Royal Dutch Shell’s Global Business Environment executive Jeremy Bentham and team addressed and fielded questions from the press regarding the company’s “Energy Scenarios to 2050” research and analysis during the first of a planned series of live Shell Dialogues web chats earlier today, May 15.
3 Hard Truths
Broadly speaking, “Three Hard Truths” underlie and are driving developments in the global energy industry, according to Shell’s analysis. Emerging nations have been increasingly participating in globalization for the past ten years and more and will continue to do so, creating a significant “discontinuity” on the demand side of the global energy production and distribution system, Bentham noted during the web chat – one that conventional energy suppliers, as well as governments and international agencies, have failed to adjust and adapt to in timely fashion, much less foresee, he might have added.
Suppliers of conventional energy resources are struggling to keep pace with growing demand. It’s not so much of a lack of traditional fuel and power sources – i.e. oil, natural gas and coal – but the long lead times necessary to explore, develop and bring them into production, Bentham explained, noting two other developments associated with this second point.
The first is that when it comes to oil, natural gas and coal, the “low hanging fruit,” so to speak, has been picked. Finding and developing new resources is hence increasingly costly and means going farther afield. Second, resource nationalism is on the rise and hence decisions made by the national governments of oil exporting nations will only gain in significance.
Finally, the third hard truth regarding global energy supply and demand is that population growth means that global energy demand will rise inexorably in coming decades, putting increasing strains locally, nationally and internationally on the energy and political systems, as well as the environment.
There is no single “silver bullet” that will address and alleviate what Shell considers are broad, essentially irreversible underlying forces already set in motion that have heightened uncertainty and risk in the global energy and economic systems. A portfolio approach is needed, yet too much of a patchwork will heighten investment risks and uncertainty, according to Shell.
To better understand the possible alternatives that all the various stakeholders public and private can and are adopting to deal with this central issue for coming generations Shell’s business environment team has developed two alternative scenarios marking somewhat opposite ends of a possible spectrum: Scramble and Blueprints.
The former envisages national governments acting more unilaterally to ensure their own energy security while the second envisages a more cooperative approach entailing a greater degree of public-private and international cooperation and coordination. While Shell believes the latter to be the preferred choice, energy demand will continue to rise – and greenhouse gas emissions more than likely with them – out to 2020 and 2030 before beginning to decline, as per Shell’s Blueprints scenario, or plateau for another decade and more, out to 2050, as per the Scramble scenario.