Energy vs environment?

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On Tuesday May 8 Shell published its 2006 report on environmental and social performance. The report measures Shell’s efforts to provide the secure supplies of energy needed to raise living standards, and to do so in environmentally and socially responsible ways.

To mark the publication of the report, Jeroen van der Veer, Royal Dutch Shell’s chief executive, answers FT.com readers’ questions on the energy challenge, and on Shell’s efforts to date to help meet it.

More background reading


Q: To what extent is energy market scenario planning suitable for affecting the financial performance of Shell?
M.P. Visser, Amsterdam

Jeroen van der Veer: Thank you for your question. When populations and living standards rise, demand for modern forms of energy can be expected to grow.

According to our scenarios and the International Energy Agency (IEA), energy consumption could more than double by 2050, as global population increases by half again, and China and India continue to industrialise. One of the biggest challenges of our time will be meeting that surge in demand, while at the same time minimising the social and environmental effects of producing and using the fossil fuels that will remain our society’s principle source of energy for many, many years to come.

Energy companies like Shell, more than most businesses, need to take a long-term view. That is why we have been producing Global Scenarios for more than 30 years. These scenarios are different from forecasts in that they provide a tool that helps us to explore the many complex business environments in which we work and the factors that drive changes and developments in those environments.

This information plays a vital part in the judgments, and ultimately the decisions, we make about our business and its future, decisions which typically are about complex projects developed and operated over several decades. Scenarios help to balance our portfolio and risks. This enhances financial performance and reduces the overall risk for the company. ............................................................................................................................................

Q: Is the share of privately owned (Shell, BT, Exxon) energy resources falling against those held by nationally owned entities (Russia, Iran, Venezuela, etc) globally? What if any are the consequences if this is the case?
Felix Drost, Amsterdam

JvdV: Felix, that’s a good question, and one I’m constantly asked.

The first thing to note is that at Shell we produce about 2.5 per cent of the world’s oil and about 3 per cent of the world’s natural gas. The majority of the world’s oil and gas has historically been produced by OPEC, and will continue to be so for some time. Shell and other international oil companies (IOCs) together produce only a minor part of the oil. For instance, Shell, BP and Exxon together produce about the same amount of oil as Saudi Aramco, the national oil company of Saudi Arabia. Also, the reserves of the national oil companies are in most cases much larger than the reserves of international oil companies.

However, having privately owned resources is only one aspect of the future of Shell. The key is to have technology and professional people. That is why the national oil companies like to work with IOCs.

I believe that national oil companies will only choose to work with international oil companies who can add real value to their operations, such as advanced technology to help produce more oil and gas; those who can help to develop national staff and national capabilities; those who can provide reliable markets for their products; and of course those who have the capabilities to undertake the world’s increasingly large and complex energy projects. ............................................................................................................................................

Q: Our present economy is completely dependent on easy oil and expectations at this point are that this dependency will only grow stronger as the world economy expands. At some point in the future however, easy oil supplies, which are energy efficient to extract, will dwindle and these supplies will no longer support our present economic needs. I would like to ask what your vision is on the solution to this problem, when it arrives?
Menno Vergeer, the Netherlands

JvdV: I agree with you, Menno, that the strategic importance of energy is unlikely to diminish with so much extra needed and that the world’s remaining “easy” oil is increasingly concentrated in a few countries.

Energy independence is not realistic for big consuming countries. For example, the USA uses about 25 per cent of the world’s oil but has less than 3 per cent of remaining proved oil reserves. The same is true for the European Union’s consumption and reserves of natural gas.

Massive investments and stable investment conditions are needed across the energy sector to meet energy demand. Here at Shell we are helping diversify energy options by extending the life of existing oil and natural gas fields; by opening up new fields and regions; by developing new ways to produce transport fuels; and by providing a wide range of options for generating electricity.

