Opportunity Realisation Manual

Royal Dutch Shell plc Opportunity Realisation Manual

Version 1: 24 November

CONTENTS

1 SUMMARY 1

2 OPPORTUNITY REALISATION MANDATORY REQUIREMENTS 2

3 EXPLANATION OF GOVERNANCE, ROLES AND RESPONSIBILITIES 3

3.1 Line of Sight 3

3.2 Business Opportunity Manager (BOM) 4

3.3 Decision Executive (DE) 4

3.4 Decision Review Board (DRB) 5

3.5 Key Competences of BOMs, DEs and DRBs 5

3.6 Opportunity Team 7

4 EXPLANATION OF THE OPPORTUNITY REALISATION PROCESS 8

4.1 The Six Phases of an Opportunity 8

4.2 Opportunity Realisation: mandatory activities and deliverables 10

4.2.1 Mandate 10

4.2.2 Opportunity Framing 11

4.2.3 Opportunity Roadmap, Risk Management & Stakeholder Engagement Plans 11

4.2.4 Opportunity Assurance Plan 12

5 GUIDANCE ON THE PRACTICAL APPLICATION OF THE ORM 13

5.1 Scaleable Application of the Opportunity Realisation Manual 13

5.2 Opportunity Archetype Guides 13

5.3 Opportunity management and other requirements 13

6 GLOSSARY 14

Terms in purple font are defined or referenced in the Glossary at the back of this manual

The Executive Vice President Controller is the custodian of this manual.

11 Summary

The Opportunity Realisation Manual (ORM) provides mandatory instructions and guidance on the application of the Group Governance and Management Standards with respect to the management of opportunities within Shell. The ORM is a component of the Shell Control Framework with links to both the Investment Decision Manual (IDM) and Joint Venture Manual (JVM)1.

Opportunity Realisation is defined in Shell as any activity that, if pursued through to execution, will require an Investment or Divestment Proposal (as detailed in the IDM). These include capital projects, acquisition/divestment opportunities, or integrated cross-Business opportunities2.

The ORM shall be applied across all Shell Businesses and Functions to all opportunities with a headline size exceeding US$ 100 mln (on a 100% basis) or involving unusual risk3. Individual businesses may choose to apply the ORM to opportunities with a smaller headline size.

The ORM sets out a rigorous approach to the management of opportunities to ensure that they are appropriately defined, evaluated and executed. It is founded on:

A decision-driven Opportunity Realisation Process (ORP), that promotes good preparation, planning and appropriate assurance in the delivery and execution of an opportunity

Competent people with clear roles and responsibilities leading, staffing and governing opportunities

A clear governance structure for the opportunity

Section 2 lays out the Opportunity Realisation mandatory requirements. Sections 3 to 5 provide further explanations of these requirements and guidance on their application.

The application of the ORM is intended to be scalable so that it is fit-for-purpose for the dimensions, complexity and risk profile of the opportunity. For specific opportunity types, Businesses/Functions may have additional requirements and offer further guidance on key activities and best practices. Where appropriate these are referenced in the Opportunity Archetype Guides (available separately) that highlight for different opportunity types, the key activities that are typically undertaken.

With respect to non-controlled Joint Ventures, Shell should use its influence to ensure that the intent of the ORM is followed, taking a risk-based approach.

The Shell Control Framework

Foundations Processes

Code of Conduct

Royal Dutch Shell plc Board, Chief Executive and Executive Committee

Delegationof Authority

Standards, Manuals and Guides

Organisation

Shell General Business Principles

Strategy, Planning and Appraisal

Legal Entities Businesses, Functions

Statement on Risk Management

External Regulatory and Legal Environment, External Stakeholders

Assurance and Compliance

November 2007

Archetype Guides

Illustrations of how the requirements of the

Opportunity Realisation Manual can be applied in different opportunity types

Governance and Management Standards

Opportunity Realisation Manual

Investment Decision Manual

Joint Venture Manual

1 Nothing in this manual overrides the requirements and authorities set out in the IDM.2 Long-term purchase and sale contracts are however excluded from mandatory application of the ORM.3 The definition of headline size can be found in the IDM.

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2 Opportunity Realisation Mandatory Requirements

The mandatory requirements outlined below shall be applied to all opportunities with an anticipated headline size above USD 100mln (on a 100% basis) and all opportunities involving unusual risk4. For each opportunity all mandatory requirements must be adequately documented. Further explanation of each of these mandatory requirements can be found in Sections 3 to 5.

