It’s official: Shell CEO says global economy has started ‘energy transition’

Royal Dutch Shell CEO Ben van Beurden.

Big Energy must stake its claim to manage the energy transition, not leave it to eco-activists

I’ve taken plenty of heat lately from fossil fuels boosters who disagree the global economy has begun a 100-year transition to clean energy technology. Well, perhaps the boosters will believe Royal Dutch Shell CEO Ben van Beurden, who gave a very important speech in Norway Monday.

Gas prices Shell photo by Oliver Reck

You can read some of my columns here and here and here.

van Beurden began his speech by saying how important it was that the oil and gas industry be “contrarians” in the debate over the transition to clean energy: “All of us here today have a pivotal role to play in shaping the energy system of the future. With our knowledge, we have some indispensable ― and you could say, contrarian ― insights to offer.”

His remarks were aimed squarely at Big Green – the environmental groups like Greenpeace and the Sierra Club which argue that wind and solar are ready for primetime now. The ones that carelessly fling about slogans like “100% renewables now!”

Permian Basin oil and gas producers are switching from rod pumps to plunger lift, with significant cost savings.

But van Beurden makes it very clear in which direction the global energy system is headed: “As we all know, the demand for energy is expected to grow [25% by 2035, according to the International Energy Agency] …Just as demand will go up, emissions of greenhouse gasses will need to come down… especially if the world is to live up to the significant and ambitious Paris agreement on climate change.”

And then he hits the rhetorical nail on the head: “The underlying question is: How far can countries transform their economies to meet demand and reduce emissions at the same time? And, crucially: How fast can they do that?”

The answers to those questions – as I have argued in many columns – are: A) Only as far as new energy technologies will allow them; B) Slowly.

Noted energy researcher and academic Vaclav Smil says energy systems change at only three per cent annually. Even that may be optimistic given modern circumstances. And, indeed, Prof. Smil has written extensively about the challenges of electrifying power, transport, industry and buildings.

Click here to watch production manager Dave Kuhnert explain how EndurAlloy™ production tubing has cut Crownquest Operating LLC’s Permian Basin well operating costs and extended well run-times.

More excerpts from van Beurden’s speech:

Social, political and geographical conditions differ from country to country. So the energy transition is likely to play out in a different way in different places…The pace of the transition will differ too. In some places it will be relatively fast, in others relatively slow.

In other words, this century’s energy landscape will inevitably be a patchwork of renewables and hydrocarbons. Or, to put it differently, some level of emissions will remain for some time.

I believe it is part of our industry’s role to underline this undeniable truth. It is part of our role to be the contrarian in the room. Not because we like it, but because realism is absolutely crucial to achieving an effective and efficient energy transition.

Our industry needs to reduce its carbon intensity too. This is one of the reasons behind Shell’s strategic choice for natural gas. When burnt to produce electricity, gas emits half the CO2 and just one-tenth the air pollutants of coal.

Reducing our carbon intensity is also one of the reasons why a new generation of energy sources has a more prominent role in Shell’s new strategy. As we have explained to our investors, new energies like wind, hydrogen and biofuels will become essential parts of our portfolio over time.

There are three takeaways I want to leave with readers.

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One, when Big Oil acknowledges the transition from fossil fuels has begun, it’s time for the boosters to throw in the towel and finally admit an energy transition is underway (and has been for five to 10 years, according to the experts I consult).

Two, being contrarian is not enough. Big Energy has to push back against environmentalists and make the case that it is best suited to manage the energy transition. The short version of that argument is this: Do we want the transition to be managed by engineers, scientists, technicians, and professional managers or eco-activists? The answer should be obvious, but Big Energy needs to make it plain and make it often.

Three, Big Energy must explain how oil and gas fit into the emerging clean energy economy. For instance, will we see a shift from oil and natural gas used as fuels to being primarily used as feedstock for industrial processes? How do gas and renewable energies work together?

Shell is hardly the only Big Oil corporation making some version of this argument. ExxonMobil, for example, has now publicly acceptied that climate change mitigation is a global challenge and that strategies like carbon taxes are required.

But industry needs more CEOS like Ben van Beurden to step up and take a leadership role.

The alternative is to continue to allow eco-activists to dominate the public debate over oil and gas, clean energy, and the energy transition. That must stop.

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