Royal
Dutch Shell plc
Carel
van
Bylandtlaan 30
2596
HR
The Hague
The
Netherlands
Tel:
+31
70 377 3120
Fax:
+31
70 377 2178
Email:
Tim.Morrison@shell.com
H.
Roger
Schwall
Assistant
Director
Division
of Corporation Finance
United
States Securities and Exchange Commission
450
Fifth
Street, N.W.
Washington,
DC 20549
USA
November
2, 2006
Dear
Mr.
Schwall:
As
Controller of Royal Dutch Shell plc (“Royal Dutch Shell”), on behalf of Royal
Dutch Shell and its subsidiaries (the “Group”), I am responding to your letter
dated September 29, 2006 addressed to Mr. Peter Voser, the Chief Financial
Officer of Royal Dutch Shell. The comments of the staff (the “Staff”) of the
Division of Corporation Finance of the U.S. Securities and Exchange Commission
(the “Commission”) set out in that letter and our responses thereto are set
forth below. I would like to express our appreciation to the Staff for providing
these comments early in the Group’s annual reporting process.
Pursuant
to Rule 83 of the Freedom of Information Act (17 CFR §200.83), a request for
confidential treatment by the Staff has been submitted concurrently with this
letter. Accordingly, this letter is provided to the Staff in paper format
pursuant to Rule 101(c)(1)(i) of Regulation S-T (17 CFR §232.101).
Capitalized
terms used but not defined herein have the meanings given to such terms in
the
Annual Report on Form 20-F for the fiscal year ended December 31, 2005 of Royal
Dutch Shell (Commission file No. 1-32575) (the “2005 20-F”).
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Responses
to Comments
1.
Staff Comment: We
note that on your website you list as a contact for Cuba an entity named Shell
Caribbean Services Limited. Your 20-F does not include any information regarding
contacts with Cuba. In light of the fact that Cuba has been identified by the
U.S. State Department as a state sponsor of terrorism, and is subject to U.S.
economic sanctions, please describe for us the extent and nature of your past,
current, and anticipated contacts with Cuba, whether through direct or indirect
arrangements. Discuss the materiality to you of such contacts, and whether
those
contacts constitute a material investment risk for your security holders.
Response:
Shell
Caribbean Services Limited (“Shell Caribbean”) is an entity established under
the laws of England and Wales whose ultimate parent entity is Royal Dutch Shell.
Shell Caribbean established the representative office in Cuba in 1995.
For
the
reasons set forth in Annex A, we believe that our contacts in Cuba are both
quantitatively and qualitatively immaterial and do not constitute a material
investment risk for our security holders. Please refer to Annex A for further
detail on the Group’s contacts with Cuba and an assessment of their quantitative
and qualitative materiality.
2.
Staff Comment: Your
materiality analysis should address materiality in quantitative terms, including
the approximate dollar amount of any revenues, assets and liabilities associated
with Cuba. Please also address materiality in terms of qualitative factors
that
a reasonable investor would deem important in making an investment decision,
including the potential impact of corporate activities upon a company’s
reputation and share value.
We
note, for example, that Arizona and Louisiana have adopted legislation that
requires their state retirement systems to prepare reports regarding state
pension fund assets invested in, and/or permits divestment of state pension
fund
assets from, companies that do business with U.S.-designated state sponsors
of
terrorism. The Missouri Investment Trust has established an equity fund for
the
investment of certain state-held monies that screens out stocks of companies
that do business with U.S.-designated state sponsors of terrorism. Florida
requires issuers to disclose in their prospectuses any business contacts with
Cuba or persons located in Cuba. Your materiality analysis should address the
potential impact of the investor sentiment evidenced by such actions directed
toward companies that operate in Cuba.
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Response:
Please
refer to Annex A for an analysis of the quantitative and qualitative materiality
of the Group’s contacts with Cuba.
3.
Staff Comment: Please
provide us with an updated analysis of the materiality of your contacts with
Iran, Sudan and Syria, and with an analysis of the materiality of your aggregate
contacts with those countries and Cuba. You should address materiality in terms
of the quantitative factors noted above, and in terms of qualitative factors
that a reasonable investor would deem important in making an investment
decision, including the potential impact of corporate activities upon a
company’s reputation and share value.
