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Energy giant Shell prepares for end of oil era

Date: 04-Oct-01
Country: USA
Author: Andrew Mitchell

Oil giants from the last century will have to look to their laurels if they are not to be unseated as motorists move towards hydrogen-powered vehicles, and renewable energies, such as wind or solar power, emerge, Shell chairman Phil Watts told reporters.

"One thing I am convinced of is that the next 50 years is not going to be more of the same. An energy company had better make sure it has the necessary expertise and knowledge," Watts said at the launch of Shell's 'Long Term Energy Scenarios'.

Shell has moved firmly into the same camp as fellow oil supermajor BP, which has made vigorous efforts to carve out an environmentally friendly public image.

The world's No. 1 oil firm, Exxon, has by contrast concentrated firmly on its oil and gas interests, and had little truck with the environmental lobby.

Shell has pledged to spend between $500 million and $1 billion in the next five years to develop new energy businesses, concentrating primarily on solar and wind energy.

"There will be different sources of energy by the middle of the century. It challenges what our portfolio will be," Watts said. "I don't know if Shell will be transmogrified by it, but I wouldn't like the opportunity to pass by default."

OIL ON TOP

Oil currently sucks up around 40 percent of primary energy use. While that will fall to barely 25 percent by 2050, oil will still be the top dog, above gas at 20 percent, according to Shell figures.

"We are going to have oil and gas for many, many years," Watts said. "The internal combustion engine is not going to go away. It's going to fight for its life. Under pressure the internal combustion engine is going to develop."

Automakers such as Toyota and Honda are already selling hybrid cars which combine traditional engines with battery powered motors.

The vast markets of China and India are key examples of how nations and energy firms alike will need to balance rapidly growing energy needs with rising import dependence and environmental effects, Watts said.

Natural gas will initially pick up much of the slack as oil's preeminence slowly wanes, Watts said. After that, the outlook is far less certain as new technologies fight to establish themselves.

"We could see an evolutionary progression, the so-called carbon shift, from coal to gas, to renewables, or possibly even to nuclear," said Watts.

"A second scenario explores something rather more revolutionary; the potential for a truly hydrogen economy, growing out of new and exciting developments in fuel cells and advanced hydrocarbon technologies," he added.

According to one Shell scenario, rapid growth in fuel cells from 2025 - which produce electricity from hydrogen and cut harmful emissions - could shift the energy business dramatically away from oil long before oil becomes scarce.

Radical changes possible in the energy business means the old order which dominated the last century such as Exxon, BP and Shell itself cannot afford to assume they will dominate for the next 100 years.

"That would be a very complacent view. Longevity in corporations is not the norm," said Watts.

Oil companies will have to be more sensitive to environmental concern, he added. "Companies are not charities but they do have values," he said.

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