Meeting the needs of 9 billion people
It’s a very great honor to have this chance to share some thoughts with you, and a little humbling, too.
My credentials for being in a room with The Academy of Medicine, Engineering and Science lend themselves more to listening to what you have to say than presuming to offer my own modest insights.
Nevertheless, I’d like to take a few minutes to suggest a way of thinking about my business – the business of energy -- in a way that might surprise you, in a way that connects to the vital work you are doing in your respective disciplines.
Along the way, I’ll offer some perspectives on why the enormous human, environmental and economic challenges of the 21st century cry out for leadership from individuals who are at the top of their game in the fields you represent.
Let me warn you right up front that I’m going to close with a pretty heavy proposition: namely, that the health, security and sustainability of the world our kids will be sharing with 9 billion neighbors by 2050 depends on people like us, working together now, on smart answers to some tough questions.
Shell and the global energy system
If you look at my company – Royal Dutch Shell – through a conventional lens you will see the second largest oil and gas business in the world.
Most people know us best through the products we sell to consumers – gasoline, diesel and engine oils like Quaker State and Pennzoil. That’s not surprising if you consider that Shell actually has more branded retail sites than McDonalds has restaurants.
But that’s just the very tip of what we do.
If you look out your seat window before your next airline flight takes off, you might well see a Shell truck pumping jet fuel into your airplane – just one of about 7,000 aircraft we refuel at over 800 airports across 40 countries each day – one every 12 seconds.
Admittedly, you’ll be less likely to see Shell fuel and lubricant flowing into one of the ships we service in more than 600 ports worldwide. And, you can’t see the 22 million tons of Shell chemicals that go into products you use every day, from detergents to packaging, from carpets to computers.
But even all these things represent only one end of the value chain we manage.
In the U.S. alone we move more than two billion barrels of crude oil and refined products annually by way of 16,400 miles of pipeline.
Worldwide we use 3,000 tanker trucks and 62 ships and barges to get product where people need it – power plants, airports, harbors, Walmarts, Jiffy Lubes, gas stations.
And before we move it, we refine it – turning natural gas and crude oil into stuff people can actually use… to move things – like cars, planes and ships… to make things – like paints, shampoos, plastics components for medical equipment… and to power things – like computers, washing machines, TVs and X-box consoles.
In the U.S. Shell has the capacity to refine more than 1.3 million barrels of product every day using cutting edge chemical, thermal and physical reactions, running at temperatures and pressures that rival any other man-made process on earth.
But refining still only represents the halfway step in a journey that links the sources of energy to its use. That journey starts further upstream, in reservoirs of oil and gas: under the ground, under water, under ice, in sand, and in layers of shale.
The upstream infrastructure of our business is the biggest, least visible, and probably most misunderstood part of what we do.
For example, one of our newest upstream production platforms in the Gulf of Mexico is one we call Perdido – roughly 200 miles southwest of Galveston.
When you think of Perdido, think of a 55,000 ton cork - nearly as tall as the Eiffel Tower and weighing as much as 10,000 large family cars - bobbing on the surface of an 8000 foot deep body of water. Think of that cork holding a crew of professionals operating miles of piping, thousands of valves, hundreds of electronic safety sensors.
Think of that cork tethered to a network of well heads and separators on the sea floor, linked to 107 miles of gas and oil pipelines, alongside species of marine life that no human being had ever seen -- before our remotely operated underwater vehicles snapped their photos.
Perdido has the capacity to pump roughly 100,000 barrels of crude oil every day. That sounds like a lot, and it is. It’s enough to meet the energy needs of about 2.2 million American households.
But there are 130 million homes in America. And 250 million cars on our roads. And more than 6 million businesses, small and large.
So imagine the number of Perdidos required to keep our economy running and to maintain our lifestyles, to secure our future, to create jobs.
And just in case you thought that was finally the end of the story, it’s not. Because to keep all that energy flowing -- to meet a demand for energy in 2050 that will be double what it is today -- we need to keep finding more of it, exploring in more and more difficult places, using seismic technologies that require the world’s biggest supercomputers to process.