In
this regard, we refer you to the specific institutional investor actions noted
in the preceding comment. We note also that the Pennsylvania legislature has
adopted a resolution directing its Legislative Budget and Finance Committee
to
report annually to the General Assembly regarding state funds invested in
companies that have ties to terrorist-sponsoring countries. We further note
that
on September 25, 2006, the governor of California signed into law a bill that
prohibits the California Public Employees Retirement System and California
State
Teachers Retirement System from investing public employee retirement funds
in
companies with active business operations in Sudan. Connecticut, Illinois,
Maine, Oregon and New Jersey also have adopted, and other states are
considering, legislation prohibiting the investment of certain state assets
in,
and/or requiring the divestment of certain state assets from, companies that
do
business with Sudan. Harvard University, Stanford University, Yale University,
Dartmouth College and the University of California Board of Regents have all
adopted policies prohibiting investment in, and/or requiring divestment from,
companies that do business with Sudan. An August 26, 2005 news report states
that New York City’s comptroller sent you a letter requesting that you establish
a board committee to review your ties with Sudan and report its finding to
your
shareholders. Your materiality analysis should address the potential impact
of
the investor sentiment evidenced by these and similar actions directed toward
companies that do business with Cuba, Iran, Sudan and Syria.
Response:
Please
refer to Annex A for an updated analysis of the quantitative and qualitative
materiality of the Group’s contacts with Iran, Sudan and Syria.
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4.
Staff Comment: We
note that your consolidated financial statements include those companies in
which you either directly or indirectly have control. However, it is not clear
from your disclosures whether there are any instances in which you do not own,
directly or indirectly through subsidiaries, more than half of the voting power,
and what the nature of the relationship is between you and such subsidiary,
as
required by IAS 27, paragraph 40. A disclosure similar to that made in Note
21
of your unaudited parent company financial statements would appear to be
beneficial to your readers in this respect.
Response:
The
Group
does not currently have any entities that the Group consolidates under
International Financial Reporting Standards (“IFRS”) without a majority equity
holding.
5.
Staff
Comment: Tell
us whether you have any oil and gas contracts that you account for on the gross
basis under IFRS, which must be netted following EITF 02-3 because they are
trading contracts. If so, clarify your disclosure for this GAAP difference
in
your reconciliation of IFRS to U.S. GAAP presented in Note 38.
Response:
Gains
and
losses on derivatives contracts and contracts involved in energy trading and
risk management are shown net in the Statement of Income if these contracts
are
held for trading purposes. We applied this treatment consistently for both
IFRS
and U.S. GAAP. This treatment is required under EITF 02-03 and there is no
specific guidance under IFRS that would mandate a different treatment (IAS
18
“revenue recognition”).
Our
conclusion is based on our belief that the risk of the transactions is limited
to the net price exposure (fair value) and therefore these contracts should
be
netted to reflect the true nature of the business. Based on this interpretation,
we believe that netting is acceptable and the preferable presentation for these
types of trades under both sets of accounting principles.
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6.
Staff
Comment: We
understand from your disclosure that the merger reserve came about as a result
of the Unification transaction consummated during 2005. Tell us where details
of
this transaction are provided, which more fully and specifically describe what
caused this reserve to arise as a result of the Unification transaction, why
it
had to be established, and what the future expectations for it
are.
Response:
We
refer
the Staff to Note 1 to the Consolidated Financial Statements on page 109 of
the
2005 20-F for details of the Unification Transaction and to Note 30 on page
141
for details of certain reserves, including the merger reserve.
Royal
Dutch Shell, as a UK public limited company (plc), is required to prepare its
accounts in accordance with IFRS and UK Law. Section 131 of the UK Companies
Act
1985 applies when an issuing company (in this case, Royal Dutch Shell) secures
at least a 90% holding in another company (in this case Royal Dutch Petroleum
Company (“RD”) and The “Shell” Transport and Trading Company p.l.c.
