Potentials of conventional and alternative fuels

Companies like Shell play a critical role in the challenge to meet the world’s energy needs. In Rob Routs’ presentation at this year’s Magdeburg Environmental Forum, he draws on the theme of sustainable mobility to explore the potentials of conventional and alternative fuels. Outlining Shell’s Three Hard Truths of the energy landscape, Rob Routs maps out how Shell is working to meet rising energy demand and supply challenges, and combat the impact of this on the environment. He explains in detail the investment Shell is making in advanced environmental technology such as Carbon Capture and Storage (CCS), and innovative fuels such as GTL, hydrogen and biofuels to ensure we move closer to meeting this difficult challenge.

Potentials of conventional and alternative fuels

Since the marriage of fossil fuels and the internal combustion engine some hundred years ago, the fortunes of the energy and automotive industries have been tied together.

For the most part that marriage has been a force for good.  But, along with the good, our products also have exacted social and environmental costs – costs that are increasingly unaffordable.

The great challenge of our second automotive century will not just be to provide mobility but to provide mobility that is cleaner, safer, more efficient and more affordable than ever before.  Mobility that is sustainable.

It’s important to put this topic into context.  At Shell, we start most conversations about the future by acknowledging what we call the three hard truths about energy.

The first hard truth is that the world’s need for energy is growing. Fast.

When I joined Shell 35 years ago, there were roughly four billion people in the world using the equivalent of 100 million barrels of oil daily.  Today, there are 6.7 billion people using more than 228 million barrels of oil equivalent a day of primary energy.  By the middle of this century there could be nine billion people using twice as much energy.

The second hard truth is that conventional oil and gas – staples of our energy diet today – are becoming harder to find and produce.  There are still large amounts of hydrocarbons in the ground.  But what’s left will take huge amounts of technology, energy, money and patience to get at it.

The third hard truth is that given today’s technologies, more energy use means more CO2 emissions – at a time when the climate can ill-afford it.  To stabilize greenhouse gases in the atmosphere at anything like what scientists say is the upper limit – we need to cut the world’s emissions in half. 

How do we address the challenges of these hard truths?

Every four or five years a team of Shell thinkers develops a set of global scenarios, offering views of various energy futures over the next thirty years or so.  These scenarios help us – and others – pick the best strategies for moving forward.

We recently completed the latest Shell scenarios.  There are two of them:  one we call “Scramble,” the other, “Blueprints.” 

In the “Scramble” scenario, companies and nations rush to secure energy resources.  Energy security is seen as a zero-sum game with winners and losers.  A kind of “energy nationalism” breaks out, with nations pinning their hopes on locally produced coal and homegrown biofuels.  Nobody tackles consumption or climate change until something shocking happens to kick start radical action.  

The “Blueprints” scenario is no less challenging, but the landing is a lot softer.  In “Blueprints” the world anticipates the challenges of energy security, energy supply and the environment. Coalitions emerge across the private sector and among local and national governments.  Efficiency standards and greenhouse gas regulations are introduced, and policies converge across the globe. 

Normally Shell offers up its scenarios to the world without stating a preference.  This time is different, and we are advocating the far safer and more manageable Blueprints scenario and working with governments and other interested parties to move toward a Blueprints future.

Sustainable mobility will be a key element of that future.  From our perspective, that means transportation powered by sustainable fuels.

What will those future fuels look like?  For the most part, not too different than they do today.

Conventional fossil fuels will continue to be our primary source of energy for many years to come.  But we are going to have to be more thoughtful about how we get them, and how we use them.

For example, Shell is exploring ways of capturing and storing carbon dioxide as we extract fossil fuels.   We have been using some Carbon Capture and Storage (or CCS) techniques for more than 20 years in our oil fields.  We’re currently involved in carbon capture demonstration projects in Australia, Norway, and the Netherlands, and actively pursuing them elsewhere. 

CCS is not cheap or easy, but it could play a key role in reducing total well-to-wheel CO2 emissions from fossil fuels.

Our CCS projects are part of an overall effort to find and produce fossil fuels more efficiently, and with fewer emissions.  Our research and development spending in this area has increased sharply, from $500 million in 2004 to $1.2 dollars last year. This is far more than our competitors invest in R&D.  We also lead the industry in capital investment in energy projects.

Of course, one of the best ways to address our energy challenges is to find ways to use less of it.

As the number of cars in the world grows from a little less than a billion today to as much as 2 billion by 2030, it’s vital that we find ways to increase their fuel economy.  For Shell, that means developing better fuel formulas, working closely with automakers to help them develop more fuel-efficient powertrains, and educating consumers.

We have a history of making improvements to conventional fuels, and we will continue to do so. We’ve created gasoline specially formulated to increase fuel economy, as well as advanced lubricants that improve the energy efficiency of engines and moving parts.  We’re also working directly with automakers to optimize the combination of vehicle, fuel, and lubricant.  Daimler has, of course, been a long-time and valued partner with us in these efforts.

We also are involved in managing energy demand by helping our millions of retail and B2B customers use our products more efficiently, on the basis that small changes by all of us could make a big difference for all of us.

