President Rein Willems on
Delivery through discipline

In the vision of Rein Willems, delivery derives primarily from discipline: "The ability to resist the need to take all kinds of other more brilliant ideas on board during execution."

If, like Rein Willems, you are due to retire in slightly less than six months' time, you tend to talk about the past more often than most people. "What was the procedure for ordering a large piece of equipment such as a reactor vessel or something similar? Well, the object in question was designed and subsequently ordered. Today, the latter is realised by very modern means: electronic bidding, saving substantial amounts of money. But if you take a closer look, these savings are realised not so much by the system of electronic bidding, but by the fact that you have had to make very disciplined and binding agreements about the specifications. This used to be a more or less open process, in which people contributed increasingly brilliant ideas during the design and the construction phases. But look what happens in your own house when you ask a contractor to change something during a building job. As soon as you start talking about more work or less work, you're a sitting target. It always takes longer and it's more expensive."
Shell Nederland's President observes that delivery is mainly a question of carrying out what has been agreed with the utmost consistency. "This is true of projects both large and small, both technical and otherwise."

More memory During his career, Rein Willems has seen various good examples of disciplined project management. The most recent was the Nanhai chemical complex in China, which started operations faultlessly last year, on time and within budget. And during his time as Country Chair of Shell's operations in the Philippines, he oversaw construction of the Tabangao refinery. "Delivered a month ahead of schedule and around eight per cent under budget," he recalls. But how is this possible? "Because there was a project manager who ran things with military precision. Someone who came up through the Shell ranks and who was therefore able to marry hands-on operational experience with detailed technical expertise. Once the project specifications had been drawn up, he forbade people in The Hague to make any changes, unless they were willing to foot the bill themselves. Such a mentality immediately makes the process much clearer and particularly more manageable."
This quality in project execution is currently being redeveloped via the Project Academy. Mr Willems comments: "It is important for more memory to be in place at the various locations, people who know what has been devised and tested in the past so that errors need not be repeated. A positive move towards the formation of such a memory has been the decision to keep people in the same job for longer."

Consultation and basis for support Rein Willems believes that: "Delivery starts during the meeting stage. It is much more important for a clear concise list of items to be drawn up immediately after a meeting, detailing who is to do what and when, than to draw up comprehensive minutes subsequently."
"Delivery does not mean cutting short the consultation processing during the project preparation stage. I have spent much time working abroad, but I have quite a positive view of the Dutch consultation model. Even where difficult issues are concerned such as restructuring, good consultations are very valuable. I often impress upon foreign colleagues less familiar with our consultation structure that while the Dutch model might take a little longer, it does lead to a basis for support as a result of which execution actually proceeds even faster. When we're talking about delivery, we have to look at the entire process and the end result."

Finance Director Nederland Margot Scheltema on
Standardisation as the norm

"The aim is to co-ordinate the business support processes within the business wherever possible and to find out where they can best be carried out," says Margot Scheltema, Finance Director Shell Nederland B.V., interpreting the Shell Group's new financial strategy for the years until 2010. Much was undertaken in the Netherlands last year to prepare for the rollout of this plan.

Shell's Chief Financial Officer launched the 'One Finance Plan' at the beginning of 2007. This financial strategy contains statements about such activities as 'offshoring' (transferring work to Shared Service Centres), far-reaching simplification of the business processes and IT systems (to carry out work at lower cost and with greater efficiency) and increasing professionalism in certain disciplines.
Ms Scheltema realises what is in store: "We are also looking at further automation, which makes work simpler and helps us to realise ongoing improvements in the controls. We are systematically incorporating much of the control work that has been carried out manually over recent years - for example in relation to SOX compliance (international regulations deriving from the US Sarbanes-Oxley Act, ed.) and often with the aid of external staff - in the IT systems. This prevents error and staff have more time for other important activities. Seventeen business processes were identified globally in 2006 as being eligible for standardisation." Examples of this given by Ms Scheltema are the drawing up of the annual accounts and the processes by which accounts between Group companies are set up.

Credit card Another major Finance activity was the setting up of a Country Controllers Network. For the past couple of years each country has had a Country Controller. His task is to facilitate financial co-ordination between the various Shell businesses within 'his' country. Ms Scheltema explains: "In the Netherlands the small Shell Nederland Corporate Office is the holding company for the large, local businesses such as SNR, SNC, SNV and NAM. Headquarters also houses the large, international Shell companies like Global Solutions and Renewables that have absolutely nothing to do with Shell Nederland, although they are involved with Shell in the Netherlands. In addition, the Country Controllers Network in the Netherlands implements innovations prescribed by the Group. Consider the 'global corporate card', the global credit card from Citibank for everyone at Shell. This was not rolled out on a business-by business basis, but country-by-country. The network will also play a role in implementing the One Finance Plan."

Tax Authority In 2006, Finance was heavily involved in the transition from external auditor KPMG to PricewaterhouseCoopers as a result of the unification. "We were forced to establish why we do things the way we do, for example. A new auditor will ask why more frequently than one with whom you've been involved for years."
Much attention was also paid in the Netherlands to providing administrative support to several new HR processes, for example the Life Cycle Savings Scheme and the new staff healthcare insurance. This was also the case for the 'Company File', the inventory of around three hundred Dutch Shell businesses. "We can now sign off the many changes centrally," the Finance Director explains. "And we can ensure that these companies complete their annual accounts earlier, enabling us to have the tax return of our large group tax entity ready on time. This is important under the Compliance Covenant (Handhavingsconvenant) between the Ministry of Finance and large companies like ours. We are established for tax purposes in the Netherlands and set great store by good relations with the Tax Authority."
Finance also focused on the development of financial talent within Shell in 2006. Some of the ways we did this was by supporting the Open Resourcing process, organising Finance Events and accrediting the Shell Learning programme with the training institutes for registered accountants and registered auditors (NIVRA and VRC). "This enables our people to earn the points they need every year to maintain their respective titles by taking the courses we offer. And partly because of this, we ensure a constant stream of high-quality financial talent that can grow and develop further here," says Margot Scheltema.

