Thanks to all for joining this session where we'll look into detail at Shell's Integrated Business Strategy. We will start with a presentation from Maarten Wetselaar, Shell Director for Integrated Gas, Renewables, and Energy Solutions, who is joined by Steve Hill, EVP Shell Energy. I now hand over to Maarten, and then later on to Steve for the Q&A. Thank you. Yeah. Good evening, good afternoon, and good morning, everybody. Many thanks for joining our second session today, which is a Shell's focus session on the Integrated Gas business. Following Shell's overall strategy update two weeks ago and the publication of our LNG outlook earlier today, I really look forward to an opportunity to talk about our business and our business strategy in a bit more detail. For those who were not on the call earlier, my name is Maarten Wetselaar. I'm the Director for Integrated Gas, Renewables, and Energy Solutions, and I will be joined for the Q&A by Steve Hill, who's the Executive Vice President for Shell Energy, in charge of all the energy, gas, power, and environmental products trading in Shell and in my business. Before we dive into the details of the IG strategy, let me start with a brief recap of the Shell overall strategy that we presented to you two weeks ago. With our Powering Progress strategy, we will accelerate our transition to a net zero emissions company by 2050, delivering value for our shareholders, for customers, and for wider society. The accelerated strategy is built around a disciplined approach to managing capital and carbon. Shell has itself set a net zero target for 2050 that is comprehensive and complete, with short-term targets between now and then to really get going. Shell is changing to be a more focused, more resilient, and more competitive business for the energy system of today and the future. This strategy means transforming the markets we operate in and the sectors that are difficult to decarbonize, such as aviation, shipping, road freight, and industry. Carrying out this strategy will radically transform the company's portfolio in the next 30 years. It will deliver compelling returns for our shareholders. Shell is already well-positioned for the enormous commercial opportunity of the energy transition. With our differentiated strengths, we have a footprint at the scale that others aspire to have years from now, and which create a unique platform to provide the lower carbon products our customers want and need, and start to demand. By 2050, the majority of our energy products would come from renewable sources. All the fossil-based carbon that we would still sell would either be captured and stored, balanced out through nature, or be embedded in materials. Shell's reshaped organization will deliver the net zero target through three pillars, growth, transition, and upstream. The integrated gas business is in the transition pillar because it's highly relevant to the transition and highly geared to the transition. We have the assets and the product networks to enable the transition and to serve as a platform for the growth pillar. Briefly on the role of gas in the energy transition. Natural gas helps to provide cleaner energy, it emits between 45% and 55% less CO2 than coal when used to generate electricity, and air pollutants are only a fraction. More than 750 tons of CO2 emissions have been saved as a result of coal to gas switching over the last decade. The environmental benefits of gas also include the reduction of air pollution. Many cities across Asia have seen significant improvement to their air quality from coal to gas switching. Shell is playing a leading role in the industry efforts to continuously reduce emissions of methane, a highly potent greenhouse gas in itself, across the full gas supply chain. We have established and we lead the Methane Guiding Principles initiative. This initiative, which is an equal collaboration between industry and civil society and academics, among other actions, has developed best practices and initiated an executive outreach program to create awareness and drive down emissions. Shell has also set an industry-leading target to maintain its methane emissions below 0.2% by 2025 for all the oil and gas assets where we are the operator. Gas is expected to play a key transition role in decarbonizing the sectors as the world moves more and more to renewables. It is driven by replacing coal and power and industry, also by growth in, for example, freight transport, where we see the share of gas growing due to innovative products and technologies. Gas is starting to prove to be a flexible and competitive solution in other hard-to-electrify sectors, like construction and the iron and steel industries. As you heard from us earlier today, these factors support a growth in gas demand of about 1% per year in the next two decades. LNG continues to be needed to connect the gas supply and the demand growth because these are geographically disconnected and will play a pivotal role in meeting energy demand growth, particularly in Asia. LNG will grow much faster than gas demand, and we expect it to grow by a compound rate of about 3.5% per year until 2040. We expect natural gas to have a long-term role beyond 2040 and beyond 2050, as it has several pathways to reach net zero itself, including CCS, biogas, nature-based offsets, and hydrogen blending. With our innovation capabilities, we are extremely well-placed to develop these pathways. I want to share perhaps a few good examples of what we're doing in this space. By the end of 2020, we delivered the industry's first seven carbon-neutral LNG cargoes to customers in Asia, enough to power almost 1 million homes for a year. These carbon-neutral cargoes help customers offset their emissions and create differentiated products down the chain. As LNG penetrates the transport sector, we aim to scale a net-zero solution in the form of renewable natural gas. For example, in Germany, we're investing in biogas liquefaction plants, which will be supplying thousands of trucks with BioLNG. We're also growing the LNG refueling stations to 50 BioLNG distribution points by the end of this year in 2021. As part of our integrated customer offerings, Shell is investing in CCS project in Northwest Europe that can help our commercial and industrial customers mitigate their own hard-to-abate emissions. For example, the Northern Lights project in Norway will store up to 1.5 million tons of CO2 per year. We will have the option to inject our own CO2 from our own operations into that project, but we can also propose to share that CO2 storage with our industrial customers as part of an integrated energy package where we take back the carbon we sell them and store it under the ground. A very exciting commercial model. CCS is becoming a business rather than just a solution. Now, with 70 million tons of LNG sold last year, we are the world leader in LNG, and we are positively leveraged to the growing role of gas and particularly LNG in that energy system. We're also the leading producer of gas-to-liquids products. Our business Integrated Gas delivered $11 billion of cash flow in tough market conditions last year. We have an unmatched LNG portfolio of demand and supply positions that is returning material and resilient cash flow to the company. From this position of strength, we will extend our lead in the growing LNG market, enabled by and supported by our world-class trading and marketing capabilities. We will continue with our successful strategy by adding competitive