21380068P1DRHMJ8KU70-2021-12-31-T01

TERMS AND ABBREVIATIONS

Currencies

US dollar

€

euro

sterling

Units of measurement

acre

approximately 0.004 square kilometres

b(/d)

barrels (per day)

boe(/d)

barrels of oil equivalent (per day); natural gas volumes

are converted into oil equivalent using a factor of

5,800 scf per barrel

kboe(/d)

thousand barrels of oil equivalent (per day); natural

gas volumes are converted into oil equivalent using a

factor of 5,800 scf per barrel

MMBtu

million British thermal units

megajoule

a unit of energy equal to one million joules

mtpa

million tonnes per annum

per day

volumes are converted into a daily basis using a

calendar year

scf(/d)

standard cubic feet (per day)

Products

GTL

gas-to-liquids

LNG

liquefied natural gas

LPG

liquefied petroleum gas

NGL

natural gas liquids

Miscellaneous

ADS

American Depositary Share

AGM

Annual General Meeting

API

American Petroleum Institute

CCS

carbon capture and storage

CCS earnings

earnings on a current cost of supplies basis

CO2

carbon dioxide

EMTN

Euro medium-term note

EPS

earnings per share

FCF

free cash flow

FID

final investment decision

GAAP

generally accepted accounting principles

GHG

greenhouse gas

HSSE

health, safety, security and environment

IAS

International Accounting Standards

IEA

International Energy Agency

IFRS

International Financial Reporting Standard(s)

IOGP

International Association of Oil & Gas Producers

IPIECA

International Petroleum Industry Environmental

Conservation Association

LTIP

Long-term Incentive Plan

OECD

Organisation for Economic Co-operation and Development

OML

oil mining lease

OPEC

Organization of the Petroleum Exporting Countries

OPL

oil prospecting licence

PSC

production-sharing contract

PSP

Performance Share Plan

REMCO

Remuneration Committee

SEC

US Securities and Exchange Commission

TRCF

total recordable case frequency

TSR

total shareholder return

WTI

West Texas Intermediate

ABOUT THIS REPORT

The Shell plc Annual Report (this Report) serves as the Annual Report

and Accounts in accordance with UK requirements for the year ended

December 31, 2021, for Shell plc (the Company) and its subsidiaries

(collectively referred to as Shell). This Report presents the

Consolidated Financial Statements of Shell (pages 238-294), the

Parent Company Financial Statements of Shell (pages 317-324 ) and

the Financial Statements of the Royal Dutch Shell Dividend Access

Trust (pages 328-330). Except for these Financial Statements, the

numbers presented throughout this Report may not sum precisely to

the totals provided and percentages may not precisely reflect the

absolute figures due to rounding.

The Financial Statements contained in this Report have been prepared

in accordance with International Financial Reporting Standards (IFRS)

as issued by the International Accounting Standards Board (IASB).

IFRS as defined above includes interpretations issued by the IFRS

Interpretations Committee. Financial reporting terms used in this

Report are in accordance with IFRS.

This Report contains certain forward-looking non-GAAP measures such

as cash capital expenditure and divestments. We are unable to

provide a reconciliation of these forward-looking non-GAAP measures

to the most comparable GAAP financial measures because certain

information needed to reconcile those non-GAAP measures to the most

comparable GAAP financial measures is dependent on future events

some of which are outside the control of the company, such as oil and

gas prices, interest rates and exchange rates. Moreover, estimating

such GAAP measures with the required precision necessary to provide

a meaningful reconciliation is extremely difficult and could not be

accomplished without unreasonable effort. Non-GAAP measures in

respect of future periods which cannot be reconciled to the most

comparable GAAP financial measure are calculated in a manner

which is consistent with the accounting policies applied in Shell plc’s

consolidated financial statements.

The companies in which Shell plc directly or indirectly owns

investments are separate legal entities. In addition to the term “Shell”,

in this Report “Shell Group”, “we”, “us” and “our” are also used to

refer to the Company and its subsidiaries in general or to those who

work for them. These terms are also used where no useful purpose is

served by identifying the particular entity or entities. “Subsidiaries”

and “Shell subsidiaries” refer to those entities over which the

Company has control, either directly or indirectly. Entities and

unincorporated arrangements over which Shell has joint control are

generally referred to as “joint ventures” and “joint operations”,

respectively. “Joint ventures” and “joint operations” are collectively

referred to as “joint arrangements”. Entities over which Shell has

significant influence but neither control nor joint control are referred to

as “associates”. The term “Shell interest” is used for convenience to

indicate the direct and/or indirect ownership interest held by Shell in

an entity or unincorporated joint arrangement, after exclusion of all

third-party interest. Shell subsidiaries’ data include their interests in

joint operations.

As used in this Report, “Accountable” is intended to mean: required or

expected to justify actions or decisions. The Accountable person does

not necessarily implement the action or decision (implementation is

usually carried out by the person who is Responsible) but must

organise the implementation and verify that the action has been

carried out as required. This includes obtaining requisite assurance

from Shell companies that the framework is operating effectively.

“Responsible” is intended to mean: required or expected to implement

actions or decisions. Each Shell company and Shell-operated venture

is responsible for its operational performance and compliance with the

Shell General Business Principles, Code of Conduct, Statement on Risk

Management and Risk Manual, and Standards and Manuals. This

includes responsibility for the operationalisation and implementation

of Shell Group strategies and policies.

This Report references Shell’s Sky 1.5 scenarios, specifically within the

"Climate change and energy transition" section (pages 84-107). Unlike

Shell’s previously published Mountains and Oceans exploratory

scenarios, the Sky scenario is based on the assumption that society

reaches the Paris Agreement’s goal of holding the rise in global

average temperatures this century to well below two degrees Celsius

(2°C) above pre-industrial levels. Unlike Shell’s Mountains and

Oceans scenarios which unfolded in an open-ended way based upon

plausible assumptions and quantifications, the Sky scenario was

specifically designed to reach the Paris Agreement’s goal in a

technically possible manner.

Sky 1.5 scenario starts with data from Shell’s Sky scenario but is more

aggressive and challenging in its assumptions about energy transitions

as the pace of change is accelerated. As in Sky, this scenario is

normative, meaning we assumed that society achieves the 1.5 degrees

Celsius stretch goal of the Paris Agreement, and we worked back in

designing how this could occur. Of course, there are many possible

paths that society could take to achieve this goal. This will be

extremely challenging, but as of today, we believe there is still a

technically possible path while maintaining a growing global

economy. However, we believe the window for success is quickly

closing.

These scenarios are a part of an ongoing process used in Shell for over

40 years to challenge executives’ perspectives on the future business

environment. They are designed to stretch management to consider

even events that may only be remotely possible. Scenarios, therefore,

are not intended to be predictions of likely future events or outcomes.

Shell’s scenarios also are not intended to be projections or forecasts of

the future. Shell’s scenarios, including the scenarios referenced in this

Report, are not Shell’s strategy or business plan. When developing

Shell’s strategy, our scenarios are one of many variables that we

consider. Ultimately, whether society meets its goals to decarbonise is

not within Shell’s control. While we intend to travel this journey in step

with society, only governments can create the framework for success.

Shell’s operating plan, outlook and budgets are forecasted for a 10-

year period and are updated every year. They reflect the current

economic environment and what we can reasonably expect to see

over the next ten years. Accordingly, they reflect our Scope 1, Scope 2

and NCF targets over the next 10 years. However, Shell’s operating

plans cannot reflect our 2050 net-zero emissions target and 2035

NCF target, as these targets are currently outside our planning period.

In the future, as society moves towards net-zero emissions, we expect

Shell’s operating plans to reflect this movement.

Shell’s “Net Carbon Footprint” or "net carbon intensity" referred to in

this Report include Shell’s carbon emissions from the production of our

energy products, our suppliers’ carbon emissions in supplying energy

for that production, and our customers’ carbon emissions associated

with their use of the energy products we sell. Shell only controls its

own emissions. The use of the term "Net Carbon Footprint” or "net

carbon intensity" is for convenience only and not intended to suggest

these emissions are those of Shell or its subsidiaries.

Except where indicated, the figures shown in the tables in this Report

are in respect of subsidiaries only, without deduction of any non-

controlling interest. However, the term “Shell share” is used for

convenience to refer to the volumes of hydrocarbons that are

produced, processed or sold through subsidiaries, joint ventures and

associates. All of a subsidiary’s production, processing or sales

volumes (including the share of joint operations) are included in the

Shell share, even if Shell owns less than 100% of the subsidiary. In the

case of joint ventures and associates, however, Shell-share figures are

limited only to Shell’s entitlement. In all cases, royalty payments in kind

are deducted from the Shell share.

Except where indicated, the figures shown in this Report are stated in

US dollars. As used herein all references to “dollars” or “$” are to the

US currency.

This Report contains forward-looking statements concerning the

financial condition, results of operations and businesses of Shell. All

statements other than statements of historical fact are, or may be

deemed to be, forward-looking statements. Forward-looking

statements are statements of future expectations that are based on

management’s current expectations and assumptions and involve

known and unknown risks and uncertainties that could cause actual

results, performance or events to differ materially from those expressed

or implied in these statements. Forward-looking statements include,

among other things, statements concerning the potential exposure of

Shell to market risks and statements expressing management’s

expectations, beliefs, estimates, forecasts, projections and

assumptions. These forward-looking statements are identified by their

use of terms and phrases such as “aim”, “ambition”, “anticipate”,

“believe”, “could”, “estimate”, “expect”, “goals”, “intend”, “may”,

“milestones”, “objectives”, “outlook”, “plan”, “probably”, “project”,

“risks”, “schedule”, “seek”, “should”, “target”, “will” and similar terms

and phrases. There are a number of factors that could affect the future

operations of Shell and could cause those results to differ materially

from those expressed in the forward-looking statements included in this

Report, including (without limitation): (a) price fluctuations in crude oil

and natural gas; (b) changes in demand for Shell’s products;

(e) reserves estimates; (f) loss of market share and industry

competition; (g) environmental and physical risks; (h) risks associated

with the identification of suitable potential acquisition properties and

targets, and successful negotiation and completion of such

transactions; (i) the risk of doing business in developing countries and

countries subject to international sanctions; (j) legislative, judicial,

fiscal and regulatory developments including regulatory measures

addressing climate change; (k) economic and financial market

conditions in various countries and regions; (l) political risks, including

the risks of expropriation and renegotiation of the terms of contracts

with governmental entities, delays or advancements in the approval of

projects and delays in the reimbursement for shared costs; (m) risks

associated with the impact of pandemics, such as the COVID-19

(coronavirus) outbreak; and (n) changes in trading conditions. Also see

“Risk factors” on pages 31-42 for additional risks and further

discussion. No assurance is provided that future dividend payments

will match or exceed previous dividend payments. All forward-looking

statements contained in this Report are expressly qualified in their

entirety by the cautionary statements contained or referred to in this

section. Readers should not place undue reliance on forward-looking

statements. Each forward-looking statement speaks only as of the date

of this Report. Neither the Company nor any of its subsidiaries

undertake any obligation to publicly update or revise any forward-

looking statement as a result of new information, future events or other

information. In light of these risks, results could differ materially from

those stated, implied or inferred from the forward-looking statements

contained in this Report.

Past performance cannot be relied on as a guide to future

performance.

This Report contains references to Shell’s website, the Shell

Sustainability Report, Tax Contribution Report, Industry Associations

Climate Review and our report on Payments to Governments. These

references are for the readers’ convenience only. Shell is not

incorporating by reference into this Report any information posted on

www.shell.com or in the Shell Sustainability Report, Tax Contribution

Report, Industry Associations Climate Review or our report on

Payments to Governments. The content of any other websites referred

to in this Report does not form part of this Report..

With effect from January 29, 2022, Shell’s A shares and B shares

were assimilated into a single line of ordinary shares. Shell’s A and B

American Depositary Shares (ADSs) were assimilated into a single line

of ADSs on the same date. This Report continues to refer to A shares, B

shares, A ADSs and B ADSs when describing the position prior to

January 29, 2022.

Shell V-Power and Shell LiveWire are Shell trademarks.

DOCUMENTS ON DISPLAY

This Report is also available, free of charge, at www.shell.com/

annualreport or at the offices of Shell in London, United Kingdom and

The Hague, the Netherlands. Copies of this Report also may be

obtained, free of charge, by mail.

STRATEGIC

REPORT

9Chair’s message

11Chief Executive Officer’s review

14Shell Powering Progress

20Strategy and outlook

25Section 172(1) statement

31Risk factors

43Summary of results

45Performance indicators

47Liquidity and capital resources

51Market Overview

54Integrated Gas

59Upstream

66Oil and gas information

74Oil Products

80Chemicals

83Corporate

84Climate change and energy transition

108Environment and society

123Our people

CHAIR’S MESSAGE

SUCCEEDING

WITH OUR

CUSTOMERS

For more than 100 years, Shell’s people have

provided much of what is needed for modern

life: the energy to heat and light homes, the fuel

for cars, trucks, ships and planes, the means to

keep the world moving.

In early 2022, when Russia invaded Ukraine, Shell’s people stepped

up. In Poland and other neighbouring countries, our employees helped

refugees, caring for the victims of a senseless conflict.

Shell is also rising to another urgent challenge: the role we must play in

helping to tackle climate change, caused for the most part by carbon

emissions from the production and use of energy. The COP26 climate

summit in Glasgow, Scotland, showed again that the overwhelming

majority of countries agree that the world must transition to a low-

carbon energy mix. For Shell to play our part will require boldness,

ambition and a willingness to transform.

I feel honoured to be the Chair of Shell at such a pivotal stage in its

history. Our Powering Progress strategy aims to help us generate

shareholder value while achieving our net-zero emissions target,

powering people’s lives and respecting the natural environment.

We can take heart from the fact that Shell has always thrived on its

people’s ingenuity, adaptability and determination. We will need those

qualities even more in the coming years.

With great challenges and changes come great opportunities. The

energy transition is both our greatest challenge and our greatest

opportunity. Our resilience will stand us in good stead. After the

COVID-19 pandemic caused one of the world's worst economic

downturns, Shell took decisive steps to reshape for the future. We had

the capital discipline and underlying strength to keep our strategy on

track and to emerge with a foundation for future growth.

We should be realistic about the scale of the challenges that lie ahead.

But we should also be optimistic about our ability to overcome them.

WORKING WITH OUR CUSTOMERS

The single most important key to our success in the energy transition will

be our ability to work with customers. We have a network of 1 million

commercial and industrial customers and around 32 million customers a

day visit our 46,000 branded retail service stations.

By listening to our customers, learning from them and working with

them, we can understand what they want and need as the world moves

towards a lower-carbon future. We aim to use such insights to

profitably provide the low-carbon products and services they will want

to buy.

This approach will be crucial to Shell’s target of becoming a net-zero

emissions energy business by 2050, in step with society’s progress

towards achieving the goals of the Paris Agreement. Customers’ use of

products accounts for the vast majority of energy-related carbon

emissions. We can seize opportunities that help us and our customers.

For example, customers in industry and road freight are increasingly

working to cut their emissions, to meet society’s expectations and

comply with tighter environmental regulations. At one of our projects,

we can now provide zero-emissions green hydrogen. As part of the

Refhyne European consortium, we have installed an electrolyser at

Shell’s Energy and Chemicals Park Rheinland, in Germany. It began

operating in July and will use renewable electricity to produce up to

1,300 tonnes of green hydrogen a year.

We expect to develop new markets by building low-carbon businesses

and forming strategic alliances that can help us and entire sectors get

to net zero. In November 2021, for example, we signed a strategic co-

operation agreement with electric vehicle company NIO aimed at

making charging easier for customers around the world.

Shell currently operates almost 90,000 electric vehicle charge points

globally. We aim to increase this to more than 500,000 by 2025. To

achieve this, we must give customers what they want and need:

charging services that are convenient, reliable and easy to use.

SIMPLIFYING FOR THE ENERGY TRANSITION

Many of our customers will also need oil and gas for years to come. If

we are to compete in the energy transition and attract investment, we

will need to continue to supply their needs too. In August, we took the

final investment decision on the Timi gas development project in

Malaysia, which will feature the first wellhead platform in the country to

be powered by a hybrid solar and wind system.

We expect this and other Upstream projects to generate strong cash

flows. Thanks to our integrated presence across the global energy

system, we can use this cash to reward investors with shareholder

distributions and to invest, with discipline, in low-carbon businesses that

will help us transform. In October we set a new target to halve the

absolute emissions from our operations and the energy we buy to run

them by 2030, compared with 2016 levels on a net basis. These are

what are known as our Scope 1 and Scope 2 emissions. Such shorter-

term objectives will push us to make faster progress towards our target

of becoming a net-zero emissions energy business by 2050, in step with

society.

We have simplified our share structure, and believe this will help us

accelerate our progress in the energy transition still further. We should

find it quicker and easier to manage our portfolio now we have

adopted a single line of shares and moved our tax residence to the UK.

Shell: providing what is needed for life in the energy

transition

(Clockwise from left): energy for cooking; charging for electric vehicles;

hydrogen for road freight; and shipments of liquefied natural gas

POWERING LIVES

Energy can help lift people out of poverty. That means something to

me. Growing up in Scotland, a short distance from what became the

COP26 venue, I sometimes accompanied my father Hugh, a doctor, as

he visited patients in deprived areas of Glasgow. Dad saw the patient,

while I sat in the car and read comics. I was struck by the importance

Dad attached to those home visits. They allowed him to see how his

patients’ hardships were affecting their health.

Now I am part of an organisation whose business helps customers to

heat their homes and travel to a job. In some parts of the world, that

access to modern energy can be the difference between struggling and

starting on a path towards a better life. Working with our customers to

meet their needs, whether industry seeking to cut carbon emissions, the

motorist driving an electric car or a family trying to improve their quality

of life, makes good business sense for Shell.

Today and for decades to come, we will only succeed by helping the

customer succeed.

SIR ANDREW MACKENZIE

Chair

CHIEF EXECUTIVE OFFICER’S REVIEW

TAKING ACTION

TODAY,

BUILDING FOR

TOMORROW

Like many others, I have been appalled by

Russia’s invasion of Ukraine, an act of

aggression that shocked the world. It has

inflicted much suffering, and threatened the

security of a continent.

Our first priority, as always, was the safety of our people. We employ

around 1,500 staff and contractors in Ukraine. We have been doing

everything we can to try to ensure their safety and well-being.

We also took decisive action in support of global economic measures

against Russia. We announced our intention to exit joint ventures with

Gazprom, a majority Russian-government-owned business, and related

entities.

This included the Sakhalin-2 liquefied natural gas (LNG) facility, Salym

Petroleum Development and the Gydan energy venture. We also

intend to end our involvement in the Nord Stream 2 pipeline project.

At the end of 2021, Shell had around $3 billion in non-current assets in

these ventures in Russia. We expect our actions will have an impact on

the book value of Shell’s Russia assets and lead to impairments.

We also decided to withdraw from involvement in all Russian

hydrocarbons, including crude oil, petroleum products, gas and LNG,

in a phased manner, in line with government guidance. We will shut our

service stations, aviation fuels and lubricants operations in Russia.

We will go ahead with these steps, regardless of their financial

implications, while doing everything we can to support our staff in

Russia.

Difficult times bring out the best in people. I was moved by how in Shell,

Russian and Ukrainian colleagues worked together to respond to

events. Shell staff in neighbouring countries stepped up to the task of

helping refugees from war.

As a business, Shell too will seek to help in the relief effort. In discussion

with governments around the world, we will also work through the

detailed business implications, including the importance of secure

energy supplies to Europe and other markets, in compliance with

relevant sanctions.

BUILDING FOR THE FUTURE

While so much has happened in recent weeks to increase the

challenges our business faces, we must stay on track to ensure

continued success. Our Powering Progress strategy and financial

framework remain unchanged.

In 2021, we continued to build for the future. We moved ahead at pace

with the transformation of our refining business into energy and

chemicals parks that can meet our customers’ growing demand for low-

carbon energy.

We made progress in developing our interests in electric vehicle

charging, biofuels, and carbon capture and storage (CCS); in

hydrogen, wind and solar power.

These are businesses of the low-carbon energy future. The world will

need them if it is to tackle climate change. They are also businesses of

enormous potential. I believe that, as they mature, they could be as

profitable for Shell as our oil and gas operations are now.

STRONG RESULTS

In 2021, we delivered strong financial results. Our income was $20.6

billion in 2021, compared with a loss of $21.5 billion the previous year.

Shell’s cash flow from operations went from $34.1 billion in 2020 to

$45.1 billion in 2021. Our distributions to shareholders were $9.1

billion in 2021, the same as in 2020. We expect shareholder

distributions to increase significantly in 2022.

Shell’s net debt reduced from $75.4 billion in 2020 to $52.6 billion at

the end of 2021. This brought us below the $65 billion milestone, at

which point we increased total shareholder distributions to 20-30% of

cash flow from operations. We announced a share buyback

programme of $8.5 billion for the first half of 2022. This will include

$5.5 billion from the sale of our shales business in the US Permian

Basin. We expect to increase our dividend by around 4% to 25 US

cents a share for the first quarter of 2022.

SAFETY

In 2021, sadly, six of our contractor colleagues and a police officer

were killed in an appalling attack in Nigeria. In Pakistan, a lorry driver

died in a refuelling accident at a dealer-operated retail site. A

contractor died in an accident at an Indonesian retail site.

I am determined that we learn from these terrible incidents. We must do

everything possible to ensure that anyone who works for Shell goes

home safe and well.

RISING TO THE CHALLENGES

The rapid recovery of energy demand in 2021 was very welcome, but a

lag in supply led to high oil and gas prices and unfortunately, in some

parts of the world, a cost-of-living crisis for consumers as energy prices

spiked. Growing tensions as Russia prepared to invade Ukraine added

to the rise in prices.

