Unlocking ValueThrough New Relationships

Malcolm BrindedShell UK Country Chairman

Co-Chair of ILT

Member of OGITF/PILOT since December 1998

Infrastructure

Technology

Partnerships

Regional synergies

Access to gas market

Quality service industry

Gov’t understanding

Asset trading

North Sea Challenges …. and Opportunities

Ageing infrastructure

Basin maturity

Small field size

Commercial complexities

Global competition

Changing relationships

• Government / Industry relationships

• Licensee relationships

• Operator / Supply Chain relationships

U.K. Government / Industry co-operation

GOVERNMENT

JOINT

INDUSTRY

2010 VISION• 3 mln boe/d

• £3 bln p.a.

Capex

• + 100,000 jobs

• + 50% exports

(by 2005)

• £1 bln extra

revenue from

new business

TASK

FORCE

PILOT

• Simpler regulations

• Fiscal understanding

• Improved Licensing

• Encourage Asset

trading

• Stimulating

Exploration

• Improved supply

chain management

(LOGIC)

• Progressing

Partnerships

• More collab’n

projects

• Increased joint R&D

(ITF)

• Improved Skills

devp’t

• Accelerate

Undeveloped

Discoveries etc.

North Sea Relationships

• UK and Norwegian sectors have developed in parallel to date:

– licences, pipelines, plants, support bases, regulatory frameworks

– little evidence of co-operation

• This has served industry well so far:

– establishment of national industries and businesses

– development of local competencies / skills sets

• With the maturation of the North Sea shelf, new challenges present themselves...

• UK - Norwegian improvedco-operation is a key opportunity

• maximising resource value– opening of markets– greater use of combined

infrastructure (e.g. gas transport)

• prolonging asset life and jobs– harmonisation of standards– operational synergies– research/development

• increasing joint share of global exports

– joint marketing in third-party countries

• Governments critical to success

Changing Licensee Relationships

Top Explorer and Project Management Experience

Operational and Subsurface Excellence

• Majors & large independents

• Focus•major project

development• 500 mln boe, $ 1000

mln• 1 or 2 partners

•new play exploration•competition

• Majors, independents, financiers

• Focus•small field

commercialisation• 20 mln boe, $ 80 mln• 3-10 partners

•mature asset management

•co-operation

Changing operator/supply chain relationships

ThePast

TheFuture?

Short Term Bidding from Local

Suppliers

E-Commoditisatio

n• Global Sourcing• Bundling of Orders• E-procured• On-line bidding• Lowest Cost Wins

Intimate Partnerships• Long Term• Global or Local• Aligned• High in

knowledge/Innovation

• High Value Wins

Summary

• The oil & gas industry is driven by global competitiveness

• Managing a mature basin requires industry and government focus and co-operation

• The Offshore North Sea must operate as a single entity

– maximising resource value

– prolonging asset life and jobs

– increasing joint share of global exports

– Governments, operators and contractors are critical to success

• Intentions must become Actions...