Exploration and Production

Nederlandse Aardolie Maatschappij B.V. (NAM, Assen)
Shell International Exploration Production B.V. (Rijswijk)
Shell E&P International B.V. (The Hague)

Production and sales The volume of gas produced by NAM in 2006 amounted to 50.4 billion m3. This is 1.7 billion m3 fewer than planned, which is entirely attributable to the warm autumn and winter. Gas production in 2005 amounted to 53 billion m3. Production from the Groningen field amounted to 33.1 billion m3, while sales from the small gas fields, both onshore and those offshore beneath the North Sea, amounted to 17.3 billion m3. This meant production from the small fields was higher than scheduled. NAM's oil production amounted to 426,000 m3 (2005: 462,000 m3). In addition, 446,000 m3 natural gas condensate was also produced.

Small fields Now that the relatively large 'small fields' in the Netherlands have since been taken into production, attention is focusing more and more on (increasingly) smaller 'small fields'. They can only be developed profitably by lower costs. These can be realised by using more intelligent drilling methods and smaller satellite locations with small, mobile gas-production installations. In 2006, as in the previous year, NAM has tapped into and developed several fields that would formerly have been considered uneconomic.
Five wells were drilled in 2006 using the innovative Drilltec Synergy drilling installation taken into operation in 2005. In combination with renewed well design, this has resulted in a 30 per cent cost reduction. The smaller derrick also has a lower impact on the surroundings, making it a good example of a move in which the economy and the environment go hand-in-hand.
NAM also continued to install 'skid mounted' production units (abbreviated to 'skids'). The first of these small, mobile installations was installed at the Norg-3 location in 2005. Another six skids were installed in 2006, including one at the Spijkenisse East location. The locations for new gas production from beneath the Wadden Sea (Moddergat, Vierhuizen and Lauwersoog) were equipped with such skids. A definite investment decision was made to take the Middelie and Westbeemster fields into production. The two fields together hold approx. 1 billion cubic metres of gas.
The first monotower (K17-FA-1) was taken into use offshore. The design of these small, unmanned platforms with one leg instead of the traditional four, is based on that used for wind turbines. As far as is known, this is the world's first offshore production facility with an electricity supply entirely from renewable forms of energy: solar panels and wind turbines.

Drilling NAM drilled sixteen wells in 2006 (not including participation in the wells of third parties), double that of the previous year. Eleven wells were drilled onshore and five offshore. Four of the wells are exploration wells (two onshore and two beneath the North Sea); the other twelve were evaluation or development wells.
Two exploration wells were drilled onshore. The Steenwijk well was found to be dry but a well from the Oud Beijerland South to the Oud Beijerland North prospect (OBLZ-2) revealed a new gasfield containing approximately half a billion m3).
Two exploration wells were also drilled offshore, both in the K15 block. While gas was found in well No. K15-FA-108 in the SW prospect, the properties of the reservoir were very unfavourable. Well No. K15-FB-107 in the NE prospect revealed good production volumes (3 million m3 per day) and developed approximately 1 billion m3 low-calorific gas.

Groningen Long Term (GLT) NAM and the Stork/GLT consortium again handed over three renovated clusters in 2006 - Amsweer, Zuiderveen and Spitsbergen - within the context of the Groningen Long Term project. As in previous years, this proceeded entirely according to schedule, within budget and without a list of residual points. The GLT project, involving an overall investment of approximately EUR 2 billion, is preparing the installations in the Groningen field suitable for future decades.

Wadden Sea A milestone was reached in 2006 for the production of gas from new fields beneath the Wadden Sea. Following twelve years of public discussion and political machinations, July 2006 saw the granting of the necessary permits to NAM for production from the existing onshore locations at Moddergat, Vierhuizen and Lauwersoog. Following intensive consultations with interested parties, including local and national government, scientists and nature and environmental protection organisations, NAM submitted the environmental impact report and permit applications in January. Gas is being produced 'with one hand on the stopcock'. This means that subsidence as a result of production must remain within predetermined safe limits. The permits stipulate that NAM execute a comprehensive measurement and monitoring programme, and provide annual reports on this to the appropriate authorities. The Ministers of Economic Affairs and Agriculture have powers to restrict or even halt gas production if necessary.
A number of parties petitioned the Council of State for a suspension of the gas production permits, but this was rejected. That decision meant that NAM is allowed to continue its activities under the permits at its own risk and that it may commence gas production. The aforementioned ruling also has a provisional character however. It is anticipated that the Council of State will issue its ruling in the proceedings on the substance of the case during the final quarter of 2007. NAM commenced gas production from the new fields beneath the Wadden Sea at Moddergat in February 2007.