People and businesses must have affordable energy bills. Shell can help

to bolster supplies by delivering LNG to countries experiencing

shortages.

Investing to meet demand today and in the future

(Clockwise from above): electrolyser producing hydrogen from

renewables at the Energy and Chemicals Park Rheinland; providing

electric vehicle charge points; planning the Whale deep-water

development; and generating offshore wind power.

Shell must also play its part in helping to tackle the world’s biggest

challenge: climate change.

The COP26 summit in Glasgow, Scotland, made some progress.

Agreement on how Article 6 of the 2015 Paris Agreement will work in

practice, for example, should stimulate cross-border carbon trading –

which could prove important in getting the world to net zero.

When we launched our Powering Progress strategy in February 2021,

we set short- and medium-term targets to reduce carbon emissions that

were ambitious, but realistic. We also reaffirmed our long-term target to

become a net-zero emissions energy business by 2050, in step with

society’s progress towards meeting the climate goals of the Paris

Agreement.

In May 2021, the District Court in The Hague ruled that by 2030 Shell

must reduce its worldwide net-carbon emissions by 45% by 2030,

compared with 2019 levels.

We were disappointed by this ruling, but we decided to rise to the

challenge by accelerating our strategy to reduce carbon emissions.

We set a new target of cutting the absolute emissions from our

operations and the energy we buy to run them by 50% by 2030,

compared with 2016 levels on a net basis.

At the same time, we are appealing against the ruling. It effectively

holds Shell, a single company, accountable for a global challenge –

reducing consumer demand for carbon-based fuels. What is really

needed is action by all: governments, business, customers and wider

society.

Companies like Shell, with our global scale, financial muscle and

technological know-how, are critical to getting things done and helping

to make the energy transition a reality.

Collaborative action is crucial. For example, in July 2021, we signed an

agreement with Deutsche Telekom. Shell will supply renewable energy

and Deutsche Telekom engineers will install more than 10,000 electric

vehicle chargers in Germany.

The transformation of our refineries into energy and chemicals parks

opens up many possibilities. We are building an 820,000-tonnes-a-year

biofuels facility at the Shell Energy and Chemicals Park Rotterdam, in

the Netherlands. And we have started producing hydrogen from

renewables at the Energy and Chemicals Park Rheinland, in Germany.

SIMPLER, FASTER

Our company-wide reorganisation has made us more streamlined.

Adopting a single line of shares and moving our tax residence to the

UK will make it quicker and easier to manage our portfolio in the

energy transition. We can also buy back shares more quickly, speeding

up distributions to investors.

We will, though, remain a major presence in the Netherlands. We are

proud of Shell’s Anglo-Dutch heritage.

Shell has the agility, and our integrated business model gives us the

financial muscle. Cash flows from our Upstream operations enable us to

deliver strong shareholder returns and invest in low-carbon

opportunities. Upstream also provides oil and gas that the world will

need for years to come.

So while we invest for the future, we must continue to invest to meet

today’s energy demand.

In 2021, we strengthened our Upstream position in core regions. We

decided to invest in the Whale development in the US Gulf of Mexico.

As part of the Libra consortium, we chose to invest in a fourth floating

production, storage and offloading (FPSO) vessel in the Mero field, off

the Brazilian coast.

If 2021 was a year of historic change for Shell, it was also a year of

great progress. One that has set us up for success as we seize the

opportunities of the energy transition.

BEN VAN BEURDEN

Chief Executive Officer

SHELL POWERING PROGRESS

WHO

WE ARE

Overview

Shell is a global group of energy and

petrochemical companies with 82,000

employees and operations in more than 70

countries.

We use advanced technologies and take an innovative

approach to help build a sustainable energy future. Shell

is a customer-focused organisation, serving more than

1 million commercial and industrial customers, and around

32 million customers at 46,000 retail service stations

daily.

Our strategy is to accelerate the transition of our business

to net-zero emissions, purposefully and profitably, in step

with society.

OUR CONTEXT

The rising standard of living of a growing global

population is likely to continue to drive demand for

energy, including oil and gas, for years to come. At the

same time, technological changes and the need to tackle

climate change mean there is a transition under way to a

lower-carbon, multi-source energy system with increasing

customer choice.

Our Powering Progress strategy combines our ambitions

under four goals: generating shareholder value, achieving

net-zero emissions, powering lives and respecting nature.

This will help accelerate our progress towards becoming

a net-zero emissions energy business by 2050, in step

with society. We are building a strong resilient business

by putting customers at the centre of our strategy,

innovating the products and solutions customers need

on their journey to net zero.

We aim to deliver value through our integrated assets

and supply chains, optimising value and managing risk for

Shell and our customers as we produce, buy, trade,

transport and sell energy products and solutions across

the world.

OUR STAKEHOLDERS

▪Our investor community

▪Our customers

▪Our employees/workforce/pensioners

▪Our strategic partners/suppliers

▪Communities

▪NGOs/civil society stakeholders/academia/think-

tanks

▪Governments/regulators

See "Section 172(1) statement", “Environment and society”, “Our

people” and “Governance”

OUR PURPOSE

We power progress together by providing more and

cleaner energy solutions.

See “Strategy and outlook”

OUR CORE VALUES

▪Honesty

▪Integrity

▪Respect for people

See “Our people”

SHELL POWERING PROGRESS continued

HOW WE

CREATE VALUE

OUR INPUTS [A]

Financial capital

Equity attributable to Shell plc shareholders ($ billion) [B]:

172 2020: 155

Non-current debt ($ billion) [B]:

81 2020: 91

Net debt ($ billion) [B][C]:

53 2020: 75

Average capital employed ($ billion) [B]:

265 2020: 277

Cash capital expenditure ($ billion) [C]:

20 2020: 18

Operations

Refining and chemicals availability:

96% 2020: 96%

Oil & gas production available for sale (kboe/d):

3,237 2020: 3,386

LNG liquefaction volumes (million tonnes):

31 2020: 33

Human capital

Number of employees (thousands) [B]:

82 2020: 87

Number of training days (thousands):

271 2020: 234

Relationships

Customers, joint arrangements,

Government relations, suppliers.

Operating countries [B]

>70 2020: >70

Intellectual capital

Research and development expenses ($ million):

815 2020: 907

Number of patents [B]:

8,532 2020: 8,480

Natural resources

Proved oil and gas reserves (million boe) [B]:

9,365 2020: 9,124

Energy consumed (million MWh):

223 2020: 241

[A] In 2021 unless stated otherwise

[B] At December 31.

[C] See "Non-GAAP measures reconciliations" on pages 337-340.

We aim to meet the world’s growing need for

more and cleaner energy solutions in ways that

are economically, environmentally and socially

responsible. Our Powering Progress strategy is

designed to create value for our shareholders,

customers and wider society.

OUR OUTCOMES AND IMPACTS [A]

Cash flow from operating activities ($ billion):

45 2020: 34

Adjusted earnings ($ billion) [C]:

19 2020: 5

Adjusted EBITDA (CCS basis –

$ billion) [C]:

55 2020: 37

Shareholder distributions ($ billion) [C]:

9 2020: 9

Absolute emissions

(Scope 1 and 2 – million tonnes of CO₂ equivalent):

68 2020: 72 | 2016: 83

Net carbon intensity

(Scope 1, 2 and 3 – grams of CO₂ equivalent per megajoule):

77 2020: 75 | 2016: 79

Women in senior leadership positions [B]:

30% 2020: 28%

Taxes paid and collected

($ billion):

59 2020: 47

Total spend on goods and services ($ billion):

38 2020: 39

Fresh water consumed

in our facilities (million m³):

22 2020: 22 | 2018: 25

Waste disposed (million tonnes):

2 2020: 2

SHELL POWERING PROGRESS continued

OUR

ORGANISATION

Delivering our Powering Progress strategy

INTEGRATED GAS, RENEWABLES AND ENERGY SOLUTIONS

Integrated Gas manages liquefied natural gas (LNG) activities and the conversion of natural gas into gas-to-liquids (GTL) fuels and other products. It

includes natural gas exploration and extraction, and the operation of upstream and midstream infrastructure necessary to deliver gas to market.

In Renewables and Energy Solutions (R&ES), we are exploring emerging opportunities and investing in those where we believe sufficient commercial

value is available. R&ES includes Shell’s production and marketing of hydrogen, nature and environmental solutions as well as our integrated power

activities.

UPSTREAM

Upstream manages the exploration for and extraction of crude oil, natural gas and natural gas liquids. It also markets and transports oil and gas,

and operates infrastructure necessary to deliver them to market.

While the Upstream business delivers the energy of today, it is also funding the energy of tomorrow and will play a fundamental role in supporting

Shell’s ambitious transformation.

DOWNSTREAM

Downstream manages different Oil Products and Chemicals activities as part of an integrated value chain that trades and refines crude oil and other

feedstocks into a range of products which are moved and marketed around the world for domestic, industrial and transport use. The products we

sell include gasoline, diesel, heating oil, aviation fuel, marine fuel, biofuel, lubricants, bitumen and sulphur. We also produce and sell petrochemicals

for industrial use worldwide.

Our Downstream organisation also manages Oil Sands activities (the extraction of bitumen from mined oil sands and its conversion into synthetic

crude oil).

PROJECTS & TECHNOLOGY

Our Projects & Technology organisation manages the delivery of our major projects and drives research and innovation to develop new technology

solutions. It provides technical services and technology capability for our Integrated Gas, Upstream and Downstream activities. It is also responsible

for providing functional leadership across Shell in the areas of safety and environment, contracting and procurement, wells activities and greenhouse

gas management.

Technology and innovation are essential to our efforts to meet the world’s energy needs in a competitive way. If we do not develop the right

technology, do not have access to it or do not deploy it effectively, this could have a material adverse effect on the delivery of our strategy and our

licence to operate (see “Risk factors” on pages 31-42). Our Chief Technology Officer, who is part of the Projects & Technology organisation,

oversees the development and deployment of new and differentiating technologies and innovations across Shell. Our main technology centres are

in India, the Netherlands and the USA, with other centres in Brazil, China, Germany, Oman and Qatar. A strong patent portfolio underlies the

technology that we employ in our various businesses.

Segmental reporting

Our reporting segments are Integrated Gas, Upstream, Oil Products, Chemicals and Corporate. Integrated Gas, Upstream, Oil Products and

Chemicals include their respective elements of our Projects & Technology organisation. The Corporate segment comprises our holdings and treasury

organisation, self-insurance activities, and headquarters and central functions. See Note 5 to the “Consolidated Financial Statements” on pages XX.

With effect from 2022, our reporting segments will change to Integrated Gas, Upstream, Marketing, Chemicals and Products, Renewables and

Energy Solutions and Corporate, reflecting the way Shell reviews and assesses its performance.

Powering Progress:

How we provide customers with the low-carbon products and

services they want and need

BUILDING ONE OF EUROPE’S BIGGEST

BIOFUELS FACILITIES

Business customers in the harder-to-abate sectors of road freight

and aviation are increasingly keen to cut their carbon emissions.

Shell and Deloitte’s Decarbonising Aviation: Cleared for Take-off

report, published in September, found that 90% of aviation executives

and experts interviewed said cutting emissions was one of their top

priorities. The equivalent figure in the January 2021 report

Decarbonising Road Freight: Getting into Gear was more than 70%.

Shell intends to supply our road freight and aviation customers with the

low-carbon biofuels they want and need. An important aim of our

Powering Progress strategy is to transform refineries into energy and

chemicals parks so that we reduce our global production of traditional

fuels by 55% by 2030.

At our Energy and Chemicals Park Rotterdam, in the Netherlands, for

example, we are building one of Europe’s biggest biofuels facilities. It is

expected to start production in 2024, making up to 820,000 tonnes of

biofuels a year, which Shell will sell as sustainable aviation fuel and

biodiesel.

The sales will help Shell make purposeful and profitable progress

towards our target of becoming a net-zero emissions energy business

by 2050, in step with society. The facility will help us achieve our

ambition of producing around 2 million tonnes of sustainable aviation

fuel a year by 2025.

TRANSFORMING OUR REFINERIES INTO

ENERGY AND CHEMICALS PARKS

The multinational chemicals corporation Asahi Kasei, a Shell customer,

is aiming to become carbon neutral by 2050 and to use more

sustainable feedstocks in its supply chain.

We believe we can profitably supply Asahi Kasei and other customers

with products that they want and need to achieve their carbon

neutrality and sustainability aims. This will play an important part in

transforming the Bukom manufacturing site into the Shell Energy and

Chemicals Park Singapore, with an increasing focus on customers’ low-

carbon energy and sustainability needs. In November, we signed an

agreement to supply Asahi Kasei with butadiene, a chemical which it

will use to make high-performance tyres that can cut vehicle emissions

by improving fuel efficiency.

We plan to make the butadiene at Bukom, using a new unit that

upgrades the quality of pyrolysis oil made from hard-to-recycle plastic

waste that would otherwise go into landfill. We expect the pyrolysis oil

upgrader to start production in 2023 and be the largest in Asia.

The pyrolysis oil it produces can be used to make chemicals that go into

hundreds of everyday products, so Shell expects many other companies

to become customers, especially those with sustainability goals. This will

help Shell profitably achieve its aim of processing 1 million tonnes a

year of plastic waste in our global chemicals plants by 2025. The

transformation of Bukom and at least four other refining sites into

energy and chemicals parks will help us achieve our ambition of

reducing our global production of traditional fuels by 55% by 2030.

STRATEGY AND OUTLOOK

OUR

STRATEGY

Powering Progress is our strategy to

accelerate the transition of our business

to net-zero emissions, in step with society.

CONTEXT

Climate change is one of the biggest challenges the world faces today,

and necessitates a rapid transformation of the energy system to net-

zero emissions.

Shell supports the most ambitious goal of the Paris Agreement, which is

to limit the rise in global average temperature this century to 1.5

degrees Celsius above pre-industrial levels.

To achieve this, there needs to be urgent action to reduce emissions

across power, transport, buildings, and industries like steel and

chemicals. Shell must play its part, purposefully and profitably, in

helping to make these changes happen.

The energy transition will bring risk and involve confronting complex

and difficult obstacles, while at the same time acting on other great

challenges such as the COVID-19 pandemic, which is continuing to

cause unprecedented levels of disruption.

But the energy transition will also offer great opportunities.

More than 120 countries and over 2,000 companies and organisations

have made commitments to get to net-zero emissions by 2050. Shell is

taking action, sector by sector. We seek to work with our customers to

profitably serve their changing needs, and to help decarbonise the

energy system and reach net-zero emissions.

Our approach is to start with the customer or sector and ask: what do

they want and need - today, and in the future?

By listening to our customers and learning from them, we work out how

to profitably provide the low-carbon products and services that they

want and need – today and throughout their progress to net-zero

emissions.

There will be no single solution that fits all customers. Instead, there will

be variations in what customers want and need, with differing

approaches and rates of progress across countries, sectors and

markets. Shell aims to provide customers with what works best for them

in their particular circumstances.

Customers’ use of our energy products accounts for the vast majority of

energy-related carbon emissions of our products sold. By helping our

customers get to net zero, we will also help ourselves get to net zero.

POWERING PROGRESS

Powering Progress is our strategy to accelerate the transition of our

business to net-zero emissions, in step with society's progress towards

the goal of the Paris Agreement on climate change.

Powering Progress generates value for our shareholders, customers and

wider society. It has four main goals which integrate sustainability with

our business strategy. These goals support Shell's purpose, to power

progress together by providing more and cleaner energy solutions. We

expect our employees at all times to maintain our focus on safety and

abide by our core values of honesty, integrity and respect for people.

Generating shareholder value: We aim to create the conditions for

share price appreciation by preparing our business for the future and

seizing the opportunities presented by the energy transition. Shell must

take a dynamic approach to its portfolio during the energy transition.

This means continuing to provide the energy the world needs today,

and increasing our investments in lower-carbon energy products and

services. We aim to do this while providing sustainable distributions

today through our progressive dividend policy. In 2021, we re-based

our dividend to $0.24 per share. We announced a share buyback

programme of up to $3.5 billion, including $1.5 billion from the sale of

our Permian business. The additional shareholder distributions from the

Permian sale will eventually total $7 billion, with $5.5 billion distributed

in the form of share buybacks in 2022. We aim to maintain a strong

balance sheet and a disciplined approach to capital investment, so we

remain strong and resilient. In this way, we will achieve our aim of

being a compelling investment case for our shareholders.

On December 10, 2021, the shareholders of the company supported

the resolution to amend Shell's articles of association to enable the

simplification of the Company. The simplification entailed establishing a

single line of shares to eliminate the complexity of Shell’s A/B share

structure. It also involved aligning Shell’s tax residence with its country

of incorporation in the UK by relocating the CEO, the CFO and the

venue of Board and Executive Committee meetings to the UK. As a

consequence, we changed the Company’s name from Royal Dutch

Shell plc to Shell plc.

The simplification was designed to strengthen Shell’s competitiveness

and accelerate shareholder distributions and the delivery of our

strategy to become a net-zero emissions energy business.

Achieving net-zero emissions: We have a target to become a net-

zero emissions energy business by 2050, in step with society. In 2021,

we set a new target to halve the absolute emissions from our

operations and the energy we buy to run them by 2030 (our Scope 1

and Scope 2 emissions), compared with 2016 levels on a net basis. We

also brought forward our target to eliminate routine gas flaring at our

Upstream operated assets from 2030 to 2025.

We are transforming our business and finding new opportunities in

selling more low-carbon products and services such as biofuels,

hydrogen, electricity generated by solar and wind power, and charging

for electric vehicles. In 2021, we announced that we are building an

820,000 tonnes-a-year biofuels facility at the Shell Energy and

Chemicals Park Rotterdam, in the Netherlands. In Germany, we opened

the Refhyne electrolyser at our Energy and Chemicals Park Rheinland.

This electrolyser is the largest of its kind in Europe, producing 1,300

tonnes of green hydrogen per year from renewable energy.

We are decarbonising sector by sector, forming alliances and working

collaboratively with customers, businesses and governments to make

progress in the energy transition and reduce emissions. This includes

sectors that are harder to decarbonise, such as aviation, shipping,

commercial road freight, power, heating and certain parts of industry.

We also support government policies to reduce carbon emissions in the

economy, including putting a direct price on carbon emissions.

Powering lives: Shell helps to power lives and livelihoods by

providing vital energy for homes, businesses and transport. The supply

of affordable, reliable and sustainable energy is crucial for addressing

global challenges, including those related to poverty and inequality.

Our ambition, by 2030, is to provide reliable electricity to 100 million

people in Africa and Asia who do not have it yet. We support

livelihoods by providing employment and training in the communities

where we operate. We are working to become one of the most diverse

and inclusive companies in the world, a place where everyone feels

valued and respected. We are focusing on four areas: gender, race

and ethnicity, lesbian, gay, bisexual and transgender (LGBT+) and

disability. We seek to respect human rights in all parts of our business.

Respecting nature: We are stepping up our environmental ambitions,

and shaping them to reflect the UN Sustainable Development Goals.

Our environmental ambitions include protecting and enhancing

biodiversity. We are also focusing on using water and other resources

more efficiently and reusing as much of them as we can. We are

reducing waste from our operations and increasing the recycling of

plastics. In 2021, we announced that we will build a new pyrolysis oil

upgrader unit at our manufacturing site on Pulau Bukom, Singapore.

Scheduled to start production in 2023, the upgrader is designed to

improve the quality of pyrolysis oil, a liquid made from hard-to-recycle

plastic waste that would otherwise have gone into landfill. We are

helping to improve air quality by reducing emissions from our

operations and providing cleaner ways to power transport and

industry.

STRATEGY AND OUTLOOK continued

BUSINESS PILLARS

Powering Progress is a strategy that combines our financial strength

and discipline with a dynamic approach to our portfolio of assets and

products, so we can seize the opportunities of the energy transition.

Shell is adapting its portfolio of assets and products to better meet the

cleaner energy needs of its customers. We are delivering our strategy

through three business pillars: Growth, Transition, and Upstream.

Our Growth pillar includes Marketing and Renewables and Energy

Solutions businesses, such as Power and Hydrogen. Our Growth

businesses increase our returns while helping customers to decarbonise.

Our Transition pillar includes our Integrated Gas and Chemicals and

Products businesses. These businesses enable us to accelerate our

progress towards net-zero emissions and deliver sustainable cash flow.

Our Upstream pillar delivers value to shareholders, provides vital oil

and gas to society and funds the transformation of our portfolio.

Achieving our strategy depends on how we respond to competitive

forces. We continually assess the external environment – the markets

and the underlying economic, political, social and environmental drivers

that shape them – to evaluate changes in competitive forces and

business models. We use future scenarios to help inform our strategy.

We regularly review the markets where we operate, assessing our

competitive position by analysing trends, uncertainties, and the

strengths and weaknesses of our traditional and non-traditional

competitors.

We maintain business plans that focus on actions and capabilities to

create and sustain competitive advantage. We maintain a risk

management framework that regularly assesses our response to, and

risk appetite for, identified risks.

See "Risk factors" on page 31-42 and "Governance" on page 129.

Our Executive Directors’ remuneration is linked to the successful

delivery of our strategy, based on performance indicators that are

aligned with shareholder interests. Long-term incentives form the

majority of the Executive Directors’ remuneration for above-target

performance. In 2021, the Long-term Incentive Plan (LTIP) included cash

generation, capital discipline, value created for shareholders, and an

energy transition condition.

See the “Directors’ Remuneration Report” on pages 175-179

For more details on how the strategic pillars are embedded into our businesses,

see “Shell Powering Progress” on pages 14-19.

OUTLOOK FOR 2022

AND BEYOND

We believe that our integrated business model is key to driving our

strategy. Shell has a competitive portfolio and we are leading our peer

group on cash generation. We intend to develop our portfolio of assets

and the mix of energy that we sell to meet the cleaner energy needs of

our customers, while delivering value for our shareholders.

