• China lends Nigeria Dollars 2bn in exchange for oil talks. • Ft com site : China oils Nigeria talks with loan

invested $5.3 billion in 2007 and we divested about $2.5 billion. We also took the decision in 2007 to proceed with the Port Arthur refinery expansion in the U.S. and made some growth investments in marketing, one in Malaysia and some in the Ukraine.
Now let me point out to you one thing on this slide because a number of times in the past I have pointed out to you that high refining margins of 2005/2006 were not the last. So have a look now at the consistent contribution of our marketing business, that's the red piece in the slide, that provides an excellent hedge against declining industry manufacturing margins and has done so over the years.
In recent years we have taken some major steps towards reshaping our manufacturing portfolio. We have made several refining divestments as we continue to streamline our portfolio and redeploy that cash. And we invested in larger and more complex manufacturing facilities. Last year we completed the sale of Los Angeles refinery. In France we are still working on the sale and we're progressing the sale of our three French refineries and we are very hopeful we can wrap this up in the first half of this year. We also sold small percentage ownership in refineries in western Africa and of course you probably read the industry sale of the Kenyan refinery environment.
Following these portfolio changes we maintain our position as number two global refinery. That's about 4 million barrels a day and we will reinvest the proceeds of the manufacturing sides through the Port Arthur refinery expansion and the development in Singapore and petrochemicals. The Nanhai complex that I've talked to you a number of times about is doing very well and is having a great contribution to our bottom line at this point. By 2010 then our average refining size is expected to increase by some 20%, so that's the size of each individual refinery rather than the total refining envelope. And we also will have greater flexibility in terms of capturing margins.
On the next slide we'd like to zoom down on some of these investments. In Port Arthur expansion we're looking at a world-class state-of-the-art facility, one of the largest refineries in the U.S. We need large complex refineries with a broad appetite for crudes, including the poorest grades, because they are the only ones that will be successful in a poor margin environment in refining. Saudi Aramco is fully supporting this project, it enables us to be competitive when the marketing conditions are good or bad. Progress to date, 98% of the fixed equipment is purchased, 67% of all materials is purchased as well. Some 6,000 piles of 52,000 piles have been driven and the construction workforce is about 1,400 workers.
On the other side of the globe in Shell Eastern Petrochemical complex in Singapore is Shell's largest ever chemicals investment that really fits our desire to grow out east. The cracker and the new MEG plant will create an advantage site in Bukom refinery and it uses many of the low-value streams in Bukom in order to get upgraded. Again here we have tremendous support from the Singapore Economic Development Board. More than 90% of the main contracts for this project have been placed. There's about 6,000 people working across ten locations in the globe to deliver this project. Both projects are scheduled to start up by the end of the decade.
The our west to east marketing portfolio, I mentioned that to you over the last couple of years as well. There's significant progress in expanding our presence in a number of key markets while withdrawing from those markets that we consider non-strategic or non-profitable. Our key achievement in marketing is our position as the number one global branded fuels retailer and the number one global branded lubricants marketer by market share.
Very early in the decade, in 2000/2001, we took the decision to get out of the direct retail business in the U.S. and switch to a wholesale class of business. We're nearing the end of that transition. 85% of our 14,400 retail stations in the U.S. have switched to the wholesale brand and we have achieved to increase sales volumes and markets, including differentiated fuels. Also the sale of these assets have been a good cash contributor to the total cash number of divestments that I mentioned before.
Scandinavia, we are expanding by 269 retail stations and then finally some eastern ventures in the Ukraine, 150 sites together with alliance company, doing very well, increased volumes throughout all sites. In Malaysia we bought the Conoco Jet retail service stations and in Turkey we're seeing tremendous success in terms of gaining market share of a retail joint venture there with Turcas. This is in addition to other businesses, for instance bitumen and lubricants, that we're growing fast in the east.
Next slide. Now let me take Germany as an example as to how we can even grow our business and improve our business in an existing market. It is the largest downstream market in Europe and it's a key market for Shell. We have the largest refinery in the country and we're a leader in retail. Our German operations are highly integrated with operations in the Netherlands and we have a strong vertical integration between refining, chemicals and the marketing businesses.
We have maintained a very low level of employment down time. If you consider Salym in first quarter ought to be a 4%, you see that our German business does very well. A lot of this is operational excellence and as a result of that we also have increased our high average throughput for retail sites while the industry is declining. And we've grown our market share significantly over the past couple of years in Germany, strong brand position. In lubricants we achieved 9% volume growth in 2007 compared to 2006 as a result of a lot of initiatives including the capture of new business. And this is against the backdrop of a declining market.
Next slide we talk about operation excellence in manufacturing. The left top corner shows you process safety, it's of course extremely important for our industry in terms of the safety, the integrity of our operations. The number of incidents has come down and we've been working on these since the late 1990s to improve the performance of the plant. It's also a major integral part of our reliability drive.
