Shell plc

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Shell plc February 2022 2

 Natural gas plays 2021 showed Energy security,

01 02 03
a significant role fragility and emissions and economic
in progressing interdependence of growth in Asia to drive
NZE ambitions the energy system future LNG demand

Around the world, more countries announced A faster than expected economic rebound LNG has a key role to play as a reliable and
net-zero emissions targets, adding pressure to following the lifting of pandemic lockdowns, lower-emission energy source, particularly in Asia,
decarbonise energy systems. As a reliable, extended European winter and drought replacing declining domestic gas production,
available and lower-emissions energy source, conditions in Brazil accelerated demand for enabling coal-to-gas switching and supporting
gas has an important role in supporting this LNG in 2021, a year which also saw gas supply economic growth. The volatility in energy prices
transition, both as a partner to renewables for constraints. Prices remained pressured all year, in 2021 shows how the energy market can
grid stability and an immediate option to lower reaching record levels towards the end of the destablise quickly without sufficient reliable
emissions in hard-to-electrify sectors. year with European gas storage levels at supply. The global LNG market is expected to
historical lows and continued uncertainty around remain tight in the near term, with a supply-
Multiple outlooks differ on the share of gas in the Russian gas supplies. Rising coal prices and demand gap forecast to emerge in the middle of
long-term energy mix, but there is agreement that carbon prices added further pressure. the current decade.
it will continue to be needed. Decarbonising gas
and liquefied natural gas (LNG) value chains China overtook Japan as the world’s largest 2021 saw increased momentum in efforts to
and developing cleaner pathways will LNG importer while US led growth in LNG decarbonise the LNG value chain, a crucial
strengthen their role in the energy transition. exports. factor for its long-term role in the energy mix.

Shell plc February 2022 3

01
Shell plc
Natural gas plays a significant role in
progressing NZE ambitions
88% of global emissions now covered
by country net-zero ambitions
Top carbon emitters set 2030 emissions targets

2030 emissions targets

NZE target

2030 CHINA

2040
Carbon peaking by 2030
Policy aimed at limiting the increase in coal
consumption and building gas power plants,
2045
encouraging use of gas in industry and LNG for
vehicles and ships.
2050

2060
INDIA
2070
Cut carbon emissions by
No
target 1 billion tonnes by 2030*
Plans focus on increasing zero carbon generation
by 500GW, reducing carbon intensity by 45% and
98% of LNG imports now under NZE ambitions increasing LNG’s share of gas demand to 70%.

Source: Shell interpretation of Net Zero Tracker, IHS Markit and Global Carbon Atlas 2021 and 2022 data.
Recent national policy announcements have been added * base year

Shell plc February 2022 5

Decarbonisation requires early action
Switching to gas can lower emissions today

Power Transport Hydrogen use

Switching just 20% of coal-fired Switching 10% of heavy goods Moving global energy mix to
power in Asia to gas can potentially CO2 vehicles and 10% of shipping fleet CO2 5% hydrogen of which 30% is CO2
save: EMISSIONS to run on gas can potentially save: EMISSIONS blue hydrogen can potentially save: EMISSIONS

EQUIVALENT TO ALL EQUIVALENT TO EQUIVALENT TO

EMISSIONS FROM 680 16.3 MILLION CARS TAKEN 75 EMISSIONS FROM MORE 475
GERMANY MTPA OFF THE ROAD MTPA THAN 70 COUNTRIES MTPA

Indicative annual gas demand Indicative annual gas demand Indicative annual gas demand
310 BCM 120 BCM 350 BCM
Source: Shell interpretation of IHS Markit Sustainable Flame Study 2021

Shell
Shell
plcplc February 2022 6
The role of gas in a changing energy system

Gas scenarios 2020-2040 Gas demand by sector in 2040 Use of gas in a

BCM BCM decarbonised world
5000 5000

Electricity
4500 Gas fired power
4000
backing up renewables
Industry Gas + CCUS
4000 Blue Hydrogen
3000 Biogas
Gas + CCUS
3500 Feedstock Buildings
Blue Hydrogen
2000 Gas + CCUS
3000 Hybrid systems