(“ST&T”)) in pursuance of an arrangement providing for the allotment of
equity shares in the issuing company as consideration for receiving equity
shares in the other company. The Unification Transaction met these
conditions.
When
Section 131 applies, Section 130 (which requires the separate recognition of
any
premium over nominal value on the issue of shares) does not apply to the equity
shares allotted by the issuing company (Royal Dutch Shell). Consequently, the
shares issued by Royal Dutch Shell in pursuance of the Unification Transaction
were accounted for at nominal value.
As
explained in Note 1, the Unification Transaction was accounted for using a
carry-over basis of the historical assets and liabilities of RD and ST&T.
Consequently, in preparing the consolidated accounts of the Royal Dutch Shell
shares, a difference arises between the nominal value of Royal Dutch Shell
share
issued and the RD and ST&T shares received. As explained in footnote (a) to
Note 30, this difference comprises the merger reserve.
Under
U.S. GAAP all such transactions would have also been recorded directly to equity
and there would be no difference compared to IFRS. The specific description
of
the “merger reserve” would have been a “capital surplus” account under U.S.
GAAP. In substance, the original $5.7 billion adjustment was nothing more than
a
change in the stated value of the shares that, in the U.S., would normally
have
resulted in a reclassification from common stock at stated value to capital
surplus/additional paid in capital.
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7.
Staff
Comment: Although
you have disclosed production and percent interest in your significant oil
and
gas properties, we believe that you should also disclose your net proved
reserves for these properties. Please see Instruction 1(a) to Item 4.D for
extractive enterprises. Please revise your document as
necessary.
Response:
The
Group
does not regard any property discussed on pages 33-37 of the 2005 20-F to be
individually material or of major significance to the Group. The additional
information is provided for the information of investors. As a result, we
believe that Instruction 1(a) to Item 4.D is not applicable to that discussion.
In future filings we will clarify this section to state whether any single
property is material or of major significance to the Group.
8.
Staff
Comment: You
state that you increased your equity interest in the North Caspian Sea PSC,
which includes the Kashagan project. However, we note only a minor increase
in
reserves due to purchase of reserves in this geographic region in the reserves
table. Please tell us how many additional proved reserves the equity increase
represents.
Response:
The
Group’s equity interest in the North Caspian PSC increased from 16.67% to 18.52%
as of May 10, 2005. This had the effect of increasing the proved reserves for
the Kashagan field by <redacted>. This amount is included in the 10
million barrels of ‘purchases of minerals in place’ line item for the Middle
East, Russia and CIS region in the Proved Developed and Undeveloped Reserves
table on page 158 of the 2005 20-F. In addition to this increase, there was
also
a separate year-end increase in proved reserves of 226.2 million barrels,
included in the 256 million barrels of ‘extensions and discoveries’ line item
for the Middle East, Russia and CIS region of the same table. This increase
reflects a 2005 year-end re-evaluation of proved reserves for the Kashagan
field
associated with recognition of company commitment to full field development
and
was determined after giving effect to the increase in the Group’s equity
interest in the North Caspian PSC.
9.
Staff
Comment: Reconcile
your statement that your equity increased from 1.85% or 18.52% in the North
Caspian Sea PSC with a similar statement under Operating and Financial Review
—
Exploration and Production that says you hold an 18.52% interest in the North
Caspian Sea PSC, which is up from 16.67%.
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Response:
We
respectfully advise the Staff that page 23 of the 2005 20-F contains the
following statement in the Exploration & Production section of the Operating
and Financial Review:
“The
Group’s equity interest was increased by
1.85% to
18.52% in the North Caspian Sea PSC, which includes the Kashagan project in
Kazakhstan.” [emphasis added]
This
is
consistent with page 35 of the 2005 20-F, which contains the following statement
in the Exploration & Production section of the Operating and Financial
Review under the heading ‘Kazakhstan’:
“A
Group
company (Group interest 100%) holds an 18.52% interest in the North Caspian
PSC
(increased from 16.67%) in respect of some 6,000 square kilometres offshore
in
the Kazakhstan sector of the Caspian Sea.”
