殼牌 (SHEL) 2008 Q3 法說會逐字稿

Welcome to the Royal Dutch Shell quarter three results announcement call.

There will be a presentation followed by a Q&A session.

(OPERATOR INSTRUCTIONS)

I would like to introduce our first speaker, Jeroen van der Veer.

Hello.

Jeroen van der Veer here.

I'm sitting here with Peter Voser.

Let me start to express my warm congratulations to Peter Voser because probably you have seen we have announced yesterday that Peter at the end of June next year will succeed me as Chief Executive of Royal Dutch Shell.

How are we going to do it?

We start with the disclaimer and then I come back to you.

Thank you very much.

So I have first speech, takes about seven or eight minutes, then Peter Voser, after that, Q&A.

Let me start by making some comments on the investment landscape.

We are seeing unprecedented volatility in world markets.

At Shell, we are particularly careful things to watch not just the credit markets but also things like oil prices and exchange rates.

We have been running the company in a conservative way.

We take a long term view of oil prices and don't plan on anything like the $150 oil prices that we were around earlier this year.

Balance sheet structure is conservative and I feel good about that.

We are watching the world economic situation closely.

Shell can cope with a wide range of energy prices.

Our strategy remains to pay competitive and progressive dividends and to make significant investments in the company for future profitability.

We are steering the Shell ship through rough waters.

And so far, okay.

Now turning to the third quarter.

We delivered another set of competitive results in the third quarter.

Earnings were impacted by things like hurricanes but performances overall were satisfactorily and underpinned by operating performance.

Excluding identified items, CCS earnings were $8.8 billion and earnings per share increased from -- increased by 47% from the third quarter '07.

Average oil and gas prices remained high during the quarter and supported upstream.

Downstream earnings were resilient despite a more challenging environment than a year ago.

During the third quarter, we completed the acquisition of in Duvernay in Canada and continue to strengthen our gas portfolio in North America with further acreage additions.

At Shell, the strategy is all about crude operating performance and competitive returns today, making some significant investment in the company for the future.

Yes, we are generating large (inaudible) and yes, we have the largest investment program in Shell's history to create value for our shareholders and to play our part in providing safe, convenient, and cost competitive energy for our customers.

Cash flow is competitive and we have making significant returns to shareholders with payout to shareholders in the quarter at $3.1 billion.

Let me update you on the portfolio development in the quarter.

We are making good progress with project under construction.

We are coming into a period where we have our new project starting up and I expect over 0.250 million barrels per day of new upstream capacity onstream by the end of '09.

Nigeria SDDC has started gas supplies to new Asian power plant and commissioning is underway.

In Sakhalin, we expect winter oil production to commence soon and for the first time.

The Sakhalin train will be ready shortly for gas sales starting early '09.

In Australia, construction is complete at the northwest shelf L&G train number 5, and the new Angel gas platform came on stream in October.

Turning to new portfolio.

In Iraq, we signed (inaudible) agreement to establish a joint venture with Iraqi partners to process American gas in the southern part of the country, including some 700 million standard cubic feet per day of gas which is currently being planned.

The joint venture will initially focus on domestic energy for Iraq with the potential for gas exports in the future.

In Australia we concluded agreements with Arrow Energy to purchase a 30% share in Arrow's Australia's coal assets and selective international positions.

We made progress in our alternative energy and Co2 strategy.

There's new biofuels reserves agreements, new funding from Alberta government for the CCS project at Scotford and Shell participation in the Westcarb CCS project in the US.

Let me update you on Canada.

In Canada, we completed the acquisition of Duvernay and took additional acreage positions in that area which has created a leading position in the (inaudible) tight gas fairway for Shell.

We estimate that these Canadian tight gas positions have resources of some 1 billion barrels of oil equivalent to for Shell.

This as a total cost of $6.2 billion.

This is an ancillary cost of about $1US per thousand standard cubic feet of gas and this excludes the further exploration potential.

Integration of Duvernay goes well and we have about 350 operated and 65 non-operated wells producing some 25,000 barrels oil equivalent per day and about 12 rigs drilling.

Staying with Canada for a moment, let me update you on oil sands activities.

We will continue to progress our Athabasca oil sands project expansion number 1 which is currently under construction.

Clearly, there is significant industry inflation and a tight labor market in the Alberta area.

We are not removed from debt, but the economics of the project remain satisfactory.

Going forward, we do see some evidence that Alberta market is going to cool down and several competitors have delayed new projects.

So we have decided to delay the final investment position on the second Athabasca oil sands project expansion number 2.

This final investment decision, the FID, was originally planned for the second expansion for 2009.

But we wait for costs to cool down in Alberta before any new investment positions.

This is another example where we put a priority on value creation, a lot of them on volumes.

And we have not been shy to delay projects where we don't like to cost outlook.

Once expansion number 1 is completed, we will look to continue to grow oil sands through the bottlenecking opportunities at our Athabasca sites.

Now let me hand you over to Peter Voser and Peter will take you through the third quarter in detail.

Thank you.

Good afternoon everybody.

Let me make some comments on the macro environment in the third quarter.

Oil and gas prices declined sharply in the quarter after strong runup in the second quarter.

However, average oil price in the third quarter was $42 higher than a year ago levels.

Defining margins were lower in all regions except Europe.

Chemicals margins increased in the US and Europe and declined in Asia.

So far in fourth quarter, the oil and gas industry is starting to see the impact of the economic slowdown.

Oil prices have started to fourth quarter at lower levels than Q3.

Defining and chemicals margins have held relatively firmly although we do expect pressure on margins from weaker demand and new industry defining and chemicals capacity.

Price of margin volatility remains unusually high.

Let me now turn to financial performance in more detail.

Excluding identified items, CCS earnings per share increased by some 47% compared to the same quarter last year.

Excluding movement in working capital, cash flow per share increased by 7%.

Dividend increased by 11% in dollar terms to $0.40 US per share and share buyback for the quarter for some $800 million.

Let me remind you that in the second quarter of '08, we saw a negative impact of $750 million to earnings from mark-to-market accounting impact for example, on commodity derivatives.

This was caused by a large increases in prices across the quarter.

IFRS accounting treatment of these risk management instruments led to a positive impact, as expected, on earnings of around $800 million in the third quarter.

These are non-cash impacts and we normally include these items in results since they are part of our normal activity in Shell.

But as we did in the second quarter, I highlight the figures for you here because the impacts are large in the context of the overall results.

Before I go into detail on the business results, let me update you on production capacity impact in the third quarter.