1000
2500

2000 0
2020 2030 2040 2020 IEA SPS IEA APS IEA NZE

IEA SPS IEA APS IEA NZE

Electricity Industry Transport Buildings Transport
WM ETO WM AET 2 WM AET 1.5
Blue Hydrogen Biogas
LNG + offsets
Source: Shell’s interpretation of IEA World Energy Outlook 2021 and Wood Mackenzie 2021 data
Wood Mackenzie’s Energy Transition Outlook (ETO) and Accelerated Energy Transition (AET); IEA’s Stated Policies Scenario (SPS), Announced Pledges Scenario (APS) and
Net Zero Emissions Roadmap (NZE).

Shell plc February 2022 7

Gas is there when the sun does not shine, wind does not
blow or rain does not fall

California electricity mix 24-04-2021 Share of UK generation 2021 Brazil hydro levels & LNG deliveries
GW 7 day rolling average % hydropower available LNG MT
Hourly Daily Monthly
25 70% 100% 1.2
90%
60% 1.0
20 80%
50% 70%
0.8
15 60%
40%
50% 0.6
10 30% 40%
0.4
20% 30%
5 20%
10% 0.2
10%
0 0% 0% 0.0

2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
1 3 5 7 9 11 13 15 17 19 21 23 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Renewables Nuclear
Gas Imports
Hydro Total demand
Residual demand Gas Wind Hydropower LNG deliveries

Source: Shell’s interpretation of California Independent System Operator, National Grid, Grid Watch UK, IHS Markit, ONS and ANP 2021 and 2022 data

Electricity sector

Shell plc February 2022 8

Decarbonising power sources offers the largest
opportunity for reducing emissions in aluminium production

Global aluminium production by energy source Global CO2 CO2 saving options
direct emissions tCO2 eq/t Aluminium
from aluminium 25

production
20

46% potential
15 emissions savings
by switching to gas

10
478
MTPA 5

Coal
Gas 0
Hydro Coal fired Gas fired
S. America China
Nuclear
N. America Oceania Electricity Direct process
Other
Asia Africa Ancillary materials Thermal energy
Size indicates production MT Transport
Eurasia GCC

Source: Shell’s interpretation of International Aluminium Institute 2020 and 2021 data
Note: GCC – Gulf Cooperation Council Industry sector

Shell plc February 2022 9

Marine LNG – a choice for today and tomorrow
30% of new vessel orders are LNG-fueled*

LNG vessels & fuel uptake New ship orders by type** Fuel pathway
# of vessels MTPA Gross tonnage (millions) Net-zero emissions fuel options such as
700 6 40 BioLNG and synthetic LNG
Biomethane potential MTPA Actual production MTPA
600 35
403 5 Bunkering locations
30
500 LNG-fueled vessels
90
on order 4
1.8
90
25 -
400
125
20
300
251 3 0.6

165
LNG-fueled vessels 15 0.2
2
200 on water
10
105
1
100 5 27% 0.4

19% 29%
49% 98%
0 0 -
Container Bulkers Tankers Cruise Passenger
2021

2025

2027
2023
2003

2009

2013

2015

2019
2007

2011

2017

ships car carriers Infrastructure pathway

In operation On order LNG Consumption LNG Other fuels Existing LNG infrastructure can be used for
drop-in fuels (BioLNG and synthetic LNG)
Source: Shell interpretation of DNV GL 2020 data, World Fleet Register, Clarksons, Total Orderbook – Jan 2022 and various news reports
*Gross tonnage Transport sector
**Only larger size vessels: containers >12000TEU, tankers > 85000DWT, bulkers > 65000DWT

Shell plc February 2022 10

Gas is a scalable, flexible and competitive
solution for the buildings sector

Use of energy in buildings (China)* Gas and electricity use (France) Indicative storage cost 2030
Mtoe TWh $/MWh
3,972 18,134
600 3.0 800

500 CO2 2.5

700
EMISSIONS
600

621
400 2.0
500

300 MTPA 1.5 400

Can 300
200 potentially 1.0
be saved 200
by a switch to
100 gas 0.5 100

0 0.0 0
Total Electricty 2019 2020 2021

Coal Oil Gas

Other renewables Other solid fuels Electricity
Heat Hydro Nuclear Not scalable Scalable
Gas Electricity