(1) All opportunities shall have a common governance structure, which consists of: (Section 3)

a Business Opportunity Manager (BOM) accountable to the Decision Executive for the day-to-day management and delivery of the opportunity.

a Decision Executive (DE), accountable to the individual in the Shell organisation with the appropriate delegated (organisational) authority for the opportunity. The DE is responsible for steering, supervising and supporting the BOM as well as ensuring the provision of appropriate assurance of the opportunity.

a Decision Review Board (DRB) which contains the relevant expertise to support the DE in his/her decision making. Finance has the right to nominate a representative to participate in each and every DRB.

a Line of Sight, the single chain of accountable individuals from the opportunity team via the BOM and DE to the individual in the Shell organisation who holds the appropriate delegated authority for the opportunity.

a Mandate, agreed up-front between the BOM and the DE that gives the BOM instructions but also room to manage the opportunity on a day-to-day basis. The Mandate, which must be within the authority delegated to the DE through the Line of Sight, sets out the objectives and boundary conditions for the opportunity, as well as key assumptions. It also describes key accountabilities, the governance structure and how the opportunity will be resourced. (see Section 4)

(2) Opportunities shall be led and staffed by professionals with the appropriate level of competence and experience (Section 3)

(3) Opportunities shall be managed through a decision driven stage-gate process (Section 4)

The opportunity must be progressed through the six defined phases of the ORP. In this process there are key decision gates at which it is decided whether to stop, hold, recycle or proceed.

(4) The DE is personally accountable that as a minimum there shall be: (Section 4)

Opportunity Framing, an activity which defines the scope of the opportunity through consideration of the Technical, Economic (and financial), Commercial, Organisational, stakeholder and other Political (TECOP) aspects of the opportunity. Mandatory outputs of Opportunity Framing, which are then updated, as required, throughout the lifetime of an opportunity are:

an Opportunity Roadmap, which outlines the plan to deliver the opportunity, including the timeline, milestones, decision gates, resource requirements and key deliverables.

a Stakeholder Engagement Plan, which identifies key stakeholders, what is known about them, and sets out the plan to understand stakeholders perspectives, engage with them and create both internal and external alignment.

a Risk Management Plan, which identifies key risks and upsides and plans how the risks will be mitigated and the upsides captured.

an Opportunity Assurance Plan, which sets out the assurance events and reviews that will promote good quality decisions in all phases of the opportunity and how functional/technical discipline controls will be applied.

4 In exceptional cases, derogation of the mandatory requirements may be justified for individual opportunities. Derogation must be authorised in writing by the individual in the Line of Sight with the appropriate delegated authority for the opportunity.

33 Explanation of Governance, Roles and Responsibilities

3.1 Line of Sight The successful delivery of an opportunity is supported by clear definition of roles and responsibilities, personal leadership and a disciplined approach of individuals executing their responsibilities.

For all opportunities there will be a single Line of Sight (LoS) from the opportunity team via the BOM and DE to the individual in Shell with the appropriate delegated authority. This LoS consists both of delegated authority (as defined in the IDM) and the separate hierarchy within the opportunity team itself, which includes the DE and the BOM. All individuals involved with an opportunity must be clear where responsibilities and accountabilities lie.

Three key roles in the governance of an opportunity are: (1) The individual (likely to be Executive Vice President or higher) who has the delegated authority for the opportunity (see Note 1)(2) Decision Executive (DE)(3) Decision Review Board (DRB) Member

The governance (i.e. steer, supervision, support and assurance) and decision responsibility for the opportunity, along with

boundary conditions, are vested in the Decision Executive. This covers the key decisions required to develop the opportunity such that it can be presented to the authority holder in the form of a PCN or an Investment Proposal. The Line of Sight above the DE sets expectations and provides clear direction to the DE with respect to the opportunity. The Decision Executive takes the responsibility delegated to him/her for all decisions taken related to the opportunity that are within his/her remit, and is expected to champion decisions that are not within his/her authority to the appropriate level up the Line of Sight.

The DE delegates the daily management of the opportunity to the Business Opportunity Manager (BOM) in the form of the Mandate. The BOM takes day-to-day responsibility for the delivery of all aspects of the opportunity including ensuring the opportunity is framed and planned, and activities are executed effectively (see section 4.2). The Decision Review Board members support the DE, enabling him/her to take good quality decisions. The DRB also supports the BOM to facilitate the delivery of the opportunity, but neither individual DRB members nor the DRB in its entirety have decision-making authority over the opportunity.

Notes:

1. Delegated (Organisational approval) authorities are as defined in the Investment Decision Manual and Manual of Authorities. The size and nature of the opportunity will determine who in the Line of Sight (VP, EVP, ED , CE or RDS Board) will have delegated authority for the opportunity. Although the threshold above which the application of the ORM is mandatory has been set at a headline size of USD 100mln (on a 100% basis), the Shell-share may be significantly smaller. In addition, individual businesses may choose to apply the ORM to opportunities with a smaller headline size.

2. An integrated, cross-business opportunity must be run as one opportunity. Even though members of the Line of Sight may come from different businesses it is imperative that a single line of opportunity governance is established. The opportunity team is also likely to contain members from different Businesses and Functions. With respect to the opportunity, team members take their orders and directions from the BOM, in line with the Mandate.

