00:00The obvious question is why Canada and why now?
00:02But the way that a lot of people are looking at this is the geopolitical bet on safe energy supply.
00:09How much were you thinking about that?
00:13I'd start off by saying actually this is just an important point on the journey that we have been on.
00:18A journey that started over three years ago where we said we want to methodically transform the company.
00:24And that's what we've been doing.
00:25And so the inflection point came that as we continue to deliver performance discipline simplification in Shell,
00:32we felt that it was time to look at more and more capital reallocation.
00:35And we felt that we had earned the right to be able to grow.
00:38And so the announcement yesterday for ARK was essentially just a step in that journey that we have been on.
00:46We had been looking at ARK for over two years.
00:49And so that, of course, predated the Middle East crisis.
00:52I've particularly been attracted to multiple elements of ARK.
00:56I mean, first and foremost, this is a liquid-rich play, high-quality resource, low-cost, long-duration,
01:04in a terrific basin like the Montigny Basin with low-carbon-intensity molecules.
01:08And so we like that piece of it.
01:11We like the synergies, the adjacency to our own assets and the integration into LNG Canada,
01:16our LNG project in Canada there.
01:20And then thirdly, we really like the people.
01:22We like the culture that they had developed over 30 years.
01:24And so this well predated the crisis.
01:27But, of course, always helpful to be able to have a diverse source of supply to meet the growing energy
01:34demands around the world.
01:35So a growing demand, does that mean you have a growing production, a growing supply into the 2030s with this
01:41additive deal, Wael?
01:43Absolutely.
01:44So we had in the past guided to a 1% CAGR growth between now and 2030 for our oil
01:51and gas production.
01:52On the back of this deal, we have guided to a 4% per annum CAGR, so a significant growth
02:00uptick between 2025 and 2030.
02:02But importantly as well, it gives a long-duration growth platform.
02:07It allows us to add 150,000 barrels per day of liquids out in 2035.
02:13And the inventory we're talking about is well above 15 years of inventory into up to 25 years in certain
02:20areas.
02:21And so this is just an exciting growth platform that is underpinned in my mind with the liquids opportunity,
02:27but also with significant optionality for the gas through our existing plant and possibly through a second phase of that
02:35development that we have in LNG Canada.
02:38We will talk more about this deal, but it's been about 10 years since I last attended an OPEC meeting.
02:45And this is a massive story.
02:47The UAE leaving OPEC.
02:49What's your reaction to that?
02:51But I think more importantly, what do you think it will do to global oil markets?
02:56Yeah, difficult to call.
02:58I mean, very, very early days.
02:59And of course, I'll leave it to the UAE leaders and to OPEC to opine on it.
03:03What I would say is, you know, OPEC is roughly a third of the overall liquids production of the world.
03:11And undoubtedly, demand for liquids continues to grow.
03:14And I mean by that oil, condensate and so on and so forth.
03:18The most important influence of OPEC has typically been in who has the spare capacity and how do they choose
03:27to deploy that spare capacity.
03:29And so that will be, I think, the calculus that will have to be made in the coming weeks, months
03:35and years.
03:35For a company like ours, of course, our focus has been on, indeed, diversifying production.
03:42We have production in OPEC countries and non-OPEC countries.
03:45But also, importantly, continuing to make sure that we look at new horizons to be able to grow our production.
03:52And that, of course, we do through both exploration and M&A, deals like what we've done, for example, here
03:57in Canada.
03:58And so I think at the end of the day, what will be important will be supply-demand balances.
04:04We know that those are going to be tight for at least the coming months, if not at least the
04:09next year plus, given the closure in the straits.
04:13The question will be longer term, how does all that pan out?
04:15And I think that's too soon to call at the moment.
04:18What is the environment that you close this deal in?
04:21How tight are global energy markets right now?
04:23We're thinking a lot on this program, Bloomberg Tech, about energy security.
04:27But Asia and Europe, it's hard to gauge the severity of how real a supply crunch is.
04:35The markets are tight.
04:37I won't play down at all.
04:41You know, we're talking about 900 million barrels that have not been produced in the last couple of months.
04:47And that's been replaced by essentially stock drawdown.
04:50We're now sort of starting to reach some relatively low levels.
04:55We're talking about demand curtailment in certain areas.
04:58We're talking about fuel switching.
04:59So this is profound.
05:02And not just for oil, by the way.
05:03It also plays in, of course, for LNG.
05:0620% of the global LNG production comes from the Middle East.
05:11And all this is happening with the backdrop of sustained growth in energy demand, of which, to your point, Ed,
05:18some of it is being, of course, contributed to by the growth in AI and technology demands.
05:23Exactly.
05:23And so it is indeed a tight situation.
05:26And this is why it's incumbent upon us, the energy sector, to continue to invest in all forms of energy,
05:34to make sure that we are able to provide that energy, to support multiple countries as they're looking to both
05:41grow in their own consumption of energy,
05:46but also those that are looking to underpin their AI and technology journeys ahead.
05:51So, Al, should investors expect more M&A coming from you?
05:55Look, this, you know, we've always talked about the bar for M&A being a high bar.
06:00And I absolutely hold on to that.
06:03This deal crossed that high threshold that we had.
06:07We didn't need to do this deal, by the way, for avoidance of that.
06:09We were very comfortable being able to meet our commitments out to 2030 and potentially to continue to methodically add
06:19resources to our overall funnel.
06:21This deal worked out perfectly because of the arbitrage in where share prices were.
06:26We got the bumps because of our outperformance recently and, of course, some of the tailwinds from the Middle East.
06:34ARK didn't have the same simply because of the nature of their portfolio.
06:38So, this worked because of that.
06:40The timing was excellent.
06:42And I think we got a good deal for both sides.
06:45But that high bar is going to be held high again.
06:49And we will only deploy capital to M&A if we really find excellent deals like this.
06:54And that was in that methodical context.
06:57What isn't methodical is geopolitics and what's happening in the Strait of Hormuz.
07:00Have you managed to get any of your ships through the strait?
07:04What is your exposure right now, Aya?
07:06Now, we continue to have multiple ships there.
07:09Actually, I have a call scheduled tomorrow with one of the crews on the ships just to check in on
07:15them.
07:15It's a tough time.
07:16It's a tough time for our people.
07:18Our number one priority is the safety of our people.
07:20And we await the appropriate signals to be able to move those ships out.
07:28As I said, we're trying to focus on keeping morale high.
07:32And many here in headquarters and well beyond across the Shell family are looking at everything they can do to
07:39be able to meet our customer demands,
07:41which, of course, those demand levels continue to be high.
07:45But we're running at roughly 15% to 20% less molecules than we were just two months ago.
07:51And so I just continue to be incredibly proud of what everyone in the company has been doing to be
07:58able to contribute.
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