World 'where oil is no longer king' is possible

World 'where oil is no longer king' is possible

Is a world with with zero carbon emissions possible? In fact, such a world is feasible and attainable even within this century, according to Shell's scenarios team head, Mr Jeremy Bentham.

In a net-zero carbon emissions world (where remaining emissions are offset or captured and stored below ground), he believes 42 per cent of the world's energy mix will come from solar and wind sources, which contribute just 1 per cent today.

Nuclear hydropower and other renewables will make up 18 per cent, and bioenergy, 15 per cent.

The remaining 25 per cent will be derived from fossil fuels or hydrocarbons - well down from the 80 to 85 per cent now - which will come with carbon dioxide-capturing and storage technologies that mop up continuing emissions.

"What we will see in the course of a century, in a world where everybody can have a decent quality of life, is that there will be at least a doubling of the energy system.

But the structure of that energy system will change," he told The Straits Times in a recent interview, pointing to the "big turnaround" in fossil fuel use. "That's a heroic set of assumptions, but it's plausible."

Mr Bentham, also Shell's vice-president for global business environment, declined to comment specifically on what this could mean for crude oil prices, which collapsed in June 2014 amid a supply glut and sluggish demand - and are still down from the peak by 57 per cent.

But such a drastic shift in demand for fossil fuels could well mean that the era of expensive oil is over.

"For something like the oil system, people may just focus on demand growth, and that's important, we're seeing actual, good demand growth. But really, the underlying depletion (of this finite resource) is an even bigger factor," he said.

"When things become tight, it ultimately plays through to higher prices, which will have an impact on demand. It drives, first of all, behaviour, and then investments in more efficient use of energy, and so that begins to shape the upper boundary. The lower side is being driven by the technology and the costs."

But he added that fossil fuels will likely play an important role for a long time to come, especially in certain industries which are "difficult to de-carbonise", such as those related to the built environment and the industrial sector.

The journey to a zero-carbon emissions world will be "very, very challenging", he said, noting that the pace at which it takes place will depend on how societies transform to make the relevant decisions.

"History so far has not been positive, but there was a big surprise, what happened in Paris last December," he said, referring to the Paris Agreement, which was adopted by 195 countries as the first legally-binding pact on climate change.

"That was a big step forward in creating a workable architecture (for a net zero emissions world), and so I believe that this is feasible this century and will be achieved this century."

Shell, for its part, has already begun to pay more attention to the importance of gas - which produces half the carbon emissions of coal - as part of its business portfolio.

The firm's US$53 billion acquisition of British rival BG Group, completed in February, has made it the world's biggest liquefied natural gas company.

Such strategies stem from understanding some of the issues the scenarios team lays out in its scenario-mapping work, said Mr Bentham.

"Part of that job is about thinking about scenarios that will help the company's executive management and board see things farther, wider, and deeper. It's a way of understanding the world. Over time, this work sets the context for the important decisions that Shell makes."

He added that in today's world, where change is a constant, the need to think through future scenarios has become more pressing.

"We have changes in the economic structure of the world that are reflected in the international multilateral structures, so there's geopolitical volatility. We have urbanisation, which has a big environmental footprint and creates stresses. We have technology changes, such as the shale revolution in our industry," he noted.

"Volatility is increasing in the world - it's not incidental, it's structural. So the demand for thinking in scenario terms has never been more important, the demand has never been higher."

This article was first published on September 13, 2016.
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