Schoonebeek For several years, NAM has been working on plans for the possible redevelopment of part of the Schoonebeek oilfield. Production from the largest oilfield in mainland northwest Europe was discontinued in 1996 after almost 50 years because the techniques and infrastructure available at the time were no longer adequate for extracting the viscous oil efficiently. After the project plan to resume oil production had been worked out in detail in 2005, NAM submitted the environmental impact report in May 2006, which was made available for inspection at the beginning of September. Intensive communications were held about the plans with people living in the neighbourhood. The Committee studying the environmental impact report issued positive advice in respect of the report at the end of November.
NAM also worked on the further commercialisation of the project. Negotiations were held with EBN (Energie Beheer Nederland B.V.), resulting in the conclusion of an agreement (January 2007) under which EBN will take a 40 per cent share in the development of part of the field.
At the end of 2007, NAM and EBN anticipate being able to make a final decision on the feasibility of redeveloping the Schoonebeek oilfield.

CO2 storage investigation Following comprehensive study, NAM concluded that the exhausted gasfield at De Lier is unsuitable for a pilot project for storing CO2 from Shell's Pernis refinery. This is because the study, part of which was conducted by TNO, reveals that a combination of factors means that insufficient certainty can be given that no leakages could occur from one or more of the abandoned wells. A total of more than 50 wells were drilled in the gasfield at De Lier, most of which were abandoned in the 1990s.
Now CO2 will not be stored at De Lier, NAM plans to look for alternatives. It is preferable for the eligible fields to be located in the vicinity of a source of CO2 - such as Shell Pernis. This will facilitate the logistical aspects of such a project.

World Paralympic Athletics Championships NAM supported the World Paralympic Athletics Championships in Assen in 2006. In addition to granting a financial contribution, many NAM staff volunteered their time and effort, contributing to the success of this major event. With the aid of their coaches, around 1,200 top athletes from 78 countries demonstrated excellent performance. The event attracted more than 61,000 visitors, including many schoolchildren, who participated in the side events of the World Championships.

EP Technology Shell EP-Technology in Rijswijk, part of Shell International Exploration Production B.V., continued to intensify its communications regarding corporate technology. Two days were organised with the trade press, for example, designed to provide background on the technology that Shell deploys in its exploration and production activities. High-ranking people were also invited to Rijswijk, where they were provided with the use of advanced and most modern technologies. Visitors included the Minister of Energy of Brunei, and representatives of national oil and gas companies from the Middle East and Russia.

Sustainable Voluntary Projects Volunteer projects are actively being developed at Rijswijk. Twelve different activities were organised in 2006 in which employees could become actively involved on a voluntary basis. Just a few of these projects included collaboration with the Zonnebloem organisation, Mappa Mondo (homes for children with life-threatening illnesses) and the Rijswijk animal protection society (Dierenbescherming).

Gas & Power

GasTerra B.V., Shell Gas & Power International B.V. and Shell Energy Europe B.V.

Gasgebouw Trading company Gasunie Trade & Supply B.V., a joint venture involving the Dutch Government (50%), Shell (25%) and Esso (25%), was renamed GasTerra B.V on 1st September 2006. Together with NAM, GasTerra forms part of the Dutch Gasgebouw, the public-private cooperation for the production and sale of Dutch natural gas.

Sales GasTerra's overall gas sales fell by 2% to 78.8 billion m3 (2005: 80.4 billion m3). This decrease was seen in the domestic market where the sales volume fell from 32.0 billion m3 to 28.7 billion m3. The key reason for this fall was the higher temperatures during the final months of 2006. Exports increased slightly from 48.4 billion m3 to 49.0 billion m3. A major milestone was the start of export deliveries of 8 billion m3/year by GasTerra to British company Centrica via the new pipeline from Balgzand to Bacton (BBL) on 1st December 2006.

Eemshaven Utility company Nuon selected Eemshaven (Groningen) for the construction of its new large 1200 Megawatt power station. Nuon obtained a licence from Shell to implement its modern coal gasification technology. This Shell technology is recognised the world over as the standard for the cleanest possible way to process coal for electricity production. Coal gasification results in the lower discharge of harmful substances and offers better opportunities for CO2 collection compared to conventional coal-fired power stations.

Oil products

Shell Nederland Verkoopmaatschappij B.V. (Capelle a/d IJssel)

Start your own company In 2005 the Shell Group adopted a global standard for the operations of its own retail outlets. To that end, the Retail Business Agreement (RBA) was developed within the Group. The first RBA was signed at the beginning of August. A total of 22 of Shell's 'own' filling stations (under the flag of Tank Exploitatie Maatschappij B.V., TEM) had been transferred to independent retailers by the end of the year. Next year, SNV plans to accommodate the more than 200 Shell retail sites located throughout the Netherlands and currently still managed by TEM, into sixty clusters. These will then be operated by local entrepreneurs under an RBA.

Sales network Mid-September saw the fourth Government-ordered auction of motorway filling stations. In organising the auction, the Government is attempting to promote competition along the motorways and to create opportunities for new operators. Six of the seven stations auctioned are still occupied by their original tenants. That also applied to Shell's filling stations that came under the auctioneer's hammer. The Shell network, including the (unmanned) Shell express filling stations, grew slightly to approx. 545 retail outlets. Of the 495 manned retail outlets, approx. 270 are operated by dealers; of these, 225 are managed via TEM or now operate under an RBA contract.

Shell express Shell opened the first Shell express filling station in the Netherlands at the end of 2004. Shell express is the name of unmanned stations where Shell fuels can be purchased at lower prices. The fiftieth unmanned filling station opened at the end of 2006. It is anticipated that around seventy Shell express filling stations will be operational by the end of 2007.