3. The members of the LoS and the opportunity team may change as an opportunity matures.

Delegated organisational authority (IDM)

Board

Chief Executive

Executive Director

Exec. Vice President

Vice President

Decision Review Board Decision Executive

Business Opportunity Manager

Team

Opportunity

Note: DE can also link to ED, CE or VP depending on size of opportunity

Opportunity Line of Sight

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3.2 Business Opportunity Manager (BOM)All opportunities shall have a Business Opportunity Manager (BOM), who is responsible for the full day-to-day management of the opportunity. The individual leading the opportunity shall have the right experience and competencies required to ensure the full integration of all the Technical, Economic (and financial), Commercial, Organisational and stakeholder and other Political (TECOP) elements of the opportunity. To deliver the opportunity the BOM is often supported by dedicated team leaders each responsible for the delivery of individual TECOP elements or sub-elements (see section 3.6).

The BOM is held accountable for the delivery of the opportunity within the Mandate agreed with the Decision Executive, including ensuring the quality of the delivered opportunity and the handover to the future owner. It is best practice that the BOM writes the Mandate that he/she needs and proposes this to the DE for approval. This Mandate is updated whenever required. [NB: for large commercial transactions the Mandate is recorded in the Deal Sheet].

Opportunities can have very long durations (e.g. a material EP opportunity can take from discovery to on-stream some 6-8+ years) and the nature of an opportunity can change through its course (e.g. from negotiating key terms with host governments to constructing facilities) and thus opportunities may require a change of team leadership and staffing. To manage these transitions, effective and well-documented handovers are essential.

3.3 Decision Executive (DE)The Decision Executive (DE) plays a central role in the delivery of an opportunity. Through the responsibility delegated to him through the Line of Sight, the DE takes full and personal accountability for the decisions made relating to the opportunity that are within his remit, the overall delivery of the opportunity and the adequacy of opportunity assurance. The Decision Executive agrees the Mandate for the opportunity with the BOM and provides steer, supervision and ongoing support to the BOM and Opportunity Team. To be effective in his/her role, he/she must be at all times fully familiar with the opportunity, ensure appropriate resources are made available and assist with the co-ordination and integration of activities that are beyond the BOMs control.

The Decision Executive chairs the Decision Review Board and is responsible for ensuring that key expertise and knowledge are represented in the DRB that, according to the risks and issues, allow him/her to make the right decisions related to the opportunity. Accountability for decisions made in the DRB lies with the DE, who must consider the input of the DRB in reaching his/her decision.

The Decision Executive, in support of the BOM, champions the opportunity and facilitates its delivery and approval up the Line of Sight. He must ensure that all the individuals up the Line of Sight are fully aligned with the direction and pace of the opportunity, that they are aware of issues, and also the roles they are expected to play in the delivery of the opportunity.

BOM (Opportunity delivery)

Personal Relational Business

Show effective leadership Accountable to the DE for the day-to-day delivery of the opportunity. Ensure selection of the right team members to complement your competencies/expertise.

Create the room to operate Obtain mandate from DE and commit to it. Maintain confidence in the face of ambiguity, shifting priorities and rapid change, even over long extended opportunities.

Maintain a learning agenda Demonstrate open and authentic communication.Apply internal and external best practice to the delivery of the opportunity.Capture and disseminate learnings.

Manage team effectivelyResponsible for getting the best out of the opportunity team and the DRB. Motivate the team and drive effective behaviours.Be clear on accountabilities within the team. Provide feedback and developmental opportunities.

Maintain relationshipsForge and maintain effective relationships with external counterparties; connect effectively with internal stakeholders and other businesses; leverage existing networks and develop connections.

CommunicateBe clear to Line of Sight; communicate clearly about progress, blockers and risks.Proactively communicate when and what decisions/support are required of the DE.

Drive and deliver the opportunityBe decisive and drive actions appropriately to deliver results.Negotiate skillfully/ensure the team negotiates skillfully to create the best possible outcome for Shell.

Be creative and innovative to secure maximum value Leverage technical knowledge, commercial savvy and relationship strengths to generate ideas and approaches that create value.Help others envisage greater synergies and possibilities in opportunity making combinations.

Maintain the overviewIntegrate all aspects of the opportunity. Manage risks and upsides.Plan the opportunity and execute the plan.Stay delivery focused.

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3.4 Decision Review Board (DRB)Opportunities within the scope of the Opportunity Realisation Manual are required to constitute Decision Review Boards (DRB) chaired by a Decision Executive.

