Welcome to Shell plc Full Year and Q4 2021 Results Announcement Q&A. Today's session will be recorded. People dialed in, if you have a question, please press star one. If you wish to be removed from the queue, please press star two. Phone callers are requested to mute the audio on their computer webcast and listen attentively to their telephone audio as we begin to progress through the telephone questions. Well, welcome, everyone, to the live Q&A on Shell's full year and Q4 2021 results. We continue to deliver strong cash flows and earnings while we are progressing our transformation into a net zero emissions business. This performance is, of course, the result of the strength of our strategy delivery and our portfolio. That's what we call powering progress profitably and purposefully. Now today, Jessica and I will be answering your questions. Please could we just have one or two each as usual. With that, could we have the first question, please, Cecilia. Thank you. The first question comes from Oswald Clint from Bernstein. Please go ahead. Good afternoon. Thank you very much. Ben, could I ask one, just one question to you. It's really on one of your slides today, you're talking about 5,000 businesses seeking net zero. It feels like to me that, you know, majority of these don't really have a good idea how to get there physically, and it's clearly a massive opportunity. You know, we've gone as far to think of Shell as this future energy Amazon type platform. Perhaps I'm dreaming, but, you know, with that sort of context, I wanted to get you to describe perhaps a typical conversation you and your teams are having with these businesses at, you know, at the moment and really how you're thinking it, doing it profitably. Is these products you have on the shelf, or you're looking into products that you still have to make and the profitability is just not quite as clear. That's the question, please. Then, Jessica, please, if I could just ask about CapEx guidance this year, and specifically chemicals and products and the marketing divisions. Both of them look around $5 billion. Obviously depreciation's less than half of that number in both. I just wanted to get a sense of some of the bigger projects or investments or buckets that are in those two businesses this year. It feels pretty high levels of spend, and I just wanna understand, is it biofuels capacity? Is it EV chargers? Is it stations? Obviously, there's some M&A potential in there. If you could just, you know, talk about that, please, it'd be fantastic. Thank you. Yeah. Great. Thank you very much, Oswald. Yeah, indeed, 5,000 companies and of course, many more coming. Many companies, of course, have been very clear in their mind that they need to get to net zero and are ready to make that pledge, but not necessarily always quite knowing how they will get there. What we have been doing, Oswald, as I've said before, is we reorganized the company and we are now looking into the market on a segment by segment basis or sector by sector basis. These 5,000 companies and more, of course, are spread over a number of sectors, so the discussions will be different. If you're talking to an airline, you will have different type of discussions than when you're talking to a taxi fleet company or when you're talking to a tech company. Sometimes, of course, they are quite conventional discussions already. Well, you know, I buy lubricants from you, but I also want to do other things. Can you help me? Quite often, of course, it's then a matter of bringing the might of Shell to that customer and say, "Well, let me listen to your challenges and let me find out what solution would work for you." Sometimes these discussions of course run higher up in the company and all the way up to, of course, the EVP for that business or the director for that business. In some cases, I get personally involved talking to the CEO of these companies as well. If you want to do some strategic deal with Amazon, quite often it does require me to also get involved. The discussions are quite often in the discovery. Rather than us telling this as the solution that we have for you, it is more trying to find out what is the challenge that you need to overcome. More often than not, we find that we have a formidable range of solutions to bring. Quite often, of course, then meaning that we also have to take some bold actions by building the supply chain to that customer or seeing the new opportunities like in hydrogen, for instance. Talking to trucking companies about how hydrogen can help them out is great, but it does mean that we still have to deliver on delivering the supply chain, of course. It is a little bit variable. It depends a little bit on what type of company and what type of sector. It is a different type of dynamic than the dynamic that we had, of course, for our first 130 years, which was all about we can make these products, how do we sell them? It's just the other way around, and that's what we call customer back. Jessica. Great. So thank you, Oswald, for the question relating to CapEx and our guidance for the year. Just to make sure everyone's aware, we've indicated that CapEx for 2022, we're looking at $23 billion-$27 billion. We expect to be on the low end of that. That's a somewhat of a step up, but I think a modest step up from what we spent in 2021 around $20 billion. The first thing to highlight in this is that we want to grow our business, and Ben spoke a bit about some of the areas where we're looking to grow the business, but we want to do it in a measured way, and we want to maintain the capital discipline that we've established in the company over the last couple of years. We also get a lot more for every dollar we spend, and we certainly want to have that continue going forward as well. In terms of where that money will go and why the step-up that you're seeing in our chemicals and products business as well as our marketing business. Oswald, you touched on, I think, all of the main points that I would like to raise. In our marketing business, our mobility business, you'll see a step up in relation to our EV business. There's a lot of great things happening in that business as we expand our charge points around the world. We've made a lot of progress in China. We've made a lot of progress here in the U.K., and you know feeling very good about that business and looking to continue to expand that business to meet our ambitious targets for the middle of the decade. You also mentioned biofuels. That does show up in our marketing spend as well. We've sanctioned two plants, two HEFA plants, so that we can provide our own source of biofuels. Those investments will start kicking in in the next couple of years. As you mentioned as well, we are building out our sites in places like China, India, and other markets. Across that spectrum of our marketing business, that's what's contributing to that slightly higher amount of CapEx being allocated. In our chemicals and products business, the main contributor to that is our finishing up the Pennsylvania Chemicals project this year, which should hopefully be up and running by the end of the year. That's really the primary large piece of CapEx that you'll see in that part of our business. The rest is mostly around run and maintain. We're also doing some energy transition spend in that money, as well as we try and improve our own Scope 1 and Scope 2 emissions in our chemicals and refining portfolio specifically. Okay. Thanks, Jessica. Thanks, Oswald. Cecilia, who's next? Lydia Rainforth from Barclays, please go ahead. Hi. Good afternoon. Two questions if I could as well. The first one, Ben, on your start of year message, you talked about going faster, being bolder, being more daring. Can you help me understand what that actually