David Frowd Global Business Environment Royal Dutch/Shell Group David Frowd Global Business...

David FrowdGlobal Business Environment

Royal Dutch/Shell Group

David FrowdGlobal Business Environment

Royal Dutch/Shell Group

Energy Needs, Choices and Possibilities

Scenarios to 2050

Energy Needs, Choices and Possibilities

Scenarios to 2050

Shell International Ltd.

Scenarios: challenging assumptions and benchmarking vision

Scenario B

Scenario APlan

Projects

Challenge

Vision


What Are Scenarios?

• Relevant to business

• NOT projections, predictions or preferences

• Alternative futures

• Challenge assumptions for better strategy


Energy Paths

What needs, possibilities and choices will shape an

energy system staying below 550 ppmv CO2?

We believe we are entering a particularly innovative

period for the energy system and that

“there is more than one path to a sustainable energy

system”


What Shapes Long Term Energy?

The contributors

By 2050 • demography: 8-10 billion people

• incomes: average $15-25k/capita

• urbanisation: 80% living in cities

• liberalisation: markets increase possibilities


Korea

Thailand

BrazilMexico

India

China

Climbing The Energy Ladder A Continuously Changing Relationship

Source: IMF, BP

GJ/capita

GDP/capita (‘000 1997$ PPP)

Japan

EU

Australia

US

0

50

100

150

200

250

300

350

0 5 10 15 20 25 30 35

• +$25k/capita:little extra energy needed.

• +$15k/capita:services start to dominate growth.• +$10k/capita:industrialisation near complete.• +$5k/capita:industrialisation and mobility take off.


The contributors

• demography• incomes• urbanisation• liberalisation

What Shapes Long Term Energy?

The critical

• resource constraints• technology• social and personal priorities

Shell International Ltd. billion barrels of oil equivalent

2000 $ per boe

Source:Shell, 2000

Oil and Substitute Costs

Unconventional Oil

35000

5

10

15

20

0 500 1000 1500 2000 2500 3000

Producedat

1.1.2000

Biofuels competition

Gas to Liquids competition

4000


million bbls per day

3,000 bln bbls

+ 350 bln bbls of NGLs

+ 850 bln bbls heavy oil and bitumen

excluding shales

Ultimate Recoverable Resource

Source: based on USGS mean estimates, June, 2000

0

25

50

75

100

125

1950 1975 2000 2025 2050

2% per annum

7.5% per annum

The Oil Mountain

Shell International Ltd. Source: based on USGS mean estimates, June 2000 and IPCC 2000 for unconventional

3% per annum

15,000 EJ(2,600 bln boe)

+ 5,000 EJ(1000 bln boe)

+ 13,000 EJ (2200 bln boe)unconventional

EJ

4% per annum

The Uncertain Gas Mountain

0

100

200

300

400

1950 1975 2000 2025 2050

Shell International Ltd. Source: SIG 1998, EUNG 1978-1994

bcm

1998

1994

1993

1990

1987

1985

1978

Forecast date

0

100

200

300

1970 1980 1990 2000 2010

actualactual

European Gas Production Forecasts

Shell International Ltd. Source:adapted from UN 2000, WEC 1994, and ABB 1998. Figures based on 10 billion people.

GJ per capita

DemandRange

Solar

Wind

Biomass

Hydro

Geothermal

0

200

400

600

800

1000

N. A

mer

ica

S. A

mer

ica

Eur

ope

FSU

Africa

Mid

dle

East

& N

.Africa Asi

a

Tot

al

Renewable Resources are Adequate to Meet all Energy Needs


20,000

1,000

500

100

5,000

10,000

10 1,000 100,000

2000 $ per peak kW

Cumulative MW installedSource: adapted from IIASA--WEC, 1995

2008 Wind Assoc.

1981

1998

Photovoltaic systems20%

1982

1987

Windmills

20%

1963

1980Gas turbines

20%

10%

199815%

2020 US PV Assoc.

On-going Renewable Cost Improvements


Fuel Cell Hydrogen

Direct ElectricitySolar

Direct - Wood, Wind, Water, Animals

Steam engine - Coal 1830-1900

Internal combustion engine - Oil 1910-1970

CCGT - Gas 1990-?