10.
Staff
Comment: Please
reconcile the reported production costs in $/equivalent barrel for 2003, 2004
and 2005, for each geographic area, and the total with the calculated costs
for
those periods and geographic areas using the production costs shown in the
Notes
to the Consolidated Financial Statements and the reported production from each
geographic area in the reserve table in the Notes.
Response:
Please
refer to Annex B for a table showing the reconciliation of the unit production
costs in dollars per barrel of oil equivalent by geographical area for
2003-2005. Where applicable, the table includes reference to the relevant pages
in the 2005 20-F. Below is further explanation of the production
costs.
The
unit
production costs are calculated based on production costs less royalty payments,
divided by the production volume (expressed in barrels of oil equivalent).
The
calculations are based on costs and barrels of oil equivalent before rounding
and hence the calculated results reflect minor differences that are entirely
the
result of rounding differences. Additionally, the production volume used for
unit production costs calculations for 2005 and 2004 in the Europe region was
adjusted by an offsetting 16 thousand million scf that represented the variance
of production numbers reported in the financial report versus reserves
reporting. The variance was created by the change in methodology (from
entitlement to actual production) applied to production volume for the Troll
field in Norway.
In
future
filings we will include an explanatory footnote on the impact of royalty
payments to assist readers in calculating production costs.
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11.
Staff
Comment: You
state that you expect overall production to increase beginning in 2006, as
additional production from new projects begins to come on stream. Please tell
us
the basis for this expectation and why you believe production increases will
be
enough to overcome the natural production decline from your existing fields.
Reconcile this statement with the risk factor presented earlier that indicates
risks related to project delivery and your ability to replace oil and gas
reserves.
Response:
In
response to the Staff’s comment to discuss the basis for the expectation of
increased overall production beginning in 2006 and why we believe production
increases will be enough to overcome the natural production decline from our
existing fields, we note the following: The expectation of increased overall
production beginning in 2006, which is reflected in the 2005 20-F, was based
in
significant part on expected production from new field development,
particularly, production from our
new
fields, Bonga and Ehra in Nigeria and Salym in Russia, The expectation was
arrived at on the basis of a business planning exercise that estimates various
key performance metrics and takes into account, and incorporates adjustments
for, various factors that may influence future performance.
In
response to the Staff’s comment to reconcile the statement of expected increased
production with the risk factor presented in the 2005 20-F that indicates risks
related to project delivery and our ability to replace oil and gas reserves,
we
note that, in the business planning exercise discussed above, we take
into
account, and incorporate adjustments for, various factors, which include natural
production declines from existing fields, the timing of execution of various
capital projects, uncertain geology, project
delay, availability of skilled resources, cost overruns
and
other information as it becomes available (e.g., the effects of natural
disasters such as Hurricane Katrina).
The
Group’s expectation is arrived at after consideration of all these risk
factors.
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12.
Staff
Comment: We
note you include significant changes in the oil and gas reserves table which
you
do not appear to fully explain in the document. Examples are large revisions
in
Africa and Asia-Pacific and extensions and discoveries in the Middle East.
Please revise your document to fully explain these reserve changes. See
paragraph 11 of SFAS 69.
Response:
We
refer
the Staff to the Proved Reserves subsection of the Exploration & Production
section of the Operating and Financial Review located on page 25 of the 2005
20-F. That section includes the following disclosure addressing the significant
changes in net additions and revisions during 2005:
“The
most
significant 2005 additions in proved reserves arose from new sales agreements
and modifications to development plans covering gas volumes to be produced
from
the Sakhalin development in Russia and the recognition of volumes associated
with the further development of the Kashagan field in Kazakhstan. Reserves
from
both these projects are expected to be produced later in the decade. The 2005
revisions reflect changes brought about by our reserves review procedures,
including additional well and reservoir performance data.”
We
believe that this level of disclosure in the 2005 20-F is adequate in relation
to the immateriality of the individual revisions to the total reserve base.
Supplementally, for the benefit of the Staff, set out below is additional detail
on the nature of the individual revisions.
