Managing our emissions

• Ending continuous flaring
• Improving energy efficiency
• Including future costs of emitting CO2 in our business decisions
• Building our capability in CO2 capture and storage

Ending continuous flaring

When oil is brought to the surface, natural gas that is trapped with the oil also comes out with it. In many locations there is no local market for the gas and no facilities, such as natural gas pipelines or liquefaction (LNG) plants and terminals, to bring the gas available to markets. As a result, the gas is burnt or ‘flared’ near the well, resulting in CO2 emissions.

We ended the continuous venting of natural gas in 2003. We committed to ending continuous flaring as well by 2008. In 2000 we launched a multibillion-dollar programme to put out the flares by gathering and using the trapped natural gas.

We have effectively ended continuous flaring everywhere outside Nigeria. Only five sites outside Nigeria, representing less than 0.5% of our total CO2 emissions, still continuously flare for technical or safety reasons.

In 2008, our total flaring from oil and gas production worldwide – both continuous and occasional safety flares - was 70% lower than in 2001.

Read more about our efforts to end continuous flaring in Nigeria.

Improving energy efficiency

About three quarters of GHG emissions from our operations come from burning fuel to power our oil and gas production sites, refineries and chemical plants. So improving how efficiently we use energy in our operations is clearly important for further reducing our GHG emissions.

The energy intensity of our oil and gas production business, has gotten steadily worse. It has risen by around 27% since 2000, as we, like our competitors, need more energy to produce from aging fields and more difficult oil and gas. To help us slow that rise, we launched a major energy efficiency programme in Exploration and Production in 2007. In line with this programme, all our upstream operations are putting energy management plans in place.

Our refineries have improved their energy efficiency since 2002. They have been helped by Shell Global Solutions Energise™ programme, which uses advanced energy modelling and benchmarking to help identify areas where improvements can be made, and by a programme of business improvement reviews that target energy reductions. These two programmes have reduced our GHG emissions by 1.7 million tonnes a year and saved us a combined $180 million annually at our refineries and chemical plants.

But more is needed. Energy efficiency at these plants has stagnated or gotten worse in the last two years. We have also launched a three-year capital investment programme specifically aimed at boosting refinery energy efficiency.

Read more about our work to improve the energy efficiency of our operations.

Including future costs of emitting CO2 in our business decisions

We were the first energy company to include the future costs of emitting CO2 into the financial planning and decisions we take about major new projects back in 2000. In 2007 we updated – and significantly raised- these costs. They are helping our new projects lower CO2 emissions from the very start - by changing their designs. We will continue to adjust cost levels and our approach as the future regulatory environment becomes clearer.

The business logic for this approach is clear:

• it raises awareness and signal our seriousness about the need to adapt to a world with stringent restrictions on emitting CO2;
• it avoids expensive retrofits later;
• it reduces the risk of future liabilities for emitting CO2; and
• it gives us a management tool for steering the Group's portfolio and designs.

Building our capability in CO2 capture and storage

As our Energy Scenarios make clear, capturing and storing CO2 (CCS) will be a critical technology for reducing GHG emissions. In our Blueprints scenario, for example, CO2 is captured and stored at 90% of all coal- and gas-fired power plants in developed countries by 2050. It will also be important for manager CO2 emissions from our own facilities. Today, none of these facilities uses CCS because it adds extra costs, uses more energy and because permits requirements and liabilities for the CO2 are not clear. We are working hard to get the regulatory support needed for CCS and to build our own capability.