third-party volumes to our trading portfolio and selectively investing in new LNG supply assets and expansions of existing positions, always with a focus on cash and carbon competitiveness. There is further opportunity on the cost side. With relentless focus on operational excellence, we aim to generate resilient cash long into the future. Running that business that has put us in the lead efficiently. By 2022, we want to reduce operating expenses in this business by around 20% compared to 2019. As the digital foundations are being established, digitalization starts to seriously improve all performance areas of our assets. For example, environmental performance, reliability, and the productivity of our people. We are accelerating the deployment of digital technologies with a focus on high quality and accessible data. One example of how we use digital technologies is real-time optimization across all our liquefaction assets and our GTL plants, yielding on average 2%-3% more production potential or efficiency gains, depending always, of course, on the gas supply situation. In GTL, we have no plans at the moment for new greenfield plants, but we do seize opportunities to further develop premium markets and expand our unit margins. We have a clear competitive advantage in this space and still see significant potential to increase the value from our GTL assets through product sales capturing a significant and increasing premium over Brent. Energy systems are becoming more complex. With that development, there is a clear case for system-wide optimization and integration of energy assets and networks. This requires flexibility, integrated infrastructure, and state-of-the-art digital platforms. In Shell, we see significant integration potential between our gas business, our integrated power business, and our hydrogen business. We are in an excellent position to generate increased returns by making these systems carbon and cost efficient, and by trading, optimizing, and converting flows of renewable energy and LNG. Here's how it works. We will bring LNG, and over time, net zero energy and clean power into an energy hub. We can sell these in their own rights as gas or as clean power. If we then take the gas, we can also convert it into power and sell it or convert it into blue hydrogen. The clean power, we can, of course, sell as power, we can also convert into green hydrogen. We can sell the blue and green hydrogen to transport customers, to industrial customers, we can use it in our own operations, or if the market demands it, we convert it back into power. Integrated energy systems like that hold significant optionality and value potential for players with superior access to energy, superior access to customers, and superior access to conversion assets. Shell has a unique starting point on these three dimensions, and intends to deploy this and extend this lead. On Strategy Day, we showed a number of examples of how our different businesses can integrate and the role that LNG and power play in this. I will run you through two of these examples later on in the presentation. Back to the growing energy market, where we are indeed well-positioned to extend our leadership. We see opportunities both in geographical expansion, but also in growing new markets through more ways to use energy, for example, in transport. Over the last 10 years, we have seen our share of the global LNG volume sold increase from around 8% in 2010 to more than 20% last year. With more than 300% volume growth over that period. Last year, we supplied LNG to no less than 37 countries in the world. For example, we recently opened an LNG regasification terminal in Gibraltar. As a result, Gibraltar switched from diesel fuel power generation to natural gas through a new gas-fired power plant, reducing CO2 emissions and improving the air quality around the Rock of Gibraltar. The number of countries supplied will continue to grow. In the coming two years, we will provide the first LNG to Ghana, Croatia, Hong Kong, and then there's more to come. We target the development of three million tons per year of new LNG markets by 2025. Now, I mentioned transport, and I want to return to that, an important growth market where we intend to grow into a material business by 2030. Shipping is where LNG is the cleanest fuel that's available today. Our aim is to supply at least 20% of the global LNG bunkering demand going forward. We already have the largest global LNG bunkering network with 6 operating bunkering vessels, and we've executed more than 400 ship-to-ship LNG bunkering operations to date. Our recent supply agreement for 5 LNG-fueled bulk carriers helps our customer, BHP, to reduce CO2 emissions by 30% and demonstrates the competitiveness of LNG as a fuel in shipping. We are rapidly expanding our own use fleet with more than 60 deep sea vessels and barges on order. We're also building an LNG for road transport retail network in Europe, China, and India. The Chinese LNG for road transport market was 30 million tons in 2020, with more than 3,000 LNG filling stations and 140,000 LNG-fueled vehicles sold in the year, a growth rate of 30% year-on-year. A substantial growth rate that we kind of expect to continue in China for now. Shell China Retail is already active in LNG refueling through joint ventures. Shell supplied those retail joint ventures with 15 kilotons of LNG in 2020, 60% year-on-year growth. Small volumes today, growing fast. The European LNG road market is still small, anticipated to grow at a rapid pace and expected to be around 8 million tons by 2030. We, Shell, are the largest supplier of LNG to road transport in Europe, having doubled our business in 2020 with 62 sites in seven countries now accepting the Shell LNG card, and over 162,000 refueling transactions performed. Again, growing fast. More generally, we continue to innovate. We will lead the market with our world-class innovation, trade, and optimization capabilities. We have a diverse portfolio with varying contract duration, flexibility, and indexation. We will create new markets in Asia and beyond, embrace new customers in all sectors, and expect most growth to be in the commercial and industrial sector. China and India will be key markets for us. How will we grow our business and create new advantage positions? Well, we look for the most competitive source of LNG supply to further strengthen and diversify our portfolio. This means buying more LNG from third parties, but also expanding our own production capacity. We have included selective investments in our capital plan to expand our portfolio of LNG plants and to grow, of course, natural gas supply to keep the existing plants full. LNG Canada and Nigeria Train 7 projects have both dealt with the logistical challenge related to COVID and are on track to be on stream by the middle of the decade. LNG Canada will deliver carbon competitive volumes, and the unit technical cost of LNG in Nigeria LNG Train 7 is one of the lowest in the industry. In the near term, our Capex is expected to be around $4 billion, similar to the last few years. If you look forward at our funnel, our future projects have an average IRR between 14%-18% and pay back before 2040. We've set a hurdle rate of at least 12% for projects in Integrated Gas. We are progressing the design of the expansion of LNG Canada in parallel to the projects under construction. For producing plants, we focus on ensuring the longevity of our LNG production by developing competitive backfill