands, TX 77380
Shell Energy North America (US), L.P. [d]
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell Energy Resources Company
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
EXCO Appalachia Midstream, LLC
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell EP Holdings Inc.
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell Expatriate Employment US Inc.
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
P.O. Box 2650, Tulsa, OK 74101
(Mail address) 910 Louisiana Street, Houston, TX 77002
1900 East Linden Avenue, Linden, NJ 07036
Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington, DE 19808
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell Exploration & Production Company
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell Exploration Company Inc.
Shell Frontier Oil & Gas Inc.
Shell Gas Gathering Corp. #2
Shell Global Solutions (US) Inc.
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell GOM Pipeline Company LLC [c]
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell Gulf of Mexico Inc.
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
111 Veterans Blvd, Suite 600, Metarie, LA 70005
137 Northpark Blvd., Covington, LA 70433
Shell Information Technology International Inc.
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell International Exploration and Production Inc.
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Bechtel Enterprises, P.O. Box 193965, San Francisco, CA, 94119-3965
Shell Leasing Company
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
MP2 Energy Retail Holdings LLC
2441 High Timbers Drive, Suite 220, The Woodlands, TX 77380
Shell North America Gas & Power Services Company
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
MP2 Mesquite Creek Wind LLC
2441 High Timbers Drive, Suite 220, The Woodlands, TX 77380
Shell Offshore Response Company LLC [c]
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell Offshore and Chemical Investments Inc.
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell Offshore Inc.
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell Marine Products (US) Company
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell Midstream LP Holdings LLC [c]
Shell Midstream Operating LLC [c]
Shell Midstream Partners GP LLC [c]
Shell Midstream Partners, L.P. [h]
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell NA Gas & Power Holding Company
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell NA LNG LLC [c]
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell Oil Company
Shell Oil Company Investments Inc.
Shell Oil Products Company LLC [c]
Shell Onshore Ventures Inc.
Shell Petroleum Inc.
Shell Pipeline Company LP [d]
Shell Pipeline GP LLC [c]
Shell Rail Operations Company
Shell RSC Company
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell Technology Ventures LLC [c]
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell Thailand E&P Inc.
Shell Trademark Management Inc.
Shell Trading (US) Company
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell Trading North America Company
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
BG Energy Merchants, LLC
BG Exploration America, Inc.
BG Gulf Coast LNG, LLC
BG LNG Services, LLC
BG LNG Trading, LLC
BG North America, LLC
BG Production Company (PA), LLC
BG Production Company (WV), LLC
BG US Gathering Company, LLC
BG US Production Company, LLC
BG US Services, Inc.
Brazil Crude Services, LLC
Brazos Wind Ventures, LLC [c]
Caesar Oil Pipeline Company, LLC
Colbea Enterprises, LLC
Colonial Pipeline Company
Colorado Wind Ventures, LLC
Crestwood Permian Basin LLC
CRI Catalyst Company LP [d]
CRI Sales and Services Inc.
CRI U.S. LP [d]
CRI Zeolites Inc.
CRI/Criterion, Inc.
EPP LLC
Equilon Enterprises LLC [c]
EXCO Resources (PA), LLC [b]
Explorer Pipeline Company
Gaviota Terminal Company [d]
Infineum USA Inc.
Infineum USA L.P.
Jiffy Lube International, Inc.
Lake Charles Exports, LLC
Laurentide E&P, LLC
LOCAP LLC
LOOP LLC
Maple Power Holdings LLC
Mars Oil Pipeline Company LLC [d]
Mattox Pipeline Company LLC [c]
Mertvyi Kultuk LLC
Motiva Company
MP2 Energy LLC [d]
MP2 Energy NE LLC
MP2 Energy NY LLC
MP2 Energy Texas LLC
MP2 Generation LLC
Mpower2 LLC
Nedpower Mount Storm LLC [f]
Noble Assurance Company
Odyssey Pipeline L.L.C. [c]
Oryx Caspian Pipeline, L.L.C. [c]
Pacwest Energy, LLC.