Delivering our strategy will require clear and deliberate capital

allocation choices. We approach capital allocation at three levels:

enterprise, portfolio and project. The enterprise level is about how we

make choices between increasing distributions to our shareholders,

investing in our business and/or strengthening our balance sheet. The

portfolio level is about how we allocate capital between our three

business pillars – Growth, Transition and Upstream. The project level is

about how we evaluate and prioritise investment opportunities.

For cash capital expenditure, the base capex to sustain our strategy is

expected to be $19-22 billion per annum. To accelerate our strategy

we expect our cash capital expenditure to grow to $23-27 billion per

annum, once we have met our priority to distribute 20-30% of cash flow

from operations to shareholders. For 2022 we expect our cash capex

to be at the lower end of this range. More than half the additional

capex (above the base capex) is expected to be spent on our Growth

businesses. We remain committed to our progressive dividend policy

and focused on targeting AA-equivalent credit metrics through the

cycle.

Subject to Board approval, we aim to increase the dividend per share

by around 4% every year. We target the distribution of 20-30% of cash

flow from operations to shareholders, and may choose to return cash to

shareholders through a combination of dividends and share buybacks.

After reaching this level of shareholder distributions, additional surplus

cash is expected to be allocated between further disciplined capital

investments to accelerate our strategy and further reduce debt to

strengthen the balance sheet.

We support the most ambitious goal of the Paris Agreement, which is to

limit the rise in global average temperature this century to 1.5 degrees

Celsius above pre-industrial levels. We have a long-term target to

become a net-zero emissions energy business by 2050, in step with

society. To achieve this target, we will have to be net zero on all

emissions from the manufacture of all our products and all our

customers' emissions from the use of the energy products we sell. This

means the target covers our Scope 1 emissions, which come directly

from our operations, our Scope 2 emissions, from the energy we buy to

run our operations, and our Scope 3 emissions, which include the

emissions from our customers' use of the energy products we sell,

regardless of whether they are produced by Shell or a third party.

We also have targets to reduce the net carbon intensity of the energy

products we sell, as measured by Shell’s Net Carbon Footprint, using

2016 as our baseline year. These include short-term targets of a 3-4%

reduction by the end of 2022 and 6-8% by 2023. Our medium- and

longer-term targets are to reduce by 20% by 2030, by 45% by 2035

and 100% by 2050, in step with society. We achieved our target of a

2-3% reduction by the end of 2021. In October, we set an absolute

emissions reduction target of 50% on all Scope 1 and 2 emissions under

Shell’s operational control by 2030, compared with 2016 levels on a

net basis.

We believe that our total carbon emissions from energy sold peaked in

2018 and will stay below 1.7 gigatonnes per annum (Gtpa). Further

details are in the "Climate change and energy transition" section on

page 84-107.

The statements in this “Strategy and outlook” section, including those

related to our growth strategies and our expected or potential future

cash flow from operations, organic free cash flow, share buybacks,

capital investment, divestments, production and Net Carbon Footprint,

are based on management’s current expectations and certain material

assumptions and, accordingly, involve risks and uncertainties that could

cause actual results, performance or events to differ materially from

those expressed or implied herein. See “About this Report” on pages

6-7 and “Risk factors” on pages 31-42.

On February 28, 2022, we announced our intention to exit our

ventures with Gazprom. On March 8, 2022, we announced our

intention to withdraw from our involvement in all Russian hydrocarbons

in a phased manner. For more information, see Note 32 on page 294.

SECTION 172(1) STATEMENT

The Companies (Miscellaneous Reporting) Regulations 2018 (2018

MRR) require Directors to explain how they considered the interests of

key stakeholders and the broader matters set out in Section 172(1) (a)

to (f) of the Companies Act 2006 (S172) when performing their duty to

promote the success of the Company under S172. This includes

considering the interests of other stakeholders which may affect the

long-term success of the company. This S172 statement explains how

Shell's Directors:

▪have engaged with employees, suppliers, customers and others; and

▪have considered employee interests, the need to foster business

relationships with suppliers, customers and others, and the effects of

those considerations, including on the principal decisions taken

during the financial year.

The S172 statement focuses on matters of strategic importance to Shell,

and the level of information disclosed is consistent with the size and the

complexity of Shell's businesses.

GENERAL CONFIRMATION OF DIRECTORS’ DUTIES

Shell’s Board has a clear framework for determining the matters within

its remit and has approved Terms of Reference for the matters

delegated to its Committees. Certain financial and strategic thresholds

have been set, in order to identify matters requiring Board

consideration and approval. The Manual of Authority sets out the

delegation and approval process across the broader business. More

information on Shell’s controls and procedures can be found in "Other

regulatory and statutory information" on page 207.

When making decisions, each Director ensures that (s)he acts in the

way he or she considers, in good faith, would most likely promote

Shell's success for the benefit of its members as a whole, and in doing

so has regard (among other matters) to the issues set out below.

S172(1) (a) “THE LIKELY CONSEQUENCES

OF ANY DECISION IN THE LONG TERM”

The Directors understand the business and the evolving environment in

which we operate, including the challenges of navigating through the

energy transition. Based on Shell’s purpose to power progress together

by providing more and cleaner energy solutions, the strategy set by the

Board is intended to accelerate the transition of our business to net-zero

emissions, purposefully and profitably, in step with society. We are

building a strong, resilient business by putting customers at the centre of

our strategy, innovating the products and solutions customers need

on their journey to net zero.

As outlined in "Our context" in the "Shell Powering Progress" section on

pages 14-19, the rising standard of living of a growing global

population is likely to continue to drive demand for energy, including oil

and gas, for years to come. At the same time, technological changes,

and the need to tackle climate change mean there is a transition under

way to a lower-carbon, multi-source energy system with increasing

customer choice. Our Powering Progress strategy combines our

ambitions under four goals: generating shareholder value, achieving

net-zero emissions, powering lives and respecting nature.

In 2021, we continued to navigate the challenges of the COVID-19

pandemic, which has continued to cause unprecedented levels of

disruption.

In 2021, the Board announced its move to the next phase of the capital

allocation framework, consistent with Shell’s Powering Progress

strategy. Shell’s operational and financial delivery and strengthened

balance sheet had given it the confidence to increase shareholder

distributions by increasing dividends and commence share buybacks,

while Shell continues to invest for the future of energy. The key elements

of Shell’s strategic direction were highlighted in our 2020 Annual

Report and included:

▪setting a target to be a net-zero emissions energy business by 2050,

in step with society;

▪growing our leading marketing business, further developing the

integrated Power business and commercialising hydrogen and

biofuels to support customers’ efforts to achieve net-zero emissions;

▪transforming our refining portfolio from the current 13 sites into five

high-value energy and chemicals parks, integrated with Chemicals.

Growth in Chemicals would shift to more performance chemicals and

recycled feedstocks;

▪extending leadership in liquefied natural gas (LNG) to enable

decarbonisation of key markets and sectors;

▪focusing on value over volume by simplifying Upstream to eight

significant core positions, which would generate more than 80% of

Upstream's cash flow from operations; and

▪enhancing value delivery through trading and optimisation.

The Directors recognise that there are differing societal views about our

operations and that some Board decisions taken today may not align

with all stakeholder interests. Given the complexity of the evolving

energy transition, the Directors have taken the good faith decisions they

believe best support Shell’s strategy.

S172(1) (b) “THE INTERESTS OF THE COMPANY’S

EMPLOYEES”

The Directors recognise that Shell employees are fundamental and core

to our business and the delivery of our strategic ambitions. The success

of our business depends on attracting, retaining, and motivating

talented employees. The Directors consider and assess the implications

of decisions on employees and the wider workforce, where relevant

and feasible. The Directors seek to ensure that Shell remains a

responsible employer, including with respect to pay and benefits, health

and safety issues, and the workplace environment. In early 2021, in

recognition and appreciation of employee resilience during 2020 when

bonuses were suspended, the Board supported a one-off award of

shares worth $1,000 to employees below the Executive Committee

level.

The Directors recognise that our pensioners, though no longer

employees, also remain important stakeholders.

More information on this can be found in "Workforce engagement" on

page 154.

S172(1) (c) “THE NEED TO FOSTER THE COMPANY’S

BUSINESS RELATIONSHIPS WITH SUPPLIERS,

CUSTOMERS AND OTHERS”

Delivering our strategy requires strong mutually beneficial relationships

with suppliers, customers, governments, national oil companies and

joint-venture partners. Shell seeks to promote and apply certain general

principles in such relationships. The ability to promote these principles

effectively is an important factor in the decision to enter into or remain

in such relationships. This standard and others are described in the Shell

General Business Principles, which are based upon our core values of

honesty, integrity, and respect for people. The Board periodically

reviews and approves the Shell General Business Principles. The

Directors take account of the General Business Principles and core

values when exercising their duties and making Board decisions. When

feasible, core value moments are built into Board agendas, so the

Board can reflect on the importance of the General Business Principles

and core values. The Board also reviews and approves Shell’s

approach to suppliers, which is set out in the Shell Supplier Principles. In

2021, relevant Board committees held briefing sessions with the

Contracting and Procurement (C&P) team to more deeply engage on

Shell’s C&P programme, including its approach, risk management

profile and stakeholder engagement. The businesses continually assess

the priorities related to customers and those with whom we do business.

The Board engages with the businesses on these topics, for example,

within the context of business strategy updates and investment

proposals.

The Directors also receive updates on a variety of topics that indicate

how these stakeholders have been engaged.

These updates include information provided by the Projects &

Technology function on suppliers and joint-venture partners, with

respect to items such as project updates and supplier contract

management. Businesses also provide information, as relevant, on

customers and joint-venture partners in relation to business strategies,

projects, and investment or divestment proposals.

The CEO provides a comprehensive update to the Board on material

business and external developments at each main Board meeting.

These include: i) a report on safety performance; ii) significant

operational updates relating to each of the business segments, e.g.

partnerships, investments, divestments, flagship projects, commercial

highlights and achievements; iii) the development of new technologies

and innovation via collaborations with partners, suppliers and others;

and iv) political or regulatory developments. The CEO also summarises

his own external engagements and any changes of senior executive

staff.

S172(1) (d) “THE IMPACT OF THE COMPANY’S

OPERATIONS ON THE COMMUNITY AND THE

ENVIRONMENT”

This aspect is inherent in our strategic ambitions. The Board receives

information on various topics to help it make decisions. The topics can

include, for example, the Net Carbon Footprint target, the impact of

the continuing COVID-19 pandemic on Shell, country-entry

considerations, proposals to invest or divest, and business strategy

reviews. The information also goes into Group-level overviews, such as

updates on safety and environment performance, reports from the Chief

Ethics and Compliance Officer, and reports from the Chief Internal

Auditor. In 2021, certain Board committees and Non-executive

Directors conducted site visits of various Shell operations and overseas

offices and held external stakeholder engagements, where feasible. As

in 2020, not all visits could be face-to-face because of continuing

restrictions and precautions related to the COVID-19 pandemic.

Despite the continued challenges presented by COVID-19, the Board

maintained a strong interface with businesses and staff through virtual

engagements, making best use of the technology available.

More information can be found in "Understanding and engaging with

our stakeholders" on page 150, and in the reports of each Board

committee.

S172(1) (e) “THE DESIRABILITY OF THE COMPANY

MAINTAINING A REPUTATION FOR HIGH STANDARDS

OF BUSINESS CONDUCT”

Shell aims to meet the world’s growing need for more and cleaner

energy solutions in economically, environmentally, and socially

responsible ways. The Board periodically reviews and approves clear

frameworks, such as The Shell General Business Principles, Shell’s Code

of Conduct, specific Ethics and Compliance manuals, the Ethical

Decision-Making Framework, and its Modern Slavery Statements, to

ensure that high standards are maintained in Shell businesses and in

Shell's business relationships. This, complemented by the ways the

Board is informed and monitors compliance with relevant governance

standards, helps to ensure that Board decisions and the actions of Shell

companies promote high standards of business conduct.

S172(1) (f) “THE NEED TO ACT FAIRLY AS BETWEEN

MEMBERS OF THE COMPANY”

After weighing up all relevant factors, the Directors consider which

course of action best enables delivery of our strategy through the long

term, taking into consideration the effect on stakeholders. In doing so,

our Directors act fairly as between the Company’s members but are not

required to balance the Company’s interest with those of other

stakeholders. This can sometimes mean that certain stakeholder

interests may not be fully aligned.

CULTURE

The Board recognises that it plays an important role in assessing and

monitoring that our desired culture is embedded in our values, attitudes

and behaviours, including in our activities and stakeholder

relationships. The Board has established honesty, integrity and respect

for people as Shell’s core values. The General Business Principles, Code

of Conduct, and Code of Ethics help everyone at Shell to act in line

with these values and comply with relevant laws and regulations. The

Shell Commitment and Policy on Health, Safety, Security, Environment

& Social Performance applies across Shell and is designed to help

protect people and the environment. In 2021, after our refreshed

approach to safety in 2020, we transitioned from our Life-Saving Rules

and implemented the Industry Life-Saving Rules. By doing this, we aim

to simplify and standardise, to adopt a broader risk scope that focuses

on potential for harm to people, and to create a greater sense of

individual and team responsibility to avoid fatalities and life-changing

injuries. The change builds on existing strong foundations, with an

increased and deliberate focus on human performance, the way

people, culture, equipment, work systems and processes interact as a

system. It remains our ambition to achieve Goal Zero, no harm and no

leaks across all our operations.

In 2021, Shell announced its Powering Progress strategy. This has four

goals: generating shareholder value, achieving net-zero emissions,

respecting nature and powering lives. At its heart is our target to

become a net-zero emissions energy business by 2050, in step with

society’s progress towards the goal of the Paris Agreement on climate

change. We also have medium- and long-term targets to reduce our net

carbon intensity, compared with 2016 levels, by 20% by 2030, 45%

by 2035, and 100% by 2050, in step with society. To achieve our

strategic goals, we need to adapt our mindset and behaviours as we

navigate the increasing complexity in the world around us. At Shell we

seek to have a culture that encourages the attitudes and behaviour that

we believe will help us succeed. We seek to encourage:

SECTION 172(1) STATEMENT continued

▪applying a learner mindset: everyone has the ability to grow, learn

from mistakes and successes, and speak up openly in a safe

environment. We encourage curiosity, humility, openness, helping

each other to make better decisions and create more value;

▪maximising our performance: we collaborate across boundaries and

speak up when we see things that can be improved. We enable

people to deliver, and we work in an integrated way with discipline,

clear focus on priorities, and tangible outcomes in order to reach our

full potential;

▪increasing trust in Shell: we aim to be a valued member of the

communities in which we operate, and to make a positive

contribution to society. We seek to listen carefully and with humility

and we have a strong desire to understand, and, where possible,

adapt to the changing needs and expectations of society, especially

as they relate to the environment. We build strong and trusted

relationships with customers and partners which are fundamental to

our collective success;

▪living by our values and Goal Zero: we live by our values and do the

right things with respect to ethics, safety, and the environment; and

▪inspiring and engaging: we aspire to a situation where everyone

feels connected to what we stand for. We build trusting and effective

teams where everyone feels ownership and has a voice in how work

gets done. We strive to maintain a diverse and inclusive culture.

The Board considers the Shell People Survey to be an important tool for

measuring employee engagement, motivation, affiliation, and

commitment to Shell. It provides insights into employee views and has a

consistently high response rate. It also helps the Board understand how

the survey's outcomes are being used to strengthen Shell culture and

values. The Board has noted that although staff surveys offer insight,

limitations exist. In 2021, a review was launched to enhance Board

oversight of culture. Due to the significant developments and challenges

affecting Shell in the second half of 2021, that review was paused. The

plan is to resume the review in 2022. It is intended that the review will

be informed by the results of the Shell People Survey from 2021 and if

available 2022, various staff engagements, relevant context from the

2022 external Board evaluation process, and the Board’s 2022

Strategy Days.

STAKEHOLDER ENGAGEMENT (INCLUDING EMPLOYEE

ENGAGEMENT)

The Board recognises the important role Shell has in society and is

deeply committed to public collaboration and stakeholder

engagement. This commitment is at the heart of Shell’s strategic

ambitions. The Board strongly believes that Shell will only succeed by

working together with customers, governments, business partners,

investors, and other stakeholders.

Working together is critical, particularly at a time when society,

including businesses, governments, and consumers, faces issues as

complex and challenging as climate change.

We continue to build on our long track record of working with others,

such as investors, industry and trade groups, universities, governments,

non-governmental organisations (NGOs) and, in some appropriate

instances, our competitors through our joint-venture operations or

industry bodies. We believe that working together and sharing

knowledge and experience with others offers us greater insight into our

business. We also appreciate our long-term relationships with our

investors and acknowledge the positive impact of ongoing engagement

and dialogue.

The guidance on preparing information, proposals or discussion items

for the Board asks for these materials to include considerations of the

views, interests, and concerns of stakeholders and how management

addressed them. This helps to strengthen the Board’s knowledge of how

the broader business undertakes significant levels of stakeholder

engagement. Board minutes have also reflected key points on

stakeholder considerations, where appropriate. The Terms of Reference

for our Safety, Environment and Sustainability Committee also include,

within the Committee’s remit, the review and consideration of external

stakeholder perspectives and how major issues of public concern that

could affect Shell's reputation and licence to operate were or are being

addressed.

The Board also engaged with certain stakeholders directly, to

understand their views. The Board draws upon Shell’s substantial in-

house expertise by periodically receiving input from economics and

policy experts on key political and economic themes, with some

updates being presented to the Board each quarter. More on this

engagement is provided in "Understanding and engaging with our

stakeholders" on page 150.

Information on how the Directors have engaged with employees can be

found on page 154 and in the "Our people" section on pages 123. The

tables below include examples of how Directors have considered the

interests of Shell employees and the resulting outcomes.

PRINCIPAL DECISIONS

In the table below, we outline some of the principal decisions made by

the Board over the year. We explain how the Directors have engaged

with or in relation to key stakeholder groups and how stakeholder

interests were considered in decision-making.

To remain concise, we have categorised our key stakeholders into

seven groups. Where appropriate, each group is considered to include

both current and potential stakeholders. The groups are:

▪investor community;

▪employees/workforce/pensioners;

▪our customers;

▪regulators/governments;

▪NGOs/civil society stakeholders/academia/think-tanks;

▪communities; and

▪suppliers/strategic partners.

Principal decisions

We define principal decisions taken by the Board as decisions taken in

2021 that are of a strategic nature and significant to any of our key

stakeholder groups. As outlined in the UK Financial Reporting Council

(FRC) Guidance on the Strategic Report, we include decisions related

to capital allocation and dividend policy.

How were stakeholders considered

We describe how regard was given to the likely long-term

consequences of the decision, including how stakeholders were

considered during the decision-making process.

What was the outcome

We describe which accommodations or mitigations were made, if any,

and how Directors have considered different interests, and what factors

they took into account.

Strategic updates

What was the outcome

Powering Progress Strategy

Shell's Powering Progress strategy was announced in February 2021, and highlighted in our 2020

Annual Report. After the announcement and associated stakeholder engagements by management,

the feedback received from investors, the media, climate activists and internal staff was presented to

and discussed with the Board.

In 2021, the Board considered strategic opportunities, and the integration of strategy, portfolio,

environmental and social ambitions under our Powering Progress goals. Additional targets regarding

Scope 1 and 2 emissions were also announced. A report was produced with the aim of helping

investors and society obtain a better understanding of how Shell is addressing the risks and

opportunities of the energy transition. The Board also considered Shell’s capital and portfolio actions

and structure. This was to support the delivery of Powering Progress and came after the Reshape

reorganisation of Shell. See "Our People" on page 123 for further information on the Reshape

initiative.

How stakeholders were considered

Energy Transition Strategy publication

In 2021, the Board approved the Shell Energy Transition Strategy publication and its submission to

shareholders for an advisory vote at the 2021 AGM. It was essential to ensure that stakeholders and

NGOs had a sound understanding of the Energy Transition Strategy. Board members were involved

in extensive advance stakeholder engagement. Among these advance engagements was the Safety,

Environment and Sustainability Committee (SESCo)’s consultation with an investor stakeholder group

with a focus on climate-related financial disclosures.

Company simplification

As the Board considered the simplification, it supported a variety of work to better assess the

relevant risks and benefits. Accordingly, a project team was assembled and workstreams set up. One

such workstream encompassed stakeholder engagement, focusing on shareholders, staff,

government and media. The Board also obtained the views of various external advisers.

During the many Board sessions that focused on simplification, discussions considered and assessed

a range of factors, including potential costs and benefits and stakeholder feedback. Implementation

of the simplification was also subject to an extensive consultation with relevant staff councils. In later

meetings, the Board considered the views and responses of stakeholders against current external

environmental events and circumstances which could affect stakeholders, but which were beyond the

Board’s or Shell’s control. The Board also participated in engagement sessions, about which more

information can be found in "Understanding and engaging with our stakeholders" on page 150.

Staff engagements

Virtual staff engagements were held with Directors which enabled them to speak directly with staff

on themes including the benefits of working in Upstream. For further information on the engagement

with our workforce see "Board activities and evaluation" and "workforce engagement" on page 146

[and page 154].

Energy transition strategy

The Board set out details of how it planned to achieve its

target to be a net-zero emissions energy business by 2050, in

step with society’s progress towards achieving net zero.

The Board announced an additional target to reduce Scope 1

and Scope 2 absolute emissions, under Shell's operational

control, by 50% by 2030 compared with 2016 levels on a net

basis. It was announced that this formed part of the Powering

Progress strategy, alongside the goals to generate shareholder

value, respect nature and power lives. The Board regarded this

as an important step as we rise to meet the challenge of the

Dutch court’s ruling in the Milieudefensie case against Shell.

