WEBVTT - Shell CEO Wael Sawan Talks LNG Sales 0:00:02.360 --> 0:00:06.720 Bloomberg Audio Studios, podcasts, radio news. 0:00:06.960 --> 0:00:09.200 Shell shares here in the US are up by about 0:00:09.240 --> 0:00:12.239 one percent after the company's Capital Markets Day at the 0:00:12.240 --> 0:00:15.440 New York Stock Exchange. One highlight plans to become the 0:00:15.480 --> 0:00:18.720 world's top LNG trader, saying it's going to expand sales 0:00:18.720 --> 0:00:21.439 by forty five percent a year until twenty thirty. The 0:00:21.480 --> 0:00:24.720 British energy giant, also vowing to increase shareholder returns and 0:00:24.800 --> 0:00:27.680 cut spending. Joining us to discuss this further is Wile 0:00:27.760 --> 0:00:30.840 Swan Shell CEO, joining us from the floor of the 0:00:30.840 --> 0:00:33.559 New York Stock Exchange. While really great to see you, 0:00:33.640 --> 0:00:36.520 Thank you so much for joining us. Congrats on getting 0:00:36.520 --> 0:00:39.959 through the day. Huge LNG targets, in particular how much 0:00:39.960 --> 0:00:41.800 it's going to make up in terms of your business 0:00:41.840 --> 0:00:44.560 twenty thirty percent larger by twenty thirty. 0:00:44.680 --> 0:00:48.880 How do you get there? Yeah? Thanks Alex. Look, we're 0:00:49.000 --> 0:00:50.400 very proud of where we are today. 0:00:51.000 --> 0:00:53.920 Today in the Capital Markets Day, we took a polls 0:00:53.960 --> 0:00:56.040 and reflected on the journey we've been on over the 0:00:56.080 --> 0:00:58.680 past couple of years, and the key message was one 0:00:58.720 --> 0:01:01.560 of trying to instill confidence. Here's a company that has 0:01:01.600 --> 0:01:03.720 delivered what it said it was going to do and 0:01:03.800 --> 0:01:07.280 actually over delivered in certain areas, and beyond that, as 0:01:07.360 --> 0:01:10.480 you rightly pointed out, we've also today laid out as 0:01:10.880 --> 0:01:13.160 a vision aut to twenty thirty five that has LNG 0:01:13.360 --> 0:01:15.840 at the heart of it. We believe LNG is going 0:01:15.880 --> 0:01:17.880 to be a critical part of the energy system and 0:01:17.920 --> 0:01:20.480 we want to be the leading player energ But our 0:01:20.520 --> 0:01:23.480 story also has lots of richness around wanting to sustain 0:01:23.560 --> 0:01:27.800 material liquids production and being the most competitive and the 0:01:27.800 --> 0:01:30.680 most focused energy marketer and energy trader in the world, 0:01:30.760 --> 0:01:33.679 And so a holistic story that I think we're very 0:01:33.680 --> 0:01:35.440 proud to be able to say is well on track. 0:01:36.080 --> 0:01:38.479 Are you worried at all about a potential looming LNG 0:01:38.680 --> 0:01:41.200 supply glut and kind of betting really big on this 0:01:41.240 --> 0:01:42.960 for the next ten years at a time where there's 0:01:42.959 --> 0:01:44.520 just too much supply coming online? 0:01:46.400 --> 0:01:48.760 Okay, my job, I have to look at twenty years 0:01:48.760 --> 0:01:50.440 and what I see when I do that is up 0:01:50.440 --> 0:01:53.240 to twenty forty, we see a potential sixty percent increase 0:01:53.280 --> 0:01:57.160 in overall LNG demand. We have a diversified port for you, 0:01:57.320 --> 0:02:02.160 both of production sources as well as demand options, and 0:02:02.200 --> 0:02:05.960 we are very much looking to leverage that global diversity 0:02:06.720 --> 0:02:11.040 of production and customer contracts to be able to create value. 