In the Gulf of Mexico, sales upstream and downstream production has been impacted by the shutdowns due to two hurricanes, Gustav and Ike.

Shell preparation for these hurricanes and the response in the aftermath ranked well.

However, there were minor damages from high winds and from flooding at onshore facilities.

In addition, we decided to use the hurricane down time in the upstream to bring forward some planned maintenance from Q4.

In the UK, the flat pipeline system and onshore facilities went into plant shutdown in the third quarter.

This was the first shutdown of the system since 1990 and the work went well.

However, production from several North Seas was shut in during this process.

Taken together, the North Sea and the Gulf of Mexico downtime reduced upstream production by some 120,000 BoEs per day versus the third quarter of '07.

In the downstream, the hurricanes reduced design and throughput capacity by some 70,000 barrels per day for the third quarter and also impacted the chemicals operations.

North Sea operations returned to normal during the third quarter as states Gulf Coast refining.

Shell Gulf of Mexico capacities down 350,000 BoEs a day.

Production has been building up during fourth quarter and is currently standing at some 300,000 BoEs per day.

A return to full production is expected in the first quarter '09.

Let me now talk a little bit business by business.

Upstream earnings increased by 69% to $6.7 billion realization to a competitive compared to industry market prices.

However, there are continued pressures industry-wide from operating costs and tax.

Underlying volumes in the third quarter were essentially unchanged versus a year ago levels.

Volumes were also supported by buildup in Orman Lange in Norway, in Nanhai in China, (inaudible) Russia and the series of smaller ramp ups.

NNT volumes quarter-on-quarter mainly due to higher near plans, maintenance and cargo scheduling.

Looking ahead, energy volumes should begin to increase again as new capacity builds up at North West Shelf and (inaudible) over the next two quarters.

In oil sands, down versus year ago levels as we continue to mine in lower grade bit men other.

In oil sands, (inaudible) production was down versus year ago levels as we continue to mine in lower grade (inaudible).

Expect for oilsands production to be at marginally higher levels than Q3.

We have made progress with alternative energy in the third quarter with completion of the advances in thin film solar plant in Germany with a 20-megawatt per year production capacity and the startup of the 164-megawatt wind project Mount Storm phase one in the United States.

As to earnings, they increased by 24% to $2.3 billion.

Earnings were supported by improved marketing margins, partially offset by weaker chemicals earnings.

We saw reduced operating rates in Gulf Coast refineries and chemical plants as a result of hurricanes.

However, these impacts were to some extent offset by increased US demand for imported downstream production from our European and Canadian refining systems.

At Shell, refining earnings were around $500 million in the third quarter of '08 compared to some $550 million in Q3 '07.

Excluding the Q3 '08 mark-to-market impact, earnings from marketing activities were up by 35% versus a year ago level to some $1.3 billion.

Our product marketing same volumes were essentially unchanged from a year ago levels excluding assets sales.

Weaker demand for retail fuels was partially offset by commercial fuels demand.

Defining availability in Q4 '08 is expected to be around 90%, somewhat lower than the 93% of a year ago due to heavier scheduled maintenance.

Chemicals earnings were impacted by lower margins and volumes, especially in the US.

Availability in chemicals in Q3 '08 was 86% and we expect that availability in Q4 to be lower compared to last year, which was 93%.

On the divestment side, we continue to make good progress with asset sales.

First nine months of this year, we have received some $4.9 billion of disposal proceeds from both upstream and downstream and we are on track to deliver the $5 billion asset sales target for 2008.

We have sold some 18,000 barrels of oil equivalents per day of upstream production capacity to end Q3, and I expect us to reach our 40,000 barrels of oil equivalents capacity per day by the end of the year as disposals continue.

Go to disposals proceeds have reached now some $31 billion, which is some 24% of average capital employed.

We do expect Shell asset sales to continue and recycling inefficient capital into new projects is a key element of the financial strategy.

However, there are clearly some pressures in the credit market today which might mean there are fewer buyers assets earlier in the year.

We were successful in selling upstream and downstream after the peak cycle in recent years.

The macro trends are down for both segments, at least for now.

We are not in a rush to sell assets (inaudible) So the pace in asset sales might slow down here considerably.

Turning to cash, the upstream and the downstream segments continue to generate cash flows above their capital requirements.

Operating cash inflow plus asset sales over the last 12 months was around $56 billion including $7 billion from asset sales.

Over the same period, we invested $51 billion in CapEx acquisitions and returns to shareholders.

So the cash position remains a healthy one, balance sheet gearing, including off-balance sheet items was15.4% at the end of Q3.

So we have got some flexibility here.

Excluding off-balance sheet items, the gearing ratio was at the very competitive 7.4%.

Now we start our call back to you for a summary.

Thank you Peter (inaudible).

We are watching the world economic situation closely.

Shell is robust across a wide range of energy prices.

Our strategy remains to pay competitive and progressive dividends and make significant investments in the company for the future profitability.

We are steering the Shell ship through rough waters and so far, okay.

I think we have delivered another strong set of results in quarters three '08 helped by operating performance.

We have made good progress with the portfolio and our strategy is on track.

Operational excellence, competitive cash flow, capital discipline.

With that, let me stop here, go for your questions.

Over to you, operator.

Thank you.

We will now begin the question and answer session.

(OPERATOR INSTRUCTIONS) The first question comes from Jon Rigby.

Please go ahead.

Oh, hello.

Thanks for taking the questions.

A couple.

The first is, it seems to me year end oil price 2007 and quarter end 3Q 2008 were about the same.

You seem to have a draw in working capital over that of about $6.7 billion, if I'm not mistaken.

Can you explain to me whether there are any sort of leads and lags in the way that working capital will evolve with the major inflow price, which I guess is oil prices.

The second question I have is whether you could just discuss a little bit more detail how you're approaching the process of FIDing projects when clearly, a lot of the inputs -- and I'm not talking about oil price assumption but particularly things like steel and also the contracting prices.

I'm probably moving around a lot right now.

And third, just a follow-up on the disposals comment.

Do you ever consider extending some sort of loans to buyers, some sort of letter of credit.

I take the middle question myself, about the FID, then the other two for Peter Voser.

He starts with that.

Thanks, Jon.

On the working capital, I think the way you need to look at this is in the following.

With the sharp rise in the second quarter, obviously, the working capital went up considerably because of the oil price.

In the third quarter, we actually performed well and those pieces reached could come back, did actually come back.

But we are running roughly a 45 day working capital in downstream and that means that at least in the second half of the quarter, that has not entirely come back yet into our cash flow.

So you will actually see quite a bit of that coming at least in October and partially even November.