projects such as the Manatee project in Trinidad and Tobago or the Crux project in Australia that will keep Prelude full for a long time. All our opportunities are cost competitive. We have already reduced the unit technical cost of our project portfolio by around 40% since 2015, and any new project will have a unit technical cost below $5 per MMBtu. We are confident that our equity suppliers continue to form a solid base for our growing trading portfolio. Now let me highlight the two examples that I promised you, where we are bringing the energy systems integration in Shell and bringing it to life. First of all, in Queensland. We have a number of ventures across the energy value chain. The case here is around maximizing value through optionality of supply and demand. We have upstream gas production with our QGC and Arrow ventures. We sell that gas domestically or we liquefy it, and we export it through the QCLNG plant. The domestic gas is sold directly or is converted to power and sold through Shell Energy Australia. This used to be called ERM, the power business that we bought a year ago. Which gives us access to an enormous industrial customer base from which we plan to grow energy solutions offerings. We also provide renewable power and storage, and we have nature-based solutions to help offset emissions. This example clearly shows the options we have in Australia by integrating across the energy system. We can direct the product flow and optimize the assets to ensure maximum value while expanding the offering of energy solutions to our customers and optimize every day the way the molecules and the electrons flow. A second example is India, which is an important growth market to Shell, and we are transforming a traditional LNG regas business into a fully integrated gas and power value chain. India is targeting to increase the share of natural gas in its primary energy consumption from 6% towards its aspired target of 15% by 2030. Starting with the optionality of LNG supply to Hazira and further optionality in the different parts of the chain, we are delivering vital energy to our customers, while at the same time lowering regional CO2 emissions in Western India, providing air quality improvements and reducing costs for companies. Further steps in the decarbonization journey are achieved through our investments in Cleantech Solar, building solar installations at our sites and customer sites, mangrove plantations. Additionally, societal impact is achieved in delivering power for more than 100 mini grids that support more than 5,000 micro enterprise customers. Today, I've given you an in-depth overview of Shell's IG business, serving the energy demand of customers in the transition to a net zero world. I explained why we are uniquely positioned to capture the opportunities in the growing energy market and will excel and lead in this business for decades to come, how we will create further value from adjacencies with our integrated power and our hydrogen businesses in these complex energy systems of the future. Finally, our belief that natural gas and LNG have credible pathways to a net zero status in their own right, making them an essential part of the world's long-term energy mix and central to our strategy of Powering Progress. With that, let me take your questions and invite Steve into the conversation. We can move to questions, please. John? We will now begin the Q&A. To ask the question, you need to be dialed in via the phone line. Please press star followed by one to be added to the queue. If you wish to be removed from the queue, please press star followed by two. Here is our first question from Thomas Adolff of Credit Suisse. Please go ahead. Your line is open. Good afternoon. Thanks for taking my question again. Two questions, please. You've talked about how digital will help you keep utilization rates high of your liquefaction trains. Earlier on, you also mentioned the lack of investment, which will lead to lower utilization rates. How do you see the base business performing in your portfolio? Secondly, you might go into a bit of detail, but essentially, I'm asking the outlook to 2030. Maarten, I think we've discussed this a number of years ago. Prior to the FID on LNG Canada, you had about 70 million tons of LNG sales. If you looked out to 2030, roughly half of that would have expired, right? Either aging hubs or contract expiries. There were three ways to renew it. New equity FIDs, whether brownfield or greenfield, new third-party offtake agreements or contract renewals or extensions. I wonder, since then, what progress you've made on those 35 million tons you would have lost and whether you're comfortable to get to the 100 million tons by 2030, which would be grossly in line with the market. Thank you. Yeah, thanks, Thomas, Steve. On your first question, what we note is that the industry has not invested enough in upstream gas supply and in their own LNG plants in order to keep utilization up for the coming years. In our own case, investments in backfill gas have by and large stayed as we planned last year. There I don't expect much impact, although we do expect industry impact. What has happened is that we've pushed a number of turnarounds from 2020 into 2021, 2022, because we simply couldn't get the people on site last year during COVID. That will give us a bit more turnaround time, a bit more plants offline this year, and potentially into next year in order to kind of catch up with this turnaround, and these turnarounds and with the maintenance. In our business, we have not seen a slowdown in, let's say, backfill gas investments. Generally in the industry, we have seen that. We do expect overall volumes to be a bit suppressed as a result. In our case, it's simply the shutdowns that will have a bit of an impact this year. To your second question, of course, we don't set volume targets, or at least I would hate to set volume targets. I'm sure Steve's team could sell 100 million tons this year if I really told them to. It would have a slice of business that either doesn't create value or even destroys value. The last thing I would want is for the team to feel that it needs to hit a particular number. I get your question is also directional. With the investments in Canada and in Nigeria, where we've FID fresh volumes into the portfolio, which is great. We've certainly signed a good number of long-term purchase contracts in the market that will help fortify our portfolio. There also still are a number of extensions to our business that are still ahead of us. I would mention, for example, Oman, which will expire in 2024, or the Equatorial Guinea supply contract that expires before the middle of the decade. We have a number of areas where we have homework to do. I can give you, and perhaps also Lucas if he's online, the peace of mind that when we make our cash flow projections for the medium term, any extensions that we haven't yet secured are not in those cash flow projections. That really is only about business we know we will have rather than business that we hope to have. There's a potential upside there if we secure a number of extensions there. I say to you today, and I said two weeks ago, that we want to and will seek to grow with the market, which indeed means growing those LNG volumes over time in the direction of the number you mentioned. Clearly, a volume target would be the wrong thing to deploy. Perfect. Thank you. We will now move on to our next question from Biraj Borkhataria of RBC. Please go