The picture I hope is forming is of a massive, complicated, expensive, global energy system that stretches from the most remote corners of this planet to the humblest kitchens, classrooms and shops. One in which Shell, alone, invests close to 30 billion dollars of capital every year to grow and maintain.
By the way, for all that boastful-sounding description of Shell’s size, the actual fraction of the world’s oil and gas my company produces amounts to a grand total of less than 3 percent.
You have to multiply the scale of Shell by 33, through dozens of major public and private energy companies, hundreds of service and engineering companies and thousands of logistics companies to account for all the energy that the world consumes every day.
To keep this massive system running safely, responsibly and reliably is a technical challenge that rivals space travel for its sheer, breathtaking scale.
This audience is better equipped than most to imagine just how technically demanding it is to find, produce, make, move and sell hydrocarbons – working at temperatures that range from 160 degrees below zero Celsius to liquefy natural gas, to more than 800 degrees Celsius to transform crude oil into useful products … at pressures more than 200 times the weight of the air in this room.
Energy for Life
The theme of your conference this year – “Energy for Life: From Human Metabolism to Powering the Planet” – got me thinking.
It occurred to me that the enormously complicated energy system we’ve built over the last 100 years or so… that we use to run our cities, factories and economies… is not even as sophisticated as the energy system of a simple, single human cell.
Nature has designed an energy plant a tenth the diameter of a strand of hair that takes proteins and amino acids and oxygen and converts it through the Krebs cycle with perfect efficiency into the energy we use to work, think, play, and stand up in front of an audience speaking.
And nature has managed to produce – and reproduce – a nearly infinite number of these microscopic energy plants to fuel life of every sort – from exotic lichens in Antarctica, to beef cattle in south Texas, to 500 year-old Sequoia trees in California.
And it further occurred to me that if we’re going to stand any chance of meeting the energy needs we’ve created for human societies – a need that will only increase for future generations – we’ll need to find ways of creating systems that take at least a few, crude, man-made steps closer to the self-sustaining, perfectly efficient, zero-waste ideal that nature has managed to produce.
So how do we do that?
Well, it starts by reducing the amount of energy we throw away every day. That means ever more efficient cars, trucks, aircraft, factory robots, laptop computers and light bulbs. Everything from kitchen toasters to supertankers will need to consume less energy per unit of work than they do today.
It also means designing better ways of organizing our lives.
By 2050, three out of every four people on this Earth will live in cities. That’s up from 50 percent today. That means the equivalent of a new city of a million people every week for the next 30 years. So we have people at Shell working with the planners of some of the biggest, densest urban areas of the world to understand how to design cities that more efficiently and productively provide for human work, education, mobility, education and culture.
But in case you’re thinking that I’m shifting the burden to someone else – that it’s all about more efficient cars and lifestyles – let me hasten to point out that companies like mine are rolling up their sleeves as well.
At Shell, we take our responsibility to help address the energy challenge seriously. We’re actively addressing future energy needs and helping customers consume and emit less.
In addition to delivering breakthrough fuels and lubricants, we’ve developed driving tips for motorists to help them use less fuel. We’ve actually trained more than 200,000 people across the globe on fuel efficiency.
We’ve developed a new type of bitumen – a petroleum product – that requires much less heat and energy to pave a road than more traditional asphalt.
We’re constantly introducing better lubricants to reduce waste heat and friction in engines and heavy machinery.
Fuel efficiency also derives from producing and moving it more efficiently, too.
We’ve adopted, for example, operating principles for how we produce natural gas from tight sands and shale formations.
These principles cover:
- Designing, constructing and operating our wells and facilities safely and responsibly;
- Protecting groundwater and reducing our water use in the process;
- Protecting air quality and controlling emissions – including greenhouse gases that cause climate change;
- Reducing the physical footprint of our operations;
- And engaging with communities on the social impacts of our operations… helping them take advantage of the economic benefits these developments can deliver.
Although we’ve designed these particular principles for our onshore gas business, they are similar to the way we operate everywhere from the Gulf of Mexico, to oil sands in Canada, to our Arctic exploration in Alaska.