We are squeezing more out of mature fields where we have an interest, in places like California, Canada and Oman, by injecting steam, gas or chemicals into reservoirs to recover additional oil or gas. We are also investigating the possibility of injecting waste CO2 into oil fields off the coast of Norway, which would boost production and reduce greenhouse gas emissions. Technology also helps to develop unconventional or difficult oil or gas, e.g. oil sands. This will be more expensive and can produce more CO2, which we have to address.

With new technology we are also developing new fields near major markets that were once thought too difficult or expensive to exploit. For example, we are developing a new project in water nearly 2.5 kilometres deep in the Gulf of Mexico. And in terms of fuels, we are one of the world’s leading distributors of biofuels. Our gas-to-liquids (GTL) technology turns natural gas into cleaner-burning transport fuel.

And lastly we are investing in wind power and next-generation thin-film solar technology. We are also a leader in coal gasification technology. Turning coal into gas allows energy-hungry countries like China, India and the USA, to use their abundant coal reserves more cleanly and efficiently.


Q: It is estimated by the United Nations that by the year 2050, nearly 25-30 per cent of the world population will be using renewable and natural energies like solar and wind power. What is your opinion on this? If this happens how much will it impact, Exxon, Shell, BP and Chevron?
Sadeesh, Muscat, Oman

JvdV: Sadeesh, thank you for your question. Fossil fuels’ high energy density and almost universal availability have made them hard to beat. They still meet about 80 per cent of total energy needs, a share largely unchanged for most of the last century. Hydro and nuclear provide most of the rest. To date, affordability has been the main problem for renewable sources like biofuels, wind and solar, which currently meet less than 1 per cent of energy needs.

As demand for energy and environmental concerns continue to rise, Shell’s scenarios and the IEA both expect renewable sources to grow quickly from today’s low base. Their share of the total energy mix should also increase. However, I think it’s clear that fossil fuel use will also need to increase because so much extra energy will be needed. We expect fossil fuels to continue to provide most of the world’s energy for many decades to come.

In Shell, we started our renewables business in 1997 and are aiming to have a substantial commercial business in at least one alternative technology. We are focusing on the most promising - advanced biofuels and hydrogen for transport and wind and thin-film solar for electricity – and are working hard to lower their costs so they can compete effectively with fossil fuels.


Q: What is your preferred method of research when considering new green technologies? Joint Venture, sponsorship of academic research or in-house, and why?
Edward Allen, Calgary, Canada

JvdV: Edward, we use all three approaches. Clearly, the first thing we do is leverage our own in-house capabilities. But we also know from experience that good ideas often bear fruit through collaboration with organisations whose strengths differ from our own.

In cases where our know-how is on the cutting edge our focus is in-house. A good example is gas-to-liquids (GTL) technology, which takes natural gas and turns it into a clean-burning liquid fuel that can be used in diesel engines. We built the first commercial GTL plant in Bintulu, Malaysia in 1993. Our experience there, coupled with research in our own lab, taught us a great deal about how to make the conversion process more efficient. We’ve just begun building the world’s largest GTL plant in Qatar, where production is due to start around the end of the decade.

We partner with others when they have special expertise, such as biotechnology. An example is our work with Iogen Energy, with whom we built and are operating a demonstration plant in Ottawa, Canada to produce cellulose ethanol. Cellulose ethanol is made from plant fibre, such as corn stalks and straw, and thus doesn’t compete with food production.

We also fund a variety of university research programs around the world. One example is a program in the Netherlands that is working on new ways to transform biomass into butanol, a solvent, and other chemicals.


Q: Why did Shell Nigeria disobey the court order from the Federal High Court in Benin City, Nigeria, to stop flaring gas? The flared gas would, if sold, bring almost 2.5 billion US dollars to this poor country - not to mention the environmental and health damage done for last 50 years that would be stopped with cessation of flaring. All of this while Shell is a funding member of the Global Gas Flaring Reduction partnership.
Darek Urbaniak, Brussels, Belgium

JvdV: Firstly let me say that we are committed to eliminating routine gas flaring in Shell Petroleum Development Company (SPDC) operations in Nigeria.

