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Shell's head of upstream - reasons to be optimistic

Tuesday, August 7, 2012

We can be optimistic about the UK oil and gas industry because of the economic contribution it makes, the role companies play globally, and its partnerships with national oil companies, said Andrew Brown, upstream international director of Shell

The UK's oil and gas industry plays a big economic contribution, companies play a big role globally and they have strong partnerships with national oil companies around the world.

These are all reasons to be optimistic about the UK oil and gas industry, said Andrew Brown, upstream international director of Shell, speaking at the London 'British Business Embassy' conference on energy on August 7th, happening at the same time as the Olympic Games.

'I'll take this opportunity to defy some of the gloomier predictions about the UK energy industry and offer 3 reasons to be optimistic,' he said.

Economic contribution

'Firstly the UK energy industry is continuing to provide economic contribution amid profound uncertainty as we invest through the downcycle,' he said.

The industry makes an economic contribution 'to global growth, development of emerging nations, and flow of taxes and dividends to government and shareholders.'

'Energy is the lifeblood to civilisation and essential to economic growth and avoiding poverty.'

In Iraq, 'the restoration of its energy infrastructure is critical to improving people's lives,' he said.

'Shell is setting up a joint venture called Basrah gas company. At the moment much of [Iraq's] gas is flared. The venture will generate gas for electricity to the national grid and cut down flaring.'

'Consider how gas has helped to fuel growth of companies like Japan and Korea. It reduces prices for virtually all goods and services throughout the economy.'

'In US, it provides a powerful economic stimulus, and at the same time reducing CO2 emissions.'

'Global energy demand is likely to double in the first half of the century, as the population expands and wealth levels rise in emerging economies.'

'To keep pace the world will need to invest 38 trillion dollars by 2025 according to the International Energy Agency (IEA).

'That's 30 billion dollars a week. More than double the estimated cost of Olympics every week.'

'This capital expenditure will flow through global economy creating jobs and creating demand for jobs and services.'

'The oil and gas industry provided a quarter of corporate taxes received by the exchequer. At Shell we grew dividends through the recession. We paid 12 per cent of dividends on the FTSE 100.'

Leading role globally

'The second point is that the oil and gas companies are playing a leading role globally,' he said.

'The twin pressures of rising demand and declining production rates in mature oil fields means that by 2020 the world will need another 30m barrels of oil per day. That's about 3 three Saudi Arabia's production of today.'

'Much of this oil will come from technically challenging and geographically remote locations.
From Arctic to deepwater.'

'The pursuit of new ways to unlock oil and gas resources is relentless.'

''The UK industry is in a strong demand of tapping these resources.'

'The North Sea is packed with technical expertise forged over 3 decades in some of the industry's toughest environments.'

The UK has played a major role in Shell's 'Pearl' gas to liquids plant in Qatar, which has $18 to $19bn of investment, Shell's largest equity investment, he said, and covers the same area as London's Hyde Park.

'The plant was designed in Greenford, West London. The automation system was designed in Bracknell. The 200 control cabinets were tested in Newhouse in Scotland.'

There is 'over a billion pounds of inward investment to UK,' he said.

Other examples of UK engineers playing a leading role globally, are in Shell's Prelude Floating Liquefied Natural Gas project off North West Australia, the largest floating vessel ever built; and developments in LNG for truck and vessel fuels, he said.

'We believe worldwide LNG could double in the next 10-15 years. This will strengthen gas supply security for gas importers, let more companies benefit from environmental advantage of natural gas.'

'It can slash the emissions and pollutants which take such a toll on human health. It offers the fastest route to CO2 reductions - it emits half the CO2 of coal. Last year - CO2 emissions in the power sector were 11 per cent lower than 2005 - as gas prices plunge and gas power replaces significant chunks of coal.'

'LNG was important in cushioning the impact of China's coal use. China will be the largest LNG importer. '

'Britain's integrated gas companies are playing a leading role here.'

NOC relationships

British oil and gas companies also have strong relationships with national oil companies (NOCs) around the world, and that's another reason to be optimistic about the UK's oil and gas industry, he said.

'These partnerships are nothing new,' he said. 'Under traditional model companies like Shell gained access to resources in return for technology or access to big consuming markets.'

'In recent years NOCs have grown stronger and moved beyond their borders. That calls for new kinds of strategic partnerships as both sides grow together.'

'At Shell we make strong partnerships with NOCs in Qatar, Saudi Arabia, we worked together with PetroChina to develop China's natural resources.

'We're forging partnerships with emerging economic powerhouses of the world.'

Associated Companies
» Royal Dutch Shell plc

External Links
» Watch the talk on YouTube

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