Revisions
in Asia-Pacific
There
was
a negative revision to proved reserves noted in the Asia-Pacific region of
706
thousand million scf of natural gas at the Group level, and of 23 thousand
million scf of natural gas for the Group share of equity accounted investments
as of December 31, 2005. The primary source of this negative revision came
from
the Group’s <redacted> where development wells drilled in the fourth
quarter of 2005 confirmed the <redacted> and led to a <redacted>.
This, in turn, led to revisions of volumetrically determined reserves in such
fields.
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Revisions
in Africa
There
was
a negative revision to proved reserves noted in Africa of 206 million barrels
of
oil and natural gas liquids and 221 thousand million scf of natural gas as
of
December 31, 2005, of which more than <redacted> was incurred in
<redacted>. The largest single factor for the revision in <redacted>
was management’s yearly review of ongoing projects. This yearly review took into
account continuing funding constraints imposed by <redacted> as well as
increasing cost pressures, which resulted in a redefinition and
re-prioritisation of a number of large integrated oil and gas gathering projects
to optimise use of available capital and investment opportunities. A decision
was made to delay some elements of these projects until funding became
available, or to seek ways to reduce total costs. As a result, the redefined
portions of these projects were no longer considered to be technically and
commercially mature and the associated oil and gas volumes were de-booked.
The
remainder of the reduction in <redacted> is attributable to other factors,
primarily including production performance, the use of revised volumetric
analyses, increased cost estimates, re-evaluation of the applicability of
analogues and revisions to development plans.
Extensions
and discoveries in the Middle East, Russia and CIS
There
was
an increase of proved reserves in the Middle East, Russia and CIS region, noted
under extensions and discoveries, of 256 million barrels of oil and natural
gas
liquids and 1,842 thousand million scf of natural gas as of December 31, 2005.
This is mainly due to additional bookings in the Kashagan field in Kazakhstan
attributable to the recognition of the Group’s commitment for full field
development and additional bookings in the Lunskoye field in Sakhalin, Russia
attributable to the approval of a revised development plan incorporating an
increased number of development gas wells planned within the proved
area.
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In
connection with these responses, Royal Dutch Shell acknowledges that
(i) Royal Dutch Shell is responsible for the adequacy and accuracy of the
disclosure in the filing; (ii) Staff comments or changes to disclosure in
response to Staff comments do not foreclose the Commission from taking any
action with respect to the filing; and (iii) Royal Dutch Shell may not
assert Staff comments as a defense in any proceeding initiated by the Commission
or any person under the federal securities laws of the United States.
If
we may
be of further assistance, please do not hesitate to call Bob Deere, on 011
31 70
377 4646 or the undersigned, on 011 31 70 377 3120.
Yours
sincerely,
/s/
Tim Morrison
Tim
Morrison
Group
Controller
Copy:
Donald
Delaney
Division
of Corporation Finance
U.S.
Securities & Exchange Commission
Brian
Puffer
PricewaterhouseCoopers
LLP
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ANNEX A
Below
please find updated information on our contacts with Cuba, Iran, Sudan and
Syria, countries designated by the U.S. Department of State as state sponsors
of
terrorism, and a materiality assessment.
Cuba
As
discussed in the response to Comment 1 above, the Group’s presence in Cuba is
limited to a representative office established by Shell
Caribbean, an entity established under the laws of England and Wales, and having
its registered office in London. The Group maintains a presence in Cuba for
the
sole purpose of monitoring potential oil and gas exploration opportunities.
Formerly, another Group entity, Shell Trading and Shipping Company (“Shell
Trading”), engaged in sales of a limited selection of products consisting of
aviation fuel (non-military) and lubricants to commercial customers in Cuba.
This activity was terminated in 2004 and, at present, Shell Trading does not
have any sales or other activities in Cuba.
The
Group
does not currently have any exploration, production or other operations in
Cuba
either directly or through any indirect arrangements. The
Group
does not hold any oil or gas reserves in Cuba. Moreover,
the Group does not have, nor has it had, any arrangements or business projects
with the Cuban government.
