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Making it easier to do business with Shell

Downstream Contracting & Procurement - Guide for Suppliers

“The Shell organisation places great importance on building mutually beneficial relationships with its suppliers and believes that a principled approach to business is key to our long-term success.”

Contents


Introduction 1

About Shell 3

Shell General Business Principles 4

Honest and open 5

Making our position clear 5

Diversity and inclusiveness 6

Conflict of interest 6

Commitment to sustainable development 6

Health, Safety, Security and Environment (HSSE) 6

Shell Downstream 9

Contracting & Procurement in Shell Downstream 11

Supplying to Shell Downstream 11

Health, Safety, Security and Environment (HSSE) 11

Working on Shell Downstream sites 11

Escalation 11

Master data 12

Prequalification of potential suppliers 12

Category management 13

Contracts 14

Electronic trading 14

Shell Downstream Supplier Portal 14

Purchasing routes 14

Deliveries 16

Confirming receipt of goods and services 16

Invoicing and payment 17

Disclaimer

This guide is solely for illustrative purposes.

Shell does not represent that the information contained herein is comprehensive. The guide is in particular not intended to form or serve as a basis for any contracting, investment or business decision by any recipient, and Shell shall not be liable for any such decision. The recipient is advised to carry out her or his own analysis and assessment and take appropriate advice from experts. This guide does not constitute any offer or legally binding commitment by Shell.

The information contained in this guide is up to date for July 2010. Shell reserves the right to amend this guide at any time. Prior to doing business with Shell please contact us to validate any information and to obtain required additional information.

“Our vision is to achieve operational excellence in our purchasing process and to deliver the right goods and services, to the right place, at the right time, in the most cost-effective way.”


Introduction

Making it easier to do business with Shell

Shell companies are committed to providing both our customers and suppliers with quality service and consistent information wherever they are in the world. This means that we are introducing simpler standard processes and systems to improve the way we do business.

Our vision is to achieve operational excellence in our purchasing process and to deliver the right goods and services, to the right place, at the right time, in the most cost-effective way.

Purpose of this guide

This guide outlines our core values and sets out how these values are applied in the activities referred to in this guide. It also describes the effect of our suite of standard procurement processes on our requirements of our suppliers.

The guide provides an overview to existing and potential suppliers to Shell Downstream companies on what:

- is expected from them- our organisation looks like- we require from our suppliers in practical terms and

standards of behaviour- suppliers need in order to transact successfully with us in

practical terms- our requirements are as we roll out our Global

Procurement processes.

Shell is committed to transacting with its suppliers in a transparent and ethical manner, in accordance with the Shell Code of Conduct and the Shell General Business Principles

Who is this guide for?

This document is intended for third party suppliers who provide goods and services to any Shell Downstream companies that have implemented the Global Procurement processes and the Global SAP transactional system.

Downstream Contracting & Procurement - Guide for Suppliers 1

http://www.shell.com/home/content/aboutshell/who_we_are/our_values/code_of_conduct/


http://www.shell.com/home/content/aboutshell/who_we_are/our_values/sgbp/

2

“To become the most competitive and innovative energy company in the world. Powering progress together - we

work together with customers and partners to create better energy solutions for a changing world.”

2 Downstream Contracting & Procurement - Guide for Suppliers

About Shell

Shell is a global group of energy and petrochemicals companies. With around 101,000 employees in more than 90 countries and territories, Shell helps to meet the world’s growing demand for energy in economically, environmentally and socially responsible ways.

We believe that oil and gas will be integral to the global energy needs for economic development for many decades to come. Our role is to ensure that we extract and deliver them profitably and in environmentally and socially responsible ways.

Our strategy and priorities for the future are to become the most competitive and innovative energy company in the world. An energy company whose primary business area is in oil, gas and chemicals. In this fast-changing world, Shell needs to be an energy company that powers progress together with its customers and partners.

At Shell we believe that a principled approach to business is key to our long term success.