Nuclear 1970-1990

MANUFACTURING ADVANTAGE

Electric dynamo - Coal 1900-1940

Energy Technology Discontinuities

18001800

18501850

19001900

20002000

20502050


demographics

urbanisation

incomes & demand

liberalisation

The Spirit of the Coming Age

Energy Choices - Consumers

Revolutionary developments

Dynamics as Usual

Energy choices- Citizens

Evolutionary system

Energy Branching Points

Resourceconstraints

Technologies

Social & personalpriorities

Innovationand

competition


Societal pressures for “secure”, “clean” and “sustainable”

energy push a direct path to renewables, supported by gas in

the medium term.

But only after advances in energy storage and a next

generation of renewables around 2025.

Vehicle efficiency advances prolong the oil transition.

Dynamics as Usual

Shell International Ltd. Source: US EIA, 1999

Index 1950=100

100

150

200

250

350

1950 1970 1990 2010

US Petrol Demand Decoupling from Income

GDPper capita

Gasoline salesper capita

300


Health and Security Concernsin Ageing OECD Societies

2000$/bbl

40

0

20

20102000

Sporadic OPEC cohesionUncertain demand and

policies

1990


0

20

40

60

80

100

2000 2010 2020

% of new cars

Diesel (inc GTL and Biomass F-T Fuels)

Gasoline (inc Ethanol)

Hydrogen

Fuel cell

Spark ignition

Compressionignition engines

LPG/CNG

Hybrid

Naphtha/Methanol

Changing Automotive Fuels and Technologies

Combined combustion systems


GTLa bridge to renewable transportation fuels

Now

Renewables Futures

Gas-to-Liquids (GTL) based on low temperature Fischer-Tropsch (F-T) cobalt-based synthesis

CI = Compression ignition

Standard CI Drive Train

F-T GTL Blends

Advanced

CI/Hybrid

Drive Train

Biomass

F-T Fuels

Hydrocarbon

powered fuel cellF-T GTL 100%

Advanced CI/Hybrid

Drive Train

F-T GTL 100%

Hydrogen

Fuel CellBiomass Hydrogen Solar Hydrogen


Million bbls per day

Volatile Oil Demand and the Long Oil Game

0

25

50

75

100

125

1970 1990 2010 2030 2050

$/bbl

0

10

20

30

40

1970 1990 2010 2030

Shell International Ltd. Source: US DOE, Vision 21, 2001

2015 coal power

objectives:

- competitive prices

- multi-fuel

- multi-product

liquids

- 60% efficiency

- pollution free

- full CO2

sequestration

The Next Generation of Coal Power


“Dash for Gas”

Middle Eastbudget pressures &

export diversification

Global Dash For Gas

China, Saudi Arabia, Russia, Iran join WTO

LNG spot market

High efficiency CCGT

Gas and powerliberalisation

CO2 gas substitution

Local air quality concerns in Asia

CIShard currency needs

Nuclear and coal decommissioning


pipelines

major demand

Natuna Malampaya

TarimSichuan

Ordos

major supply

Turkmenistan

Yakutsk Sakhalin

West Baikal

Iran

LNG flows

Asian Gas Grid 2020

Oman


Gas Imports as % of Energy Consumption

Japan

North East Asia

W. Europe

0

10

15

20

25

1970 2000 2030

Gas Security Concerns

5


Liberalisation Disruptions: EU Gas Prices

$2000/mmbtu

0

1

2

3

4

5

1990 1995 2000 2005 2010 2015 2020


A Tale of Two Eras for Renewables Growth and Plateau

• strong government support

• environment and security

• green power niches open

• intermittence constraints

• saturated OECD demand

• planning blockages

EJ

0

25

50

75

2000 2010 2020 2030


2010 2020 2030

Gas?

Nuclear?

Renewables?

