Information Data & Analytics

Title: Strategy Day 2021 - Plenary Session with Ben van Beurden & Jessica Uhl

Duration: 61:34 minutes

Description: 

Ben van Beurden and Jessica Uhl, CEO and CFO of Shell respectively, talk about Shell's Powering Progress strategy and vision for the next 30 years, including capital allocation, managing carbon, and the Three Pillars approach.

Strategy Day 2021 - Plenary Session with Ben van Beurden & Jessica Uhl Transcript

Powering Progress Part One

[Background music plays]

Slow meditative music.

[Animated sequence]

Abstract 3D forms in Shell colours slowly change as words display on the screen.

[Text displays]

Shell Strategy Day 2021. Our purpose, to power progress together by providing more and cleaner energy solutions.

[Video footage]

Close up of Ben van Beurden in an office setting.

[Text displays]

Powering Progress. Ben van Beurden, CEO, Shell.

Ben van Beurden

Powering Progress. That's how I think about our role. That's what I believe we do, and we should continue to do. That is what I think the case for Shell. Powering Progress sets out our strategy to accelerate the transition of our business to a net-zero emissions business, purposefully and profitably. Powering Progress delivers value for our shareholders, for our customers, and for wider society. It builds a strong and a resilient company by putting customers at the centre of our strategy. 

Powering Progress means partnering with others to reduce carbon emissions, especially in sectors that are hard to decarbonise. This includes supporting government policies to reduce carbon emissions sector by sector. At our Q3 results, we introduced you to our new approach, and today, we build on that, explaining we are ready to seize the significant opportunities at our fingertips in the energy transition.

But first, let's look at a short film that illustrates a challenging, but a possible vision of the future. It underlines great opportunity, but also, the urgent need to accelerate to meet Paris.

Accelerating to Net-Zero Emissions Film

[Background music plays]

Calming keyboard music plays.

[Video footage]

Scene of a sunset over misty mountains. A wind turbine on a hill is in the foreground.

[Text displays]

Shell Strategy Day 2021. Accelerating to Net-Zero Emissions with Ben van Beurden.

[Video footage]

Aerial view of a city with older buildings overlooking a riverfront, skyscrapers in the background. Closeup of Ben van Beurden viewing pictures on the wall.

Ben van Beurden

The way the world produces and uses energy is visibly changing.

[Video footage]

Van Beurden speaks to the camera. 

[Text displays]

Ben van Beurden, CEO, Shell

Ben van Beurden

But to meet the most ambitious goals of the Paris Agreement, change needs to happen faster.

[Video footage]

Shot of an electric vehicle being recharged at a Shell station. A couple refuel their car in front of a sign reading Shell Hydrogen. Closeup of a hand removing a nozzle from a bank. Shot of the sun shining through clouds. Aerial shot of a field of solar panels. Closeup of a wind turbine with others visible in the background. Shot of man in safety gear up a pole working on a wind turbine.

Ben van Beurden

Shell is becoming an energy business for the future, and it's playing its part to help drive that change.

[Video footage]

Shot of idyllic island with palm trees and mountains, and a wind turbine in the foreground. Shot of man adjusting lightbulbs in a hut. Closeup of Ben van Beurden.

Ben van Beurden

Our scenarios help inform our thinking and show how the energy system could transform quicker.

[Video footage]

Shot of a station in an underground transport system, time lapse showing trains arriving and passengers getting on and off. Cut to time lapse of a city at twilight, with traffic moving on elevated highways. Cut to closeup of Geraldine Wessing. Time lapse shots of large crowds of people. Closeup of a young woman's face, looking up and smiling.

[Text displays]

Geraldine Wessing, Senior Political Analyst, Shell

Geraldine Wessing

The transition of the world's energy system is happening while global population is growing, potentially to 11 billion by the end of the century.

[Video footage]

Time lapse of people and traffic moving through a city centre. Cut to a large screen mounted on top of a building, showing two girls using a tablet device. A busy highway is below. Graphic appears with a triangle and the words powering lives. Cut to wind turbine seen through trees. Cut to montage of people laughing and clapping.

Geraldine Wessing

That's more people requiring more energy for a better quality of life.

[Video footage]

Shot of very busy traffic flow. Closeup of Ben van Beurden.

Ben van Beurden

So the question is, what could this energy system look like?

[Video footage]

A giant screen shows a woman's face on one side, and a wind turbine on another. Clouds are behind. Cut to aerial shot from above the clouds of the sun sinking below them. Cut to giant screen in a city, split into nine, showing nine different people including the speakers in this video. Zoom in to closeup of Mallika Ishwaran. A graphic appears beside her of the globe surrounded by lab beakers, an electricity pylon, and the symbol for hydrogen. Cut to shot of a city at night from street level. The graphic and a screen showing a wind turbine are in the foreground. The screen shows a field of wheat.

[Text displays]

Mallika Ishwaran, Senior Economist, Shell

Mallika Ishwaran

For the global economy to achieve net-zero carbon dioxide or CO₂ emissions, electricity, primarily from renewables, as well as hydrogen and biofuels are expected to be important in the future energy system.

[Video footage]

Aerial shot of a wind farm in hilly country. Closeup of Geraldine Wessing. Cut to scene with two workers in safety gear comparing notes with electrical pylons in the background.

Geraldine Wessing

Shell scenarios explore a range of possible futures to help make better decisions today, for tomorrow.

[Video footage]

Man walks past a bank of screens showing graphical data. Four red-clad workers walk through an industrial plant towards the camera. Closeup of Geraldine Wessing. A graphic appears beside her and then fills the screen, showing a graph labelled CO2 emissions with lines showing the effects of the various scenarios. Closeup of Geraldine Wessing. Cut to forest scene. Graphic overlay shows tangential circles and the words achieving net-zero emissions.

Geraldine Wessing

Our newest scenarios, Waves, Islands and Sky 1.5, are all on a path towards net-zero CO₂ emissions, with energy systems eventually dominated by renewables. But the choices society makes will determine how quickly the world moves towards net-zero emissions.

[Video footage]

Closeup of Mallika Ishwaran.

Mallika Ishwaran

In the most ambitious scenario, Sky 1.5, the average global temperature rises above and is then limited to 1.5 degrees Celsius above pre-industrial levels before the end of this century.

[Video footage]

Shot of a path lined with palm trees. Aerial shot of a busy city street lined with skyscrapers. Cut to forest scene.

Mallika Ishwaran

This requires the entire world to reach net-zero CO₂ emissions by sometime before 2060.

[Video footage]

Closeup of Ben van Beurden. Shot of Shell Hydrogen sign. Closeup of Shell logo. Aerial shot of city with solar panels in the foreground.

Ben van Beurden

Our scenarios show that leading economies, sectors and companies must act faster for the world to achieve this timeline. And we want to be one of those leading companies, which is why Shell's target is to become a net-zero emissions energy business by 2050 or sooner.

[Video footage]

Closeup of Adam Eales. Cut to time lapse night shot of an airport with planes taking off and landing. Night shot of a port with containers being loaded onto a ship. Aerial view of a train coming out of a tunnel and moving through a green landscape. Aerial view of a city with elevated trains moving through it. Time lapse of an office building with glass walls, showing many rooms with people working inside them. 

[Text displays]

Adam Eales, Energy Analyst, Shell

Adam Eales

The Sky 1.5 scenario requires energy efficiency improvements of around 50% across the global economy, but more energy will still be needed to meet demand. So, the emerging system needs to address the economic sectors that consume the most energy.

[Video footage]

Aerial view of a city. Cut to interior of an industrial plant showing heavy machinery. A graphic is superimposed, labelled industry energy consumption. A pie chart with the globe in the centre shows the proportions of energy sources today. The graph changes to show a net-zero emissions scenario. Parts of the graph are emphasised as the speaker mentions them.

Adam Eales

To get from today's energy consumption to a net-zero emissions energy system, industry will need to shift towards more electricity, primarily from renewables as well as hydrogen and bioenergy.