Pecten Arabian Company
Pecten Midstream LLC [c]
Pecten Orient Company
Pecten Orient Company LLC [c]
Pecten Producing Company
Pecten Trading Company
Pecten Victoria Company
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
2050 Plainfield Pike, Cranston, RI 02921
P.O. Box 1624, Alpharetta, GA 30009-9934
825 Ne Multnomah, Portland, OR 97232
811 Main Street, Suite 3400, Houston, TX 77002
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Criterion Catalyst Company
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Criterion Catalysts & Technologies L.P. [d]
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Deer Park Refining Limited Partnership [b] [c]
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Endymion Oil Pipeline Company, LLC
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
2441 High Timbers Drive, Suite 220, The Woodlands, TX 77380
2441 High Timbers Drive, Suite 220, The Woodlands, TX 77380
2441 High Timbers Drive, Suite 220, The Woodlands, TX 77380
2441 High Timbers Drive, Suite 220, The Woodlands, TX 77380
2441 High Timbers Drive, Suite 220, The Woodlands, TX 77380
2441 High Timbers Drive, Suite 220, The Woodlands, TX 77380
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
C T Corporation System, 1999 Bryan Street, Suite 900, Dallas, TX 75201
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
3450 E. Commercial Ct., Meridian, ID 83642
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Pecten Brazil Exploration Company
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
%
100
100
100
100
100
100
100
100
100
100
100
100
100
50
15
50
13
50
100
24
100
100
100
100
100
100
100
51
5
100
100
100
50
50
32
20
50
50
100
80
100
20
46
68
35
79
100
100
100
100
100
100
100
100
100
100
50
100
34
100
50
100
100
48
100
100
100
100
100
%
100
100
100
100
100
20
17
100
5
100
50
100
100
100
100
100
48
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
48
100
48
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
E18
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
E19
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SHELL ANNUAL REPORT AND FORM 20-F 2017 additionaL inForMation
e19
Company by country of incorporation
Address of registered office
Shell Trading Risk Management, LLC [c]
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell Trading Services Company
Shell Transportation Holdings LLC [c]
Shell Treasury Center (West) Inc.
Shell US E&P Investments LLC [c]
Shell US Gas & Power LLC [c]
Shell US Hosting Company
Shell WindEnergy Inc.
Shell WindEnergy Services Inc.
Ship Shoal Pipeline Company [d]
SOI Finance Inc.
SOPC Holdings East LLC [c]
SOPC Holdings West LLC
SWEPI LP [d]
Tejas Coral GP, LLC [c]
Tejas Coral Holding, LLC [c]
Tejas Power Generation, LLC [c]
Texas Petroleum Group LLC
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
(Mail address) 910 Louisiana Street, Houston, TX 77002
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
11111 Wilcrest Green, Suite 100, Houston, TX 77042
Texas-New Mexico Pipe Line Company
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Valley Camp Coal Company
Three Wind Holdings LLC
TMR Company
Tri Star Energy LLC
Triton Diagnostics Inc.
Triton Terminaling LLC [c]
Triton West LLC
True North Energy LLC
URSA Oil Pipeline Company LLC [c]
West Shore Pipe Line Company
Zeolyst International
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
1740 Ed Temple Blvd, Nashville, TN 37208
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
10346 Brecksville Rd, Brecksville, OH 44141
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
(Mail address) 910 Louisiana Street, Houston, TX 77002
Zydeco Pipeline Company LLC [c]
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
VENEZUELA
Petroregional del Lago, S.A.
Calle 78 con Av. 3H, Sector Dr. Portillo, Edificio Centro Empresarial Plaza, # 3G-81, Piso 1 a PH, Maracaibo, Zulia,
Shell Venezuela Productos, C.A.
Av. Orinoco, Edificio Centro Empresarial Premium, Piso 2, Oficinas 2-A y 2-B, Urb. Las Mercedes, Caracas, Miranda,
4002
Shell Venezuela, S.A.
Sucre Gas, S.A.