By the end of 2005, six of the associated gas gathering projects had been completed and another five were at various stages of completion. But our progress in 2006 on these remaining projects has been impacted by the current security situation in the Niger Delta and means that some of the projects may be delayed.

For instance, two projects were scheduled for completion in 2006 - Sapele and Forcados Yokri. At Sapele, SPDC’s facilities are completed but the gas uptake could not commence due to sabotage of the customer’s gas infrastructure. The Forcados Yokri project has been delayed, as we could not deploy our staff and contractors to the area due to the ongoing lack of security in the Niger Delta.

In terms of court proceedings, the Court of Appeal set aside the High Court’s decision restraining us from flaring, because the decisions were given arbitrarily and not in line with the rules of court. So there is no valid court order restraining us from flaring gas. But as I said, we are nonetheless committed to eliminating routine gas flaring.


Q: What regulatory change would be most effective in reducing the conflict between the profit motive and environmental performance?
Joseph, London

JvdV: Joseph, I think the word “conflict” overstates the situation. Sure, companies need to make a profit – they must do so in order to survive, create jobs, and invest for the future. Companies cannot live in disharmony with society.

At the same time, Shell - and many other companies, for that matter - know that acting in an environmentally responsible manner is simply good business. That’s why, for instance, Shell was one of the first energy companies to acknowledge the threat of climate change, to call for action by governments, and to take action ourselves (in 1998 we voluntarily set our own targets for reducing greenhouse gas emissions).

I’m not saying we’re perfect. Nobody is. The Shell Sustainability Report discusses quite candidly how we are doing in our efforts to safeguard the environment.

Now about regulations. Let’s take carbon dioxide emissions as an example. Society needs more energy as much as it needs better ways to reduce the negative environmental effects of its production and use. Governments have a crucial role in ensuring that consumers and industry respond effectively.

They must urgently provide the rules that can foster lower carbon dioxide emissions. These rules need to encourage both energy conservation and investment in new technologies. I’ll give you a concrete example: Under Europe’s current carbon trading scheme, companies that undertake projects to capture and store CO2 receive no credit for the reduction in emissions. That must change.


Q: Efficiency obviously reduces demand and therefore helps with both climate change and security of supply issues. Take the average US automobile, it consumes about twice as much fuel per mile travelled as a European car. How can energy companies, which make money on volume sold, help consumers improve their efficiency whilst maintaining a profitable business.
Peter Wood, The Hague, The Netherlands (Shell staff member)

JvdV: Peter, you are right that energy conservation can provide part of the answer for both reducing greenhouse gasses and security of supply. Substantial improvements in efficiency can be made, quickly and cost-effectively. But even with quite some bold assumptions about energy savings, the total energy need of the world will go up. Oil production and gas is seen to increase over the coming decade or decades. As I said before, Shell is only producing a few percent of the world’s oil and gas and has enough space to grow if we have the right technologies and professional people.

More than 80 per cent of the CO2 from fossil fuels is emitted when energy products are used. Our customers emit six to seven times more CO2 using our products than we do making them – more than 750 million tonnes of CO2 in a typical year. We encourage the efficient use of energy and provide technologies and fuels to help.

For transport, Shell’s advanced, low-sulphur transport fuels are helping reduce local air pollution and improve vehicle fuel efficiency. Every year we host the Shell Eco-marathon contest in Europe (and in 2007 also in the USA) challenging students to design and build the most energy-efficient vehicle possible. In fact, I will be a spectator there on Friday. In 2006, the contest was won by a car with average fuel efficiency of 2,885 km for the equivalent of one litre of fuel. In 2005–2006 we ran Fuel Stretch Campaigns in 19 countries to help drivers use less fuel and reduce CO2 by teaching more efficient driving techniques.