[Video footage]

Time lapse of traffic on a busy highway. A graphic is superimposed labelled transport energy consumption. A pie chart with the globe in the centre shows the proportions of energy sources today. The graph changes to show a net-zero emissions scenario. Parts of the graph are emphasised as the speaker mentions them.

Adam Eales

Currently in transport, energy consumption is mostly from oil-based fuels. But the use of hydrogen and biofuels will need to grow, as will electricity, mainly from renewables.

[Video footage]

Closeup of an office building. A graphic is superimposed labelled buildings energy consumption. A pie chart with the globe in the centre shows the proportions of energy sources today. The graph changes to show a net-zero emissions scenario. Parts of the graph are emphasised as the speaker mentions them.

Adam Eales

Today, buildings mostly consume energy from non-renewable sources. In the future, they will require electricity mostly from renewables with some bioenergy.

[Video footage]

An elevated train runs through a city. Cut to closeup of Geraldine Wessing. A graphic appears beside her, showing the globe surrounded by an electrical plant, a wind turbine, a solar panel, and a pylon. Cut to a montage of industrial scenes.

Geraldine Wessing

Deep electrification of the global economy is needed to achieve net-zero emissions, which means more than tripling electricity consumption.

[Video footage]

Closeup of Mallika Ishwaran. Cut to aerial view of a field of solar panels. A graphic is superimposed labelled power generation. A pie chart with the globe in the centre shows the proportions of energy sources today. The graph changes to show a net-zero emissions scenario. Parts of the graph are emphasised as the speaker discusses them. Cut to shot of offshore wind turbines in the sunset.

Mallika Ishwaran

In power generation, electricity will increasingly come from renewables, primarily wind and solar, as well as some nuclear. Natural gas will continue to play an important role supporting the transition from coal and compensating for the intermittency of renewables.

[Video footage]

Closeup of Adam Eales. A graphic beside him shows the globe surrounded by lab beakers and the hydrogen symbol. Closeup of a vehicle with the words powered by Shell hydrogen on the side of it.

Adam Eales

Commercial production of biofuels from biomass must ramp up, alongside the production and distribution of hydrogen at scale.

[Video footage]

Shot of a freight train pulling into a station. Closeup of Mallika Ishwaran. A graphic beside her shows the globe surrounded by a CO2 symbol and some trees. Shot of an industrial plant. Closeup of sign reading CO2 to pipeline. Closeup of an industrial pump. Aerial view of a forest. Aerial view of a forest with a road running through it.

Mallika Ishwaran

To achieve Sky 1.5, unavoidable emissions are removed from industrial processes or from the atmosphere using both technology and nature.

[Video footage]

Closeup of Geraldine Wessing. Cut to twilight scene of a road. Beside the road is a billboard with a giant screen. On the screen, there is a montage of crowds of people in different places. Cut to a view of an industrial plant. An inset screen shows pylons in the sunset.

Geraldine Wessing

While the energy transition is inevitable, it will proceed at different paces in different places and sectors and with different degrees of turbulence.

[Video footage]

Closeup of Ben van Beurden. Cut to aerial view of a busy city street lined with skyscrapers. A graphic is superimposed showing stylised clasped hands and the words generating shareholder value.

Ben van Beurden

Faster progress needs pioneering leaders in government and businesses to act. Government policy and greater alignment will also be crucial, country by country and sector by sector, with each needing a different approach to unlock well-directed investment.

[Video footage]

Closeup of Geraldine Wessing. A graphic beside her shows the globe surrounded by a solar panel, a wind turbine, and recycling symbols. Cut to aerial shot of an offshore wind turbine. Closeup of an electric vehicle being connected for charging. Closeup of a charging point symbol. Closeup of sign reading Shell Hydrogen.

Geraldine Wessing

We know that the energy transition can only happen if governments and businesses incentivise low and zero-carbon choices and if customers embrace these changes.

[Video footage]

Closeup of Ben van Beurden. 

Ben van Beurden

There is no doubt the transformation of the energy system must move faster to limit global warming.

[Video footage]

Shot of a forest. A graphic is superimposed, showing a stylised leaf and the words respecting nature. Cut to shot of the sun shining through the forest canopy. Cut to shot of hut with a solar panel. Cut to an interior scene showing children playing. Cut to closeup of wind turbine.

Ben van Beurden

And this is a huge challenge that affects everyone because the world needs energy to improve lives. And for a healthy planet, this must be cleaner energy.

[Video footage]

Aerial view of field with solar panels. Closeup of Ben van Beurden. Cut to two people discussing data on a computer screen. Cut to shot of a government assembly. Cut to a field with pylons, with an animation showing solar panels covering the field.

Ben van Beurden

Put simply, it is going to take ambitious orchestration of government policy, investment and sector cooperation. But we believe the world can achieve net-zero CO₂ emissions to meet the goal of Paris, if industry, government and society work together to make the right choices now.

[Video footage]

Closeup of Ben van Beurden.

Ben van Beurden

The energy system must change faster, and change is opportunity. Shell is acting today to be part of this future.

[Video footage]

The screen is split into 12 parts, showing solar panels, a girl with tattoos on her face, a forest canopy with the sun shining through it, a wind farm, more solar panels, a city, pylons against the sky, a farmer in his field, another wind farm, sun shining through greenery, the sky through a forest canopy, and a man with a beard and a turban.

Powering Progress Part Two

[Background music plays]

Slow meditative music.

[Video footage]

Closeup of Ben van Beurden.

Ben van Beurden

The transition to a low carbon world is an opportunity. Grasping that opportunity would radically transform the company's portfolio in the next 30 years. 

[Graphic]

A graphic appears beside Ben van Beurden showing three panels, labelled markets, assets and resources. The pictures show a woman at a petrol station fuelling her car, a worker in a hardhat surveying an industrial site, and a man standing in front of a 3D contour map. Words across the bottom read, enhanced value delivery through trading and optimisation.

Ben van Beurden

Today, we have a highly competitive portfolio of assets, products and market positions. Today, we deliver superior value from our integrated business model, as we produce, buy, trade, transport and sell our products around the world. But we cannot stand still. Pursuing the value in the future of energy means changing our businesses across each of our three pillars of growth, transition and upstream. 

We will take new opportunities to grow and become even more competitive, and even more resilient, and as we take those opportunities, we aim to be a compelling investment case for our shareholders, and also, a company that brings value to society. A company that is at one with society as it moves towards that net zero future.

[Animated sequence]

An animated graphic labelled the Shell investment case appears on the screen. Four stylised symbols are arranged in a diamond shape around the words powering progress. Clasping hands at the top, a person inside a triangle to the right, tangential circles at the bottom, and a leaf to the left.

Ben van Beurden

Powering Progress serves four main goals, all of which are critical to our future, and together, these goals integrate sustainability with our business strategy.

[Video footage]

Closeup of Ben van Beurden.

Ben van Beurden

These goals are founded upon our core values of honesty, integrity and respect for people, and they are secured through our determined focus on safety, and our commitment to doing business in a transparent way. It's through the successful pursuit of these four goals that we will build the investment case in Shell.

[Animated sequence]

The diagram described previously is shown again. The shot zooms in to the clasped hands. The words generating shareholder value appear beside the symbol.

Ben van Beurden

I will take you through each in turn now, starting with our goal to generate shareholder value. Powering Progress drives the creation of wealth for our shareholders in the short, the medium and the long term. 

[Video footage]

Closeup of Ben van Beurden.

[Graphic]

The stylised clasped hands appear beside Ben van Beurden, with the words generating shareholder value.

Ben van Beurden

That means seeking to grow dividends every year, and further increase in total shareholder distributions as we grow our cash flows, and by accessing the enormous opportunities that the future of energy holds, we will create the conditions for share price appreciation. 

The changing energy landscape means that Shell must take a dynamic approach to our portfolio of assets and products, and our upstream business will continue to generate the cash and returns needed to fund shareholder distributions and also to accelerate our transition into the future of energy. Of course, we will keep a disciplined approach to capital investment, and a strong balance sheet so our company remains strong, resilient and ready in this time of change.

