Jeroen van der veer, chief executive, Royal Dutch Shell

The world needs energy, and there is not any form of energy without disadvantages. You have to fight a balance between is the energy at an affordable price; is it secure, so do we have it in our own country; do I create political aspects by sourcing that energy; and what is the environmental footprint of the energy? And that is of course very different from oil, compared to for instance nuclear. Or even oil is different compared to gas. Or even what we call renewables. If we take wind energy, then I think a very good example is sometimes you see adverts [which say] should we use wind energy or a large power station based on coal. What you should do in the advert is you have to show the number of windmills that is equivalent to this power station based on coal. And then you will see that you need a huge land area to build all those windmills. That is then a more true comparison.

Our concern is not that there is not enough oil or gas in the ground. Mother Nature has been very nice. But a lot of the oil and gas is not easy to produce, or very very far away from markets, so it means that a lot of the future oil and gas is more difficult than a lot of the oil and gas produced in the past and that means that the oil industry, per barrel, has to do more investments, to apply more technology, or, if we think about natural gas it has to cross more borders, longer pipelines, it may have to come all the way from the Arctic, and this takes time. So in the whole supply-demand balance, more supplies can come but it takes time and a lot of money. And at the moment, due to more increase in energy demand than we expected some years ago you see there’s a very low spare capacity in the system, and we think thanks to this low spare capacity between supply and demand we think that is one of the core, one of the key reasons that we see present high energy prices.

Consumers will make choices. And of course they look at price, they look at convenience, they may look at security aspects – is it a reliable source – and part of the choices can be influenced by taxation. With excise duties, you can for instance make gasoline more expensive, and then you will see that people use less of it. A good example is that average efficiency of cars in Europe is 40 per cent better than in the United States. Now why is that? Because we have had in Europe always a lot of excise duties on gasoline. So consumers bought, over time, cars where the performance was more miles per gallon. So you get a kind of feel how people will react on that.

Consumers have a heart for the environment as well, but not all consumers are in a position to pay extra for that. So you have to look at all those aspects. In that context we will try to help our consumers to say, OK, how can you drive more miles per gallon, which after some driver’s training it’s really remarkable what you can do.

For the longer term, we can work together as oil companies with car manufacturing companies to see, in the combination of the engine and the gasolines we develop, to see how you can make cars more fuel-efficient.

Energy companies like ourselves we have to do a lot of energy efficiency in our own operations. We are pretty big users of energy. We as energy companies can help our consumers to work with their energy that they buy from us to be very efficient. Short-term that’s about habits and behaviours, longer-term that’s about technology development and standards as well. What governments can do, they can make sure that trading systems will be successful. We have the European Trading System, we think it is a good system, but it has had teething problems. Over time we have to think about how we get auctions in those systems. We can support that, but we have to make sure as well that Europe stays competitive with outside Europe. For energy intensive companies, we have to think how we do auctions in the European Trading System.

Governments can help to make a success of what we call CO2 storage into the ground. This will create a lot of costs, and you have to find business models that make it possible. The good thing about storing CO2 in the ground is that at least you can work on a relatively large scale. It can really make a dent into the problem. But it is who pays for the costs, can it be passed on to the consumer – all those kind of aspects.

In Shell’s view, we do not like flaring at all, so our policy is already for years that wherever we flare that we try to reduce or completely stop it. If I look at the world, at the Shell operations, basically we have only the problem in Nigeria left. Why do we flare in the first place? It’s because if you produce oil you get gas as well. You can’t separate it. So if you like to produce oil the gas will come above ground as well, and if you don’t have pipes to do something with the gas – to bring it to consumers or to make liquefied natural gas out of it – then your only alternative is to flare. So what it takes in Nigeria we have to build a huge pipeline network in an area that’s as big as southern England, so this is a huge area – to build all those pipelines in very difficult terrain and then you can transport the gas and do something useful with it. Now that takes time, and it takes money. And our people can only work in that area if it is safe for them to work. So in a nutshell the problem of flaring is we don’t like flaring at all, we will get it right in Nigeria, but our people have to work securely in a huge area and all the shareholders has to pay their share to make those pipelines – so the funding. And as you can read every day in The Times this is not going without problems. But our commitment is very clear: flaring should stop.

I’m always amazed that people think that oil companies they are just for the money and greedy and like to do a lousy job. Now we employ 100,000 people ourselves, we have hundreds of thousands of contractors and then we have a lot of people who man our Shell retail stations, all those people in my experience when they go around they are normal citizens, they like to do a green job – usually due to the nature of our profession we know a lot about the environment, so maybe on the average we are at least as green or maybe a bit greener. We think to take environmental aspects into account is good long-term business as well because it prevents problems, and it helps that people think that Shell is doing a good job so that if they have a consumer choice they fuel up with our gasoline. So I don’t like to be portrayed in this angle that oil business and being green cannot go together. I am absolutely of a different school.

RELATED LINKS

http://business.timesonline.co.uk/tol/business/movers_and_shakers/article4747885.ece