Feedback from all of the advance stakeholder engagements

was taken into account by the Board, SESCo and the

Executive Committee. As appropriate, revisions were made to

the Energy Transition Strategy report prior to submission at the

2021 AGM. Shell’s Energy Transition Strategy report

described our progress towards becoming a net-zero emissions

energy business and our emissions targets. Shell was the first

energy company to submit an energy transition strategy to

shareholders for an advisory vote. Shareholders were informed

of the intention to publish an update every three years until

2050. The energy transition strategy received 88.74%

shareholder support at the 2021 AGM.

Following the AGM, the Chair, CEO and CFO engaged with

stakeholders on a number of matters, which included Shell's

energy transition strategy and the Dutch court’s ruling in the

Milieudefensie case against Shell. The key areas on which we

received feedback from our largest shareholders were

communicated to the Board. On October 28, 2021, Shell

responded to this feedback and the court ruling by announcing

a new target to halve Scope 1 and 2 absolute emissions under

Shell’s operational control by 2030, compared with 2016

levels on a net basis. This is another strategic milestone on our

path to becoming a net-zero emissions energy business by

2050, in step with society.

Company simplification

The Board reviewed feedback from stakeholders as well as

from the Board’s independent advisers, concluding that the

benefits of the simplification outweighed the downsides.

Simplification was assessed as a way to increase the

Company’s flexibility to implement our Powering Progress

strategy at pace, strengthen Shell’s competitiveness, and

support the acceleration of Shell’s transition to a net-zero

emissions business and create value for shareholders,

customers and wider society. Shareholders were asked to

approve a change of Shell’s Articles of Association which

would facilitate a series of measures leading to simplification.

On December 10, 2021, shareholders approved the

amendments to the Articles. On December 20, 2021 the Board

formally approved the simplification, and on December 31, the

Board approved the key steps required to move the

Company’s tax residence to the UK. The Company’s name

was changed on January 21, 2022, and the Company’s shares

were assimilated into a single line of shares on January 29,

2022. This completed the simplification.

SECTION 172(1) STATEMENT continued

Financial strength, cash allocation including shareholder distributions

What was the outcome

The Board considered cash flow, the macro environment and business performance in 2021 compared

with 2020. The Board also considered management’s view of the outlook for the Group’s performance,

and reviewed the Capital Allocation Framework with specific focus on the next phase including

shareholder distributions. Directors approved several proposals with the aim of delivering value to

shareholders and increasing shareholder distributions through a combination of progressive dividends

and share buybacks.

How stakeholders were considered

A number of considerations underpinned each proposal, with proposals discussed and reviewed at

certain points throughout the year. These considerations took account of the macro environment, robust

business performance and outlook, the strength of the balance sheet, capital discipline, feedback from

advisers and feedback from other stakeholders, and the net debt milestone.

The Financial Framework was reviewed as part of the Board’s Strategy Day 2021 meeting. This was at

a time when it was being considered whether to move to the next phase of the Capital Allocation

Framework and to increase shareholder distributions in the second half of the year. Investor valuation

approaches, ongoing pressure for investors to divest from the oil and gas sector and reshaping of the

organisation were also considered. So too were planned divestments which were being looked at by

the Board. When making decisions regarding the potential use of funds from divestments, and in

support of the Capital Allocation Framework, the Board also considered at length the views of debt

investors and credit ratings agencies, commitments to pension holders, and broader stakeholder views

about whether to use divestment proceeds for shareholder distributions or reinvestment in, for example,

energy transition businesses.

The Board and management carefully considered various

stakeholders, other strategic factors and matters such as

Operating Plan 2022-2024 (OP21) before reaching the

decision to proceed with the next phase of the Capital

Allocation Framework. In July 2021, Shell announced that

shareholder distributions would be increased through an

increase in the dividend payment (38% increase on the first

quarter payment) and launching $2 billion of share

buybacks, aiming to complete them by the end of 2021.

On September 20, 2021, Shell announced the sale of its

Permian business. The Board confirmed that the cash

proceeds from this transaction would be used to fund $7

billion in additional shareholder distributions, with the

remainder used to further strengthen the balance sheet. The

first tranche of this distribution (up to $1.5 billion) was

announced on December 1, 2021.

In relation to the decisions to increase distributions to

shareholders, the Board and Management considered the

views of stakeholders, the strength of the Company’s

balance sheet and the need to continue to invest for the

future of energy. The form and timing for distributing the

remaining $5.5 billion was announced in early 2022. These

distributions are in addition to our shareholder distributions

in the range of 20-30% of cash flow from operations.

Approval of Shell’s detailed Operating Plan 2022-2024 (OP21)

What was the outcome

The approval of OP21 followed an in-depth review by the Board of proposals on capital allocation,

capital investment outlook, competitive outlook, operating expenses, return on average capital

employed and shareholder distributions. This included reviews in numerous Board meetings leading up

to the December 2021 Board meeting in which OP21 was approved.

How stakeholders were considered

OP21 discussions included a full review against Shell’s Powering Progress strategy, the macroeconomic

environment, and the financial strength of the organisation. The Directors and Executive Committee

balanced the priorities in the capital allocation framework including capital and operating expenditure

commitments towards the energy transition alongside increased shareholder distributions, maintaining

balance sheet strength, aspired credit ratings and greenhouse gas target tracking. The plan was

discussed extensively and reviewed thoroughly. Responses from investors, and discussions with equity

and debt market analysts were also presented to the Board for consideration. The Board sought advice

from the Legal Director on the impact of the Dutch Milieudefensie judgment on OP21 and asked

questions of management on the flexibility of the Plan to be as agile as feasible in the event of various

energy transition scenarios.

Following extensive review and discussion, the overall

outcome of this decision was an Operating Plan that the

Board believes is robust against various scenarios and

features strong optionality if needed. In particular, the

Board assured itself that, as decisions are taken by the

Board over the Plan period, OP21 flexibly demonstrates

pathways to enable delivery of Shell’s absolute Greenhouse

Gas (GHG) emissions and GHG intensity targets by 2030.

While stakeholder opinion differs on Shell’s approach,

OP21 is based on society’s demand for products and

services. OP21 also supports Shell in maintaining a

reputation for high standards on business conduct and

health, safety, security, and environment issues. It

maintained the approach to employee remuneration and

benefits to pensioners. OP21 also seeks to reward our

investors with returns and maintain the long-term financial

strength of the Company to invest in more and cleaner

forms of energy and meet the current and future needs of

society.

Investing in new business, acquisitions and divestments, and closures

What was the outcome

Over the course of the year, the Board considered and approved new opportunities and projects and

proposed divestments or closures. The Board also considered and approved country entries and exits,

more details of which are available in "Board activities and evaluation" on page 146.

How stakeholders were considered

The Board considered the impact of decisions related to new business opportunities and divesting from

existing opportunities in the context of sustainability, supply, regulations, and carbon intensity.

Critically, the Board reviewed the various proposals’ alignment with Shell’s strategy. Particular focus

was given to potential benefits of certain divestments, including their potential to: create returns for

shareholders; further strengthen the balance sheet; de-risk future cash flow; and avoid significant

additional capital investment. As part of the discussions, the Board considered the strategic drivers for

the intended divestments, including the Scope 1 emissions of each asset, anticipated regulatory

changes expected to lead to value erosion, and any value opportunities afforded by the macro

environment.

As part of each proposal, the respective business unit will undertake effective due diligence on

prospective purchasers from a financial, reputational as well as operating philosophy standpoint to

ensure future obligations are met or suitable mitigating measures are in place to protect Shell and its

people.

Within each divestment proposal, the Board considered if the Company was being a responsible seller

of its assets and if the purchasers have the capability to manage our assets/people appropriately.

Staff matters are explicitly considered during negotiations and the due diligence process for

acquisitions and divestments. Comprehensive engagement plans are developed as appropriate in

parallel to the negotiations.

Permian - shareholder approval for the divestment of Shell Permian assets.

Raízen S.A. and Biosev S.A. - shareholder approval for Raízen joint venture to acquire Biosev S.A.,

a Brazilian ethanol producer.

Deer Park Refinery – shareholder approval for the divestment of Deer Park Refining Limited

Partnership.

Sale of holding in PCK Schwedt Refinery – shareholder approval for the divestment of Shell’s

interest in PCK Schwedt Refinery.

Purchase of fuel and convenience retail sites in Texas - This acquisition enables Shell to continue

its existing, trusted premium product offerings.

Pernis Refinery – shareholder approval to take final investment decision to build an 820,000-tonnes-

a-year biofuels facility at the Shell Energy and Chemicals Park Rotterdam (formerly Pernis Refinery).

Note. References to "shareholder approval" relate to the Shell intercompany approval process.

Permian – After reviewing multiple strategies and portfolio

options for our Permian assets, the Board determined that the

transaction with ConocoPhillips presented a compelling value

proposition, as well as disciplined capital stewardship. The

Board concluded that Shell’s Upstream business plays a

critical role in the Powering Progress strategy through a more

focused, competitive, and resilient portfolio that provides

energy which the world needs while funding shareholder

distributions and investments in the energy transition. The

cash proceeds from the transaction were identified for use in

providing additional shareholder distributions of $7 billion

through share buybacks.

Raízen S.A. and Biosev S.A — While discussing the

proposal for the Raízen joint venture to acquire Biosev S.A.,

the Board considered joint-venture partner aspects, and

factors regarding assurance of due diligence on

environmental aspects and safety performance.

Deer Park Refinery and PCK Schwedt Refinery – This

was part of Shell's strategy to reduce its global refinery

footprint to core sites integrated with the company's trading

hubs, chemicals plants and marketing businesses.

Purchase of fuel and convenience retail sites in Texas -

As one of the largest fuels and convenience retail markets

globally, growing in the US gives Shell the opportunity to

build on its successful brand presence and benefit from the

strength of its ongoing business relationships.

Pernis Refinery - In discussing the proposal to build a

biofuels facility at the Shell Energy and Chemicals Park

Rotterdam, in the Netherlands, the Board considered the

project’s potential to increase the production of low-carbon

fuels (including for aviation), Scope 1 emissions and

associated adaptations, supply and demand aspects, and

enhancing the capability of employees in the talent pipeline.

RISK FACTORS

The risks discussed below could have a material adverse effect

separately, or in combination, on our earnings, cash flows and

financial condition. Accordingly, investors should carefully consider

these risks.

Further background on each risk is set out in the relevant sections of this

Report, indicated by way of cross references under each risk factor.

The Board’s responsibility for identifying, evaluating and managing our

significant and emerging risks is discussed in “Other Regulatory and

Statutory Information” on pages 207 to 215.

STRATEGIC RISKS

We are exposed to macroeconomic risks including fluctuating prices of

crude oil, natural gas, oil products and chemicals.

Further information: See “Market overview”on page

51.

Risk description

The prices of crude oil, natural gas, oil products and chemicals are affected by supply and demand,

both globally and regionally. Macroeconomic, geopolitical and technological uncertainties can also

affect production costs and demand for our products. Government actions may also affect the prices

of crude oil, natural gas, oil products and chemicals. This could happen, for example, if governments

promote the sale of lower-carbon electric vehicles or even prohibit future sales of new diesel or

gasoline vehicles, such as the phasing out in the UK that will come into force in 2030. Oil and gas

prices can also move independently of each other. Factors that influence supply and demand include

operational issues, natural disasters, weather, pandemics such as COVID-19, political instability,

conflicts, such as the recent Russian invasion of Ukraine, economic conditions, including inflation, and

actions by major oil- and gas-producing countries. In a low oil and gas price environment, we would

generate less revenue from our Upstream and Integrated Gas businesses, and parts of those

businesses could become less profitable or incur losses. Low oil and gas prices have also resulted and

could continue to result in the debooking of proved oil or gas reserves, if they become uneconomic in

this type of price environment. Prolonged periods of low oil and gas prices, or rising costs, have

resulted and could continue to result in projects being delayed or cancelled. Assets have been

impaired in the past, and there could be impairments in the future. Low oil and gas prices have

affected and could continue to affect our ability to maintain our long-term capital investment and

shareholder distribution programmes. Prolonged periods of low oil and gas prices could adversely

affect the financial, fiscal, legal, political and social stability of countries that rely significantly on oil

and gas revenue. In a high oil and gas price environment, we could experience sharp increases in

costs, and under some production-sharing contracts, our entitlement to proved reserves would be

reduced. Higher prices could also reduce demand for our products, which could result in lower

profitability, particularly in our Oil Products and Chemicals business. Higher prices can also lead to

more capacity being built, potentially resulting in an oversupplied market which would negatively

affect our Upstream, Integrated Gas, Oil Products and Chemicals businesses.

Accordingly, price fluctuations could have a material adverse effect on our earnings, cash flows and

financial condition.

How this risk is managed

We maintain a diversified portfolio to manage the impact

of price volatility. We test the resilience of our projects and

other opportunities against a range of prices and costs for

crude oil, natural gas, oil products and chemicals. We

prepare annual strategic and financial plans that test

different scenarios and their impact on prices on our

businesses and company as a whole. We also aim to

maintain a strong balance sheet to provide resilience

against weak market prices.

Our ability to deliver competitive returns and pursue commercial

opportunities depends in part on the accuracy of our price

assumptions.

Further information: See “Market overview” on page

52.

Risk description

We use a range of oil and gas price assumptions, which we review on a periodic basis. These ranges

help us to evaluate the robustness of our capital allocation for our evaluation of projects and

commercial opportunities. If our assumptions prove to be incorrect, this could have a material adverse

effect on our earnings, cash flows and financial condition.

How this risk is managed

The range of commodity prices used in our project and

portfolio evaluations is subject to a rigorous assessment of

short-, medium- and long-term market drivers. These drivers

include the extent and pace of the energy transition.

Our ability to achieve our strategic objectives depends on how we

react to competitive forces.

Further information: See “Strategy and outlook” on

page 22.

Risk description

We face competition in all our businesses. We seek to differentiate our services and products, though

many of our products are competing in commodity-type markets. Accordingly, failure to manage our

costs and our operational performance could result in a material adverse effect on our earnings, cash

flows and financial condition. We also compete with state-owned hydrocarbon entities and state-

backed utility entities with access to financial resources and local markets. Such entities could be

motivated by political or other factors in making their business decisions. Accordingly, when bidding

on new leases or projects, we could find ourselves at a competitive disadvantage because these

state-owned entities may not require a competitive return. If we are unable to obtain competitive

returns when bidding on new leases or projects, this could have a material adverse effect on our

earnings, cash flows and financial condition.

How this risk is managed

We continually assess the external environment - the

markets and the underlying economic, political, social and

environmental drivers that shape them - to evaluate

changes in competitive forces. We define multiple future

scenarios and business environments by identifying drivers,

uncertainties, enablers and constraints. These scenarios

help us to find issues which affect our operating

environment and have implications for our strategy.

STRATEGIC RISKS continued

Rising concerns about climate change and effects of the energy

transition could continue to lead to a fall in demand and potentially

lower prices for fossil fuels. Climate change could also have a physical

impact on our assets and supply chains. This risk may also lead to

additional legal and/or regulatory measures, resulting in project

delays or cancellations, potential additional litigation, operational

restrictions and additional compliance obligations.

Further information: For further explanations of our

climate change governance, risk management approach,

climate ambition and strategy and our portfolio and

performance, please refer to the section “Climate change

and energy transition” on pages 84 to 107.

Risk description

Societal demand for urgent action has increased, especially since the Intergovernmental Panel on

Climate Change (IPCC) Special Report of 2018 on 1.5°C effectively made the aspirational goal of

the Paris Agreement to limit the rise in global average temperature this century to 1.5 degrees Celsius

the default target. This increasing focus on climate change and drive for an energy transition have

created a risk environment that is changing rapidly, resulting in a wide range of stakeholder actions

at global, local and business levels. The potential impact and likelihood of the associated exposure

for Shell could vary across different time horizons, depending on the specific components of the risk.

We expect that a growing share of our GHG emissions will be subject to regulation, resulting in

increased compliance costs and operational restrictions. Regulators may seek to limit certain oil and

gas projects or make it more difficult to obtain required permits. Additionally, climate activists are

challenging the grant of new and existing regulatory permits. We expect that these challenges are

likely to continue and could delay or prohibit operations in certain cases. Achieving our target of

becoming net zero on all emissions from our operations could result in additional costs. We also

expect that actions by customers to reduce their emissions will continue to lower demand and

potentially affect prices for fossil fuels, as will GHG emissions regulation through taxes, fees and/or

other incentives. This could be a factor contributing to additional provisions for our assets and result

in lower earnings, cancelled projects and potential impairment of certain assets.

The physical effects of climate change such as, but not limited to, increases in temperature and sea

levels and fluctuations in water levels could also adversely affect our operations and supply chains.

Certain investors have decided to divest their investments in fossil fuel companies. If this were to

continue, it could have a material adverse effect on the price of our securities and our ability to

access capital markets. Stakeholder groups are also putting pressure on commercial and investment

banks to stop financing fossil fuel companies. According to press reports, some financial institutions

have started to limit their exposure to fossil fuel projects. Accordingly, our ability to use financing for

these types of future projects may be adversely affected. This could also adversely affect our

potential partners’ ability to finance their portion of costs, either through equity or debt.

In some countries, governments, regulators, organisations and individuals have filed lawsuits seeking

to hold fossil fuel companies liable for costs associated with climate change. While we believe these

lawsuits to be without merit, losing could have a material adverse effect on our earnings, cash flows

and financial condition. For example, in May 2021, the District Court in The Hague, Netherlands,

ruled that, by 2030, Shell must reduce, from its consolidated subsidiaries, its Scope 1 net emissions by

45% from its 2019 levels and use its best efforts to reduce its Scope 2 and Scope 3 net emissions by

45% from its 2019 levels. In 2019, our Scope 1 emissions from our consolidated subsidiaries were 86

million tonnes carbon dioxide equivalent (CO2e), rounded. We expect to see additional regulatory

requirements to provide disclosures related to climate risks and their impact on business performance.

In summary, rising climate change concerns and effects of the energy transition have led and could

lead to a decrease in demand and potentially affect prices for fossil fuels. If we are unable to find

economically viable, publicly acceptable solutions that reduce our GHG emissions and/or GHG

intensity for new and existing projects and for the products we sell, we could experience financial

penalties or extra costs, delayed or cancelled projects, potential impairments of our assets, additional

provisions and/or reduced production and product sales. This could have a material adverse effect

on our earnings, cash flows and financial condition.

How this risk is managed

Our response to the evolving risk outlook requires

transparency and clarity around our plans and actions to

achieve our climate target. We have a climate change risk

management structure which is supported by standards,

policies and controls, as part of our health, safety, security

and environment and social performance (HSSE & SP)

control framework. Climate change and risks resulting from

GHG emissions are reviewed and managed in accordance

with other significant risks through the Board and Executive

Committee. We have established several dedicated

climate change and GHG-related forums at different levels

of the organisation. These forums seek to address, monitor

and review climate change issues. Our strategy to assess

and manage risks and opportunities resulting from climate

change includes considering different time horizons and

their relevance to risk identification and business planning.

Overall, mitigation of the risk is addressed through our

strategy to accelerate the transition to net-zero emissions,

purposefully and profitably. This approach has three

components:

•reducing the GHG emissions intensity of our operations.

We expect to reduce our carbon intensity primarily

through altering our product mix as customer (Scope 3)

emissions represent the largest component of our

carbon intensity. Our aim is to achieve this by shifting

the focus of our portfolio as we build our power,

hydrogen, biofuels, carbon capture and storage and

nature-based solutions businesses and activities;

•demonstrating our resilience by aligning our disclosures

to the Task Force on Climate-related Financial

Disclosures; and

•working towards our target to become a net-zero

emissions energy business by 2050, in step with society.

We are also working with governments on their climate

policy to help establish regulatory frameworks that will

enable society to reach the goals of the Paris Agreement.

The ruling delivered by the District Court in The Hague in

May 2021 has provided an additional challenge in this

context. We have appealed the ruling but have stated that

we want to rise to the challenge and accelerate our

Powering Progress strategy to become a net-zero emissions

energy business by 2050, in step with society, regardless

of whether we win or lose the appeal.

RISK FACTORS continued

STRATEGIC RISKS continued

If we fail to stay in step with the pace and extent of society’s changing

demands for energy as it transitions to a low-carbon future, we could

fail in sustaining and developing our business.

Further information: See "Strategy and outlook" on

page 20 and “Climate change and energy transition” on

page 89.

Risk description

The pace and extent of the energy transition could pose a risk to Shell if our own actions to

decarbonise our operations and the energy we sell move at a different speed relative to society. If we

are slower than society, customers may prefer a different supplier, which would reduce demand for

our products and adversely affect our reputation besides materially affecting our earnings and

financial results. If we move much faster than society, we risk investing in technologies, markets or

low-carbon products that are unsuccessful because there is limited demand for them. This could also

have a material adverse effect on our earnings, cash flows and financial condition.

How this risk is managed

We actively monitor societal developments, such as

regulation-driven carbon-pricing mechanisms and customer-

driven preferences for products. We incorporate these into

scenarios which provide insights into how the energy

transition may unfold in the medium and long term. These

insights and those from various other external scenarios

(such as the IPCC Special Report 1.5°C) guide how we set

our strategic direction, capital allocation and carbon

emission commitments. We have updated our strategy and

organisational structure to increase our focus on the

sectors where our customers operate, in order to make us

better able to compete in the current evolving energy

environment.

The ruling delivered by the District Court in The Hague in

May 2021 has provided an additional challenge. We have

appealed against the ruling. But regardless of whether we

win or lose the appeal, we want to rise to the challenge, as

part of our Powering Progress strategy, of accelerating our

transition to a net-zero emissions energy business by 2050,

in step with society.

We seek to execute divestments in pursuing our strategy. We may be

unable to divest these assets successfully in line with our strategy.