[Animated sequence]

The diagram described previously is shown again. The shot zooms in to the tangential circles. The words achieving net-zero emissions appear beside the symbol.

Ben van Beurden

Next, becoming a net zero emissions business by 2050, in step with society. Our net-zero target supports the most ambitious goal of the UN Paris agreement, one and a half degrees Celsius.

[Video footage]

Closeup of Ben van Beurden.

[Graphic]

The stylised tangential circles appear beside Ben van Beurden, with the words achieving net-zero emissions.

Ben van Beurden

This means we have to transform our business, working with our customers and others in sectors that are difficult to decarbonise. That includes aviation, shipping, road freight, and industry. 

[Animated sequence]

The diagram described previously is shown again. The shot zooms in to the person in the triangle. The words powering lives appear beside the symbol.

Ben van Beurden

Powering Progress also means powering lives and livelihoods. Of course, you know us as a company that provides vital energy for homes, businesses and transport, but a supply of affordable energy is also crucial for addressing global challenges like poverty and inequality.

[Video footage]

Closeup of Ben van Beurden.

[Graphic]

The stylised person in a triangle appears beside Ben van Beurden, with the words powering lives.

Ben van Beurden

That is why we have set an ambition by 2030 to provide reliable electricity to 100 million consumers in emerging markets who do not have it today. Of course, everything we do, we focus on improving inclusion and representation in four areas. Disability, race and ethnicity, LGBT plus, and gender. 

[Animated sequence]

The diagram described previously is shown again. The shot zooms in to the leaf. The words respecting nature appear beside the symbol.

Ben van Beurden

Let's look at our goal to respect nature. We are stepping up our environmental ambitions to protect and enhance biodiversity.

[Video footage]

Closeup of Ben van Beurden.

[Graphic]

The stylised leaf appears beside Ben van Beurden, with the words respecting nature.

Ben van Beurden

We're also focusing on using water and other resources more efficiently, and reusing as much of it as we can. We are reducing waste from operations, and increasing the recycling of plastics.

[Animated sequence]

The diagram described previously is shown again.

Ben van Beurden

Now, you will find more information about our Powering Progress strategy on shell.com, and in April, we will talk in greater depth about the two goals of respecting nature and powering lives at our annual ESG update. 

[Video footage]

Closeup of Ben van Beurden.

Ben van Beurden

But today, our focus will be on our two interlinked goals of generating value for shareholders while achieving net-zero emissions. As I said right at the beginning, we expect to radically transform Shell over the next 30 years. We will do this by seeking out and grasping the tremendous opportunities of the global shift to a lower carbon future. Now, 30 years is a long time away, and it's not a timescale for hard predictions. But I can share my long-term vision for Shell. By 2050, I would envision all our cash flows coming from serving customers with net-zero energy solutions and sustainable materials. 

[Text displays]

Serving customers with net-zero energy solutions.

Ben van Beurden

Our energy product mix will be dominated by low and no carbon energy, such as renewable power, biofuels, and hydrogen. 

[Text displays]

Partnership across sectors.

[Graphic]

Around the words, pictures appear showing a plane refuelling, containers stacked at a port, a woman and child on a couch with a laptop, and a woman charging her car at an electric charging point.

Ben van Beurden

A product mix that we will develop in partnership with sectors that use the energy, from biofuels in aviation, hydrogen for heavy duty transport, renewable power for homes and businesses. Some of the products we sell might still contain carbon. But the majority of our energy products would come from renewable resources.

[Graphic]

Aerial picture of a river running through a forest.

[Text displays]

Capturing and storing carbon.

Ben van Beurden

All the fossil-based carbon that we would sell would either be captured and stored, balanced out through nature, or embedded in materials. So, I can imagine us capturing and storing maybe 50 million tons a year of carbon dioxide. I can imagine us working with nature to lock away maybe 300 million tons in forests and wetlands and soils. We could have established the commercial business storing away carbon dioxide emissions as a service for our customers.

[Graphic]

Aerial picture of a suspension bridge carrying six lanes of traffic, with a city and mountains in the background.

[Text displays]

Building out supply chains.

Ben van Beurden

In this future, Shell would have become an even more formidable partner for our customers, building out the supply chains to meet their low-carbon energy needs. This is our great task of the next 30 years. 

[Graphic]

A man in safety gear uses a tablet device. Industrial equipment is in the background.

[Text displays]

Using assets to transition.

Ben van Beurden

Our LNG, chemicals and products assets would be the platforms for our future biofuel plants, the hydrogen and synfuel facilities. Together with our power assets, they would form a highly efficient energy and product network that enables our transition, and just as today, our traders would optimise this for maximum value. 

In this future, upstream would play a key role for a long time to come, funding the bulk of our shareholder distributions well into the 2030s, as well as the acceleration of our shift into the future of energy.

That, all of that, is just how I see things. I cannot predict exactly how Shell would look as a net-zero emissions business, but I believe the value of our business would only increase as we make inroads into the future of energy. Yes, our legacy assets and resource positions may fade in the picture of our financial success, but they would be replaced by the value generated from our strong market positions, built on our advanced products and relationships with customers. 

So, how might we travel this journey? How might we evolve towards this future? I may only have been able to give you a vision for the next 30 years, but we have already clear ideas and expectations for the next decade. That starts with a deliberate approach and a strong discipline of managing capital and carbon. Let's start with capital.

Capital Allocation

[Background music plays]

Slow meditative music.

[Video footage]

Long exposure shot of a highway passing between tree covered hills at sunset. Trails from the vehicle lights are on the highway.

[Text displays]

Shell Strategy Day 2021. Our Plan, Capital Allocation.

[Video footage]

Closeup of Jessica Uhl in an office setting.

[Text displays]

Jessica Uhl, CFO, Shell

Jessica Uhl

Delivering our strategy will require clear and deliberate capital allocation choices. How we reward our shareholders, manage risk and invest in our businesses will define the pace and quality of our delivery.

[Graphic]

Vector circle with three parts labelled enterprise, portfolio and project. Sections are highlighted in yellow as they are discussed. Words appear below repeating some of the speaker's words.

Jessica Uhl

We approach capital allocation at three levels, enterprise, portfolio and project. The enterprise level is about how we make choices between increasing distributions to our shareholders, investing in our business and/or strengthening our balance sheet. The portfolio level is about how we allocate capital between our three business pillars - Growth, Transition and Upstream. The project level is about how we evaluate and prioritise investment opportunities.

At the enterprise level, we look to achieve the right balance between shareholder distributions today, and investing for value enhancing growth. Having a strong balance sheet provides financial strength for resilience and allows us to pursue opportunities. That is why we have a clear approach on shareholder distributions as well as debt and capex levels.

[Graphic]

Table labelled near-term cash capex, $19-22 billion. 

Jessica Uhl

As we said at Q3, while our net debt is above $65 billion, we plan to invest $19-22 billion a year, which will be allocated across our portfolio. This will sustain our core businesses while funding moderate growth.

[Text displays]

Approximately 4% dividend per share growth annually, subject to Board approval.

Jessica Uhl

We will do this while continuing to grow the dividend per share annually, subject to Board approval. This will provide a strong, steady return for our shareholders while offering the potential for both increased distributions and share price appreciation.

[Text displays]

Bringing net debt to $65 billion. Total shareholder distributions, 20-30% of CFFO.

Jessica Uhl

In this context, we announced last week our intention to increase the dividend per share for Q1 by 4%. We will also strengthen the balance sheet, reducing net debt to $65 billion. Once we have reached this milestone, we will look to further increase total shareholder distributions. Through our progressive dividend and share buybacks, we target total distributions to shareholders of 20-30% of our cash flow from operations. At this time, we will also seek measured increases in investments to grow value and further strengthen our balance sheet.

[Graphic]

Vector circle diagram with portfolio highlighted in yellow. Words appear repeating some of what the speaker is saying.

Jessica Uhl

At the portfolio level, our strategy determines which businesses we will sustain or grow... transitioning our portfolio towards the future of energy. 