Our core values – honesty, integrity and respect for people – have formed the basis of our General Business Principles for 30 years and remain as important as ever.

Our aim is to meet the energy needs of society, in ways that are economically, socially and environmentally viable, now and in the future.

Read more on our website www.shell.com


http://www.shell.com

We aim to work with integrity and support fundamental human rights in line with the legitimate role of business wherever we operate. We continue to apply our General Business Principles even as the search for oil and gas takes us into challenging locations and politically sensitive countries.

We are judged by how we act - our reputation is upheld by how we live up to our core values honesty, integrity and respect for people. Our eight Business Principles are based on these core values and indicate how we promote trust, openness, teamwork and professionalism, and pride in what we do.

Read more about the Shell General Business Principles on our website www.shell.com

We would like to draw your attention in particular to, but not limiting to, the following:

Shell Code of Conduct

Our Code of Conduct describes how the Shell General Business Principles must be applied. We support our staff and contractors in meeting our standards and react appropriately when violations occur.

Shell Code of Ethics

4

Shell General Business Principles

Downstream Contracting & Procurement - Guide for Suppliers4

http://www.shell.com/home/content/aboutshell/who_we_are/our_values/sgbp/


http://www.shell.com/home/content/aboutshell/who_we_are/our_values/code_of_ethics/

5

“Integrity, mutual trust and respect are the key components in our business relationships with suppliers.”

Honest and open

We aim to be fair, honest and open in every aspect of our work and our relationships with others. Since 1997, we have voluntarily reported on our environmental and social performance. We believe that it matters to our staff, to our shareholders, and to the governments and people of the countries in which we work.

Making our position clear

Shell’s position is that business has no mandate to participate in party politics, but Shell companies do have the right and responsibility to make their position known on any matter which affects them, their employees, their customers or their shareholders.

They also have the right to make their position known on matters affecting the community where they have a contribution to make.

Shell companies do not make donations to political parties and we treat this issue in the same way as bribery and corruption. We report annually on the implementation of our policy of no political payments.


Diversity and inclusiveness

At Shell, we see a diverse staff and an inclusive work environment as vital to building relationships with employees, customers, suppliers, partners, governments and other stakeholders.

Conflict of interest

Our commitment to business integrity is clear and unequivocal. Shell companies insist on honesty, integrity and fairness in all aspects of business and we expect the same in our relationships with all those with whom we do business.

We would like to draw your attention in particular to, but not limiting to, the following:

Shell Code of Conduct

Shell Code of Ethics

Commitment to sustainable development

We have a comprehensive set of business principles and rigorous standards to cover health, safety, security, environment and social performance.

Shell has publicly reported on its progress in contributing to sustainable development since 1997.

You can download a copy of Shell’s latest Sustainability Report from our website www.shell.com

Health, Safety, Security and Environment (HSSE)

Shell companies have a systematic approach to HSSE management designed to ensure compliance with the law and to achieve continuous performance improvement. We expect our suppliers to meet our HSSE requirements.



http://www.shell.com/home/content/aboutshell/who_we_are/our_values/code_of_ethics/

http://sustainabilityreport.shell.com/2008/servicepages/welcome.html

http://www.shell.com/home/content/environment_society/safety/


“We comply with all applicable laws and regulations of the countries in which we operate.”



“What matters to our business matters to Contracting & Procurement.”

Shell Downstream

Shell’s Downstream business encompasses all the activities necessary to transform crude oil into Shell petroleum products and petrochemicals, and deliver them around the world. Downstream Classes of Business refine, supply, trade and ship crude oil worldwide, and manufacture, transport and market fuels, lubricants, bitumen, LPG and bulk petrochemicals for domestic, transportation and industrial uses.

Read more on our website www.shell.com or visit your local country website to find out more.



Contracting & Procurement in Shell Downstream

We procure an average of $40m of non-hydrocarbon goods and services from third parties on behalf of Downstream businesses every day. The purchase and supply of everything from pencils to pipelines is down to us.