Further information: See “Strategy and outlook” on

page 22.

Risk description

We may be unable to divest assets at acceptable prices or within the timeline envisaged because of

market conditions or credit risk. This would result in increased pressure on our cash position and

potential impairments. In some cases, we have also retained certain liabilities following a divestment.

Even in cases where we have not expressly retained certain liabilities, we may still be held liable for

past acts, failures to act or liabilities that are different from those foreseen. We may also face

liabilities if a buyer fails to honour their commitments. Accordingly, if any of the above circumstances

arise, this could have a material adverse effect on our earnings, cash flows and financial condition.

How this risk is managed

We continually monitor market developments to assess

potential divestments in pursuing our strategy. We

carefully tailor our sales processes to buyers’ perceived

expectations so we can deliver the most competitive

outcomes. As a general principle, the sales processes are

configured so that buyers will acquire the assets including

all related liabilities. For some assets, Shell may agree to

retain certain liabilities. We monitor these liabilities closely

and make appropriate provisions for them.

STRATEGIC RISKS continued

We operate in more than 70 countries that have differing degrees of

political, legal and fiscal stability. This exposes us to a wide range of

political developments that could result in changes to contractual

terms, laws and regulations. We and our joint arrangements and

associates also face the risk of litigation and disputes worldwide.

Further information: See "Other Regulatory and

Statutory Information" on page 210.

Risk description

Developments in politics, laws and regulations can and do affect our operations. Potential impacts

include: forced divestment of assets; expropriation of property; cancellation or forced renegotiation

of contract rights; additional taxes including windfall taxes, restrictions on deductions and retroactive

tax claims; antitrust claims; changes to trade compliance regulations; price controls; local content

requirements; foreign exchange controls; changes to environmental regulations; changes to

regulatory interpretations and enforcement; and changes to disclosure requirements. Tensions

between nation states, such as Russia's recent invasion of Ukraine, can also affect our business.

Any of these, individually or in aggregate, could have a material adverse effect on our earnings, cash

flows and financial condition.

Since 2020, many governments have run deficits to deal with the economic impacts of the COVID-19

pandemic. Given the ongoing nature of the pandemic, there will be uncertain long-term fiscal

consequences, with possible subsequent effects on government policies that affect Shell’s business

interests.

From time to time, social and political factors play a role in unprecedented and unanticipated judicial

outcomes that could adversely affect Shell. Non‑compliance with policies and regulations could result

in regulatory investigations, litigation and, ultimately, sanctions. Certain governments and regulatory

bodies have, in Shell’s opinion, exceeded their constitutional authority by: attempting unilaterally to

amend or cancel existing agreements or arrangements; failing to honour existing contractual

commitments; and seeking to adjudicate disputes between private litigants. Certain governments

have also adopted laws and regulations that could potentially conflict with other countries’ laws and

regulations, potentially subjecting us to criminal and civil sanctions. Such developments and outcomes

could have a material adverse effect on our earnings, cash flows and financial condition.

How this risk is managed

We continually monitor geopolitical developments and

societal issues relevant to our interests. Our Legal and Tax

functions are organised globally and support our business

lines in ensuring compliance with local laws and fiscal

regulations. Our Corporate Relations department engages

with governments in countries where we operate to

understand and influence local policies and to advocate

Shell’s position on topics relevant to our industry. We are

prepared to exit a country if we believe we can no longer

operate there in accordance with our standards and

applicable law, and we have done so in the past.

OPERATIONAL RISKS

Russia’s invasion of Ukraine has affected the safety and security of our

people and operations in these and neighbouring countries. The

sanctions and export controls and the evolving geopolitical situation

have caused wide-ranging challenges to our operations which could

continue in the medium to longer-term.

Further information: See “Post-Balance Sheet Events”

on page 294.

Risk description

Russia’s recent invasion of Ukraine poses wide-ranging challenges to our operations. The immediate

impacts include the safety and security of our people and operations in these and neighbouring

countries. The subsequent sanctions and export controls imposed by countries around the world

could have a material impact on a number of our activities, including supply, trading and treasury

activities. More sanctions and export controls are expected.

Given the evolving situation, there are many other unknown factors and events that could materially

impact our operations, which may be temporary or more permanent in nature. These risks and future

events could impact our supply chain, commodity prices, credit, commodity trading, treasury and

legal risks. The tensions also create heightened cyber-security threats to our information technology

infrastructure. The geopolitical situation may influence our future investment and financial decisions.

Any of these factors, individually or in aggregate, could have a material adverse effect on our

earnings, cash flows and financial condition.

How this risk is managed

In response to the invasion, a Group Crisis Team has been

set up to assess the current situation, consider potential

scenarios of how events may further develop and co-

ordinate our responses accordingly.

Care for our people is Shell’s top priority. Local crisis

teams, led by the respective Country Chairs, have been

deployed to ensure the health, safety and well-being of our

staff, contractors and their families in Ukraine, Russia and

neighbouring countries. We are supporting evacuations of

Shell employees in Ukraine and their families. We are also

working with aid partners and humanitarian organisations

to help in the relief effort.

We announced our intention to exit our joint ventures with

Gazprom and related entities and to end our involvement

in the Nord Stream 2 pipeline project. Furthermore, we

announced our intention to withdraw from our involvement

in all Russian hydrocarbons, including crude oil, petroleum

products, gas and LNG in a phased manner, aligned with

new government guidance. As an immediate first step, the

company will stop all spot purchases of Russian crude oil.

We will shut our service stations, aviation fuels and

lubricants operations in Russia.

We are closely monitoring and responding to the sanctions

that have been imposed and are following international

guidelines where relevant to our business activities.

RISK FACTORS continued

OPERATIONAL RISKS continued

The estimation of proved oil and gas reserves involves subjective

judgements based on available information and the application of

complex rules. This means subsequent downward adjustments are

possible.

Further information: See “Supplementary information -

oil and gas (unaudited)” on page 295.

Risk description

The estimation of proved oil and gas reserves involves subjective judgements and determinations

based on available geological, technical, contractual and economic information. Estimates can

change over time because of new information from production or drilling activities, changes in

economic factors, such as oil and gas prices, alterations in the regulatory policies of host

governments, or other events. Estimates also change to reflect acquisitions, divestments, new

discoveries, extensions of existing fields and mines, and improved recovery techniques. Published

proved oil and gas reserves estimates could also be subject to correction because of errors in the

application of published rules and changes in guidance. Downward adjustments could indicate lower

future production volumes and could also lead to impairment of assets. This could have a material

adverse effect on our earnings, cash flows and financial condition.

How this risk is managed

A central group of reserves experts undertakes the primary

assurance of the proved reserves bookings. A

multidisciplinary committee reviews and endorses all major

proved reserves bookings. Shell’s Audit Committee reviews

all proved reserves bookings and Shell's CEO is

responsible for final approval. The Internal Audit function

also provides further assurance through audits of the

control framework, from which information disclosed in

‘’Supplementary information – oil and gas (unaudited)” is

obtained.

Our future hydrocarbon production depends on the delivery of large

and integrated projects and our ability to replace proved oil and gas

reserves.

Further information: See “Shell Powering Progress” on

page 17.

Risk description

We face numerous challenges in developing capital projects, especially those which are large and

integrated. Challenges include: uncertain geology; frontier conditions; the existence and availability

of necessary technology and engineering resources; the availability of skilled labour; the existence of

transport infrastructure; project delays; the expiration of licences; delays in obtaining required

permits; potential cost overruns; and technical, fiscal, regulatory, political and other conditions. These

challenges are particularly relevant in certain developing and emerging-market countries, in frontier

areas and in deep-water fields, such as off the coast of Mexico. We may fail to assess or manage

these and other risks properly. Such potential obstacles could impair our delivery of these projects,

our ability to fulfil the full potential value of the project as assessed when the investment was

approved, and our ability to fulfil related contractual commitments. This could lead to impairments

and could have a material adverse effect on our earnings, cash flows and financial condition.

Future oil and gas production will depend on our access to new proved reserves through exploration,

negotiations with governments and other owners of proved reserves and acquisitions, and through

developing and applying new technologies and recovery processes to existing fields. Failure to

replace proved reserves could result in an accelerated decrease of future production, potentially

having a material adverse effect on our earnings, cash flows and financial condition.

How this risk is managed

We continue to explore for and mature hydrocarbons

across our Upstream and Integrated Gas businesses. We

use our subsurface, project and technical expertise, and

actively manage non-technical risks across a diversified

portfolio of opportunities and projects. This involves

adopting an integrated approach for all stages, from basin

choice to development. We use competitive techniques

and benchmark our approach internally and externally.

Oil and gas production available for sale

Million boe [A]

2021

2020

2019

Shell subsidiaries

1,047

1,104

1,182

Shell share of joint ventures and associates

134

135

156

Total

1,181

1,239

1,338

[A] Natural gas volumes are converted into oil equivalent using a factor of 5,800 scf per barrel.

Proved developed and undeveloped oil and gas reserves [A][B] (at December 31)

Million boe [C]

Dec 31,

2021

Dec 31,

2020

Dec 31,

2019

Shell subsidiaries

8,456

8,222

9,980

Shell share of joint ventures and associates

909

902

1,116

Total

9,365

9,124

11,096

Attributable to non-controlling interest of Shell subsidiaries

267

322

304

[A] We manage our total proved reserves base without distinguishing between proved reserves from subsidiaries and those from

joint ventures and associates.

[B] Includes proved reserves associated with future production that will be consumed in operations.

[C] Natural gas volumes are converted into oil equivalent using a factor of 5,800 scf per barrel.

OPERATIONAL RISKS continued

The nature of our operations exposes us, and the communities in which

we work, to a wide range of health, safety, security and environment

risks.

Further information: See “Environment and society” on

page 109.

Risk description

The health, safety, security and environment (HSSE) risks to which we and the communities in which

we work are potentially exposed cover a wide spectrum, given the geographical range, operational

diversity and technical complexity of our operations. These risks include the effects of natural disasters

(including weather events), earthquakes, social unrest, pandemic diseases, criminal actions by

external parties, and safety lapses. If a major risk materialises, such as an explosion or hydrocarbon

leak or spill, this could result in injuries, loss of life, environmental harm, disruption of business

activities, loss or suspension of permits, loss of our licence to operate and loss of our ability to bid on

mineral rights. Accordingly, this could have a material adverse effect on our earnings, cash flows and

financial condition.

Our operations are subject to extensive HSSE regulatory requirements that often change and are

likely to become more stringent over time. Governments could require operators to adjust their future

production plans, as has occurred in the Netherlands, affecting production and costs. We could incur

significant extra costs in the future because of the need to comply with such requirements. We could

also incur significant extra costs due to violations of or liabilities under laws and regulations that

involve elements such as fines, penalties, clean-up costs and third-party claims. If HSSE risks

materialise, they could have a material adverse effect on our earnings, cash flows and financial

condition.

How this risk is managed

We have standards and a clear governance structure

to help manage HSSE risks and avoid potential adverse

effects. The standards and governance structure also help

us to develop mitigation strategies aimed at ensuring that if

an HSSE risk materialises, we avoid catastrophic

consequences and have ways of trying to remediate any

environmental damage. Our standards and governance

structure are defined in our Health, Safety, Security,

Environment and Social Performance (HSSE & SP) Control

Framework and supporting guidance documents. These

describe how key controls should be operated, for

example to ensure safe production and implementation of

maintenance activities. Shell Internal Audit provides

assurance on the effectiveness of HSSE & SP controls

to the Board. We routinely practise implementing our

emergency response plans to significant risks (such

as a spill, toxic substances, fire or explosion).

We assessed the impact of COVID-19 on our activities and

implemented measures to minimise the adverse effect of

the pandemic on our operations. These measures include

monitoring and additional protection to prevent infections,

promote safety and protect the well-being of all staff,

especially critical staff who continue to operate our assets.

We also seek to minimise the pandemic’s impact on our

operations through scenario planning, implementing

continuity plans and ensuring our sites and offices are

COVID safe.

A further erosion of the business and operating environment in Nigeria

could have a material adverse effect on us.

Further information: See “Upstream” on page 63.

Risk description

In our Nigerian operations, we face various risks and adverse conditions. These include: security

issues affecting the safety of our people, host communities and operations; sabotage and theft; issues

affecting our ability to enforce existing contractual rights; litigation; limited infrastructure; potential

legislation that could increase our taxes or operating costs; the challenges presented by limited

government and state oil company budgets; and regional instability created by militant activities.

Some of these risks and adverse conditions, such as security issues affecting the safety of our people

and sabotage and theft have occurred in the past and are likely to continue in the future. These risks

or adverse conditions could have a material adverse effect on our earnings, cash flows and financial

condition.

How this risk is managed

We test the economic and operational resilience of our

Nigerian projects against a wide range of assumptions

and scenarios. We seek to proportionally share risks and

funding commitments with joint-venture partners. When we

participate in joint ventures in Nigeria, we require that they

operate in accordance with good industry practice. We

monitor the security situation, and liaise with host

communities, governmental and non-governmental

organisations to help promote peaceful and safe

operations.

RISK FACTORS continued

OPERATIONAL RISKS continued

An erosion of our business reputation could have a material adverse

effect on our brand, our ability to secure new resources or access

capital markets, and on our licence to operate.

Further information: See "Other Regulatory and

Statutory Information" on page 210 and "Our people" on

page 127.

Risk description

Our reputation is an important asset. The Shell General Business Principles (Principles) govern how

Shell and its individual companies conduct their affairs, and the Shell Code of Conduct tells

employees and contract staff how to behave in line with the Principles. Our challenge is to ensure that

all employees and contract staff comply with the Principles and the Code of Conduct. Real or

perceived failures of governance or regulatory compliance or a perceived lack of understanding of

how our operations affect surrounding communities could harm our reputation.

Societal expectations of businesses are increasing, with a focus on business ethics, quality of

products, contribution to society, safety and minimising damage to the environment. There is

increasing focus on the role of oil and gas in the context of climate change and energy transition. This

could negatively affect our brand, reputation and licence to operate, which could limit our ability to

deliver our strategy, reduce consumer demand for our branded and non-branded products, harm our

ability to secure new resources and contracts, and restrict our ability to access capital markets or

attract staff. Many other factors, including the materialisation of other risks discussed in this section,

could negatively affect our reputation and could have a material adverse effect on our earnings, cash

flows and financial condition.

How this risk is managed

We continually assess and monitor the external

environment for potential risks to our reputation. We

engage in ongoing dialogue with our key stakeholders

such as investors, industry and trade groups, universities,

governments and non-governmental organisations (NGOs)

to gain greater insights into societal expectations of our

business. We have mitigation plans for identified brand

and reputation risks at the Group, country and line of

business level. Our country chairs are responsible for

implementing country reputation plans which are updated

annually. We continually develop and defend our brand in

line with Shell’s purpose and promises, and target our

investments to drive brand differentiation, relevance and

preference.

We rely heavily on information technology systems in our operations.

Further information: See “Corporate” on page 83.

Risk description

The operation of many of our business processes depends on reliable information technology (IT)

systems. Our IT systems are evolving because of changing business models, our increasing focus on

customers, ongoing digitalisation of business processes and migration to the cloud. Our IT systems

are increasingly dependent on contractors supporting the delivery of IT services. The COVID-19

pandemic and geopolitical tensions altered the nature of the IT threat, increasing the frequency and

ingenuity of malware attacks and increasing the temptation to attack targets for financial gain.

In 2021, Shell was impacted by data security breaches, including one involving a third-party supplier

who gained unauthorised access to various files during a limited window of time, some of which

contained personal data. Shell contacted the impacted individuals and stakeholders and worked with

them to address possible risks. We also informed relevant regulators and authorities.

The factors described above continue to contribute to potential breaches and disruptions of critical IT

services. If breaches are not detected early and responded to effectively, they could harm our

reputation and have a material adverse effect on our earnings, cash flows and financial condition.

How this risk is managed

We continually measure and improve our cyber-security

capabilities. To reduce the likelihood of successful cyber

attacks, our cyber-security capabilities are embedded into

our IT systems. Our IT is protected by detective and

protective technologies. Identification and assessment

capabilities are built into our IT support processes and

adhere to industry best practices. When external

companies provide us with IT services, the security of those

services is managed through contractual clauses and

supplier assurance reports. Shell continually invests in

efforts to embed and improve our controls and monitoring.

For example, we improved our global web content filtering

capability in response to the challenge of increased remote

working. If breaches occur, all entities, including those that

have yet to be fully integrated into Shell's systems and

processes, are required to report the incident and use

Shell's information security capabilities. In relation to the

2021 breach, the root cause of the incident was

addressed, and the investigation showed no evidence of

any impact on Shell’s core IT systems. The incident was

handled in line with regulations and in co-operation with

the authorities.

Our business exposes us to risks of social instability, criminality, civil

unrest, terrorism, piracy, cyber disruption and acts of war that could

have a material adverse effect on our operations.

Further information: See “Environment and society” on

pages 120.

Risk description

As seen in recent years, these risks can manifest themselves in the countries where we operate and

elsewhere. These risks affect people and assets. Potential risks include: acts of terrorism; acts of

criminality including maritime piracy; cyber espionage or disruptive cyber attacks; conflicts including

war - such as Russia's recent invasion of Ukraine - malicious acts carried out by individuals within

Shell, civil unrest and environmental and climate activism (including disruptions by non-governmental

and political organisations).

The above risks can threaten the safe operation of our facilities and the transport of our products.

They can harm the well-being of our people, inflict loss of life and injuries, damage the environment

and disrupt our operational activities. These risks could have a material adverse effect on our

earnings, cash flows and financial condition.

How this risk is managed

We seek to obtain the best possible information to enable

us to assess threats and risks. We conduct detailed

assessments for all our sites and activities, and implement

appropriate measures to deter, detect and respond to

security risks. Further mitigations include strengthening the

security of sites, reducing our exposure as appropriate,

journey management, information risk management, crisis

management and business continuity measures. We

conduct training and awareness campaigns for staff and

provide them with travel and health advice and access to

24/7 assistance while travelling. We learn from incidents,

in order to continually improve our security risk

management in Shell.

OPERATIONAL RISKS continued

Production from the Groningen field in the Netherlands causes

earthquakes that affect local communities.

Further information: See “Upstream” on page 61.

Risk description

Shell and ExxonMobil are 50:50 shareholders in Nederlandse Aardolie Maatschappij B.V. (NAM).

An important part of NAM’s gas production comes from the onshore Groningen gas field, in which

EBN, a Dutch government entity, has a 40% interest and NAM a 60% interest. The gas field is in the

process of being closed down owing to earthquakes induced by gas production. Some of these

earthquakes have damaged houses and other structures in the region, resulting in complaints and

lawsuits from the local community. The government has announced it intends to accelerate the close-

down, bringing the end of production forward from 2030 to possibly mid-2022. The exact close-

down date depends on security of supply considerations and is still to be decided. While we expect

the earlier close-down of the Groningen gas field to further reduce the number and strength of

earthquakes in the region, any additional earthquakes could have further adverse effects on our

earnings, cash flows and financial condition.

How this risk is managed

NAM is working with the Dutch government and other

stakeholders to fulfil its obligations to residents of the area.

These include compensating for damage caused by the

earthquakes and paying to strengthen houses where this is

required for safety considerations. Negotiations with the

state are being conducted to determine how to manage

the accelerated close-down. Specific remediations within

the agreed scope of responsibilities are planned. NAM's

joint-venture partners will review its financial robustness

against different scenarios for Groningen's liabilities and

costs, with the aim of the venture being able to self-fund

any additional expenses and claims.

We are exposed to treasury and trading risks, including liquidity risk,

interest rate risk, foreign exchange risk and credit risk. We are

affected by the global macroeconomic environment and the conditions

of financial and commodity markets.

Further information: See “Liquidity and capital

resources” on page 47 and Note 20 to the

“Consolidated Financial Statements” on pages 279 to

284.

Risk description

Our subsidiaries, joint arrangements and associates are subject to differing economic and financial

market conditions around the world. Political or economic instability affects such markets.

We use debt instruments, such as bonds and commercial paper, to raise significant amounts of

capital. Should our access to debt markets become more difficult, the potential impact on our liquidity

could have a material adverse effect on our operations. Our financing costs could also be affected by

interest rate fluctuations or any credit rating deterioration.

We are exposed to changes in currency values and to exchange controls as a result of our

substantial international operations. Our reporting currency is the US dollar, although, to a material

extent, we also hold assets and are exposed to liabilities in other currencies. While we undertake

some foreign exchange hedging, we do not do so for all our activities. Even where hedging is in

place, it may not function as expected.

Commodity trading is an important component of our Upstream, Integrated Gas, Oil Products and

Chemicals businesses. Processing, managing and monitoring many trading transactions across the

world, some of them complex, exposes us to operational and market risks, including commodity price

risks. We use derivative instruments such as futures and contracts for difference to hedge market risks.

We do not hedge all our activities and even where hedging is in place, it may not function as

expected.

We are exposed to credit risk; our counterparties could fail or be unable to meet their payment and/

or performance obligations under contractual arrangements. Although we do not have significant

direct exposure to sovereign debt, it is possible that our partners and customers may have exposure

which could impair their ability to meet their obligations. Our pension plans invest in government

bonds, so they could be affected by a sovereign debt downgrade or other default.

If any of the above risks materialise, they could have a material adverse effect on our earnings, cash

flows and financial condition.

How this risk is managed

We use various financial instruments for managing

exposure to foreign exchange and interest rate

movements. Our treasury operations are highly centralised

and seek to manage credit exposures associated with our

substantial cash, foreign exchange and interest rate

positions. Our portfolio of cash investments is diversified to

avoid concentrating risk in any one instrument, country or

counterparty. Other than in exceptional cases, the use of

external derivative instruments is confined to specialist

trading and central treasury organisations that have the

appropriate skills, experience, supervision, control and

reporting systems.