0:02:11.320 --> 0:02:13.040 Importantly, our LNG port. 0:02:12.840 --> 0:02:15.560 For you is heavily linked to long term contracts that 0:02:15.600 --> 0:02:18.079 are tied to brand, which means we have a lot 0:02:18.080 --> 0:02:21.320 of resilience and so we can ride at the inevitable 0:02:21.360 --> 0:02:24.760 cycles in this business while making sure that the underlying 0:02:24.919 --> 0:02:26.920 cash flow continues to come from this business. 0:02:27.080 --> 0:02:30.240 So what should investors look for in terms of the 0:02:30.360 --> 0:02:33.280 capacity increase on your energy output? 0:02:35.360 --> 0:02:38.160 Very much what we outline today, which is four to 0:02:38.200 --> 0:02:40.560 five percent per year, So indeed the twenty to thirty 0:02:40.600 --> 0:02:43.720 percent by twenty thirty, and that's just to twenty thirty. 0:02:43.840 --> 0:02:46.080 We see more running room beyond that, we have projects 0:02:46.120 --> 0:02:49.239 that we can evolve over and above that. But what's 0:02:49.360 --> 0:02:52.840 unique around our LNG business is not just the production piece. 0:02:53.360 --> 0:02:56.760 We are actually also selling roughly the equivalent amount not 0:02:56.840 --> 0:02:59.359 just of what we produce, but also another equivalent amount 0:02:59.360 --> 0:03:02.480 to that because we're also one of the largest optimizers 0:03:02.480 --> 0:03:05.040 of LERG in the market, and so in any year 0:03:05.080 --> 0:03:08.440 we're selling around sixty million tons of LNG, which is significant, 0:03:09.120 --> 0:03:11.800 and so we are trying to continue to build up 0:03:11.800 --> 0:03:15.360 our portfolio to really have that diversity and to be 0:03:15.440 --> 0:03:18.320 able to make sure that we can continue to essentially 0:03:18.320 --> 0:03:20.960 stay in the fifteen to twenty percent of the overall 0:03:21.080 --> 0:03:22.600 LG market is what we represent. 0:03:22.960 --> 0:03:25.440 So once you get to twenty thirty while what actually 0:03:25.480 --> 0:03:28.880 happens to the oil side of this business. 0:03:29.400 --> 0:03:31.839 So we have a very clear pathway to sustain our 0:03:31.840 --> 0:03:34.239 liquids production to the tune of around one point four 0:03:34.240 --> 0:03:36.720 million baros per day between now and twenty thirty, and 0:03:36.760 --> 0:03:39.640 we have plans to extend that plateau well into the future. 0:03:39.920 --> 0:03:42.800 So we already have plans in place for that. And 0:03:42.840 --> 0:03:45.040 so the key areas where we see growth at the 0:03:45.080 --> 0:03:48.240 moment are our integrated gas business, as we've talked about LNG, 0:03:48.720 --> 0:03:51.760 but also I would say our marketing business, our mobility business, 0:03:51.800 --> 0:03:55.240 which is the leading franchise in the world, our lubricants business, 0:03:55.280 --> 0:03:57.960 which is another core part of our overall value proposition. 0:03:58.360 --> 0:04:02.520 So those will be growth trajectories and are sustained liquid 0:04:02.520 --> 0:04:05.360 production will allow us to have the fundamental underpinning that 0:04:05.400 --> 0:04:07.280 continues to keep us as a scale company. 0:04:07.320 --> 0:04:12.360 Overall sustained liquids doesn't sound like growing oil production. And 0:04:12.400 --> 0:04:14.240 you know, this is my way of asking about you 0:04:14.240 --> 0:04:16.080 guys don't have Permian assets. 