Q: Since our blue planet is destined to warm 2+C within our generation, what are your company’s candidate strategies to follow when the public criticism for the use of fossil fuels intensifies as the adverse effects of climate change become more and more visible and disturb economies globally?
Can Salik, Istanbul, Turkey

JvdV: Thank you for your question. Indeed, the transition from the age of hydrocarbons to the sustainable energy age is one of the biggest challenges the world is currently facing.

Solutions must also be found for the environment and climate impacts of our present energy system. Doubts have sometimes been openly expressed about the willingness of oil companies to invest in alternative sources of energy and in CO2 reduction.

So please allow me to make one thing clear: In Shell it is all about what we do as a company to reduce greenhouse gasses. The climate change debate will undoubtedly continue elsewhere for some time to come, but we’re no longer taking part. The only thing we consider important now is to discuss, consider and design solutions.

Shell does not intend to take a defensive attitude to these CO2 challenges. Because if we find the most attractive solutions for sustainable energy sources and CO2 emissions, we as a company will be in a better position. There are fair opportunities for us here. CO2 reduction is responsible behaviour, and let’s be frank, it also offers opportunities to make money, which is nothing to be ashamed of. That’s why Shell has been investing for many years in research, development and demonstration in sustainable energy and CO2 reduction.


Q: A question of future morals for the IOCs. What is the applicability of CCS-EOR to the developing World? For example: Angola currently supplies 6 per cent US imported oil; peak exploration is set for 2015-2018 and peek production for 2024-2028, after which easy oil will be increasingly expensive. One has to look at whether the particular country will have the economic power in the private sector to invest in EOR. If not, is Shell willing to subsidise this technically and economically intensive technology transfer for Angola? Oil and gas infrastructure and production after all has significantly time-limited windows.
John Costasch, UK, London

JvdV: John, as you can imagine, it’s difficult to speak with any certainty about the situation in Angola two decades from now, so please excuse me if I don’t try.

In general, one of the ways that Shell is responding to the world’s growing demand for oil is by coaxing more resources from existing fields. Just as background for non-technical readers, when an oil field reaches the end of its normal life, on average about two-thirds of its oil is still left in the ground because it is too difficult or expensive to extract.

One of a range of proven techniques to enhance recovery is to inject carbon dioxide into reservoirs. We pioneered the approach in Texas in the 1970s using naturally produced carbon dioxide. Now we are investigating cost-effective ways of capturing carbon dioxide from man-made sources such as power plants to do the same job. CO2 is already captured for use in some industrial processes, but the high cost and substantial extra energy required present serious hurdles to widespread use for the moment. As we and the rest of the industry gain experience, however, the cost may come down - just like it has with many new technologies as they mature.


Q: The energy sector faces an uncertain future. The costs incurred to procure the next barrel of oil are rising steadily, while many oil-rich regions of the world are becoming increasingly off-limits to companies with the capital and technology to recover the oil. Hence, my question for you is this: Given the above difficulties, is it realistic to believe that global oil production can be increased significantly over the next 10-15 years?
Matthew Sandretto, Corpus Christi, TX

JvdV: Matthew, that’s something many people are asking themselves. As I said in response to a question above, increasing global oil production will be part of the future energy mix. Massive investments and stable investment conditions are needed. So is sophisticated technology.

However, the increase in oil production will go slower than economic growth in the world. The use of alternative energy, such as solar and wind, is set to grow. If we look to 2050 and beyond, renewables could perhaps begin to make up as much as a quarter of the global energy mix. But very few people realise just how far we have to go to reach that point. For instance, if the UK would fit 20 million roofs each with 4 square metres of standard silicon-based solar panels, this would generate less full-time equivalent power than a typical power station fired by gas or coal, or about 1 percent of UK electricity capacity. As we say in the Netherlands, only the sun rises for free. However, we clearly need to improve our performance in exploiting its energy.

My sense is that meeting this new energy challenge together will depend heavily on national and international companies working together in strong, long-term partnerships.