For
the
year 2005, Shell Caribbean recorded de
minimis revenue
and reported a net loss of approximately $47,500. Total assets and liabilities
for 2005 were less than $1 million and $86,000, respectively. For the year
2004,
net revenue reported was less than $500. Total assets and liabilities for 2004
were less than $1 million and $43,000, respectively.
Iran
A
Group
company has a 70% interest in an agreement to develop the Soroosh and Nowrooz
fields in the northern Gulf, as Contractor. The Group company handed over
operatorship to NIOC following production startup in 2005. Under the agreement,
the Contractor is responsible for the execution of the development plan, the
development operations and the provision of technical assistance and services
following completion of the development phase. The term of the agreement expires
when all petroleum costs and the remuneration fee have been recovered, which
period shall not exceed seven years from the date of first production, unless
extended by mutual agreement. This information is disclosed on page 35 of the
2005 20-F.
The
Group
entered into a project framework agreement for the Persian liquefied natural
gas
project in 2004. During 2005, the project made further engineering and design
progress. This information is disclosed on page 41 of the 2005
20-F.
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ANNEX
A
Also,
as
disclosed in footnote (b) on page 50 of the 2005 20-F, a Group entity has a
61.57% interest in a joint venture in Iran that operates a lubricant oil
blending plant and sells lubricants in Iran.
Finally,
through Shell Global Solutions, an entity established under the laws of England
and Wales, the Group has technology licensing agreements with unaffiliated
third
parties in Iran.
For
the
year 2005, revenues in Iran represented less than <redacted> of the
Group’s consolidated 2005 revenues and less than <redacted> of the Group’s
consolidated net income, and at December 31, 2005, the Group’s net assets in
Iran represented less than <redacted> of the Group’s consolidated net
assets.
Sudan
The
Group
has had limited operations in the Sudan for approximately 70 years. Currently,
these operations are conducted through The Shell Company of the Sudan Limited
(“Shell Sudan”), an indirect wholly owned subsidiary of Royal Dutch Shell. Shell
Sudan’s activities consist of the sale of fuels and lubricants to retail and
commercial customers. Shell Sudan also sold aviation fuels until the disposition
of this activity in 2005. The Group does not hold any oil or gas reserves in
Sudan. This information is disclosed in footnote (c) on page 50 of the 2005
20-F.
The
Group
does not have any exploration, production or other operations in Sudan either
directly or through any indirect arrangements. Moreover, the Group does not
have, nor has it had, any arrangements or business projects with the Sudanese
government. At present, there are no plans in place to commence business
activities or operations in Sudan.
For
the
year 2005, revenues of Shell Sudan represented less than <redacted> of the
Group’s consolidated 2005 revenues and less than <redacted>
of net
income, and at December 31, 2005, the net assets of Shell Sudan represented
approximately <redacted> of the Group’s consolidated net
assets.
Syria
The
Group
holds undivided participating interests ranging from 62.5% to 66.67% in three
production sharing contracts that expire between 2008 and 2014. Operations
under
these contracts are performed by Al Furat Petroleum Company, a Syrian joint
stock company in which Syria Shell Petroleum Development B.V. holds a 31.25%
interest. In addition, Group entities are parties to a gas utilization agreement
for the collection, processing and sharing of natural gas from designated fields
for use in Syrian power generation and other industrial plants. This information
is disclosed on page 36 of the 2005 20-F.
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ANNEX
A
For
the
year 2005, the Group’s revenues from Syria represented less than
<redacted> of the Group’s consolidated 2005 revenues and less than
<redacted>
of net
income, and at December 31, 2005, the Group’s net assets in Syria represented
less than <redacted> of the Group’s consolidated net assets.
Assessment
of Materiality
As
discussed in the Operating and Financial Review of our 2005 20-F, the Group’s
various activities are conducted in more than 140 countries and territories.
The
Group markets oil products in more countries than any other oil company and
has
a strong position not only in the major industrialised countries but also in
the
developing ones.
The
Group
reports revenues by industry segment and also by the following geographic areas:
Europe, Other Eastern Hemisphere, USA and Other Western Hemisphere. The Group
reports other operating data for selected countries but does not report revenue
on a country-by-country basis (except for the U.S.A. which constitutes a single
geographic area).