means in practice? And is that different to where you were thinking a year ago? And then the second one, just come back to this idea of energy as a service and the 5,000 companies. Is the idea that that helps you build market share, or is it a case of actually if you're reducing emissions by, let's say, 1 million tons, that the margin for you would be $10 a ton? So almost trying to think about it as a carbon management business. Thanks. Great questions, Lydia, and thanks for reading my notes. I always read yours as well, of course. Bolder and faster, I said it in my end of year message. Of course, also very much meant for the staff in Shell. Why did I say that? You know, we have tremendous opportunities in this energy transition, but that do require perhaps a slightly different mindset. I talked earlier on about, you know, this customer back, and we'll talk about it in a moment as well. It also means that people have to think different about what is the opportunity and what risk, and how do I take that risk intelligently. Let me just give you two examples. Take, for instance, hydrogen. If we want to build a new hydrogen plant, you can't take the conventional approach of just saying, "Oh, let's do some analysis about market developments in this area and how can we build this up and what will happen, et cetera." The market isn't there. Does it mean that we then can adopt a build it and they will come attitude? No, not entirely, but maybe a little bit. Maybe we have to understand, can we shape that market as it comes into being? What risks can we take as this market is building up? What do we do with the hydrogen before all these customers start showing up with the hydrogen trucks, if that is what we are aiming for that, for the particular facility? You need to have a slightly different mindset. We talked about customers getting to net zero. Sometimes these discussions we have with customers about what do you need, what can we do for you, will also bring things out where we just say, "Well, yes, I think we can do that. We don't have that ready or handy for you, but we're happy to commit to it." That doesn't mean that we basically go short on everything. We can't do that either. You can take intelligent risks and say, "Okay, fine, we're ready to commit it. Let's work with that customer. How are we going to build that supply chain for that particular opportunity or customer need?" As I said, sometimes that requires a different sort of way of dealing with the challenges, the opportunities, the risks than we are used to, of course, in, shall we say, somewhat old world, where we basically had more conventional planning tools. Now, on your second question, which is very much related to it, Lydia. Yeah, if we provide energy as a service or if we do customer back, indeed, it does mean that we develop new types of customers as well. Does it mean that our share can grow? Maybe in some cases, yes, absolutely. But I predominantly still look at that as basically high grading the quality of our portfolio of customers and products. In years to come, we will find that we have to put real carbon constraints on the product portfolios that we put out there. We have to find good ways, and we are finding good ways, therefore, to reform the demand that we are serving from a higher carbon demand to a lower carbon demand, while at the same time actually upgrading the cash flows as well. That is what the energy challenge is all about for us. Therefore, making sure that people look at these opportunities as upgrade opportunities is as important, if not more important, than simply growing market share. Probably a little bit of both will happen, because before the market will completely transition to a low carbon market, it will just be adding low carbon demand onto the existing demand as well. It's a little bit of both, but for me, the high grading, Lydia, is the more important objective to pursue. Thank you very much. Cecilia, can I have the next question, please? The next question is from Martijn Rats from Morgan Stanley. Please go ahead. Yeah, thanks for taking my question. The first one I wanted to ask is, it's much more practical. We've seen huge rises, of course, in JKM LNG prices. I know that historically your LNG portfolio is largely built around oil-indexed contracts with, you know, S curves that we don't really know. Nevertheless, there is still a significant chunk that is on a spot basis, and we've seen a strong beat, of course, in Integrated Gas. The rise in JKM is so large that it's sort of not swamping any error anymore. I was hoping you could provide perhaps some commentary about, like, how if this is sustained, and forward curves does suggest that, how is this going to feed through into earnings over the next couple of quarters? I'd be most interested in that. Then secondly, I simply wanted to ask your assessment of how you see the recovery in oil and gas demand ongoing. As in you often, you know, sit on more real-time data than many of us. What is your assessment of how demand is coming back? It's not coming back. Where is it accelerating? Where is it stalling? I was hoping you could say a few things from a macro perspective. Yeah. Thanks, Martijn. Let me start with the second question. Jessica will take the first one. I think recovery of oil and gas demand, of course, is very much in evidence. If you just look at how fast, particularly the East, of course, has recovered, you can say it's booming. A 12% rise in gas demand in China. Tremendous pool there for LNG. Of course, many of these things have to do with just the tail end of the pandemic. But then, of course, also the drive for decarbonization, which I think we will see more and more of. A very important part of decarbonization is conversion of coal-fired power to gas-fired power, but also, of course, industry, residential heating, et cetera. Many of the demand drivers is not just LNG or gas for power generation. Two-thirds is actually non-power generation, and therefore general economic activity is also driving a significant part of it. I think the sector that stays behind a little bit, I would say, is more in the liquid side. So it is still aviation. I think many of the other liquid sectors, road transport, shipping are back, and we see actually quite a few constraints. If you look at the overall liquids demand, of course, you'll see, Martijn, that that is largely sort of restored to where it was from before the pandemic. I think the big point, of course, is not so much the demand, the demand recovery, it is actually how supply is lagging. Because in the meantime, of course, the industry has, with capital discipline, but also to preserve financial resilience, been quite parsimonious with investments. As a result of it, we actually see a significant struggle for supply to keep up with demand. I think that is going to be with us for some time to come. Jessica? Great. Martijn, in terms of the LNG industry today and what we should be expecting going into the first quarter, indeed an absolute standout quarter for our LNG business in the fourth quarter. Really great to see what that business, the portfolio and the capabilities of our trading and optimization team can deliver in these circumstances. It is relatively unprecedented, both in terms of the absolute level that prices have achieved, but importantly also the duration in which these high levels of prices have been maintained in the industry. That's really unprecedented. There's reason to believe that some of those dynamics could continue for the reasons that Ben had just mentioned. There are genuine supply issues that are being felt across the energy system, and that does put pressure on gas prices. We're certainly seeing that in Europe, and in LNG specifically, and that could continue