Shell CEO says technology needed to meet fuel demand

HOUSTON, Feb. 10 -- The oil and gas industry must apply new technologies on unprecedented scale and pace to meet the world's expanding demand for fossil fuels, said Jeroen van der Veer, chief executive of Royal Dutch Shell PLC, at the Cambridge Energy Research Associates annual energy conference in Houston.

With continued economic growth, the world's energy needs could increase by 100 million b/d of crude over the next 25 years—"more than we added over the past quarter century," Van der Veer said. Most of that increased demand will be in new markets where infrastructure and international trade must be developed. "And this has to go together with cutting carbon dioxide emissions from energy," he said.

"I have a vision of green—or greener—fossil fuels with much of their carbon dioxide captured and sequestrated either underground or in inert materials," Van der Veer said. "A typical 1 Gw coal-fired power plant produces the same carbon emissions as 1.5 million cars. China alone is building about 17 of these plants a year. That's why I think sequestration for power plants should be a priority."

Alternative energy sources
Consumption of liquefied natural gas could double over the next decade, depending on "technological as well as commercial innovation," said Van der Veer. Gas-to-liquids technology also "will be increasingly important, providing high-quality fuels to help reduce transport emissions." Other large unconventional resources include heavy oil, oil sands and shales, "contaminated" and tight gas, coalbed methane, and "lots of coal, particularly in countries like the US and China," he said. Royal Dutch Shell and other major oil companies are involved in developing those resources.

The biggest benefit, said Van der Veer, would be to increase the amount of crude recovered from reservoirs. That can be done through "smart technology" that allows engineers to monitor and control development and production. Enhanced oil recovery techniques using heat, gas, or chemicals to increase the oil flow are costly, complex, and technically demanding but will be increasingly important, he said.

The challenge facing the industry is to deliver the necessary technology. "That means applying advances on the scale necessary to make real progress," Van der Veer said. "It means learning from experience to use them increasingly effectively and quickly sharing that learning around the world. It means integrating many technologies because that's where the real benefits come in this complex business. It means applying those technologies in increasingly demanding projects—accessing more difficult resources and creating the complex chains needed to deliver the energy people need."

Van der Veer also sees a growing need for energy efficiency. "I believe the world is just starting this journey, partly because it is politically painful to push forward changes that must involve all energy users," he said.

The technology to develop those new energy sources depends on experienced workers in the industry. Shell is focusing on global recruitment of new employees, "with considerable success last year," Van der Veer said.

"In North America and Europe, fewer young people pursue scientific and technical education. Here in the US, for example, the number of university students studying petroleum engineering has fallen by more than 80% since the early 1990s," he said. "We need to convince young people that a technical career in this industry is both stimulating and worthwhile."

The International Energy Agency, Paris, estimates the oil and gas industry will have to invest $17 trillion by 2030 to meet the world's future energy needs.

"Oil and gas prices have risen. But so have industry costs. And developing more difficult resources will mean higher unit investment," Van der Veer said. "Given the urgent investment needs, exacting 'windfall' taxes is counterproductive, particularly in an industry with a history of volatile prices. In an increasingly uncertain world, long-term investors need predictable terms."

Contact Sam Fletcher at samf@ogjonline.com.