The DRB has no executive authority in its own right over the opportunity (these responsibilities rest solely with those with the appropriate delegated authority in the Line of Sight), but the DRB members facilitate the delivery of the opportunity by providing support and advice, based on their specialisms, to the Decision Executive, the BOM and the opportunity team. In particular the DRB can facilitate the opportunity by providing access to resources, ensuring functional alignment, communications and review and challenge of decisions. If deemed appropriate, the DE should call on relevant DRB members to provide assurance and, as appropriate, secure technical and other functional support against requirements as stipulated in the Investment Decision Manual, and in the Opportunity Roadmap and Opportunity Assurance Plan.

The DRB should be appropriately scaled for the opportunity and contain only the relevant business and functional representation required to support the opportunity and to help the DE make the right decisions. Finance has the option under the Shell governance model to nominate a representative for each and every DRB, in order to provide an independent assessment of all opportunities that may be brought forward for approval via an Investment Proposal. For large, complex opportunities, with significant exposure and large risks, the appropriate governance structure will typically require a cross-section of functional and business expertise. It is considered good practice that the DRB remains small in size.

3.5 Key Competences of BOMs, DEs and DRBsThe successful and effective delivery of opportunities is determined to a great extent by the skills, knowledge, and not least the behaviours of those leading them. The table below summarises the key attributes of the BOM, the DE and DRB members that are considered essential for opportunity delivery, and which are based on learnings collected from past opportunities across the Group. The competencies are listed per specific role and consist of personal, relational and business competences.

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DRB (Support and advice to DE)


Actively engage as DRB memberFully commit to the role; engage with team; understand the opportunity. Provide both challenge and support.

Take time to reflect and implement learningChallenge DE to use best practice; share feedback constructively; contribute your knowledge.

Challenge and support the DE to empower the BOMConnect personally with BOM; support DE to address strengths and weaknesses of the team and the approach to the opportunity; be honest and direct in all matters.

Be clear on your roleSupport the DE in him/her making good decisions. Understand that a DRB role and responsibility is separate and different from any line position.

Act as ambassador in support of the opportunity. Be an ambassador to organisation outside the opportunity; take full ownership of decisions taken; use your connections to assist in resourcing the opportunity team.

Support links to the external worldScan external world for relevant information; challenge full understanding of counterparties. Support the opportunity through your relationships.

Manage input and impactOffer advice, guidance, ideas to DRB and DE; be clear about your views and the impact on the opportunity; do not act as roadblock; be flexible.

Offer an objective and informed viewpointEnsure your viewpoint is understood; stay objective and respect and support DE decision; if you have different view, ensure this is minuted.

Think broadlyBring the strategic context in the picture and take a panorama view of the opportunity; challenge quality of decisions; challenge DE and BOM to prevent tunnel vision; stay focused on delivery.

Provide AssuranceEnsure that there has been assurance in extent/scale and depth that is appropriate to the opportunity risks to give confidence that sound decisions are recommended to the DE.

DE (Governance, ie: Steer, Supervision, Support)


Empower the BOMGive the BOM the room to operate. Make time available and be accessible. Act as coach; support and challenge.

Create a culture of trust and accountabilityAct honestly and transparently;Act consistently; communicate your role; encourage feedback and listen.

Reflect and learnReview own, and BOM strengths and weaknesses; choose DRB and team members to complement each other in the all phases and aspects of the opportunity.

Champion the opportunityKeep Line of Sight involved; ensure buy-in by senior leadership; determine with BOM and DRB how to approach / involve and communicate with internal stakeholders.

Resource DRB and clarify roles Choose DRB members with appropriate expertise and knowledge; communicate roles DE, DRB and BOM to all parties; ensure full enrollment of DRB and effective DRB operations by utilising existing processes (e.g. assurance).

Maintain external relationshipsUnderstand external stakeholders and influencers; work with the BOM to develop and implement a productive stakeholder management strategy.

Determine key strategiesEngage with BOM and DRB to define strategy, boundaries etc; obtain delegation from Line of Sight; agree strategy with Line of Sight, and agree Mandate with BOM.

Secure maximum valueTake responsibility for the opportunity decisions. Push boundaries; encourage to think broadly (especially) early in the opportunity and focus on hard delivery (particularly) later in opportunity; draw on knowledge DRB in trade-off decisions.

Balance speed and rigourAct decisively; take accountability for decisions; avoid reworking same decisions; take conscious decisions regarding flexibility; be clear about factors (e.g. commercial) demanding change of timeline and make proper use of assurance.

73.6 Opportunity Team The composition of an opportunity team must be well planned, promote single point accountabilities and shall involve the appropriate mix of expertise from technical, commercial, finance and other functions relevant to the opportunity. It shall also include, from an appropriately early stage, representation of the future owner that will ultimately be involved in delivering the value, and, often in the case of acquisitions and divestments, a member of the implementation/integration team. An example of an opportunity team is illustrated below, but it is stressed that the composition of the team will vary according to the nature of the opportunity and is likely to change as an opportunity matures.