Our retail marketers surveyed 3,000 people in eleven countries and found that 60 % of them had never tried to improve the fuel economy of their cars.  So we developed a range of “FuelStretch” Tips to educate consumers to drive in a more efficient way.  Using these types of techniques, an unmodified production car broke the Guinness Round-the-World fuel economy challenge, covering 28,970 miles in using just twenty-four tanks of Shell fuel.

We also promote the goal of fuel efficiency through the annual Shell Eco-Marathons in Europe and North America, where teams of university students compete fiercely to produce a vehicle with the best fuel mileage over a given distance on the track.  This year’s European winner achieved an incredible 3,382 kilometers per liter.

In addition to using conventional fossil fuels more wisely, we also are working hard to develop alternative, low-CO2 sources of energy.  In the first half of this decade, we invested more than $1 billion in alternative energies including GTL, hydrogen, and biofuels.

We’ve been working for thirty years on turning natural gas to liquid – what we call GTL.  GTL significantly lowers local vehicle emissions (particulate matter, nitrogen oxides, carbon monoxide and hydrocarbons) compared to conventional diesel fuel.  It can be used in conventional diesel engines without the need for modification.  In fact, we already blend it with conventional diesel fuel and sell it in more than 4,000 Shell service stations in Europe and Thailand.

We have teamed up with a number of major cities around the world to see if GTL could have a positive impact on air quality and CO2 emissions in busy urban environments.

The results are promising.  The most recent test data, announced in Shanghai last September, showed that Shell GTL Fuel used in buses can reduce CO2 by 4%, particles matters by 35%, and black smoke emissions by 70% compared to conventional diesel.

Longer term, hydrogen offers the potential to substantially reduce emissions and increase energy security.  It is the world’s most plentiful element, so supply is not a concern.  It does not emit greenhouse gases and does not affect the quality of the air we breathe.  The only by-product of using it is clean, distilled water. Last week, Shell Hydrogen announced the opening of California’s first hydrogen refueling station on a conventional Shell gasoline forecourt in West Los Angeles (LA).

There are obstacles to be overcome, but hydrogen could become a commercially viable transport fuel in the years to come.  Shell is committed to bringing it into a retail setting as a fuel.  We already have hydrogen filling stations in the US, Europe and Asia, and are working to develop mini hydrogen networks in urban areas.

Unfortunately, the widespread use of hydrogen as a power source could take a decade or more.  We need to find nearer term alternatives, which is where biofuels come in.

Shell has been working on biomass research since I joined the company 35 years ago.  Today we distribute more biofuels, ethanol and biodiesel, than anyone else.  In 2007 we sold more than 5 billion liters – mainly to meet government mandates – and we continue to build our capability. 

But the world now understands that biofuels –are not the environmental silver bullet they once seemed. 

If not managed carefully, they can sometimes compete for land with food, consume a lot of water, or disrupt biodiversity or local cultures.  It varies tremendously but some of today’s biofuels also deliver only modest CO2 benefits– compared to conventional gasoline or diesel.

Looking to the future, these disadvantages could be over come by next-generation biofuels, which are already starting to show their promise.  These are biofuels that use non-food raw materials and that deliver CO2 savings of as much as 90 % compared to conventional gasoline and diesel.  They are going to be vital part of the fuels mix in the future.

We’re pursing these next generation biofuels aggressively.  We have partnerships that include:

• Canadian company, Iogen, which in 2004 resulted in the world’s first commercial cellulosic ethanol demonstration plant making fuel from straw
• German company, Choren, to develop a high performance synthetic fuel from wood residue
• a Californian company called Codexis to develop new super enzymes to accelerate the conversion of biomass into fuel
• the creation of a new joint venture called Cellana with HR BioPetroleum in Hawaii to explore the production of algae as a biofuel feedstock
• a company called Virent to convert sugars directly into biogasoline.

I think biofuels could grow from a mere one percent of the world fuels mix today to as much as 7 or 10 percent over the next couple of decades.  I want us to lead in that space; and to that end we decided in 2007 to increase our rate of investment in them – quadruple it, in fact.

To hear some tell it, all of today’s, or ‘first-generation’, biofuels are a disaster and should be written off.  But let’s be clear: when it comes to truly sustainable, low carbon biofuels, we can’t open the taps overnight.

We still need more innovations to lower the costs and raise the yields.  We still need to learn more about sustainable production.  We still need to develop markets and use them to scale up capacity.  We still need first generation biofuels, both to meet mandates and to build capacity for the next generation.

All that means starting with the best of what we have now – the best technology, feedstocks and regulations – to develop even better solutions for tomorrow.   Governments can do their part by regulating the sustainability of supply chains and creating market-based incentives that reward biofuels with low CO2.

Then it’s down to companies like ours to develop and deploy better and better products.

The argument that we should not touch biofuels until they are perfect is really an argument to abandon them altogether.  That to me is self-defeating in a world of hard truths. 

Providing sustainable mobility is a hugely complex task.  Shell is doing its part by developing transport fuels that are affordable, available, and environmentally acceptable.  I invite everyone in this room to do their part also, as business people, researchers, engineers, teachers, government officials, or simply as individual consumers making responsible choices.

Future generations are counting on us to do the right thing.

I’m optimistic that we will.