ahead. Your line is open. Hi. Thanks for taking my questions. My first question is on some of your carbon neutral LNG sales. Presumably over time, that will make you more sensitive to the carbon intensity of the assets. A few times in this presentation and previously, you've highlighted that well on that basis because of the hydropower use. I've never seen any numbers associated with that. Are you able to highlight where that screens versus the industry and just some numbers would be helpful context there. Then the second question is a follow-up to Thomas question. I think about options you have in the portfolio, such as entrance into the Qatari LNG expansion. Maybe not specifically to that project, but when you look at decisions like this, can you talk about how you determine whether you want just the offtake versus having the integrated equity interest in the upstream and liquefaction, going forward? That would be helpful. Thank you. Yeah. No, thanks. Let me take both. You're absolutely right that the carbon content of a cargo matters already to many of our customers, and I think it will matter more going forward. I can well imagine it becoming a spec of LNG that we trade and that we optimize later in this decade more as a rule than as an exception. Therefore, indeed, if you want to sell offset cargos, it really matters how much credits you need to apply. Depends on the carbon intensity. LNG Canada is less than half of the industry average of the carbon intensity and will be the most carbon competitive plant in the world. We haven't actually given the numbers, and it's something for us to consider. We will think about whether we want to actually share the carbon intensity of it, but that's where it sits against the industry. It is a step change, not just because it uses hydropower, but also because of all the other equipment choices that have been made here, which very much has had carbon in mind. Also, the way we produce the upstream in Canada, in Groundbirch, although it's shale gas, it's very low carbon because it's fully electrified, and again, using mostly hydropower. It is very carbon competitive. To your second point, we clearly like to have the offtake from competitive projects, if we can buy at a reasonable price, and particularly at reasonable flexibility. Whether we will invest or not really depends on the terms on offer, and whether that investment gives us any more control over the scheduling of the plant, over what to do with flexible cargos, et cetera. That's often where value gets created, actually on the interface of managing a plant and managing a trading portfolio. The more input that we can have on how plants are managed, and how the LNG is scheduled and how the shutdowns are scheduled, the more optionality we can create. At the end of the day, an investment will have to meet the return threshold and will have to fit into the overall return, the IRR picture that I talked about in my speech and we gave you on strategy day. That's very helpful. Thank you. We will now move on to our next question from Christopher Kuplent of Bank of America. Please go ahead, your line is open. Thank you very much. I hope you can hear me okay. Sorry, I had trouble with my phone line earlier in the earlier session. One question on the macro, if I may, and one on the Shell strategy. Just wanted to ask, the kind of outlook you presented earlier today, how or which scenario that you presented a couple of weeks ago, that comes closest to where I think Sky would probably lead you to a different conclusion in the next 20, 30 years in terms of looking at when global gas demand peaks. I wonder when it's time to pick a different date rather than talk about 2040 in your LNG outlook. The second question is, perhaps along similar lines to what Thomas just asked. I wonder whether what you've experienced over the last year, but also over the last few years of updating these LNG outlooks, you think the degree of vertical integration in your LNG supply footprint is about right, no matter how fast you wanted to grow sales versus your upstream liquefaction? I hope that makes sense. Thank you. Yeah, no, I think that makes a lot of sense. Steve, maybe you can come back on the first question after I have a go at the second one. The degree of vertical integration to me is almost a more important element in the portfolio than the exact market share that we have in the market. When I talk vertical integration, I don't necessarily mean that I have to be all the way from the wellhead to the customer. It is more about the flexibility that I have in the chain. If I have an offtake agreement, where I have a lot of flexibility, that to me is sufficiently vertically integrated to count. Assets or trend line trading agreements can be elements of the portfolio, but are not particularly exciting because they don't add value to the rest. They are only valuable in their own right. Given how competitive the industry is, these are quite hard to find. We tend to find that the way these things make more sense to us than to others is through vertical integration rather than on a standalone basis. Chris, is that an answer to your question? Or did I misinterpret that part of it? Yeah. Thank you. That's helpful. Just wondered whether you think the short position today has perhaps become more valuable than it was, considering what's happened to the market. I think Steve and I always try to build portfolios that behave well in many market circumstances, because it's so hard to predict where things are going. Steve, let me give you the floor if you have a thought on that, and on the other part of Chris's question. Yeah. On Chris's first question, that long term, the outlook is somewhere between Waves and Islands. You kind of dismissed Sky as being a comparator. Actually, for the next decade, Sky is in the range. It's only after 2030 that that has gas demand tailing off much more quickly. From now to 2030, they're all relatively bunched together. Waves is at the top of the range and Islands is at the bottom. Our outlook and Sky is somewhere in between. After 2030, Sky falls off and the outlook is probably in the higher end of the range between Waves and Islands. Sorry, I missed the second question because I was looking up the first one in detail. Could you just repeat that? On the second question, I just was wondering whether you had any further thoughts on that, on integration. I would just add, perhaps Chris, that of course the energy outlook is basically an average or an interpretation of third-party outlooks. We don't overlay it with our own scenarios. What you see is that the third-party outlooks are more bullish on natural gas than Sky 1.5, but are somewhere in the range with the two other scenarios. What will actually play out is relatively uncertain. What is really important is that you have affordable energy, that you are on the left end of the cost curve. Such that if we get more of a Sky scenario, that our energy continues to be competitive in what, in that case, will be quite a competitive market. Yeah. On integration, I think that it's a concept that has a lot of value for us. Clearly over time, the value in the LNG chain can move upstream and downstream. Our integrated model, it gives us a position wherever the value happens to be at the time. The optionality that's created by having a chain with multiple supply sources, multiple shorts, our own market positions, unlocks a lot of the trading value we subsequently capture. What really excites me, though, as