Resource requirements should be identified and agreed by the BOM with the Decision Executive and both human and financial resources made available in a timely manner. Specific accountabilities of the Opportunity Team members should be explicitly agreed up-front, including for securing functional/technical discipline support. The members of the opportunity team report to the BOM with respect to matters pertaining to the opportunity, even though formal organizational (e.g. functional) reporting lines remain in place. Opportunities can also be very complex and involve large teams. Within Opportunity Teams, there may be separate work-streams, with designated work-stream leaders who sit on the core team and must be kept aware of all dimensions of the opportunity. A clear and direct line of communication must exist between these work-stream leaders and the BOM.

EVP

DEDRB

BOM

Legal

CO2

Opportunity Team

An illustration of an opportunity team, and its Line of Sight (Actual team composition depends on nature of opportunity)

Economics

Project/Technical lead

HSSECommercial

lead

Finance lead

Implementation lead

Future Owner

Project expert

Cost estimator

Technical expert

Tax

Treasury

Controllers

4.1 The Six Phases of an OpportunityOpportunities are developed through six phases; Identify to Operate (see figure below). Each phase has clear milestones and Decision Gates, activities, deliverables and decision requirements. Understanding what activities need to take place in which phase of an opportunity, and taking a disciplined approach to their delivery are essential to success. In the early phases of an opportunity the focus will be on understanding potential scope, feasibility and maximising value creation and capture. In the later stages of an opportunity the focus changes to value delivery.

In the lifetime of an opportunity there are key Decision Gates coinciding with phase boundaries at which the Decision Executive (DE), supported by advice from members of the Decision Review Board (DRB) formally decides whether to stop, hold, recycle or proceed, and where the DE seeks approval up the LoS for this decision, if it is outside his/her own delegated level of authority. Decisions to stop, hold, recycle or proceed may also occur between Decision Gates when new information becomes available or when other key milestones in the progress of the opportunity are reached.

To ensure that value is maximised and to enhance the chance of success, the Technical, Economic (and Finance), Commercial, Organisational and Political (TECOP) aspects of opportunities need to be fully considered throughout, though the balance will naturally depend on the nature of the opportunity. The BOM should ensure that the relevant knowledge and expertise that is available within Shell is fully utilised throughout the lifetime of the opportunity. Typical activities in the different stages of the ORP are outlined overleaf.

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Divergent Thinking Convergent Thinking

Deliver the ValueIdentify Opportunity. Understand what we get into

Look wide. Understand what are feasible options

Concept selection. Focus in on and evaluate best and "doable" options

Prepare to lock into an investment/divestment

Implement the opportunity

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Do we understand what we are starting?

1

Have we looked wide enough?

2

Have we selected the optimal solution?

3

Is everything in place to ensure success?

4

Are we ready to Operate?

5

GIPMandate

(as required)

PCN

Identify Assess Select Define OperateExecute

4 Explanation of the Opportunity Realisation Process

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C

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Identify Assess Select Define OperateExecute

Description of technical challenge.

Understand economic & financial dimensions and metrics using available information.

Show the strategic and portfolio fit.

BOM, DE, LoS established Mandate. Opportunity Framing.

Immediate stakeholders recognised & who knows who/what.

Describe range of options, pros & cons & feasibility.

Assess economics based on technical, commercial value drivers, incl. tax & financing, involving those functions.

Engage with counterparties and develop value propositions.

Opportunity Roadmap, Risk and Stakeholder Management Plan and Opportunity Assurance Plan.

Stakeholders mapped and engaged 3D Discovery & Diagnosis.

Focus in on optimal concepts and develop concept designs.

Evaluate economic value proposition of the opportunity, reflecting all agreed functional inputs. Articulate risks, uncertainties and sensitivities.

Perform due diligence and detail the preferred commercial structures for opportunity.

Carry out assurance. Start implementation plan. Prepare & submit PCN. Manage risk.

Stakeholder & counterparties engaged - 3D, Diagnosis & Design.

Articulate the conceptual design as required for FID (GIP).

Complete detailed economic evaluation with full risk and uncertainty analysis. Show financial reporting impact. Obtain functional support from economics, Controllers, Tax and Treasury.

Negotiate and conclude commercial agreements for signature after GIP approval. Obtain functional support from Legal.

Inform ECJV & ECPV if >$1bln. Carry out assurance. Prepare to implement. Prepare and submit GIP after Finance sign-off.

Stakeholder & counterparties engaged 3D, Diagnosis & Design.

Initiate technical implementation.

Monitor opportunity performance and track costs. Record transaction in the accounts. Execute financing strategy.

Execute commercial agreements. Address outstanding commercial issues before "completion" of the opportunity.

Transition to implementation team. Prepare to operate. Monitor performance.

Stakeholder & counterparties engaged 3D, Design and Deliver.

Technical implementation moves to steady state.

