A TECHNICAL INTRODUCTION TO - Shell...The term “Shell interest” is used for convenience to...

1 Copyright of Royal Dutch Shell plc 13 October, 2014

A TECHNICAL INTRODUCTION TO CARBON CAPTURE AND STORAGE

13 OCTOBER 2014 ROYAL DUTCH SHELL PLC


DEFINITIONS & CAUTIONARY NOTE

The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate entities. In this presentation “Shell”, “Shell group” and “Royal Dutch Shell” are sometimes used for convenience where references are made to Royal Dutch Shell plc and its subsidiaries in general. Likewise, the words “we”, “us” and “our” are also used to refer to subsidiaries in general or to those who work for them. These expressions are also used where no useful purpose is served by identifying the particular company or companies. ‘‘Subsidiaries’’, “Shell subsidiaries” and “Shell companies” as used in this presentation refer to companies in which Royal Dutch Shell either directly or indirectly has control, by having either a majority of the voting rights or the right to exercise a controlling influence. The companies in which Shell has significant influence but not control are referred to as “associated companies” or “associates” and companies in which Shell has joint control are referred to as “jointly controlled entities”. In this presentation, associates and jointly controlled entities are also referred to as “equity-accounted investments”. The term “Shell interest” is used for convenience to indicate the direct and/or indirect ownership interest held by Shell in a venture, partnership or company, after exclusion of all third-party interest.

This presentation contains forward-looking statements concerning the financial condition, results of operations and businesses of Royal Dutch Shell. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management’s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of Royal Dutch Shell to market risks and statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions. These forward-looking statements are identified by their use of terms and phrases such as ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, ‘‘estimate’’, ‘‘expect’’, ‘‘intend’’, ‘‘may’’, ‘‘plan’’, ‘‘objectives’’, ‘‘outlook’’, ‘‘probably’’, ‘‘project’’, ‘‘will’’, ‘‘seek’’, ‘‘target’’, ‘‘risks’’, ‘‘goals’’, ‘‘should’’ and similar terms and phrases. There are a number of factors that could affect the future operations of Royal Dutch Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this presentation, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for Shell’s products; (c) currency fluctuations; (d) drilling and production results; (e) reserves estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, fiscal and regulatory developments including potential litigation and regulatory measures as a result of climate changes; (k) economic and financial market conditions in various countries and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; and (m) changes in trading conditions. All forward-looking statements contained in this presentation are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-looking statements. Additional factors that may affect future results are contained in Royal Dutch Shell’s 20-F for the year ended 31 December, 2013 (available at www.shell.com/investor and www.sec.gov ). These factors also should be considered by the reader. Each forward-looking statement speaks only as of the date of this presentation, 13 October, 2014. Neither Royal Dutch Shell nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements contained in this presentation. There can be no assurance that dividend payments will match or exceed those set out in this presentation in the future, or that they will be made at all.

We use certain terms in this presentation, such as discovery potential, that the United States Securities and Exchange Commission (SEC) guidelines strictly prohibit us from including in filings with the SEC. U.S. Investors are urged to consider closely the disclosure in our Form 20-F, File No 1-32575, available on the SEC website www.sec.gov. You can also obtain this form from the SEC by calling 1-800-SEC-0330.


ENVIRONMENTAL, SOCIAL AND CORPORATE GOVERNANCE

SRI Programme

SRI annual roundtable

Technical learning events

Ongoing engagement

Corporate Governance

Remuneration committee roadshows

Chairman roadshows

www.shell.com/esg

Shell’s approach to sustainability

Helping to shape a more sustainable energy future

Sharing wider benefits where we operate

Running a safe, efficient, responsible and profitable business


CLIMATE CHANGE + LOW CARBON FUTURE

Gas Innovation: LNG For Transport

Energy Efficiency: Refineries

Biofuels: Raizen JV

Carbon Capture + Storage: Oil Sands


CARBON CAPTURE AND STORAGE

TIM BERTELS Head of CCS

BILL SPENCE Business Opportunity Manager Peterhead CCS Project 13 October 2014 ROYAL DUTCH SHELL PLC