Source: Shell’s interpretation of Wood Mackenzie, ENTSO-E, ENTSO-G and Imperial College SGI 2021 and 2022 data
* 2021- Buildings sector

Shell plc February 2022 11

Asian gas demand to drive future LNG growth
LNG needed to replace declining domestic gas and coal-to-gas switching

LNG imports by region Demand drivers of LNG in Asia Asian gas demand by supply source
MTPA BCM BCM
800 800 1,500
77%77%

600 600
16%16%
1,000
7% 7%

400 400

500
200 200

0 0
0
2020 2025 2030 2035 2040 2020 2025 2030 2035 2040
2020 Domestic Pipeline LNG 2040
LNG bunker fuel
production imports imports
LNG complements domestic and pipeline supply
Asia Europe Americas Rest of world LNG replaces declining domestic production
LNG is sole gas supply

Source: Shell interpretation of Wood Mackenzie 2021 data Domestic production is net of LNG exports

Shell plc 12
02
Shell plc
2021 showed fragility and interdependence
of the energy system
Gas and LNG prices hit record highs in 2021

Supply constraints Economic rebound Global gas price markers

$/MMBTU

JKM prices spike with a Prices rise steadily with Low European inventories, Prices reach record highs
colder than normal start increasing Asian and Russian gas uncertainty to pull LNG cargoes into
of the year but ease as South American LNG and winter buying Europe
inventories fill up in North demand amid supply pressure leads to extreme
Asia constraints price volatility
◼ Several LNG projects underperform ◼ Faster than expected economic
◼ Limited discretionary Russian gas rebound following the lifting of
volumes pandemic lockdowns 60
◼ Decline in European gas production ◼ Robust Chinese LNG demand

40
Inventory Pressured energy complex
balances ◼ Coal and carbon prices rally
◼ Limited gas-to-oil switching
20
capacity
◼ New financial players in
commodity markets
0
Jan 21 Apr 21 Jul 21 Oct 21

JKM HH TTF
◼ European gas
inventories at
Weather events
multi-year lows ◼ Prolonged 2020/2021 winter in Europe
◼ Major LNG ◼ Drought in Brazil – low hydro power
Source: Shell interpretation of ICE, CME, S&P Global Platts 2021 data
buyers stock up ◼ Lower wind energy in Europe

Shell plc February 2022 14

Global LNG supply increases by 21 million tonnes
US LNG export growth offsets supply constraints elsewhere

Net LNG exports 2021 y-o-y Top exporting countries 2021 Non-US liquefaction utilisation US exports by month vs capacity
MT MT % MT
30 90 95% 8

25 80
90%
20 70 6
85%
60
15
50 80%
10 4
40 75%
5
30
70%
0 2
20
-5 65%
10
-10 0 60% 0
Qatar

Brunei

Peru
Egypt

Cameroon

Indonesia
PNG
Argentina

Nigeria
Aus

E.Guinea

Oman
UAE

Russia East

Trinidad
USA

Russia West

Norway
Algeria
Malaysia

Angola

Jul
Mar

May
Jun

Oct
Apr

Nov
Aug

Dec
Jan
Feb

Sep
Corpus Christi Elba
Cameron Freeport
Australia Qatar US 2016-2020 2019
Cove Point Sabine Pass
Atlantic Basin M East Asia Pacific Russia Malaysia 2020 2021 Liquefaction capacity

Shell interpretation of Kpler, Wood Mackenzie & Customs 2021 data

Shell plc February 2022 15

China becomes the world’s largest LNG importer

Net LNG imports 2021 y-o-y Top LNG importers 2021

MT MT
14.0 90

12.0 80

10.0 70

8.0 Total LNG trade: 380 MT 60

Total LNG trade: 380 MT
6.0 50

4.0 40

2.0 30

0.0 20

-2.0 10

-4.0 0
Malta

UAE
Taiwan

Sweden

USA
Israel
Greece
Malaysia
Brazil

Pakistan

Dom Rep

Myanmar

Mexico

Italy
UK
China

Indonesia
Thailand

Jamaica
S Korea

Poland

Panama

Turkey
Kuwait

Spain
India
Argentina

Bangladesh
Croatia

Chile

Egypt

Lithuania

Belgium

Jordan
Netherlands

Canada

Japan

Colombia

France
Puerto Rico

Portugal

Singapore

N America S America Europe M East Asia China Japan South Korea India Taiwan

Shell interpretation of Kpler & customs 2021 data

Shell plc February 2022 16

Economic recovery post COVID-19 lockdowns leads to
18% LNG import growth in China