Report information to management on operational performance and costs.

Operational management of commercial agreements.

Transition to operational team. Opportunity and Implementation teams dissolved.

Value delivered with stakeholders and new opportunities identified.

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4.2 Opportunity Realisation: mandatory activities and deliverables

As outlined below, Opportunity Framing should be undertaken and the mandatory deliverables prepared as early as is practically possible in the life of an opportunity. Opportunity Framing should, thereafter, be repeated and the deliverables revised and updated throughout the lifetime of the opportunity as new information becomes available and in response to external events. It is the responsibility of the BOM and DE to agree the appropriate scaling of Opportunity Framing and the deliverables for the size and complexity of the opportunity.

There are no prescribed formats at Group level for Opportunity Framing or deliverables, although Businesses and Functions may require the use of formal templates in certain circumstances.

4.2.1 MandateAt the outset of every opportunity the individual with the appropriate delegated responsibility will define the remit of the DE with respect to the opportunity. Within this remit, the DE will agree the Mandate with the BOM , which shall address the following:

Opportunity objectives: A clear statement of what the opportunity is, boundary conditions and the aspired end position and value that could be delivered from the opportunity. A description of the wider context around the opportunity can be included.

Assumptions that will affect the time, cost and objectives of the opportunity. These assumptions may be Shell specific as well as independent from Shell.

Roles and responsibilities, including governance and the Line of Sight.

Human resources and budget needed by the Opportunity Team to deliver the opportunity to an Investment Proposal, or to the first exit decision point.

Key Decisions that the BOM cannot make him/herself and for which either the Decision Executive (or the individual with delegated organizational authority for the opportunity) is to be involved and accountable.

Timing of key decisions.

The Mandate establishes the accountability of the BOM and provides him/her with the room to manage the opportunity on a day-to-day basis. The Mandate must be reviewed and updated at appropriate points throughout the opportunity life and significant changes to the Mandate should always be agreed with the DE, and documented.

The Mandate is at all times subject to the requirements of the IDM.

[Note: For large, commercial transactions, the Deal Sheet is used to document the Mandate. The Deal Sheet also documents aspects of the Opportunity Roadmap and Opportunity Assurance Plan.]

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4.2.2 Opportunity FramingOpportunity Framing is a scalable activity, which is undertaken at an early stage of an opportunity when the potential to create and capture the value of an opportunity is at its greatest. The emphasis of Opportunity Framing is on preparing for success and requires taking sufficient time with the right people to:

Reach internal alignment on the scope of the opportunity (i.e. what optimises value for Shell)

Define success in explicit terms

Identify key relationships and where not present, start developing these

Consider counter-party/stakeholder requirements (external drivers) and diagnose, through wide (not deep) external engagement where Customer/Counterparty Value may lie in the opportunity.

Identify, and understand the various (technical, commercial, economic etc) value drivers of the opportunity and how these need to be managed to maximise value and mitigate downside risk.

Identify key technical and other functional contributions and reviews (as appropriate)

Apply learnings from other opportunities

Understand and manage the timeline identify when and how the most value can be delivered

Define roles and responsibilities and plan the way forward for the opportunity (i.e. key activities, key milestones, decisions to be taken)

The key deliverables of Opportunity Framing are outlined in Section 4.2.3.

4.2.3 Opportunity Roadmap, Risk Management & Stakeholder Engagement Plans

Opportunity Roadmap

The Opportunity Roadmap is the agreed plan for the delivery of the opportunity, and aligns the activities of the opportunity team, the individuals in the Line of Sight and other involved Shell stakeholders. The Opportunity Roadmap should articulate which activities should be undertaken when, including:

The timeline, with dates for key milestone decisions

The key decision points

Any intermediate decisions between key decision points

The deliverables required to support the decisions

The Opportunity Roadmap should integrate the critical activities and/or milestones that are contained in the stakeholder engagement strategy and the Risk Management Plan (see below).

Often a Roadmap can only provide a detailed description of the activities in the next phase and an outline of activities envisaged for later phases; it is then updated as the opportunity progresses.

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Risk Management Plan

The effective management of risks (threats and opportunities) is fundamental to being able to deliver opportunities and value to Shell. Risks may be internal to the opportunity, such as cost or resource availability, but can also be external to Shell, such as potential competition, linkage to other opportunities. The management of risk requires that:

Risks and opportunities are recorded in a Risk and Opportunity Matrix

Their likelihood and consequence are assessed

Responses and mitigation are planned and implemented; and

There is an ongoing process of monitoring, appraisal and reassessment, leading to a revision of the Risk Management Plan, when required.

