TiP

Seeing Peter Voser, the global CEO of Royal Dutch Shell, on ABC Television’s ‘7.30 Report” this evening reminded me that I wanted to read his contribution to the 25th world gas conference in Kuala Lumpur earlier this month.

Shell is one of a group of 5-8 companies whose thinking about energy issues has kept me informed over more than three decades’ involvement in the sector.

The company is no more infallible than any other, but it has a long tradition of thinking aloud about key issues – something I found essential reading when directly involved with the upstream petroleum industry as chief executive of its lobby group in Australia from 1980 to 1991 and which has gone on being helpful in the years since.

Voser told the Kuala Lumpur conference, which attracted more than 5,000 delegates from four dozen countries, following closely on the heels of our Australian Petroleum Production & Exploration Association 2012 conference (which had 3,008 delegates from three dozen countries), that “the natural gas revolution is the most significant energy development in decades.”

This is no minor statement and needs to be read in proper context.

It is not an attempt to dismiss oil and coal, which intent is the chief driver of so much of the noise emanating from the “clean energy future” activists, nor does it dismiss the likes of solar, wind and geothermal energy, which are all making their way up through the ranks of technologies.

But it drives home that, worldwide, what is happening with gas development is of huge significance, something you might be forgiven as a layman for missing if your information is solely the way energy stuff is reported in the Australian media.

And the “7.30 Report” focus was almost all on Voser’s views on a carbon price and our impending carbon tax, understandable I guess, but not terribly helpful in addressing the bigger energy picture that the program’s viewers never seem to have drawn to their attention.

Briefly, the producers had access to one of the world’s leading energy figures and could only use him to gaze at our political navel.

(In parenthesis, the outlook over 25 years here, just in power generation, is for east coast Australia alone to require more than a billion tonnes of black coal, about a half billion tonnes of brown coal and some 10,000 petajoules of gas to provide electricity for a population moving towards 30+ million at the end of the ‘Twenties. Even the greenest of consultants employed by Federal Treasury sees fossil fuels contributing 65 per cent of power generation around 2030 while Martin Ferguson’s Bureau of Resources & Energy Economics sees the 2030 fossil fuel contribution as nearer 80 per cent.)

Going on to the global Shell website, I found three speeches in fact that are germane to my focus: two by Voser, the other one to the highest-ranking energy forum in the world, the annual CERA conference in the US, and the third by Simon Henry, the group’s CFO, at a dinner marking the company’s 120th anniversary in Thailand.

They can all be found on the group’s media centre website.

Paraphrased, Voser’s message is this: In the past decade the petroleum industry has “perfected” the technology needed to unlock gas from places previously assumed to be out of reach. This now provides increasingly abundant and diverse supply, enhancing energy security. Worldwide, recoverable resources of gas now account for about 250 years’ consumption at current production rates.

China and Australia are singled out – beyond developments in North America – as likely to see “the next wave of the gas revolution.”

You and I know the Australian story.

Of China, Voser says: “Its potentially enormous deposits could play a major role in helping to boost the share of gas in its energy mix and to ease its dependence on coal.”

(Its coal use, of course, is the biggest single factor in greenhouse gas emissions today.)

A key part of the Voser narrative is to highlight the substantial investment and complex technology required to sustain the global gas boom.

He takes on the problem areas quite forthrightly.

Many worry that modern production techniques will harm the environment and endanger their health, he acknowledges, but he insists that the techniques are “tried and tested.”

Hydraulic fracking, for example, he says, has been performed in the US alone 1.1 million times in 60 years.

“Documented instances of freshwater contamination are rare – and they were due to poorly designed and constructed wells.”

He asserts that some of the concern is not based on facts or rational argument, “but it is our reality and these concerns need to be addressed.”

And he is firmly of the view that the industry needs to do a better job of its communications.

Shell supports transparency about chemicals used in the tight and shale gas businesses.

From an Australian standpoint, the Shell market perspective is important.

Henry points out that South-east Asia’s urban population has almost doubled in two decades and two-thirds of its population will live in cities by 2050.

Gas will be a critical part of their energy security and improved lifestyle.

“Urban dwellers,” he notes, “typically consume more energy than their rural counterparts, partly because they are wealthier. Sprawling cities have much higher levels of energy consumption.”

This is especially true in personal travel.

Henry says sprawling cities in the US have per capita energy consumption that is 5-10 times higher than in some Asian cities, of which the high density stand-out is Singapore.

(This, of course, is the story of Melbourne, Sydney and south-east Queensland, too, where public transport infrastructure is inadequate to curb energy demand.)

The Shell executive also highlights an issue that is hardly a problem here, but is a huge one in Asia: the fact that burning gas to make electricity in the urban airsheds offers a major air quality gain for large cities.

Henry’s analysis goes to the fact that, for the medium term, South-east Asia is a big, and growing, demand area for energy supply, including Australian LNG, but in the longer term it will see greater energy efficiency.

The bottom line comes from Voser: “The natural gas revolution offers the best, most promising opportunity we have today to make substantial, immediate progress towards a more sustainable energy supply” – including, he is careful to add, as a supporter for intermittent solar and wind power, too.

Between them, Voser and Henry also canvass an issue that I personally think is too far under the radar here in Australia – the conversion of gas to liquid fuels. (Something that can also be done with black and brown coal, of course.)

When our dollar value falls back, as it will do eventually, to rather less elevated heights than it scales today, there is a nasty surprise waiting for us in the cost of importing transport fuels – and perhaps also in terms of energy security for a country that seems to struggle to manage its blue water naval activities.

I thought management consultants Deloitte summed up the immediate Australian situation in a paper the firm distributed at the APPEA conference: “Eastern Australia’s gas market is currently facing an unprecedented convergence of issues that have the potential to both transform it in to one of the world’s largest LNG exporters while presenting challenges for the security of domestic gas supply.”

The Shell speeches serve in part to reinforce this thought and go further in terms of both the promise and the problems gas now presents.

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