LNG demand growth Gas supply & demand Gas production & imports Gas storage capacity
MT BCM BCM BCM %

14 390 40 50% 40 20%

45% 35
12 370 35
40% 30 15%
30
10 350 35% 25
Average 25 30% 20 10%
8 330
20 25% 15
6 310 10 5%
15 20%
5
4 290 15%
10 0 0%
10%
2 270 2019 2020 2021 2022
5 5%
Other storage facilities
0 250 0 0%
Large-scale peak-shaving projects

2020
2021
2012
2013

2018
2019
2010
2011

2014
2015
2016
2017
Pipeline
2020

Industry
Transport
2020
LNG

Power
Dom Gas

2021

Res & Comm

2021 forecast Actual
LNG tanks at regas terminals

Domestic prod Pipeline imports Underground gas storage

LNG imports Share of LNG % of gas demand (RHS)

Source: Shell interpretation of GasTank, IHS Markit, Poten & Partners, Wood Mackenzie & China GAC 2020 and 2021 data

Shell plc February 2022 17

Brazilian LNG imports triple
Demand increases for gas-fired power as hydropower sources dry up

Reservoir fill Brazil gas supply & demand Brazil gas production & imports
% BCM BCM % Share
80% 36 4 100%

90%

80%
60% 32 3
70%

60%

40% 28 2 50%

40%

30%
20% 24 1
20%

10%

0% 20 0 0%

2020

2021
2010

2014

2016

2017
2012

2013

2018

2019
2011

2015
Others
Dom prod

Pipeline

LNG

Power
2020

2021

Industry

2020
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Domestic production Pipeline imports

2017-2021 2020 2021 LNG Imports Share of LNG

Sources: Shell interpretation of ONS, ANP, MME, Wood Mackenzie and Kpler 2021 data
Note: Reservoir level is weighted average

Shell plc February 2022 18

Extended winter, economic rebound and gas supply
constraints kept European gas storage at historical lows

Gas demand & supply* Gas demand y-o-y change* Russian pipeline supply Inventory level**
BCM BCM MMCM/d BCM

550 16 700 120

14
Industry
Others 600 100
12
10 80
R&C
500
8
6 60
500 N Africa 400
4
Norway 40
2
300
Russia - 20
(2) 200
0
(4)

Apr
Feb

Jul

Sep
Jun

Nov
Jan

Oct
Mar

May

Aug

Dec
450 (6) 100

Apr

Sep

Nov
Feb

Jun
Jul
Jan

Mar

May

Oct
Aug

Dec
LNG

Power
Non-power
Domgas

Ukraine exp
Pipeline
2020

Storage

2020
2021

Jan Mar May Jul Sep Nov

2017-21 Range 2020

2021 2022
Industrial LDC Power Others 2019 2020 2021 2022 5-year average

Shell interpretation of Wood Mackenzie, ENTSO-G and GIE 2021 data LDC: Local Distribution Company 1 BCM = ~10.47 TWh
* Europe 34 ** EU 27+UK

Shell plc February 2022 19

Renewable generation across Europe* declines
despite increased installed capacity in 2021

RES capacity y-o-y change RES generation y-o-y change Generation by source y-o-y change
GW TWh TWh
700 9%
500 15% 30
13%
600 8%
6% 20
400 12%
500
3% 10
300 9%
400
6% 0% 0
4% -3%
200 6% 300

