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Higher prices and the end of “easy” oil are helping make energy a political lever again. Big energy-consuming countries are increasingly worried about the vulnerability of their supplies.
Energy independence is not realistic for big consuming countries. For example, the USA uses about 25% of the world’s oil but has less than 3% of remaining proved oil reserves.
The same is true for the European Union’s consumption and reserves of natural gas. Competitive international markets are the surest way to increase global supplies and promote a wide range of supply alternatives – both from different regions and different energy sources.
Massive investments and stable investment conditions are needed. So are sophisticated technology, the ability to manage complex projects and access to resources for the international oil companies that have this know-how. Energy efficiency measures, encouraged by governments, will also need to play an important role.
We are helping diversify energy options in four main ways: 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.
Squeezing more out of existing fields
New technology is helping us extend the life of existing energy resources close to markets. Today, only 30–40% of oil contained in most reservoirs is typically extracted. Boosting recovery rates by just a few per cent can dramatically increase long-term supply. For example, injecting steam, gas or chemicals into reservoirs is slowing the natural decline in production from mature fields where we have an interest in California, Canada and Oman. A Shell team is investigating the possibility of injecting waste CO2 into oil fields off the coast of Norway, which would boost production and reduce GHG emissions.
Developing new fields
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 km deep in the Gulf of Mexico. With further technology advancement, unconventional oil sands and shales could also significantly increase supplies to some of the world’s biggest energy consuming countries (see unconventional oil). Unmanned production platforms – like those in the North Sea, powered by renewable energy from wind turbines and solar panels – are allowing us to tap ever-smaller deposits that were not previously economic.
More options for transport fuel
Substitutes that can be blended with petrol or diesel can increase supply options and reduce dependence on oil in the transport sector. We are one of the world’s leading distributors of transport fuel from plants (biofuels). Our Gas to Liquids (GTL) technology turns natural gas into cleaner-burning transport fuel. We operate one GTL plant in Malaysia and are building a second, the world’s largest, in Qatar (see diversified gas).
Shell Hydrogen is exploring ways to promote hydrogen as a longer-term fuel option and in 2006 operated five demonstration refuelling stations around the world.
More refinery capacity will help avoid bottlenecks in fuel supplies. Subject to a final investment decision, construction could begin in 2007 to more than double production at our Motiva joint venture refinery in Port Arthur, Texas. After the expansion, the refinery would process 600,000 barrels of oil a day, producing enough petrol to fill up more than one million cars per day. The project would make Port Arthur the largest refinery in the USA.
Electricity choices
Shell Renewables is a major developer of wind power and is investing in next-generation thin-film solar technology.
Our natural gas production provides customers with an alternative to coal and oil for power generation. Cooling natural gas to liquid form, so that it can be cost-effectively shipped long distances, gives natural gas users a wider choice of suppliers. We are a leader in LNG (see Diversified gas). LNG operations we participate in supply more than a third of Japan’s and Korea’s total natural gas needs, as well as customers in Europe, India, North America and Taiwan.
Shell is 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 (see CO2 capture technology).