Stakeholder Engagement Plan

It is essential to understand and engage with stakeholders who are affected by an opportunity and can influence positively or negatively its outcome. The Stakeholder Engagement Plan requires that:

internal and external stakeholders are identified

the opportunity team understand what is known about the stakeholders; attitudes, interests and influence, and potential routes for engagement

a plan for stakeholder engagement is created which aims to understand stakeholder perspectives, attitudes and interests and creates internal alignment. Best practice plans include a strategy considering sequencing of engagements.

4.2.4 Opportunity Assurance PlanThe Opportunity Assurance Plan (OAP)5 sets out an agreed set of activities and deliverables that are collectively designed to provide confidence that the opportunity will be / has been undertaken in a manner that will meet objectives. The OAP must include the assurance activities and deliverables that are mandated in the relevant Businesses involved, and may include additional assurance activities and deliverables as considered appropriate by the DE/DRB and Team.

Establishing the OAP is the responsibility of the Business Opportunity Manager (BOM) who is accountable for its creation and delivery. The DE must approve the OAP and the Terms of Reference for the major external assurance reviews.

[In the case of Large Complex Transactions the key elements of the OAP will be recorded in the Deal Sheet.]

5 Accountability for the opportunity always remains in the Line of Sight , but various parties, internal or external to this Line of Sight, can be responsible for providing assurance. Some (external) forms of assurance can have the dual purpose of providing counsel to the Line of Sight, as well as providing confidence to Businesses and/or Functions that requirements will be met. In capital projects in EP, the OAP is known as the Project Controls and Assurance Plan (PCAP).

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5.1 Scaleable Application of the Opportunity Realisation ManualThe application of the Opportunity Realisation Manual should be scaled appropriately for the opportunity, dependent on its dimensions, associated risks and the timescales involved. The detail of how the Opportunity Realisation Manual will be applied on a particular opportunity must be agreed between the BOM and the DE. Individual businesses may have additional mandatory requirements for some opportunity types, and where this occurs the BOM and DE will also need to ensure they are addressed.

The scaleable application of the Opportunity Realisation Manual is illustrated below for three opportunities, which have different financial dimensions and risks.

5.2 Opportunity Archetype GuidesTo assist in the practical application of the Opportunity Realisation Manual a number of Archetype Guides have been created. These Archetype Guides, available in a variety of formats, outline typical activities for different opportunity types but are not intended to be exhaustive or comprehensive. Users should view them as guidance, not as checklists.

The Archetype Guides will typically include a number of the following elements

A pictorial illustration of the typical activities of an opportunity Helpful illustrations: e.g. typical team structure, risk matrix, Opportunity Roadmap A narrative describing the key activities in each of the ORP phases Quick-look tables outlining key activities in each of the ORP phases Additional useful information sources

The Archetype Guides include reference to all the mandatory requirements of the Opportunity Realisation Manual and also to Business and Function Standards and guidance, where appropriate.

5.3 Opportunity management and other requirementsThe Opportunity Realisation Manual sets out mandatory requirements to be applied to opportunities across Shell. However, for particular opportunity types, additional mandatory requirements defined by Shell Businesses and/or disciplines and guidance on professional practice may also apply. For instance, there is a business requirement in EP that ESARs are carried out for all field development opportunities. At the discipline level in EP, the Discipline Controls and Assurance Framework (DCAF) provides the standard approach towards Quality Assurance (QA) and Quality Control (QC).

5 Guidance on the Practical Application of the ORM

Small Financial DimensionsLow Risks

Moderate Financial DimensionsModerate Risks

Large Financial Dimensions Large Risks

DE links to VP or EVP EVP EVP or ED or CE

DRB Small, but sufficient to provide the needed support. In some instances the DRB may be limited to those who sign-off the proposal, organisational approval and finance co-signature.

The DRB must be able to provide the support for such an opportunity. All key functional and business expertise should be represented, including the future owner.

The DRB must be able to provide the support for such an opportunity. All key functional and business expertise should be represented, including the future owner.

Framing Mostly in team. All TECOP aspects reviewed. Input requested where there are gaps. Typically 2-4 hour formal OF session needed. Written output.

Team plus input from peers outside team. All TECOP aspects reviewed. Typically 1-2 day facilitated formal OF session needed. Written output.

Extensive exercise, involving team plus input from peers. Typically 2+ day facilitated formal OF session needed. Written output.

Roadmap, Risk/ Opportunity and Stakeholder Management

Simple Roadmap, reflecting limited complexity of opportunity. Risks and Stakeholder issues must be understood and plans made to address these.

Roadmap outlines the plan to address issues and deliver the opportunity. Risks and Stakeholder issues must be understood and plans made to address these.

Roadmap reflects work-plans of multiple work-streams working on the opportunity. Risks and Stakeholder issues must be understood and plans made to address these.

Opportunity Assurance

Assurance plan weighted towards peer assistance and challenge. Discipline controls and assurance is applied in all opportunities, regardless of size.