0:04:17.440 --> 0:04:20.760 So what we have is a very diverse portfolio. We 0:04:20.839 --> 0:04:23.479 have the largest position in the Gulf of America, we 0:04:23.520 --> 0:04:25.800 have the largest position in Brazil, which are the two 0:04:26.320 --> 0:04:30.560 premier deep water basins in the world. It requires a 0:04:30.560 --> 0:04:34.120 lot of running just to stay flat. So these portfolios 0:04:34.120 --> 0:04:37.000 are declining anywhere between four to six percent per year, 0:04:37.320 --> 0:04:39.839 so one has to stay running fast just to stay flat. 0:04:40.600 --> 0:04:43.279 Beyond that, we will look at opportunities and we will 0:04:43.279 --> 0:04:46.360 continue to look at those opportunities. But of course we've 0:04:46.440 --> 0:04:49.520 left the Permian and we believe that the opportunities we 0:04:49.560 --> 0:04:51.440 have in front of us in the Gulf of America, 0:04:51.440 --> 0:04:55.960 in Brazil, in many of our heartlands like Kazakhstan, Oman Malaysia, 0:04:56.400 --> 0:04:58.279 those are the places where we want to continue to 0:04:58.279 --> 0:04:59.600 strengthen our portfolio. 0:05:00.560 --> 0:05:04.760 The analyst notes about today, we're all relatively positive. RBC 0:05:05.120 --> 0:05:07.720 has had a really nice quote said today reads is 0:05:07.800 --> 0:05:12.440 more evolution than revolution, And I'm wondering if the revolution 0:05:12.640 --> 0:05:15.719 part is what investors need to see to have Shell 0:05:15.839 --> 0:05:18.400 Share start to outperform the likes of Exxon as well 0:05:18.400 --> 0:05:21.320 as chev Run, and would that evolution be buying a 0:05:21.400 --> 0:05:25.000 US gas producer doing some sort of substantial oil deal. 0:05:27.000 --> 0:05:29.440 I think there's a couple of dimensions to that question. 0:05:30.440 --> 0:05:33.120 I'm very pleased with the evolutionary nature of it, and 0:05:33.160 --> 0:05:36.479 it's important that one footnote in all that discussion is 0:05:36.520 --> 0:05:39.480 that we have brought back around twenty plus percent of 0:05:39.480 --> 0:05:43.200 our share share register over the last three years, and 0:05:43.240 --> 0:05:45.640 a big part of what we announced today is we 0:05:45.680 --> 0:05:50.200 will continue to preferentially lean towards buybacks, having indeed increased 0:05:50.200 --> 0:05:53.839 the overall distributions to forty to fifty percent of our CFFO. 0:05:54.160 --> 0:05:55.839 On this trajectory that we're on. 0:05:56.240 --> 0:05:58.880 We will have quietly bought another forty percent of the 0:05:58.880 --> 0:06:01.800 company by twenty thirty. Need to me, the revolution is 0:06:01.800 --> 0:06:04.760 not in singular actions. It's in looking at the life 0:06:04.839 --> 0:06:07.120 cycle over a period of seven eight years. If we 0:06:07.160 --> 0:06:10.240 can buy more than half of this company, that is 0:06:10.240 --> 0:06:13.160 what is truly going to be differentiated and transformational for 0:06:13.200 --> 0:06:14.440 our shareholders. 0:06:14.720 --> 0:06:17.120 So while I do want to ask you though about 0:06:17.200 --> 0:06:19.520 just the general structure, I mean a lot of in 0:06:19.600 --> 0:06:21.840 terms of the cash giving back. There has been a 0:06:21.880 --> 0:06:25.080 lot of discussion in analyst circles about this idea of 0:06:25.120 --> 0:06:29.279 why we haven't seen more balance between the dividend versus 0:06:29.360 --> 0:06:32.880 the buybacks relative to some of your competitors. 0:06:33.560 --> 0:06:35.760 Yeah, it's a great question. I think the first thing 0:06:35.800 --> 0:06:38.560 I keep getting asked is can you grow your overall 0:06:38.600 --> 0:06:41.320 share of distributions, And thankfully we've been able to move 0:06:41.360 --> 0:06:43.560 from twenty to thirty, to thirty to forty to forty 0:06:43.560 --> 0:06:45.360 to fifty, so big tick there. 