Technology and Innovation: Creating More with Less – Partnership, Innovation and Application

Good morning and thank you for inviting me to address this conference.

Our theme of creating more with less has probably never been more important. Political, economic and social factors all mean that our industry will need to provide more energy from conventional resources in the years ahead. And meeting those challenges will require innovation, partnership and the effective application of that innovation.

What I would like to do today is to explore some of the wider context for the challenges facing us all, and then look at the kind of solutions the industry can offer. How we can get the technical partnerships in place. How we can support the innovation we need, and then how we can make sure we have the right frameworks to apply that innovation successfully to meet our customers’ needs.

The energy challenge

The first challenge we need to recognise is the increased demand for energy that will result from both the increase in the world’s population and the fact that those people will be wealthier and able to afford energy consuming goods. As a result, we could see a doubling of global energy demand in the first half of this century. 

So we will need more energy, but it will be harder for energy suppliers to keep up with that growth in demand, as existing oil and gas fields mature and new sources are harder to extract. And all this will need to be achieved at the same time as meeting the environmental challenge of reducing CO₂ emissions from energy use.

Power generation accounts for one third of the world’s CO₂ emissions and the transport sector, a further one fifth - and emissions in this area are growing fast. So our industry will need both to make more efficient use of fossil fuel supplies and develop new low carbon energy sources, in both these areas. But this will not happen quickly. For all new forms of energy, it takes about thirty years to achieve a one per cent market share. And it is always uncertain which technologies will prove successful over the long term.

Four pillars of CO2 reduction

Yet this should not be a reason for delay. Despite the uncertainties, it is vital to invest in a range of technologies and to do so now. That is why Shell invested more than one billion dollars last year in researching alternative energies and energy solutions.

But what we do today is as important, maybe even more so, than the technology we are developing for tomorrow. That’s why Shell’s approach is to target our technology innovation and partnerships on providing the practical applications that will help today’s customers reduce the CO₂ emissions from their energy use.

Our focus is on four areas, natural gas, biofuels, carbon capture and storage, and energy efficiency. 

Natural gas offers some particular advantages. When used as a source of electricity, in comparison to other available sources, it offers tangible, substantial and immediate environmental benefits. For example, a modern gas plant has CO₂ emissions that are up to seventy per cent lower than a coal-fired plant. Technological developments have also allowed us to grow and diversify the market for natural gas, especially through LNG. And gas is widely available, due mainly to the industry’s ability to unlock tight gas reserves. The International Energy Agency estimates that, worldwide, there’s now enough technically recoverable gas in the ground for two hundred and fifty years at current production rates. 

The second pillar of Shell’s work to reduce emissions is biofuels. Of all the low-carbon transport fuels, Shell believes biofuels are the most realistic commercial way to reduce CO2 emissions from the road transport sector over the next twenty years. Today, biofuels’ share of the global road transport fuel mix is approaching three per cent. And our in-house modelling suggests it could reach as much as nine per cent by 2030.

Shell is already one of the world’s largest distributors of biofuels, and we sold nine billion litres in 2009. We are now developing our interests in the production of biofuels further. In Brazil we have the necessary approvals in place to set up a Joint Venture with Cosan, one of the largest producers of sugarcane ethanol in the world, focusing on biofuels and retail. The new JV, called Raizen, currently has production capacity of some 2 bln litres of ethanol per year and has aspirations to produce 5 billion litres. Ethanol from sugarcane is the best performing of today’s biofuels in terms of CO2 reductions.

The third pillar of our work to reduce emissions is carbon capture and storage. This is developing technology which can capture carbon dioxide from fossil fuel powered industrial and power plants and store it underground so it doesn’t enter the atmosphere. Shell is involved in demonstration projects to explore the potential of this approach. This includes the world’s largest carbon capture project to date, Gorgon, in Australia, which is demonstrating the potential of storage in a deep saline aquifer. However, developing these projects is costly and brings no revenue for the industry so financial support from the public sector is also needed to help build experience, share knowledge and drive down costs.

And the fourth and final element in this work is improving energy efficiency in our own operations and also in helping our customers conserve energy and reduce their own CO2 emissions.

This brings me to the work we are doing in fuels and lubricants. We need to recognise that by 2050, two-thirds of vehicles are still likely to use current engine technologies and conventional liquid fuels. So we need to use innovation and partnerships to find ways of improving the fuel economy and cleanliness of those fuels and engines by improving and applying existing technologies.