We will allocate our capital spending between our business pillars to achieve three key objectives, maintaining our assets, sustaining cash flows from our strong, existing businesses, and building new cash flows by finding and creating value in the future of energy. Importantly, these businesses have different capital profiles. 

[Graphic]

Graph labelled balanced approach to investment decisions across pillars.

Jessica Uhl

Upstream and Transition require a large proportion of their capital to maintain their assets and sustain cash flows, while most capital spending in our Growth pillar is aimed at increasing cash flow and value. A key principle for our strategy is our focus on the customer. This will shape the portfolios of each of our businesses, reinforcing our value over volume approach for Upstream, repurposing our refining assets for biofuels and hydrogen production, as well as developing renewable energy infrastructure and our customer portfolios. 

[Graphic]

Table showing desired changes that the speaker has been outlining.

Jessica Uhl

Shell has traditionally focused on securing and developing assets – a business model that linked us to commodity prices and project-based returns. The Shell we are building will create value from advanced products that provide low or no-carbon energy, risk management and related services.

[Text displays]

Keeping near-term capex between $19-22 billion. Opex no higher than $35 billion. Divestment programme $4 billion a year.

Jessica Uhl

As already mentioned, we will keep capital spending between $19-22 billion in the near term. In addition, we expect operating costs to be no higher than $35 billion and to deliver a divestment programme totalling around $4 billion a year in this period.

[Graphic]

Bar graph labelled cash capex evolution.

Jessica Uhl

Only when we reach net debt of $65 billion will we increase capital spending. This increase will be moderate and balanced with additional shareholder distributions. To accelerate our strategy to make the future of energy, the Growth pillar will have priority, attracting around half of this additional capital spending. Over time, the balance of capital spending will shift away from Upstream towards the businesses in our Growth pillar.

[Graphic]

Vector circle appears with project highlighted in yellow. Words appear to emphasise points the speaker is making.

Jessica Uhl

At the project level our approach seeks to maximise value while managing risks. We evaluate our projects across a spectrum of criteria that align with our Powering Progress goals, carbon, nature, people and shareholder value. We also look to achieve a stable cash flow profile, while considering capital efficiency, payback periods and overall return levels.

We have a common approach to assessing investments in projects. Nevertheless, we use different criteria to reflect the project risk and return characteristics of each business. Importantly, we assess the risk profile of each project to ensure we are achieving returns above the cost of capital. And we have an expected level of project returns for each of our businesses.

[Graphic]

Table labelled average project returns.

Jessica Uhl

For instance, take integrated power. Lower-risk generation assets with secure revenue streams can bear lower returns, whereas assets with technology or market risks may need higher returns. Overall, we expect this integrated power business to deliver an internal rate of return above 10%. Additionally, with renewable generation assets, once the asset is built, our equity investment can be reduced, while we still control the electrons.

[Graphic]

Artist's impression of future retail station. 

[Text displays]

Growth.

Jessica Uhl

In the Growth pillar, marketing is a lower capital intensity business where opex is also a key driver of growth. In retail, a relatively low-risk activity with fast payback, returns can reach more than 25%.

[Graphic]

A man in safety gear uses a tablet device against a backdrop of industrial equipment. 

[Text displays]

Transition.

Jessica Uhl

In the Transition pillar returns are slightly lower and the payback periods are longer with our Integrated Gas business providing steady cash flow streams. Importantly, these Transition businesses give us the infrastructure to enhance value through integration and optimisation.

[Graphic]

Aerial view of a platform structure with solar panels. 

[Text displays]

Upstream.

Jessica Uhl

Upstream assets are typically the most capital intensive throughout their life cycle. They also require up-front development and commodity price risk-taking. Therefore, these projects must deliver higher returns. In addition, we are looking to build projects with shorter payback periods that are resilient to lower prices.

[Graphic]

Bar graph labelled future-proofing our cashflows.

Jessica Uhl

For the last three years, we have generated more cash than any of our peers in a range of economic conditions. Ultimately, as Shell progresses towards being a net-zero energy business and our capital investment shifts towards the Growth pillar, so will our cash flows. With this, our cash flows will become less exposed to oil and gas prices. They will have a stronger link to broader economic growth. 

[Graphic]

Bar graph labelled cash potential, diversified and resilient cash generation across the cycle.

Jessica Uhl

We expect cash flow to grow in the medium term as the global economy recovers. This will allow us to strengthen the balance sheet, invest in our businesses and grow cash distributions to shareholders. This increase in cash flow comes from growing our marketing platform, assets under construction coming online, and reducing our opex. We also expect increasing contributions from our renewables and energy solutions businesses.

Certain segments have little exposure to commodity prices and are expected to deliver growing cash flow. These include Marketing, Renewables and Energy Solutions, and Chemicals and Products, and as one of the largest commodity traders in the world, we expect additional opportunities to enhance cash delivery through integration and optimisation.

As I said at the beginning, our approach to capital allocation will define the pace and quality of our delivery. We will make our choices in line with our strategy, pursuing leading shareholder returns and balance sheet strength, built upon a portfolio of high quality, highly cash-generative assets.

With that, let me hand over to Ben to take you through our thinking on managing carbon.

Carbon Management

[Background music plays]

Slow meditative music.

[Video footage]

A man in safety gear in the foreground looks at a ship over the water. The ships lights are visible in twilight and reflect in the water.

[Text displays]

Shell Strategy Day 2021. Our Plan, Carbon.

[Video footage]

Ben van Beurden

Shell's target is to be a net-zero emissions energy business by 2050, in step with society. This means net-zero emissions from our operations, our Scope 1 and 2 emissions, and also net zero from the end use of all the energy products we sell, our Scope 3 emissions. Three things are crucial to note on that.

[Graphic]

Pie chart labelled total emissions appears beside van Beurden, showing Scope 1, 2 and 3 emissions.

Ben van Beurden

One, our target includes Scope 3. That is critical because emissions from the end use of our energy products, Scope 3 emissions, account for over 90% of our total emissions. Two, our target includes the emissions not only from the energy we produce ourselves, but also from the oil and gas that others produce and we sell as products to our customers. Altogether, we sell around three times more oil and gas products than the oil and gas we extract ourselves. So, to account for Shell's full effect, we have to include everything we sell in our targets, not just what we extract.

And, finally, it is critical to note that achieving this target would mean absolute net-zero emissions. We believe our target is already aligned with the science behind Paris. And we are working with organisations like the Science-Based Target Initiative, working to develop a standard approach to emissions accounting that is fit for the oil and gas industry. And once that science-based target accounting method is established, we intend to use it.

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Pie chart labelled our operational emissions, showing small slice that is Scope 1 and 2 emissions.

Ben van Beurden

Now, our first responsibility, of course, is to deal with the emissions from our own operations, our Scope 1 and 2 emissions. They make up less than 10% of our total emissions.

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Net-zero by 2050.

Ben van Beurden

And we will drive them down, all the way down to net zero by 2050, initially by making all our assets top quartile on emissions intensity. We will end routine flaring by 2030 and we will keep our methane emissions below 0.2%.

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Oil production peaked in 2019.

Ben van Beurden

As I said at our Q3 results, our total oil production peaked in 2019. And we expect our oil production to gradually decline by around 1-2% a year, including divestments, by 2030, while the percentage of total gas production in our portfolio is expected to gradually rise to around 55% or more.

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No new frontier exploration entries after 2025.

Ben van Beurden

And moreover, we do not anticipate any new frontier exploration entries after 2025. But even so, to make real progress, Shell must change what we sell. We must sell a lower-carbon energy mix. Only this will reduce our carbon intensity over time. And we will track our progress through the carbon intensity of our business measured by the metric we call our Net Carbon Footprint.

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Lower-carbon energy mix, gCO2e per MJ.

Ben van Beurden

This metric tracks the total amount of carbon dioxide associated with each megajoule of energy consumed. And just to be clear, achieving net zero on carbon intensity is exactly the same as achieving net zero on absolute emissions.

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Graph labelled carbon intensity shows reductions required.