0:06:45.800 --> 0:06:45.960 Then. 0:06:46.000 --> 0:06:48.480 Indeed, it's the balance of how we want to return capital. 0:06:48.920 --> 0:06:51.120 It's a point that you both made earlier, which is 0:06:51.320 --> 0:06:55.080 we still find that our fundamental valuation does not fully 0:06:55.080 --> 0:06:57.680 price the cash flows we see into the future. So 0:06:57.720 --> 0:07:00.680 what a great opportunity to be able to use remarginal 0:07:00.760 --> 0:07:03.000 dollar of distributions to be able to buy back our 0:07:03.040 --> 0:07:05.839 shares and create that life cycle value. 0:07:05.560 --> 0:07:06.400 For our shareholders. 0:07:06.760 --> 0:07:09.160 By the way, we have increased our dividend per share 0:07:09.200 --> 0:07:11.920 by twenty five percent over the last two years, and 0:07:11.960 --> 0:07:15.040 we have a four percent progressive policy around our dividends, 0:07:15.320 --> 0:07:19.160 so we are addressing the dividend. But today the right 0:07:19.240 --> 0:07:22.320 capital allocation option is to go into more buybacks, and 0:07:22.320 --> 0:07:23.320 that's what you see us doing. 0:07:23.760 --> 0:07:27.880 Investors also, while have also I guess pondered, if not asked, 0:07:27.920 --> 0:07:32.080 the question about your listing. Obviously your primary listing overseas 0:07:32.240 --> 0:07:34.040 you're standing there on the floor of the New York 0:07:34.080 --> 0:07:37.400 Stock Exchange. Has there been any sort of meaningful discussion 0:07:37.840 --> 0:07:41.520 dot consideration about making the US your primary place of listening. 0:07:43.360 --> 0:07:46.000 There has been, and indeed we made the decision a 0:07:46.000 --> 0:07:49.200 couple of years ago to move our listing or to 0:07:49.200 --> 0:07:50.800 move sorry our headquarters over. 0:07:51.200 --> 0:07:51.760 To the UK. 0:07:52.560 --> 0:07:55.280 At the heart of it, our focus is to make 0:07:55.320 --> 0:07:58.440 sure that we are driving the fundamentals up to me. 0:07:58.600 --> 0:08:01.440 That means growing the free cast of the company. Yes, 0:08:01.520 --> 0:08:04.760 listing might add different liquidity, but we're already very liquid 0:08:04.760 --> 0:08:07.560 here in the US. Over fifty percent of our shareholder 0:08:07.600 --> 0:08:10.960 base is a US shareholder base, so we are attracting 0:08:10.960 --> 0:08:14.320 many of the investors that believe in the investment thesis 0:08:14.320 --> 0:08:17.280 we have. And so while we focus today on making 0:08:17.280 --> 0:08:21.160 sure that we're pulling every lever to build consistency, to 0:08:21.200 --> 0:08:24.600 build resilience, and to build longevity, of course we keep 0:08:24.640 --> 0:08:28.840 all options open. Right now, a change of listing is 0:08:28.880 --> 0:08:31.240 not a live discussion, but it's always under review, and 0:08:31.280 --> 0:08:33.040 of course we'll look at it when the time is right. 0:08:33.320 --> 0:08:36.120 It feels like a no for now. While I'm just 0:08:36.120 --> 0:08:38.839 going to paraphrase that going back to M and A 0:08:38.920 --> 0:08:41.360 for a moment, You're going to love this question. But 0:08:41.480 --> 0:08:43.079 when it comes to say BP, I know you get 0:08:43.080 --> 0:08:45.560 a lot of questions on when, if how are you 0:08:45.559 --> 0:08:47.120 going to buy VP, But I want to approach it 0:08:47.120 --> 0:08:49.480 from another angle and talk about synergies. A big part 0:08:49.520 --> 