The challenge we face
First, let me say a few words about the challenge we all face.
All of us in this room recognise that the global energy system is experiencing a profound, if slow, transition. And that there are some powerful fundamentals at work.
Global energy demand, as we all know, is rising. And will continue to rise.
Demand growth will be particularly strong in emerging economies like China and India.
As the number of people grows – which we know it will – so will their desire for goods and services.
How much will energy demand increase? According to the International Energy Agency, by almost 40% by 2040.
Meeting that demand will be a massive challenge.
But so too is the need to respond to climate change.
With COP 21 talks scheduled in Paris towards the end of the year, the global focus on how to respond to climate change is rightly becoming more intense.
For the record, Shell supports the signing of a global climate agreement. But we particularly support multilateral policy initiatives that encourage the implementation of existing technological solutions. In other words, targets are all very well. What we need is answers.
And a key requirement is that governments develop policies which both reduce greenhouse gas emissions and support economic development.
What the global energy system is experiencing – what it needs to undergo – is a transition from the traditional model based on oil and coal to a progressively cleaner, less carbon-intensive model. And that new configuration needs to be characterised by a greater share of natural gas and renewables – and a key role for carbon capture and storage.
I’ll go further. In a world where, as we heard recently, Saudi Arabia has ambitions to become a “global power in solar and wind energy”, the vision of a long-term future powered in the main by renewables is one none of us can ignore.
It’s also a vision I would encourage all OPEC members to take seriously. Not least because I believe twenty years from now, if we don’t act, global public opinion will be unforgiving.
In essence, we need to provide more energy, with far fewer emissions. To tackle poverty and climate change at the same time.
It’ll take time, a great deal of innovation – and plenty of courage – but I believe it can be done.
Participating in the energy transition
Effective carbon pricing is an essential first step. And that’s a public position Shell shares with Statoil, BP, Eni, BG and Total.
Well-implemented and regulated carbon pricing systems have the potential to encourage energy efficiency and promote low-carbon technologies. They’re also typically flexible, fair and relatively cheap to implement.
Carbon pricing can encourage relatively easy changes to be made quickly – such as switching from coal to gas in power generation. That, in turn, can allow more time to sectors that are more difficult to decarbonise – such as cement, chemicals, and iron and steel.
Then there’s natural gas. As you all know, gas is relatively clean-burning, abundant and versatile. When burnt to generate power, it produces half the amount of CO2 that coal does.
At Shell, we believe that natural gas also has a long-term role as a flexible partner to intermittent energy sources like solar and wind.
Meanwhile, carbon capture and storage could revolutionise the way the world produces electricity, removing up to 90% of carbon dioxide emissions from gas-fired power generation.
In the coming months, Shell's Quest CCS project in Alberta, Canada, is expected to start capturing and storing more than 30% of the CO2 emissions produced when oil sands bitumen is processed into synthetic crude oil. The project will be able to store more than 1 million tonnes of CO2 a year – the equivalent of taking 250,000 vehicles off the road.
As the IEA’s recent Energy Technologies Perspectives report stated: “Deploying innovative, sustainable processes will be crucial in the long run, with CCS playing a key role.”
Making CCS part of the mainstream won’t be easy. But every government represented here today can and should take its potential seriously.
At Shell, we’re advancing our knowledge of CCS – and scaling up the relevant technologies – through projects in Canada, the UK and Australia. And we stand ready to share the knowledge we gain and to help pilot more CCS projects.
At this point, it’s also worth our while remembering that innovation isn’t just about new technologies. It’s about policy, finance, regulation, collaboration and implementation too. And as the same IEA report said: “Governments can play a critical role for promising technologies by ensuring stable, long-term support in all stages of innovation.”
At Shell, we’re also continuing our development of cleaner, more advanced biofuels. Raízen, our biofuels joint venture with Cosan in Brazil, already produces around 2 billion litres a year of low-carbon biofuel from sugar cane. We’re also developing advanced biofuels from leaves, bark and other sugar-cane waste.
And, in fuels, we envisage a combination of solutions: making best use of local resources and infrastructure. Because, while we can probably all agree that an energy transition is happening, some sectors will be harder to decarbonise than others. In the case of oil’s role in transport, for example, that process will take decades.
To put it another way: the energy transition is not about one system replacing another. It’s about finding a way of integrating the old and the new systems. The two evolving alongside each other – and complementing each other.
Widespread adoption of carbon pricing. More natural gas. The development of carbon capture and storage. Low-carbon biofuels. Those are some of the key practical things we need to make a lower carbon, higher energy future a reality.
The final thing we need to do – and by “we” I mean governments, business and civil society – is to learn to work better together.
Energy systems, as we all know, are hugely complex. Ensuring that businesses and households continue to get the energy they need will require efficient, joined-up action, based on well-informed, joined-up thinking.
More than that, developing effective and appropriate energy solutions will require the world to design plans specific to the needs of a particular region, a particular country – and, in some cases, a particular community. And those plans need always to be alert to the essential role of energy in economic development.
Conclusion – Applying innovation
At Shell, we know that the energy system is transitioning away from a dependence on hydrocarbons, albeit slowly. But we see new means of producing, distributing and consuming energy as opportunities not threats.
In the past, we and others like us have used innovative approaches to reduce water use in our operations. To limit impact on the land. To protect biodiversity.
Today, at Shell, for example, we’re examining a means of harnessing waste heat for district heating systems. We’re asking ourselves whether it would be possible to reuse waste cold air extracted from regasifying liquefied natural gas. We’re assessing the likely future contribution of new transport fuels like hydrogen and LNG. And, of course, we’re working hard to make CCS a reality.
These are real-world initiatives designed to meet real-world challenges.
That’s the philosophy behind everything Shell does. And it’s a philosophy which can and should inform the way we collectively approach the ongoing energy transition.
Thank you for listening. I look forward to our discussion.