VIETNAM
Shell Vietnam Ltd
ZIMBABWE
1060
Calle 77 (5 de Julio), entre Av. 3C y Av. 3D, Edificio Torre Financiera BOD, Piso 4, Sector 5 de Julio, Maracaibo, Zulia, 4001
Av. Leonardo Da Vinci, Edificio PDV Servicios, Caracas, Distrito Capital
Go Dau Industrial Zone, Phuoc Thai Commune, Long Thanh District, Dong Nai Province
Central African Petroleum Refineries (Private) Limited
Block 1, Tendeseka Office Park, CNR Samora Machel Avenue, Renfrew Road, Harare
%
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100
100
100
100
100
100
100
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43
100
100
100
100
100
100
100
50
100
100
50
100
33
100
100
48
50
45
19
50
52
40
100
100
30
100
21
Exhibit 12.1
I, Ben van Beurden, certify that:
1. I have reviewed this Annual Report on Form 20-F of Royal Dutch Shell plc (the Company);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and
have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual
report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and
5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s
auditors and the audit committee of the Company’s Board of Directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the Company’s ability to record, process, summarise and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over
financial reporting.
/s/ Ben van Beurden
Ben van Beurden
Chief Executive Officer
March 14, 2018
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
E20
e20
additionaL inForMation SHELL ANNUAL REPORT AND FORM 20-F 2017
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
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Company by country of incorporation
Address of registered office
Shell Trading Risk Management, LLC [c]
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Shell Trading Services Company
Shell Transportation Holdings LLC [c]
Shell Treasury Center (West) Inc.
Shell US E&P Investments LLC [c]
Shell US Gas & Power LLC [c]
Shell US Hosting Company
Shell WindEnergy Inc.
Shell WindEnergy Services Inc.
Ship Shoal Pipeline Company [d]
SOI Finance Inc.
SOPC Holdings East LLC [c]
SOPC Holdings West LLC
SWEPI LP [d]
Tejas Coral GP, LLC [c]
Tejas Coral Holding, LLC [c]
Tejas Power Generation, LLC [c]
Texas Petroleum Group LLC
The Valley Camp Coal Company
Three Wind Holdings LLC
TMR Company
Tri Star Energy LLC
Triton Diagnostics Inc.
Triton Terminaling LLC [c]
Triton West LLC
True North Energy LLC
URSA Oil Pipeline Company LLC [c]
West Shore Pipe Line Company
Zeolyst International
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
(Mail address) 910 Louisiana Street, Houston, TX 77002
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
11111 Wilcrest Green, Suite 100, Houston, TX 77042
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
1740 Ed Temple Blvd, Nashville, TN 37208
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
10346 Brecksville Rd, Brecksville, OH 44141
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
(Mail address) 910 Louisiana Street, Houston, TX 77002
Texas-New Mexico Pipe Line Company
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Zydeco Pipeline Company LLC [c]
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
Petroregional del Lago, S.A.
Calle 78 con Av. 3H, Sector Dr. Portillo, Edificio Centro Empresarial Plaza, # 3G-81, Piso 1 a PH, Maracaibo, Zulia,
Shell Venezuela Productos, C.A.
Av. Orinoco, Edificio Centro Empresarial Premium, Piso 2, Oficinas 2-A y 2-B, Urb. Las Mercedes, Caracas, Miranda,
4002
1060
Calle 77 (5 de Julio), entre Av. 3C y Av. 3D, Edificio Torre Financiera BOD, Piso 4, Sector 5 de Julio, Maracaibo, Zulia, 4001
Av. Leonardo Da Vinci, Edificio PDV Servicios, Caracas, Distrito Capital
Go Dau Industrial Zone, Phuoc Thai Commune, Long Thanh District, Dong Nai Province
VENEZUELA
Shell Venezuela, S.A.
Sucre Gas, S.A.
