Shell officials outline routes to world’s energy future

April 7, 2008
The world’s energy producers, consumers, and governments could either cooperate or “scramble” as they try to solve major energy and environment problems, two Royal Dutch Shell PLC executives said on Apr. 1.

The world’s energy producers, consumers, and governments could either cooperate or “scramble” as they try to solve major energy and environment problems, two Royal Dutch Shell PLC executives said on Apr. 1.

The multinational oil company has developed new scenarios that reflect growing climate concerns and increased energy demand from emerging economics, they explained during a presentation at the Center for Strategic and International Studies. The new scenarios, called TANIA (“There Are No Ideal Answers”), run to 2050. They replace an outlook known as TINA (“There Is No Alternative”) that Shell strategists introduced in the 1990s.

“You can still have good world economics with less carbon dioxide. Shell sees its future as an energy entrepreneur in this context,” Chief Executive Jeroen van der Veer said.

The next 32 years could be an era of revolutionary transitions, according to Jeremy B. Bentham, Shell’s vice-president of global business environment. TANIA’s two scenarios are called “Scramble,” in which policymakers simply react to problems, and “Blueprints,” in which stakeholders form coalitions in advance.

“This is a world where people recognize complexity and realize fear. They delegate complexity to governments which develop supply-side responses that eventually hit constraints. China, for instance, has begun to import coal instead of increasing its domestic production,” Bentham said.

Draconian steps by 2020

Under a strategy that simply uses immediately expedient solutions, there could be an even bigger squeeze on oil and gas supplies and imposition of draconian measures by 2020, he warned. Growth of wind, solar, and other alternates could take place locally but would be limited, he said.

Under the “blueprints” scenario, new coalitions emerge, initially within cities or regions and sometimes across national borders, Bentham continued. “Meaningful CO2 pricing may emerge around 2012, not due to political altruism but from local responses to emergency situations,” he said.

The growth of alternates and carbon capture-and-storage could result in most new power plants—50% in emerging economies and 80% in industrialized nations—incorporating carbon capture and storage (CCS) by 2012, he said. By 2020, 50% of vehicle miles traveled could still be with liquid fuels but the engines would be much more efficient, he added.

“A patchwork of standards would cause national governments to step in and try to harmonize strategies to keep trade rational,” Bentham said. Pursuing a strategy of blueprints through coalitions would be difficult but preferable to the “scramble” scenario, he maintained.

‘Blueprints’ tools

That approach basically will result in governments fighting for supplies with little regard for carbon and other environmental impacts, which are acknowledged and addressed under the “blueprints” scenario, Van der Veer said. The tools for doing this include cap and trade programs, CCS, more-efficient transportation, credible wind and storage targets, and more-efficient building and appliance standards, he emphasized.

“Europe may be having some problems as it implements its cap and trade system. But it’s based on the US sulfur dioxide trading system from the 1980s, which was very successful and provides a good model,” Shell’s chief executive said.

He said Shell has tried to take the lead by putting high CO2 penalties on new construction the last 8 years. The company also has become the world’s largest biofuels distiller, benchmarks operations to be in the top environmental quartile, and works with other companies to conserve energy. “There’s still a lot of low-hanging fruit on the energy conservation tree,” Van der Veer said.

The two executives made a similar presentation a day earlier in New York. The company also plans to hold a webcast on its new energy scenarios with a live online question and answer session in May.