We have credit risk policies in place which seek to ensure

that products are sold to customers with appropriate

creditworthiness. These policies include detailed credit

analysis and monitoring of customers against counterparty

credit limits. Where appropriate, netting arrangements,

credit insurance, prepayments and collateral are used to

manage credit risk. We maintain committed credit facilities.

Management believes it has access to sufficient debt

funding sources (capital markets) and to undrawn

committed borrowing facilities to meet foreseeable

requirements.

In affecting commodity trades and derivative contracts, we

operate within procedures and policies designed to ensure

that market risks are managed within authorised limits and

trading can only be performed by staff with the

appropriate skills and experience. Senior Management

regularly reviews mandated trading limits. A department

that is independent from our traders monitors our market

risk exposures daily, using value-at-risk techniques

alongside other risk metrics as appropriate.

RISK FACTORS continued

OPERATIONAL RISKS continued

Our future performance depends on the successful development and

deployment of new technologies and new products.

Further information: See “Shell Powering Progress” on

page 17.

Risk description

Technology and innovation are essential to our efforts to help meet the world’s energy demands

competitively. If we fail to effectively develop or deploy new technology and products and services,

or fail to make full, effective use of our data in a timely and cost-effective manner, there could be a

material adverse effect on the delivery of our strategy and our licence to operate. We operate in

environments where advanced technologies are used. In developing new technologies and new

products, unknown or unforeseeable technological failures or environmental and health effects could

harm our reputation and licence to operate or expose us to litigation or sanctions. The associated

costs of new technology are sometimes underestimated. Sometimes the development of new

technology is subject to delays. If we are unable to develop the right technology and products in a

timely and cost-effective manner, or if we develop technologies and products that harm the

environment or people's health, there could be a material adverse effect on our earnings, cash flows

and financial condition.

How this risk is managed

Shell’s technology organisation and the relevant business

lines work together to determine the content, scope and

budget for developing new technology that supports our

activities. The new technology is developed to ensure

portfolio alignment with Shell’s strategic ambitions and

deployment commitments. A significant proportion of

Shell’s technology contributes to our Renewables and

Energy Solutions portfolio and our emissions reduction

targets. We benefit from key relationships with leading

academic research institutes and universities, and from

working with start-ups. In our Shell GameChanger

programme, we help companies to mature early-stage

technologies. In our Shell Ventures scheme, we invest in

and partner with start-ups and small and medium-sized

enterprises that are in the early stages of developing new

technologies.

We have substantial pension commitments, the funding of which is

subject to capital market risks and other factors.

Further information: See “Liquidity and capital

resources” on page 47.

Risk description

Liabilities associated with defined benefit pension plans are significant, and the cash funding

requirement of such plans can also involve significant liabilities. They both depend on various

assumptions. Volatility in capital markets or government policies could affect investment performance

and interest rates, causing significant changes to the funding level of future liabilities. Changes in

assumptions for mortality, retirement age or pensionable remuneration at retirement could also cause

significant changes to the funding level of future liabilities. We operate a number of defined benefit

pension plans and, in case of a shortfall, we could be required to make substantial cash contributions

(depending on the applicable local regulations). This could result in a material adverse effect on our

earnings, cash flows and financial condition.

How this risk is managed

A pensions forum chaired by the Chief Financial Officer

oversees Shell’s input to pension strategy, policy and

operation. A risk committee supports the forum in reviewing

the results of assurance processes with respect to pension

risks. Local trustees manage the funded defined benefit

pension plans, and the contributions paid are based on

independent actuarial valuations that align with local

regulations.

We mainly self-insure our hazard risk exposures. Consequently, we

could incur significant financial losses from different types of risks that

are not insured with third-party insurers.

Further information: See “Corporate” on page 83.

Risk description

Our Group insurance companies (wholly owned subsidiaries) provide insurance coverage to Shell

subsidiaries and entities in which Shell has an interest. These subsidiaries and entities may also insure

a portion of their risk exposures with third parties, but such external insurance would not provide any

material coverage in the event of a large-scale safety or environmental incident. Accordingly, in the

event of a material incident, we would have to meet our obligations without access to material

proceeds from third-party insurers. We have incurred adverse impacts from events, such as Hurricane

Ida in 2021. We may, in the future, incur significant losses from different types of hazard risks that are

not insured with third-party insurers, potentially resulting in a material adverse effect on our earnings,

cash flows and financial condition.

How this risk is managed

We continually assess the safety performance of our

operations and make risk mitigation recommendations,

where relevant, to keep the risk of an accident as low as

possible. Our insurance subsidiaries are adequately

capitalised and they may transfer risks to third-party

insurers where economical, effective and relevant.

Many of our major projects and operations are conducted in joint

arrangements or with associates. This could reduce our degree of

control and our ability to identify and manage risks.

Further information: See "Other Regulatory and

Statutory Information" on page 212.

Risk description

When we are not the operator, we have less influence and control over the behaviour, performance

and operating costs of joint arrangements or associates. Despite having less control, we could still be

exposed to the risks associated with these operations, including reputational, litigation (where joint

and several liability could apply) and government sanction risks. For example, our partners or

members of a joint arrangement or an associate, (particularly local partners in developing countries),

may be unable to meet their financial or other obligations to projects, threatening the viability of a

given project. Where we are the operator of a joint arrangement, the other partner(s) could still be

able to veto or block certain decisions, which could be to our overall detriment. Accordingly, where

we have limited influence, we are exposed to operational risks that could have a material adverse

effect on our earnings, cash flows and financial condition.

How this risk is managed

For every major project where we share control,

Shell appoints a Joint Venture Asset Manager, whose

responsibility is to manage performance and create and

protect value for Shell. The Joint Venture Asset Manager

seeks to influence operators and other partners to adapt

their practices in order to drive value appropriately and to

mitigate identified risks. An annual assurance review

assesses how the joint venture’s standards and processes

align with those of Shell. The Joint Venture Asset Manager

follows up on any gaps identified.

CONDUCT AND CULTURE RISKS

We are exposed to conduct risk in our trading operations.

Further information: See "Other Regulatory and

Statutory Information" on page 211 and Note 20 to the

“Consolidated Financial Statements” on pages 279 to

284.

Risk description

Commodity trading is an important component of our Upstream, Integrated Gas, Renewables &

Energy Solutions, Oil Products and Chemicals businesses. Our commodity trading entities are subject

to many regulations including requirements for standards of conduct. The risk of ineffective controls,

poor oversight of trading activities, and the risk that traders could deliberately operate outside

compliance limits and controls, either individually or as a group, has occurred. This has resulted in

losses in the past and may result in further losses in the future. This could have material adverse effects

on our earnings, cash flows and financial condition.

How this risk is managed

We maintain a trading compliance function managed by a

regulated Chief Compliance Officer with adequate

resources, a comprehensive governance structure,

including mitigating controls (both automated and non-

automated), and established reporting lines. Staff receive

clear guidance through the organisation’s Trading

Compliance Manual, a specific compliance website,

training modules where completion is monitored, and

additional quarterly training sessions. Shell leaders

frequently reinforce the importance of managing

compliance and conduct risk in the trading organisation. In

response to the COVID-19 pandemic, we issued guidance

on maintaining compliance and conduct standards and

upgraded our trader monitoring tools.

Violations of antitrust and competition laws carry fines and expose us

and/or our employees to criminal sanctions and civil suits.

Further information: See "Other Regulatory and

Statutory Information" on page 211.

Risk description

Antitrust and competition laws apply to Shell and its joint arrangements and associates in the vast

majority of countries where we do business. Shell and its joint arrangements and associates have

been fined for violations of antitrust and competition laws in the past. This includes a number of fines

by the European Commission Directorate-General for Competition (DG COMP). Because of DG

COMP’s fining guidelines, any future conviction of Shell or any of its joint arrangements or associates

for violation of EU competition law could potentially result in significantly larger fines and have a

material adverse effect on us. Violation of antitrust laws is a criminal offence in many countries, and

individuals can be imprisoned or fined. In certain circumstances, directors may receive director

disqualification orders. It is also now common for persons or corporations allegedly injured by

antitrust violations to sue for damages. Any violation of these laws can harm our reputation and could

have a material adverse effect on our earnings, cash flows and financial condition.

How this risk is managed

We maintain an antitrust programme with adequate

resources, a comprehensive governance structure and

established reporting lines. Staff receive clear guidance

that includes requirements in Shell’s Ethics and Compliance

Manual, an antitrust-specific website, training modules

where completion is monitored and regular messages from

Shell leaders on the importance of managing antitrust risks.

Staff must understand and comply with the Protect Shell

Policy, which explains Shell's position on managing

antitrust risks in engagements with parties external to Shell.

In response to the COVID-19 pandemic, we issued

guidance to address antitrust risks arising from the

disruption to supply chains, including procurement

guidance which outlines the risks associated with

exchanging information and collaborating with Shell’s

procurement competitors.

Violations of anti-bribery, tax-evasion and anti-money laundering laws

carry fines and expose us and/or our employees to criminal sanctions

and civil suits.

Further information: See “Our people” on pages 127,

"Other Regulatory and Statutory Information" on page

211 and Note 26 to the “Consolidated Financial

Statements” on pages 288 to 290.

Risk description

Anti-bribery, tax-evasion and anti-money laundering laws apply to Shell, its joint arrangements and

associates in all countries where we do business. Shell and its joint arrangements and associates

have in the past settled with the US Securities and Exchange Commission regarding violations of the

US Foreign Corrupt Practices Act. Any violation of anti-bribery, tax-evasion or anti-money laundering

laws, including potential violations associated with Shell Nigeria Exploration and Production

Company Limited's investment in Nigerian oil block OPL 245 and the 2011 settlement of litigation

pertaining to that block, could harm our reputation or have a material adverse effect on our earnings,

cash flows and financial condition. Violations of such laws also could expose us and/or our

employees to criminal sanctions, civil suits and other consequences, such as debarment and the

revocation of licences.

How this risk is managed

We maintain an anti-bribery, anti-tax evasion and anti-

money laundering (ABC/AML) programme with adequate

resources, a comprehensive governance structure and

established reporting lines. Staff receive clear guidance,

which includes requirements in Shell’s Ethics and

Compliance Manual, an ABC/AML-specific website,

training modules where completion is monitored and

regular messages from Shell leaders on the importance of

managing ABC/AML risks.

As regards OPL 245, we have always maintained that the

2011 settlement was fully legal and on March 17, 2021, the

court in Milan, Italy, acquitted Shell and its former

employees of all charges on the grounds that there was no

case to answer.

In response to the COVID-19 pandemic, we set up fast-

track processes to deal with relief donation requests. These

processes include counterparty due diligence and are

supported by Shell's Ethics and Compliance Office.

RISK FACTORS continued

CONDUCT AND CULTURE RISKS continued

Violations of data protection laws carry fines and expose us and/or

our employees to criminal sanctions and civil suits.

Further information: See "Other Regulatory and

Statutory Information" on page 211.

Risk description

Data protection laws apply to Shell and its joint arrangements and associates in the vast majority of

countries where we do business. Since many countries in which we operate have data protection

laws and regulations, Shell has adopted Binding Corporate Rules. This means we apply one

consistent standard to data protection, across the Group and globally. The EU General Data

Protection Regulation (GDPR) forms the basis of our Binding Corporate Rules. With data privacy

legislation now in force in the USA, the risk of class actions is increased. Class actions after large-

scale data breaches are increasingly common.

Shell companies are increasingly processing large volumes of personal data as we continue to

acquire small companies with relatively large amounts of customer data during the energy transition.

The COVID-19 pandemic has increased the level of processing of sensitive personal data, for

example to confirm the health or vaccination status of our employees and visitors. Some governments

require immediate disclosure of information, including sensitive personal data. We must be able to

update our guidance to employees quickly, so it includes the relevant points of country legislation on

COVID-19.

In some countries that are key to Shell’s business operations, such as China, relevant legislation

continues to be amended or introduced. Shell must be able to adapt dynamically to such legislative

changes and be capable of updating our internal programmes if necessary. Many countries require

mandatory notification of data breaches in certain situations. In these circumstances we might be

required to report to affected individuals and regulators in the relevant countries.

Non-compliance with data protection laws could harm individuals and expose us to regulatory

investigations. This could result in: fines, which could be up to 4% of global annual turnover if under

GDPR; orders to stop processing certain data; harm to our reputation; and loss of the trust of existing

and potential customers, stakeholders, governments, and employees. With regard to data breaches,

we notified a number of data privacy regulators in 2021 of personal data breaches, and some

investigations are still ongoing. To date, no material fines have been imposed, but no assurance can

be provided that future breaches would have similar outcomes. In addition to imposing fines,

regulators may also issue orders to stop processing personal data, which could disrupt operations.

We could also be subject to litigation from persons or entities allegedly affected by data protection

violations.

Violation of data protection laws is a criminal offence in some countries, and individuals can be

imprisoned or fined. Any violation of these laws or harm to our reputation could have a material

adverse effect on our earnings, cash flows and financial condition.

How this risk is managed

We maintain a Group-wide data privacy programme, a

comprehensive governance structure and established

reporting lines. Shell has had Binding Corporate Rules in

place for the last 10 years to ensure consistent levels of

data protection across the Group. Staff receive clear

guidance which includes requirements in Shell’s Ethics and

Compliance Manual, a website focusing on data privacy,

training modules where completion is monitored, and

regular messages from Shell leaders on the importance of

managing data privacy risks.

We monitor new and imminent data privacy legislation

and ensure we have a robust impact assessment process

aligned with the relevant businesses. We design

operations and processes with privacy requirements and

build controls into our processes and practices which

involve the handling of personal data.

Recognising legal developments, not only in data privacy

but also in electronic communications and advertising, we

have developed pragmatic guidance on direct and indirect

marketing.

We have and continue to update a Group-wide incident

management process designed to immediately identify and

remediate data breaches. The process also helps us to

comply with country-level requirements for reporting

breaches. We continue to address challenges with

compliance in data-heavy companies controlled by Shell

but not yet fully integrated into our systems.

There is a requirement for newly acquired companies to

become compliant with our Binding Corporate Rules within

three years of acquisition and there is currently a multi-year

programme under way to achieve compliance. IT

remediation work remains a priority in such companies, as

does the strengthening of programmes to support data

privacy compliance. To respond to the increased risk

resulting from the pandemic, we updated our guidance on

privacy best practices for COVID-19.

CONDUCT AND CULTURE RISKS continued

Violations of trade compliance laws and regulations, including

sanctions, carry fines and expose us and our employees to criminal

proceedings and civil suits.

Further information: See "Other Regulatory and

Statutory Information" on page 211.

Risk description

We use “trade compliance” as an umbrella term for various national and international laws designed

to regulate the movement of items across national boundaries and restrict or prohibit trade and other

dealings with certain parties. For example, the EU and the USA continue to impose comprehensive

sanctions on countries and territories such as Syria, North Korea and Crimea, and continue to adopt

targeted restrictions and prohibitions on certain transactions in countries such as Venezuela and

Russia. The USA continues to have comprehensive sanctions against Iran and Cuba. The EU and

some nations continue to maintain targeted sanctions against Iran. The EU and the USA introduced

sectoral sanctions against Venezuela in 2017, which the USA expanded in 2018 and 2019. The US

sanctions primarily target the government of Venezuela and the oil industry.

In 2014, the EU and the USA imposed additional restrictions and controls directed at defined oil and

gas activities in Russia. These remain in force. The USA introduced further restrictions regarding Russia

in 2017, expanding them in 2018. In February 2022, countries around the world began imposing

additional sanctions and export controls against Russia over its invasion of Ukraine including,

regional trade bans, designations of entities (including Russian banks and state-owned entities) and

individuals as Specially Designated Nationals and Blocked Parties (SDNs), and restrictions on access

by Russia to financial systems. Export controls have also been introduced targeting Russian defence,

aerospace, and maritime sectors. More sanctions and export controls are expected. A number of

countries have also implemented new sanctions against Belarus for its role in the Russian invasion.

Many other nations are also adopting trade compliance programmes similar to those administered

by the EU and the USA. Since January 2021, the UK has maintained a legal framework for trade

compliance that is separate and distinct from those of the EU and USA.

Abiding by all the laws and regulations on trade compliance and sanctions can sometimes be

complex and challenging because of factors such as: the expansion of sanctions; the frequent

addition of prohibited parties; the number of markets in which we operate; the risk of differences in

how jurisdictions apply sanctions; and the large number of transactions we process. Shell has

voluntarily self-disclosed potential violations of sanctions in the past. The COVID-19 pandemic has

increased trade compliance risks, because of factors such as growing state involvement in business

dealings, the need to maintain and develop business opportunities and cross-border movement of

goods and technologies, and the increasing likelihood that counterparties will change ownership as

the economic crisis continues.

Any violation of sanctions could lead to loss of import or export privileges and significant penalties on

or prosecution of Shell or its employees. This could harm our reputation and have a material adverse

effect on our earnings, cash flows and financial condition.

How this risk is managed

We continue to develop and maintain a trade compliance

programme with adequate resources, robust screening

protocols, a comprehensive governance structure and

established reporting lines. Staff receive clear guidance,

which includes requirements in Shell’s Ethics and

Compliance Manual, a specific website for trade

compliance, training modules where completion is

monitored and regular messages from Shell leaders on the

importance of managing trade compliance risks. The

effectiveness of the trade compliance programme is

assessed annually (or more frequently if necessary) and we

are continually seeking ways to improve.

In response to the COVID-19 pandemic, we promote an

increased focus on compliance and assurance. For

example, in Trading and Supply we promote a particular

focus on compliance with trade controls in high-risk areas

such as port agency, inspections and terminal operations.

Investors should also consider the following, which could limit shareholder remedies.

OTHER (generally applicable to an investment in securities)

The Company’s Articles of Association determine the jurisdiction for shareholder disputes. This could limit

shareholder remedies.

Risk description

Our Articles of Association generally require that all disputes between our shareholders in such capacity and the Company or our subsidiaries (or our Directors or

former Directors), or between the Company and our Directors or former Directors, be exclusively resolved by arbitration in The Hague, the Netherlands, under the

Rules of Arbitration of the International Chamber of Commerce. Our Articles of Association also provide that, if this provision is to be determined invalid or

unenforceable for any reason, the dispute could only be brought before the courts of England and Wales. Accordingly, the ability of shareholders to obtain monetary

or other relief, including in respect of securities law claims, could be determined in accordance with these provisions.

SUMMARY OF RESULTS

Key statistics

$ million, except where indicated

2021

2020

2019

Income/(loss) attributable to Shell plc shareholders

20,101

(21,680)

15,842

Income attributable to non-controlling interest

529

146

590

Income/(loss) for the period

20,630

(21,534)

16,432

Current cost of supplies adjustment

(3,148)

1,833

(605)

Total segment earnings [A][B], of which:

17,482

(19,701)

15,827

Integrated Gas

6,340

(6,278)

8,628

Upstream

9,694

(10,785)

3,855

Oil Products

2,664

(494)

6,139

Chemicals

1,390

808

478

Corporate

(2,606)

(2,952)

(3,273)

Identified Items [B]

(2,216)

(24,767)

(1,192)

Adjusted Earnings [B]

19,289

4,846

16,462

Adjusted EBITDA (CCS basis) [B]

55,004

36,533

56,644

Capital expenditure

19,000

16,585

22,971

Cash capital expenditure [B]

19,698

17,827

23,919

Operating expenses [B]

35,964

34,789

37,893

Underlying operating expenses [B]

35,309

32,502

37,000

Return on average capital employed [B]

8.8%

(6.8)%

6.7%

Net Debt at December 31 [C]

52,556

75,386

79,093

Gearing at December 31 [C]

23.1%

32.2%

29.3%

Oil and gas production (thousand boe/d)

3,237

3,386

3,665

Proved oil and gas reserves at December 31 (million boe)

9,365

9,124

11,096

[A] Segment earnings are presented on a current cost of supplies basis. See Note 5 to the “Consolidated Financial Statements” on pages 256-259.

[B] See “Non-GAAP measures reconciliations” on pages 337-340.

[C] See Note 15 "Debt and lease arrangements" on page 268 and "Non-GAAP measures reconciliations" on pages 337-340.

EARNINGS 2021-2020

Income attributable to Shell plc shareholders in 2021 was $20,101

million, compared with a loss of $21,680 million in 2020. With non-

controlling interest included, income/(loss) for the period in 2021 was

$20,630 million, compared with a loss of $21,534 million in 2020.

After current cost of supplies adjustment, total segment earnings in

2021 were $17,482 million, compared with a loss of $19,701 million in

2020.

Earnings on a current cost of supplies basis (CCS earnings) exclude the

effect of changes in the oil price on inventory carrying amounts, after

making allowance for the tax effect. The purchase price of volumes sold

in the period is based on the current cost of supplies during the same

period, rather than on the historic cost calculated on a first-in, first-out

(FIFO) basis. When oil prices are decreasing, CCS earnings are likely

to be higher than earnings calculated on a FIFO basis and, when prices

are increasing, CCS earnings are likely to be lower than earnings

calculated on a FIFO basis.

Integrated Gas earnings in 2021 were $6,340 million, compared with

a loss of $6,278 million in 2020. The increase was mainly driven by

lower impairment charges, higher realised prices for oil, LNG and gas,

higher gains on sale of assets and favourable tax movements. This was

partly offset by higher losses due to the fair value accounting of

commodity derivatives and higher operating expenditure. See

“Integrated Gas” on pages 54-58.

Upstream earnings in 2021 were $9,694 million, compared with a loss

of $10,785 million in 2020. The increase was mainly driven by higher

realised oil and gas prices, lower impairment charges and favourable

tax movements. This was partly offset by higher losses related to fair

value accounting of commodity derivatives. See “Upstream” on pages

59-65.