Fuels with a bio-component Starting January 2006, Shell started mixing part of its Euro 95 with an ethanol-based bio-component (ethyl tertiary butyl ether, ETBE). This made Shell the first fuel supplier to capitalise on the Government-imposed obligation to add bio-components to fuels from 2007. A lowering of excise duty means the gasoline with bio-components is sold without supplementary levies. Shell introduced an improved Euro 95 grade gasoline at the beginning of April. Economy Formula gasoline was developed especially to help motorists save fuel.
Diesel fuel has also contained a bio-component since 1st June. Shell adds the FAME (fatty acid methyl ester) bio-component to part of the volume. FAME is obtained from the chemical processing (esterification) of vegetable oil.

FuelStretch The international 'FuelStretch' campaign (in the Netherlands: Verder met Shell) was launched in January. The campaign is design to help Shell's customers by providing tips and advice on how to achieve the best possible fuel consumption efficiency without additional cost. The campaign ran throughout the year on the internet and also featured in public relations activities. During the first few months of the year, Shell gave away a thousand tanks of fuel free of charge for the most original tips for saving fuel.

Shops -Shell Shops also make a considerable contribution to the filling stations' income. Sales in the shops are deliberately supported by various advertising campaigns and active product promotion (in which weekly offers are actively featured in the stores).
Higher purchase levels were achieved through the new look and feel of the shops, the tailored product range, professional management and employee commitment.

Chemicals

Shell Nederland Chemie B.V. (SNC, Pernis and Moerdijk)

Shutdowns The shutdown of the MLO plant will enter the history books as the largest and most complex shutdown at the Moerdijk site ever. In the autumn of 2006, the cracker was decommissioned (following six years of operations) for large-scale maintenance. A great deal of time and attention was also devoted to replacing steam turbines and cold boxes (complex heat exchangers in the cold streams). SNC invested a great deal of time in a fully integrated planning schedule for the shutdown. Projects and maintenance were incorporated into one total planning schedule, in which the commissioning and decommissioning of various operational systems were closely co-ordinated.

Safety Progress has generally been made with respect to safety. One positive point was that for the first time in history no accidents involving absenteeism occurred. However, the goal for the number of accidents without absenteeism was not achieved in 2006. Neither Pernis nor Moerdijk have seen any accidents involving absenteeism for more than a year. The MLO shutdown, in which a total of approx. 6,000 extra contractors and employees were present on site, also proceeded more safely than ever before. Special programmes contributed to the health and safety of all involved.

Chemistry Open Day The national Chemistry Open Day was organised at SNC Pernis in 2006. The goal of the Chemistry Open Day - an initiative of the Netherlands Chemical Industry Association VNCI (Vereniging van de Nederlandse Chemische Industrie) - is to allow people to find out about the chemical industry. Around a thousand people came to take a look at the Pernis plant.

Renewable energy

Shell International Renewables B.V. (The Hague)

Electrical power from the sea As of the beginning of 2007, the electricity available from the power sockets at Shell's three large sites in the Netherlands (The Hague, Rijswijk and Amsterdam) is green. Green electricity now powers the lighting, computers, lifts, laboratory apparatus and all the other electrical equipment. The natural energy is generated 'on-site', by the wind farm of NoordzeeWind B.V. located offshore of Egmond aan Zee.

NoordzeeWind is a joint venture of Shell WindEnergy and utility company Nuon. Work commenced in April on building the wind farm, which comprises 36 turbines, each generating 3 Megawatts (MW) power. Electricity production commenced as early as October 2006. The installed power amounts to 108 MW, which means the wind farm will generate 108 MW power under optimum conditions, i.e. at ideal wind speeds and without malfunctions. Ideal wind speed ranges from 15 m/s (force 5) to 25 m/s (force 10). The turbines automatically stop working during heavy storms to avoid damage, and less energy is produced at lower wind speeds because there is less energy in the wind. The wind farm will produce an average 330,000 - 360,000 Megawatt hours (MWh) each year.
The energy produced by NoordzeeWind is more than adequate for the three large Shell sites: The Hague (Headquarters) and the research and technology centres in Amsterdam and Rijswijk.
The NoordzeeWind demonstration project is linked to a comprehensive monitoring programme, in which the technical results as well as, among other things, the effects of the wind farm on the local area, nature and the environment are studied.

Thin solar cells Shell and Saint-Gobain, a glass and building materials producer, together set up a company called Avancis that will manufacture thin-film solar cells in the Germany town of Torgau. These are CIS cells, produced from an alloy of copper, indium and diselenide. A very thin film of this alloy is applied to glass panels. CIS solar technology does not use the pure silicon that has until now been the standard material for solar cell production. Inadequate capacity among silicon producers has led to a dramatic increase in the price of pure silicon (used in semiconductor manufacturing) around the world in recent years. CIS solar cells are much simpler and less expensive to produce than silicon cells. Furthermore, CIS technology offers greater scope for future cost reductions and efficiency increases.

Sales The intended sale of Shell Solar's silicon-based solar energy (classic solar cells and panels) was announced at the end of January. The deal did not include the rural activities (solar energy systems in remote areas of Asia), which will be continued with a partner company. Consequences for employees in the Netherlands were limited. The positions of a small number were terminated, although most of these people found other jobs within Renewables or elsewhere at Shell.

IT for Shell

Shell Information Technology International B.V.

Top Shell Information Technology International (SITI) B.V. is an integral part of the global Shell IT organisation. SITI provides IT services in the field of infrastructure, applications and projects. Personnel are deployed at Amsterdam, Assen, The Hague, Leidschendam, Pernis and Rijswijk. The goal is to provide 'top quartile performance' for all IT services. This means the ambition is to provide IT functionalities at a predefined high level of service and quality.

