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Royal Dutch Shell CEO on the State of the Oil and Gas Industry


In a speech to the Asia Oil and Gas Conference in Kuala Lumpur, Royal Dutch Shell CEO Jeroen van der Veer noted the opportunities for the oil and gas industry, but underscored the challenges.

It is no exaggeration to suggest that the course of the 21st century will depend on this industry’s ability to meet the world’s energy needs without destroying our environment.

Those challenges offer many business opportunities. But we should not underestimate the challenge of turning prospects into reality.

Van der Veer outlined seven fundamental shifts in the market during his presentation.

  1. Developing Asian countries are now the primary drivers of growing energy demand, accounting for nearly half last year’s very rapid rise in oil consumption, and potentially consuming a quarter of the world’s oil by 2030.

  2. Concerns for supply security are rising as consumers become increasingly dependent on imported energy. Developing Asian economies could be importing three quarters of their oil by 2030. Europe even more. [The US also approximately three-quarters.]

  3. Global energy intensity—the amount of extra energy for each additional unit of GDP—is increasing. This reverses a long-term downward trend and reflects the scale of Asian development. (Chart at upper right.)

  4. Hydrocarbon resources are maturing, in major exporting areas as well as consuming ones.

  5. An increasing focus on the potential of unconventional oil and gas resources. This includes possibilities for using coal in new ways, as well as renewable sources such as biomass.

  6. The international gas (natural gas) trade is expanding very rapidly, in both the Pacific and Atlantic. It is no longer a buyers’ market.

  7. The challenge of carbon dioxide and climate change.

Energy prices, he acknowledged, are likely to remain high.

Economic logic suggests that high prices will reduce demand and encourage investment in supply. But the elasticity of energy demand is not clear, particularly in buoyant developing economies.

Prices also reflect uncertainty, in a system that no longer has sufficient spare capacity to be shock proof.

Projects now underway should reduce this tightness. But we must maintain the pace of investment in capacity. I think the necessary sustained, heavy investment in increasingly difficult and capital-intensive projects will require higher long-term prices than we have been used to in recent decades.

Unconventional oil and gas “is an essential part of Shell strategy.” In addition to the Canadian oil sands project, which Shell hopes to push to output of 500,000 barrels per day from the present 155,000, van der Veer highlighted the importance to Shell of Gasification and Fischer-Tropsch conversion to turn gas, coal and biomass into high-quality synthetic fuels.

The company has major GTL (Gas-to-Liquids) work underway in Qatar and a significant CTL (Coal-to-Liquids) work in China. Shell is also working on both BTL (Biomass-to-Liquids) and the enzymatic conversion of cellulose to make bio-ethanol.

Last year, the IEA forecast global energy consumption growing by some 60% from 2002 to 2030, two thirds from oil and gas, and estimated that some $16 trillion in investment would be required to support that level of output.

Van der Veer briefly noted that the investment required “could be more.”

The prospects for success for are not guaranteed, particularly without affecting the demand side of the equation through efficiencies or conservation.

A recent report available from ASPO analyzes the prospects of the Canadian Oil Sands resources and concludes:

The future Canadian oil sands production cannot even compensate for the combined declining conventional oil production in Canada and the North Sea. The most optimistic scenario will not manage to compensate the decline by 2030.

That report also accepts Shell’s target of a future 500,000 barrels a day, concluding that maximum daily output of crude produced from Canada’s oil sands will be somewhere in the 5 million barrel range (prior to its own peak event).

At the same conference, Iran’s senior deputy minister, ministry of energy, Dr Reza Amrollahi, emphasized that the stability of states in near future depends primarily on their capability to produce clean, secure and sufficient energy.

Dr. Reza identified Iran and Saudi Arabia as having the largest energy supply risk factors with heavy reliance on high risk energy resources (fossil fuels), and concluded with a recommendation for pursuing nuclear fusion.

“Considering all political aspects and the serious environmental issues involved with nuclear fission, the best remaining choice for energy production is the peaceful and clean nuclear fusion technology,” he added. (Bernama)



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