Oil Products earnings in 2021 were $2,664 million, compared with a

loss of $494 million in 2020. The increase was mainly driven by lower

impairment charges and higher marketing volumes and oil sands

margins. This was partly offset by lower contributions from trading and

optimisation, higher operating expenditure and unfavourable tax

movements. See “Oil Products” on pages 74-79.

Chemicals earnings in 2021 were $1,390 million, compared with $808

million in 2020. The increase was mainly driven by higher margins in

base chemicals and intermediates as well as favourable tax

movements. This was partly offset by higher impairment charges and

operating expenditure. See “Chemicals” on pages 80-82.

Corporate segment earnings in 2021 were an expense of $2,606

million, compared with $2,952 million in 2020. The lower expense was

mainly driven by lower net interest expenses and favourable foreign

exchange movements. See “Corporate” on page 83.

PRIOR YEAR EARNINGS SUMMARY

Our earnings summary for the financial year ended December 31,

2020, compared with the financial year ended December 31, 2019,

can be found in the Annual Report and Accounts (page 41) and Form

20-F (page 26) for the year ended December 31, 2020, as filed with

the Registrar of Companies for England and Wales and the US

Securities and Exchange Commission, respectively.

PRODUCTION AVAILABLE FOR SALE

Oil and gas production available for sale in 2021 was 3,237 thousand

boe per day (boe/d), compared with 3,386 thousand boe/d in 2020.

This net reduction was mainly driven by divestments, higher

maintenance activities, net field declines and production-sharing

contract effects.

Oil and gas production available for sale [A]

Thousand boe/d

2021

2020

2019

Crude oil and natural gas liquids

1,685

1,752

1,823

Synthetic crude oil

Natural gas [B]

1,498

1,583

1,790

Total

3,237

3,386

3,665

Of which:

Integrated Gas

942

911

922

Upstream

2,240

2,424

2,691

Oil sands (part of Oil Products)

[A] See “Oil and gas information” on pages 66-73.

[B] Natural gas volumes are converted into oil equivalent using a factor of 5,800 scf per barrel.

PROVED RESERVES

The proved oil and gas reserves of Shell subsidiaries and the Shell share

of the proved oil and gas reserves of joint ventures and associates are

summarised in “Oil and gas information” on pages 66-73 and set out in

more detail in “Supplementary information – oil and gas (unaudited)”

on pages 295-313.

Before taking production into account, our proved reserves increased

by 1,470 million boe in 2021. Total oil and gas production was 1,229

million boe. Accordingly, after taking production into account, our

proved reserves increased by 241 million boe in 2021, to 9,365 million

boe at December 31, 2021.

CASH CAPITAL EXPENDITURE AND OTHER INFORMATION

Cash capital expenditure was $19,698 million in 2021, compared with

$17,827 million in 2020.

Operating expenses were $35,964 million in 2021, compared with

$34,789 million in 2020. Underlying operating expenses were

$35,309 million compared with $32,502 million in 2020.

Our return on average capital employed (ROACE) increased to 8.8%,

compared with (6.8)% in 2020, mainly driven by higher earnings.

Net debt was $52,556 million at the end of 2021, compared with

$75,386 million at the end of 2020, mainly driven by cash flow

generation.

Gearing was 23.1% at the end of 2021, compared with 32.2% at the

end of 2020, mainly driven by net debt reduction and higher earnings.

SIGNIFICANT ACCOUNTING ESTIMATES AND

JUDGEMENTS

See Note 2 to the “Consolidated Financial Statements” on pages

242-251.

LEGAL PROCEEDINGS

See Note 26 to the “Consolidated Financial Statements” on pages

288-290.

PERFORMANCE INDICATORS

These indicators enable management to evaluate Shell’s performance against our

strategy and operating plans during the year. These are also used as part of the

determination of Executive Directors’ remuneration. See “Directors’ Remuneration

Report” on pages 175-179.

FINANCIAL DELIVERY

Cash flow from operating activities ($ million)

45,104 2020: 34,105

Cash flow from operating activities is the total of all the cash receipts

and payments associated with our sales of oil, gas, chemicals and other

products. The components that provide a reconciliation from income for

the period are listed in the “Consolidated Statement of Cash Flows”.

This indicator reflects our ability to generate cash to service and reduce

our debt and for distributions to shareholders and for investments.

See “Liquidity and capital resources” on pages 47-50.

Free cash flow ($ million)

40,343 2020: 20,828

Free cash flow is the sum of “Cash flow from operating activities” and

“Cash flow from investing activities”, which are disclosed in the

“Consolidated Statement of Cash Flows”. This indicator is used to

evaluate the cash available for financing activities, including

shareholder distributions and debt servicing, after investment in

maintaining and growing our business.

See “Non-GAAP measures reconciliations” on pages 337-340.

Return on average capital employed (%)

8.8 2020: (6.8)

ROACE is defined as income for the period, adjusted for after-tax

interest expense, as a percentage of the average capital employed

during the year. Capital employed is the sum of total equity and total

debt. ROACE measures the efficiency of our utilisation of the capital

that we employ and is a common measure of business performance.

See “Summary of results” on pages 43-44 and “Non-GAAP measures

reconciliations” on pages 337-340.

Total shareholder return (%)

33.1 2020: (32.7)

Total shareholder return (TSR) is the difference between the share price

at the beginning of the year and the share price at the end of the year

(each averaged over 90 days), plus gross dividends delivered during

the calendar year (reinvested quarterly), expressed as a percentage of

the share price at the beginning of the year (averaged over 90 days).

The data used are a weighted average in dollars for A and B shares.

The TSRs of major publicly traded oil and gas companies can be

compared directly, providing a way to determine how we are

performing relative to our industry peers.

OPERATIONAL EXCELLENCE

Upstream controllable availability (%)

87.8 2020: 89.2

Upstream controllable availability performance reflects our ability to

optimally run our Upstream assets. Reliability issues, turnarounds and

maintenance at own-operated or third-party facilities all impact

controllable availability, but it excludes the impact of extreme

unexpected events that are outside our control such as government

restrictions and hurricanes.

Midstream availability (%)

87.3 2020: 92.3

Midstream availability shows to what extent liquefied natural gas

(LNG) assets are ready to process product as a comparison with

capacity, considering the impact of planned and unplanned

maintenance.

Refinery and chemical plant availability (%)

95.6 2020: 95.5

Refinery and chemical plant availability is the weighted average of the

actual uptime of plants as a percentage of their maximum possible

uptime. The weighting is based on the capital employed, adjusted for

cash and non-current liabilities. This indicator is a measure of the

operational excellence of our refinery and chemical plant facilities.

Project delivery on schedule (%)

87.0 2020: 48.0

Project delivery on budget (%)

104.0 2020: 103.9

Project delivery reflects our capability to complete major projects on

time and within budget on the basis of the targets set in our annual

business plan. Project delivery on schedule measures the percentage of

projects delivered on schedule. Project delivery on budget reflects the

aggregate cost against the aggregate budget for those projects, where

a figure greater than 100% means over budget.

PROGRESS IN ENERGY TRANSITION

Upstream and Integrated Gas greenhouse gas (GHG)

intensity (tonnes of CO2 equivalent/tonne of

hydrocarbon production available for sale)

0.172 2020: 0.16

Upstream/midstream GHG intensity is a measure of GHG emissions

(direct and indirect GHG emissions associated with imported energy,

excluding emissions from exported energy), expressed in metric tonnes

of CO₂ equivalent emitted into the atmosphere per metric tonne of

hydrocarbon production available for sale.

See “Climate change and energy transition” on pages 84-107.

Refining GHG intensity (tonnes of CO2 equivalent/

UEDCTM)

1.05 2020: 1.05

Refining GHG intensity is a measure of GHG emissions (direct and

indirect GHG emissions associated with imported energy, excluding

emissions from exported energy), expressed in metric tonnes of CO₂

equivalent emitted into the atmosphere per unit of Utilised Equivalent

Distillation Capacity (UEDCTM). UEDCTM is a proprietary metric of

Solomon Associates. It is a complexity-weighted normalisation

parameter that reflects the operating cost intensity of a refinery based

on the size and configuration of its particular mix of process and non-

process facilities.

See “Climate change and energy transition” on pages 84-107.

Chemicals GHG intensity (tonnes of CO2 equivalent/

tonne petrochemicals produced)

0.95 2020: 0.98

Chemicals GHG intensity is a measure of GHG emissions (direct and

indirect GHG emissions associated with imported energy, excluding

emissions from exported energy), expressed in metric tonnes of CO₂

equivalent emitted into the atmosphere per metric tonne of steam

cracker, high-value petrochemicals production.

See “Climate change and energy transition” on pages 84-107.

GHG abatements (thousand tonnes of CO2 equivalent)

279 2020: N/A

This is the total mass of GHG emissions reduced by interventions that led to

sustained drops in emissions. By sustained drops, we mean that each intervention

ensured emissions were lower for the given year, and there was a reasonable

expectation that emissions would continue to be lower because of the

intervention, all things being equal. This is a new metric for 2021.

See “Climate change and energy transition” on pages 84-107.

SAFETY

Serious injury and fatality frequency

(cases per 100 million working hours)

6.9 2020: 6.0

Serious Injury and Fatality (SIF) is defined as a serious work-related

injury or illness that resulted in fatality or a life-altering event, which is

defined as a long-term or permanent injury or illness with significant

impact on daily activities.

See “Environment and society” on pages 108-122.

Number of operational Tier 1 and 2 process safety events

102 2020: 103

A Tier 1 process safety event is an unplanned or uncontrolled release of

any material, including non-toxic and non-flammable materials, from a

process with the greatest actual consequence resulting in harm to

employees, contract staff, or a neighbouring community, damage to

equipment, or exceeding a threshold quantity, as defined by the API

Recommended Practice 754 and IOGP Standard 456. A Tier 2 process

safety event is a release of lesser consequence.

See “Environment and society” on pages 108-122.

LIQUIDITY AND CAPITAL RESOURCES

We manage our businesses to deliver strong cash flows to fund

investment for profitable growth. Management's priorities for applying

Shell's cash are base capital expenditure to sustain our strategy,

progressive dividend growth of around 4% annually, AA credit metrics

through the cycle, and additional shareholder distributions (20-30% of

cash flow from operations). The fourth priority is disciplined and

measured capital expenditure growth and continued balance sheet

strengthening.

FINANCIAL CONDITION AND LIQUIDITY

Shell generated cash flow from operations of $45.1 billion, including a

negative impact from working capital of $10.4 billion, and free cash

flow of $40.3 billion in 2021, aided by the improving global macro

environment and divestments. (For more information on free cash flow

see "Non-GAAP measures reconciliations" on page 337-340.) Net debt

decreased to $52.6 billion at December 31, 2021, (December 31,

2020: $75.4 billion). Gearing fell to 23.1% at December 31, 2021,

compared with 32.2% at December 31, 2020, as increases in equity

and cash flow generation reduced net debt. Note 15 to the

"Consolidated Financial Statements" on pages 268 provides

information on our debt arrangements, including net debt and gearing

definitions.

LIQUIDITY

We satisfy our funding and working capital requirements from the cash

generated from our operations, the issuance of debt and divestments. In

2021, access to the international debt capital markets remained strong,

with our debt principally financed from these markets through central

debt programmes consisting of:

▪a $10 billion global commercial paper (CP) programme, with

maturities not exceeding 270 days;

▪a $10 billion US CP programme, with maturities not exceeding

397 days;

▪an unlimited Euro medium-term note (EMTN) programme (also

referred to as the Multi-Currency Debt Securities Programme); and

▪an unlimited US universal shelf (US shelf) registration.

All these CP, EMTN and US shelf issuances are issued by Shell

International Finance B.V., the issuance company for Shell, with its debt

being guaranteed by Shell plc (the Company).

We also maintain committed credit facilities. The core facilities were

extended in December 2021. Of the $10 billion total facility, $0.08

billion matured in 2021, $1.92 billion matures in 2022, $0.32 billion in

2025 and $7.68 billion in 2026. This remained fully undrawn at

December 31, 2021. These core facilities and internally available

liquidity provide back-up coverage for our CP programmes. In April

2020, to increase liquidity amid COVID-19-related uncertainties, Shell

entered into a dual-currency $7.2 billion and €4.4 billion one-year

revolving credit facility, with two six-month extension options at our

discretion. This facility remained undrawn and expired at the end of the

first year in April 2021. Other than certain borrowing by local

subsidiaries, we do not have any other committed credit facilities.

Our total debt decreased by $18.9 billion to $89.1 billion at December

31, 2021. The total debt excluding leases matures as follows: 7% in

2022; 6% in 2023; 7% in 2024; 10% in 2025; and 69% in 2026 and

beyond. The portion of debt maturing in 2022 is expected to be repaid

from a combination of cash balances, cash generated from operations,

divestments and the issuance of new debt.

In 2021, we issued $1.5 billion of bonds under our US shelf registration.

All CP outstanding was repaid within the year with no additional

issuance. Additionally in 2021, we redeemed $4.5 billion of USD

bonds, bringing forward maturities of certain bonds maturing before the

end of 2025. We believe our working capital is sufficient for current

requirements.

While our subsidiaries are subject to restrictions, such as foreign

withholding taxes on the transfer of funds in the form of cash dividends,

loans or advances, such restrictions are not expected to have a

material impact on our ability to meet our cash obligations.

MARKET RISK AND CREDIT RISK

We are affected by the global macroeconomic environment as well as

financial and commodity market conditions. This exposes us to treasury

and trading risks, including liquidity risk, market risk (interest rate risk,

foreign exchange risk and commodity price risk) and credit risk. See

“Risk factors” on pages 38 and Note 20 to the Consolidated Financial

Statements on page 279-284. The size and scope of our businesses

require a robust financial control framework and effective management

of our various risk exposures.

We use various financial instruments for managing exposure to

commodity price, foreign exchange and interest rate movements. Our

treasury and trading operations are highly centralised and seek to

manage credit exposures associated with our substantial cash,

commodity, foreign exchange and interest rate positions. Our portfolio

of cash investments is diversified to avoid concentrating risk in any one

instrument, country or counterparty. The use of external derivative

instruments is confined to specialist trading and central treasury

organisations that have appropriate skills, experience, supervision,

control and reporting systems. Credit risk policies are in place to ensure

that sales of products are made to customers with appropriate

creditworthiness, and include credit analysis and monitoring of

customers against counterparty credit limits. Where appropriate,

netting arrangements, credit insurance, prepayments and collateral are

used to manage credit risk. Management believes it has access to

sufficient debt funding sources (capital markets) and to undrawn

committed borrowing facilities to meet foreseeable requirements.

PENSION COMMITMENTS

We have substantial pension commitments, the funding of which is

subject to capital market risks (see “Risk factors” on page 39). We

address key pension risks in a number of ways. Principal among these is

the Pensions Forum, chaired by the Chief Financial Officer, which

oversees Shell’s input to pension strategy, policy and operation. A risk

committee supports the forum in reviewing the results of assurance

processes in respect of pensions risks. In general, local trustees manage

the funded defined benefit pension plans, with contributions paid based

on independent actuarial valuations in accordance with local

regulations. Our total employer contributions were $0.9 billion in 2021

and are estimated to be $0.9 billion in 2022. See Note 18 to the

"Consolidated Financial Statements" on page 272-277.

Capitalisation table

$ million

December

31, 2021

December

31, 2020

Equity attributable to Shell plc shareholders

171,966

155,310

Current debt

8,218

16,899

Non-current debt

80,868

91,115

Total debt [A]

89,086

108,014

Total capitalisation

261,052

263,324

[A] Of total debt, $61.5 billion (2020: $79.4 billion) was unsecured and $27.6 billion (2020:

$28.6 billion) was secured. See Note 15 to the “Consolidated Financial Statements” on

pages 268 for further disclosure on debt.

STATEMENT OF CASH FLOWS

Cash flow from operating activities in 2021 was an inflow of $45.1

billion, compared with $34.1 billion in 2020, mainly due to higher

earnings, partly offset by unfavourable working capital movements of

$10.4 billion (compared with favourable working capital movements of

$4.6 billion in 2020). The decrease in cash flow from operating

activities in 2020, compared with $42.2 billion in 2019, was mainly

due to lower earnings.

Cash flow from investing activities in 2021 was an outflow of $4.8

billion, compared with an outflow of $13.3 billion in 2020. The

decreased cash outflow was mainly due to higher proceeds from sale

of property, plant and equipment in 2021, including the divestment of

our Permian business in the USA. The decreased cash outflow in 2020

compared with $15.8 billion in 2019 was mainly due to lower capital

expenditure in 2020.

Cash flow from financing activities in 2021 was an outflow of $34.6

billion, compared with outflows of $7.2 billion in 2020 and

$35.2 billion in 2019, due to net repayment of debt of $19.7 billion

(2020: $5.6 billion net issuance; 2019: $3.4 billion net repayment),

and higher repurchases of shares of $2.9 billion (2020: $1.7 billion;

2019: $10.2 billion).

Cash and cash equivalents were $37.0 billion at December 31, 2021

(December 31, 2020: $31.8 billion; December 31, 2019: $18.1 billion).

CASH FLOW FROM OPERATING ACTIVITIES

The most significant factors affecting our cash flow from operating

activities are earnings, which are mainly impacted by: realised prices

for crude oil, natural gas and LNG, production levels of crude oil,

natural gas and LNG, chemicals, refining and marketing margins; and

movements in working capital.

The impact on earnings from changes in market prices depends on: the

extent to which contractual arrangements are tied to market prices; the

dynamics of production-sharing contracts; the existence of agreements

with governments or state-owned oil and gas companies that have

limited sensitivity to crude oil and natural gas prices; tax impacts; and

the extent to which changes in commodity prices flow through into

operating expenses. Changes in benchmark prices of crude oil and

natural gas in any particular period provide only a broad indicator of

changes in our Integrated Gas and Upstream earnings in that period.

Changes in any one of a range of factors, derived from either within the

industry or the broader economic environment, can influence refining

and marketing margins. The precise impact of any such changes

depends on how the oil markets respond to them. The market response

is affected by factors such as: whether the change affects all crude oil

types or only a specific grade; regional and global crude oil and

refined products inventories; and the collective speed of response of

refiners and product marketers in adjusting their operations. As a result,

margins fluctuate from region to region and from period to period.

Cash flow information [A]

$ billion

2021

2020

2019

Cash flow from operating activities excluding working capital movements

Integrated Gas

18.3

10.8

14.8

Upstream

22.6

9.8

19.9

Oil Products

12.0

7.0

10.7

Chemicals

3.3

1.8

1.7

Corporate

(0.7)

0.1

(0.3)

Total

55.5

29.5

47.0

(Increase)/decrease in inventories

(7.3)

4.5

(2.6)

(Increase)/decrease in current receivables

(20.6)

9.6

(0.9)

Increase/(decrease) in current payables

17.5

(9.5)

(1.2)

(Increase)/decrease in working capital

(10.4)

4.6

(4.8)

Cash flow from operating activities

45.1

34.1

42.2

Cash flow from investing activities

(4.8)

(13.3)

(15.8)

Cash flow from financing activities

(34.7)

(7.2)

(35.2)

Currency translation differences relating to cash and cash equivalents

(0.5)

0.2

0.1

Increase/(decrease) in cash and cash equivalents

5.1

13.8

(8.7)

Cash and cash equivalents at the beginning of the year

31.8

18.1

26.7

Cash and cash equivalents at the end of the year

37.0

31.8

18.1

[A] See the Consolidated Statement of Cash Flows on page 241.

LIQUIDITY AND CAPITAL RESOURCES continued

DIVESTMENT AND CASH CAPITAL EXPENDITURE

The levels of divestment proceeds and cash capital expenditure in 2021

and 2020 reflect our discipline and focus on the Powering Progress

strategy. See "Non-GAAP measures reconciliations" on page 337-340.

Divestment proceeds

$ million

2021

2020

2019

Integrated Gas

3,195

503

723

Upstream

10,930

1,909

5,384

Oil Products

935

1,368

1,517

Chemicals

Corporate

205

225

Total divestment proceeds

15,113

4,010

7,871

Cash capital expenditure is used to monitor investing activities on a

cash basis, excluding items such as lease additions which do not

necessarily result in cash outflows in the period.

Cash capital expenditure

$ million

2021

2020

2019

Integrated Gas

5,767

4,301

4,299

Upstream

6,269

7,296

10,205

Oil Products

3,868

3,328

4,907

Chemicals

3,573

2,640

4,090

Corporate

221

262

418

Total cash capital

expenditure

19,698

17,827

23,919

CONTRACTUAL OBLIGATIONS

The table below summarises our principal contractual obligations at December 31, 2021, by expected settlement period. The amounts presented

have not been offset by any committed third-party revenue in relation to these obligations.

Contractual obligations

$ billion

Less than 1

year

Between

1 and 3 years

Between

3 and 5 years

5 years

and later

Total

Debt [A]

4.1

8.2

10.3

38.4

61.0

Leases

5.8

9.1

6.8

18.3

40.0

Purchase obligations [B]

28.8

29.2

21.9

64.1

144.0

Other long-term contractual liabilities [C]

0.4

0.7

0.2

1.1

2.4

Total

39.1

47.2

39.2

121.9

247.4

[A] See Note 15 to the “Consolidated Financial Statements” on pages 268. Debt contractual obligations exclude interest, which is estimated to be $1.6 billion payable in less than one year,

$3.1 billion between one and three years, $2.7 billion between three and five years, and $15.6 billion in five years and later. For this purpose, we assume that interest rates with respect to variable

interest rate debt remain constant at the rates in effect at December 31, 2021, and that there is no change in the aggregate principal amount of debt other than repayment at scheduled maturity as

reflected in the table. Leases definition follows IFRS 16, which was implemented as of January 1, 2019. Lease contractual obligations include interest.