for some time in terms of into the Q1 and Q2. In terms of Shell specifically, we managed extremely well during the Q4. Some of the supply issues that we had in the Q3 continued to the Q4, but the team worked hard in terms of managing some of those risks. I think we learned a bit from the Q3, and that learning from the Q3 and the innate power of our portfolio, and as I said, the capabilities really came through. Going from you know, almost $2 billion of earnings to $4 billion of earnings over that quarter was realized in two parts of the business. Part of that came through the asset side of the business and the other piece from the trading and optimization side of our business. It's not just an entirely trading story that you're seeing in those earnings. It's also the positive effect of the macro environment on our assets as well. That should continue. The trading and the optimization piece is a bit harder to predict. It is very dependent on the circumstances in the market and the timing of cargoes, et cetera. Again, the team did a stellar job in the Q4 of really optimizing that. I'm optimistic that can continue through the Q1, but we still do have some supply challenges that we're continuing to manage. I think most of those will be behind us by the end of Q2. I think there's favorable conditions for the first quarter, certainly from our asset perspective. The trading side, again, I think we proved our strength in Q4, and I hope the team can achieve perhaps not quite the same levels, but almost the same levels in the Q1. I think the conditions are there. I will point out, though, there's two things that are playing out. In the Q1, we have maintenance in Pearl in the Q1, so please keep that in mind. Of course, Prelude, we're bringing that back online after having a power interruption issue in the last quarter. Okay. Thank you, Martijn. Bear in mind also, of course, that in February we will do our annual LNG update. Wael will be hosting it together with Steve. Please reserve some questions for them as well. Cecilia, who's next? Biraj Borkhataria from RBC, your line is open. Hi, thanks for taking my questions. First one's on the buyback. You know, on an underlying basis, excluding the Permian proceeds, looks like you're at the top end of the 20%-30% payout on cashflow, using the last four quarters as a reference point. I suppose if the macro holds, the cashflow numbers move up. But can you comment on your thinking on how you're deciding where you fit in that 20%-30% range? Presumably debt will keep moving lower, so the balance sheet's not a constraint. But I'm just trying to understand how you as a management team and a board are thinking about it. The second question is actually on your balance sheet. You're sitting on $36 billion of cash, and I think you've repaid some debt in the Q4, which resulted in some penalties, but I suppose in the grand scheme of things still made sense. Just conceptually, sitting on that much cash in this environment seems a little bit odd. I'm just trying to understand your thinking there and whether we should expect any early repayments for 2022. Yeah. Thanks, Biraj. I'll bite off the top end, and then most of it will be answered by Jessica. I think you worked out the percentage correctly. It's when we said it's higher up in the range. It's somewhere between 29% and 30%. Well done there. And of course, you have to bear in mind this particular financial framework was set out when there was a different outlook that we were facing. Let's first of all deliver that first half of the year. We've been very clear about what we want to do. Also bear in mind, of course, at this stage, buying back $4 billion per quarter is probably sort of the maximum run rate that we can do, unless we ask for permission to also buy off market, which is something that we are indeed considering. Then let's indeed take a look on how things play out and whether that upper limit is still the right way to think about it. We have said we will pay out on a historical basis, so we don't pay out prospective cash. We pay out cash that we have earned. I think therefore it's appropriate for you to just wait a little bit until we are at the cusp of Q2, and we come back to you with what's going to happen next. Jessica, quite a few more questions unanswered, so why don't you take them? Thanks. Thanks, Ben. And thanks, Biraj. Indeed, 2021 was, you know, an exceptional year for us in terms of cash generation and, you know, $55 billion of CFFO excluding working capital, $40 billion of free cashflow, $27 billion of organic free cashflow. These are, you know, obviously material amounts being generated by the company, reflection of the strengths of our portfolio, the strengths of our operational excellence and our performance really coming through, particularly in IG and Upstream in the last quarter. That has put us in a very different place than where we were just a year ago. We've paid down our debt by some $23 billion. I can honestly say we didn't anticipate that. We were still in the 40s in terms of Brent prices as we were leaving 2020. We're in a very different place than we expected, a very strong place, financially. That does set a different context in terms of how these decisions are being made, whether it be the level of share buybacks, our CapEx levels, and the balance sheet levels. I think the balance sheet right now is very strong. We're comfortable with where it is, so it is less of a priority. Strength is always a priority, but in terms of needing to allocate disproportionately to balance sheet, I think we can step a bit back from that. It's more a question of how we want to prudently, appropriately, in a measured way, grow CapEx, and that's why we're at the lower end of the range of $23 billion-$27 billion. The share buyback, which Ben just spoke about, we, you know, considerable cash being generated, and that's what's really driving the $8.5 billion share buybacks that we've outlined for the first half. The level of cash that we have on the balance sheet is a reflection of where we were a year ago and being well prepared to manage any volatility and any risk and ensure the financial resiliency of the company. Again, we weren't anticipating Brent reaching $90 this year, and that's what the balance sheet reflects and the cash levels reflect. We did do some early redemption of debt that caused an interest expense that shows up in corporate this quarter, which some of you have may have seen. It was a positive NPV transaction for us. We will continue to look at opportunities to optimize the balance sheet, optimize our cash levels, and if we see similar opportunities, and we may in fact do that, but we'll do that. We'll let you know when that happens, rather than through kind of indicating that prospectively. I think hopefully I've given you a sense of some of the considerations that we're making across the spectrum of capital allocation. Thanks, Jessica. Thanks, Biraj. Cecilia, who's next? Irene Himona from Societe Generale, please go ahead. Thank you very much, and congratulations on these excellent results. My first question relates to what Jessica just talked about, the capital allocation priority number two, which is net debt supportive of credit rating. You mentioned that, Jessica, that it's not that much of a priority. Just obviously thinking ahead, and in this price environment, you will continue to generate very substantial free cash flow. We are, however, towards the high end of the cycle, even if the cycle lasts a little bit longer. How should we think about That was my question. How much lower would you want gearing, for example, to be at the top end of the cycle, given that you've managed to reduce it so far last year? My second question was on your approach to asset disposals. In