Shell Plc · LSE:SHEL
Shell — ESG Presentation (2023)
44 slides from Shell's sustainability presentation, 2023
Slide 1: Decarbonising Shipping: All Hands on Deck 2.0
Decarbonising Shipping: ALL HANDS ON DECK 2 Oo Industry Perspectives www.shell.com/marine/decarbonising #PoweringProgress Deloitte
Slide 2: Contents
Slide 3: Foreword
FOREWORD Change is often the only certainty we have in the shipping industry. For proof, look no further than how much has changed in the three years since we published our initial All Hands on Deck report in collaboration with Deloitte. From the COVID-19 pandemic to the war in Ukraine, and the resu
Slide 4: About the report structure
ed e first pr vides commentary 2 on r = and = n 4 b repen e Mesentedi in peel lysis ‘on decarbonisation ees Ps Vik solutions. The Shell response : perspective on these developments, challenge for shipping. 2 S ind part, covers Shell's f on the decarbonisation’ maven 4 DECARBONISING SHIPPING: ALL HAN
Slide 5: Report highlights and recommendations
REPORT HIGHLIGHTS AND RECOMMENDATIONS Decarbonisation remains a key focus for the shipping sector. Some progress has been made in the past two to three years, but the magnitude of action and investment needs to step up with speed to achieve the ambition of net zero by 20501. Six critical recommendat
Slide 6: Introduction and objectives
INTRODUCTION AND OBJECTIVES The time for climate action - more than ever - is now. Although change is happening, there is growing consensus that more needs to be done across all sectors to reach net zero by 2050. The shipping sector has a unique role to play: as the backbone of global trade, it is n
Slide 7: A summary of progress
A SUMMARY OF PROGRESS Since All Hands on Deck 1.0 was launched in 2020, ‘emissions in the shipping sector have not shown, significant improvement. Both shipping volumes ‘and CO, emissions increased by nearly 6% by the end of 2021, despite a temporary decline of 10% in the period, driven in part by t
Slide 8: All Hands on Deck 1.0 solution definitions
‘All Hands on Deck 1.0’ solution definitions ess factors | “All Hands’ solution Scale-up customer demand Green finance Investor pressure Global regulatory alignment Port coalitions Cross-sector R&D Scale-up controlled pilot projects Flexible and modular designs Operational efficiency Scale-up fuel p
Slide 9: Decarbonisation readiness framework - progress
Decarbonisation readiness framework - progress Progress: @ High @ Medium @ Limited Readiness factor Summary Perceived impact of barrier Market and + Pockets of demand for alternative fuels have grown customer demand + Most signs of voluntary demand come fioin the customerfacing (82C} container segme
Slide 10: Decarbonising shipping: readiness factors closer look
10 DECARBONISING SHI A closer look at the readiness factors reveals that although there are pockets of progress across all dimensions, four areas are worth highlighting, as the observed success and momentum offer additional solutions to complement those identified in All Hands on Deck 1.0. These are
Slide 11: Solution-actions per theme and readiness factor
Solution-actions per theme and readiness factor Readiness factor ‘All Hands on Deck 2.0’ solution actions Market and customer Demand aggregation 1 Group long-term contracts via joint purchasing coalitions Demand 2 Implement book and claim models Segment-based approach 3 Identify segment-specifie cha
Slide 12: Solutions - Deep Dives
SOLUTIONS - DEEP DIVES
Slide 13: Market and customer demand
MARKET AND CUSTOMER DEMAND In All Hands on Deck 1.0, the challenges around market and customer demand included a scarcity of demand signals, and a lack of customer willingness to pay. Although customers had made decarbonisation commitments, few of those had resulted in action. Financiers and investo
Slide 14: Illustrative example of 'book and claim' for alternative fuels
Illustrative example of ‘book and claim’ for alternative fuels 2 Shipper A’pays the higher price for the alternative fuel to a producer in a different geography 1 Shipper A wants to buy the 3 alternative fuel, but there is none available on the routes they sail Instead of shipping the alternative fu
Slide 15: Aggregating demand; taking a segment-based approach
Aggregating demand across many customers will be essential for delivering the scale required to unlock investment in supply. It is most effective in coalitions of customers with shared characteristics, as they offer a more compelling value proposition One emerging example is in the container segment
