Highlights from Shell’s Strategic Report 2014

Chairman’s message

Below are some key comments made by Jorma Ollila, Chariman of Shell in the company’s Strategic Report 2014.

  • The short term outlook for energy markets is uncertain.
  • IMF estimates that the world economy grew by 3.3% in 2014.
  • IMF revised its forecast for 2015 down from 3.8 – 3.5%, pointing to concerns over the Russian and Eurozone economies, combined with slowing growth in China.
  • Many new energy resources will be needed in the longer term.
  • Global primary energy demand could grow by 37% from 2012 – 2040 according to the IEA.
  • Gas will be increasingly in demand partly because of the important role it can play in reducing carbon emissions when replacing coal.
  • It is clear that new technologies will be needed to tackle climate change effectively.
  • All sectors of society must work together to combat climate change effective. One vital and pressing step is to set up effective systems for putting a price on carbon emissions. It is an efficient way to encourage companies to changes their activities in ways that have a deep and lasting impact on emissions.

CEO’s review

Below are a selection of key comments made by Ben van Beurden, CEO of Shell in the company’s Strategic Report 2014.

  • Shell’s earnings on a current cost of supplies basis attributable to shareholders improved in 2014 compared to 2013.
  • The company’s improved operational performance, prudent spending and sales of assets that are not central to the main strategy helped the company enter the current period of low oil prices from a position of strength.
  • For 2014, Shell’s earnings on current cost of supplies basis attributable to shareholders was US$19 billion, which included impairments of US$5 billion and gains on divestments of US$2 billion.
  • Shell reduced capital investment from US$46 billion in 2013 to US$37 billion.
  • Upstream earnings increased from 2013 – 2014, reflecting improved operational performance and the start of production from new deep water projects.
  • The integration of the Repsol LNG businesses acquired in January helped boost Shell’s LNG sales to 24 million t, up 22% on 2013.
  • The company continued to streamline downstream operations, selling most of its businesses in Australia and Italy. While there is some growth potential in businesses such as chemicals, lubricants and in China, Shell continue to look for opportunities to reduce costs and optimise the downstream portfolio.
  • In the long term, Shell expect the global energy supply to mix to evolve significantly in the decades ahead with gas, the cleanest burning fossil fuel, becoming more widely used for power generation.
  • Oil and gas will be vital to meet the considerable expected increase in energy demand.
  • In the shorter term, the world economy is going through a period of relatively slow growth. There is no change in the long term outlook for energy demand, however, as the global population rises and living standards improve.

Outlook

  • For 2015, Shell will continue to focus on the three key priorities set out in 2014: improving financial performance, enhancing capital efficiency and continuing to focus on project delivery.
  • The completed divestment programme will result in various production and tax effects in 2015.
  • Shell expects higher levels of downtime in 2015, especially in upstream and chemicals, driven by increased maintenance activities.
  • The company has new initiatives underway this year that are expected to improve the upstream engine and resource plays outside the Americas.
  • Today’s lower oil prices are creating opportunities to reduce Shell’s costs and to take costs out of the supply chain.

Edited from report by Claira Lloyd

Published on 13/03/2015


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