Refining costs including energy as shown as well, we have improved since 2002 and in 2006 we were about 8% below industry average. But there's no room for complacency here and we'll continue this drive. Refining availability has reached a plateau and a more challenging environment will force us to find ways to even make our refining operation more robust and create higher integrity.
Now I'd like to show you the figures for some of the marketing businesses which we haven't done in the past. And because it's a major part of it and has actually over taken refining in terms of profitability, I'd like you to understand what we're doing here. First of all our aspiration is to maintain and grow our position as number one global branded fuels retailer. We have the largest branded retail network in the world, we've got 46,000 service stations which is higher than some of the well-known food chains around the world.
We have indications that Shell is the most profitable retail business in the industry. Our retail earnings continue to grow in an extremely competitive environment. We have begun a journey of simplification and standardization and are reaching high efficiency and operational excellence. For instance, our business models in retail used to be about 160 different business models, we are now down to four. Average throughput per site has grown by some 6% and this helps unit costs to come down and improve our competitive position.
Amongst IOCs Shell sells the highest gasoline volumes globally through our retail chain with a strong footprint throughout all regions. So through our strong brand and focus on quality fuels we plan to maintain the position of being the undisputed preferred brand amongst oil majors, which is greatly helped, by the way, by our differentiated fuels position and our Ferrari relationship. The differentiate fuels actually enable us to be very profitable even in a very low retail environment.
Then we'll talk about lubricants in the next slide. Our global journey in lubricants is basically founded on a number one leadership position in branded automotive and selected industrial lubricant segments. We're number one also in customer satisfaction and loyalty amongst IOCs in China and in the U.S. Key component, and this is something we've focused on very strongly over the last couple of years, is a very strong sales culture.
And that's supported by advanced technology and technology development with a great momentum of growth in China and Russia and strengthening our positions in the U.S. and Western Europe. This continuously again boils down to operational excellence. In the supply chain, as indicated here, it's demonstrated that two-thirds of our lube oil blending plants are in the first second quartile in terms of performance. Together with other initiatives as process standardization and the implementation of simplified business model, we try to capture a high value in smaller, less strategic markets and we basically work on our unit costs [off the serve].
In the next slide we'll show what the collection of our commercial businesses is and we call this B2B marketing. This basically contains aviation, bitumen, commercial fuels, LPG and marine and we also added Sulphur Solutions. So it's interesting to see here that actually our commercial volumes are higher than our retail volumes if you count them all together. So it is a major business in itself.
Shell Aviation last year was named the best marketer by the airlines. It supplies about 900 airports in 70 countries and is refueling a plane every 12 seconds. In February 2008, the Airbus A380 was the first commercial aircraft to fly on Shell's synthetic jet fuel processed from gas to liquids.
On Commercial Road Transport, this is the huge network of services that we give to trucking business across Europe and other places, has a card system in place across 12,000 sites across Europe. Shell Asphalt business is growing very quickly in China, China's infrastructure is growing 6% a year and we're a good participant in that growth of the market by supplying the bitumen. Marine products began the first delivery of bulk fuels to international customers who are calling at the Port of Shanghai in China.
Then our marketing business in chemicals, since '99 we have divested non-core assets to focus on a tightly integrated portfolio of businesses. Shell's chemical portfolio, we've told you before, is based on a strategy and still is, cracker plus one. Crackers provide base chemicals, principally ethylene and propylene, which are then turned into further derivatives. Our manufacturing chemical sites demonstrated good reliability.
As the chart shows, we have over the recent years sustained high availability at our plants. 2006 was impacted by major plant maintenance activities. In our returns on a rolling four quarters basis we have increased every quarter in the last two years and we moved actually in second position amongst our peers as a result of the increased integration with refining and the full benefit of the Nanhai complex.
Trading earnings remained very strong in 2007, however the result was impacted by less favorable trading conditions than we had in 2006. The year saw a move from Kashagan to flat backward dated market structure, lower average volatility and periods of high volatility being driven by non-oil commodity related events like the credit crisis. The trading business continues to grow. Traded volumes, trading locations and a number of trading products continue to increase. Integration of E&P in particular across the downstream continue to unlock value.
There are a number of areas in trading which we believe are key and we need to be excellent in. Number one is we're trading off a huge infrastructure. We have a global presence with a global portfolio and globally traded products. We have an excellent financial control framework in place and we can do feedstock optimization across the refining system.
And on top of that we're number in freight movement for both crude and oil in the world. So that is a tremendous infrastructure to build this business on. That's the arguments I'd like to make around our marketing business and just to place it in context for people that are focused on refining and don't find this marketing site very transparent.