well, is the integration Maarten showed in his presentation about between gas and power and hydrogen and offsets and CCS, and the integrated cleaner energy system. We play in all those different parts of the market. When you've got all those options in a advantage network, that's a tremendously exciting opportunity for a trading business. Yeah. A business, I would add, that very few people in the world can play in. Clearly we have new competitors as we move. That's not the topic of today, but as we move deeper into power, deeper into hydrogen. Many of the people that we meet in that business don't have this gas business, don't have that opportunity and that trading sophistication to optimize these energy systems. I do indeed believe that that is a significant differentiator going forward. Let's move to the next, John. Understood. Thank you. We'll take our next question from Anish Kapadia of Palissy. Please go ahead. Your line is open. Good afternoon. Yeah, I've some questions on project outlook. Firstly, I was thinking about the Eastern Med area, because there's been an awful lot of gas discovered in that area. It seems like Egypt is getting its act together in regards of restarting LNG plants. Just really wanted to see your thoughts in terms of the growth in LNG from Egypt and potentially other projects coming either through Egypt, like Israel, Cyprus, some floating LNG. How you see that playing out over the next 5- 10 years or so? Secondly, just if you could give some updates on, I suppose some of the lower return, higher risk projects in your portfolio, such as Tanzania and the Indonesian projects, in terms of those the growth potential there and how you're thinking about them. Thanks. Yeah, thanks. The Egypt situation is a fascinating one. I guess if you're going to have an empty LNG plant anywhere, then the East Med is not a bad place to have it. Every time someone drills a hole, they find gas, it seems. Although, not everybody all the time. There is clearly a lot of gas now discovered and a lot of exploration going on. Almost certainly, and fundamentally, our Egyptian LNG plant, that has not done much in the last few years, will fit itself in the course of this decade. It is our task to try and get as much control over those molecules as we can, commercially and potentially even economically and physically, because then we can build the most valuable value chains. That requires exploration, it requires commercial negotiation, and it requires a degree of political maneuvering, because, of course, the East Med is not free of political position taking. I do absolutely believe that the East Med can be a source of significant value for us. Of course, it's positioned beautifully between the Atlantic and the Pacific basin. I'm optimistic there. I think between the guys in Egypt and Israel and Cyprus, we will find ways to orchestrate for enough of that to come to our plant for that to be a significant source of value. To your other questions, I wouldn't necessarily characterize Tanzania as a low return, high risk project. I don't like low return, high risk. I would say it's more a high return, high risk project. It is very competitive, and cheap to produce offshore gas and 16 TCF of it, which is a fantastic starting point. That's a bit like Sakhalin type volumes. Not so difficult to get onshore. In principle, you could build a very competitive, potentially modular LNG plant onshore in Tanzania. The issue there really is indeed the political risk that we need to overcome. When we overcome it, we will push the go button. I think energy from Tanzania fundamentally is very valuable energy, if you can get past the political risk equation. We're working that, but not in a hurry. We have enough other places at the moment to build in. If I can take Tanzania over time, an investment decision based on solid fundamentals, I will. Abadi is a different story. We have decided to market Abadi. Again, that is not a low return project, but in the total portfolio of assets we have on priorities, it simply doesn't at the moment attract funding. The government and our partner are quite keen to get on with it. For us, it will be a later project for later in the decade as things stack up now. It's probably better if somebody else owns our Abadi shareholding. Let's move, if that's okay, Anish? Perfect. Thanks. Thank you. Okay, let's move, John, to the next. Move on to our next question comes from Lucas Herrmann of Exane. Please go ahead. Your line is open. Morning, Steve. Thanks again. Hi again, and thanks for coming back on the earlier observation, or comment right around Thomas. A couple of others, if I might. I can see it and I can feel it in terms of India, Australia, what you're doing building out value chain. I've absolutely no idea how to put a value on it or think about the incremental income that comes. I guess the question of you is, how do you help me understand not the concept, but the hard financial benefit, and when do you think we start to see it in a meaningful way? Secondly, perhaps slightly more cheeky, mousetraps, Mark and Steve, you like leaving them about. How have they worked for you through this first quarter. Yeah. Thanks, Lucas. Good question. Mousetraps is, by the way, the second reason, apart from the extensions that we don't count on in our projections, is perhaps the second reason why we're a little bit disappointed with our cash projection for the medium term. We occasionally get successful with our mousetraps, and that then flows through our results in the previous years. Of course, they're hard to put into your plan because it really depends on events that are unpredictable, weather events or other events, and therefore we see them in our actuals. We tend not to plan for them, and it can look like if you look at a stream of actuals that our medium-term projections are perhaps a little bit on the light side, I wouldn't want to promise events such as the weather events. Your other question is hard to give you modeling advice on. In some hubs, such as the ones that we described today, net optimization is real today. Maybe Steve can talk a little bit, perhaps to the Australian example that is currently the most material one. The one that I described is also a system where hydrogen plays a big role. Of course, that at the moment is still a projection. I do believe when hydrogen becomes, in the course of this decade, a more significant business, there will be a significant supply trading optimization element to it. Those who can produce the cheapest green and blue hydrogen and mix and match and get it into the right place and have the right logistical control points will have some significant advantages in the market there. Some of these hubs will take a little bit of time to construct, but some of them are live. Can you talk to one or two examples there, maybe, Steve? Sure. Well, Australia is a very obvious example over the last year. We talked earlier about LNG prices being at 20-year lows and all-time highs over the past year. You can think about QCLNG in many ways, but one way to think about it is a option between the Australian domestic gas market and the LNG market. There's obviously constraints on how that option can be utilized both within the constraints of the business and the government policies and agenda in Australia. Clearly there's been times when the domestic gas price in Australia has been significantly higher than the LNG price and vice versa. That type of flexibility has a value for us. One of the other businesses we're growing at the moment is a power business in Japan. It's still very small business, but we are a participant in the Japanese power market now, and we're trying to link our LNG business to our power business in Japan. 