We’re also finding ways to be more efficient in finding and producing oil and gas – using new techniques that can only be described in highly technical terms, like “really cool.”
For example, researchers from Shell and HP will work together on tiny “nano” motion sensors – a thousand times more sensitive than those in the Wii electronic game – to create sharper pictures of underground rock formations.
At the other end of the scale is new Floating Liquefied Natural Gas technology that includes vessels six times the size of the biggest aircraft carriers that can reduce the volume of gas by a factor of 600 and send it on its way to markets anywhere in the world.
But I can guess the question that is still on the tip of many of many of your tongues: “Why only fossil fuels? Great that you’re working to minimize the impact of fracking and oil sands and offshore drilling, but what about alternatives? Hydrogen? Biofuels? Wind? Solar?”
Well, the answer is that those alternatives are tremendously exciting. The answer is that they will be – that they must be – a significant part of our energy system.
And the answer is that we’re actively working on them.
For example, last year we formed a $12 billion joint venture in Brazil producing 2 billion liters of biofuels every year. The sugar-cane based ethanol we’re producing there is the most sustainable, least carbon-intensive biofuel available anywhere at such a scale.
What’s more, our JV could be a platform for commercializing far more technically advanced – so-called next generation – biofuels that we’re working on with partners in the U.S. and Canada.
You’ve already heard from Dick Williams this morning about the potential we see in wind.
We’re exploring how best we might someday bring hydrogen fuel to our retail markets when the auto industry is ready for it.
Solar, nuclear, geothermal and tidal power will all be part of the world’s future energy portfolio, too. We’ll need them all. And Shell could make a contribution to more of them than you might expect.
But replacing any meaningful fraction of today’s fossil fuel system with alternatives will require major technological breakthroughs, investments, infrastructure changes, public education and intelligent policy frameworks.
Most current projections show that roughly 30 percent of our energy will come from alternatives to oil and gas by the middle of this century.
Frankly, I think that figure ought to be much higher. But just as frankly, I don’t yet see how we get there.
So we continue to work on all fronts, making sure that we don’t sacrifice the best solutions available today to the ideal solutions we imagine for tomorrow.
We continue to work on getting a few steps closer to that ideal energy system nature designed into the human cell.
And we continue to expand our thinking about the role that energy – and energy companies – play in the bigger scheme of things.
Because just as that human cell is a system within much larger systems that add up to our ability to think, and feel, and work and metabolize; so is our industry a system within a much larger integrated system that adds up to the ability of the planet and its resources to support our communities and economies.
The water/food/energy nexus
We need to take an especially close look at the nexus between water, food and energy. There is a powerful interplay between the three.
Increasingly it takes energy to produce dwindling supplies of fresh water. It takes water – and lots of it – to produce certain kinds of energy. And it takes both water and energy to produce food in the increasing quantities needed to support a growing population.
We could let the need for those three resources compete with each other or we could work with governments, partners from other industry sectors, and customers to innovate smarter ways to optimize the supply and use of water, food and energy.
That’s why at Shell we’re actively developing innovative new technologies for reducing the water we use in our drilling and production operations. It’s why we’re developing biofuels only in places where they don’t compete with food and water supplies, and learning ways to produce tomorrow’s biofuels from agricultural waste.
And it’s why we’re so focused on ways to tackle CO2 emissions that drive climate changes that could radically affect future availability of water supplies, agricultural patterns, and demand for energy.
Which finally brings me to the proposition I threatened you with at the beginning of this talk… and that is that it will take the integrated leadership of people like you and me -- in professions as diverse as medicine, engineering, science and business -- working together across sectors and disciplines, to tackle the enormous challenges and opportunities confronting us in this still-new century.
And there’s enough of Texas in my DNA to further suggest that there are few more logical homes for that kind work and thinking than right here, supported by organizations like this Academy. That’s not just a Texas swagger. That’s recognition of this state’s responsibility in the world as a big place, with big ideas, big resources, big appetites and a big heart.
We are, in my view, the energy capital of the world, and when the world looks for ways to tackle the challenges of energy – from human metabolism to powering the planet – they ought to find some of the best answers right here.