Thoughts from Shell

Last week, Shell’s US President John Hofmeister came to Cleveland as part of a US tour to offer Shell’s perspectives on national energy security.

Hofmeister made some interesting comments at a private reception and at a luncheon at the City Club:

  • World oil supply at 85 million barrels per day was barely exceeding world oil demand at 85 million barrels per day. Although he didn’t say so explicitly, Hofmeister certainly implied that the 85 million barrel per day production level was going to be very difficult to increase — certainly from existing production fields, and maybe even if all untapped opportunities were pursued. Is 85 million barrels per day as good as it gets? In other words, if you believe that “peak oil” production is rapidly approaching, his comments did little to dispel your belief.
  • Oil prices are thus high for legitimate reasons, but oil prices are higher than Shell would like. Clearly, Shell feels the heat from the public and politicians for the huge profits that they are generating these days. Hofmeister claims that Shell would like to see oil prices in the $30-40/barrel range — enough to earn good profits, but not so high that customers complain so loudly (or — heaven forbid! — start consuming less fuel).
  • World oil demand growth is being driven by China and India…and US SUVs. He indicated that the shift to SUVs caught the experts by surprise. This was the first time I’d ever heard an oil company executive almost “blame” US automakers and the public for being so gluttonous. This thought was further embellished later by noting that…
  • It is “immoral” that the US consumes so much energy, far in excess of its world share of population. Hofmeister got his facts wrong (he said the US represented 8% of world population, when it’s more like 4%), but he was right to indicate that the US accounts for 25% of world energy demand. He said that the US really ought to change its habits of energy consumption — but didn’t go so far as to suggest that US policy-makers had an obligation to do anything about it. Hofmeister noted that high oil prices are already having a salubrious effect on demand (“A lot of people are parking their RVs”). OK, fair enough, but that alone won’t cut our energy consumption by 80+%. Does he really think we’ll significantly reduce our energy consumption to more in line with our population without someone making us do it via some kind of regulation? Yeah, right.
  • Climate change is in fact happening, and that carbon emissions from energy consumption is a significant contributor. Well, it was encouraging for Hofmeister to not weasel on that one. Hopefully, eventually, that message will be heard and understood by all of his employees, his competitors and his customers. It amazes me that there are still so many Luddites who aren’t there yet.
  • Energy independence for the US is not only not achievable, it’s not even a good idea. Hofmeister’s point is that trade is global, and that it’s not necessarily bad that the US imports at least some of its energy requirement. He did go on to say, however, that importing 62% of oil requirements is very bad for the US. Thank goodness he didn’t use this observation as an excuse for punching holes in ANWR, at least partly because he sees that…
  • There are lots of opportunities for unconventional oil production. While he noted Shell’s involvement in the Alberta tar sands and the Orinoco reserves in Venezuela, Hofmeister went on at length about Shell’s involvement in new technology development to recover oil from the massive (1+ trillion barrel) shale resource in the US Rocky Mountains. Shell’s technology involves using downhole electric resistance heaters to “bake” the oil out of the rock in-situ. Theirs is not the only in-situ shale recovery technology under development — see, for instance, Independent Energy Partners’ geothermic fuel cell approach, which I believe has more economic merit — but their active and public involvement in shale, and expectation that it is a viable resource at ~$30/barrel, is important to take seriously.
  • With 100 years of operation in the Middle East, Shell would like to operate in Iraq, but is not present there because they will not put their employees in an unsecure situation, in a country with no rule of law. While Hofmeister steered clear of political views, his observation that “respect among and between peoples is currently lacking” was both a reserved understatement and a pretty clear signal that Shell is not optimistic about the situation there for the foreseeable future.
  • Shell is committed to alternative energy, as they see themselves as an energy provider to humans for the indefinite future, rather than an oil and gas company. He noted Shell’s activity in ethanol (mainly focused on second-generation “cellulosic” ethanol rather than first-generation corn/sugar based ethanol, which he didn’t seem enthusiastic about), wind and solar energy as areas for growth. In particular, he defended Shell’s recent decision to exit its active photovoltaics (PV) business in favor of R&D in copper indium diselenide (CIS) thin-film PV because of limited future economic/cost improvement potential in the now mature crystalline-silicon technology. I agree wholeheartedly.

All in all, an interesting and generally forward-looking set of comments for an oil company CEO to make.

5 replies
  1. Parker
    Parker says:

    Shell is the single major oil company that does not clearly deserve to be boycotted. Before I switched to biodiesel, I only bought Shell.Speaking of which, why no talk about biodiesel?? Its as easy as gasoline, and if you have a TDI engine, its extremely clean, fast and efficent.

  2. Anonymous
    Anonymous says:

    Hi, Luddites are more against pointless technology. There are many people who rebel against the post-modern anti-human world AND who have known about climate change for quite awhile. Nice article though, but be fair to the Luddites!

  3. Troy Helming
    Troy Helming says:

    Nice comments. Energy independence IS, however, a good – no, a great – idea. And it IS possible, a la the Freedom Plan (see http://www.myspace.com/thefreedomplan) and can be great for the US economy and world balance of trade. We simply shift imports of oil and liquified natural gas to exports of clean technologies, liquified hydrogen, biodiesel, ethanol, etc. Read the book The Clean Power Revolution (Amazon.com) to learn more about the economic benefits of the Freedom Plan.

  4. vaporcarb
    vaporcarb says:

    All Gasoline Powered Vehicles in the USA from 1996 to the Present, under the EPA-OBD II Law are required to Run at 14.7 Parts of Air to 1 Part of Fuel.Under this Law, it is possible to Fail a Vehicle Inspection for not Emitting enough Pollution.I can Prove that Gasoline can be Safely converted to Propane, 100 Parts of Air to 1 Part of Fuel.Even the largest SUV could get 50 + MPG,& Emit 10 X less Pollution.But, it's Illegal to even attempt on any vehicle 10 Years Old, or Newer.Who Passed this Law that only benefits the Big Oil Companies ?

  5. c moe
    c moe says:

    The greatest problem with our energy / pollution crisis is not petroleum but, the blatant wastefulness of the how we use it! Less than .05 cents out of every dollar you spend on gasoline starts you car and pushes you down the road? The rest of your $2.50 + per gallon fuels energy goes out the exhaust and radiator!The engine in your car or truck is likely a four-cycle engine with four to ten cylinders. Each cycle equals 180º of a circle. The four cycles are Intake, Compression, Power, Exhaust totaling 720º equaling two rotations before that cylinder is ready to fire again. Only the power stroke doses the work the rest are drag. The more cylinders in an engine the more drag. (Resistance to work) In the180º Power stroke the first 30º and the last 40ºare worthless for push. It’s like standing on a bicycle pedal. That leaves 110º of the Power stroke to do all the work! 110º ÷720º = 15.2 % of the each engines cylinder dose the work! We loose about 6% additional from that 15.2% to the Drag in the operation of the engine through the alternator, water pump, oil pump, and barring friction. 15.2% – 6% = 9.2 % of the Mechanical Physics pushing your car or truck!Thermal Energy of your FuelEngine design engineers agree that one third of the fuels thermal energy (Heat) is lost from the engine’s combustion through the radiator, and another third is lost through the exhaust leaving only one third to turn the crankshaft in each Power stroke!9.2% ÷ 33% = 3.036% Is the over all efficiency given to the reciprocating car engine! Allowing for variations the automotive engine efficiency of today isabout 5% maximum!That is equivalent to .05 Cents of every dollar you spend at the pump for fuel !www.Pdtdesigns.com

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