Branching Point 2025


The Benefits of Scale 300 MW PV Factories

Source: from KPMG, 1999 500 MW Plant

$ per peak watt

0

1

2

3

4

5

6

1999 20 MW Plant

300 MW Plant

Plant8 fold reduction

Materials and Balance of System3 fold reduction


% of Primary Energy

Energy Transitions Dynamics as Usual

Coal

Nuclear

Oil

GasNewRenewables

BiofuelsHydro

Traditional

0

20

40

60

80

1850 1900 1950 2000 2050


demographics

urbanisation

incomes & demand

liberalisation

The Spirit of the Coming Age

Energy Choices - Consumers

Revolutionary developments

Dynamics as Usual

Energy choices- Citizens

Evolutionary system

Energy Branching Points

Resourceconstraints

Technologies

Social & personalpriorities

Innovationand

competition


Consumer demands for more convenience, flexibility, and

independence, supported by advanced hydrocarbon

technologies, provide an infrastructure bridge to a

hydrogen economy.

Longer term this creates a large demand pull for

sustainable hydrogen and renewables.

Spirit of the Coming Age

Shell International Ltd. Source: IIASA, Grubler & Nakicenovic, 1991

Percentage of maximum US network size

Airways1835

1891

1946

Roads

Oil PipelinesRailways Tele-

graphs

Canals

Internet

Infrastructure - The Critical Enabler

100

0

40

20

80

60

1800 20001900 19501850


Vehicles

• utilised 50% of time, not 5%

Dwellings

• heat & power from fuel cells

• power from idle vehicles

Rural Households & Industry

• small fuel cell CHPSource: Powering the Future, Koppel, 1999

One Size Fits All

PEM Fuel Cell $ per kW

10

100

1,000

10,000

100,000

1960 1980 2000 2020

Gas turbine

Shell International Ltd. Source: derived from Investment Strategies for China’s Coal and Electricity Delivery Systems, 1995 IBRD

Trains per day from Shanxi, Henan & Nei Mongol

2500 tonnes and 70 wagons per train

0

500

1000

1500

2000

2500

1970 1980 1990 2000 2010 2020

Rising Coal Logistic Costs in China


China Hydrogen Economy

Land scarcity limits bio-fuels

Mass transport &electric drive for uneven terrain

Large coal resourceLogistic constraints

Air quality concernsand weak

regulatory control

Global price for CO2

Water scarcityin the north

CH4 and H2 from coal Advanced membranes

Fuel cells

Supply securityconcerns

- oil, gas, fertiliser

China Leapfrog 2020


The Great Game of GasOil and Gas Demand

Million bbls per day

0

50

100

150

1970 2000 2030

Gas

Oil


Primary Energy

EJ

HydroNuclear

Gas

Oil

CoalTraditional

New Renewables

Coal CH4 & H2

0

250

500

750

1000

1250

1970 1990 2010 2030 2050


CO2 Emissions and Atmospheric Concentration

ppmv

300

350

400

450

500

550

1975 2000 2025 2050 2075 2100


Dynamics as Usual

billion tonnes carbon

0

2

4

6

8

10

12

14

1975 2000 2025 2050


Dynamics as Usual


Dynamics as Usual Spirit of the Coming Age

“Health and Security” “Convenient and Unobtrusive”

Incumbent technologies respond Revolutionary new technologies. Renewables promoted. Convergence around fuel cells.

Gas favoured but security concerns. Gas provides backbone

Renewables ‘boom then bust’ until Indirect path to sustainable energy new generation and storage Large scale renewables pulled solutions emerge around 2030. by H2 demand post 2030.

Towards a renewables dominant Towards a fuel cell dominant electricity and liquid fuels world hydrogen economy

Long Term Energy Scenarios


Primary Energy Comparison

EJ

HydroNuclear

Gas

Oil

CoalTraditional

New Renewables

Coal CH4/H2

0

250

500

750

1000

1250

1970 1990 2010 2030 2050

EJ

0

250

500

750

1000

1970 1990 2010 2030 2050


• Natural gas as a bridge fuel over the next two decades and

the importance of mitigating supply security fears.

• Strong pressures which oil markets will face as new vehicle

technologies diffuse.

• Gradual shift towards distributed heat and power for

economic and social reasons.

• Potential for renewables, particularly solar and biofuels, to

dominate primary energy supply in the longer term.

Scenarios - Common Features

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