Water has gone up in the, let's say second quarter and then you started to build up in the third quarter.

So there is an effect coming later in the year and from that point of view, that's still to come.

I would also say trading can be fluctuating quite a bit depending on what storage deeds you take in, and that is a more short term kind of business.

But it make take up to six months before that actually comes out.

So taking year end and then to quarter is not always the right thing as you're stocking up for storage for winter, say, for example.

The third quarter also have seen towards the end of the September with the falling price in absolute terms moneywise, a sharp rise in accounts receivables because especially in Europe, you have seen a lot of weakness stopping all the rating of gas oil because quite a number of customers, actually many of them, were running at very low stocks and as the price came down, there was a real rush onto volumes, and that's one of the reasons why we haven't seen the volumes increase.

We have actually seen the market share gain for us in the third quarter.

I may take the third one, the disposal on the loans.

I think as a general policy, if we sell something that we do not subsidize to support the buyer too much.

We may enter into long term takeoff agreements of product is, for example, linked to a refinery.

There might obviously be some loans involved when we run businesses and then sell them.

For example, in the BEB sale, we got the money from the government, but at the same time, loans from the company were paid back to us.

But these loans you should more see as a normal capital -- either working capital, capital expenditure, financing which we do throughout the year to the companies owned by us.

Many sold that comes back to us and the buyer needs to finance that.

No long speech about the whole (inaudible) coming to FIDs.

But on the day of the final investment decision, in general, what do you know on that day?

The design is made.

The architect has done his work, so to say.

You have selected already the people who are going to build the project.

You have probably locked in your major pieces of equipment, especially nonstandard equipment so you know when you can get that because you know that you have a political price idea.

You have worked on a basis with your contractor.

Is it a cost basis, is it turn key, a whole kind of hybrid systems and an understanding.

Well then, how do you -- and then so basically -- and then you may have to arrange financing, understanding (inaudible) et cetera.

Now, back to your question is, how do you work labor at steel prices?

If we look at Canada, the first global system of location factors you know by experience.

That you, in certain places, it's more expensive to work or at lower cost that this called the location factor, and then you take a tailored-made view of where you are going to build the project as we do in Canada.

These are not only our own estimates, but for instance, CERA, that is the Cambridge Energy Research Associates, Cambridge, USA, they will publish data as well and more data is available for other consultancies.

And that leads you then to base your economics.

The view in this case that the markets will cool down in Canada is basically, I don't think it is so difficult to come to that idea.

Because at this moment, we are still in very overheated situation in Canada.

But it is quite clearly that there are various cancellation of projects and that will have an impact on the overheated situation.

Right.

What I mean is, couldn't you extend the argument that you're specifically making about Canada generically across the industry, in that the way that a lot of the import costs that you obviously pay are moving that waiting three or six months might actually pay you on starting up new projects.

Starting on the construction phase of new projects.

The point you make is good.

If I go back to my old memory and I'm pretty sure that analysis will show that you see a strong correlation, albeit with time lapse between their strong oil prices and costs from the service industry to contractors, et cetera.

Secondly, usually in the past a project was ready, then you like to go because the contractors have reserved the capacity of (inaudible).

And even if you have a bit of a swing, on the earlier cash flow was better than to delay it, or to say it differently, to delay a project just the evening before FID is usually not as clever, because then you start to miss the cash flow, et cetera, whilst you don't have not necessarily all the advantages.

I think having said that, what is happening now, the swings in the last, may I say cycle of the prices in the service industry, if I look at oil rigs on shore, offshore, steel prices, the volatility, the size of the swings was much bigger.

So you can come closer to your argument that timing is -- to timing them to take FID is probably even more important even relatively compared to the past.

Thank you very much.

Next question, operator.

Thank you.

The next question comes from Lucas Herman.

Please go ahead.

Good afternoon, gentlemen.

Peter, I've got to say congratulations and all the best with that.

But three questions if I might.

Very simply, US dollar moved phenomenally sharply against a multitude of currencies.

And I wondered whether you could remind us of the sensitivity -- or transactional sensitivity of the business is to the dollar, given what we've seen.

And secondly, just to folks a little bit more on Canada, can I just be clear whether or not you were paying full royalties on Canadian production of (inaudible) through this quarter.

And some caller made some comments a couple of days ago on the cash break even of their business, indicating it was around 40 US -- or $40 Canadian.

I wonder whether you care to give us any indication of whether that's the kind of number that seems sensible, $40 Canadian for your existing activities.

And finally, just staying with the sands, Jeroen, you said you're still going to make satisfactory returns from the phase one project.

satisfactory on the basis of what oil price or what kind of assumption around crude?

I leave all four questions, including the last to Peter.

Okay.

Okay.

Thanks Lucas, thanks for congratulating.

On the US dollar, you hit a CapEx a 10% swing of the dollar against the euro is roughly $0.5 billion, more or less, depending on where it swings.

On the income side, it's roughly $150 million to $200 million, the same 10%.

Q on Q, both quarters in oil sands at 25%.

So you're going on the royalty side.

We were going in and out and last quarter, it was different, but it came back in in July.

The fourth one, if you hear -- Jeroen saying satisfactory, that means actually, he's normally very pleased about it.

That's what I learned with him after four years of working with him.

I think we have our price grid with the three, the low, the medium, the high.

We take a very long term view.

As you know, in '99 we took actually FID on the first project, and there we were back at 14 to 16 and if I look back now, this was a very, let's say, satisfactory project,to use Jeroen's term as well.

It was very successful one.

Then you had a question about the cash costs.

I would say it's around $36 for us, of which, as you know, it's 30% of it is energy costs driven.

So you can then actually move that.

Is that $36 US or $36 Canadian?

US.

Okay.

Thank you.

And Peter, sorry, just going back on the sensitivity, the 10% move on income, $150 million to $200 million, is that per quarter or per annum?

That's per annum.

Super.

Thanks.

Thank you.

Next question, operator.

The next question comes from Theepan Jothilingam.

Please go ahead.

Good afternoon, gentlemen.

First of all Peter, congratulations on yesterday's announcement.

Three questions, actually.

Just on marketing, very strong result there.

Just wanted to get a feel for how much you thought this was a transitory effect from oil prices falling and whether you could give a sence of indication of how things are moving into Q4.

The second question just is on CapEx.

Potentially at lower prices, I was just wondering what sort of level of discretionary CapEx do you have in the portfolio.

For example, give us the amount in 2008 that's reflected by higher activity levels.

And lastly, just a follow-up on the FIDs.

Could you perhaps disclose what other FIDs you may be planning to take in 2009.