ENERGY & ENVIRONMENT – INSEPARABLE ISSUES


ENERGY SYSTEM

Technology diffusion

TJ/yr

Energy demand outlook

million boe/d

1.0E+03

1.0E+04

1.0E+05

1.0E+06

1.0E+07

1.0E+08

1.0E+09

1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

~1% of energy system

Oil Gas Biomass Wind

Coal Nuclear Other Renewables Solar

Shell activities

~30 years to grow a technology to ~1% in today’s energy system

Total Nuclear Biofuels – 1st Gen Wind

Oil LNG Solar Photovoltaic “Laws”

Source: Shell analysis


CCS – KEY TO A LOW CARBON FUTURE

17% CCS has the potential to deliver 17% of the required mitigation by 2050

(International Energy Agency)

40% Without CCS the cost of tackling

climate change could be 40% higher

(International Energy Agency)

138% Without CCS, the cost of

limiting global CO2 emissions to 450 ppm could increase by 138%

IPPC Fifth Assessment Report

£32billion per annum

Without CCS, the additional costs to run a decarbonised UK economy

in 2050 will be £32 billion.

UK Energies Technology Institute


INTERNATIONAL ENERGY AGENCY PERSPECTIVE

Slide presented by IEA as part of the “Role of CCS Globally: IEA 2013 CCS Roadmap” presentation in Beijing December 5, 2013


CCS PROJECTS IN THE SHELL PORTFOLIO

TCM = Technology Centre Mongstad


INTRODUCTION TO CCS

www.youtube.com/watch?v=sqkXYKRFkFc


CCS PROCESS


QUEST CO2 CAPTURE

Capture-related technology practiced in industry for decades

Most mature capture technology is use of amine solvents for CO2 and H2S removal from gas/liquid streams.

Other emerging capture technologies build on industrial processes e.g. solid sorbent fluidized beds & membranes


POST COMBUSTION CAPTURE – SHELL CANSOLV

The CANSOLV CO2 capture system

Transfer of regenerable SO2 capture technology learnings

Experience in the design and start up of flue gas treating units

Cansolv technology is competitive against alternatives

Systems can be guaranteed for bulk CO2 removal up to 90%.

Technology designed for reliability through flexible turn-up and turndown capacity


CO2 TRANSPORTATION

Pipelines prevalent across the US and Europe

Pipeline capacity ~50 million tonnes per annum

Pipelines in operation for ~40 years.

CO2 ships can operate for smaller volumes.

Decades of CO2 Enhanced Oil Recovery industry in the US


CO2 STORAGE

Storage complexes must guarantee:

Containment

Capacity

Injectivity

Monitoring & verification

Monitoring well Injection well

Primary seal

Secondary seal

Potable aquifer

Ultimate seal Porosity = space between grains

Sand grains

Permeability = flow between grains


CARBON STORAGE TECHNOLOGY EXPERIENCE

Storage (and retrieval) of industrial gas in depleted gas fields

Balancing N.W Europe gas market

Tertiary oil recovery using CO2 in Texas, USA, pioneered by Shell in 1970,

Large scale CO2 compression, transport & injection

Exploring, appraising, producing reservoirs

Reservoir simulation

Seismic imaging

Underground gas storage CO2-EOR operations Sub-surface imaging & operations


CO2 STORAGE - GEOLOGY

Quest CO2 Storage plan

SALT SEALS

Intermediate Casing

Main Injection Casing

Cement

Surface Casing

Tubing

SHALE SEALS

TARGET FORMATION

Packer Assembly

Perforations allow CO2 to penetrate the formation

Peterhead CO2 Storage plan

*Source: Intergovernmental Panel on Climate Change (IPCC) "Likely" is a probability between 66 and 90%, "very likely" is between 90 and 99%

Storage performance depends on a combination of physical and geochemical trapping

Over time, residual CO2 trapping, solubility trapping and mineral trapping increase