0:08:51.640 of your outperformance in the past couple of years has 0:08:51.679 --> 0:08:54.800 been synergies and weeding out those costs. At what point 0:08:54.800 --> 0:08:58.680 does BP become so cheap you just cannot avoid looking 0:08:58.720 --> 0:09:02.160 at them for those synergies, Alex. 0:09:01.920 --> 0:09:04.600 You'll forgive me if I don't directly answer that question, 0:09:04.640 --> 0:09:07.360 but what I will say is our focus over the 0:09:07.440 --> 0:09:10.400 last few years has been to build fitness and strength 0:09:10.440 --> 0:09:14.040 for Shell that today people are asking the question because 0:09:14.080 --> 0:09:18.720 they see a fitter, stronger, more dynamic company. Anatomy is great. 0:09:19.000 --> 0:09:21.839 We want to be able to build flexibility. We've been 0:09:21.880 --> 0:09:25.400 able to bring our net debt down to essentially the 0:09:25.440 --> 0:09:28.720 lowest it has been excluding lises for over a decade. 0:09:29.240 --> 0:09:31.800 We've been able to outperform our peers in the sector 0:09:32.080 --> 0:09:36.040 on both TSR as well as just pure shareholder purer 0:09:36.160 --> 0:09:40.040 share performance, and we are generating free cash flow in 0:09:40.080 --> 0:09:43.000 a very robust and solid way. And so today we 0:09:43.120 --> 0:09:46.640 have options. At the same time, when we think about 0:09:46.640 --> 0:09:49.920 those options, the priority is to deliver that ten percent 0:09:50.000 --> 0:09:52.800 free cash flow per annum growth within our business that's 0:09:52.840 --> 0:09:55.920 immediately within our control, and of course we will keep 0:09:55.960 --> 0:09:57.960 an eye out for opportunities. But I have to say 0:09:57.960 --> 0:10:00.160 the bar is high, because if you're going to go 0:10:00.240 --> 0:10:03.120 for a big acquisition, one has to recognize that that 0:10:03.160 --> 0:10:04.320 can potentially describe. 0:10:04.320 --> 0:10:06.120 And therefore we're very focused. 0:10:05.760 --> 0:10:08.880 On making sure if we do something in the inorganic space, 0:10:08.920 --> 0:10:10.719 that the bar is high and that we go in 0:10:10.960 --> 0:10:12.599 ready to do that. 0:10:12.320 --> 0:10:15.040 And that also kind of felt like a no. I'm 0:10:15.160 --> 0:10:16.880 just saying from where I sit. 0:10:17.360 --> 0:10:20.839 Yeah, I would qualify Alex as it's finding the right 0:10:20.880 --> 0:10:23.040 time to make the moves and what is the long 0:10:23.120 --> 0:10:23.640 journey first? 0:10:23.640 --> 0:10:25.720 Okay, but is BP like on the road to the 0:10:25.760 --> 0:10:28.480 moves or is BP like on the highway somewhere that 0:10:28.480 --> 0:10:29.240 you're not passing. 0:10:30.640 --> 0:10:33.560 What I would say is we are always looking at companies, 0:10:34.040 --> 0:10:37.280 both in Europe and beyond, and every company will have 0:10:37.360 --> 0:10:39.960 its time and at that point we will make a decision. 0:10:40.280 --> 0:10:42.160 All right, Well, I'll get you off the hook here 0:10:42.200 --> 0:10:44.400 and give Alex a break for a second. I do 0:10:44.559 --> 0:10:46.640 want to get your thoughts so on just a broader 0:10:46.679 --> 0:10:49.480 economic condition globally. And I have to ask you, of 0:10:49.520 --> 0:10:52.360 course about what's going on here in the US politically. 0:10:52.400 --> 0:10:54.080 And I know you don't have a lot of exposure 0:10:54.080 --> 0:10:56.839 to assets here, but obviously what we do here has 0:10:56.920 --> 0:10:59.280 ripple effects across the world. Have you actually had a 0:10:59.360 --> 0:11:01.920 chance to actually meet with anyone from the administration, including 0:11:01.920 --> 0:11:02.400 the President? 