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Energy industries set to change over fisrt half of century 2nd add

Transport fuel choices :Let me highlight how the two scenarios model transport.

In Scramble, the choice is liquid fuels, with biofuels augmenting fuels fromfossil sources. By 2050, biofuels – increasingly from less damaging sources– account for a quarter of demand. In Blueprints – with its sustained focuson efficiency – the energy used in transport is a fifth lower than in Scramble.

But the key shift assumed is electrification – with electric and hydrogenvehicles accounting for a sixth of the energy mix by 2050. But is this the best solution? There would be many advantages to sticking with liquid fuels, from hydrocarbons and sustainable biomass. They can utilise the same infrastructure and require an evolution – not a revolution – in engine technology.

On the other hand, the advantages of electrification in Blueprints depend notonly on the rapid global introduction of CCS, but also on a massive turnover invehicle technologies, plus reinforcement of electrical grids, plus being able toproduce half of global electrical power from renewable sources by 2050.

So, we are doing more work to see whether a liquid-fuel scenario couldmatch the emissions reduction in that original Blueprints.

In the medium term, blending in the right biofuels combined with continuousimprovements in vehicle efficiency have the greatest potential for decarbonisingmobility. In the longer term, the indications are that these can match thebenefits of electric vehicles, with the addition of CCS on liquid hydrocarbonfuel production. This would be good news for oil producing countries andcompanies, and for our customers.

However, while we continue to work on the details, I have no doubt that thebasic premise of Blueprints is right; that we will all have a better future ifcountries and companies work together globally to anticipate challenges, andaddress them early on.

A Scramble scenario would be a turbulent, risky and ultimately unsustainableworld. A Blueprints approach would offer a better long-term basis for sustainingthe use of hydrocarbons for energy and chemicals, and for building economiesand maintaining global growth. And, I believe that major producers likethe United Arab Emirates will play an increasingly important leadership role insuch a world.

Still technological surprises :First a reminder that – however much effort we put into exploring the future – we’re still going to be surprised by technology. Which is why in Shell we put somuch effort into getting ahead of the game – increasing our R&D spendingnearly threefold since 2002, to 50% higher than our nearest IOC competitor.

Of course, we undertake our technology development together with ourpartners in operations around the world. And I should mention here the AbuDhabi Investment Fund’s stake in the Shell Technology Ventures Fund.

Let me give an example of technology surprises in North America,always of interest in this industry.

Let me give an example of technology surprises in North America,always of interest in this industry. Five years ago, there was aninfluential report from the US National Petroleum Council stressing how hard it would be just to maintain US gas production, and the likely need for very large scale LNG imports. As you know, companies scrambled to establish LNG import capacity – 50 or more terminal schemes were mooted, and 14 have been or are being built.

The flat trend of Lower 48 production from 1998 to 2006 seemedto confirm the pessimistic outlook. But, today production is growing rapidly – bysome 9% in just the last 2 years. People are wondering just how littleLNG the US will require. This growth in domestic gas supply isthe result of greatly improved technology for producing gas from tight sands and shales.

For example, since buying our Pinedale tight gas field in Wyoming in2002 we have utilised multiple new technologies – including microseismicand underbalanced drilling – to treble production while halving costs and welltimes.

Such advances are expected to open some 500 Tcf of untapped unconventionalgas resources in North America in the next 15 years, possibly considerablymore. New technology could also unlock major additional North American oilresources.

An example is Shell’s new in situ upgrading technology, which convertsheavy oil into high quality products underground. The technology can alsobe applied in oil shales, which could hold some 800 billion barrels of recoverable oil in the US alone. Of course, the impact of technologicaladvances is not restricted to North America. They have the potentialto shift energy supply/demand balances globally, including here in the Gulf.

© Copyright Emirates News Agency (WAM) 2008.