Q: Can the world energy needs in the form of electricity - along with the CO2 emission commitments be satisfied without increasing the number of nuclear plants? Do oil companies consider seriously investing in nuclear energy?
Enrique Alvarez-Uria, Barcelona (Spain)

JvdV: Enrique, Nuclear energy is not part of our portfolio. We are a hydrocarbons company, including petro-chemicals and clean coal technology. That is what I expect us to remain, at least for the coming decades. We are also trying to get at least one alternative energy technology off the ground and turn it into a viable business. But we will not go into nuclear energy.

More than 80 per cent of the CO2 from fossil fuels is emitted when energy products are used. We encourage the efficient use of energy and provide technologies and fuels to help.

Safe and cost-effective ways need to be found to capture and store CO2 from coal, oil and natural gas, to meet the world’s demand for more energy for development and a solution to climate change.

There are many technical options for capturing CO2. Once it is captured, CO2 can then be stored underground (in aquifers or in some oil and gas fields). It can also be used in industrial processes. However, capturing and storing CO2 is energy intensive and expensive. At a medium-sized coal-fired power plant, for example, capture and storage would lower the plant’s overall energy efficiency by about 10 per cent and add several hundred million dollars to investment costs. Storage will also require acceptance by planning authorities and by local communities.

We are involved in large-scale demonstration projects in this area. One of these is ZeroGen, a low CO2, coal-fired power project being considered in Australia. Another, in Norway, is the largest offshore project to date to store CO2 and use it to enhance oil recovery. If it were to go ahead, the Halten project, which we are working on together with the Norwegian Government and Statoil, would solve a power shortage in central Norway and reduce CO2 emissions by up to 2.5 million tonnes a year. Both projects are at the feasibility stage.


Q: What exactly has the royalty arrangement between Shell and the Nigerian government been over past decades, and how far should the standard of public services in Nigeria be seen as a reflection of the generosity of this arrangement?
Gordon Glass, Milton Keynes

JvdV: Gordon, let me try to explain the position for oil that comes out of the Delta in Nigeria in some detail. What we call the “split of the barrel” among the joint venture (JV) partners is based on a revenue-sharing formula agreed between the partners and reflected in a Memorandum of Understanding signed by the government and the JV oil companies in 2000. The MoU has continued to form the basis for calculating the tax payable by the private joint venture partners - including Shell Petroleum Development Company (SPDC) - and the sharing of oil revenues between the joint venture partners in 2006.

Under the terms of the MoU, at an oil price of $30 per barrel, the government’s take is $24.13 per barrel, while the margin shared by the private partners is $1.87, and the rest is costs. At $50 a barrel, this generates more than $40 for the government for every barrel produced, and $1.46 for Shell.

I should add that we not only help by generating oil and gas revenues for the government. As a responsible company, we can create jobs, help establish local businesses and set a good example. But effective public institutions and services make the real difference. Only governments can and should provide these. So we find indirect ways to help. For example, we strongly support The Extractive Industries Transparency Initiative (EITI), where we make public how much money we pay to governments.

Through our relationships with international development experts we also help via our own development programmes. Shell-run operations spent over $59 million [Shell’s share is $18 million] in 2006 on these programmes, and contributed a further $114 million [Shell’s share $61.5 million] to the Government’s Niger Delta Development Commission.


Q: In recent years Royal Dutch Shell has invested a lot in unconventional resources such as Canadian Oil Sands. How do you think concerns about carbon emissions and the environment will affect those investments? Will you continue to invest in oil sands or are we going to see a shift in Shell’s strategy? How do you see a carbon cap and trade program affecting the economics of oil sands? On the other side of the coin it seems like shell is making huge investments in alternative energies such as wind farms. How much revenue do you see clean alternative energy generating for Shell in 5, 10, and 20 years?
Arash Nazhad, Austin, Texas

JvdV: Arash, by 2015, only 10–15 per cent of our overall oil and gas production could come from unconventional sources like oil sands and gas-to-liquids. We are committed to pursuing their development in an environmentally and socially responsible way.