I was thinking about Bonga Southwest and if you could give some clarity around Gorgon.

Shall I start with marketing prices and then Peter will help you for the other two.

Yes.

First, the market (inaudible) is remarkable this year that if we correct for hurricanes, our worldwide marketing volumes are about the same as last year if I take -- this is the first nine months.

Very hard to read how that this if gaining a bit of market share and all those kinds of things.

So that is remarkable.

Having said that, we could see a especially in the summer, you could see that there was an impact on the amount for gasoline for instance in the USA and western Europe.

But we could see as well is that if they think about certain Asian countries, if you take the subsidies on the gasoline, if you take that away, that you get an initial amount reaction.

What we don't know as yet is that if the prices -- they has fallen now in all countries, yes?

Is the demand coming back or are habits and behaviors of customers change in a more lasting way?

Too early to say, and that's why I abstain from giving precise marketing volumes guidance for the fourth quarter.

Peter, the question about CapEx (inaudible) to FIDs of what we did do with other projects.

Yes, okay.

Thanks for the question.

On the discretionary CapEx, I think -- I'm not going to give you a number there, but let me explain a little bit how we look at this.

Post FID projects that we are working on at the moment which will give us from 250,000 pounds per day in '08 and '09 of new production or 1 million if you take all the projects together in '08, 09, '10, etc.

These are projects where we are committed, that where we are going through with them.

That's how we have built up the balance sheet.

That's how the gearing actually has been planned, et cetera.

Then you get to the pre-FID ones, and that's where you take a very hard look at your costs, at your labor rate, at the EPS contract, at your production and your productivity of labor, et cetera.

And I think that's where you're going to take a hard position if a project is not actually achieving the returns according to the three oil pricing oils you're managing.

Then you either postpone or you cancel.

And we have done this in the past, and we will not be shy to do this going forward if we are not satisfied.

But I have to be very clear that we take NPV and IRR outlooks for these kind of projects rather than being -- we'll be actually steered by short term kind of price spikes, either upwards or downwards.

I've given you in March a chart which shows you at $50 and $70 what IRRs we are achieving for all of these projects.

I would refer you back to those as well.

Then on the FIDs, we have given you a slide which gives you kind of a large number of projects which we are working on and we will take these FIDs when they come.

We will not specify that per year.

What we have said the we are working at the moment at 800,000 barrels of production.

So of projects there we have not taken FID and that should unlock some 6 billion additional barrels of resources.

Remember what we are bringing onstream at the moment has a 10 billion barrels of resources attached to it.

That's how we are looking at it.

So I feel good about how we are managing CapEx and our program.

And I think there is sufficient in our pipeline to go through the next few years in order to achieve our long term growth aspiration of 2% to 3%.

I would like to come back quickly to look up questions because I answered too fast.

From the dollar effect, the CapEx cost is annually to $150 million to $200 million On income, that is a quarterly number.

I'm sorry about that.

Next question, please.

Thank you.

The next question comes from Irene Himona.

Please go ahead.

Good afternoon.

I have a question on tax.

Third quarter tax appears to be a little bit above guidance.

I was wondering if you could update the guidance for Q4 and the full year.

My second question concerns disposals where Peter, I think you clearly said that they're going to be running below previous expectations.

Are you able to update your guidance for net investment of 35%, $6.4 billion the full year?

And my final question, going back to Athabasca, if you could just clarify whether phase two, the phase that you're now delaying, was included in 800,000 barrels a day of projects where you don't have FID?

And was it also included in the guidance for 2%to 3% volume growth or not?

Thank you.

Thanks, Irene.

On the tax side, I think your need to look at from where the earning streams are coming from and quite clearly, they're a very strong third quarter on upstream income, which normally has a higher tax rate.

If you go back to 2007, to NTS, you have got a tax rate for business in there.

So there is a business segment mix, but there was also regional mix.

There was also some one-off items when you actually look at our divestment streams, et cetera.

From that point of view, the tax was affected by that.

I'm not giving annual tax rate.

I think if you look at '07, this gives you a good indication on where long term our tax actually will be.

On the CapEx question, the 35/36 which is for (inaudible) remains unchanged because it includes roughly $30 billion, $31 billion of organic CapEx, $10 billion of acquisitions and some $5 billion of divestments.

We achieved $4.7 million already by the end of September and I'm comfortable with having $5 billion, so we have achieved that or will achieve it .

So I think the total number for the year will be unchanged.

As you know, we don't give outlooks, but I've always said in the past that the round costs what we see in the market is an inflation of 10%.

Yes, indeed, oil prices have come down.

Commodities have come down.

Certain costs will come down, but it's by far too early to give any impact of that in the shorter term into next year.

You also know that exchange rates are moving and fluctuating quite a bit.

So we need to wait for all of this before we talk again about 2009 CapEx.

For the time being, I think the 10% inflation is a good number to use.

On the oil sands, let me just make a few comments on the oil sands.

On a Shell share basis, once we have implemented the expansion number 1, the 100,00, we will be around 150,000 barrels a day which is roughly 5% of our current crude production.

So relatively a small amount, just to set the whole thing a little bit into perspective.

Is it part of the $800,000 down to $6 billion?

Yes, it is part of that one.

Is it part of our long term aspiration of two to three?

I think there is a per year gross, yet there's a high number of projects in there.

And whenever you talk about pre-FID projects, et cetera, there is always a probability that something goes ahead and something doesn't go ahead.

So that's why we have set it to long term next decade aspiration,which we have.

It is every year.

It can have swings, you can have years with much more and other years with less..

If you take such a FID of such project now in '09, '10, that production, in fact, comes somewhere in '14, '15.

So I think the 2%to 3% as a guidance aspiration, aspirational guidance is the right way to look at it and we will work on

Next question, operator.

Thank you.

The next question comes from Mark Iannotti.

Please go ahead.

Good afternoon, gentlemen and congratulations Peter.

Just a quick question on volumes.

You've indicated 250,000 barrels a day of volumes from new projects by the end of next year.

Can you maybe comment on Nigeria and your thinking on barrels there and what exactly you're doing to try and get those barrels back and the potential for those returning at some stage in 2009.

And also give us if you can an update on the status of projects in Qatar in terms of their progress.

Mark, thanks for your question, I take them.

Nigeria, you know the story..

Three companies offshore go and buy a large well and L&G plants in spite of all the difficulties, they can fulfill their obligations on shore, an area as bit as England, or bigger than Scotland, yes?

We have a lot of problems there.

We have two problems which are the most important to say here.

That is security one.

Our staff can't work safely there.

