Welcome to the 2008 Shell Sustainability Report. It describes our efforts to contribute to sustainable development in what was, for all of us, an exceptionally turbulent year.

The financial crisis and the economic recession it triggered affected people around the world. The downturn is expected to bite deeper in 2009. Oil prices plunged by more than $100 from a record high of around $145 a barrel in July.

Our response has been to intensify our drive to reduce costs while continuing to improve our performance and invest in the big projects that will deliver more energy and growth. We have learned from past recessions how important it is to do all three. We must stay on course. Critical things like safety, which is always our first priority, energy efficiency and social performance need constant focus. We must also keep the long-term view. With rising greenhouse gas concentrations and more than 3 billion more energy users by 2050, the energy challenge is here to stay. The world will need much more and much cleaner energy in the decades to come, and supplies will struggle to keep up. Meeting that challenge will require steady investment in new production capacity and new technologies. Stopping and starting at each phase of the business cycle will not work.

In 2008, we invested a record $32 billion net of proceeds from divestments, and expect to maintain these levels in 2009. We pressed ahead steadily with our major growth projects. They will help meet energy needs for many years to come. For example, Sakhalin II began commissioning year-round oil production and was preparing to start exports of liquefied natural gas (LNG) in 2009. Construction moved ahead on the Pearl GTL project in Qatar, on the expansion of the Motiva Port Arthur Refinery in the USA, on the Shell Eastern Petrochemicals Complex in Singapore, and on the expansion of the Athabasca Oil Sands Project in Canada. Progress on these projects has depended on mitigating environmental impacts and earning the trust of local communities.

The same is true in Nigeria, where conditions remained difficult. Security and funding problems meant we were unable to make significant further progress on our programme to end continuous flaring onshore in the Niger Delta. Despite the difficulties we did manage to start up the AFAM VI power plant. It will increase the country’s electricity supply by a fifth.

Our focus on managing CO2 emissions remained strong. We continued to reduce the greenhouse gas emissions from the facilities we control or operate. These emissions have fallen by more than 30% since 1990, largely because of operational improvements like reduced flaring. We are involved in a number of demonstration projects for technology to capture and store CO2 safely underground, including the first research pilot in Europe to inject CO2 onshore. We would like these projects to move ahead faster and are working with governments to help them put the policies and incentives in place to speed up the development of this critical technology. We also continued to roll out advanced lubricants and transport fuels, like Shell Fuel Economy (and in 2009 Shell FuelSave), that can help drivers improve their fuel efficiency.

While our primary focus continues to be delivering oil and natural gas responsibly, we also made progress developing renewable energy. Wind is currently our largest business in this area. In 2008, we increased our wind capacity by nearly a quarter to 550MW, enough to power nearly 250,000 households. We will now concentrate on continuing to operate our existing wind farms reliably and safely, rather than expanding our portfolio further. For the next few years, we will be stepping up our efforts in sustainably sourced transport biofuels with good CO2 performance. This will be the area of focus for our renewable energy activities. In 2008, we continued rolling out our sustainable sourcing safeguards with our biofuel suppliers and increased our stake in advanced biofuels company Iogen Energy to 50%.

I would like to thank the members of the Report’s External Review Committee for their valuable contributions. Their straightforward and insightful comments on early drafts of the Report again this year forced us to think more critically about the choices we make and how to report on them effectively to our stakeholders.

In mid-2009, after some five years as Chief Executive, I shall hand over to Peter Voser, currently our Chief Financial Officer. I wish Peter every success. I would also like to thank our people for the tremendous effort, dedication and passion they have shown. I am proud of the way they are embracing the sustainable development mindset and am convinced this will serve Shell well in the challenging times ahead.

Jeroen van der Veer
CHIEF EXECUTIVE