Recent examples of Shell’s innovation in this area are Shell FuelSave Unleaded and Diesel. These products contain our most advanced fuel economy formula ever and can help motorists save up to one litre of fuel per tank, based on a 50-litre fill-up. And our commercial road transport customers can achieve up to three per cent fuel savings when using Shell FuelSave Diesel. These fuels have now been launched in ten countries across Europe and Asia, with further launches planned this year.

Last year we also launched Shell FuelSave Partner, a new fuel management system for commercial transport fleets. It links fuel transactions with vehicle and driver data to give customers easy-to understand reports that can help them improve their fleet’s fuel efficiency by up to 10 per cent.

This progress in fuel efficiency is underpinned by the work Shell is doing in our lubricants business. Lubricants can make a very specific contribution to vehicle efficiency. They are in contact with almost all parts of the engine and driveline and play an important role in improving fuel economy.  This recent Shell Helix Ultra advertisement was a neat way of showing drivers just how important lubricants are in cleaning and protecting engines

As we all know, the lower the viscosity of the lubricant, the less fuel an engine needs to use to overcome its resistance. So the challenge is to determine the lowest viscosity lubricant which still provides the right level of engine protection and durability.

One option which provides higher quality base oils and lower viscosity is gas-to-liquids or GTL. And we are now nearing the start of production at Shell’s Pearl GTL plant in Qatar. This will provide enough gas to liquids fuel to fill over one hundred and sixty thousand cars a day and enough base oils each year to make lubricants for more than two hundred and twenty five million cars. The technology also allows us to convert natural gas into products normally derived from oil. For instance, we’re already preparing to sell a new GTL kerosene blend to the aviation industry for commercial aircraft.

GTL is one way for natural gas to play a greater role in the transport sector. Other options include using compressed natural gas to fuel lighter passenger vehicles and liquefied natural gas could, in future, help to power ships and heavy road transport, such as buses and coaches. This range of options underlines the flexibility and range of possibilities offered by gas.

However, these developments are only one element in the work that we need to do to meet the energy challenges ahead. At Shell we believe the best and fastest way to improve fuel economy and lower CO2 emissions, for conventional fuels, is to achieve a more cohesive approach between the development of new vehicle technologies and engines and the development of new grade fuels and lubricants. By working together we can introduce innovation, sustain performance, and make gains in driveability. So we all need to focus on finding ways of improving the fuel economy and performance of those fuels and lubricants and matching them to the evolving demands of component design.

The importance of partnerships

Shell’s research shows that fuel economy can be improved by up to two per cent by using the most suitable quality lubricant for an engine. Further savings can be achieved when the lubricants provider and the automotive OEM work together to develop bespoke products for a particular vehicle. Those developments are clearly important, but to move those efficiency gains onto the next level the industry will need to move to the next level of collaboration. These are long-term co-engineering projects where we develop fuels, lubricants and vehicles together. This kind of collaborative approach could lead to fuel economy improvements of up to five per cent.

Shell’s work with Daimler, the world’s largest supplier of trucks, is another example of what collaboration can achieve... Daimler’s most economical truck, the new Mercedes-Benz Actros, powered by Shell FuelSave Diesel and Shell Rimula R6 LME, set a new world record for fuel efficiency. In perfect conditions it used just over nineteen litres of fuel per hundred kilometres.

In another partnership with Daimler we have helped to develop an optimal fluid for their latest transmission technology. The new product extends the performance of Shell’s established ATF 134 and is one of several innovations which have helped Daimler achieve a seven per cent fuel efficiency improvement in their latest 7-speed automatic transmission.

Another project which is showing very exciting results is Shell’s work with Gordon Murray Designs, a company with a background in motor sport that aims to provide a radical new type of lightweight urban passenger vehicle to help meet the CO₂ challenge.  We tested a 0W-10 concept oil in the vehicle’s low-friction 660cc engine and it achieved around a six per cent reduction in urban-cycle fuel consumption. This is the power of a co-engineering approach.

I want to underline that all this work starts with the customer. Customers across the world have become ever more sophisticated and demanding and it is vital to the success of Shell that we meet both their current demands and anticipate their future needs. This is partly about reducing their costs but it is also about keeping up with customer preferences and needs, whether that is for improved engine performance or improved environmental performance and continuously innovating to provide the products to meet those needs today and in the future. It is also about our engineers working with our customers on the ground to help them apply our products in a way that delivers tangible savings.

Our task is only going to become more challenging with new legislation across the world, demanding major reductions in CO₂ emissions. In the EU, for example, the technologies required to meet new emissions regulations could add the equivalent of 2500 Singapore dollars to the price of cars. And many countries in this region are now taking the same approach to setting demanding CO2 emissions targets.