Responsibly done CCS is very safe

According to IPCC* fraction retained in appropriately selected and managed geological reservoirs is:

very likely to exceed 99% over 100 years

likely to exceed 99% over 1,000 years


QUEST MEASUREMENT, MONITORING AND VERIFICATION PLAN

Comprehensive plan developed – All domains from Geosphere to Atmosphere and entire lifecycle

Independently (DNV) certified MMV and storage plan


FIRST OF A KIND Nth OF A KIND

DEVELOPMENT DEMONSTRATION DEPLOYMENT

CAPITAL GRANTS (SUPPORT BUILD)

OPEX SUPPORT (ENSURE PLANT OPERATES)

ROBUST CO₂ PRICE

NON-FINANCIAL MEASURES (ENABLING REGULATIONS, LIABILITY AGREEMENTS, ETC)

CCS POLICY NEEDS

CCS will require: a robust CO2 price; a level playing field with alternative low carbon technologies; and short term demonstration support to drive down costs


CANSOLV – SCALE UP OF POST COMBUSTION CAPTURE

0.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

Xstrata CEZ Lanxess ConocoPhillips DCU Coker DCU FCCU Chalco Boiler IOCL GDLY RWE Lanxess SaskPower SSE Peterhead

2001 2002 2002 2006 2006 2009 2012 2013 2012 2013 2013 TBD

Tota

l Abs

orbe

r C

ross

Sec

tiona

l Are

a [m

2 ]

Concrete Concrete Concrete

SO2 CO2

2X

4X


-100

-50

0

50

100

150

200

250

CO2 MITIGATION COSTS

Energy learning curves2

Relative cost of CO2 mitigation1

$ /tonne abated

1 Source: GCCSI (Oct 2013, “Global status of CCS”) 2 Source: European Commission World energy, technology and climate policy outlook, WETO 2030

Carbon pricing key: encourages energy efficiency promotes a range of low-carbon technologies including renewables

Cost reduces as installed capacity increases


CCS REGULATION

EUROPE ETS: Back loading proposal supported by Parliament and Council in Dec 2013. 2030 Climate & Energy Package White Paper (Jan 2014) recognises role of CCS. Funding available to support large-scale CCS demonstration projects

(UK Gvt, NER300, EERP)

CANADA Alberta Government extended the

deadline to renew the Specified Gas Emitter Regulation to January 1, 2015. (There is a range of potential options from maintaining existing regulation to doubling stringency). Alberta technology fund designed to

support low carbon technology. Quest and Boundary Dam landmark

CCS demo projects supported by government funds.

AUSTRALIA Australian Regulatory Guiding Principles The Offshore Petroleum Amendment (GHG Storage) Act 2008 Australian Greenhouse Geological Sequestration act 2008 Queensland Greenhouse Gas Storage Act 2009 The Barrow Island Act of 2003 related to Gorgon

UNITED STATES Obama Climate Action Plan launched in June,

references CCS as a key technology and proposes establishment of a loan mechanism to support CCS.

Proposed EPA Utility GHG New Source Performance Standard for new facilities requires CCS for new coal.

Pacific Coast Action Plan on Climate Change & Energy announced in October by Governors of California, Oregon, Washington and the BC Premier.

CHINA Pilot ETSs established in 2013.

National scheme proposed from 2016.

12th Five Year Plan on Controlling GHG Emissions

Draft National Medium and Long-term Science and Technology Development Plan Towards 2020 identifies CCS and CCUS as key technologies.

Notification that new coal-chemical projects must be capable of substantially reducing CO2 emissions

Notice on Promoting CCUS Pilot and Demonstration in a range of industries

UNFCCC Clean Development Mechanism

includes CCS as an eligible technology.


RISK MANAGEMENT

Shell and other CCS developers need to demonstrate:

The storage site can take the required volume of CO2, at the required rates, “on demand”

Guarantee containment of the CO2

Ongoing monitoring to prove that all the CO2 is being contained

Confidence of all key stakeholders

Shell utilizes a risk-based approach that allows continuous risk reduction throughout all stages of a CCS project

Capacity Containment

Acceptability

Sustained Injectivity

Ability to monitor


COMMUNITY ENGAGEMENT – LEARNING FROM BARENDRECHT

The proposed Barendrecht CCS project comprised:

Capture of 350 ktpa of CO2 from Shell Pernis refinery

Transport of CO2 through 17 km new pipeline from Pernis to Barendrecht town

Permanent storage in onshore depleted gas field

What was missing?