2021 has already been an interesting year in terms of price environment. We've seen record high prices for electricity in Japan. We've seen high LNG prices. We've seen high gas and power prices in the U.S. The longer we create these value chains, the more options we have. The combination of the optionality of the value chain and the trading business, it gives us money to make that. Again, it's not just the capturing the optionalities, it's seeing these trends come. By being in the Japanese power market, it's another way where we would get insights coming to us for what was likely to happen in the LNG market early in the year. Yeah. Singapore will be another place where between the gas and the power market and the significant demand we have from our own industrial assets, we find very frequently place to optimize the fact that we are the main LNG importer into Singapore, and that we are a very large power consumer as well, and increasingly can play these markets off against each other. Many opportunities, many big and small mousetraps. The one that you saw last year in our results in Q1 was obviously when we correctly caught the falling LNG price and benefited from that in the first quarter results. We would always continue to try and prepare for these events. We don't always get them right, but it is definitely a feature of our business. Maarten, if I were to ask you, if I look back at that particular slide showing operating cash flow and was to say, okay, over the last five years on average, what was the trading income or the income that you managed to realize from the optionality that's inherent in your portfolio, would you be willing to disclose or put a number on it? The answer is no. It's always a positive number because otherwise we don't do optimizations, then we simply stay with the base business. As of course we've said a few times, it is not so easy to actually separate these things. If we're able to squeeze additional cargo out of Nigeria LNG, out of Sakhalin, and sell it through our trading system to a particularly well-paying customer, it's always a little bit difficult to say where the value was created. Was it in the reservoir in Sakhalin? Was it in the operator's decision to squeeze the extra cargo out, or was it in Steve's brilliant trading operation? I'm also interested, it is produced, that result, in the unique integrated business model that we have. We don't actually make that sum. We make it on a legal entity basis, but that is just a transfer pricing discussion. Yeah. We like to think of the business as integrated. I know and understand why you're interested in that, but I can't actually give you the number. If I had it, I probably wouldn't, but I don't have it. Okay. Well, Steve, thanks very much. We'll move on to our next question from Paul Cheng of Scotiabank. Please go ahead. Thank you. Good afternoon. I have to apologize first because I want to ask one of the questions on trading again. Just want to see that Steve or Maarten then, whether you can tell us, for your non-equity LNG sales, those that you purchase and then you resell it, those you purchased it. Can you tell us that what percent are those you purchased it on the spot market, and what percent is under long-term contract? Also, that for those resell volume, what percent you actually get unloading in the spot market and what percent is on your long-term customer contracts? That's the first question. The second question, I think you're talking about the project extension will be 14%-18% internal rate of return. That seems extremely high for a long lead time LNG project. I'm not sure anyone has been able to achieve it. Can you tell us that whether your current portfolio is already achieving that kind of return, and what is the LNG Canada, your expected return at what commodity prices that you assume? If I can put you in a side, you sold certain carbon neutral LNG cargo. Have you seen any price differential for the selling price for those compared to your regular cargo? Thank you. Let me first check if you can hear me because my system is indicating. Now I can hear you. Thank you. Excellent. Okay. Thank you. Maybe Steve can think a bit about the percentage of spot and term in our purchases and sales, and come back to both those statistics and the philosophy behind it. What we've indicated in our returns presentation is indeed two data points. It's the 12% minimum IRR for investments. LNG Canada, we reported as 13% when we took FID, and that number stands, and it's at the middle of the road macro environment. The higher returns tend to come in, for example, expansions. If I build a Train 7 in Nigeria with all the utilities and the tanks and the jetties, and the skilled workforce available, then I tend to actually be able to sit in the higher part of that return. Of course, our highest returns come from the backfill volumes. The 17% and beyond is if I develop an offshore gas field in Trinidad or in an upstream development in Nigeria or in Australia that feeds an existing LNG plant, where the only additional investment that I need to do is drill a few upstream wells, then you really get into the very high IRR. The portfolio consists of all these three. Of greenfields, expansions, and of backfill. The greenfields tend to sit at the lower end, but the backfills that will sit in the middle of that range. Sorry, the expansions sit in the middle of that range, and then the backfill upstream projects would tend to pull the range up. That's how it works, if that helps. Steve, do you want to take the other question? Maarten, what oil price assumption you were using at 13%? You say mid-cycle. You said based on, say, $60 Brent or $55 Brent oil price. I think that's all. To what year? Is it 2020 or 2017 when you sanction it? We would always look at the year we sanction. We don't disclose the exact price, but the numbers you mentioned are reasonable. In our LNG update earlier today, we shared that the overall LNG market we see as being about 70% of the volumes are sold under long-term contract and about 30% under spot sales. The percentages for our portfolio will be slightly higher on the long-term contracts, both on the purchase side and on the sale side. Steve, that you're saying that even for the resell barrel or resell cargo, that you are still more than 70% is for the long-term take or pay contract? Correct. Yeah, it's closer to 80%. Okay. Go ahead. Yeah, I'm sorry. No. It is closer to 80%. I understand fully. I just want to understand fully that for the cargo that you purchase and then you resell, those cargo you purchase it is also under long-term contracts, or that is higher than 30% is under the spot? Yeah. Well, the individual cargoes may be purchased under a long-term contract and sold under a spot contract, or they may be purchased under a spot contract and sold under a long-term contract. They may be put into one of our own import terminals and our own downstream market positions. When you look at our portfolio overall, yeah. The amount of spot changes year on year, depending on the market conditions. Some conditions give rise to a lot of optimization potential, and you get quite a high spot volume, others less so. Typically, you would expect that 70%- 80% of our purchases are purchased under long-term take or