Shell chief fears oil shortage in seven years

Carl Mortished, Times Online 25 Jan 08;

World demand for oil and gas will outstrip supply within seven years, according to Royal Dutch Shell.

The oil multinational is predicting that conventional supplies will not keep pace with soaring population growth and the rapid pace of economic development.

Jeroen van der Veer, Shell’s chief executive, said in an e-mail to the company’s staff this week that output of conventional oil and gas was close to peaking. He wrote: “Shell estimates that after 2015 supplies of easy-to-access oil and gas will no longer keep up with demand.”

The boss of the world’s second-largest oil company forecast that, regardless of government policy initiatives and investment in renewables, the world would need more nuclear power and unconventional fossil fuels, such as oil sands.

“Using more energy inevitably means emitting more CO2 at a time when climate change has become a critical global issue,” he wrote.

Mr van der Veer is expected to discuss Shell’s energy outlook today at the World Economic Forum in Davos.

In his e-mail, which was reported on RoyalDutchShellplc.com, an independent website that monitors the company, Shell’s chief set out two scenarios for the world’s energy future.

The first scenario, “Scramble”, envisages a mad dash by nations to secure resources. With policymakers viewing energy as “a zero-sum game,” use of domestic coal and biofuels accelerates.

It is a world, said the Shell chief, where “policymakers pay little attention to energy consumption – until supplies run short.”

The alternative scenario, “Blue-prints”, envisages a world of political cooperation between governments on efficiency standards and taxes, a convergence of policies on emissions trading and local initiatives to improve environmental performance of buildings.

Shell has not committed to either scenario. The oil company regularly uses scenario-planning to test the likely impact of widely divergent economic and political scenarios on its long-term strategy.

Unsurprisingly, Mr van der Veer indicated that Shell preferred the Blueprints scenario but he expressed caution over the likelihood of it coming to pass without a global approach to emissions trading.

The Blueprints scenario assumes that 90 per cent of CO2 is captured by coal and gas power plants in developed countries by 2050, and at least half of the CO2 emitted by power stations in the developing world. No such plants are in operation today, noted the Shell chief. “It will be hard work and there is little time,” he said.

Mr van der Veer’s comments emerged in the same week that the European Commission launched reforms to its carbon trading system, with plans to force power stations to buy permits to emit CO2.

In an acknowledgement of the challenge of securing global acceptance of the need to curb carbon emissions, the Commission President, José Manuel Barroso, said that the Commission would consider the possibility of taxing imports into the EU by countries that failed to take equivalent measures to curb carbon emissions.

Mr van der Veer’s prediction that the oil industry would soon struggle to deliver sufficient conventional oil and gas to meet demand echoes growing concern from other oil bosses.