Canada’s vast oil sands – a mix of tar-like heavy oil and sand – are thought to contain as much mineable oil as Saudi Arabia has conventional oil. Shell Canada’s Athabasca Oil Sands Project (which we call AOSP for short) already produces enough oil to meet the equivalent of approximately 10 per cent of Canada’s oil needs.

Shell Canada has been taking voluntary action on climate change for over a decade. For our base AOSP project, we committed to a 50 per cent voluntary reduction in greenhouse gas emissions by 2010 from those estimated when the project was officially launched in late 1999. All new business investments take the cost of carbon into consideration in project economics.

Shell Canada has developed a ground-breaking project called “Quest” which would involve capturing CO2 at our oil sands upgrader near Edmonton and sending it through a pipeline for either enhanced oil recovery from mature oilfields, or storage.

As I mentioned earlier, our aim is to have a substantial commercial business in at least one alternative energy technology. We are focusing on the most promising technologies – advanced biofuels and hydrogen for transport, and wind and thin-film solar for electricity – and working hard to lower their costs so they can compete effectively with fossil fuels.


Q: In order to effectively develop ways of capturing and storing carbon dioxide it is needed that a monetary value is assigned to carbon dioxide, instead of treating it as a waste product with no monetary value. Do you think that levying taxes is an efficient way of creating value and developing a efficient carbon dioxide ’market’? Would you support a supranational institution, along the lines of the IMF (in this case the ICF), driven and supported by the developed nations and with explicit aim to fully include (and where needed carry) the emerging countries to play a leading role in developing a carbon dioxide market? Or do you envision different ways altogether of incentivising sequestering carbon dioxide?
Raymond Franssen, Miri, Malaysia (Shell staff member)

JvdV: Raymond, we stepped up our appeal to governments in 2006, to lead on this issue and introduce effective policies to combat climate change. The importance of government leadership has become clear. Without policies that reward lower CO2 technologies and create a predictable, long-term cost for emitting greenhouse gases, individual companies will have no incentive to make the massive investments needed.

Our appeal to governments is fourfold: firstly, to involve all major emitting countries and all sectors – not just industry – to avoid distorting competition; secondly, to develop stable, long-term greenhouse gas targets to allow companies to plan and invest; thirdly, to use emissions trading systems more widely as a cost-effective way to manage greenhouse gases from industry and to include reductions from CO2 capture and storage in these schemes; and finally, to design better targeted support for alternative energy sources, to help them reach the point where they can compete without further subsidies.

Now, I think it’s clear that government policy will play a decisive role in determining the future of CO2 capture and storage. The significant additional investment involved means it will not be rolled out on a large scale without government action. At the moment, emission reductions achieved through capture and storage do not qualify for emission credits. Our appeal is for more effective project permitting and measures to reduce costs, for example through the European Technology Platform for Zero Emission Fossil Fuel Power Plants. These include granting carbon credits for captured CO2, and setting emission targets beyond 2012 to create a stable long-term investment framework.

I should also note that Shell Trading has become a leader in carbon trading for Shell facilities and for its own account.


Q: A FT editorial of last week advocated taxation over emissions trading. I found this bizar: emissions trading is superior to taxation because it sets the environmental outcome correctly, while sending price signals on the cost of carbon. Setting a tax implies that someone in the government knows the price of carbon, which is difficult if not impossible. Besides, taxes generate income for the government, and are not always circulated back into the private sector. In addition, because of price inelasticity, many companies simply see it as a cost and eat it or pass it through (unless alternatives exists that are cleaner and more expensive such that it closes the gap). What is your opinion on tax vs emissions trading?
Gerhard Mulder, Amsterdam

JvdV: I tend to agree with you and I think trading remains an important tool.

The central objective of climate change policy should be to reduce CO2 emissions by encouraging investment in technologies that are effective at lowering them. Taxation does not do this. It channels capital away from industries that are capable of delivering emissions-reduction projects and gives it to governments with no guarantee that they will spend it effectively. Trading schemes, by contrast, give business incentives to improve energy efficiency and develop new technology. Unlike some incentive systems, they do so without using public funds.