No buy in to the case for CCS

Safety concerns on CCS

Confusing messaging

No immediate benefits for community, who had been impacted by several infrastructural projects


COMMUNITY ENGAGEMENT

Quest Peterhead

Public project disclosure in 2008

Extensive engagement from 2010 to 2012

Biannual County and Town Council updates

Community Advisory Panel meetings started in 2012 on MMV program

Project at FEED stage

Series of meetings with local communities

Opportunity for Q&A

Reached >2,000 people

Feedback requested


APPENDICES

13 OCTOBER 2014 ROYAL DUTCH SHELL PLC


SHELL CCS: COMPETENCE BASED PROGRAM

Shell operated Non operated

Gorgon Quest TCM

Onshore storage Offshore storage Saline aquifer storage Depleted reservoir storage Pre-combustion capture Post-combustion capture Contaminated gas Heavy oil Refining Gas fired power

In FEED

Peterhead


QUEST CCS – UNDER CONSTRUCTION

Location: Scotford Upgrader Complex, Alberta, Canada

Type: Fully integrated CCS

Size: One million tonnes CO2 per year capacity for 25 years

Partners: Shell (60%); Chevron (20%); and Marathon (20%)

Status: Construction expected to complete 2015. Project FID taken September 2012

Emissions reduction: 35% reduction of Upgrader CO2 emissions - equivalent to emissions from175,000 North American cars


PETERHEAD CCS – IN FEED

Location: Peterhead, UK with storage in Goldeneye reservoir offshore in the North Sea

Type: Fully integrated CCS

Size: Ten million tonnes CO2 capacity

Owner: Shell (100%)

Status: Project FEED – February 2014

Technology: Shell Cansolv technology

Emissions reduction: 90% of the CO2 from one turbine at the Peterhead Power Station to be captured


SASKPOWER BOUNDARY DAM CCS PROJECT

Location: Estevan, Saskatchewan, Canada

Type: The world’s first large-scale CO2 capture plant for coal fired power

Size: Capture of 1 million tonnes CO2 per year; use of CO2 for EOR (Cenovus Weyburn field)

Owner: SaskPower (Shell has no equity)

Status: Plant opened early October 2014

Technology: Shell Cansolv SO2 and CO2 capture technologies


CO2 TECHNOLOGY CENTRE MONGSTAD (TCM) NORWAY

Location: Mongstad, Norway

Type: The world’s most advanced test centre for CO2 capture

Size: Capture of up to 100,000 tonnes of CO2 a year from 2012

Partners: Gassnova SF (Norwegian State), Statoil, Shell and Sasol

Status: Plant has operated for two years, learnings being gained and shared. The newest vendor to test will be Cansolv

Technology: test Amine and Chilled Ammonia on two CO2 sources; gas power plant (3.5%) and refinery cracker (13.5%)


GORGON CO2 STORAGE – UNDER CONSTRUCTION

Location: North West Shelf, Australia

Type: Industrial scale CO2 storage project, potentially largest in the world, driven by regulatory compliance

Size: 3 – 4 million tonnes per year of CO2

Scope: Store CO2 separated from LNG feed gas into saline aquifer underneath class A nature reserve

Partners: Chevron (47% - operator), Shell (25%) and XOM (25%)

Status: Investment decision made. Operation expected from 2015 onwards

CO2 Injection Barrow Island


COST REDUCTION POTENTIAL

Source: CCS Cost reduction Task Force

Key Levers

Scale of operations

Lower cost financing for CCS as technology matures and risk premium comes down

Emergence of robust CCS supply chain, experienced contractors and a competitive market

Novel (capture) technology and/or configurations

A TECHNICAL INTRODUCTION TO - Shell...The term “Shell interest” is used for convenience to...

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