Now I'd like to say a few words about biofuels. We are the largest distributor of biofuels in the world right now with 5 billion liters blended in 2007. And that's a growth from 3.5 billion liters in 2006 and we continue to invest in infrastructure and capability. Let me point out to you that not all biofuels are the same.
Managing sustainability issues linked with increased production of biofuels is critical. Shell currently procures, trades, blends and distributes first generation biofuels. We introduced the sustainable sourcing policy in 2007. This is a complex challenge but we are working closely with our suppliers pressing for social and environmental safeguards and looking for certification.
We're also working hard on new biofuels, as Jeroen mentioned. There are a number of technology pathways to the better generation or next generation biofuels. They look very promising and we've quadrupled our investment. The task here is to make sure that lifecycle CO2 is low, they have low impact on food production and pricing and that the performance of the fuel is high. And of course the whole thing needs to be commercial viable.
The public debate on these issues is intense but we feel that we have a number of good future prospects. We're pursuing a wide development program, one is with Iogen in Canada on cellulosic ethanol and Choren in Germany on biomass to liquids. We also announced a collaboration with Codexis on enzyme technology. Most recently though we announced work with HR Biopetroleum on algae for feedstock. We've taken a majority position in a joint venture called Solana and we will construct a facility to grow marine algae and produce vegetable oil.
Advantages of course are obvious, I mean no food competition, they're fast moving organisms, they don't use fresh water, the salt water is good enough and there are no land use issues that we can see at this point. So our commitment to finding second-generation solution doesn't stop at the projects I talked about, there is a lot more R&D going on today.
Let me in conclusion wrap up with some messages. So we continue to achieve strong financial competitive performance. We continue to reshape our downstream portfolio in order to ensure that we're well positioned. We continue to focus on efficiency and cost. We continue to build on our leadership position in our sales and marketing businesses and these business activities provide a solid base for the downstream performance, especially in times of the declining refining margins. We continue to focus on our customers and our products and make them excellent.
And then also with external increasing pressures on our margins from volatile oil prices and increasing refining capacity, it's even more important that we run our [kit] safely and efficiently. We look into future fuels capabilities and finally we will continue to make this and to run this as a very highly profitable downstream business for Shell. Thank you.
MALCOLM BRINDED, EXECUTIVE DIRECTOR, E&P, ROYAL DUTCH SHELL PLC: Good afternoon, ladies and gentlemen. So 2007 was a good year for EP and I'm going to focus today on I think three key reasons why. The first is that we're really building our portfolio of new long-life low-decline positions. The second is that our resource and reserve space continues to grow. And the third is that we're delivering industrial leading unit cash flows and that really comes through our focus on top quartile reliability and project delivery.
So earnings were good, obviously on the back of high oil prices but also helped by that high reliability. And production was over 3.2 million barrels of oil equivalent, that's excluding oil sands and that was within our target range despite the particularly mild winter we had in Europe last year. Our capital expenditure is on track, our exploration drilling program was our most successful for seven years and importantly last year we stabilized both Sakhalin at the beginning of the year and the Kashagan joint venture at the end of the year.
We sanctioned eight significant new projects in 2007 and the majority of EP's capital expenditure is being spent on those long-life low-decline projects, which will be crucial to provide the solid platform for future production growth. In fact currently we have about 1 million barrels a day of production under construction.
Before we leave this slide, overall cash generation which included $5 billion from divestments, so we're still on the first slide, was very strong at nearly $30 billion. And you'll see that it was more than one third up on 2006. Let me say something about our divestments. We focus very much on late life and isolated assets, but we're also constantly looking to realize value at the right time rather than just chase volumes. And a good example of that was the Skarv project which we divested last year, at FID in fact, for $900 million because we saw that as the best time to maximize value.
This is a strategy slide. The left hand side is very familiar to you, it's the same strategy we've set for some years and it looks even more relevant today because it's all about sustaining Heartlands while seeking resource and price upside. Because it's obviously clear that competition for access has become tougher and that's why we focus so much on technology, on value chain integration and on global scale as being our key differentiators.
Now the simple roadmap on the right sets out the top priorities for our tens of thousands of staff and contractors in over 40 countries. And it provides them and is very well known by them, it provides them with very clear focus and direction. And this approach to clear guidance and alignment across the world is delivering results.
So let's see in reserves where you see our progress. Organic additions in 2007 were over 1.5 billion barrels of oil equivalent, that's a reserves-replacement ratio of 124%. Now if you go to the bottom left table where we include the reductions that you get in PSC contracts because of the high year-end closing price and there you see organic additions were still 109%. And that compares with an average for the four main competitors of around 80%. In fact for us over the last three years this ratio has averaged 113%. Now all these figures include mining reserves, which is just as I've shown it in previous years.