Ben van Beurden

Getting to net zero by 2050 means cutting our carbon intensity by 100% and achieving 45% by 2035. These targets also include all carbon mitigation action, including action taken by our customers. And we include this because, over this timeframe, we believe society will be working towards net zero. And in such a society, our customers will act to address their own Scope 1 and 2 emissions, and these are the same as Shell's Scope 3 emissions. And we will help our customers with this challenge where we can.

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No longer serving customers who emit unmitigated carbon by 2050.

Ben van Beurden

But by 2050, we will no longer serve customers who emit unmitigated carbon. Change is already underway. We believe our absolute emissions reached a high point in 2018 at 1.7 gigatonnes, and now we will have to work to bring them down. And we must act now.

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Graph labelled carbon intensity showing required reductions.

Ben van Beurden

So, we have also set short-term targets to reduce our carbon intensity by 6-8% by 2023, that's compared to 2016, and this is tied to our staff incentive structure. We also announce a medium-term target of 20% reduction by 2030. Our short and medium-term targets include action to mitigate emissions taken by Shell, but in this timeframe, we do not take account of any action taken by our customers.

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Picture of a forest.

Ben van Beurden

And speaking of mitigation actions, climate scientists are clear that nature, which can absorb and store carbon, has an important role to play, and we agree. We also agree with them on something else, that mitigation through nature is necessary on top of the transition of the energy system. So, we support the responsible use of high-quality nature-based offsets. And to be clear, the order of priority is this. First, avoid emissions, second, reduce emissions, and only then turn to mitigation. In line with that philosophy, we aim to offset around 120 million tonnes of our annual Scope 3 emissions by 2030.

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Aerial views of industrial plant. 

Ben van Beurden

We also believe the world needs to use technology to mitigate emissions. So, we want to have built an additional 25 million tonnes a year of carbon capture and storage by 2035, the same as 25 Quest facilities in Canada.

But it's not enough for Shell to take action on our own. We can only meet a net-zero target as part of a world that is also heading to net zero. Now, I accept that means reducing the supply of carbon-based energy, but that will only happen by reforming the demand for carbon-based energy.

So we, as a supplier, must work together with customers on a sector-by-sector basis. Together we have to develop the right recipes to wean that sector off carbon-based energy and to provide low-carbon solutions instead. And that includes the technologies, the fuel solutions and the government policies and regulations to get there.

[Graphic]

Aerial view of an airplane in flight. View of planes on the ground being serviced. Closeup of airplane tyres.

Ben van Beurden

Let me give you just one example. Shell's membership of the Mission Possible Partnership includes Clean Skies for Tomorrow. And this is a coalition of leading airlines, airports, aircraft and engine manufacturers, and also fuel providers. And this coalition has a view on the recipe the aviation sector needs. Sustainable aviation fuels. And they recently published a report on the steps needed to get there, the ingredients and the method.

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Cutting carbon sector by sector. Line drawings of a ship, an airplane, a tanker truck and a power plant.

Ben van Beurden

And so, as part of reshaping the company, we will restructure our marketing business on a sectorial basis. This will allow us to make progress in this area as quickly and as efficiently as possible. But our customers can speak for themselves. Let's hear from them.

Rolls-Royce and Shell

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Airplane in flight over a city at sunset.

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Shell Strategy Day 2021. Rolls-Royce and Shell, Piloting a Route to Net-zero Emissions.

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Aerial view of airport at night, time lapsed to show aircraft landing and taking off as well as lights and vehicles on the ground. Closeup of Paul Stein.

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Paul Stein, Chief Technology Officer, Rolls-Royce.

Paul Stein

Aviation is vital to our connected world, but, as an industry, we must reduce its net carbon emissions.

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Hand drawing question mark on a blackboard. Three people conferring around a computer. Several people in lab coats discussing a model prototype aircraft. Closeup of hands fitting two jigsaw pieces together.

Paul Stein

The question is, how do we do it? There's no single solution.

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Experimental electric aircraft shown on the ground, then taking off. A multi-rotor helicopter in a hangar. An experimental craft on display with a sign that says Skydrive. Close up of an engine. Pull out to show the experimental craft that houses the engine. Pan along the side of the craft, showing the words UK experimental. Shot of the same craft taking off. A shot of a commercial jet descending over palm trees in a sunset.

Paul Stein

Electric aircraft and hybrid technology undoubtedly have a part to play, as does hydrogen. But these technologies aren't suited to long-haul flights.

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Closeup of Paul Stein. Time lapse of an airport showing aircraft taking off and landing. Night view of an airport showing the lights of planes taking off and landing.

Paul Stein

We believe SAF, sustainable aviation fuel, is crucial to powering today's aviation fleets while reducing carbon emissions compared with conventional jet fuel, but we don't have anywhere near enough of it.

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Closeup of aircraft control panel. Low fuel is flashing in red. Sped-up video of a plane pulling up to a gate and being serviced.

Paul Stein

SAF currently represents less than 1% of the total aviation fuel supply.

[Video footage]

Closeup of Anna Mascolo. Cut to worker getting into refuelling truck. Pull back to wider view of the same truck. Closeup of control panel. View of the truck fuelling an airplane. Cut to people walking through an airport with the sunset visible through the window. Shot of aircraft on the ground with Prime Air livery. Shot of aircraft on the ground with DHL livery.

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Anna Mascolo, President of Global Aviation, Shell

Anna Mascolo

For me, it is all about showing the way, showing the industry what can be done and what is possible. Shell is helping to grow demand for SAF by working with our industry partners and stakeholders, supporting companies like Amazon Air and DHL Express that want to become part of the solution.

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Aerial view of storage tanks. Cut to interior of industrial plant. The words production, supply, technology and policy development are superimposed. Closeup of mechanic working on airplane. Long shot of the interior of a hangar with two workers walking towards an aircraft. 

Anna Mascolo

We are enabling SAF supplies through investment in production, supply, technology and policy development, and we are collaborating with all parties in the aviation ecosystem.

[Video footage]

Vintage footage montage, including a biplane in a field surrounded by people, a man push starting a biplane, a biplane with an elaborate tail stabiliser. Vintage footage of a worker in a jumpsuit with Shell on the back refuelling an old plane with the Rolls-Royce logo on it. Vintage footage of a jet doing a steep turn. An early commercial aircraft. Shot of the Concorde taking off, then in flight. Cut to man working at a computer showing a design diagram. Pan to a man and a woman walking towards an exposed engine. 

Paul Stein

Rolls Royce and Shell have collaborated for over 100 years, pioneering technology, fuels and infrastructure that have shaped commercial aviation. And that pioneering spirit continues.

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Interior of a large hangar, where people are working with an engine in a testing rig. Series of closeups showing different parts of the engine with people working with them. 

Paul Stein

We're currently testing our engines to show they run on 100% sustainable aviation fuel supplied by Shell.

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People in lab coats gathered around a large computer screen. 

Anna Mascolo

Collaboration like that between Shell and Rolls Royce is vital to enable aviation's pathway to net-zero emissions.

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A man and a little girl are running towards each other. The man has a plush toy. They hug and look happy. Closeup of Anna Mascolo.

Anna Mascolo

If all parties work together, we can decarbonise aviation and continue to enjoy the immense benefits of flying.

[Video footage]

A person looks out a window overlooking an airport.

MSC and Shell

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Aerial view of several ships' decks.

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Shell Strategy Day, 2021. MSC and Shell, Navigating a Course to Net-zero Emissions.

[Video footage]

Several views of a container ship at port, at sea heading towards the camera, and from the air. Closeup of Bud Darr.

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Bud Darr, Executive VP, Maritime Policy and Government Affairs, MSC Group

Bud Darr

At MSC, we are passionate about building a path to sustainable and decarbonised shipping.

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Aerial view of a container ship, looking down on its deck and then from the side. View from the interior of the ship of sunset over the ocean. Aerial view of container ship passing under a road bridge.

Bud Darr

The biggest challenge that we face right now is that we do not have available the required alternative fuels and technologies that are necessary to do this at the scale that we need them.