And then we have a problem that, especially the government, they don't come up with the cash calls and that affects future production.

Not necessarily production today.

If you don't invest and you follow your decline rate, et cetera.

At this moment, it is the production, let's say the number of barrels we can produce is about the same already for the whole year.

But having said that, it is not exactly the same barrels out of action because what happens, and that's your question, what do you do about it, every time that your staff can't work safely there, you start a process with the local authorities, the local chiefs, as fair as possible, the groups who make life difficult to us to work there, the government of Bucha.

And very often, after some time, you can issue work there.

Then you have to check that it's safe or you may miss pieces of equipment, et cetera, and then you can restart.

Why are we not gaining because we have discovered that the other part in the delta, you may have to have new problems.

So at this moment, we have on the number of barrels out of action, we don't have new guidance.

The two projects in Qatar -- is the first of all, what happens there is quite unbelievable.

In Pearl, we have now we estimate 35,000 contractors busy building all the plants.

That's a bit more than two year ago hardly anybody, 35,000 now.

In Qatar gas number 4, our L&G plant, we have more than 10,000 people involved in building that.

So there you have -- if you go to this for (inaudible) only for Shell, we are close to 50,000 persons building those plants.

We have so far, we don't have unexpected developments.

We have to realize there's pressural costs as well.

If we look at the total picture, it's still within the assumptions that we have made.

Thank you.

Next question.

Thank you.

The next question comes from Colin Smith.

Please go ahead.

Good afternoon, gentlemen.

Congratulations also Peter, on your appointment.

And my first question is in connection with that.

Some very well placed, or apparently well placed sources seem to be strongly under the impression that you had been ruled out or ruled yourself out of succession.

I wonder if there is anything you'd like to say about that.

The second thing was just on L&G volumes which continue to be down year-on-year and again, possibly relating back to Nigeria question.

Can your just comment on why that is, that -- is your existing portfolio appears to be underperforming on the volume front.

Thank you.

I'm not sure I caught the second question.

Shall I take the first?

(laughter) We smile to each other, because we said before this teleconference, all questions elected Peter.

I will answer on all questions related to myself, Peter will answer.

But this is a quite personal question.

But let me do it as follows, Colin.

We are simply delighted that Peter is prepared to step up to the Chief Executive post in Shell.

We emphasized this morning in the press conferences we like to make from Shell, a real meritocracy.

Everybody can go to the first job, but it is important to note that he is the first non-Dutch, non-British person to do so.

That basically shows we are truly an multinational company.

The second question of the volume, I leave that to Peter.

Thanks for the words anyway, Colin, and absolutely excited to go for it and really build on the excellent base which Jeroen has actually built for the last few years.

Can your just repeat the second question, because you were breaking up.

My second question was on L&G volumes which continue to run below last year.

Obviously, you've got some new portfolio pieces coming into the picture.

But it's just -- why are things running so weak?

And I was wondering if that related to the performance in L&G in general, particularly in view of the fact that you do have this extreme there which could be available.

Thanks.

Now it's clear, yes.

The answer on the L&G is no.

So we are happy with how we are progressing there.

The total L&G sales volumes were $3.1 million tons which was 6% lower than in the same quarter a year ago.

This was mainly as a consequence of planned maintenance shutdowns in Australia and in Malaysia and changed cargo lifting schedules compared to the same quarter last year.

Last year we brought things into Q3 and this year that's not the case, and that gave us a little bit artificial difference.

Overall, all energy contracts were met in the quarter.

We expect Q4 volumes to increase from Q3 levels due to lower maintenance, but also due to the startup of Northwest Shelf train 5.

As I said already earlier on, looking into the next year, then we cycle incoming in, that gives us more.

So nothing kind of wrong with volumes this quarter.

It was just two effects coming together.

L&G pricing were obviously very strong and had actually record L&G profit quarter in Q3.

Thank you.

Next question.

Thank you.

The next question comes from Jason Kenney.

Please go ahead.

Hi there, I'll just add my congratulations to those of many of my peers.

I asked for a similar update from one of your oil peers the other day, and I can appreciate that you have sustainable and attractive cash returns at the $60 to $90 per barrel level.

But all things remaining equal, how low does the oil price need to go before dividends and CapEx are not covered in Shell?

I start and then Peter can fill you in.

Because I like to show that we have never lowered our dividends since '94, '95 and that had to do with were the war, before the war, et cetera.

We are strongly committed to our dividend policy and that is at least in line with inflation.

And make sure that if you make such a statement, of course we have done our homework about modeling about all kind of assumptions.

Over to you, Peter.

Let me give you a little bit longer answer here.

I think let me start with the fact that you do kind of two planning cycles whenever you look at your things.

You do the very long term and you look at projects and that is net present value derivative.

So you use a grade of low, high and medium prices rather than a single point forecast.

We look through the short term peaks and the lowest parts of the prices.

We look really for the long term business.

Today prices are well within our ranges, so no change to the basic philosophy that we have for project screening.

The second one you do is obviously you look at your cash for the near term, for the next three, five years.

That's where you are wrong, and I have been very consistent on this over the last few years.

You cannot get kind of blinded by the fact that you have got high oil prices and you are at the high end of the cycle of refining margins.

You need to cut that out and look through that, because we are in a cyclical and volatile business.

There you obviously plan for the next few years to actually keep your dividends according to your policy and Jeroen just described that.

Be on your post-FID project.

The worst thing you can do is that you have a need to cut so you just run them through.

You look at your pre-FIDs the same time and you again manage and invest through the cycle.

With the balance sheet which is 7% geared without the off-balance sheet you have enough financial muscle actually to do that.

So the average oil price over the last few years was actually $70 a barrel.

We should not forget that.

We had a spike in the middle, we generated all the $120 billion of cash, and we invested and pay back to shareholders 104 and kept $16 billions in the balance sheet.

I think that's the way we manage and I'm comfortable with that and I think with our growth aspirations around unlocking the 10 billion barrels of resources through 1million barrels of production, that's the way you want to run this.

I'm happy where we are at this stage, and I think our dividend policy over the last few years has shown that we can actually weather the storms and be prepared for that.

Can I just follow-up on that?

Just by implication, are you implying that you would use gearing if the oil price fell back to $40?

Gearing on the balance sheet is planned in such a way that you can weather the storms in the shorter term.

And if you have got good projects, you have a low gearing, and you are happy with your returns you're investing, that can be done.

That's not an issue.

But I've always said over the last few years, strongly supported by Jeroen and the board, we have got four legs in our financial framework.

The first one is dividends, the second one is organic growth CapEx.