-4% -10
-3%
-7%
200
100 3% -20
-6%

Apr

Sep
Feb

Jun

Jul

Nov
Jan

Mar

Oct
May

Dec
Aug
100

0 0% Solar Wind
0 -9%
Wind Solar PV Hydro Total Hydro Coal/Lignite
Wind Solar PV Hydro Total Oil Gas
2020 2021 y-o-y % Growth (RHS) 2020 2021 y-o-y % Growth (RHS) Nuclear Total y-o-y change

Source: Shell interpretation of Global Data TSOs / ENTSO-E 2021 data

*EU7: DE, NL, ES, FR, BE, IT + UK

Shell plc February 2022 20

Gas in Europe at the centre of a pressured
energy complex

Europe coal & carbon price Oil-fired capacity ICE Futures exchange data only –
$/MMBTU €/tonne GW
0 20 40 60 (excludes OTC)
60 100 Number of lots (base 2014*)
Japan
50 EU Nat Gas futures average yearly growth
80
Bangladesh +12% +40%
40
60 600
30 Pakistan 500
40
400
20
South Korea
300
20
10 200
Philippines
100
0 0
0
Sep-20

Feb-21

Sep-21
Mar-21

May-21
Jun-21

Dec-21
Dec-20
Nov-20

Apr-21

Jul-21
Oct-20

Jan-21

Aug-21

Oct-21
Nov-21

China

2018
2015

2019
2016

2017

2020

2021
Switching Range TTF
ARA Coal EUA (RHS) 2010 2015 2021 EU nat gas Coal, power & emissions Brent

Source: Shell interpretation of Global Data and ICE 2021 data Y-axis reflects change in monthly traded volumes vs volumes traded in the same month of the
year 2014 (= 100)

Shell plc February 2022 21

Europe became the preferred destination for LNG
only towards the end of 2021

JKM/TTF spreads LNG imports from US

$/MMBTU MT (DES)
10 8

Spreads favour
5 Asian deliveries
6

0
4
Spreads favour
-5 European deliveries

2
-10

-15 0
Feb-21

Sep-21
Mar-21

Jun-21

Dec-21
May-21
Apr-21

Aug-21

Nov-21

Jan-22
Jan-21

Jul-21

Oct-21

Feb-21

Sep-21
Mar-21

Dec-21
May-21

Jun-21
Jan-21

Apr-21

Jul-21

Oct-21
Aug-21

Nov-21

Jan-22
Asia Middle East & India North America
South America NW Europe Rest of Europe

Source: Shell interpretation of ICE, Kpler & Customs 2021 data

Shell plc February 2022 22

Asia expected to continue leading LNG demand
growth in 2022

Forecast LNG supply growth 2022 Forecast LNG demand growth 2022
MTPA MTPA
25 25

20 20

15 15

10 10

5 5

0 0

-5 -5
N America S America Europe Africa M East Asia Total N America S America Europe Africa M East Asia Total

Source: Shell interpretation of Wood Mackenzie, IHS Markit and Poten & Partners 2021 and 2022 data

Shell plc 23
03
Shell plc
C
Energy security, emissions and economic
growth in Asia to drive future LNG demand
Expectations of a tight near-term global LNG market
drives new contracting

Global LNG supply growth Global upstream capex Domestic gas production Term contracts for new
MT $billion BCM liquefaction projects
MTPA
40 800 500 80
65
BCM
700 400 60
30
25%
600 300 SoutheastAsia
Southeast Asia
40
20

500 200 20
Europe
10 Europe
400 100 0
2017 2018 2019 2020 2021
South Asia
0 300 0 US Qatar
South Asia
2020

2021

2024

2025
2022

2023
2019
2017

2018

2018
2019
2017

2020
2021
2022
2023
2024
2025
2020 2021 2022 2023 2024 2025 Portfolio Other
Canada Russia
Mozambique
Post-COVID19 Pre-COVID19

Source: Shell interpretation of Wood Mackenzie and Rystad 2021 data Excludes Heads of Agreement

Shell plc February 2022 25

China dominates term contracting last year
>20 million tonnes of LNG supply secured for coming decades

2021 new term contracts by importer Spot purchases as % of imports 2021 China LNG contract lengths
MTPA Spot as % of total 2060
2030
35 Emissions NZE Target
60% Target