0:11:04.520 --> 0:11:05.560 So firstly, just. 0:11:07.480 --> 0:11:11.040 A correction, So, our biggest capital employed globally is here 0:11:11.080 --> 0:11:15.199 in the US. We are the largest producer and operator 0:11:15.240 --> 0:11:17.600 in the Gulf of America. We are the largest off 0:11:17.640 --> 0:11:22.120 taker of US LNG of any company, so we have 0:11:22.160 --> 0:11:25.560 a very material presence, not to mention thirteen thousand staff 0:11:25.600 --> 0:11:26.880 that are very. 0:11:26.880 --> 0:11:28.320 Much the core of our company here. 0:11:29.440 --> 0:11:32.080 I have had the opportunity over recent weeks to indeed 0:11:32.840 --> 0:11:36.400 meet many in the administration, including the privilege to meet 0:11:36.400 --> 0:11:39.120 the President. And what I would say is we are 0:11:39.280 --> 0:11:43.280 very encouraged and welcome the strong support for the energy sector, 0:11:43.640 --> 0:11:46.280 not something that has always been there in the US 0:11:46.400 --> 0:11:48.800 or beyond, and I do think the energy sector is 0:11:48.840 --> 0:11:52.360 a critical underpinning of any successful economy. 0:11:52.920 --> 0:11:55.560 Beyond that, what I would say is what is key 0:11:55.640 --> 0:11:56.480 for our sector. 0:11:56.480 --> 0:11:59.720 For companies like ours is predictability in the investment climate 0:11:59.760 --> 0:12:02.640 and stability of the investment climate because many of our 0:12:02.640 --> 0:12:07.400 investments have payback periods usually above seven eight years, and 0:12:07.480 --> 0:12:09.600 so that is a critical part of being able to 0:12:09.600 --> 0:12:11.680 have the peace of mind to make the material investments 0:12:11.720 --> 0:12:12.840 that we need to be making. 0:12:12.960 --> 0:12:14.120 Well before we let you go. 0:12:14.440 --> 0:12:16.920 If there is a piece deal between Ukraine and Russia, 0:12:16.960 --> 0:12:20.000 are you anticipating Russian gas flows to Europe and how 0:12:20.040 --> 0:12:20.560 are you seeing them? 0:12:20.600 --> 0:12:25.880 Global flows here difficult to call where that ends up playing. 0:12:26.000 --> 0:12:29.360 I mean, what you find, of course is Russian gas 0:12:29.400 --> 0:12:31.960 to Europe has gone down from roughly forty percent of 0:12:32.000 --> 0:12:35.840 Europe's demand to just under ten percent, so potentially some. 0:12:35.720 --> 0:12:36.800 Flows will occur. 0:12:37.640 --> 0:12:40.280 What we are focused on is making sure that through 0:12:40.360 --> 0:12:45.160 our world leading trading capability that we have, that we 0:12:45.200 --> 0:12:49.640 are managing all these potential discontinuities that we are seeing 0:12:49.640 --> 0:12:51.760 in trade flows, and so we want to make sure 0:12:51.760 --> 0:12:52.040 that we. 0:12:52.000 --> 0:12:53.240 Can deliver to our customers. 0:12:53.520 --> 0:12:57.320 How the situation in Russia evolves is anyone's guests, but 0:12:57.360 --> 0:13:00.040 we are preparing for multiple different scenarios so that we 0:13:00.120 --> 0:13:02.120 can honor those straight flows that need to be met. 0:13:02.800 --> 0:13:04.839 Well, we really appreciate you taking time for us. I 0:13:04.880 --> 0:13:07.200 know it's been a long and busy day. While Swan there, 0:13:07.360 --> 0:13:11.000 he's the CEO of Shell. Down there in downtown Manhattan, 0:13:11.320 --> 0:13:13.760 on the floor of the New York Stock Exchange.