The
Group’s aggregate investment in Cuba, Iran, Sudan and Syria is estimated to be
less than <redacted> of Group net assets at December 31, 2005, generating
less than <redacted> of Group net income in 2005. Total production from
operations in Iran and Syria was approximately <redacted> of the Group’s
total production for 2005 and trading value in 2005 with entities in Iran,
Sudan
and Syria represented approximately <redacted> of the Group’s 2005
consolidated cost of sales. In addition, the Group’s reserves in Iran and Syria
at December 31, 2005 are estimated to be approximately 35 million barrels
of oil, or less than <redacted> of the Group’s consolidated reserves. The
Group does not have any production or reserves in Cuba or Sudan. On both an
individual and aggregate basis, the assets, income and production resulting
from
these countries are de
minimis.
Therefore, we believe that these activities are quantitatively immaterial.
The
Group
has also considered qualitative factors in assessing the materiality of these
investments and operations in countries that are designated by the U.S.
government as state sponsors of terrorism and their potential impact on the
Group’s reputation and on the value of their publicly-traded securities. In that
connection, the Group understands that certain investors have policies limiting
or prohibiting investments in companies that have investments or operations
in
countries that are designated by the U.S. government as state sponsors of
terrorism. The primary factors that the Group considered in evaluating
qualitative materiality include:
| · |
The
fact that the Group has included, in the 2005 20-F as well as prior
annual
reports, specific disclosure that identifies the countries where
the Group
has investments or operations. As a result,
|
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ANNEX
A
|
investors,
consumers and analysts are aware that the Group has operations
in Iran,
Sudan and Syria.
|
| · |
The
fact that the Group has included, in the 2005 20-F as well as in
prior
filings with the Commission, a specific risk factor on the possible
imposition of U.S. government sanctions as a result of the Group’s
activities in certain countries.
|
| · |
The
fact that the Group maintains policies and procedures pursuant to
which
the Group seeks to comply with applicable regulations relating to
activities in Cuba, Iran, Sudan and Syria. Among other things,
subsidiaries of Royal Dutch Shell conduct training and maintain
arrangements designed to ensure that U.S. persons associated with,
or part
of, the Group are not engaged in activities that violate or would
cause
members of the Group to violate applicable regulations on dealing
with
Cuba, Iran, Sudan or Syria. While the Group’s investments in Iran have
exceeded the limits specified in U.S. legislation, the Group has
considered the implications of those investments in light of the
Council
of the European Union regulation that prohibits compliance by European
companies with that provision.
|
| · |
The
fact that the Group has a minimal presence in Cuba and Sudan and
the lack
of any oil reserves, exploration, production or other operations
in either
country, either directly or through any indirect arrangements in
Cuba or
Sudan or with the Cuban or Sudanese
governments.
|
Based
on
the foregoing, as well as the quantitative immateriality of the aggregate
revenues derived from these countries, we do not perceive that such operations
have had any significant impact on the Group or its public or investor
sentiment. Also, the Group believes that investors and consumers are aware
that
much of the world’s oil is found in the countries of the Middle East, including
Iran and Syria. For these reasons, we believe these investments are not material
from a qualitative point of view and do not pose
material financial or reputational risks to our company or security holders.