What's in IT for me? In order for an organisation to perform well, it is important to attract and retain the very best talent. That is why SITI launched the programme titled 'What's in IT for me?' in 2006. This comprises the key elements that IT can offer its employees. The programme covers various subjects, such as personal development, work/life balance and recognition.

Change As in previous years, a great deal attention was also paid in 2006 to simplifying the portfolio of IT facilities by standardising and reducing the number of applications. More IT activities were also outsourced to low-wage countries like Malaysia and India. At the end of 2006, the IT Leadership Team and the Shell Executive Committee expressed their support for the strategic decision to outsource a substantial part of the corporate IT infrastructure to a small number of IT service providers. A study in 2007 will investigate which companies may be eligible for this.

Virtual collaboration IT at Shell is mirroring the new developments in the field of virtual collaboration. Web conferencing (Microsoft® Live Meeting) was introduced in 2006 as an integral part of Shell MeetMe, a global teleconferencing service. This facilitates the safe sharing and presentation of information via the Shell intranet and the World Wide Web. Any Shell employee can dial in from any location at any desired time. He or she only needs a normal telephone connection and internet access to take part in the Shell MeetMe conferences, and hence to collaborate in a virtual environment.

Shell Global Solutions

Shell Global Solutions International B.V. (The Hague, Amsterdam)

Shell Global Solutions, Shell's engineering consultancy organisation, has shown steady growth since it was set up in 1998. Consultants and engineers throughout the world work together to address the energy issues of today and tomorrow. With its commercial and technical centres in the United States, Europe and Asia Pacific, Global Solutions plays a key role as an innovator in a greener energy future.

Chief Technology Officer The appointment of Chief Technology Officer (CTO) Jan van der Eijk emphasises the importance that Shell attaches to strengthening its capabilities in the field of innovation and applied technology. Together with the Chief Scientists, the CTO is Shell's scientific face to the outside world. The Chief Scientists, each with their own specialisation, from geophysics to chemistry and catalysts, actively advocate continuous innovation. CTO Jan van der Eijk emphasises that new technologies are worthless unless you know how to use them. An example of 'non-stop' innovation is the years spent by Shell on improving advanced catalysis processes in refineries to produce cleaner diesel fuel.

Partnerships In order to improve the application of new technologies, Shell and Global Solutions collaborate closely with universities, research centres and partners from industry. Shell held the first 'Shell International Science Symposium' in November 2006. Twenty-five independent researchers and scientists from leading universities and institutes across the world came together at Shell Headquarters in The Hague to work with scientists and technical experts from Shell experts on new solutions for upgrading crude oil.

Shell Technology India A sustainable future for energy is also important in China and India, both of which have a high-energy demand as the result of their economic growth. To support India's energy requirement and as part of growing 'globalisation', Shell Technology India opened a technology centre in Bangalore in February. This will afford a large number of Indian engineers and scientists every year the opportunity to work on global technical projects, services and R&D. In July the first crop of recent engineering graduates travelled from India to Rijswijk and The Hague for a month to get to know their Shell colleagues and the corporate culture.

Amsterdam Work is continuing on the construction of a new technology centre in Amsterdam. With its floor area of 80,000 m², the New Technology Centre (NTC) will replace all the present facilities of the Shell Research and Technology Centre in Amsterdam, and will accommodate approx. 1,200 employees. A milestone was reached when the NTC building was topped out in November. The structure is characterised by a glass backbone connecting different wings containing offices, laboratories, halls and conference rooms. To the north of the main building an outdoor area has been provided to accommodate, among other things, a shipping department, a warehouse and various test setups. Amsterdam City council plans to use the remaining twenty hectares along the IJ River for urban development (residential and business).

Natural gas production from under the Wadden See
Balance between emotion and fact

NAM finally obtained all the permits necessary to produce natural gas from beneath the shallow Wadden Sea in 2006.

The stopcock for production was opened at Moddergat in Northern Friesland during the first week of February 2007. "Well, we're talking about the Wadden Sea," says Pieter van de Water, NAM Project Leader Wadden Sea Permits, looking back over the past years. "This involves a great deal of commitment, much emotion and a predilection for absolute certainty."
Society demanded this absolute certainty and the politicians adopted that demand. This resulted in a study of uncommon breadth and depth into that one essential question: will gas production result in such subsidence that the sandbars will partially disappear beneath the water and potentially damage nature and the environment?
NAM's initial response in 1995, and underpinned by numerous independent studies, was: 'No, there will be no damage because the area's natural dynamics are so high that the (minor) subsidence that can be expected will be amply replenished by alluvial deposits.'

One hand on the stopcock However, the above response was insufficient at the time to satisfy the 'great deal of commitment, much emotion and a predilection for absolute certainty' held by society and politicians. The Lower House of the Dutch Parliament demanded that 'remaining uncertainties' be removed. And that meant more studies and monitoring would be needed. NAM ecologist and environmental advisor George Wintermans: "The Meijer Committee set up by Government then advised that scientists first define the scope of use for human activity in and around the Wadden Sea. This is in effect the scope for subsidence and the rise in sea level together within which nature remains unaffected."
For gas production, this means the difference between the anticipated rate of alluvial deposits and the rate of the rise in sea level. The difference between the two can be used to compensate for subsidence owing to gas production.
That is what was agreed and that is how it is now being carried out. The extra guarantee is that if the sea level should rise unexpectedly and exceed the rate of alluvial deposits, NAM will cease production; this gave rise to the slogan: 'Production with one hand on the stopcock' (Productie met de hand aan de kraan).