[B] Purchase obligations disclosed in the above table exclude commodity purchase obligations that are not fixed or determinable and are principally intended to be resold in a short period of time

through sale agreements with third parties. Examples include long-term non-cancellable LNG and natural gas purchase commitments and commitments to purchase refined products or crude oil at

market prices. Inclusion of such commitments would not be meaningful in measuring liquidity and cash flow, as the cash outflows generated by these purchases will generally be offset in the same

periods by cash received from the related sales transactions.

[C] Includes all obligations included in “Trade and other payables” and provisions related to onerous contracts included in "Decommissioning and other provisions" in “Non-current liabilities” in the

“Consolidated Balance Sheet” that are contractually fixed as to timing and amount. In addition to these amounts, Shell has certain obligations that are not contractually fixed as to timing and

amount, including contributions to defined benefit pension plans (see Note 18 to the “Consolidated Financial Statements” on pages 272-277) and obligations associated with decommissioning

and restoration (see Note 19 to the “Consolidated Financial Statements” on page 278).

GUARANTEES AND OTHER OFF-BALANCE SHEET

ARRANGEMENTS

There were no guarantees and other off-balance sheet arrangements at

December 31, 2021, or December 31, 2020, that were reasonably

likely to have a material effect on Shell.

DIVIDENDS

Subject to Board approval, Shell aims to grow the dividend per share

by around 4% every year. In total, Shell targets the distribution of

20-30% of its cash flow from operations to shareholders. Shell may

choose to return cash to shareholders through a combination of

dividends and share buybacks.

When setting the level of shareholder remuneration, the Board looks at

a range of factors, including the macro environment, the underlying

business earnings and cash flows of Shell Group, the current balance

sheet, future investment and divestment plans and existing

commitments. We returned $6.3 billion to our shareholders through

dividends in 2021.

The fourth quarter 2021 interim dividend of $0.24 per share will be

payable to shareholders on the register at February 18, 2022. See

Note 24 to the “Consolidated Financial Statements” on page 288. The

Board expects that the first quarter 2022 interim dividend will increase

by around 4% compared with the fourth quarter 2021 interim dividend,

to $0.25 per share.

PURCHASES OF SECURITIES

On July 29, 2021, the Company announced the start of a share

buyback programme of $2 billion, which was completed in November

2021. Subsequently, on December 1, 2021, the Company announced

the first $1.5 billion tranche of a buyback programme to return $7

billion of proceeds from the divestment of its Permian assets. This

tranche was completed in January 2022. In February 2022, share

buybacks of $8.5 billion for the first half of 2022 were announced.

These included the remaining $5.5 billion of the Permian divestment

proceeds that had been allocated for share buybacks.

At December 31, 2021, 126 million B shares with a nominal value of

€8.8 million ($10 million) (1.62% of the Company's total issued share

capital at December 31, 2020) were purchased and cancelled during

2021 for a total cost of $2.7 billion including expenses, at an average

price of $21.60 per share

This was in accordance with the authorities granted by shareholders at

the 2021 Annual General Meeting (AGM) for the Company to

repurchase up to a maximum of 10% of its issued ordinary shares,

excluding treasury shares (780 million ordinary shares). As at

December 31, 2021, 653 million ordinary shares could still be

repurchased under the current AGM authority. The purpose of the

share repurchases in 2021 was to reduce the issued share capital of the

Company.

A new resolution will be proposed at the 2022 AGM to renew the

authority for the Company to purchase its own share capital, up to

specified limits, for a further year. This proposal will be described in

more detail in the 2022 Notice of Annual General Meeting.

Shares are also purchased by the employee share ownership trusts and

trust-like entities (see "Other regulatory and statutory information" on

pages 205-213) to meet delivery commitments under employee share

plans. All share purchases are made in open-market transactions.

The table below provides information on purchases of shares in 2021

by the Company and affiliated purchasers. Purchases in euros and

sterling are converted into dollars using the exchange rate on each

transaction date.

Purchases of equity securities by issuer and affiliated purchasers in 2021 [A]

A shares

B shares

A ADSs [B]

Purchase period

Number

purchased

for employee

share plans

Number

purchased

for cancellation

[C]

Weighted

average

price ($)[D]

Number

purchased

for employee

share plans

Number

purchased for

cancellation

[C]

Weighted

average

price ($)[D]

Number

purchased

for employee

share plans

Weighted

average

price ($)[D]

January

—

1,525,265

37.23

February

—

March

—

34,140

40.17

April

—

May

—

June

156,668

—

20.61

91,523

—

19.70

23,603

40.74

July

—

1,474,422

19.95

—

August

—

25,134,113

19.81

—

September

—

23,807,741

20.27

32,670

41.01

October

—

25,200,000

23.82

—

November

960,000

—

20.93

120,000

17,217,286

22.6

233,300

41.88

December

7,185,000

—

22.03

911,200

33,393,418

21.75

975,299

43.66

Total 2021

8,301,668

—

21.88

1,122,723

126,226,980

21.59

2,824,277

39.94

January

—

31,678,192

24.43

1,106,045

46.31

Total 2022

—

31,678,192

24.43

1,106,045

46.31

[A] Reported as at settlement date

[B] American Depositary Shares

[C] Under the share buyback programme

[D] Includes stamp duty and brokers’ commission

FINANCIAL INFORMATION RELATING TO THE ROYAL

DUTCH SHELL DIVIDEND ACCESS TRUST

The results of operations and financial position of the Royal Dutch Shell

Dividend Access Trust (the Trust) are included in the consolidated results

of operations and financial position of Shell. Certain condensed

financial information in respect of the Trust is given below. See “Royal

Dutch Shell Dividend Access Trust Financial Statements” on pages

327-330.

The Shell Transport and Trading Company Limited and BG Group

Limited have each issued a dividend access share to Computershare

Trustees (Jersey) Limited (the Trustee). For the years 2021, 2020 and

2019, the Trust recorded income before tax of £2,201 million, £2,777

million and £5,484 million respectively. In each period, this reflected

the amount of dividends payable on the dividend access shares.

Dividends are also classified as unclaimed where amounts have not

cleared recipient bank accounts.

At December 31, 2021, the Trust had total equity of £nil (December 31,

2020: £nil; December 31, 2019: £nil), reflecting assets of £7 million

(December 31, 2020: £7 million; December 31, 2019: £3 million) and

unclaimed dividends of £7 million (December 31, 2020: £7 million;

December 31, 2019: £3 million). The Trust only records a liability for an

unclaimed dividend, to the extent that dividend cheque payments have

not been presented within 12 months, have expired or have been

returned unpresented.

On January 29, 2022, one line of shares was established through

assimilation of each A share and each B share into one ordinary share

of the Company. This assimilation had no impact on voting rights or

dividend entitlements. Dutch withholding tax, applied previously on

dividends on A shares, no longer applies on dividends paid on the

ordinary shares following the assimilation.

In relation to the assimilation of the Company's Class A and B shares,

the Trust will continue in existence for the foreseeable future to facilitate

the payment of unclaimed dividend liabilities for B shareholders, until

these are either claimed or forfeited in line with the terms outlined.

MARKET OVERVIEW

We maintain a large business portfolio across an integrated value

chain and are exposed to crude oil, natural gas, hydrocarbon product

and chemical prices (see “Risk factors” on page 31). This diversified

portfolio helps us mitigate the impact of price volatility. Our annual

planning cycle and periodic portfolio reviews aim to ensure that our

levels of capital investment and operating expenses are appropriate in

the context of a volatile price environment. We test the resilience of our

projects and other opportunities against a range of crude oil, natural

gas, oil product and chemical prices and costs. We also aim to

maintain a strong balance sheet to provide resilience against weak

market prices.

GLOBAL ECONOMIC GROWTH

After a sharp economic deceleration related to the COVID-19

pandemic in 2020, the global economy has experienced a strong but

uneven recovery in 2021. In its World Economic Outlook of January

2022, the International Monetary Fund (IMF) estimates that global

growth for 2021 has reached 5.9% – its strongest post-recession pace

in 80 years. This recovery is uneven and largely reflects sharp rebounds

in some major economies, most notably the USA and China, owing to

substantial government policy support. In many emerging market and

developing economies, inequalities in access to vaccines led to higher

infection rates. This combined with a partial withdrawal of policy

support have offset some of the benefits of strengthening external

demand and rising commodity prices. Early policy support and

vaccinations proved effective at mitigating some of the adverse

economic and health impacts of COVID-19 during 2021. However,

rising energy prices and supply disruptions have also resulted in broad-

based inflation in the second half of 2021, notably in the USA and

many emerging market and developing economies.

The global economic prospects remain highly uncertain. The world

remains vulnerable to COVID-19 and the pandemic is continuing, owing

to unequal access to vaccines, the reluctance of some to get vaccinated

and the emergence of more infectious new variants such as Omicron.

Socioeconomic challenges abound, including rising inflation, subdued

employment growth, supply chain problems, setbacks to educational

attainment, and climate change.

Confronted with such complex challenges, policy choice is difficult

because a sharp increase in global debt levels during the pandemic has

left limited room for manoeuvre. There is also an upside, because the

pandemic has induced greater automation and workplace

transformation, which could accelerate productivity growth. Structural

investment plans implemented in Europe and the USA could also lift the

growth outlook.

GLOBAL PRICES, DEMAND AND SUPPLY

The following table provides an overview of the main crude oil and

natural gas price markers to which we are exposed:

Oil and gas average industry prices [A]

2021

2020

2019

Brent ($/b)

West Texas Intermediate ($/b)

Henry Hub ($/MMBtu)

4.0

2.0

2.5

EU TTF ($/MMBtu)

Japan Customs-cleared Crude ($/b) - 3

months

[A] Yearly average prices are based on daily spot prices. The 2021 average price for Japan

Customs-cleared Crude is based on available market information up to the end of the period.

CRUDE OIL

Brent crude oil, an international benchmark, rebounded in 2021,

supported by stronger demand and moderate supply growth. Brent

traded between $50 per barrel (/b) and $86/b in 2021, ending the

year at around $77/b and averaging $71/b for the whole year. This

was about 70% higher than in 2020.

Global oil product demand rose by 5.6 million barrels per day (b/d) in

2021 to 97.4 million b/d, after a sharp drop of around 8.5 million b/d

in 2020, according to the IEA. The rebound was supported by

successful vaccine roll-outs, especially in developed economies such as

the USA, UK and EU. Road mobility has largely returned to pre-

pandemic levels, with COVID-19 travel restrictions being lifted and

more people switching from public transport to cars. Air travel has

begun to recover, but is still around 20-30% below pre-pandemic levels.

This is probably attributable to remaining cross-border travel restrictions

and public hesitancy about air travel during a global pandemic.

Mirroring the broad economic recovery, demand for naphtha, LPG and

ethane also picked up.

Global oil production has started to rise gradually as demand recovers.

Annual growth in 2021 was about 1.5 million b/d, with OPEC+ making

up most of the growth. From the second quarter of 2021, OPEC+ has

been gradually unwinding the production cuts it implemented in 2020,

with full unwinding expected by the second half of 2022. Outside

OPEC+, US light tight oil (LTO) has dominated the growth, supported

by the rebounding oil price. The number of US rotary oil rigs increased

by more than 160% by December 2021, from the record low seen in

August 2020. This, though, remained only around 60% of the 2019

average.

The OPEC+ production cuts have enabled a quick rundown of a record

global oil inventory. The industry stock of Organisation for Economic

Co-operation and Development (OECD) economies, which had

reached more than 3,200 million barrels by the middle of 2020, fell to

around 2,760 million barrels by the end of 2021, a seven-year low.

The oil price largely followed an upward trend for most of the year. The

Brent daily price passed the $70/b mark in June and $80/b in

October. The strong price move reflected a tight market balance,

resulting from modest supply growth and robust demand recovery. It

also reflected the broad inflationary pricing environment for energy

commodities such as coal and natural gas, in a period of economic

recovery and supply chain challenges.

The price rally was at times interrupted by restrictions introduced in

response to new waves of COVID-19, especially those caused by the

Delta variant in the summer and Omicron towards the end of the year.

In the final few weeks of 2021, the Omicron variant triggered the

sharpest sell-off since April 2020, with Brent retreating almost $10/b in

a single day at the height of the sell-off. Brent started regaining its

strength towards the end of December, as a severe Omicron-induced

demand disruption failed to materialise and supply concerns once

again prevailed.

Looking forward, demand uncertainties related to the COVID-19

pandemic remain a key uncertainty affecting the recovery of the global

crude market. This is particularly so for aviation fuel which has been the

most impacted by travel restrictions. But the extent of new COVID-

related demand disruption could be moderated by booster

programmes and the greater availability of more effective treatments

for the virus.

At the same time, there has been increasing evidence of supply side

risks. Upstream investment worldwide has slowed considerably during

the pandemic. As a result, OPEC's excess capacity will be declining.

Meanwhile, US light tight oil is expected to be facing continued capital

discipline pressures, restraining its growth. These factors will constrain

the global fast response supply capacity to manage demand and

supply disruptions, which may lead to price upside and volatilities.

NATURAL GAS

Global demand for natural gas rose by an estimated 4.6% in 2021,

after the COVID-19 pandemic caused consumption to decline by

around 1.2% in 2020, according to the IEA. The 2021 rate represents a

return to around the historical norms of growth for gas, and is roughly

the same as the pre-pandemic growth rate of 2019. The revival of

economic growth underpinned the industrial uptake of gas, especially

in China. Underperformance of hydroelectric output in China and South

America as well as weak renewables generation in Europe drove

incremental power demand for gas. Colder-than-normal winters and

hotter-than-usual summers also produced higher-than-expected demand

for gas from commercial and residential users. Reduced supply from a

number of sources led to shortages and record high prices for gas and

LNG globally.

LNG imports were up 6.0% in 2021 after only a minor increase in

2020. The global LNG supply complex experienced upstream

production deficits in 2021. Nigeria, Trinidad and Tobago, Peru and

Norway were down a combined 12 million tonnes, or 32%, from 2020.

The addition of new liquefaction capacity was also limited in 2021,

although utilisation of projects that started in 2020 improved, which

provided some support for supply growth.

European gas prices rose to unprecedented levels by the middle of

2021, with the average Dutch Title Transfer Facility (TTF) price more

than five times that of 2020. The TTF price reached a peak of almost

$60 per million British thermal units (MMBtu). TTF and European spot

gas hub prices broke above oil parity by the third quarter and

continued well above that level for the rest of the year. Prices were

supported by an extended heating season that left gas storage at a

deficit coming out of winter and prompted fears of scarcity as

indigenous production slumped and pipeline and LNG imports were

restrained. Record coal and carbon prices also contributed to the price

surge.

Asian spot LNG prices, as reflected by the Japan Korea Marker (JKM),

responded to the tight European market conditions with bids at a

premium to TTF for most of the year. This was in order to secure LNG

supplies for China and South Korea, where demand was higher than

expected. Average JKM prices ended the year up more than 300%

from 2020 and up more than 200% from 2019. Long-term contracts

indexed to oil prices tracked the wider crude complex upward during

the year but did not increase at the same rate as spot gas and LNG

prices.

Strong Asian and European prices incentivised full US LNG export

production. This helped strengthen Henry Hub cash prices to an

average of $3.81 per MMBtu for 2021, up more than 90% year-on-

year. After trading in a narrow range of around $3 per MMBtu for the

first half of 2021, Henry Hub prices rose above $5 per MMBtu by the

end of the third quarter. The upstream investment cuts of 2020

continued into 2021. Production did not keep pace with rebounding

demand, heightened by a combined 34% increase in LNG and Mexico

pipeline exports from a year ago.

Looking ahead, we expect that the high gas prices in North America,

Europe and Asia-Pacific will go down to more normal levels. This is

because we anticipate that global gas inventories will eventually

replenish as production recovers in response to the current elevated

price levels. Price developments, though, are highly uncertain.

We believe gas and LNG prices in Europe and Asia will be increasingly

influenced by European gas storage levels and by competition with

Asia for LNG imports, particularly flexible supply from the USA. Overall

LNG supply is expected to recover and increase as new liquefaction

capacity is added in the USA in 2022. But the global LNG market will

remain structurally tight as a relatively small amount of incremental

supply will come to market over the coming years.

In the USA, Henry Hub prices are expected to moderate from 2021 as

production increases in response to higher gas prices as well as oil

prices (which support associated gas production in the Permian basin).

But upward pressures on gas prices are also expected as LNG exports,

Mexico pipeline exports and economic growth stimulate demand.

CRUDE OIL AND NATURAL GAS PRICE ASSUMPTIONS

Our ability to deliver competitive returns and pursue commercial

opportunities ultimately depends on the accuracy of our price

assumptions (see “Risk factors” on page 31). We use a rigorous

assessment of short-, medium- and long-term market uncertainties to

determine what ranges of future crude oil and natural gas prices to use

in project and portfolio evaluations. Market uncertainties include, for

example, future economic conditions, geopolitics, actions by major

resource holders, production costs, technological progress and the

balance of supply and demand. See also Note 9 to the “Consolidated

Financial Statements” on pages 261 to 264.

REFINING MARGINS

Refining marker average industry gross margins

$/b

2021

2020

2019

US West Coast

14.6

8.5

13.5

US Gulf Coast Coking

9.8

2.3

4.9

Rotterdam Complex

1.9

0.4

2.3

Singapore

(1.7)

(0.5)

(0.6)

Gross refining margins improved during 2021, especially during the

second and third quarters. This is because demand for oil products

recovered significantly as economies rebounded and transport use

increased with the easing of COVID-19 travel restrictions. Demand for

kerosene for aviation remained below pre-pandemic levels because

varying levels of international travel restrictions remained in place in

2021. Despite the Omicron variant of COVID-19, demand recovery

continued during the fourth quarter.

Industry utilisation showed some recovery, but in 2021 there were

further announcements that refineries would fully or partially close on a

permanent basis. Construction of new capacity continued during the

year, especially in the Middle East and Asia.

Refining margins for the next few years are expected to be supported

by demand returning to pre-pandemic levels in 2022. The continued

addition of new refinery capacity, often integrated with chemicals

production, will put downward pressure on margins during the next few

years.

MARKET OVERVIEW continued

PETROCHEMICAL MARGINS

Cracker industry margins [A]

$/tonne

2021

2020

2019

North East/South East Asia naphtha

229

362

302

Western Europe naphtha

597

513

528

US ethane

692

433

440

[A] ICIS data are quoted. Cracker margins have been revised from the fourth quarter of 2019

onwards because of ICIS updating its methods for calculating cracker margins. Further revisions

are based on available market information to external industry data provider up to the end of

the period.

Cracker margins were volatile in 2021. This was because of supply

interruptions and demand increases as COVID-19 lockdown restrictions

eased. Overall margins were higher than in 2020, except in Asia.

Chinese demand recovered quickly from the pandemic, but

petrochemical supply was constrained by power restrictions that

affected manufacturing centres, logistics issues within China because of

COVID-19, and global logistics issues. Asia cracker margins were down

slightly from 2020 because of the balance of supply and demand, and

rising prices for energy, crude oil and naphtha feedstock. US ethane

cracker margins were supported by disruption due to winter storm Uri in

February and March and to a lesser extent by interruptions caused by

Hurricane Ida in August and September. West European cracker

margins were supported by the US weather events and strong domestic

demand, which offset rising crude and natural gas prices for the

majority of 2021.

The outlook for petrochemical margins in 2022 and beyond depends

on feedstock costs and the balance of supply and demand. Demand for

petrochemicals will be affected by the spread of COVID-19 as new

variants emerge, and the extent of recovery from the pandemic. Supply

of petrochemicals will depend on the net capacity effect of new builds

and plant closures (taking into account any delays or cancellations in

building new plants or closing old ones). Product prices reflect the

prices of raw materials, which are closely linked to crude oil and natural

gas prices. The balance of all these factors will drive margins.

The statements in this “Market overview” section, including those

related to our price forecasts, are forward-looking statements based on

management’s current expectations and certain material assumptions

and, accordingly, involve risks and uncertainties that could cause actual

results, performance or events to differ materially from those expressed

or implied herein. See “About this Report” on pages 6 to 7 and “Risk

factors” on pages 31 to 42.

INTEGRATED GAS

Key statistics

$ million, except where indicated

2021

2020

2019

Segment earnings/(loss)

6,340

(6,278)

8,628

Including:

Revenue (including inter-segment sales)

60,289

36,697

45,602

Share of profit of joint ventures and associates

1,906

562

1,791

Interest and other income

1,787

263

Operating expenses [A]

7,126

6,555

6,667

Underlying operating expenses [A]

6,892

5,769

6,534

Exploration

127

611

281

Depreciation, depletion and amortisation

6,188

17,704

6,238

Taxation charge/(credit)

2,246

(2,507)

2,242

Identified Items [A]

(2,417)

(10,661)

(326)

Adjusted Earnings [A]

8,757

4,383

8,955

Adjusted EBITDA (CCS basis) [A]

16,421

11,668

16,719

Capital expenditure

5,279

3,661

3,851

Cash capital expenditure [A]

5,767

4,301

4,299

Oil and gas production available for sale (thousand boe/d)

942

911

922

LNG liquefaction volumes (million tonnes)

31.0

33.2

35.6

LNG sales volumes (million tonnes)

64.2

71.9

74.5

[A] See “Non-GAAP measures reconciliations” on pages 337-340.

OVERVIEW

Our Integrated Gas segment includes liquefied natural gas (LNG),

conversion of natural gas into gas-to-liquids (GTL) fuels and other

products, and our Renewables and Energy Solutions activities. The

segment includes natural gas and liquids exploration and extraction,

and the operation of upstream and midstream infrastructure that

delivers gas and liquids to market. It markets and trades natural gas,

LNG, power and carbon-emission rights, and LNG as a fuel for heavy-

duty vehicles and marine vessels.

BUSINESS CONDITIONS