Beyond the limits of fossile energy

Beyond the limits of fossile energy www.shell.nl

Speech of Jeroen van der Veer – President of the committee of directors of royal/Shell group – at occasion of 25e the symposium van der Veer foundation in Leiden.

Thanks to Smiley for the translation.

Beyond the fossil energy of today lays the energy of tomorrow. Although a new energy economy will come inevitably, we know that the way is still long. In the meantime the world needs more and more energy and we will not be able it to neglect the current, before we new have the new. That was said by Jeroen van der Veer today on 25e the symposium of de van der Veer foundation in Leiden. Below you find the most important points of that presentation.

The world population will grow by about 2.5 billion to 9 billion people between now and 2050. Moreover the average prosperity on the world increases. But more people and more prosperity inextricable means however also more energy usage. Developing countries need more energy to reach a higher prosperity level. In several scenarios the world energy consumption doubles before 2050. Possibly it will grow even more.

200 millions barrels per day.

The world uses now, daily, about 200 millions barrels oil-equivalent. Of that 200 millions barrels, around 80% is produced from fossil sources: oil, gas and coals. Nuclear power, waterpower and traditional biomass, such as logwood and agricultural waste, together attribute roughly 20%. Real renewable energy, sun and wind and modern biomass are only measured in tenths of a percent.

The average annual increase of the world energy consumption lays now around 1.5 – 2 per cent. This means that for the oil production an annual increase with approximately 1.5 million barrels per day is required. But the oil-industry has to do more than that to produce the extra volume. She must also compensate for the natural depletion of the existing fields by means of new finds and investments. This depletion amounts to something like 4 – 5 percent per year, (or in volume around 3.5 million barrels per day). The oil-industry must develop, 28.5 million barrels per day of new capacity, in the next five years alone: in comparison that is three times the current production of Saudi Arabia.

But what about renewable energy, you ask? We’ll remain active in this, but renewable energy sources are simply too insignificant to be able to play a meaningful role. You cannot require a baby to run the hundred meters sprint within ten seconds. You need twenty years of training. The same applies to renewable energy.

At this moment the energy sector stands for a three tasks.

1) Increase the production of fossile energy, affordable and as clean as possible. Of our present energy – 200 mbdoe – 80% comes from fossil sources. In 2050 it will become 400 mboe and we believe that still half of that will come from fossil fuels. But in volume that is 80% more than now.

2) Simultaneous development of new energy sources. They must take over in the long run.

3) Reduce the negative environmental effects of producing and using fossil energy an to reduce the exhaust of greenhouse gasses.

The main question is of course: are there still sufficient reserves to oil and gas?

People always speak about the `proved reserves’. For oil that amounts to 1,200 billion barrels, or approximately 40 years of current production. But there are also probable and suspected reserves. These two categories are annually added to the proved reserves by investments in exploration and production. This limit thus shifts continuously, stimulated by technological advances. And this development still goes on. It is even accelerating. For this reason we can produce more oil from the reservoirs that we ever though was possible. An we are still finding more –although smaller – fields.

The reserves are so large that I expect something surprising to happen: Namely that we enter a new era of durable energy, when we still have a lot of fossil energy in the ground. The Stone Age didn’t end because we ran out of stones. It ended because humanity found something better.

Fluid limit

Although the reserves of oil are large, they are of course finite. That limit is out there somewhere. However you must see it as a fluid limit. It is susceptible to the influence of technology and social changes. We have to start thinking what lays beyond that limit now, before we run out. I want to outline a few possibilities for the things ahead.

First of all, photovoltaic or solar energy. The challenge here is to increase the conversion efficiency of current cells. Also we must improve the production technology. The price per produced kilowatt has to come down considerably. In this we have already made considerable progress. In the past the costs have decreased by 50%. Shell doesn’t want to wait for these new cells. That is why the company set up Shell Solar to work towards that development. This has given us a favorable position in the research field.

There is no better way to learn than by your own experience. However there is a considerable amount of money involved in such a start-up. We don’t consider Shell Solar as some kind of playground. It is serious business, although with a reduced output objective.

In the same renewables division you will also find wind. We develop wind parks with a capacity of 700 MW. That must grow in the coming year to 2000 MW, by a new offshore windpark at Egmond aan Zee. To transfer energy from sea to the coast is a challenge. It is expensive to call in a repair ship every time there is a malfunction. That’s where our offshore experience can help to produce a larger reliability.

With wind and solar electricity is produced, which is less suitable for mobility. For that liquid fuels offer advantages. Crude oil doesn’t need to be the only source. Biomass can provide a source of ethanol or pure alcohol, which can be added to petrol. Bio-diesel is another option.

Commercial iogen production

This biomass technology we typify as `conventional biomass conversion’. Our research aims at Advanced Biomass Conversion. This is a promising technique, which makes it possible to derive diesel and petrol additives from a wide range of materials. For instance alcohol or bio-crude made from trees and straw. Others think of the production of diesel components from organic waste. We find these sophisticated technologies very important.

We also look at the ethical aspects of using a food source for energy production. It would be an improvement when we could grow special plants for energy production, preferably on soils, which have a low agricultural value. In Canada Shell participates in a test factory of Iogen in which -with a special ESA technology- all types of green can be converted into sugars and in special EcoEthanol. The iogen process does not aim at the edible part of the plant but the stems and the waste that remains after food production. This year we decide on the placement of a large commercial Iogen factory. We value this development highly and believe it can eventually produce a significant percentage of our motor fuels.

Since 1999 our business unit Shell Hydrogen has been aiming at the technology and market development of hydrogen, particularly for mobility. Hydrogen has a large potential, but there are still considerable hurdles to be taken. For instance the storage of the devices in cars. We consider hydrogen made from natural gas as an interesting bridge to a real new energy future.

But the hydrogen era can only begin when the hydrogen can be produced by electrolysis of water, for example with the theoretically infinite flow of core fusion.

There will be a new energy future. Which energy will power the future is yet unknown, but that it will come is certain. Meanwhile fossil fuels will play an important role and its use will grow for some time to come. We work on that.