Assurance plan includes peer and (formal) technical and other functional assistance and challenge plus formal external challenge, including on key technical functional deliverables (e.g. in EP the Field Development Plan and Project Execution Plan) at key decision gates, as either agreed by DE or stipulated by Business requirements (such as mandated VARs in EP).

Plan includes peer and formal (technical) functional assistance and review and formal external challenge on key (technical) functional deliverables (e.g. in EP the Field Development Plan and Project Execution Plan) at all key decision gates as either agreed by DE or stipulated by Business requirements (such as mandated VARs and ESARs (in e.g. EP).

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Archetype Guides Illustrative examples, using a variety of formats, of how the ORM, other manuals within the Shell Control Framework, and other Business/discipline requirements are used complimentarily to develop the opportunity in a generic category of opportunities (= Archetype).

Assurance Assurance is an objective, systematic and independent process of ensuring that the business risks, e.g. opportunities of projects, are adequately managed to achieve stated business objectives through adherence to prescribed policies, standards and procedures. (see also Quality Assurance).

Business Opportunity Manager (BOM) The individual responsible for the day-to-day management of the opportunity, who is accountable to the Decision Executive.

Deal Sheet A standard format for registering all relevant aspects of an opportunity, used for all large commercial opportunities [http://sww.shell.com/sx/commercial_academy/framework/framework_deal_sheet.html].

Decision Gates The point where an opportunity moves from one phase to the next.

Decision Executive (DE) The individual who provides steer, supervision and support and is fully and personally accountable for the decisions made relating to the opportunity, the overall delivery of the opportunity and for quality assurance.

Decision Review Board (DRB) The team, consisting of individuals with the appropriate functional expertise, which advises and supports the DE and BOM.

Estimate and Schedule Assurance Review (ESAR) A review which provides an independent assurance that project schedule and cost estimates accurately represent the project scope and the risks to project delivery, and are compliant with Group project guides.

Headline size Refer to the Investment Decision Manual for definition.

Investment Decision Manual (IDM) A separate manual, which provides mandatory instructions on the application of the Group Governance and Management Standards and Delegation of Authority process in relation to Investment (/Divestment) and Financing Proposals. The ORM does not contradict any mandatory requirement in that manual. [http://sww.shell.com/finance/authorities].

Investment Proposal Refer to the Investment Decision Manual for definition.

Joint Venture Manual (JVM) A separate manual, which provides mandatory instructions on the application of the Group Governance and Management Standards with respect to joint venture governance. The ORM does not contradict any mandatory requirement in that manual.

Line of Sight (LoS) The clearly documented single chain of accountable relationships that exist during the lifetime of an opportunity from each member of the Opportunity Team, upwards via the BOM and the DE to the individual in the Shell organisation with the appropriate delegated organisational authority.

Mandate The document agreed between the BOM and the DE, which sets out the opportunity objectives, boundary conditions and assumptions. It also describes the governance structure and the opportunity team make-up.

Opportunity Assurance Plan (OAP) A mandatory deliverable in the ORM, which sets out the assurance activities that will be undertaken to enhance the decision quality around the opportunity. (For Capital Projects in EP, the OAP is known as the Projects Controls and Assurance Plan (PCAP)).

Opportunity Framing (OF) A structured set of activities involving all members of the opportunity team, which are collectively designed to define the ultimate objective of the opportunity, deliver an Opportunity Roadmap, Opportunity Quality Assurance Plan, Stakeholder Engagement Plan and Risk Management Plan.

6 Glossary

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Opportunity Realisation Any activity that, if pursued through to execution, will require an Investment or Divestment Proposal (as detailed in the IDM). These include capital projects, acquisition/divestment opportunities or integrated cross Business opportunities. Long-term purchase and sale commitments are not included in this definition.

Opportunity Realisation Process (ORP) The process for managing opportunities and on which the ORM is based.

Opportunity Roadmap A high-level plan for the opportunity, showing Decision Gates and the main deliverables and activities per phase.

Opportunity Realisation Manual (ORM) Manual which sets out the common approach to the management of opportunities across Shell.

Proposal to Commence Negotiations (PCN) Refer to the Investment Decision Manual for definition.

Project Manager The person, who is specifically responsible for the development and realization of the hardware of the assets in a capital project. If the Project Manager is responsible for the entire opportunity (across TECOP dimensions), the Project Manager is in fact the Business Opportunity Manager.

Quality Assurance Part of quality management, focused on providing confidence that quality requirements will be met.

Quality Control Part of quality management, focused on fulfilling quality requirements.

Risk Management Plan An inventory containing risks and opportunities associated with the opportunity together with actions planned to influence the likelihood of occurrence.

Shell, the Shell Group, or simply the Group: Collective terms used interchangeably for companies in which Royal Dutch Shell plc holds a controlling interest, either directly or indirectly, including itself.

Shell International Limited 2008

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Documents

Opportunity Realisation Manual