Energy plans fall short of future reality: Shell
Royal Dutch Shell PLC says current plans by companies and governments worldwide to expand the global energy supply will fall short of growth in China and India.
AMSTERDAM, Netherlands: Royal Dutch Shell PLC says current plans by companies and governments worldwide to expand the global energy supply will fall short of projected growth in demand from China and India.
The Amsterdam-based global oil giant said in its Signals and Signposts report examining anticipated energy supply and demand up to 2050, that the impending gap means tough, uncertain times lay ahead. It will have to be bridged “by some combination of extraordinary demand moderation and extraordinary production acceleration,” which Shell says will be highly challenging while reducing greenhouse gas emissions.
Here are some highlights from the report:
• The world is entering an era of volatile transitions and intensified economic cycles. The recession interrupted the oil and commodity price boom but it may return. Emerging nations like China and India are going through materially intensive development and a tighter market will continue to put pressure on prices and generate volatility. Improvements in policy-making and strong gains in productivity have helped economies to grow without inflation in the last two decades. We do not believe the moderating effect of this combination of good policies, good practices, and good luck will continue into the future.
• Developing nations, including China and India, are entering their most energy-intensive phase of economic growth as they industrialise, urbanize, build infrastructure, and increase their use of transportation. Demand pressures will stimulate alternative supply and more efficiency in energy use but these alone may not be enough to offset growing demand tensions completely. Underlying global demand for energy by 2050 could triple from its 2000 level if emerging economies follow historical patterns of development.
• Natural innovation and competition could spur improvements in energy efficiency to moderate underlying demand by about 20% over this time. Ordinary rates of supply growth – taking into account technological, geological, competitive, financial and political realities – could naturally boost energy production by about 50%. But this still leaves a gap between business as usual supply and business as usual demand of around 400 EJ/a – the size of the whole industry in 2000. This zone of uncertainty will have to be bridged by some combination of extraordinary demand moderation and production acceleration.
• Supply will struggle to keep pace with demand. By the end of this decade, growth in the production of easily accessible oil and gas will not match the projected rate of demand growth. While abundant coal exists in many parts of the world, transportation difficulties and environmental degradation ultimately pose limits to its growth. Meanwhile, alternative energy sources such as biofuels may become a much more significant part of the energy mix, but there is no “silver bullet” that will completely resolve supply-demand tensions.
• Smart urban development, sustained policy encouragement and commercial and technological innovation can all result in some demand moderation. But so can price-shocks, knee-jerk policies and frustrated aspirations. Timescales are a key factor. Buildings, infrastructure and power stations last several decades. The stock of vehicles can last 20 years. New energy technologies must be demonstrated at commercial scale and require 30 years of sustained double-digit growth to build industrial capacity and grow sufficiently to feature at even 1% to 2% of the energy system. The policies in place in the next five years shape investment for the next 10 years, which largely shape the global energy picture out to 2050.
• The global economic crisis has coincided with a shift in geopolitical and economic power from west to east. This decisive shift is transforming the global economic and political system. The change is gradual, but its potential consequences are profound. The economic crisis in the west may accelerate this trend. Future generations may see 2008 as the turning point. The world faces a period of uncertain global politics. Strategic fault lines are emerging. Rising powers are increasingly and confidently asserting what they see as their national interests. This is undermining global mechanisms for ensuring collective security.
• Environmental stresses are increasing. Even if it were possible for fossil fuels to maintain their current share of the energy mix and respond to increased demand, CO2 emissions would then be on a pathway that could severely threaten human well being. Even with the moderation of fossil fuel use and effective CO2 management, the path forward is still highly challenging. Remaining within desirable levels of CO2 concentration in the atmosphere will become increasingly difficult.
Files from Canadian Press.