this extraordinary price environment, it's quite likely that price views will begin to diverge. Others might see more value in some of your assets than you judge them to be worth to you. Would you contemplate some other additional sizable asset disposals driven by value creation should someone offer you a good price? Thanks, Irene. Let me take the second one, and Jessica, if you talk about net debt and the position in the cycle, which is an interesting perspective as well. Of course, we always look at asset disposals, Irene. We have to take a view on how do we keep our portfolio fresh, which are the assets where we believe they are better off in the hands of others, and where do we believe we want to put our new investment dollars. Is that in continuing to harvest the value left in an asset or are we better off building a new asset, which has longer running room? We always look at it throughout the cycle. We permanently manage a funnel of $10 billion-$20 billion of divestment prospects, which we can activate, pull forward, push back, depending a little bit on where we are in the market, and the cycle. Yes, you can expect us to continue to work on divestments. Not quite at a $15 billion level, I would say, every year. Across the cycle, work with an average of $4 billion per year is not a bad place to start. Indeed, with a very strong macro, it does make sense to think harder. Is this the moment to harvest some of the late-life assets that are probably better off in the hands of others? Jessica? Great. Irene, thank you for the question. In terms of balance sheet strength and kind of the ultimate destination, as I mentioned, we're really pleased in terms of the improvement that we've seen on our net debt over 2021, down some $23 billion, as I just mentioned. We're, you know, much further ahead on that journey than I expected us to be a mere 12 months ago, so we're comfortable with that. Now, a bit more strengthening is not a bad thing. It certainly gives us financial resiliency and flexibility. If nothing else, in the last 12-24 months, we've seen how quickly the macro can change from one direction to the other. I would. While you know it all feels quite buoyant right now, you know, six, 12, 18 months from today, we could be in a different position. Of course, that's what we always need to keep in mind with respect to our balance sheet and kind of not get too far ahead of ourselves. I think we'll look at it quarter by quarter before really making any kind of material adjustments to our capital allocation framework. I think we're in a good place. As I mentioned, the current macro and the current performance of the company will give us, you know, I think, a lot of optionality, if you will, with respect to shareholder distributions. That's a great place for us to be. On the capital side, it does give us more room to grow CapEx, but we're clear we wanna maintain our capital discipline. We want to grow in a measured way. We want to prove our business models while also being bold and ambitious, but trying to get that balance right. Not getting too caught up in the moment when things are really high, and similarly not getting too caught up in the moment when things dip down as well. I mean, that's our job. Our job is to work through these cycles, and I think we're in a great position right now in terms of managing volatility, and importantly, being able to fund the energy transition and help transform the company. Thanks, Jessica. Thanks, Irene. Cecilia, who will be next? Our next question is from Michele Della Vigna from Goldman Sachs. Please go ahead. Ben and Jessica, thank you, and congratulations. I had two questions. The first one is about the EU green taxonomy. It will start to be applied this year in terms of taxonomy-eligible revenues and investment. I was wondering if you could give us perhaps an early indication of where you think you're likely to score in terms of percentage there, given how important this is going to be for the ESG strategies of so many European investors. And secondly, cost inflation is the theme of the moment. It's emerging across many industries. It seems like so far in oil and gas, the only area of really material inflation is U.S. onshore. I was wondering if perhaps there are other areas that are concerning you at the moment. If we look at your CapEx increase, which, you know, your guidance is about 15%-20% in 2022, how much of that is activity versus price increases? Thank you. Thanks, Michele. I'll take the second one, and Jessica will talk about the EU green taxonomy. We see some price inflation as well. Of course, most of the price inflation that is being talked about today is, of course, in cost of living and clearly driven also by energy prices. If you look into our supply chain, though, it's a slightly different story. I think probably where we see most of the supply chain cost inflation is actually in the renewable space. So wind turbines, significantly up, but also battery costs. We see the raw materials there also being significantly affected by inflation and supply chain. That's something that we are watching very carefully, because of course, quite often you bid on projects, where you have to take a view on how costs then subsequently will develop as well. That's probably the most significant part. In other parts of the supply chain, depending a little bit where you look in terms of steel or construction cost, other materials, yes, there are inflation percentages, but most of them, if I analyze it a little bit further, it is actually more base year effects. In other words, we come off a year where we had a lot of cost deflation because of lowering activity, and now you see a little bit of a recovery. Yeah, you may be looking at an 8% rise in costs, but that's off a 7% drop in cost last year. That's most of what we see in the more conventional supply chains. If I then look at overall unit operating cost, we are still quite confident that we can continue to drive costs further down from where we are today. We don't see that inflationary aspect in the supply chain coming through into our cost of operations. On the project side, actually, the step up that we are talking about, which is a moderate step up, of course, is predominantly activity. We want to allocate more capital to certain parts of our portfolio. That is not cost inflation. That is simply because we want to do more. Also there, we are quite confident that with all the changes that we are pursuing in P&T, we can continue to drive down costs further. We don't think we are back at where we need to be or where we were two decades ago. Also there, more running room to come. On the first question. Yes. On the EU taxonomy, first of all, as you're likely aware, Michele, and 'cause I know you know the subject well, I've read some of the reports you've written on the EU taxonomy, which I think were quite good, by the way. As a PLC, we're not actually subject to the requirements of the taxonomy, but nonetheless, we have had a team in place working to prepare disclosures according to the taxonomy. Once again, as you're likely aware, there's a lot of important details that haven't been sorted out, both in terms of the scope of what's in the taxonomy, but also how to actually practically apply some of the concepts. Nonetheless, we're working through all of that, and I would expect there'll be. We'll be providing disclosures on that over the course of 2022 and bringing some of that into our annual report as well. We're fully committed in terms of making sure we understand the intent of it as well as being able to represent our business in that context. It's another important way of describing or understanding how the world needs to move to a green future. It's an important piece of it, but there's a lot