Shell energy scenarios to 2050 stress cooperation, flexibility

Global economic growth, North America’s new oil and gas strength, and increasing climate change impacts will have to be carefully juggled through 2050 by industries, governments, academic experts, and environmental and other public interest groups, Royal Dutch Shell PLC said on Feb. 28 as it launched its latest “New Lens Scenarios.”

Government policymakers, corporate and academic strategists, and other stakeholders will need to consider as many long-term impacts as possible that might result from current decisions, Shell officials said during a presentation at the Center for Strategic and International Studies cosponsored by the Peterson Institute for International Economics.

“This work isn’t about trying to make successful decisions in the future,” explained Jeremy Benthem, who heads Shell’s scenarios team. “It’s about making decisions now that will lead to a more successful future.”

Doing this won’t be easy since the world is undergoing one of its biggest transitions in history, he said. “We’re entering an era of volatility and change,” Benthem said. “Business as usual is not an option going forward as we deal with political and social changes, growing urbanization, increasing energy demands, emerging energy resources, and environmental pressures.”

Mountains, oceans

Shell’s latest scenarios begin with a pair of what it calls lenses—designated Mountains and Oceans—to broadly differentiate future global strategies and help describe possible consequences. Mountains are “the world with status quo power locked in and held tightly by the currently influential”, creating a rigid system that “dampens economic dynamism and stifles social mobility,” the report said.

Through the Oceans lens, it continued, “power is devolved, competing interests are accommodated, and compromise is king. Economic productivity surges on a huge wave of reforms, yet social cohesion is sometimes eroded and politics destabilized. This causes much secondary policy development to stagnate, giving immediate market forces greater prominence.”

A future world dominated by Mountains would be rigid and disappointing as emerging economies become nationalistic to try and protect their resources as their populations increasingly move from the countryside to big cities and energy producers try to keep prices and markets stable, Bentham said.

He said Oceans would be more dynamic and diversified with more participants, but will volatile prices because they would be dominated by market forces. More environmental progress would be possible if groups of those participants collaborated to combat climate change consequences, he added.

“Imagine natural gas outside North America still grows, but not as quickly because geology isn’t favorable and social demands divert government resources,” Bentham said. “A high gas price environment could bring alternatives like solar through to become the new global energy backbone because public policies support them.”

Use best features

All these systems are connected and built on each other, he emphasized. “The dialogue isn’t whether we’ll have a world as seen through one lens or the other, but how to use the best features of each,” the Shell strategist said. “Emissions control is a race, not a competition. Cleaning fossil fuels is only part of the equation. Alternatives and renewables also will be needed.”

“For an industry with a 40-50 year timeline, uncertainty is our biggest challenge,” noted Shell Chief Executive Peter Vosser, who also participated. “When we do research and development with these new lens scenarios, we test to see what technologies will be needed and invest our capital there.”

Shell’s strategists have been developing scenarios for more than 40 years, he indicated. “In the early 1970s, the team explored something that was considerable unthinkable at the time—an oil embargo,” Vosser said. “When one materialized in late 1973, Shell executives at least had considered the possibility.”

The company’s 2013 scenarios are designed to stimulate discussion, he added. “Effective responses will rely on business, government, and academic partnerships,” Vosser said. “Our task now is to broaden the scope of public engagement, which will be essential if we are to succeed. All of us must work to help these scenarios reach the broader audience they deserve.”

“It will be necessary to create the kind of leadership able to deal with each of these uncertainties,” said Bentham. “The scenarios’ lenses could help.”

Contact Nick Snow at nicks@pennwell.com.

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