pay contracts and a similar amount on our sales. Okay, thank you. Thank you very much. John? We will now move on to our next question from Bert Bekkering of ABN AMRO-ODDO BHF. Please go ahead. Your line is open. Good afternoon, gentlemen. First question is on carbon emissions. If I go to Shell's new goals, you aim for a reduction of, what is it, 40% by 2035 or so. Is Integrated Gas also committing to that 40% for Integrated Gas by itself by 2035, or should we look differently at that target? Maybe a request on general data. I get one number for Upstream and Integrated Gas greenhouse gas intensity, and no separate data at all on the, let's say, the split between Australia and other parts of the world. Is it maybe possible in the near future to give much more data so that we can actually prove that Shell is on the way to reduce that carbon intensity? Yeah, thanks Bert, and thanks for joining today. On your second question, I think that's an excellent suggestion. Let me take that up with the team. The IR team is on the line. We can see and perhaps work out a bit more offline, what would be meaningful and what data do we have that is stable and reproducible. Giving a bit more insight into our carbon intensity across the businesses is clearly something we should be doing. I think it's a good suggestion. Let's take offline how we follow up on that and under what time frame we would give you a bit more information there. The carbon intensity targets that we've set are enterprise-wide targets. The total of RDS will achieve those reductions in carbon intensity. Of course, the sources for this will be different. The renewables and energy solutions business will never even get to the carbon intensity of Shell. It will stay far below it. By growing it aggressively over the next five, 10, 15 years, it will reduce the average. The integrated gas business itself is at the moment beneficial to Shell's carbon intensity because the carbon intensity of the LNG and gas business is actually lower than Shell's average. There comes a point in time on our way to zero where it isn't anymore, where it actually hits that average and where it could, if it's not careful, become a drag on that average. It needs to go on its own net zero journey, mindful of the overall corporate target. Indeed, over time, there will be no hiding place for everybody because the whole group will need to be net zero. At the moment, it pulls the group average down and will continue to do so for quite some time. It will continue to need to work to stay in that position for as long as possible. The 40% doesn't necessarily apply to every business or to every venture by itself. It applies to the global portfolio. Of course, we can only get there if everybody travels, and travels fast. Does that help there? Yeah. Do you then, as a business unit, already have a goal to reach by 2035? Something like, for instance, 25% or so? It's a really good question, and it comes back to the carbon management framework that we talked about on the 11th February. That goes really to the heart of what we want to achieve. It sets carbon management objectives for each part of the business. So, for example, in Steve's business, it would, for example, talk about how we want to develop the LNG, the carbon neutral cargo business over time in order to improve. In the power business, it would talk about how much ahead of the market average carbon footprint we want to be. It then becomes quite specific. Not generally sort of, let's say, one measure for the business, but we try to make it down in very specific goals that business units can go after. It's our task to make sure it all adds up to the corporate target that we set. An LNG plant might have a reduction in intensity target. Steve's marketeers might have an LNG carbon neutral target. In that way, we target all parts of the business. Each fund might have its own hydrogen and Shell Recharge targets in order to get to the 2035 number. We break it down much deeper than just the target per business. Yeah. Maybe one add-on question, and that's on, let's say, LNG shipping. You have great growth projections for LNG shipping for the coming 10 years. I would say hydrogen or ammonia comes in. Is it then a big turnaround that you start to promote hydrogen? How does it then work in the battle between Shell Hydrogen and Shell LNG? Steve, do you want to go first? I'll talk about the battle. I think you were talking about shipping from the perspective of shipping fuel and our fuel supply into the shipping industry. Yeah. LNG is one of the great examples where we've been driving the emissions down within the LNG industry already. We're using bigger ships with larger capacities that have much lower emissions than 5 or 10 years ago, and we're continually upgrading our LNG shipping fleet to make sure we're operating with the latest technology and the lowest emissions. In terms of shipping demand, LNG is clearly the cleanest option available today, as Maarten mentioned, and we're working very hard to develop the infrastructure to maximize our ability to supply LNG as a fuel to the shipping industry around the world. There's some uncertainty what will be the next fuel for shipping, whether it be methanol or ammonia or hydrogen. Hydrogen, we think, is the better solution. There's a lot of infrastructure to be built to supply hydrogen to all the other sources of demand for hydrogen and shipping as well. Shipping tends to be a buyer of the cheapest available fuel, so it may not be the sector that drives hydrogen demand. It may be the beneficiary of hydrogen production that's developed to meet demand in other sectors. It may be some time before we see hydrogen as a widespread fuel in shipping. We will absolutely make sure that the LNG and the hydrogen is being sold by the same people to shipping companies rather than two different branches of Shell competing. I would say, guys, I would imagine this in waves. At the moment, if you look at the total shipping business, it's essentially fuel oil. It is our projection and our target for LNG to penetrate as much as possible. I don't think LNG will penetrate 100% in the next 10- 15 years. I mean, that would be great, but that will be hard to achieve. When hydrogen or ammonia, for that matter, or methanol comes into that market, the first thing it will start to displace is actually the rest of the fuel oil. Of course, at some point in time, it's a bit like the power business, where we say, at the moment, the urgent priority is get coal out of power. By growing gas and renewables aggressively. By the time we really have coal out of power, then, of course, start saying, "Okay, well, let's drive renewables hard to reduce the role of gas to truly get to net zero." I think that will be a bit the story in shipping as well. For now, we should absolutely cheer on LNG to displace fuel oil. When the net zero solution, hydrogen or whatever else comes in, displacing the rest of fuel oil with it is the first priority. Indeed, at some point, it will start to displace energy back. If you look at the timelines for any of these three solutions, ammonia, methanol, or hydrogen, to first of all be proven, because none of them is proven into shipping. To build global production capacity and to build global distribution capability, you're into the 2030s before that journey even starts. You're well into the 2040s before LNG and hydrogen actually start to compete in shipping, because there's no fuel oil to be displaced anymore. By then, you and I will no