of details that need to be sorted. Importantly, we'll have to see how the market responds to it. If the market thinks this is a good way of considering whether a company is on the right path or not, part of the challenge that we have is that there's a lot of very worthy efforts out there that are trying to determine whether companies are on the right or wrong side of the greenhouse gas reduction agenda. Of course, we think we're very much on the right side of that and are trying to drive it with our absolute emission targets for Scope 1 and 2 and our intensity targets, where we believe we've taken the full scope into consideration. We'll continue to report across that breadth. But as you know, as society, we'll have to figure out what's the best way for really assessing a company and a company's performance. Taxonomy, I expect, will be one of the important considerations in that area. Thank you very much, Jessica. Maybe another point to bring in here, which I think is quite important. In determining whether a company is Paris compliant or not, quite often, the focus on just capital spend is just incomplete, just inappropriate. It is actually not just the capital spend, it's also the operating cost. Because much of our green agenda is much more OpEx denominated than it is CapEx denominated. If you add it all up, OpEx and CapEx, we spend about $55 billion a year. More than a third of that we actually spend on the green agenda. I think that's an important point to bear in mind as well. Anyway, thanks for the question, and more to come on this one. Cecilia, can we have the next one, please? Our next question is from Roger Read from Wells Fargo. Please go ahead. Yes, I guess good afternoon, good morning on our side of the pond. I'd like to hit on two things. One, a question on execution just within the existing operations. Obviously, you know, we've had things like Prelude that have had hiccups. I was just curious, though, as you look across your overall portfolio and with the, I don't know if I'd call it above normal, but, you know, relatively heavy level of maintenance coming in Q1, how that should be considered. Then the second part is to follow up on one of your comments from earlier about real carbon constraint. I was just curious, what does that really mean to you? Is it, you know, a global price of carbon? Is it piecing together all the regional markets? Is it a tax, a credit? Just, you know, kind of what your thoughts are and what would be the best approach overall. Yeah. Okay. Thanks, Roger, and good morning to you. Let me take the second question. Jessica, if you want to take the first one, including the one on Prelude. I think, Roger, when I talk about real carbon constraints, it is making sure that we as a business can grow our cash flows while at the same time reducing our carbon footprint. Sometimes indeed we will be helped by, you know, a carbon price that may exist in a market where our customers are indeed being encouraged to take low carbon energy products, and therefore we can supply them to them, and therefore we can decarbonize while still growing our business with them. In some other areas, that may not work like that. Take, for instance, the example of aviation. In my mind, putting a price on a ticket or even putting a price on jet fuel is just not going to decarbonize the aviation sector. What needs to happen there is that we will have to have regional and ideally global mandates on the amount of Bio-jet that needs to be blended into the jet fuel pool. What I would love to do, when this process gets underway, and of course, we are building our Bio-jet plants and some jurisdictions are indeed now introducing blending mandates, but only, you know, small mandates, 5% of Bio-jet by 2030, which is just not enough if you consider it in the bigger scheme of things. What I would love to do is to give our aviation business the task to grow their business, but with a lower carbon footprint. You figure out together with your customers how we are going to bring competitive biofuels to market in a way that they want to buy, need to buy, work together with regulators, making it happen, et cetera, et cetera. A similar story I could tell, for instance, for the heavy-duty trucking sector, where I would love to have our trucking business figuring out, how can I grow my business without just selling more diesel. Can we somehow find ways and means to sell bio LNG, hydrogen, biofuels in general, and how do I work together with my customers and maybe with regulators, depending on which jurisdiction we are working in, to grow that business. At this point in time, it is a shift from, well, if the opportunity is there, we may actually take advantage from it, to how do I make sure that this opportunity will come? I'm the one shaping it, and I'm actually the one building the customer loyalty and the solution space and the infrastructure very early on in the journey, so that we have lock-in of future profitability. That is what our strategy is all about when it comes to pursuing net zero. We have this strategy on a sector-by-sector basis because it will be different, again, sector by sector. I hope it helps a little bit, Roger, but I'm sure we will be coming back to this in future calls as well. Jessica, operational. Good morning, Roger. In terms of operational performance, operational excellence is a priority for all of our businesses across Shell, and you would find for every business, every asset, there is an ambition to move to top quartile performance to the extent that they're not already there. That is a clear focus for our business. It's one of the main drivers of value. You saw that commitment to operational excellence in our numbers in the Q4. Particularly in our upstream business, what you see is earnings and cash generation that are much higher than they were, say, just a few years ago in a comparable price environment. There's a portfolio piece to that, our value over volume strategy coming into the fore, that's contributing to that outcome. Importantly, it's been a focus across all of our assets to really get the most out of the performance. The recovery from Ida in the Gulf of Mexico, which I mentioned in the video, I think is an excellent example of the capability of Shell to deal with extraordinary kind of unplanned events and bring those assets back online safely, on time and under the expected cost of recovery. Similarly in IG, you know, very strong performance across the portfolio. The challenges we've had in IG have largely been around gas supply, which is different than kind of an operational performance issue, and it's been primarily from third parties. It's not really Shell per se. We own it, we've got to fix the problem, but it's not a kind of operational excellence issue for us in IG specifically. Now, there's a couple other pieces to that in terms of performance. It's not all perfect. Prelude, we had an event in the Q4 and an electric event that was very kind of specific. It was not kind of a process issue or kind of a wider operational issue. It was kind of equipment failure. That will take us some time to work through and get that back online safely. Safety is always the first priority in terms of responding to occurrences like this. I'd say on the whole, those types of issues across our portfolio have been declining over the last few years. If you think about the Q1 of 2021 and some of the maintenance that you referred to, what's happening there is we have in Pearl a scheduled turnaround. It was completely planned. That's normal for that asset, so there's nothing extraordinary there. I've mentioned Prelude and getting that up and running. Then we have in our refining business, Norco, which was impacted by Hurricane Ida, that's been a bit harder for us to bring