Sound balance Last year, NAM's Wadden Permit Team had to obtain a total of 33 permits before the two production wells could be taken into operation in February 2007 via Moddergat, located just behind the Wadden Sea dyke in Northern Friesland. Gas is now flowing from the anticipated 20 billion cubic metres or more in the six gas fields. Production is now realised from Moddergat, Vierhuizen (in 2008) and Lauwersoog (in 2009).
A number of parties have appealed to the Administrative Law Division of the Council of State. A request by one of these parties that production be suspended was rejected, which meant that NAM could commence operations at its own risk. Pieter van de Water continues: "In our opinion, there is now a package of expertise, permit regulations and guarantees that reasonably excludes the risk of damaging the Wadden Sea and has realised a sound balance between emotion and fact."
It is anticipated that the Council of State will issue a ruling at the end of this year in respect of the action on the substance of the case, and will indicate whether they concur with NAM's vision.

Safe, historic large-scale shutdown

Never in the history of Shell Nederland Chemie in Moerdijk was there a turnaround (large-scale shutdown) the size of that involving the MLO (cracker) in the autumn of 2006. A few figures: 4500 employees, around 1500 extra people present on site at the height of the activities, 8000 work permits, 300,000 man-hours. And all this, when a 'mere' two hundred people are employed to work on the cracker plant in Moerdijk during normal operations. Despite the almost astronomical numbers, the HSE aspects of the MLO shutdown were better than ever before - with the exception of a couple of incidents and minor accidents during the first two weeks.

There are two mainstays for improved safety during such a large-scale shutdown. The preparations will go down in history as one of the best ever executed at SNC Moerdijk and the approach taken to HSE has been largely different from that during other shutdown procedures. "We were much more visible on the shop floor and we focused on helping each other instead of pointing out things that needed improving," said Ad Theuns, SNC Safety Advisor and Team Leader of the HSE Co ordinators during the shutdown. "This led to good relations between Shell and the contractors."

The plant was divided into seven areas, each with their own technical, operational and HSE co ordinators. "Daily meetings were held in each area, and the Safety Co-ordinator was also present at these meetings," said Health Advisor Marieke Verhoeven, involved in the shutdown on behalf of the ARBO (Working Conditions) Service. "At the end of every day, all the co-ordinators met with Ad Theuns to discuss the day's operations." Mr Theuns continued: "We looked at HSE-related issues during these meetings. After the first couple of weeks, we established that we had to involve the contractors more and we made it clear to them that they are also responsible for safety. We also observed that our own co-ordinators were not working with the contractors' safety people in the best possible way. We improved that situation by also holding meetings with the contractors' safety advisors and discussing 'near misses' or incident reports with them in detail. We did this so that we could learn from each other and prevent incidents together."

Incident According to Rob van Gils, Senior HSE Co-ordinator MLO and one of the seven area co-ordinators during the shutdown, the contractors needed little persuasion to co-operate. "If something went wrong, we would usually investigate the matter and issue instructions for a different approach. We were now putting the ball directly in their court. 'You had this or that incident yesterday evening. Please find out exactly what happened and provide a clear account of the circumstances and how you believe this can be prevented in future'. So we actively involved them in the operations and for a safety advisor that is clearly much more interesting than waiting around for Shell to tell you what to do."
Mr Theuns also hopes that contractors will take a similar approach to HSE during shutdown activities with their subcontractors. "But I'm sure they did, the performance of the past two weeks would not have been so good otherwise," he suspects.

Personnel

Pay and bonus measures The salaries of employees in salary groups (SG) 1 to 15 inclusive (non-CAO) were increased by 1.25 per cent with effect from 1st March. At the same time, the salary scales were increased by the same percentage. The performance bonuses were paid in March on the basis of the Group Scorecard (for 2005) for the first time. The Group Scorecard applies to virtually all employees in the service of Shell companies worldwide.

Employee Share Purchase Plan The number of participants in the seventh savings cycle of the Global Employee Share Purchase Plan increased to 3,178 in the Netherlands. This brings the participation percentage to almost 28 per cent of employees in the Netherlands. The total investment in 2006 amounted to almost EUR 7 million. The maximum monthly investment for the seventh savings cycle is EUR 365. The Match Shares (15 per cent) relating to the sixth savings cycle were awarded in November.

Life Cycle Savings Scheme With effect from January 2006, employees had the opportunity to save a portion of their gross income under the Life Cycle Savings Scheme. Tax payable over the amount saved is postponed until the moment the amount in question is withdrawn. After an initial hesitant start, the percentage of employees saving money under this Scheme increased quite rapidly. In 2006, a total of more than EUR 15 million was saved by 2,065 employees. The participation percentage at year-end was around 18%.

Child care The point of departure of the Netherlands Child care Act is that childcare is the collective responsibility of parents, (both) employers and the State. All parties are expected to contribute to the costs of child care. The employer's contribution from Shell amounts to one sixth of the costs. Parents received the contribution via Kintent, the organisation responsible for executing and administering the Child Care Arrangement on behalf of Shell. The Tax Administration is responsible for administering finance and payments for child care as of 2007.
Of the employees, 1,014 made use of the Child Care Arrangement in 2006. Places were provided for 1,454 children. The total costs of child care for Shell in the Netherlands amounted to EUR 1.3 million.

