Shell Exploration & Production

More Upstream, Profitable DownstreamThe 2005 EP Roadmap to realising the strategy

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Where we are now:

Active in 30+ counties around the world~ 12 bln boe proved reserves3,772 thousand b/d equity production ------ 3,684

thousand b/dEarnings $9 billion ------------------------------- $5.7 blillionCapital investment of $9.9 billion ------------- $5.1 billionTotal operating cost of $ 7.2 billionDebt adjusted cashflow of $ 16.4 billion

The World’s 3rd largest IOC

2005 half year update

2004 full year figures

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The Shell Strategy

More Upstream, Profitable Downstream

Shaping the portfolio to match the strategy

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2004 Capital Investment $14.9 bln$ bln (100%) Half Year Update: on track for

$15 bln

EP GP OP CH

Shell’s 2004 Capital Investment demonstrates the commitment to EP’s contribution to delivering the strategy.

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Realising the Strategy in EP . . .

Project Delivery, Operational Excellence, Competitive Costs

Portfolio Action

Exploration & New Positions

Where we want to be

Portfolio today• Robust cash generation

• Leader in Gas

• Lower proved reserves life

• Existing Oil

• New Material Oil

• More Integrated Gas

• More Unconventional Oil

Hig

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Up

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. . . requires setting Priorities today

SAFETY TAKES PRIORITY

And our six EP Business Priorities:1. RRR at least 100% over 2004 – 20082. Production 3.5 - 3.8 mln boe/d in 2005/63. Grow resource base 4. Effective Project Delivery5. Operational Excellence6. Competitive Cost Structure

Deepening professionalism – inspiring our people

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Accountabilities for ensuring global targets are met

1. RRR at least 100% over 2004–83. Grow our resource base

– Working the maturation funnel

EP Business Priority

John Darley

Growth Leadership Forum: Malcolm Brinded (Chair),

John Darley

5. Operational Excellence

3. Grow our resource base – Aggressive Exploration and NBD– Reshaping the portfolio

4. Effective Project Delivery

Regional EVP Forum: Tom Botts (Chair),

6. Competitive Cost StructureSimon Henry

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… Responsibility for delivery unchanged

1. Regional proved reserve addition targets2. Regional production targets3. Regional HC maturation targets 4. Value delivery of projects against GIP5. Drive delivery of performance improvements6. Delivery of operating cost targets

Matthias Bichsel

Guy Outen

3. Grow our resource base – Aggressive Exploration– Working the (front part of the) maturation funnel

3. Grow our resource base – Aggressive NBD– Reshaping the portfolio

Delivering each Priority

Regional EVP’s

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ion So, how do we contribute?

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Safety takes priority

Safety is, and will ALWAYS remain, a priority

 

In the event of conflict, safety takes precedence

Everyone can and must contribute to this priority and the relentless pursuit of improvement.

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HOW

Common global processes and standards Winning “Hearts and Minds” of staff, contractors &

suppliers Visible leadership

And, we will focus on contractor safety as we move into big new frontier development projects

Safety takes priority

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Business Priority 1

RRR average 100% over 2004-2008

A significant driver of long-term value for the Group and a key business goal in the planning cycle

HOW:Get staff back to development activities Increase Petroleum Engineering resourcesFocus on proved reserves in the business planning cycleAccelerate new project FIDsTreat proved reserves bookings as projects

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Business Priority 2

Production 3.5 –3.8 mln boe/d in 2005/6

The biggest single contributor to Group financial success in the short-term

HOWFlawless start upSingle global total reliability processTop quartile uptime Improved drilling performance Best practice sharingExtra production-generating opex

Pro

duct

ion m

ln b

oe/d

20043.4

3.6

3.8

4.0

2003

Field decline

New Volumes

Divestmentshurricanes

PSC

Other

3.8

2005-6 Target Range

3.5

Half year update: 3.6 b/d

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Business Priority 3

Grow the Resource base

Growth of our overall hydrocarbon resource base is key in the coming 3-5 years

HOW Aggressive exploration &

new business development Accelerate the maturation funnel Reshaping the portfolio