Now because of consolidation accounting affects, after Sakhalin dilution the 2007 RRR was 17%. However on the Shell equity net reserves basis the Sakhalin divestment was largely offset by the Canada acquisition and in fact there were other gains. So now if you look at the bottom right table, proved reserves attributable to shareholders, which is the volume that actually flows through to the bottom line, remained at 11.9 billion BOE, unchanged from 2006 and as you see, up 5% from 2005. There's further details at the back of the slide pack and of course lots in the 20-F published today.
I'm going to turn now from reserves to resources. And in this slide we show our resource base which is consistent with the new 2007 SPE definitions for total resources and we're showing it on an SPE 2P and 2C basis. And we aim to replace both reserves and resources over time. Now since 2005 our resources have increased by 6 billion barrels to around 66 billion BOE, which corresponds to a resource life of 55 years. Of course it's this that gives us the confidence that underpins our long-term production growth potential.
We've now added over 19 billion BOE since the end of 2004 from exploration and business development and this increase includes a substantial addition of heavy oil in Canada. Conventional oil and gas exploration has added over 4 billion barrels of resources over those three years, which is more than we produced. And in the same three-year period, as you see on the right, we've brought 5 billion of barrels on stream and took FID on projects, unlocking another 6 billion barrels, which means that today we have about 10 billion barrels in total under construction.
On to exploration where our strategy to explore in basins with proven hydrocarbon systems and running room has been very successful. In 2007 we added over 1.4 billion barrels of resources from exploration discoveries with 11 notable finds and five wells each added over 100 million barrels Shell share resources. Our three-year average unit finding cost remains below $2 a barrel. On top of exploration, appraisal and development drilling added another 600 million barrels. So that brings the total resource added from the drill bit to around 2 billion barrels in 2007.
In terms of acreage, since the start of 2007 we've now licensed 43,000 square kilometers of new and high quality acreage. And I'm especially pleased with the success we had in the Gulf of Mexico sale in the back end of last year and in the Chukchi Sea at the beginning of this year. The Chukchi offshore Alaska is the most prospective undeveloped basin in the U.S. And in both these cases our basin knowledge together with the proprietary seismic tools have been the key, have been fundamental, to giving us the confidence to go hard and win these bids.
Now what do we do with the acreage? Here are two examples of exploration of success. First in Australia where I think we've got a great gas position with equity in 18 gas discoveries of the largest 25 gas discoveries on the Greater North West Shelf. And the shelf contains over 150 tcf, trillion cubic feet of discovered gas with up to 100 yet to find. Now from Shell's perspective, in 2007 we drilled the 100% shell-owned Prelude discovery, finding some 2 tcf to 3 tcf which brings our discovered resources in the Browse Basin alone, that's the area shown on the left, to 9 trillion cubic feet.
Now moving to the right, the North Caspian, since the discovery of Kashagan we've found Kalamkas, Aktote and Kairan in the same basin, which has added over 500 million barrels Shell share of resources. And in 2007 we made another bit CAT discovery in the Khazar well in the 55% Shell share Pearls block. And we aim very much to fast track the further exploration appraisal and then development of this block.
Let me turn now to Canada where I think technology will be the key to unlock a tremendous set of heavy oil opportunities. And in Alberta we're now in full control, following the Shell Canada buyout, in full control of recoverable heavy oil resources in excess of 20 billion barrels. Now Rob's going to come back on the mining side, but on the in situ resources at Carmon Creek and Peace River, we plan to use vertical steam drive in a 100,000 barrel a day development, which has potential for further expansion. And that's a 100% Shell development.
But we also see great opportunities coming from our proprietary in situ upgrading process. This is important new technology. It allows high recovery rates of 50% or more and converts heavy oil into high quality product in situ. And the pilot for the technology at Peace River has produced some 100,000 barrels so far and we're now planning a field trial on the Grosmont acreage.
Now on to costs. As Jeroen showed, cost inflation is an industry-wide challenge. And I thought I'd take two examples of how we're dealing with it, focusing on drilling which is an area where on rigs alone we spend around $2.5 billion to $3 billion a year. And in 2005 we saw the growing global demand for rigs coming at us and booked much of our capacity in long-term contracts through 2009 and in cases with extensions, through to 2013. Since we did that market rates have trebled and as a result we expect to save $0.5 billion over the next two years.
But we've gone further, as you see in the lower part of the chart, by entering a 50% partnership with Frontier Drilling to build a totally new class of drilling vessel. The bully rig I think is a game changer because it's suitable for both deepwater and the Arctic. It provides fuel savings that are very significant and we see and expect to see a day rate about 20% less than the competition. And we'll be taking delivery of the first two of these rigs in 2010 on long-term contracts.
Now to projects and of course effective project delivery is key to our success. And I'll go through a series of time frames now starting with the last two years where we've grown tight gas production in the U.S. and in Changbei in