VIETNAM
Shell Vietnam Ltd
ZIMBABWE
Central African Petroleum Refineries (Private) Limited
Block 1, Tendeseka Office Park, CNR Samora Machel Avenue, Renfrew Road, Harare
%
100
100
100
100
100
100
100
100
100
43
100
100
100
100
100
100
100
50
100
100
50
100
33
100
100
48
50
45
19
50
52
40
100
100
30
100
21
Exhibit 12.1
Exhibit 12.1
I, Ben van Beurden, certify that:
1. I have reviewed this Annual Report on Form 20-F of Royal Dutch Shell plc (the Company);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and
have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual
report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and
5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s
auditors and the audit committee of the Company’s Board of Directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the Company’s ability to record, process, summarise and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over
financial reporting.
/s/ Ben van Beurden
Ben van Beurden
Chief Executive Officer
March 14, 2018
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
E20
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
E21
SHELL ANNUAL REPORT AND FORM 20-F 2017 additionaL inForMation
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Exhibit 12.2
Exhibit 12.2
I, Jessica Uhl, certify that:
1. I have reviewed this Annual Report on Form 20-F of Royal Dutch Shell plc (the Company);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
for, the periods presented in the Report.
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and
4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company
and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c)
(d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual
report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and
5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
Company’s auditors and the audit committee of the Company’s Board of Directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely
to adversely affect the Company’s ability to record, process, summarise and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over
financial reporting.
/s/ Jessica Uhl
Jessica Uhl
Chief Financial Officer
March 14, 2018
In connection with the Annual Report on Form 20-F of Royal Dutch Shell plc, a public limited company organized under the laws of England and Wales (the
Company), for the year ended December 31, 2017, as filed with the Securities and Exchange Commission on the date hereof (the Report), each of the
undersigned officers of the Company certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to
such officer’s knowledge, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The foregoing certification is provided solely for purposes of complying with the provisions of Section 906 of the Sarbanes-Oxley Act of 2002 and is not
intended to be used or relied upon for any other purpose.
Exhibit 13.1
/s/ Ben van Beurden
Ben van Beurden
Chief Executive Officer
/s/ Jessica Uhl
Jessica Uhl
Chief Financial Officer
March 14, 2018
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
e22
additionaL inForMation SHELL ANNUAL REPORT AND FORM 20-F 2017
E22
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
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Exhibit 13.1
Exhibit 13.1
1. I have reviewed this Annual Report on Form 20-F of Royal Dutch Shell plc (the Company);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
In connection with the Annual Report on Form 20-F of Royal Dutch Shell plc, a public limited company organized under the laws of England and Wales (the
Company), for the year ended December 31, 2017, as filed with the Securities and Exchange Commission on the date hereof (the Report), each of the
undersigned officers of the Company certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to
such officer’s knowledge, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and
for, the periods presented in the Report.
4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company
The foregoing certification is provided solely for purposes of complying with the provisions of Section 906 of the Sarbanes-Oxley Act of 2002 and is not
intended to be used or relied upon for any other purpose.
and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual
report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and
5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
Company’s auditors and the audit committee of the Company’s Board of Directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely
to adversely affect the Company’s ability to record, process, summarise and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over
/s/ Ben van Beurden
Ben van Beurden
Chief Executive Officer
/s/ Jessica Uhl
Jessica Uhl
Chief Financial Officer
March 14, 2018
Exhibit 12.2
I, Jessica Uhl, certify that:
financial reporting.
/s/ Jessica Uhl
Jessica Uhl
Chief Financial Officer
March 14, 2018
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
E22
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
E23
SHELL ANNUAL REPORT AND FORM 20-F 2017 additionaL inForMation
e23
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Exhibit 99.1
Exhibit 99.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statement on Form F-3 (No. 333-222005) and the Registration Statements on Form S-8 (No.
333-126715, 333-141397, 333-171206, 333-192821, 333-200953, 333-215273 and 333-222813) of Royal Dutch Shell plc of our reports dated
March 14, 2018, with respect to the Consolidated Financial Statements and the effectiveness of internal control over financial reporting of Royal Dutch Shell
plc, included in the Annual Report on Form 20-F for the year ended December 31, 2017.