The third one is maintaining a balance sheet, i.e., serving your debt but also and maintaining a gearing ratio of throughout the cycle.

Max of 25%.

And then if you have money left over, you do something else with it, either inorganic growth, more organic growth and I think that has serves us well as a framework.

Thanks very much.

Next question.

(laughter)

Thank you.

The next question comes from Bert van Hoogenhuyze, please go ahead.

Good afternoon, gentlemen.

And I add my congratulations.

Most questions have been answered, a few remain.

The derivative fair accounting, should I assume, seeing the fact that the minors with the rising oil prices is about the same level as the plus in the decreasing oil prices, that this is a cap which is sort of kept constant, or is this a coincident and is it just dependent on day-to-day trading with certain caps and bottoms.

The second question, as you mentioned good L&G prices, I understand especially in Asia, how is this going forward in the fourth quarter and the beginning of next year?

I take them, Jeroen.

On the mark-to-market, normally when you look at trading, we are looking at the window of three to six months where these kind of deals which you are doing are happening.

So we normally -- we get things back within two quarters.

When prices were rising in the second quarter, we had $750 million actually being where we took a snapshot at the end of the quarter that were taken, we're actually giving us a loss.

But I said already back then, normally that comes back when these fees are actually maturing.

So we had the $800 million coming back this quarter.

Under normal circumstances with little bit less volatility than what we have seen the last three, four months, we would have effect of plus, minus, $50 million in GP, maybe plus minus $100 million oil products and chemicals.

And we consider this as normal business.

And then we will not let you know, because that's just part of our results.

If they go outside certain boundaries, then I will just tell you every quarter on what that means.

But you cannot try for forecast this.

My opinion, when you model these stuff, you should leave these accounting things aside and look through that.

Okay.

Thanks very much.

And on the energy prices, I think I would just say -- remember Asia Pacific is a Japanese crudes kind of diet driven pricing.

So it's a percentage of the oil price, and we said from time to time, if its $100, then typically, you may look at the 16% of the L&G on the L&G side.

I think therefore, you see the fluctuation, but you have a delay effect in that.

In the results, depending on how the oil surprise moves.

If you ask me what's happening next year, I need to give the question back because then you'd have to tell me the oil price which we are not going into because we don't want to forecast that.

Thank you very much.

Next question.

Thank you, the next question comes from Joseph Tovey, please go ahead.

This is Joe Tovey, congratulations again to Peter.

And my questions are basically focused on financial types of items.

First item relates to the pension plans and related potential liabilities (inaudible) probably have affected to some extent the assets that are behind them.

Has the company quantified yet the extent of any potential chargeoffs or additional costs on that account.

Similarly in the financial area, obviously, there's been a set of major changes in the American and European banking (inaudible) Southeast Asia.

Has the company quantified the extent of its potential writeoffs and exposures on those?

I'll set aside any questions on the foreign exchange exposures for the, if I may just use them as a follow-up?

Okay.

The first -- thanks for the congratulations.

The first one is on pension plans, I think it's too early to say that.

I had a number which was in September, now I can tell you the end of October one or the weekly ones I get, they're completely different.

So I think we need to let this go throughout the year.

You can actually see how we're running our pension plans in the 2007 20S, you see the allocation to equity, fixed income, cash, etc.

I think like all pension funds obviously, asset levels have come down.

I think so far, so good.

You may remember that we had a surplus last year, but as I said, it's a little bit too early.

It depends a lot on obviously, the assumptions for your liabilities which have discount factors in it which are driven by bond rates, et cetera.

So you need to wait until the end of the year.

I think att this stage, I would expect the charge coming into P&L from pension to increase next year.

But I think if I look at the total picture, I don't see that as too material.

The banking system, we saw this coming rather early so reacted early.

We put our, A, our cash but also we managed our counter party risks in a very good way.

A very direct impact of quite a number of institutions going the wrong way or going bankrupt.

I can tell you we are around $16 million or $17 million losses.

That's all what we have at this stage.

Otherwise, such goods we have managed very well, and I think a great thanks to all of our business and finance colleagues in Shell.

They have done a tremendous job here.

So I think that's on this one.

Next question.

Thank you.

The next question comes from Neil McMahon.

Please go ahead.

Congratulations, Peter.

I've got a few questions to hassle you with.

The first is really on gas to liquids.

You noted in your press release that you had got good gas liquids pricing.

Just trying to figure out, did you have lots of extra volumes on the market in the quarter since I think they're relatively low.

And was that driven on the loop side or was that from the diesel side?

I think that's 14,000 barrels daily production.

It was higher prices and higher volumes.

I think it's in the specialties most probably, but I think we will get back to you.

I'm not entirely sure which product it is, but we'll get back to you.

But it is a very small volume at the end of the day.

Okay.

The second question is really around your acquisition strategy.

There's been quite a number of acquisitions you've done yourself over the last few years and the latest in Canada.

But if you look at the US lower 48 and the various companies in distress in terms of their share price, are you considering doing any more acquisitions around tight gas in the Rockies or shale plays towards the Gulf Coast or towards the eastern seaboard, or are you writing off any further acquisitions in that area now?

Neil, this is all (inaudible).

This is, of course, a sensitive question, so we have to look out what we say.

What can we say about it?

We have a long term strategy as we have shared with you in quite some detail in our strategy update in March.

So that is the first thing there.

When given a certain assumption for oil or gas prices, wherever we are, you always compare them what is better for the company.

Is that to invest in oil projects?

You develop the projects, you have to build them and later they come onstream.

Or do I go for Wall Street barrels today?

Now Wall Street barrels can be already be producing accessory assets which are the development as well.

That is balance we have to make all the time.

We are, in the (inaudible) basically practical business people.

On the other hand, if I looked to the total picture over the past years, we thought it was very good to run with a pretty conservative balance sheet as we have done.

The way we will take it forward is the same as normal businessmen.

We look at all our opportunities.

And I think you have seen that we don't do very wild things.

I expect that to continue those kind of lines.

We do not exclude any things we don't do or do do, but it should fit in our strategy and it should be the best for the company which is the same thing as saying the best for the long term shareholder interest.

One last question.

Just looking at your position in the Santos Basin in Brazil, I noticed in your portfolio update, there doesn't seem to be many plans there.

Could your just give us an update on what you're actually seeing there in terms of your first discovery and any plans, whether accelerated or not?

There's a side job but Peter is already sitting there.

Because Peter, you always think you see (inaudible) if he has a regional responsibility as well, which is South America.

So we can certainly give you data there.

Thanks, let me be clear here.