Shell Downstream’s ability to establish robust and mutually beneficial relationships with our suppliers and contractors lies at the heart of all Shell Downstream operations.

Supplying to Shell Downstream

Health, Safety, Security and Environment (HSSE)

Shell Downstream expects its suppliers to maintain high standards of health, safety, security and environmental performance, for quality, innovation and commercial ethics.

Working on Shell Downstream sites

Safety is the number one priority for Shell Downstream and strict conditions apply for working on Shell Downstream sites; these are non-negotiable. Therefore provision of the service must be according to the contract, the conditions for working on site, and the agreed time schedule including completion of the work by the agreed date and according to relevant Shell Downstream HSSE standards.

Escalation

The Shell Global Helpline provides suppliers with the means of reporting to us any concerns over unethical behaviour on the part of Shell employees. This confidential helpline can be accessed via our company website www.shell.com





https://www.compliance-helpline.com/Shell.jsp

Master data

The integrity of our master data is key to the efficiency of our operations. When appropriate we will work with suppliers to develop product master data.

Content provided by Shell, Public Exchange and Direct Suppliers is also supported, which enables suppliers to create data once and publish many times. This facility makes it easier to update information and reduces errors.

Prequalification of potential suppliers

Shell Downstream is no different from any other responsible organisation in that it needs to be satisfied that potential suppliers are suitable to supply to Shell Downstream companies. Therefore all potential suppliers to Shell Downstream must undergo an appropriate appraisal to ensure that the HSSE, Quality, Commercial and Financial status of their organisation matches the robust standards set by Shell Downstream. This means that no business can be committed to with potential suppliers until they have undergone successful prequalification. Typical, but not exhaustive, criteria include:

Technical expertise •Organisation (people, facilities, equipment) and •capabilities HSSE policy/record •

Quality Assurance system •Industrial and employee relations history •Financial status •Continuous improvement ethos/innovation capabilities •Sub-contractor management •Reputation management/business ethics policy/record. •



“The integrity of our master data is key to the efficiency of our operations.”

Category management

Value

Like any other sensible organisation Shell Downstream looks for best value from its suppliers. However, we aim to buy a package of attributes from suppliers and competitive pricing is just one of the attributes that make up the total lifecycle cost, so our decisions are not made purely on price.

Quality

It is essential that goods and services supplied to Shell Downstream are fit for purpose and comply with our specifications.

Innovation

Shell Downstream believes in working in partnership with its suppliers. It is important for us to develop and build relationships with suppliers who strive for continuous improvement and have the ability to take the initiative and offer suggestions for improvements.

Category management and contracting process

Shell’s procurement processes are designed to identify, evaluate and select suppliers based on merit and their capabilities to meet Shell’s requirements. Shell will award business to suppliers based on best total value principles.

Shell has a commitment to high ethical standards in all of its business relationships and expects the same level of commitment from all of its suppliers. We actively manage supplier performance and relationships and readily seek supplier input to improve processes and lower costs.

Shell’s key suppliers should expect to participate in regularly scheduled business performance review meetings and be subject to periodic audits. Integrity, mutual trust and respect are the key components in our business relationships with suppliers.


Contracts

Prior to and as a prerequisite to any supplier relationship, either a full contract or the acceptance of Standard Terms & Conditions of Purchase is obligatory to doing business with Shell.

Depending upon the part of the Shell Downstream business that you supply you may be required to agree a Service Level Agreement. This will be part of the commercial terms.

Electronic trading

Shell Downstream supports electronic trading. We will inform you of the preferred electronic exchange. Shell Downstream will work with suppliers to develop the most efficient means of transacting and help both parties to reduce processing costs and avoid errors and rework.

Shell Downstream Supplier Portal

Shell Downstream is able to provide selected suppliers with access to the Shell Downstream Supplier Portal. The Portal is a single-sign-on web-based portal that enables selected suppliers to view and update purchase orders, review remittance advice documents and access other useful functions. This dispenses with the need for fax and paper orders by enabling suppliers to collect and acknowledge purchase orders from a web portal.