Recruitment and selection Shell recruited 141 talented graduates from Dutch universities, 99 men and 42 women, in 2006. Graduates from colleges of higher professional education and experienced professionals were also recruited. Shell's image as an attractive employer is realised by a combination of activities, supported by the deployment of Shell Campus Ambassadors and graduates. The company participates in career fairs, organises presentations, training sessions and excursions to Shell locations and offers (graduation-project) internships. Three Shell Gourami Business Challenges were also held in 2006, in which around forty talented students from across Europe together developed a business assisted by experienced Shell coaches.
In addition to the attention paid to technical talent, there was a great deal of emphasis this year on recruiting financial, HR and IT talent. Shell has a very good image on the labour market: academic students listed the company as their favourite employer in the leading Intermediair-Ebbinge Image survey. The efforts directed at recruiting talented candidates from non-Western ethnic backgrounds were rewarded with the first place in the category of 'favourite employer among people from non-Western ethnic backgrounds'.

Healthcare insurance The collective company medical insurance via the Onderling Medisch Steufonds (OMS) was discontinued when the basic healthcare insurance came into force on 1st January 2006. A new arrangement entered into effect for this. On the one hand, this Shell arrangement encompasses a collective healthcare insurance and on the other an ex gratia contribution for employees and retirees alike. The latter is proof that Shell Nederland has kept its word in respect of the fact that the introduction of the new healthcare insurance system would not be used to make cuts in healthcare expenditure. The sum of the mandatory and ex-gratia employer's contribution was actually slightly higher than the corresponding expenditure (OMS subsidy and ZFW contribution) in 2005.

Thanks to its modular structure, the collective arrangement offers comprehensive freedom of choice for policyholders. It is possible to opt for a package equivalent to the facilities of the former OMS medical insurance. But every policyholder is also free to tailor the supplementary components of his healthcare insurance to his individual needs and wishes. Policyholders may also vary the level of excess for the basic medical insurance. None of these options were available under the collective OMS arrangement. There are approximately 47 thousand participants, comparable to the number participating in the former OMS arrangement.
With effect from 1st January 2006, approximately 1500 expats working in the Netherlands and their family members have been accommodated in the Group's Global Expat Medical Scheme.

Co determination Compared to 2005, 2006 was a relatively quiet year for the Central Staff Council (COR). Council held six regular meetings during the course of the year and five Consultative Meetings with the Manager (Bestuurder) of Shell Nederland B.V. A Supervisory Board Member attended three of the Consultative Meetings. Matters addressed by the COR in 2006 included the adjustment of policy relating to the Individual Performance Factor (IPF) of 0.4 as the minimum for normal good performance, the introduction of a standard target-promotion percentage (non-CAO staff), the International Mobility Review (adjustment of the International Business Visit Allowance and the introduction of the Short Term Assignment arrangement), and the replacement of the present merit matrix by a Salary Management Chart in salary groups 1 to 7 inclusive (non-CAO staff).

Shell and Jet-Net

During its fourth year, Jet-Net (Jongeren en Technologie Netwerk Nederland), which encourages pupils to pursue mathematic, scientific and technical subjects, has developed into an organisation in which twenty-five companies (including Shell in the Netherlands) and more than 130 schools of higher general secondary/pre-university education are participating.

Shell Nederland is responsible for co-ordinating the Jet-Net activities for Shell and maintaining contacts with the other companies and the national Jet-Net Bureau. The goal for 2007 is to continue expanding the capacity (number of participating schools and companies) to expand the number of activities in which young people are exposed in a positive way to technology.
The many Jet-Net activities have contributed to an increase in the number of registrations for mathematics, scientific and technical courses in further education in 2006 for the third year in a row: six per cent higher than in 2005, when the number of registrations had risen by approx. four per cent; while the figure for the preceding year was eight per cent.

The seven business units of Shell in Nederland actively involved in Jet-Net have partnered with thirty schools. Around 140 activities were organised for these schools in 2006, bringing more than 8,500 pupils and teachers into contact with Shell employees. The activities varied from guest lectures, workshops, practicals (including sessions for teachers), a 'girls' camp' together with Delft University of Technology, to work-experience schemes and contributions to the 'girls day'. At the end of 2006, a team from a school supported by Shell Jet-Net, coached by members of the Young Shell network, started preparations for participation in the 2007 edition of the Shell Eco Marathon.
Over the past year, measurements have revealed that efforts by Jet-Net companies in this respect have the greatest effect when they are made at schools also participating in other scientific and technical promotional programmes, such as the Universum programme, Technasium, or Beter-Bèta. In that way Jet-Net can contribute creatively and constructively to the educational innovations supported by the school.

Invest in Social Energy

The Social Investment programme is one form of sustainable business advocated by Shell. Activities are aimed specifically at groups outside Shell. In the projects it supports, Shell endeavours to find a good balance between economic growth, care for the local environment and equitable social development. One spearhead is the encouragement of talent. Potentially, people themselves have everything needed to build a sustainable world. The art is to turn this into concrete initiatives, giving talent an opportunity and clearing a path for innovation.
In its Social Investment programme, Shell offers financial support, and the expertise and commitment of its personnel. Under the header 'Invest in Social Energy', we channel our efforts and support towards five key themes: Knowledge transfer, Youth and Technology, Voluntary work, Innovation climate and Good neighbours.