But our industry does have a good history to build on. There have been dramatic improvements over the past thirty years in almost all aspects of vehicle and fuel technology. Today’s cars are safer, more comfortable and pollute far less. But reducing vehicle CO₂ emissions on the scale that will be needed in the future will require all those involved to push the boundaries of what is possible. That means fuels and lubricants providers and OEMs will all need to consider more adventurous approaches. In particular, I believe we should be considering new approaches to specifying oils, and to tackling or perhaps sidestepping issues of backward compatibility.

Pushing the frontiers in lubricants

At Shell we see three stages in this work. In the short term, all those involved across the industry need to continue to increase their understanding of emerging technologies and lubricant interactions. This will include a focus on areas such as engine coatings; roller bearings; turbochargers and low-friction piston designs. In the medium term, we need to look at creating formulations to meet the particular demands of city driving; of small, ultra-lightweight vehicles; and accommodating lower specification fuels around the world. We also need to convert concept oils from the laboratory into real options for drivers on the road. In the longer term, we can see breakthrough co-engineering solutions developed with technology partners that may include split lubricant engines and temperature-controlled viscosity.

Underpinning all this will be a need to challenge the specification stranglehold. The demand for CO₂ emissions reductions gives us a very strong incentive to look again at the traditional approach to specifications. By starting from first principles, the industry will be able to develop specifications that are appropriate for vehicles which are focused on achieving improvements in fuel economy. Many current specifications place a limit on oil volatility, which rules out unusually low viscosity oils, even if in all other respects they are acceptable. These same specifications include some seal compatibility tests, which are widely viewed as outmoded and almost irrelevant. Revising the specification mould will reduce the level of compromise we need to make and allow us to review our priorities and make sure they are suitable for the current climate.

Another area where radical thinking could pay real dividends is in ‘backward compatibility’– the need to ensure that products are broadly compatible with older engines. This is a sound principle and was developed for good reasons, but it could be hindering more creative approaches and the development of more effective solutions for new engines. And the risk of an incompatible lubricant being put in an engine can be minimised. The engine’s oil filler could be designed so that oil can only be added through a special container equipped with a matching nozzle or an electronic interlock. Backward compatibility should not be a bar to innovation.

This underlines that all parts of the industry must both support innovation and develop the means to put that innovation into practice. If we can do this, we open up a whole range of possibilities for our customers. On one level it may include the replacement of an existing formulation by an equally effective but less costly alternative. On another level the development of a new diesel engine oil formulation is constrained by chemical limits on sulphated ash, phosphorus and sulphur – challenging those limits opens up new possibilities. Or we could explore systems which allow fluid viscosities to remain constant across the entire engine operation. These would be fluids which are capable of both lubricating the engine and, perhaps, cooling high energy density battery systems without risk of causing electrical breakdown.

Reducing lubricant viscosity is a reliable way of improving fuel economy, and formulations are slowly evolving towards lower levels. However, no matter what viscosity grade is chosen, the viscosity of all lubricants is closely linked to their temperature. If the lubricant provides adequate performance at one hundred degrees centigrade then it is inevitable that it will thicken and increasingly resist engine movement at all temperatures less than a hundred degrees.

The introduction of ‘High Viscosity Index’  base fluids tempers this effect to a degree. But could we do even more? Could we develop a mixing-demixing system within the engine which is capable of blending a pair of fluids - one with high viscosity, one with a much lower level? This would help us develop a fluid with the optimal viscosity for the prevailing engine operating point – and be able to reverse the process on demand. Shell has developed a prototype system that could, in principle, be applied to both engine and transmission fluids in this way. There is a lot more work to be done with an OEM partner before this solution could be demonstrated in practice but the gain could be significant.

Conclusion

These are just the examples I know best, but across the industry there is a whole range of activity to support the innovation that will help us find solutions to the challenges ahead.

And it is clear that no one company, no one part of the industry will succeed by acting alone.  We can see that significant progress can be made through partnerships focused on improving the technologies that we already have in place around conventional fuels and vehicles. But that will not be enough. We will also need larger scale collaboration across OEMs and the whole range of energy providers to develop the technologies, the rules, the practical applications to meet the challenges of the future. And we, at Shell, certainly want to remain at the heart of this debate and strengthen our technical partnerships with OEMs further to move our collaboration and co-engineering onto the next level.

Our industry has a great track record of innovation, partnership and application to build on - and we are already delivering the practical solutions to our customers on the road. And if we can work together even more closely in the future then I am really optimistic that we can create more with less, and ensure our customers have cleaner, more efficient engines in the decades ahead.

Thank you.