Purchasing routes

Shell Downstream has three approved purchasing routes:The • Global Credit Card should be used where appropriate. Suppliers may be expected to arrange for acceptance of such credit card before they can do business with Shell Downstream. Purchase Order• is the default if a credit card is not used. An official purchase order will be issued. To ensure prompt payment the purchase order number must be quoted on invoices. Invoice Only• process is an exceptional process used for a very limited number of categories. This means that an official purchase order will not be issued. The supplier will be advised if the category is ‘invoice only’.

In addition, we will inform you where we make use of Consignment Inventory – Maintenance Repair and Operating (MRO) materials.

Consignment inventory will be managed by Shell’s Enterprise Resource Planning (ERP) system regardless of whether inventory is managed by Shell or by the supplier. The details will be defined in a specific consignment agreement.


“Shell’s procurement processes are designed to identify, evaluate and select suppliers based on merit and their capabilities to meet Shell’s requirements.”


Deliveries

Deliveries of goods must be according to Shell Downstream’s requirements and must be made to the address stated on the purchase order. Deliveries to the wrong address will be returned.

Confirming receipt of goods and services

All goods and services will be formally receipted through Shell Downstream Enterprise Resource Planning (ERP). Inability to receipt may prevent the payment period from starting. Suppliers must ensure that:

Delivery documentation is accurate and clearly references •Shell’s purchase order and applicable material numbersAppropriate certification is supplied where required •(e.g. mill certificates, certificates of analysis)Material Safety Data Sheets (MSDS) are supplied •where requiredMaterial is packaged in compliance with Shell’s •requirementsInvoices are sent only when the work is complete.•


Invoicing and payment

Invoices

In order for the payment period to start invoices must be correct and complete. Suppliers should not accept any orders without an official purchase order number unless it is a credit card purchase. This means invoices must:

Be legible and not handwritten •

Quote a valid purchase order number•

- Official purchase orders have 10 digits and always start with 4500

Not quote more than one purchase order number•

Quote the correct invoice address•

Quote the agreed price and quantity•

Quote the agreed payment term•

Meet legislated VAT requirements•

Be arithmetically correct•

Be sent to the correct central address•

Incorrect invoices will be returned.

Invoice Format

Where allowed the preferred format is PDF. Country specific address and additional requirements will be detailed within purchase orders.

Electronic payment methods

Shell Downstream supports EDI (Electronic Data •Interchange).Shell Downstream supports EFT (Electronic Funds Transfer).•Shell Downstream supports ERS (Electronic Receipt •Settlement), also known as Self Billing.

“Shell Downstream believes in working in partnership with our suppliers.”


Standard payment terms

Shell Downstream has standard payment terms that are applied globally and locally. The Payment due date will be calculated from the date of receipt of a correct invoice that complies with all tax and legal requirements as well as any requirements Shell may request.

Remittance advice

Shell Downstream has the capability to email remittance •advice documents, which informs suppliers of invoices that have been passed for payment and removes the need for telephone enquiries. Selected suppliers will be able to view their remittance advice •documents via the Shell Downstream Supplier Portal.

“The East is an increasingly important and growing market for Shell.”


The companies in which Royal Dutch Shell plc directly or indirectly owns investments are separate entities. In this document the collective expressions “Shell”, “Group”, “Shell Group” and “Shell Companies” are sometimes used for convenience where references are made to the companies, including Royal Dutch Shell plc, in which

Royal Dutch Shell plc either directly or indirectly has control either through a majority of the voting rights or the rights to exercise a controlling influence or to obtain the

majority of the benefits and be exposed to the majority of the risks. These expressions are also used where there is no purpose in identifying specific companies.

© Shell International Petroleum Company 2010

Restricted. Permission should be sought from Shell before any part of this publication is reproduced, stored in a retrieval system or transmitted by any other means.

www.shell.com

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