back online. Then at Scotford, we had a turnaround also that affected us in the Q4. I think on balance, you know, there's a couple soft spots, but on balance, I think very strong performance in the fourth quarter. In the Q1, for the most part, it's about planned activity, which is a kind of normal what you would expect with the scale and scope of the company. Excellent. Thank you very much, Jessica. Roger, thank you very much. Cecilia, who is next? Our next question is Christyan Malek from JP Morgan. Please go ahead. Thank you. It's Christyan Malek. So hi, Ben and Jessica. I hope you and your families are well and move to London's been smooth. So two questions. The first question relates to slide 18. Maybe this sounds cynical, but if I had no idea about the company and simply looked at this slide in isolation and measures capital allocation versus cash regeneration. I'd wonder why you aren't increasing your upstream CapEx to generate more cash, especially given it represents 50% of total CFFO. I mean, surely you'd want to take advantage of prices being backwardated, your reserves ratios are improving. I'd sort of say in the context of generalist concerns that renewable energy simply can't make money over long-term, given how much CapEx, you know, how much money or capital is going into it. That's the first question. The second question pertains to the 20%-30% range and absolute quantum of cash return, you know, in 2025 and beyond as Shell pivots the business through transition. While your current yield is fantastic, and congratulations on delivering, I'd like to ask how sustainable is it if you plan to move to a effectively sort of lower returns business? It might be kind of unfair way to put it, but I get a lot of, you know, sort of questions from global PMs asking, "How do you think you can compete with the U.S. majors on cash return over the medium-term who are very long oil and gas, and by definition, can generate premium cash flow?" Thank you. Thanks, very much, Christyan. I'm afraid I have to disagree with you on a few points, namely, that you can't make money in renewables. If you define it very narrowly to renewable assets, it's maybe one story. Of course, we don't necessarily invest in renewable assets to be supplying the commodity or the merchant market in a particular country or region. We want to build an integrated business, which I said works from the customer back. Many a time, of course, the opportunities are there for the entire value chain. Building a hydrogen business, if it will be high return, is not necessarily the return I can make on the electrolyzer. It is the entire return that we will be able to make in serving the trucking business in Europe, for instance, which is made up of many more component parts than just the naked asset. The other thing you have to bear in mind, of course, is that yes, you may look at individual projects, and we may have a differentiated return requirement for certain projects over others. For instance, yes, higher for upstream, maybe lower for some of the marketing and also energy transition projects. That simply is because for every successful project that we execute in upstream, there are also significant costs that are non-recoverable. In other words, we have to deal with dry holes. We have to deal with the fact that projects sometimes can disappoint because of the subsurface being disappointing. Many a time, of course, the investment decision that you take in an upstream project, you make after a significant amount of cash has already been sunk in it. You have to look at full cycle economics here. What we are sharing with you is the economics forward-looking at the sanction decision. I do believe, certainly that if you take a risk-adjusted approach, that the way we have competition going on for capital, it is actually a level playing field. It is not just investing in assets, it is investing in building businesses. Now, you're absolutely right. In today's environment, many of the short cycle projects that we are doing and tiebacks, et cetera, have a much better prospect, and that is also where indeed we are allocating capital too. In the long run, we also have to build a business that is fit for the future, so the company is fit for the future. That is also a focus we need to have. We cannot have that focus on a cyclical basis. We just say, "Well, you know, today it looks good, tomorrow not anymore." Therefore, look through the cycle, look across the entire value chain, look at life cycle cost and look at a risk-adjusted basis, and then indeed you come to the right conclusions. Thank you, Christyan. Cecilia, who is next? Our next question is Lucas Herrmann from Exane. Please go ahead. Yeah, thanks very much. And Jessica, thanks for the opportunity. A couple if I might. Can I push you a little bit on Pearl, just in terms of the timing of the, or the duration of the maintenance program? And I presume that the vast majority of the guidance you've given for reduction in volumes in Integrated Gas is associated with Pearl. So in short, is this going to be down for a quarter? And is this, you're operating on one train this year and you'll look to undertake maintenance on the second next? Just to give me an idea, 'cause obviously it's a very large cash flow asset. And secondly, can I just ask how much... I mean, going back to the CapEx observation that Christyan made, I mean, actually I'd probably go the other way, Ben, in that it strikes me that, you know, CapEx last year in your Upstream was $6 billion. You're guiding towards $8 billion this year. The Permian has fallen out, which must have been a considerable few hundred million. It's more around, you know, where is the incremental spend actually going? What are you driving it towards? Is it predominantly short cycle? Some more explanation if possible. That's it. Thank you. Thanks very much, Lucas. I'll leave Jessica to talk a little bit about the Pearl details because I do not have them off the top of my head. For a moment, I was thinking you might ask, why don't you defer it when the prices are right. Of course, these are unbelievably complex logistics operations that you have to put together for such a large turnaround event. You cannot quickly move it around, you plan it, and then that's the end of it. But we'll get back to you with a bit more detail. Hopefully, Jessica has that, too, to hand as well. I think we've been very clear. We will invest roughly $8 billion in upstream. Indeed, you're also right that that then doesn't include anymore the Permian. We have plenty of good opportunities to invest in. Now, where will we go? Mostly in the core assets. Again, we have said 80% of our spend is in the core assets, and that is no different for 2022. Therefore, yeah, expect more to go into deep water, where we have quite a few good opportunities that we are executing on and maybe a few more to come. It will also be, hopefully, in an acquisition of new activities that we can continue to invest in. So it is. Is it short cycle? Well, to the extent that you call deep water short cycle, perhaps it is. I again have no hesitation to say that by getting out of the Permian, still allocating $8 billion to upstream, we will simply high-grade the spend to those areas where we believe we have most of the running room. Jessica on Pearl? Sure. Touching on some of the statements I made earlier. For the outlook for the Q1 in 2022 for integrated gas, the volumes are being impacted by both Prelude and Pearl. Those are the main drivers. Pearl should be mostly through the Q1. I'm not expecting kind of more material impacts beyond the Q1 from a Pearl perspective or in the portfolio perspective. I mean, those ongoing maintenance that happens throughout our asset base. But in terms of Pearl, I'm not expecting