CO2
30
50%
25 2020 2030
2030 2040 2050 2060
2060
40%
20
30%

China 2021 contracts

15

20%
10

5 10%

0 0%
2017 2018 2019 2020 2021

China Japan
Others Bangladesh South Korea
South Korea India
Pakistan China Europe Global average Contract Contract
start expiration

Source: Shell interpretation of Wood Mackenzie and IHS Markit 2021 data Excludes Heads of Agreement
Excludes “portfolio” contracts that have no defined import market & excludes Heads of Agreement

Shell plc February 2022 26

European* gas fundamentals point to continued
exposure to price volatility

Europe gas balance Germany power generation Europe LNG supply contracts
BCM TWh BCM
Potentially divertible volume
500 600 120

500 100
400

400
Spot 80 Spot
300
Domestic production
300 60

200
Flexible term contracts
Pipeline imports 200 40

100
100 20
Firm term contracts Firm term contracts
0 0 0
2020 2025 2030 2020 2025 2030 2021 2024 2027 2030

Total gas demand Other Nuclear Coal Gas Renewables

Source: Shell interpretation of IHS Markit and Wood Mackenzie 2021 data

* EU 27+UK

Shell plc February 2022 27

Expected rising demand for LNG in Asia requires
investment in new supply

Incremental LNG demand 2020-2040 LNG supply-demand gap

MT MTPA
100 800

80
600

60

400
40

200
20

0 0
2015 2020 2025 2030 2035 2040

-20
SE Asia S Asia China Bunkering Other Europe M East S America NE Asia Demand forecast range LNG supply in operation LNG supply under construction

Source: Shell interpretation of IHS Markit, Wood Mackenzie, FGE and Poten & Partners 2021 and 2022 data

Shell plc February 2022 28

Momentum builds in decarbonising the LNG
value chain in 2021

UPSTREAM LIQUEFACTION SHIPPING REGASIFICATION CONSUMPTION

Carbon capture utilisation & World’s largest LNG First commercial LNG cargoes
offset with
~30
storage (CCUS) projects liquefaction project ME-GA low-
carbon
planned with gas fields in under construction, speed, dual-fuel
credits
Indonesia and Malaysia North Field engines design for in 2021
East, to feature LNG carriers Liquid hydrogen
CCUS and solar tested successfully plant using waste
cold energy generated
GIIGNL
from regasifying
LNG to be built in
establishes an
LNG
South Korea MRV & GHG
neutral LNG
Agreement signed to begin framework for the industry
pilot for hydrogen blends into Singapore LNG
Over 80% increase liquefaction to reduce emissions Regasification
15
15 Japanese
from LNG terminal goes companies
in CCUS for gas
solar form alliance to
with 63 MTPA promote and
Pluto LNG and Cryogas-
of new projects improve processes
announced
CO2 Vysotsk LNG share plans for offsetting
to use renewable energy carbon emissions
in 2021 for liquefaction from LNG
Source: Shell interpretation of published announcements 2021

Shell plc February 2022 29

Summary

Natural gas plays a significant 2021 showed fragility and Energy security, emissions and
role in progressing NZE interdependence of the energy economic growth in Asia to drive
ambitions system future LNG demand

◼ 88% of global emissions now covered by ◼ With historically low inventory levels, European ◼ With limited new supply growth expected in the
net-zero ambitions gas price exceeded Asian LNG price to pull near term, LNG contracting rebounded in 2021
cargoes into Europe to meet winter gas demand ◼ China dominated contracting activity last year,
◼ Switching to gas can significantly lower
emissions: switching just 20% of coal-fired ◼ LNG demand rebounded following the lifting of securing more than 20 MTPA of term supply
power in Asia to gas can potentially save 680 pandemic lockdowns – 21 MT growth ◼ European gas fundamentals point to continued
MTPA of CO2 ◼ China became largest LNG importer exposure to price volatility
◼ Multiple energy scenarios have a role ◼ US LNG export growth offsets supply constraints ◼ Longer term, expected future Asian
for natural gas elsewhere LNG demand growth requires investment in
new supply
◼ Asian gas demand to drive future LNG growth
◼ Momentum builds in decarbonising the
LNG value chain in 2021

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