Shell Cares Shell employees address a current community issue in Shell Cares, working together with a non-profit partner over a three-year period. The partner not only receives financial support, but above all the expertise and personal commitment of Shell staff. The three-year collaboration with the WijkAlliantie foundation came to an end at the end of 2006. In that time, Shell and WijkAlliantie joined forces to coach the residents of poorer areas of the big cities to take action themselves to improve the liveability of their neighbourhoods. Dozens of Shell volunteers and professional personnel helped to organise numerous activities in Amsterdam, The Hague, Rotterdam and Utrecht. The collaboration came to a close in a series of internet debates involving young people, local residents, community workers and volunteers discussing our multicultural society. The new project for the coming three years is the ShoppingPlusBus (BoodschappenPlusBus) of the Dutch National Fund for the Elderly (Nationaal Fonds Ouderenhulp).

Shell Young Technical Award In collaboration with the NEMO science centre, a new technology competition was developed for pupils in the first couple of years in secondary education. The challenge was to design a new moving device from existing electronic components. The organisers received 60 entries for this first year of the competition and ultimately selected 10 designs for the final. The adjudicators awarded prizes to three teams. The entry Peddelen of Verzuipen by 't Atrium school in Amersfoort was judged the most attractive, best working and most creative construction. The combination of creativity with the opportunities offered by technology will have opened many people's eyes to the fact that there is a future in technology.

LiveWIRE More than 200 technically innovative entrepreneurs used the LiveWIRE support programme in 2006, a partnership with the Syntens organisation, which was set up by the Ministry of Economic Affairs. This programme offers coaching and advice to young entrepreneurs bringing a technical innovation to the marketplace. The year was brought to a close by the presentation of the Young Business Award 2006 to DEAM. This Amsterdam-based company has since secured international contracts and markets surgical instruments for 'cutting round corners'.

Shell Eco-marathon Five Dutch teams started building the vehicles with which they plan to participate in the 23rd Shell Eco-marathon in 2007. The challenge is to drive as far as possible on as little fuel as possible in a vehicle developed by your own team. Teams comprise students from universities, colleges of higher professional education and secondary schools. The challenge is to encourage students to explore ideas for sustainable mobility, to foster innovations in this field and to demonstrate what technology can lead to. In May 2007 they will travel to the South Of France to pit their strength against more than 200 other teams of students from across Europe and other parts of the world. The record was set by a Swiss academy in 2005: 3,836 kilometres on 1 litre of fuel.

Shell Bachelor Master Award The first winners of this newly developed award were announced in Delft in 2006. The adjudicators acclaimed the two 'sustainability dissertations' by Martijn Damen and Joep Pijpers, both students at Delft University of Technology, as excellent, innovative and relevant.
Martijn Damens' bachelor graduation project focused on the direct use of sunlight for the production of hydrogen by photoelectrolysis. The master graduation project of Joep Pijpers investigated photocatalysis; an alternative means of chemical processing. The Shell Bachelor Master Award is an initiative of Shell in collaboration with Delft University of Technology.

Preserving the art of Van Gogh As a Partner in Science of the Van Gogh Museum until 2010, Shell is providing equipment and expertise for technical and scientific research into Van Gogh's paintings. A new showcase exhibition opened at the Van Gogh Museum in September 2006. In the new exhibition, titled 'Hidden Colours', the Museum presents the results of research from the analysis of paint samples from works from Van Gogh's Dutch period. This showcase exhibition uses paintings and samples to show how the painter used the primary colours red, yellow and blue in his works.

Youth Hockey Besides providing regular support to the existing youth hockey projects in 2006, Shell marked the ten years of its sponsorship of the Royal Dutch Hockey Association (KNHB) by presenting 66,666 gumshields, free of charge, to the Association's youth members up to the age of 12 at the more than 300 hockey clubs across the country. In the opinion of KNHB, collaboration with Shell has resulted in a growth in the popularity of hockey, and youth hockey in particular here in the Netherlands. KNHB membership has risen from 120,000 in 1996 to more than 180,000 in 2006.

International

Shell Centenary Scholarship Fund The Shell Centenary Scholarship Fund was set up in 1997 to offer students from developing countries (financial) support for study at United Kingdom universities. Since 2004, places have been available for a maximum of six students each year to pursue two-year studies for a master's degree at the universities of technology of Delft and Eindhoven and at the University of Twente. The students must be following studies that are clearly linked to the support of sustainable development in their home countries. Their willingness to make a concrete contribution to the continuing development of their country is a major criterion for awarding grants from the Shell Centenary Scholarship Fund. The third group of 18 students commenced their studies in the Netherlands in October 2006.

Shell Foundation The Shell Foundation, with financial resources amounting to US$ 250 million, is engaged in improving the environment and combating poverty. The Shell Foundation transcends national boundaries. In 2006 Aspire, a joint initiative of the Shell Foundation and GroFin, won the prestigious Africa Investor Award for "Best initiative in support of SME development". GroFin is an African investment and development corporation. Aspire is a programme taking an integrated approach to the application of investments and the provision of assistance for company development.

Core figures 2006

		2006
Investments of Shell in the Netherlands (€ billion) *		0,78
Exploration and Production (100% NAM-operated and non-operated)
Natural gas production (0ºC and 1.01325 bar) (billion m³)		50,4
Groningen		33,1
Other onshore and offshore fields		17,3
Oil production (15ººC and 1 atmosphere) (million m³)		0,426
Oil processing and sales (SNR, SNV, BK-Gas)
Processed volume of crude oil and semi-finished product (million tonnes)		18,1
Sold volumes (million bbl)		42,6
Chemical Products sales (million tonnes)		13,5
Domestic		4,3
Foreign		9,2
Research
Research costs (€ million)		298
Workforce
(average annual workforce, corrected for part-time employment)		10.820

* including turnaround costs