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statement on Form F-3 (No. 333-222005) and the Registration Statements on Form S-8
(No. 333-126715, 333-141397, 333-171206, 333-192821, 333-200953, 333-215273 and 333-222813) of Royal Dutch Shell plc of our report dated
March 9, 2016, relating to the Consolidated Financial Statements, which appears in this Annual Report on Form 20-F.
/s/ Ernst & Young LLP
Ernst & Young LLP
London, United Kingdom
March 14, 2018
Exhibit 99.2
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
London, United Kingdom
March 14, 2018
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
e24
additionaL inForMation SHELL ANNUAL REPORT AND FORM 20-F 2017
E24
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
E25
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Exhibit 99.2
Exhibit 99.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statement on Form F-3 (No. 333-222005) and the Registration Statements on Form S-8 (No.
333-126715, 333-141397, 333-171206, 333-192821, 333-200953, 333-215273 and 333-222813) of Royal Dutch Shell plc of our reports dated
March 14, 2018, with respect to the Consolidated Financial Statements and the effectiveness of internal control over financial reporting of Royal Dutch Shell
plc, included in the Annual Report on Form 20-F for the year ended December 31, 2017.
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statement on Form F-3 (No. 333-222005) and the Registration Statements on Form S-8
(No. 333-126715, 333-141397, 333-171206, 333-192821, 333-200953, 333-215273 and 333-222813) of Royal Dutch Shell plc of our report dated
March 9, 2016, relating to the Consolidated Financial Statements, which appears in this Annual Report on Form 20-F.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
London, United Kingdom
March 14, 2018
Exhibit 99.1
/s/ Ernst & Young LLP
Ernst & Young LLP
London, United Kingdom
March 14, 2018
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
E24
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
E25
SHELL ANNUAL REPORT AND FORM 20-F 2017 additionaL inForMation
e25
Shell Annual Report_Master Template.indd 25
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Exhibit 99.3
Exhibit 99.3
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statement on Form F-3 (No. 333-222005) and the Registration Statements on Form S-8 (No.
333-126715, 333-141397, 333-171206, 333-192821, 333-200953, 333-215273 and 333-222813) of Royal Dutch Shell plc of our reports dated
March 14, 2018, with respect to the Royal Dutch Shell Dividend Access Trust Financial Statements and the effectiveness of internal control over financial
reporting of the Royal Dutch Shell Dividend Access Trust, included in the Annual Report on Form 20-F for the year ended December 31, 2017.
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statement on Form F-3 (No. 333-222005) and the Registration Statements on
Form S-8 (No. 333-126715, 333-141397, 333-171206, 333-192821, 333-200953, 333-215273 and 333-222813) of Royal Dutch Shell plc of our
report dated March 9, 2016, relating to the Royal Dutch Shell Dividend Access Trust Financial Statements, which appears in this Annual Report on Form 20-F.
/s/ Ernst & Young LLP
Ernst & Young LLP
London, United Kingdom
March 14, 2018
Exhibit 99.4
/s/ PricewaterhouseCoopers CI LLP
PricewaterhouseCoopers CI LLP
Jersey, Channel Islands
March 14, 2018
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
e26
additionaL inForMation SHELL ANNUAL REPORT AND FORM 20-F 2017
E26
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
E27
Shell Annual Report_Master Template.indd 26
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Exhibit 99.4
Exhibit 99.4
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statement on Form F-3 (No. 333-222005) and the Registration Statements on Form S-8 (No.
333-126715, 333-141397, 333-171206, 333-192821, 333-200953, 333-215273 and 333-222813) of Royal Dutch Shell plc of our reports dated
March 14, 2018, with respect to the Royal Dutch Shell Dividend Access Trust Financial Statements and the effectiveness of internal control over financial
reporting of the Royal Dutch Shell Dividend Access Trust, included in the Annual Report on Form 20-F for the year ended December 31, 2017.
