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Peak oil, climate change, threats and standardisation

Tuesday, January 9, 2018

In a panel discussion at Offshore Europe, Bob Dudley, CEO of BP, Ben van Beurden, CEO of Shell, and Robin Watson, CEO of Wood Group, shared perspectives on peak oil, reducing GHG emissions and the biggest threats.

'We're never going to see peak supply of oil,' Mr Dudley said. 'We find more and more with [new] technology.

'[But] we will peak in terms of demand for oil. There will be a point in time.'

'It will be some time out there. But it won't be a peak and it drops off, it will be a long curve down.'

'Media estimates vary from tomorrow to the 2nd half of the century
The real answer will be somewhere in between.'

Shell's Ben van Beurden said that the subject 'has an element of obsession around it. And an element of media want our industry to be obsolete.'

But even if demand drops, 'it is not the end of our companies,' he said.
'We have tremendous adaptability.'

Shell's annual investment is equivalent to about a tenth of its total assets, so you can say that the company completely rebuilds itself every 10 years, he said. 'So every 10 years a new Shell. We will adapt before peak oil.'

GHG emissions

When asked for the best way to reduce greenhouse gas emissions, Shell's Ben van Beurden said, 'We have been pushing for a carbon price for decades.'

Mr van Beurden said that he regretted that 'we haven't been harder hitting on the price of carbon,' he said.

'Ultimately, if you look at climate change, [solving] it is all possible and viable, and it is not going to tank the world economy.

'Without CCS there is no hope to meet the Paris commitments. It is not going to happen automatically.'

'But it doesn't make commercial sense to do [CCS]', he said. 'We need parameters that compel and motivate us to invest in these things. Don't expect us to inflict self-harm. Do expect us to put our money where our mouth is when conditions are there.'

'We were involved in a CCS project in Scotland pulled at the 11th hour due to different priorities in the treasury.'

The cost of CCS 'has to go through the same cost curve as renewables.'

It may have been a mistake for oil companies to promote CCS as a solution for power generation (rather than for industry) - because in gas and power, it relies on Shell's customers (who buy gas to burn in power stations) to do it.

CO2 emissions from industries of all kinds are as large as CO2 emissions from power generations, and this includes plants which oil companies run, such as petrochemical plants.

But for now, governments think that reducing CO2 is 'all about renewables,' he said.

'At some point people will wake up. CCS will come back and we have to be ready for it.'

BP's Mr Dudley said that if the industry is going to be able to promote gas as a 'natural transition fuel' (between coal and renewables), it needs to get away from criticism about methane leaks. 'It is the Achilles Heel of a natural low carbon fuel.'

BP is part of an industry wide scheme to find out what the methane leaks actually are, and to eliminate flaring.


When asked what they saw as the biggest threats to the company, BP's Bob Dudley noted that BP 'has been a case study in terms of what you worry about in terms of survival'.

The Deepwater Horizon disaster 'has changed the culture of the company. We have learned so much'.

One particular worry was class action legal suits in the US. 'There's something wrong with that [system],' he said. 'This was a huge threat to the company. I'm not worried about the survival of BP now, but I really was. I'm not as worried as I had been.'

Shell's Mr van Beurden said that his biggest worries are 'what can go wrong in terms of safety and environmental incidents.'

And he also thinks about how Shell can demonstrate it is a world class investment case. I'm reasonably confident we will get there.'

He also thinks about how Shell can 'establish beyond any shadow of a doubt our company is a force for good in society.' The company needs to retain its 'societal license to operate.'

'It may not be a big deal in Aberdeen or Brazil, it is not an issue in sub-Saharan Africa or India, but it is an issue in our home countries,' he said.

The company needs 'much more focus on society dimensions. We can't just be good solid engineers,' he said. If this is not addressed, eventually, 'it will come to bite us.'


When asked if he could 'commit on record to do a step change in standardisation,' Shell's Mr van Beurden said that 'standardisation is very important, we have been on a standardisation journey for some time.'

'Often it has been internal standardisation, [but] the real benefit comes if we do it across the industry. It is also tough to get it right.'

As an example, there has been an industry wide project on standardising Christmas trees, but Shell thought the standardisation could have gone further.

It is important to make sure the commitment in the company runs high, and the standards are being used.

Wood Group's Robin Watson said that standardisation can be helpful if it leads to simplified equipment and processes. But it can also be a distraction if it leads to too much focus on 'how we do things' rather than what is actually achieved.

Ingenuity and technology

When asked that the most relevant new technologies are, Wood Group's CEO Robin Watson said that ingenuity can be more useful than just technology - working out how to use technology usefully.

Also 'taking the digital environment into the field' - giving field workers the same sort of digital tools that office workers has, has proven to be 'Fairly simply technology but useful technology'.

Janeen Judah

The theme of the conference was 'embracing new realities, reinventing our industry.' New realities are the low oil price, the increased number of younger professionals in the industry (described 10 years ago as the 'big crew change'), and also renewable energy, decommissioning and changing political realities, said Janeen Judah, president of SPE, in her introduction to the conference.

'Re-inventing the industry', means introducing new technologies and being more efficient and effective in how oilfields are operated, she said.

Catherine Macgregor

Catherine Macgregor, drilling group president with Schlumberger, and chair of the Offshore Europe committee, said that the industry can become more sustainable through more collaboration, better use of technology, and 'fully embracing digital transformation'.

'We are still seeing many projects plagued by inefficiency, overlaps in responsibility, silo mentality - optimisation of parts don't necessarily mean optimisation of the whole system. Trust needs to be re-established.'

The industry has 'always been very good,' with technology, she said. Perhaps the best way to reduce cost is through 'tech savviness'.

For digital transformation, the industry can use digital technology to help 'optimise pretty aspect of what we do'. For example, it is possible to reduce turnaround time for seismic projects from 18 months to 2 months, and do much more with the available production data, optimising how facilities run from a production and reservoir point of view.

The oil and gas industry can learn from other industries which had to re-invent themselves over past decades, including automotive, aeronautic and mining, she said.

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» Offshore Europe
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