Q: Your recent articles have confused me. As I understand it, the EU ETS is a fairly robust framework. How can this be inadequately regulated as you suggest? Isn’t this just a problem in the voluntary market?
Liz Butler, London

JvdV: I can’t speak for the FT, which wrote and published the articles. But I think that by many measures, the European Union’s Emissions Trading Scheme (ETS) is a success. From a cold start two years ago, it is now a vibrant market that is driving companies to reduce their carbon footprint. It has reacted promptly and clearly to market information and provided sufficient liquidity for traders to execute their business. These are all characteristics of a market that is working. This is real and is happening today.

Certainly, the ETS is still in its infancy and more can be done to improve it. For example, debate continues over whether to auction emission allowances or give them away. While I don’t favour auctioning, governments may do so eventually because it allows them to capture some of the value of allowances and is an efficient way to allocate them: they go to the bidder who values them the most. If auctions are used, the money raised should be recycled back to the company or industry and directed to helping further reduce emissions. Clearly, if allowances are given away, they should not lead to windfall profits - something that can be avoided, for instance, by steps such as tailoring the allocation of allowances to specific sectors.


Q: Unlike other oil companies, Shell has discontinued the buying back of its own shares. Does Shell believe there are better possibilities for investing surplus liquid assets and thereby creating shareholder value? For instance, at BP the buyback of shares has created considerable shareholder value over the past half-year, due to the rise in the share price, despite its mediocre operating results as compared to Shell’s.
Martin de Jager, Almere

JvdV: Martin, our policy is to do buy backs subject to market conditions and the capital requirements of the group. We prefer a sustainable dividend as the major route to return cash to shareholders. We remain skeptical of the benefits of large-scale buy-backs ahead of dividends and investment in assets. Of course, buy backs do have a part to play, and are part of the overall distribution policy of the Group. So far this year, we have bought back shares for $0.5 billion, and the policy has not changed - we buy back stock subject to market conditions and the capital requirements of the group.


Q: I see that your Company is becoming increasingly focused on gas. Wouldn’t it be better to sell off the oil business and concentrate on gas and new energy?
Ms Dokman, Delft

JvdV: The world’s population could well reach 9 billion by the middle of this century. That means there would be three times as many people on the planet in 2050 as when I was born. Population growth and an expanding middle class translates into greater economic activity. Economic activity translates into higher demand for energy.

Think about it: 3 billion new participants in the global economy, all using energy!

In Shell we have the capability to develop responsibly both oil and gas. Both will be used as energy for some time to come, therefore both will be good business opportunities for us. Moreover, there are a lot of synergies between the two.


JvdV: To wrap up, let me say that I have appreciated all the questions. They show how involved people are with the energy challenge and the environmental aspects of it. In Shell, where it is at the core of our thinking to work responsibly while taking many different aspects into account, we see an exciting future for our company.

Background reading:

Meeting the world’s growing demand for secure and affordable energy while managing CO2 emissions is one of the great challenges of our time. As big developing countries, like India and China, industrialise and lift millions of people out of poverty, global energy needs could increase by half in the coming 20-25 years. Meeting that challenge will require massive investment in infrastructure and continued technological development - both to gain access to new resources and to develop ways of capturing and storing carbon dioxide.

International oil companies can play an important role in meeting the challenge, both by developing and deploying the advanced technology and engineering skills needed, and by partnering with national oil companies who are seeking to develop and grow their own businesses.

It highlights Shell’s efforts to address key issues such as climate change in 2006 and the urgent need for effective action by governments; includes an open discussion of the challenges of working in Nigeria and the progress of the Sakhalin II project in meeting its environmental and social commitments over the last, tumultuous, year; and measures how the company has done against the key indicators developed with the stakeholders to track our environmental and social performance.

Other sections

Shell: Sustainability reports

FT blog: Energy filter

In depth: Energy security, The new 7 sisters, Carbon trading

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