Slide 16: Container segment demand for green shipping
16 DECARBONISING SHIPPING: ALL HANDS ON DECK 2.0 Analysis indicates that the container segment has seen the greatest increase in demand for green shipping solutions, due to multiple factors including its closeness to end customers, branded businesses (cargo), higher profit margins (relative to dry a
Slide 17: Regulatory incentives
REGULATORY INCENTIVES In 2020, All Hands on Deck 1.0 noted sector-wide concerns regarding misalignment of global and local regulations, a lack of meaningful and binding emissions regulations, and the complex process to create a level playing field. Asa result, global regulatory alignment was recomme
Slide 18: Selection of current and proposed policy
Selection of current and proposed policy International Maritime Eur & Organization (IMO) Regulatory body that sets and aligns global shipping guidelines for shipping, including concerning GHG emissions GHG targets = Overall target for global shipping set to 50% total emissions reduction vs 2008. lev
Slide 19: Other regulatory developments and opportunities
Other regulatory developments and opportunities The IMO mandates now in effect, such as EEXI, Cll and EED!, are already causing some shipowners to invest in efficiency and design measures, as well ments for dual-fuel-capable vessels. However, some challenges have been raised by as com shipowners acr
Slide 20: Industry view of policy measure impact
Industry view on priority: [MJ High |) Moderate Limited Engines and ships + R&D incentives - Scrapping benefits for HFO ships + Net-zero newbuilds and retrofit subsidy Fleet ownership Fuel bought eee ne Route + Route optimisation mandates + Sailing velocity cap Freight price + Environmental tax on f
Slide 21: Technology alignment
TECHNOLOGY ALIGNMENT The growing maturity of alternative fuel technologies, and clarity on their development timescales, is driving greater clarity on the likely set of dominant fuel pathways. For example, itis increasingly clear that LNG is a viable solution that can support near-term shifts away f
Slide 22: Deep-sea shipping decarbonisation pathways
Deep-sea shipping decarbonisation pathways Part of future articipants indicating yes) 2020 2022 Carbon-based fuel Te) {fossil in transition, bio/syn end-state) - Methanol Bio, blue, green Ammonia Blue, green Growing industry confidence for bio- and HFO (incl, LSFO, VLSFO, MDO, MGO) Liquid H, Blue, g
Slide 23: Near-term fuel choices: LNG and methanol
This view acknowledges that nearterm choices such as LNG and methanol preserve a broader set of options longer term, through bio or synthetic production methods. For example, the immediate benefits of LNG and methanol produced from renewable energy sources (where available) are now clearer, as evide
Slide 24: Cost of ownership comparison of alternative fuels
Cost of ownership comparison of alternative fuels ($/k tonne-mile) 3.0 3.0 3.0 35 35 35 35 35 35 33 33 33 35 35 35 60 60 60 2030 ©2040-2050 2030 2040 ©2050 2030 2040 2050 2030 2040-2050 2030 ©2040-2050 2030 2040 ©2050 Vessel OpEx 02 02—~—«OO2 03038 03038 03038 03038 0505S 2030 ©2040-2050 2030 2040 «
Slide 25: Asset replacement
ASSET REPLACEMENT Fleet composition is an essential lever to tackle the decarbonisation challenge. This covers the emissions profile of the current fleet, and the rate at which new vessels are added and existing vessels ate scrapped. This section takes a “working back from 2050" lens, to explore the
Slide 26: Efficiency measures
Efficiency measures iency measures : ” 2 Vessel ° 3 Design ; 3 = tal 2 5 Vessel 2 2 Operations 9 = : a ry £ Da 5 Fleet . € Operations ° oS z Exhibit 9: Elficiency measure categorisation The efficiency measures that have gained the most attention since 2020 include high-performing hull coatings; digi
Slide 27: Slow-steaming and flexible, modular designs
Finally, although slow-steaming can have an immediate impact on emissions-reduction, should not replace or preclude investment in efficient design or dual-fuel vessels, to avoid shipping capacity constraints that could arise due to a large proportion of vessels all travelling at lower speeds. Flexib
Slide 28: Shipyard demand and capacity
Shipyard demand and capacity (million DWT) Shipyard demand drivers: | Newbuild- replacement vessels Newbuild- additional vessels [ll Retrofits 250 200 | = - - 4 . Historic maximum 150 production (200) ——— be 2 2 8 2 8 8 Bee Fee 8 Ue Current shipyard production (2021) Fy | 2025 2030 2035 2040 2045 20
