Black Economic Empowerment Progress in Shell Presentation to the Parliamentary Portfolio Committee for Minerals and Energy 30 August 2006

The presentation will focus on Transformation and Black Economic Empowerment in Shell Presented By: Vusi Khanyile - Chairman of Thebe Investment Corporation (Pty) Ltd Paddy Milner – Country Chair: South Africa Gheneez Munian – BEE Advisor Vernon De Vries – External Affairs Manager Ivan Collair – Regulatory Environment Advisor Equity Ownership Management Control Preferential Procurement Enterprise Development Social Investment Employment Equity Skills Development Supportive Culture Retail Network

Shell policy of embracing Black Economic Empowerment in South Africa is driven by the imperatives to address the imbalances of the past and to secure the long-term sustainability of our business in a sustainable socio-economic environment

 The long term objective of BEE is the normalisation of South African society and it therefore has a number of facets all of which are included in the Oil Industry charter.  The main criteria for success of the transaction are - whether it is aligned with the equity objectives of the Oil Industry Charter -whether it is sustainable  Because of FDI considerations any action on BEE must be perceived positively by the international investment community and that includes the shareholders of multinationals.  The equity element of the charter was transacted by the parties, assisted by their professional advisors on a willing buyer/willing seller basis.  To achieve a successful transaction, two key variables need to be balanced and traded off -sources of capital -where risk is carried The principles underpinning the discussions of the Equity Deals Equity Ownership

Phase 1 resulted in a Corporate Structure involving 2 legal entities Shell South Africa Holdings (Pty) Ltd SSAH ZA 2001/020068/07 (owner of Group businesses in SA) The Shell Petroleum Company Ltd. SPCO UK (a Shell Group holding company) Shell South Africa Marketing (Pty) Ltd SSAM ZA 1961/000645/07 (Shell Marketing businesses in SA) Shell South Africa Energy (Pty) Ltd SSAE ZA 2000/018439/07 (Manufacturing, Supply, Trading and Chemicals business in SA) 100% 75% 100% 25% Thebe Investment Corporation (Pty) Ltd 1992/001846/07 Thebe Petroleum Investments (Pty) Ltd 2001/023590/07 Equity Ownership

Our Marketing Equity transaction was built on the following foundation SUSTAINABILTY CHECKS & BALANCES COMMUNITY BENEFITS - Affordability of the equity - Preference Dividend Structure - Allocation of Risk - Balance between operational control and minority protections - Aims to benefit a wide range of South Africans, especially HDSA’s and contribute to sustainable development. Equity Ownership

Summary of the current equity deal Thebe Petroleum Investments 25% ordinary shares (and hence asset ownership) 25% voting rights 25% Board representation the right to appoint 25% of the board members has received >25% economic interest in recent years Equity Ownership  Economic sustainability of the transaction  Structures for BEE partner’s involvement across the value chain  Phase 2 – Manufacturing, Supply and Trading in progress  Structures for involvement in the entire spectrum of the business i.e. strategy, management and operations of the business  Skills transfer and development  Protection of BEE Partner against volatility of the oil business

Shell’s measurement and assessment of progress to date

Board and Top management Liquid Fuels Charter targets have been exceeded. Gender transformation is our focus. Board Representation Top Management SSAM SSAE Management Control

Collectively, women representation in Shell is above industry average. Employment Equity Shell65% Black23% Black women38% Women Industry69% Black17% Black women25% Women

Shell has a long-standing policy on the development of its employees because it believes in providing an environment in which people can learn to excel. Skills Development 1% of Payroll was spent on Black Skills development Skills development Initiatives include: - Women in Oil and Energy Course (10 delegates) - Global initiatives (BUILD, RECOGNISE, CHOOSE) - Executive Development Leadership Program - Global leadership Programmes - Shell Life - Expatriate exchange

YearTarget BEE % Actual BEE (>50%) % Actual ABE (>25%) % ABE + BEE % Spend 20025%7% %12%18% 30% %22%21% 43% %28%27% 56% %24%33% 57% Local Preferential Procurement has exceeded the Oil Industry Charter target of 25%. BEE Procurement Strategy BEE Procurement Policy in place Company and departmental targets set BEE standard item on Executive Management Meeting Agenda A BEE Team member appointed as permanent member of Contracts Board Monitor BEE spend on a monthly basis All suppliers evaluated using Industry standard Preferential Procurement

Crude Procurement: we purchase locally where availability and economics are attractive Challenges: To be sustainable, crude trading (as opposed to purchasing) needs to be a global activity. No BEE trading house consistently offers crude on the global market. Shell South Africa, as a refiner, does not do true crude trading i.e. buy and sell for profit. In line with most oil companies, crude trading is a globalised central activity. Preferential Procurement SHELL LOCAL PURCHASES

Shell’s enterprise development activities are aligned with the Liquid Fuels Charter Examples of Enterprise Development include: Mzanzi (Logistics Company) - R300k set up costs: R120m contract over 5 yrs: 17 Owner vehicle drivers in partnership Livewire Program - Business skills training. Program has been running for over 10 years Black Retailer Dealer development programme - Training to develop Black dealers Supplier Development -SASDA investment via SAPIA - 2 full time employees SMME support – startup, mentoring and financial assistance Energy through Empowerment Fund – R20m underwritten by Shell Foundation Enterprise Development

Our Corporate Social Investment aims at sustainable development initiatives as envisaged by the Liquid Fuels Charter About 2% of Net Profit After Tax is invested in CSI. Categories of investment include:- Education – especially Maths and Science Job creation Social development Health - AIDS Environment Grants to employees involved in community projects Road Safety program ‑ via SAPIA ‑ via Shell Oil Product Africa (Drive-to-Live) Social Investment

Internally Shell’s organisational culture, systems and demographics builds upon individual differences to stimulate creativity, remove barriers and thus create a competitive advantage Supportive Culture Led at strategic level by the Chairmen of Shell’s Companies Driven by the Transformation Committee: committee of the board BEE advancement part of formal performance targets Shell has a global Group Diversity and Inclusiveness Programme guided by Shell Group Business Principles. Involvement in SAPIA, BUSA and NBI Committees and structures to report on discrimination: - A staff Employment Equity Evaluation Committee - A staff Employee Consultative Committee - Independent outsourced “Whistle Blower” process Supportive Culture

We regard the stability and sustainability of our Retail Network critical to our business and customers Retail Network – 41% Black owned and operated Shell has a dedicated programme in place to fast-track and support HDSA's to successfully own and operate retail sites. Shell provides business support to ensure changes of dealer ownership are viable and sustainable. - Apply an evaluation model to assess true value of site - On-going support  Monitor operational and financial performance from a central point  Contact with dealers daily  Ground staff trained to coach and mentor  Field Staff provide for technical and business support Retail training outsourced to an active Black retailer with strong expertise. Reseller – 21% Black owned Retailer

In summary, our current assessment of transformation progress towards achieving the Liquid Fuels Charter 2010 aspirations Equity Ownership Management Control Preferential Procurement Enterprise Development Social Investment Employment Equity Skills Development Supportive Culture Retail Network Priority Areas Conclude Phase II BEE deal Increase Women participation on board Increase Black and women representation in senior and professional levels Direct skills spend to core and critical skills and women development Further develop Black suppliers Continue to build a sustainable Retail network

Shell’s Ethos Business Growth will not happen without parallel socio-economic development Ongoing transformation is key to growing our business