that to be significant for the whole year. Of course, we've got the quarterly update note that we'll provide as we go into the first quarter, and we'll provide any more insight should there be any further updates at that point in time. For Integrated Gas, it's really those two assets. Of course, Pearl is not LNG-related. You, I'm sure, know that already, but just to make sure that everyone on the call has that in mind. It's the GTL asset and the Prelude asset which does affect LNG volumes. Thanks, Lucas. Cecilia, who is next? Our next question is from Christopher Kuplent from Bank of America. Please go ahead. Thank you very much. Good afternoon, everyone. Can I just continue along Lucas's lines, please, Ben, and actually make the point that it seems your 1%-2% per annum production decline outlook is indeed still here after taking out a considerable chunk from the Permian. I wonder how you would address that particular point that you're spending more, but yet your overall volume outlook appears poorer. A question again on CapEx, but elsewhere. Jessica, you talked earlier about Penn Chem obviously swallowing up a significant chunk of your chemicals allocation for this year. What are your thoughts beyond 2022 for chemicals? I remember a few years ago you were talking about sustaining capital in chemicals to be significantly below $2 billion. I wonder whether you can comment on that. If I may, even if it's just a short yes, any excess cash flow from higher oil and gas prices in particular, who knows what's to come, Ben, I assume you continue to have a preference for using more buybacks, even though you are already at the maximum, or are you indeed suggesting that dividends could go up faster as well? Thank you. Yeah. Thanks, Chris. Let me take the last one quickly then. That is a short yes. As I said earlier on, I realize maybe I need to deepen that comment a little bit more. We can do more buybacks, of course, now that we are unifying or have unified the two lines of shares, so we roughly double. That gives us about $4 billion a quarter. I think it would be good if we would have more freedom. We are looking at bringing a resolution forward for our AGM to see whether we can also buy back on the Euronext, for instance, which will give us almost a doubling of that number again. Therefore we can do a whole lot more, particularly if it needs to be concentrated, for instance, in one or two quarters. Yes, if the opportunities are there, I still believe that our shares are undervalued, and therefore it does make sense to return in the form of buybacks. That may, of course, change over time, but not at this point in time. I think on your comment, yeah, it doesn't quite work like that now that we have the $8 billion, but minus the Permian, 1 to 2 somehow changes. I think by and large, we mean to signal here, there will be a gentle decline in the volumes in our upstream business as this business indeed is being, over a very long period of time, harvested well into the next decade, by the way. But at the same time also, as we drive this business with a value over volume approach. Again, I think we started talking about value over volume, about nine years ago, and it's still very much alive, and you see the effects of it. Today, we are producing a materially better result in our upstream business, with, at comparable price levels that we saw, for instance, in 2018, with significantly lower volumes. Indeed, it is a continuous high grading of the business, making sure that this is also a business that continues to deliver the free cash flow that we are going to need to, of course, fund shareholder returns, but also to fund the rest of the strategy. Yeah, the 1%-2% is still there, even though we have taken, of course, a bit of a step down with the Permian divestment. Jessica? Good. Yeah, I would say the 1%-2% is from a lower base. It's picking up from the Permian volumes coming out, so it's not entirely apples to apples to the prior 1%-2%, which was at a higher number. Just to so that's clear for people. On the CapEx side and what's driving the CapEx levels in our Chemicals and Products businesses. As you mentioned, it is the Penn Chem, finishing that up in 2022. There's other important investments we're making. We're investing in plastics-to-chemicals. That's also driving some of the CapEx. We're continuing to look at growth opportunities. There's other energy transition spend that we're doing because we're looking to drive overall carbon profile of the company to a very different place. We think ultimately that's gonna become a competitive advantage for us as well. On the refining side, which is in those numbers as well, we're continuing to repurpose those assets as well. Part of that is supporting the HEFA and the creation of biofuels. But across kind of the spectrum, also our hydrogen agenda, which is getting played out in places like Rhineland, those are also coming into these numbers. For refining, it's about repurposing for the future, for the energy parts of the future. For chemicals, it's the Penn Chem, plastics-to-chemicals and other energy transition spend on top of the normal maintenance that you would expect in the portfolio. Okay. Thanks very much, Jessica. Christyan, thank you for that. Thanks very much. Can we have the next question, please, Cecilia? The next question comes from Alastair Syme from Citi. Please go ahead. Hi. Thanks for the opportunity. A couple of questions. In 2020, you know, my understanding is you undertook a major restructuring that was labeled about, you know, repositioning the company for the energy transition. You know, there are press reports out there that suggest that some of your high level management that was put in place then, you know, sort of barely a year later, seems to have departed the organization. So I just wanted to understand what's going on and whether maybe you're struggling to maintain, you know, holding on to talent in what's a pretty hot market area. Then, Ben, I just wanted to pick up on your earlier comment about, you know, lifecycle costs and maybe talk about that in the context of ScotWind. You know, my understanding is there's not gonna be a return on that until 2030. You know, paybacks may be another 15 years after that. How can you give investors, or how do you think you can give investors confidence on lifecycle costs when you're not gonna be $1 in the money until maybe the mid-2040? Thank you. Yeah. Thanks very much, Alastair. Indeed, you know, we will have to learn the concepts of lifecycle cost also in different types of businesses. I can tell you already the amount of exploration we will do in the wind space in ScotWind is going to be relatively minor, and it's going to be, of course, significantly less expensive as well. Yes, some of these projects is building a funnel that will be able to last us for many years and decades so that we have a backlog of projects to work on. Of course, the trick will be to have a funnel with relatively low maintenance costs so that we can take these projects off when we are ready to pursue them or when we need them without necessarily incurring a lot of costs. Unlike, of course, many of the upstream projects, where quite often between taking the license and taking the FID is a decade, and that's not a cheap decade. We spent a lot of money in that decade doing seismic, doing exploration, doing appraisal, quite often doing two or three designs, et cetera. By the time you are ready to take your investment decision, of course, you have spent a significant amount of sunk cost, which is the reason why we have a higher hurdle for projects that are being sanctioned at that point in time. That will be different for projects like ScotWind, where by the way, we are very pleased that we have been able to