Slide 29: Impact of various measures on global fleet GHG emissions
Impact of various measures on global fleet GHG emissions - illustrative scenario, MT CO, equivalent I Engine efficiency improvements Other efficiency improvements [fll Alternative fuel vessels! HL LNG vessels? Il Gap towards net zero goal 1,500 2025 Exhibit 11: Global feet GHG emission development (
Slide 30: Impact of measures including retrofits on fleet GHG emissions
Impact of various measures including retrofits on global fleet GHG emissions - illustrative scenario, MI CO, equivalent I Engine efficiency improvements Other efficiency improvements [Ml Alternative fuel vessels’ gf LNG vessels? ll Gap towards net zero goal 1,500 1,000 IMO Target -50% emission vs 20
Slide 31: Solutions - In Brief
| SOLUTIONS - IN BRIEF
Slide 32: Infrastructure replacement
INFRASTRUCTURE REPLACEMENT There has been little progress in infrastructure replacement, with the exception of green corridors and complementary, port-led incentives, such as preferred port fee structures for lower-emission vessels, and more active involvement in investments to support low-carbon fu
Slide 33: Operational green corridor user journey
Operational green corridor user journey Responsibility: MM leadrole Enabling role What needs to be true Fuel suppliers Establish joint buyer's coalition and long-term contract groupings for the alternative fuel(s) 2 Aggregate cargo owner demand via book and claim 3 Invest, build and operate dual-fue
Slide 34: Clarity on roles and decision-making
CLARITY ON ROLES AND DECISION-MAKING Coalition activity and pledges have increased since All Hands on Deck 1.0, highlighting the recognition across the sector that shared responsibility and collaboration are required. Examples include the 2021 formation of the Global Centre for Maritime Decarbonisat
Slide 35: Stakeholder responsibility matrix
Stakeholder responsibility matrix Responsibility: | Lead role bling role customer demand Segment-based approach Green finance Regulatory incentives 4 Regulation Technology alignment 5 fuellandscape Resilient fleet replacement Infrastructure replacement Green corridors Clarity on roles th, safety and
Slide 36: Shell Response
SHELL RESPONSE
Slide 37: Shell Response
37 DECARBONISING SHIPPING: ALL HANDS ON DECK 2.0 SHELL RESPONSE The contributions and reflections shared in this refresher report provide valuable guidance from industry on the prevailing headwinds and tailwinds influencing the pace of change. We will continue to use these insights to test our own a
Slide 38: Regulatory framework and Shell's action
regulatory framework. However, there is clearly more work to be done; namely, a global policy regime is required that targets NZE by 2050 to drive decarbonisation and prevent distortion and fragmented regulatory requirements. Our action: From future fuels to electrification, from energy efficiency s
Slide 39: Next steps
Next steps The shi scale of the challenge ahead. At Shell, however, we are proud of the progress we have made with our customers and partners since All Hands on Deck 1.0, 1g industry is under no illusion of the In consideration of the recommendations put forward in this industry report, we see conti
Slide 40: Partnership between shipowners and fuel suppliers
As we look ahead, shipowners and fuel suppliers will need to work in close partnership on: the availability of their preferred fuel pathways; the scaling and roll out of technology solutions; and shared carbon reduction targets over the next 5:10 years. With a recognition that, while the green pret
Slide 41: Legal Disclaimer
LEGAL DISCLAIMER
Slide 42: Legal Disclaimer
Legal Disclaimer The companies in which Shell ple directly ond indirectly owns investments ore separate legol entities. In this report “Shell”, “Shell Group" and “Group” are sometimes used for convenience “where references are made to Shell ple ond ts subsidiaries in general Likewise, the words "we"
Slide 43: Endnotes
Endnotes Clarksons (2023) "Wedd fast monitor’, accessed 14 Mor 2023 © DNV Veracty Akemative Fuel nights platform, accessed 2022 * UNCTAD (2022) "Review of marine wansport 2022", accessed 7 Feb 2023. Manifold Times "Grimaldi orders Silverstream air lubrication tach for PCTC newbuilds’, accessed 5 Apr
Slide 44: Discover more at
Discover more at www.shell.com/marine/decarboni jing Engage with us on our LinkedIn Page: www.linkedin.com/showcase/shell-marine/ © 2023 Shell International B.V. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, published or transmitted, in any form or