| Confidential treatment requested by Royal Dutch Shell plc |
RL1
|
15
ANNEX
B
Reconciliation
of Unit Production Costs
| Unit Production Cost | |||||||||
|
Year
|
Europe
|
Africa
|
Asia
|
Middle
East, Russia &CIS
|
USA
|
Other
Western
|
Total
|
||
|
Reconciliation
of Unit Production Costs - 2005
|
|||||||||
|
Production
Costs
|
2005
20-F Page 147
|
$
mln
|
2,245
|
1,971
|
674
|
857
|
1,040
|
562
|
7,349
|
|
Royalty
Payment included in above
|
$
mln
|
277
|
1,310
|
257
|
43
|
0
|
53
|
1,940
|
|
|
1,968
|
661
|
417
|
814
|
1,040
|
509
|
5,409
|
|||
|
Production
(Oil/NGL)
|
2005
20-F Page 158
|
mln
bbls
|
195
|
136
|
42
|
111
|
86
|
29
|
599
|
|
Production
(Gas)
|
2005
20-F Page 160
|
bln
scf
|
778
|
138
|
596
|
92
|
418
|
182
|
2204
|
|
Adjustment
|
bln
scf
|
-16
|
-16
|
||||||
|
Total
Oil & Gas Production
|
mln
boe
|
326
|
160
|
145
|
127
|
158
|
60
|
976
|
|
|
Unit
Production Costs
|
as
calculated based on rounded data above
|
6.03
|
4.14
|
2.88
|
6.42
|
6.58
|
8.43
|
5.54
|
|
|
Unit
Production Costs
|
as
reported in 2005 20-F Page 27
|
6.03
|
4.13
|
2.89
|
6.39
|
6.57
|
8.45
|
5.54
|
|
|
Reconciliation
of Unit Production Costs - 2004
|
|||||||||
|
Production
Costs
|
2005
20-F Page 147
|
$
mln
|
1,799
|
1,548
|
541
|
1,332
|
767
|
510
|
6,497
|
|
Royalty
Payment included in above
|
$
mln
|
174
|
999
|
138
|
638
|
0
|
58
|
2,007
|
|
|
1,625
|
549
|
403
|
694
|
767
|
452
|
4,490
|
|||
|
Production
(Oil/NGL)
|
2005
20-F Page 159
|
mln
bbls
|
209
|
146
|
46
|
172
|
99
|
38
|
710
|
|
Production
(Gas)
|
2005
20-F Page 161
|
bln
scf
|
735
|
137
|
535
|
253
|
486
|
197
|
2343
|
|
Adjustment
|
bln
scf
|
16
|
|||||||
|
Total
Oil & Gas Production
|
|
mln
boe
|
339 |
170
|
138
|
216
|
183
|
72
|
1114
|
|
Unit
Production Costs
|
as
calculated based on rounded data above
|
4.80 | 3.24 | 2.92 | 3.22 | 4.20 | 6.28 | 4.03 | |
|
Unit
Production Costs
|
as
reported in 2005 20-F Page 27
|
4.80 | 3.23 | 2.92 | 3.21 | 4.19 | 6.38 | 4.02 | |
|
Reconciliation
of Unit Production Costs - 2003
|
|||||||||
|
Production
Costs
|
2004
20-F/A (Amendment No.1) Page G33
|
$
mln
|
1886
|
1087
|
419
|
1408
|
603
|
366
|
5769
|
|
Royalty
Payment included in above
|
2004
20-F/A (Amendment No.1) footnote b Page G33
|
$
mln
|
365
|
670
|
112
|
545
|
0
|
8
|
1700
|
|
Production
Costs excluding Royalty
|
1521
|
417
|
307
|
863
|
603
|
358
|
4069
|
||
|
Production
(Oil/NGL)
|
2004
20-F/A (Amendment No.1) Page G57 /2005 20-F Page
161
|
mln
bbls
|
245
|
133
|
57
|
181
|
110
|
37
|
763
|
|
Production
(Gas)
|
2004
20-F/A (Amendment No.1) Page G58 /2005 20-F Page
161
|
bln
scf
|
1303
|
128
|
541
|
258
|
555
|
197
|
2982
|
|
Total
Oil & Gas Production
|
mln
boe
|
470
|
155
|
150
|
225
|
206
|
71
|
1277
|
|
|
Unit
Production Costs
|
as
calculated based on rounded data above
|
3.24
|
2.69
|
2.04
|
3.83
|
2.93
|
5.05
|
3.19
|
|
|
Unit
Production Costs
|
2004
20-F/A (Amendment No.1) Page 7 / 2005 20-F Page
27
|
|
3.24
|
2.69
|
2.05
|
3.83
|
2.93
|
5.04
|
3.19
|
| Confidential treatment requested by Royal Dutch Shell plc |
RL1
|
16