Not having it on the portfolio slide is not correct because if we look at what we are, today the biggest IRC producing in Brazil.

We have got 100,000 barrels DC10 projects coming on stream next year, and we have done a lot of exploration and some of our partners have actually briefed the market on that.

We have, if I'm not mistaken, actually 10 wells next year to be drilled.

So there's a lot going on there, and we are very active in presold and non-presold acreage.

Normally, we'd give exploration updates on an annual basis, so we will then talk about this again.

But Brazil we are very active there on the upstream side and in actually progressing with our business.

Thanks.

Next question.

Thank you.

The next at the question comes from [Alexander Weinberg].

Please go ahead.

Yes, good afternoon, gentlemen.

Congratulations Peter.

I've got three questions.

The first one regarding Canadian oil sands.

To what extent do you believe you can benefit from the potential cooldown of the very overheated environment and specifically in terms of operating costs, so the variable OPEX.

Secondly, could you update us on the cost cutting measures and initiatives such as the outsourcing on the IT or sourcing center?

And maybe remind us the annual amount you are targeting.

And the third one, could you give us your -- could you remind us what was the decline rate on the portfolio for the periods in the upstream portfolio.

Thank you.

Peter, I'm not sure I understood your second question.

But the third, Peter will answer that.

Okay.

Let me start with the oil sands.

Which really is aimed at what we are operating today which is already the 155,000 on the percent capacity and the 100,000 coming onstream pretty soon.

I think from an optimization point of view, we are not going for another expansion at this stage.

Having two mines then, actually, because start to de-bottleneck both lines and this has very low recap intensity, but on the side, it also gives advantages on how our operating costs longer term actually than are developing.

That's one way of looking at it.

Then you can work on the mine efficiency in that sense and you get a lower replacement costs.

There's quite a bit which we can do, and we are very much developing this at this stage.

On the forecasting, there is quite a bit going on in the sense that we do not need a new program, that is already running for quite a while.

It's Jeroen's top quartile program.

All businesses and all functions are working on that.

If -- you mentioned actually the functional programs like IT and finance.

Yes, the infrastructure was outsourced.

That works very well.

On the finance side, we are now 3,500 people in service centers across the world.

We are bringing them out of mainstream financing to locations where we actually have some salary arbitrage, but more importantly, we have economy of scale.

What we have said in the past is roughly $0.5 billion on an annual basis.

The impact of what's going on across the businesses and in the functions, so that's the kind of number which we have given.

I think it is really moving now, it's accelerating, so I'm very happy with that price.

As I said, we don't need any new initiatives because we do it already for quite some years now.

On the decline rate, guidance 3% to 6% over the last two years or so.

We have been between 4% and 5%, so more or less in the middle of the 3% to 6%.

So that one is the long term and the other one is the kind of near term hastily which I'm giving you here.

Next question, thank you.

Thank you.

The next question comes from Mark Gilman.

Please go ahead.

Good afternoon.

Peter, congratulations.

I had a couple short questions.

First back to Canada.

I assume that the 6 billion or 1 billion equivalent barrels of resource is a recoverable number.

Could you confirm that and if so, what kind of recovery rate is being utilized?

The answer is yes, it's recoverable and it's, normally it's 90%.

90%?

For gas.

Recovery rate?

Just hold on a second.

You were talking about 6 billion?

Well, BCF or 1 billion BoE, whichever you like.

Let me help here.

I leave it to the finance guys to figure it out.

This is the tight gas place, it is 1 billion barrels of oil equivalent.

6 BCF, we agree on that.

These are qualified as resources and that's what we expect to produce.

You tried to see that as a percentage of oil in place.

That's your question, Mark?

That's right, Jeroen.

I don't know that percentage.

I look at the finance guys here.

But I understand your question.

We don't got that.

Mark, sorry, I understood you were on oil sands so that is why I was confused.

We'll get back to you with that number.

Do you have a revised cost estimate for the phase one expansion at Athabasca?

No, we do not give revised single project cost estimates nor regional cost estimates.

It's part of our seven (inaudible) development costs for the whole -- on average for the whole portfolio.

Okay.

On L&G, were there any favorable contract renegotiations that took place in the third quarter, contract rollovers, and what kind of spot sales percentage was there?

The answer on the first one is yes.

We have these effects already in Q3.

And the renegotiations are going very well.

On the diversions, which is your spot sales question, typically, we have 55, 60 ships at quarter.

And you can take kind of 5% to 10% to 15% could be actually diversions.

It depends a little bit quarter-on-quarter.

Okay.

And my final question relates to the performance of the chemicals, which I guess -- I just can't understand how in the margin environment appearing in your slides, absent undisclosed nonrecurring effects over and above what seems to be a small impairment, that the results could be so weak, Peter.

You think they are very weak, Mark.

Is that (inaudible)

About $500 million below where they should have been, I think, Jeroen.

The -- I don't try to be defensive about it.

I'm not so sure, by the way of the $500 million figure.

But what have we seen?

Yes, hurricanes impact (inaudible) damage that you didn't have electricity, all those kinds of things.

That is very important factor.

Secondly, we are a liquid cracker (inaudible) and especially in our US portfolio, this broke us up over the summer.

That are the two important factors.

To give you two more, Mark, there is $80 million off hurricane costs in it.

Which -- cost to margin, so that's one.

And the other one is actually, we had not a strong quarter in Nanhai in China.

Because of the demand slowdown within China in the third quarter, and both contributed actually quite significantly to the results.

And that's why we are lower.

Okay.

Gentlemen, thank you.

And again, Peter, my congratulations.

Thank you very much, Mark.

Thanks, Mark.

Next question, operator.

Thank you.

The next question comes from Kim Fustier, please go ahead.

Hi, good afternoon gentlemen.

Just two questions.

Firstly, can you remind us of the share buyback policy and whether your share buybacks are tied to disposals.

And secondly, in your comments earlier, you talked about the historical correlation between oil prices and costs.

You also said that it was too early to see the impact on next year's CapEx or inflation.

So what's your best guess of how quickly costs can adjust to a lower oil cost environment?

Are we talking about six months, one year, or 18 months?

Thank you.

Peter.

The buyback policy is very simple.

We have our four financial building blocks, which I said already, it's dividend, it's organic growth, it's a safe, conservative balance sheet.

If there is cash surplus, then we can either choose to buy back, we can choose to further invest in organic growth or we can actually do inorganic growth acquisitions as well.

So they are not straight tied back to divestments, it's the overall cash flow and (inaudible) which drives this.