Hydrocarbon resources and development

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40

Pro

du

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eso

urc

es,

bln

boe

e.g. Bonga, Erha, Holstein, Qatar, Deimos, Ormen Lange, Sakhalin, Kashagan66

e.g. Kashagan Phase-2, GoM Perdido, Brazil Deepwater, Nigeria Deepwater, Athabasca Jackpine mine

e.g. further volumes in Sakhalin, Kazakhstan, Nigeria, oil sands, Asia Pacific gas

Short-term Medium-term Long-term

No change in overall resource base

Onstream by end 2004

Onstream by end 2009

Includes oil sandsExcludes Sakhalin minority interests

Longer-term scope

FID by end 2009

Difficult scope

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Business Priority 4

Effective Project Delivery to ensure medium/longer term production growth

Bring projects onstream to unlock 13 bln boe by 2009Effective project delivery – on time, on budget – is keyCompliance (OPMG) + Competence + Contracting effectiveness

Existing Oil Unconventional Oil Integrated GasNew Material Oil

~40%

~40% ~15%

~5%

2009 Outlook 3.8 – 4.0 mln boe/d

2014 Aspiration 4.5 – 5.0 mln boe/d

~20%

~25%

10 – 15%

40 – 45%

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Business Priority 5

Operational Excellence

Maximise cashflow from existing operations to support growth plansOperational excellence, focused on production operations, technical integrity and well delivery, is key in this.

HOW Focus on fundamentals Top quartile performance Globalisation, standardisation

and simplification

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$/b

oe

Regional Benchmarking: eg GOM Operating Costs

Source : Ziff 2003

Mixed Product Fields

Shell

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Business Priority 6

Competitive Cost Structure

Our cost base has increased – partly by external circumstances, partly by choice - but good cost management is essential

HOW• Clear accountabilities• Budget control• Supply chain management• Reducing complexity

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7

8

9

2002 2003 2004 2005 TGT

$ b

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Deepening professionalism – inspiring our people

Build pride in Shell and trust in leaders

Strong business results and an exciting work environment

• Resource the business – 1300 new staff in 2005

• Expand technical career ladders, extend job tenure

• Improve coaching and development

• Simplify CBD, Progression and MOR

• More frequent two-way engagement• Business direction & performance• Enterprise First behaviours• Employee Value Proposition & Shell People Survey

Half year update: 50% recruited

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One Scorecard

Simplifies and reinforces Enterprise First:TSR reflects EP profitability and growth Cash reflects EP volumes and cost controlEP TRCF within SD measure Production within Operational Excellence

Weighting

Relative TSR 25%

Cash $ bln 25%

OperationalExcellence

30%

SustainableDevelopment

20%

Weighting

EP-Production kboe/d

40%

GP-LNG Sales

10%

OP-Refinery Downtime %

40%

Chemicals-Cap. Utilisation %

10%

Connects directlywith EP

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EP Dashboard Financial and Operating KPIs

Against Target

Global Performance

HSE (EPS) People (EPH) Technology (EPT) Compliance (LSEP)

Strategic Objectives

Proved Reserves (Reserves Committee)

Resources (EPT)

Competitive Costs (EPF, RCEO’s)

FY QTR

Production -1%

Total Costs

Capital Expenditure

Expl. Expenditure

Earnings

Cashflow

Perf vs. Competitors

Operational Excellence (EPT, RCEO’s)

Rationalise Portfolio (EPB)

Exploration (EPX)

Project Delivery (EPT, RCEO’s)

New Business Development (EPB)

+1%

-1% +1%

-1% +1%

+2% -2%

+2% -2%

+2% -2%

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Strengthening performance management

ECMB

Decision Forums

Regions, Global businesses, Functions

EPLT members

Performance Management

Roll-up and corrective

actions

CascadeReport

Strengthened mandate of the Decision Forums

Focused quarterly performance reviews up to ECMB and EPLT members

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In summary Reserves recategorisation now behind usWe can be positive about the futureDelivering on the priorities is key to delivering on our strategy

Safety takes Priority 1. RRR 100%2. Production 2005/63. Grow the Resource Base 4. Project Delivery5. Operational Excellence6. Competitive Cost Structure

We have a long term strategy

We have clear priorities

We know how we must contribute to delivering them both