longer worry about this question. I can assure you, Shell will make sure that the net zero fuel dominates. Clear. Thank you. We will now move on to our next question from Bertrand Hodee of Kepler Cheuvreux. Please go ahead. Your line is open. Yes. Thank you for taking my call. If I may, the first one is on Pearl GTL. It is now 10 years it has been in operation, so quite a long time. There were huge CapEx associated with that. As you see the production sharing contract, can you tell us where do you stand in terms of your cost oil recovery? Have you fully recovered your cost already? Meaning that you are ex-c ost oil. Can we expect some negative impact, when you would be ex-c ost oil? Are there any profit-sharing rules mechanism trigger that will happen in 2021 or onwards? Really my question, I do not want a financial impact. I just wanted to know whether this cost oil desaturation has already happened or is still to come, or whether there is also some profit or a negative impact to come in the coming years. My second question is on Tanzania. As a follow-up, have you taken any impairments on Tanzania? Do you still have a value for Tanzania since your book? Thank you, Bertrand. On Pearl GTL, there's very little I can tell you because the production sharing agreement is obviously confidential. You can't access it, and I'm not allowed to tell you any detail of it. Perhaps the easiest answer to give you is that you will not see a change in underlying trend in Qatar in 2021 compared to recent history. Let's say compared to 2020, other than, of course, the oil price having started out the year looking a bit more bullish than it did last year. Unfortunately, I can't give you the detail of Qatar. It isn't as binary as you describe or as people sometimes think, not so much as you described. Of course, we continue to spend capital in Qatar to maintain and to debottleneck, et cetera, and these amounts also come into the mechanism. You won't see a change in trend in 2021 or for that matter in 2022 in Qatar. Your second question, Bertrand, just remind me. I didn't write it down. Yes. It was on Tanzania, whether you did take some impairment on Tanzania. Yeah. What's the value? Tanzania is hardly in our books. There's not much book value to worry about. Okay. Thank you. We will now move on to our next question, comes from Jason Gabelman of TD Cowen. Please go ahead. Your line is open. Caller, you may have yourself on mute. Jason, your line is now open. Please go ahead. We will move on to our next question from Roger Read of Wells Fargo. Please go ahead. Your line is open. Yeah, thanks. Quick question for you as we get to the CO2 intensity issues. Has there been any transaction to this point that IG has not made because of too high of a CI intensity? You mentioned earlier that Shell Canada has a real good carbon intensity footprint. I was wondering if you could highlight what specifically about that project scores well on the CI scale? Let me take the second one and see if Steve has any example of a business that we didn't do for carbon reasons. It's a good question. I couldn't come up with one immediately, give you some thinking time. Yeah, in Canada, first of all, the upstream that we have in Groundbirch is essentially electrified. We use no gas to produce gas, which is important. We use hydro energy to produce gas, which is, of course, zero CO2. We have made sure the equipment that we use in Groundbirch is energy efficient and doesn't leak, let's say, methane, and that flaring is really a very rare event. Our upstream in Groundbirch is highly greenhouse gas competitive. The midstream solution we're building in Kitimat uses, again, hydropower, that helps. All the electricity it uses is again CO2 free. In the equipment selection and choice that we've made, LNG Canada is advantaged on almost every piece of the machinery in terms of its energy efficiency. Its potential to leak methane, which is very tight. Of course, finally, the shipping distance to Asia is relatively short compared to, let’s say, LNG from the Gulf. All that together makes that the most carbon competitive LNG chain in the world by some margin. Could you come up with any examples, Steve? I think the best example is when we think about how we're building our power business. There is some parts of our power strategy or the power industry which we've clearly decided we don't want to participate in. Either we don't want to participate in coal generation or commercial constructs which are underpinned by long-term coal contracts. We do want to participate in renewables. Clearly, there's a very attractive opportunity for us to participate in gas-fired power when it's replacing coal or replacing oil-fired power, particularly in island markets. There may be other cases where we don't think gas-fired power is sustainable. It very much drives our thinking and therefore individual deals that may or may not fit the strategy. No, I agree. In the power business, it's clear. Okay. Go ahead. Yeah, I was just really looking to clarify. Was there anything in the existing LNG world, meaning that LNG Canada obviously scores well? Was there an LNG project out there you wouldn't want to buy the gas from because it has a poorer score on the CI side? If there's anything as you kind of rank them globally, you don't have to give us a name, but is there, "Boy, I really wouldn't want to buy from supplier X because it doesn't score well"? Are we still a few years away from that where clients are going to say, "I don't want that gas because it doesn't score well"? I think that's definitely coming. We haven't seen that in the market yet, although we have customers who want to know what the CO2 concentration is of the gas and energy produced. I'm not aware that we've turned down an LNG supplier for that reason. Of course, we own a few pretty old plants. Being one of the founding fathers of the LNG industry, Brunei LNG got going in 1974. Now, of course, much of it has been rejuvenated and replaced over time. It's an example of an LNG plant that doesn't compete with LNG Canada, shall we say, on its footprint. The answer is no, but it is a really good question because I think that question is coming in terms of what do we continue to accept, but also what particularly and even more relevant, what do our customers continue to accept? Thank you. John, do we have any more questions? It appears we have no further questions over the audio, sir, at this time. Let's give it a minute unless we have exhausted this crowd. If so, I really want to thank you for spending time with us, particularly if you joined us for the two meetings. It's one of the first where we had first the outlook, which is an industry outlook, and then the Shell specific meeting. I realize that takes three hours of your time. We still like to keep the outlook as an industry product rather than something that is a Shell story. We welcome feedback on that setup from all of you, and we certainly welcome the high level of interest that you've shown in our business. We look forward to continuing to stay in touch as Steve and I continue to drive the LNG business in Shell and of course, alongside it, the power, the hydrogen, the environmental product businesses to new heights for our shareholders, but also very much because we believe it's highly relevant to the energy transition in the world. Thank you very much for your time today and for your continued interest in Shell. We look forward to staying in touch. We wish you a really good rest of the week.