So it's market circumstances which we take into account and obviously, also take yield thinking into account, maybe look at our share prices.

On the cost side, it is quite clear, it's too early to see it.

And that's why we have said at the moment up to the last, let's say six, eight weeks and the prices coming down so far, we have seen roughly a 10% inflation.

And I think that's comes which you need to think about when you look at our CapEx figures for next year.

There might be impact coming later on, but typically in a CapEx number, it takes, I would say 12 to 18 months to actually get the full effect of cost decreases in.

You may see it a little bit early in OPEX, but typically, we work with two to three years of contract, so it takes a while before these things come out, and you need to structure your balance sheet in such a way.

So I think that's the way you need to look at this.

And you may not see the impact from a cost point of view that early in the CapEx number, but please be reminded, we can always postpone projects and therefore, that will have an impact, obviously in the absolute amount which we spend.

Next question, operator.

Thank you, the next question comes from Paul Andriessen Please go ahead.

Good afternoon gentlemen.

Paul Andriessen, Fortis Bank, Netherlands.

I have another two questions about CapEx.

What is your room for maneuver at all to throttle down on upstream CapEx given your stick to the 2% to 3% growth outlook for the next decade and progressive dividends, and the second question, let's say around $30 million organic CapEx of this year.

Going into next year, how much is already committed on existing projects?

Okay.

I take the second one first and come back to the first one.

As I said on the preFI -- post-FID project, we are committed and we go through that.

And these are the major pillars, obviously, of our capital expenditures.

So no change there.

We take a long term view on oil prices and performance of these projects, and I think it's the worst you can do in an oil and gas business, to do a stop and go policy on capital expenditures.

That's from a strategic point of view, not the right thing to do.

As I said earlier, when you look at your cash flow and your balance sheet structure, you take into account how you are going to actually structure it in a low oil price scenario in the medium and the high one.

And given that we are at 7% of (inaudible) ratio at this stage, we have an solid balance sheet and hence, we can follow through with our dividends, policies, and we can follow through with our organic growth strategy which we have outlined in the past.

So I think we are very strong, we are in the right position for this downturn.

We have always said we don't believe in these very high oil prices.

We do believe in long term higher oil prices, we have said that.

But I think you are -- you need to measure the -- or go through the stormy waters, and Jeroen calls them and continue to work on the same issues and pay your dividend.

I'm very happy where we are.

Okay.

Thank you very much.

Next question, operator.

Thank you, the next question comes from Mark Bloomfield, please go ahead.

Good afternoon, gentlemen.

I just wondered if you could give us some thoughts on the availability of financing as you're seeing it at the moment for projects which are approaching FID over the next 12 months or so.

And specifically wondering if this is a possible source of delayed FIDs on those projects which would traditionally require project financing.

Okay.

I take this, I guess, Jeroen.

I think there are two answers to this question.

There's a Shell answer and a market answer.

From a Shell point of view, we have only a very few projects where we actually do project financing.

Normally, we are a self-financing organization or company and if we can't finance and don't have the financial muscles, then most of it will not go into a project.

From that point of view, I wouldn't see at this stage that because of missing project financing, a project would not go ahead.

There is obviously a wider question on partner strengths and that's where assess your counter party risk, with whom you are developing these projects, et cetera, et cetera.

And there is the wider market, and I think there you have a point.

That most probably some projects of weaker companies, weaker in the sense of financial stability may be already burdened with high CapEx and high leverage already that they most probably will have to postpone or take other partners in.

Now I think that's what Jeroen referred to it In the earlier part.

The financial crisis, the economical crisis had some challenges, but it also has opportunities.

I understand, operator, I can go to the last question.

Thank you.

The next question comes from Dominique Patry, please go ahead.

Yes, good afternoon.

You have mentioned in detail the criteria leading to your FID process.

I was just wondering when it comes to exploration, how do you envision your exploration given as the current commodity price volatility and given the sharp increase in explor --

You broke away.

Probably the easiest to repeat you question.

So you talked about FID process, and then we had difficulty to catch your question.

Can you go again, Dominique?

Sure -- from the line.

Your details met criteria leading to your FID decision.

I had a similar question coming to your exploration efforts.

Given the current commodity prices volatility, and given the fact that you have sharply increased your exploration as well over the past couple of years, how do your envision exploration into the coming months?

Thank you.

Good question.

Exploration.

I think the best example is we spent a lot of exploration money this year on the church CC.

This is a arctic area, close -- that's relatively close to the North Pole.

How do you do that?

First of all, if you do that exploration, you know that you first have to explore, then you have to develop projects.

This is offshore, so -- and then after you hope to be -- not lucky, to be find the good stuff to develop that.

But it will take many years before the production starts.

This is the kind of basins where we expect after our production had started that you continue to produce for quite some years as well.

So basically, you have to take the kind a kind of view here, is what will the carbon prices many years oil and more than a decade away.

So short term price swings as we have seen over the past several hardly have any influence for that.

And of course, in order to assume those prices, we've got inspiration from our long term energy scenarios and we have, so we have published that, However, I like to add two things.

First of all, it is not only about prices for gas or oil assumes.

It is very important how this work, the royalty regimes, how can the cost recovery go for taxation et cetera.

These are very important assumptions.

Nobody can say what was the tax in 15 years, but we have learned over the past years that usually tax regimes of countries are relatively constant and in ceratin other countries, they change all the time.

So you take that into account.

Last but not least, and church cc's a very good example, what is the percentage of chance that you have major oil or gas farms?

And here I like to explain that we did have experience from some time ago.

That's from the '80s, because we have been drilling there and we know a lot about the geology.

But we took into account as well that if we found new fields there, we think we have the right type of coup attempts and capabilities not only to do a good job from an economic point of view relative to the competition, but we think that in Shell, we can work very well in a responsible way in those arctic and environmental sensitive areas.

So, that's how we do it.

Operator, can I close the conference?

Sorry, don't do it because before we close it, Peter would like to say something specific.

Can I close the questions part?

Before we close, let me remind that you we will be releasing Q4 '08 results on the 29 of January, '09.

In the same way that we updated markets last year, we will give you the 2008 reserves figures with the annual report and the 20-F and not with the fourth quarter results.

We will do that somewhere in March as I expect Jeroen will report in the 20-F to be filed then.

Let me also clarify that the '08 reserves reporting will be on the current SEC definitions.

If the SEC adopts new reserves definitions this year, we expect these definitions to be put in place for 2009 20-F filing not for '08.

Thanks to all of you for joining the call and have a nice afternoon.

Thank you.

This concludes today's conference call.

Thank you for participating.

You may now disconnect.