win that 5 GW wind farm for our floating technology. On the talent, indeed, we did do a significant reorganization reshape. We think we've taken out well over $2 billion of cost structurally, a significant amount of staff as well, unfortunately. Indeed, we have also repositioned the structure of the company. I think you're referring probably to our power business and particularly to the departure of Elisabeth Brinton. Let me be very clear. I recruited Elisabeth when she came in as the head of strategy for power, and I was very impressed with the work that she did, and therefore I appointed her as the Executive Vice President for our Renewables and Energy Solutions business when that position came up. I think Elisabeth has done a very good job. She has taken that strategy, turned it into much more of a reality. Indeed, at some point in time, another opportunity and a change in her priorities in life came along back in the United States. You know, we depart on very good terms. I'm very grateful for the contribution that she has made. Now we move into the next phase. What you will have seen is that we have replaced her with actually two executive vice presidents. We have a very strong person that we recruited from Ørsted, Thomas Brostrøm, who will be looking at the generation part of that business as an EVP. Then Steve Hill, who you will be familiar with also from our gas marketing business, who actually also did the power trading. He now takes care of the marketing side, both on the gas and power side. We have a very strong dual-headed approach for the entire value chain here, building on the legacy that Elisabeth will leave behind. There is nothing more to it. Can I have the next question, please, Cecilia? We will now take our final question today from Jason Gabelman from Cowen. Please go ahead. Good afternoon. Thanks for squeezing me in. I just wanted to ask first another one on the financial framework. If I'm reading between the lines, it does sound like you're reassessing that a bit now that you maybe are a bit more confident in the market outlook. Are you specifically looking at what you're gonna do on cash returns as a percentage of? Sorry. Hey, yeah. Can you hear me? I can hear you, but you cut out a little. Would you mind going once over the question again, Jason? Apologies for that. Oh, yeah. Sorry. Yeah, no. Sorry for that. Yeah, I just wanted to ask on the financial framework and specifically the cash returns. It does sound like you're reassessing that now that you're a bit more confident in the market outlook. Is that a fair assessment of your comments today? When do you think you'll have a decision on if there will be a change on the cash return metrics based on cash flow from ops? My second question is on something that wasn't discussed. There's obviously a proposal out there for Shell to break into different parts, and Shell has said, you know, we see a lot of value in the integration of the business. Have you studied that more in depth since that proposal came out? What's the response been from shareholders to that proposal? Thanks. Yeah. Thanks very much, Jason. By all means, we're not squeezing you in. We're happy to take your questions. Let me take the second one on Third Point, and Jessica will talk about a little bit more about what we meant by the comment on the financial framework. Let me first of all say congratulations to Third Point and Dan Loeb for an excellent moment in which they stepped into the stock and the results that they no doubt are enjoying at the moment. That was a very smart move. Of course, we were a significantly undervalued company, and by the way, I still believe that the share price has more running room ahead of it, of course. Now, we have been talking to Third Point. We have listened to what the ideas, which by the way, are ideas for us also to build on. By the way, we do this all the time with all shareholders. What ideas do you have? Where can we improve? Many a time, of course, individual shareholders will see some of the moves that we make or some of the changes that we made or some of the disclosures that we did or some of the other activities that we've done, that they will see back that actually that was exactly what they were proposing. There is therefore no difference in terms of how we deal with Third Point. I do believe we have to look at why is it that there is still a gap from what I believe is the full valuation of our company versus what is the current enterprise value. We have to then weigh that also against, you know, what would be the pros and cons. Yes, indeed, are we studying ideas like this? Yes. But then again, we more or less do this all the time. We continuously reflect on what we hear back, and we incorporate some of these ideas or new insights in our strategy going forward. That's all I can say about it at this point in time. On your second question, have we heard from many other investors the encouragement to break up? No, not really. It... Again, it doesn't mean that we shouldn't be looking at how more and how better can we make sure that our total value is best reflected in what you see in our shares. Jessica? Jason, thank you for the question on the financial framework. One of the points I wanted to get across today was that the current framework that we're operating within was conceived in very different macro environment. We've generated far more cash in 2021 than we certainly had planned for, and we'd strengthened the balance sheet at a pace much faster than expected because of the macro environment and because of the performance of the company. The 20%-30%, there's a bit of a balance we need to strike, which is, on the one hand, we wanna provide a clear, consistent framework that shareholders understand, that the market understands, and can help frame the way we're thinking about capital allocation on the one hand. On the other hand, we obviously need to respond to the market that we're in, and we're in a very favorable market. The distribution profile that we've announced today in terms of the first half of 2022 reflects that very positive macro environment as well as the positive performance of the company. What I would say is that, obviously, we do reflect on the reality of today. There's nothing kind of new to announce. I think when there is something to announce, we'll do it. The 20%-30%, you know, if anything should be considered a floor, that's the minimum we would do. There certainly wouldn't be anything that would stop us going over 30%, but that is a decision for the board. If the market continues to be as it is today, I think there is reason for us to consider different allocation. I think we need to do that with a little bit more experience and the actual reality playing through and not get ahead of ourselves. We'll certainly let you know and the market know as soon as our thinking shifts in any way. Okay. Well, that feels like a good moment to indeed wrap it up. Thank you very much for all your questions and for joining today. I realize we didn't get to all of you there in the queue, but our IR team has taken down your names, and we'll call you back. Nevertheless, I hope that the questions that we get to have given you insights into how we are delivering our strategy, what our financial performance has been in 2021 and, of course, how we look at 2022 and what the outlook for the year really is. As I already mentioned earlier on, we also have the Annual Energy Outlook and the Shell Insights event for integrated gas. We'll have that later in the month. That will be hosted by Wael Sawan and Steve Hill, and they will be looking forward to seeing you there again. That's it for now. I wish you a very pleasant end of the week and hope you and your families stay safe and stay well. Thank you very much.