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Several views of many container ships anchored near a port. View of a port in the sunset.

Bud Darr

There are between 60,000 and 100,000 ships out there of various shapes and sizes that need to decarbonise over time.

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Closeup of Bud Darr.

Bud Darr

There's no one single solution that's going to work for that entire spectrum of needs.

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View of a container ship with wind turbines and a sunset in the background. Cut to interior of a factory, closeup of grain pouring down a chute. The view pulls back to show more of the factory. 

Bud Darr

At MSC, we have pioneered the use of responsibly-sourced biofuels at scale within our existing fleet.

[Video footage]

A couple walks on the deck of a ship holding hands, sunset over the mountains in the background. Cut to view of a cruise ship docked at a small port with a green mountain behind it. Cut to view of the cruise ship at sea, with a sunset behind it. A person silhouetted on the deck of a ship, looking into the sunset.

Bud Darr

We also see LNG as an incremental option, for our cruise ships in particular. We need to work side by side because no one entity can do this alone.

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Closeup of Bud Darr. The words reliability, scale and trust appear beside him.

Bud Darr

What we look for in a fuel partner is reliability, scale and trust. Shell brings us all three of those, and that's why we so highly value this relationship.

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Closeup of Melissa Williams. Cut to aerial view of fuel storage tanks, a ship is docked in the foreground. View of a ship with the words powered by natural gas on its side. Two men in front of a large screen showing graphical data. Closeup of a sample bottle in a lab worker's hand. Closeup of liquid being poured from the sample bottle into a beaker. A worker in safety gear attaches a fuel hose and turns on a valve. 

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Melissa Williams, VP Marine, Sectors and Decarbonisation, Shell

Melissa Williams

So, how is shell helping its customers lower emissions today? By developing a world-leading LNG refuelling network, improving efficiency through advanced data analytics and marine lubricants, and offering our customers biofuels as part of their existing fuel mix.

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Closeup of pressure gauges. Shot of a worker standing beside a truck. View of a cruise ship docked at night. View of hydrogen storage tanks. Closeup of lab equipment. 

Melissa Williams

And in the longer term, we're exploring how zero-emission fuels, such as hydrogen and fuel cell technologies, work in the marine environment.

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Closeup of ship's wake. View of sunset out of porthole. Long view of ship at sea against a sunset. Closeup of Melissa Williams.

Melissa Williams

No single technology holds all the answers. And for the industry to achieve net-zero emissions by 2050, it will require global collaboration.

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Man in ship's cabin, silhouetted against the sunset. Cut to aerial view of many ships. A graphic is superimposed with the Global Maritime Forum logo and name. Aerial view of ship's deck with a sunset in the background. Graphic is superimposed showing the title Decarbonising Shipping, Setting Shell's Course.

Melissa Williams

To help get there sooner, we're partnering with industry groups such as the Global Maritime Forum, and in our report Decarbonising Shipping, Setting Shell's Course, we share our industry perspective.

[Video footage]

Closeup of Melissa Williams.

Melissa Williams

Like our customers, we're passionate about achieving a low-carbon future for shipping.

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Closeup of Bud Darr.

Bud Darr

This isn't something to be thinking about and talking about. This is something that we have to do and do today.

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View of sunset over the ocean reflecting in a ship's wake in the foreground.

Carbon Management Part Two

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Closeup of Ben van Beurden.

Ben van Beurden

So, we will change. We have clear targets for change. And we are working hard to speed up that change.

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By 2030, 50 million households, 2.5 million charging points, 10% transport fuels.

Ben van Beurden

To give you an idea of the scale of the change by 2030, we could be delivering the equivalent of 50 million households with renewable electricity, operating two and a half million charge points for electric vehicles, and increasing the amount of low-carbon transport fuels like hydrogen and biofuels from 3% to about 10%.

Now, to be clear, this is not a business plan. This is just an indication of the scale of change to come in the next nine years. And, ultimately, the changes will depend on where we can find business value as our customers move towards net zero.

To ensure the individual business decisions contribute to our overall emissions targets, we are substantially changing how we work. So, I mentioned a moment ago that we are restructuring so that we have marketing teams facing individual sectors.

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Carbon budgets. Doubling weight linked to energy transition, 20%.

Ben van Beurden

But we are going further than that. We are developing carbon budgets for those teams to motivate them to find value growth by substituting high-carbon income for low-carbon income. Moreover, we today announced that we are doubling the weighting of the energy transition condition in our long-term incentive share awards, affecting more than 16,500 employees. And for the most senior leaders, this means an increase in weighting from 10% to 20%.

[Text displays]

Industry association climate review.

Ben van Beurden

Something that will be more visible to people looking at Shell from the outside is our relationship with trade associations. Two years ago, we became the first company in our industry to conduct a review on the associations to see if they were aligned with our climate policies. And, in April, we will issue a third report on this and take action where necessary, as we have done in the past.

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Support for TCFD.

Ben van Beurden

We were also the first company in our sector to support a Task Force for Climate-Related Financial Disclosures. And our support remains firm and we will continue to refine our reporting to be in harmony with the Task Force principles.

And finally, starting this year, we will publish an energy transition plan for shareholders to examine and to vote on, and we will update that plan every three years. And annually, we will ask our shareholders to vote on our progress made. That is our approach on carbon. Now, we will move on to explore how that approach combines with our approach to capital in our businesses.

Three Pillars

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View of the roof of a fuelling station, showing storage tanks with the Shell logo.

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Shell Strategy Day 2021. Our Plan, Delivering Our Strategy Through Three Pillars.

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Closeup of Ben van Beurden.

Ben van Beurden

Shell has three pillars to its business, pillars that give us strength.

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A panel of three photos representing the three pillars. Growth pillar, a woman charging an electric vehicle. Transition pillar, a cityscape at night. Upstream pillar, workers with solar panels.

Ben van Beurden

Through our Growth pillar, we work with our customers on our joint transition to net zero. We will build our future based on customer needs. Through our Transition pillar, we are flexible and will deliver a sustainable flow of cash. And through our Upstream pillar, we deliver value to shareholders, provide vital energy supplies to society and fund the transformation of our portfolio.

I will take you through all three. But there is a lot to say, so I will keep it short here. And for those who want to go deeper, there is more on our website. A whole lot more.

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Growth Pillar, marketing, renewables and energy solutions. 

Ben van Beurden

Looking first at our Growth pillar, our home for Marketing and Renewables and Energy Solutions. Our marketing business is our single largest customer-facing business. It has high, resilient returns and is primed for future growth.

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Marketing, plus 7% year on year growth rate since 2013. Plus $4.5 billion net earnings in 2020. Plus $6 billion by 2025.

Ben van Beurden

With earnings growth of more than 7% year-on-year since 2013, we already have an enviable position and we will extend our lead. In 2020, Marketing delivered more than $4.5 billion in net earnings and by 2025 we expect to generate more than $6 billion.

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Marketing, premium fuels and lubricants, fleet solutions, convenience retail.

Ben van Beurden

Today more than half our gross margin in retail and lubricants comes from differentiated offerings, like premium fuels and premium lubricants, fleet solutions and convenience retail. So, we start from a good place, and we push on for more.

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Marketing, one in nine machines and engines use shell lubricants today, one in eight by 2025.

Ben van Beurden

Today, one in nine machines and engines in the world uses Shell lubricants and by 2025 we will make it one in eight.

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Marketing, 30 million retail customers every day across 46,000 sites today. 40 million retail customers every day at 55,000 sites by 2025.

Ben van Beurden

Today, we serve 30 million retail customers every day across 46,000 sites, and by 2025 it will be 40 million at 55,000 sites.

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A woman recharges an electric vehicle at a Shell fuelling station, a man stands beside a car next a fuel pump. A man stands beside a car at a street charging station.

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EV.

Ben van Beurden

And on charging points for electric vehicles, we are expanding ReCharge on our retail sites, we are growing NewMotion and Greenlots, and we recently bought Ubitricity. Together we will go from more than 60,000 points today to more than half a million by 2025.