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statement on Form F-3 (No. 333-222005) and the Registration Statements on
Form S-8 (No. 333-126715, 333-141397, 333-171206, 333-192821, 333-200953, 333-215273 and 333-222813) of Royal Dutch Shell plc of our
report dated March 9, 2016, relating to the Royal Dutch Shell Dividend Access Trust Financial Statements, which appears in this Annual Report on Form 20-F.
/s/ PricewaterhouseCoopers CI LLP
PricewaterhouseCoopers CI LLP
Jersey, Channel Islands
March 14, 2018
Exhibit 99.3
/s/ Ernst & Young LLP
Ernst & Young LLP
London, United Kingdom
March 14, 2018
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
E26
ADDITIONAL INFORMATION SHELL ANNUAL REPORT AND FORM 20-F 2017
E27
SHELL ANNUAL REPORT AND FORM 20-F 2017 additionaL inForMation
e27
Shell Annual Report_Master Template.indd 27
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Notes
Notes
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FiNANCiAL CALENDAR iN 2018
The Annual General Meeting will be held on May 22, 2018.
Results announcements
Interim dividend timetable
Announcement date
Ex-dividend date [D]
Record date
Closing date for currency election [E]
Euro and sterling equivalents announcement date
Payment date
2017 Fourth
quarter [A]
February 1
February 1 [C]
February 15
February 16
March 2
March 9
March 26
2018 First
quarter [B]
April 26
April 26
May 10
May 11
May 25
June 4
June 18
2018 Second
quarter [B]
July 26
July 26
August 9
August 10
August 24
September 3
September 17
2018 Third
quarter [B]
November 1
November 1
November 15
November 16
November 30
December 6
December 19
[A] In respect of the financial year ended December 31, 2017.
[B] In respect of the financial year ending December 31, 2018.
[C] The Directors do not propose to recommend any further distribution in respect of 2017.
[D] The New York Stock Exchange (NYSE), with effect from September 5, 2017, reduced the standard settement cycle in accordance with the SEC amendments to Exchange Act Rule 15c6-1(a).
Under these rules, regular settlement will occur on a T+2 basis for trades occurring on or after the SEC’s implementation date of September 5, 2017. As a result, RDS A and B ADSs traded on the
NYSE markets will now settle in line with RDS A and B shares traded on European markets, which moved to a T+2 settlement basis for trades in 2014, resulting in the same ex-dividend date for RDS A
and B shares, and RDS A and B ADSs. Record dates will not change.
[E] A different currency election date may apply to shareholders holding shares in a securities account with a bank or financial institution ultimately through Euroclear Nederland. This may also apply to
other shareholders who do not hold their shares either directly on the Register of Members or in the corporate sponsored nominee arrangement. Shareholders can contact their broker, financial
intermediary, bank or financial institution for the election deadline that applies.
REgiSTERED OFFiCE
Royal Dutch Shell plc
Shell Centre
London SE1 7NA
United Kingdom
Registered in England and Wales
Company number 4366849
Registered with the Dutch Trade Register
under number 34179503
Headquarters
Royal Dutch Shell plc
Carel van Bylandtlaan 30
2596 HR The Hague
The Netherlands
SHARE REgiSTRATiON
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United Kingdom
0800 169 1679 (UK)
+44 (0)121 415 7073
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and to change the way you receive your
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www.shareview.co.uk
SHAREHOLDER RELATiONS
iNvESTOR RELATiONS
Royal Dutch Shell plc
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2501 AN The Hague
The Netherlands
+31 (0)70 377 4540
or
Shell Oil Company
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www.shell.com/investor
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Royal Dutch Shell plc
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The Netherlands
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+31 (0)70 377 4088
or
Royal Dutch Shell plc
Shell Centre
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United Kingdom
+44 (0)20 7934 3363
royaldutchshell.shareholders@shell.com
www.shell.com/shareholder
AMERiCAN DEPOSiTARY
SHARES (ADSs)
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USA
Overnight correspondence to:
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462 South 4th Street Suite 1600
Louisville, KY 40202
USA
+1 888 737 2377 (USA)
+1 201 680 6825 (international)
shrrelations@cpushareownerservices.com
www.mybnymdr.com
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