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A woman fuels her car at a Shell station. A view of a Shell LNG station. 

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Retail.

Ben van Beurden

With our retail sites, we will not only expand in electric charging but also in hydrogen, LNG and renewable natural gas. There will be more convenience retail and services like parcel collection. And we will expand this business in markets like India, Indonesia, Mexico, Russia and, of course, China.

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Worker in safety gear refuelling aircraft. Aerial view of a container ship. Shot of parked heavy goods vehicles. Aerial shot of storage tanks. View of cab of truck branded Raizen. View of a field with a tractor. View of industrial plant.

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Low-carbon fuels.

Ben van Beurden

We will partner with our customers around the world sector by sector. We will help chart their decarbonisation journey and offer low-carbon fuels and solutions. And again, we start from a good place. In 2019, Shell sold more than 10 billion litres of low-carbon fuels for use in sectors like aviation, shipping and road transport.

In 2020, we signed two agreements for the supply of renewable natural gas to Los Angeles, supported by investments in two renewable natural gas facilities in the US. And if our Raizen Joint Venture was a country, it would be the fifth largest producer of sugarcane ethanol globally. And to move up further in that league, Raizen just announced the acquisition of Biosev, adding another 50% of production in low-carbon fuels.

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A woman uses a Shell app on her phone. Closeup of her screen, which reads six visits to go.

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Digital loyalty platforms.

Ben van Beurden

So, we look at our marketing business as a key to unlock new markets and provide new solutions to drive decarbonisation throughout the economy. And for our end consumers, we will also use our digital loyalty platforms to link our mobility and energy offerings to create cross-selling opportunities. With a strong customer-focus, we will help our customers at home and on-the-move with the most iconic brand in the industry.

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Renewables and energy solutions. Power as a service.

Ben van Beurden

Which brings me to Renewables & Energy Solutions. This is a new name for our low-carbon businesses and includes our activities in Integrated Power, Hydrogen, Nature Based Solutions and CCS. But let's start with Power.

To decarbonise, many of our customers, whether they are households or businesses, must switch to low-carbon electricity, so they are looking for reliable and simple-to-use services. We believe Shell can become a leading provider of clean power. A provider of Power-as-a-Service. We can make net zero a simple and practical choice for the customer. We can do so by managing the complexity for them and taking the opportunities of an economy turning to electricity. This is where Shell has competitive advantage.

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Line drawings showing an electric vehicle charging station, a hydrogen fuelling station, trees, an industrial plant with underground CO2, wind turbines, a powerplant labelled green.

Ben van Beurden

Unlike others, we are already present in all areas of the future energy system, from electric vehicle charging to hydrogen, from offsets to carbon capture, from clean power to low-carbon fuels. And, as I said before, we operate over 60,000 vehicle charging points in 14 countries, and we'll grow the number of points to half a million by 2025.

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Renewables and energy solutions, 15 million customers by 2030. 560 terawatt hours, twice today's electricity.

Ben van Beurden

We are building a material business for Shell through digital platforms that will serve more than 15 million customers worldwide by 2030. By then, we aim to sell 560 terawatt hours a year, twice as much electricity as today. Through these digitally-enabled platforms, we are providing services to simplify and to accelerate our customers' decarbonisation journey, offering a truly flexible solution with real customer value.

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A man carrying a child in a modern kitchen. A roof bearing solar panels.

Ben van Beurden

An example of that is Sonnen, where we help 60,000 households with batteries to meet about 75% of their energy needs. And we do this by digitally managing the clean energy they generate themselves.

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Renewables and energy solutions, one fifth Australia's commercial and industrial electricity supply.

Ben van Beurden

For larger customers, our digital platform matches supply and demand. For instance, our fully-owned subsidiary ERM in Australia supplies more than a fifth of the country's electricity to commercial and industrial customers, while achieving the nation's highest customer satisfaction rating in nine years in a row.

We also manage complexity through our global scale in trading and risk management and asset optimisation, and through our expertise in power product design. In North America alone, we are the third-largest wholesale power trader. Our scale and global reach make us the perfect partner for large corporations that want to decarbonise their worldwide operations reliably and competitively.

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Renewables and energy solutions, $2-3 billion invest per annum in the near term. 

Ben van Beurden

In the near term, we will invest on average $2-3 billion each year in this part of the business, with that level rising through the decade. We target an unlevered IRR of more than 10%, a rate made possible by our integrated business model with the customer at its heart. And we will make our investments go further by partnering with others as we grow a material position in renewable generating capacity.

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Circular flow diagram showing customer journeys to digital platforms to manage green electrons back to customer journeys.

Ben van Beurden

Our emphasis is on owning and managing green electrons from these assets for our customers. We believe that this is what it takes to succeed. A customer-first approach, digital capabilities and a global reach, alongside strategic investments in clean power assets such as solar and wind farms.

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Line drawing of wind turbines labelled HKN, with arrows out to Amazon, trade to others, Shell, and convert to hydrogen.

Ben van Beurden

Let's bring this to life with our Rotterdam energy hub concept. At its core is our HKN offshore wind farm joint venture. We will supply part of the power output to an anchor customer, Amazon, in support of their decarbonisation objectives. With the remaining power, we can supply other customers through our trading business or we can choose to use the electricity ourselves, or use it to make green hydrogen at a 200-megawatt electrolyser that we want to build in Rotterdam. It is this integrated clean energy system that enables the higher returns that we are targeting.

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Hydrogen, 50 plus sites in Germany and California. Four gigawatts, green hydrogen production coming on stream. 

Ben van Beurden

And speaking of hydrogen, the growth potential is huge. And also here, we are ahead with years of experience. We are a leading hydrogen retailer with over 50 sites in Germany and California. We have also announced a number of green hydrogen projects, with a combined production capacity of over 4 gigawatts, to come on stream this decade.

There are strategic keys to our success. Our existing customer relationships and global retail network mean that we are well-placed to supply hydrogen to our customers in industry and in heavy-duty transport. We can use our own demand to launch new supply projects.

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Aerial view of refinery. 

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Hydrogen, ability to anchor growth on Shell's own demand.

Ben van Beurden

So, for example, the anchor customer for our 10-megawatt electrolyser in Germany, starting up later this year, will be our Rhineland refinery. But, over time, we aim to serve a growing transport market with this hydrogen. In this way, we can start local and go regional.

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View of a pipeline. 

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Building an integrated hydrogen value chain.

Ben van Beurden

With LNG, we built an integrated global business. And we believe we can do the same with hydrogen, but faster. And, ultimately, aim to replicate even the scale, flexibility and the success of our LNG market position.

We aim to capture a double-digit market share of global clean hydrogen sales. So, Integrated Power and Integrated Hydrogen will be major contributors to both our compelling investment case and to our net zero target.

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Closeup of a hand holding an evergreen tree sapling. A hand holding a deciduous sapling. A path through a forest. A stream running through a forest.

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Nature based solutions.

Ben van Beurden

And finally, our Nature Based Solutions business. Many customers, from individuals to companies, today have no alternative to using carbon-based energy, but they still want to be net zero. We can mitigate their emissions as an integral part of the energy solution that we sell them. And we are the leading player in this area.

We mitigate their emissions by creating and protecting forests, wetlands and other environments which store carbon away from the atmosphere. And we connect our customers to these investments in nature through carbon markets.

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Nature based solutions, $100 million a year in independently verified projects.

Ben van Beurden

We expect to invest around $100 million a year in high-quality, independently-verified projects on the ground, to build a significant and a profitable business. So, that was our Growth pillar.

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Transition pillar, integrated gas, chemicals and products.

Ben van Beurden

Now, let's take a look at our Transition pillar, starting with Integrated Gas. Over the coming decades, the world will have to say goodbye to coal. Renewables will replace much of that and natural gas will have its role too, both in power generation and in industry.

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Integrated gas, LNG growth by up to 4% a year until 2040.

[Graphic]

Bar graph labelled LNG portfolios in 2020.

Ben van Beurden

And so, LNG demand is expected to grow by up to 4% a year until 2040. With 70 million tonnes sold last year, we are the world leader in LNG, and we are also the leading producer of Gas-to-Liquids, or GTL, products.

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Integrated gas, $11 billion CFFO.

Ben van Beurden

Altogether this business made $11 billion cash in tough market conditions last year. And from this position of strength, we will grow. We will grow volumes and markets. We will grow our volumes by sourcing long-term LNG supply from third parties. But we have also included selective investments in our capital plan to expand our own portfolio of LNG plants and to grow natural gas supply to keep our plants full.

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Integrated gas, 14-18% IRR for future projects.

Ben van Beurden

Our future projects have an average internal rate of return of between 14 to 18%. And all our opportunities are cost-competitive.

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Line graph labelled unit technical cost showing 40% reduction.

Ben van Beurden

We have already reduced the unit technical cost of our project portfolio by around 40% since 2015. They are also carbon competitive. In Canada, we are building the lowest CO₂-intensity LNG plant in the world.

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Integrated gas, 20% reduction in opex by 2022 compared to 2019.

Ben van Beurden

By the end of next year, we expect to have reduced operating expenses by around 20% compared to 2019.

[Graphic]

View of a cruise ship in port. 

Ben van Beurden

A new market is shipping, where LNG is the cleanest fuel readily available today. Our aim is to supply at least 20% of global demand. And more generally, we continue to innovate, by offering carbon-neutral LNG, and by using our LNG trading and marketing capabilities to win new customers with advanced solutions.

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View of an industrial plant at night. 

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Pearl GTL.

Ben van Beurden

And in GTL, while we have no plans for greenfield plants, we still see opportunity to further develop premium markets and to expand margins. Integrated Gas is a business in which we excel and we will continue to excel for decades to come.

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Transition pillar, chemicals and products.

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Circular flow diagram with a line drawing of a chemical storage facility in the centre. The flow diagram shows six energy and chemicals parks to trading and optimisation to markets back to the six energy and chemicals parks.

Ben van Beurden

Staying with the Transition pillar, let's move on to Chemicals and Products. In Q3, we announced we are transforming 14 refining sites to six high-value Energy and Chemicals Parks. We will be done by 2030, if not sooner. And some of this transition is already well underway with the divestment and closure of non-core refining positions.

These six energy and chemical parks will be highly integrated with our trading and optimisation business, along with our standalone chemical sites, of course. And together, they will work in real time to ensure we always produce the most valuable products for the market, using the flexibility of our assets to maximum effect.

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Chemicals and products, reduce our production of traditional fuels by 55% by 2030. 

Ben van Beurden

Our shift to energy and chemical parks means we will reduce our production of traditional fuels by 55% by 2030. And at the same time, we will produce more low-carbon fuels and performance chemicals. Of course, all these parks will have their own ways to transform and deliver value. So, Bukom with be different to Pernis, and Pernis will be different to Scotford.

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Closeup of hands operating a lotion dispenser. Woman on a bus wearing headphones. Man using a microwave with a woman and two children in the background. Closeup of wind turbines.

Ben van Beurden

We see chemical demand continuing to grow, outpacing GDP, because chemicals are found in all aspects of modern life. They are in detergents, cosmetics, paints, textiles, household goods, and they are the building blocks of the future energy system. So, we will continue to grow our chemicals business with a focus on intermediates and performance chemicals. These are the areas where we have competitive advantages in technology, scale and market access.

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Chemicals and products, one million tonnes of plastic waste processed by 2025.

Ben van Beurden

We are currently building or studying projects in Pennsylvania and Louisiana in the USA and at Nanhai in China. We will also produce virgin chemicals from recycled waste, known as circular chemicals. By 2025, we are aiming to process 1 million tonnes a year of plastic waste in this way.

This move to sustainable and performance chemicals brings us closer to the end customer. It will help us evolve our portfolio, from commodity chemicals to products that are priced on the value they bring to end consumers.

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Chemicals and products, 70% reduce commodity exposure by 2030. $1-2 billion increased cash flow from operations by 2030.

Ben van Beurden

And in this way, we start to delink our business results from the commodity cycle, reducing our exposure by around 70% by 2030. Between our opportunities to increase margins and the options that we have to invest for growth, we will increase our chemicals cash generation by $1-2 billion a year by 2030.

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Upstream pillar.

Ben van Beurden

Moving on to our Upstream pillar. Even as the world decarbonises, it will still need oil and gas for decades to come. Our Upstream business will provide that essential energy. And the cash we generate will fund our distributions to shareholders and help pay for the transformation of Shell. But our Upstream pillar will become more focused, more resilient and more competitive, and it will continue to provide material cash flows into the 2030s.

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World map highlighting nine core positions.

Ben van Beurden

We will focus on the nine core positions that generate more than 80% of the Upstream cash flow. And they will attract around 80% of the Upstream capital spending. So, these are positions where we have superior capabilities, the potential for growth, and access to strong integration with Integrated Gas and Trading.

The rest of our positions are run as a lean portfolio. They are tasked with either maximising cash generation or developing to the point that they may become core positions. And, in some cases, such as onshore Egypt and the Philippines, we will simply divest. We will continue to high-grade our exploration activities, reducing annual spending from around $2.2 billion in 2015 to around $1.5 billion between 2021 and 2025.

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No new frontier exploration entries after 2025.

Ben van Beurden

We have attractive opportunities which we plan to take in the first half of this decade. But, after 2025, we do not anticipate entries into new frontier exploration positions. I am proud of the way our Upstream team delivers the energy the world needs today. And, at the same time, we aspire to continuously improve our operations.

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Upstream pillar, 85% availability in 2015, approximately 90% availability in 2020. Up to 30% reduction in costs by 2025 compared with 2019.

Ben van Beurden

One example of this is how we have significantly improved our upstream availability. We have already improved that availability from 85% in 2015 to around 90% in 2020. Moreover, we aim to further reduce our cost structure by up to 30% by 2025 compared with 2019. An example of what we can do is our recent transformation of the Shales business. So, here we removed 30% of costs compared to 2019 and around 40% of manpower.

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Upstream pillar, 50% reduction unit development costs since 2015. 20-25% IRR at FID. Seven years average pay back period.

Ben van Beurden

Across Upstream, we have reduced our unit development costs by over 50% since 2015. Our current portfolio of projects has an average internal rate of return of around 20-25% at the final investment decision, and an average breakeven price of around $30 per barrel, and an average expected payback period of 7 years.

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Workers overlooking an oil platform.

Ben van Beurden

We will also review positions that continue to be challenged from an environmental perspective, and a particular point of attention is onshore oil in Nigeria. In the last decades, we have reduced the total number of licenses by half. But, unfortunately, our remaining onshore oil position continues to be subject to sabotage and theft, despite our efforts to reduce and respond to this illegal activity. So, in this context, we are reviewing material portfolio options for onshore oil. But despite this, Nigeria as a whole remains a heartland. And you can see this from our decision to expand Nigeria LNG and our drive to further develop our deep-water assets.

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Upstream pillar, more focused, more resilient, more competitive.

Ben van Beurden

Overall, Upstream is making a significant shift. A shift towards a portfolio that will be more focused, more resilient and more competitive. Indeed, I could say the same thing about the whole of Shell. The whole of Shell is changing to be more focused, more resilient and more competitive. And not just for the energy system of today, but for the energy system of the future.

The world is changing, so we will change too. And that is what Powering Progress is about. Change to deliver on four goals: delivering shareholder value, powering lives, respecting nature, achieving net-zero emissions. Our role. Our goal. Our mission.

You have heard my vision for the future of Shell. You have heard about our approach on carbon. And you have heard from Jessica how this approach on carbon interlocks with our approach on capital. All of that will drive change in Shell through each of our three pillars: Growth, Transition and Upstream.

These are the three pillars of Shell. Designed to deliver value. Value today, value tomorrow, value for decades to come, to shareholders and to wider society, as part of a society heading towards net-zero emissions. That is our future. That is Powering Progress. That is Shell.

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Shell logo.

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Shell Strategy Day 2021