|Tuesday, 10 June 2003|
In a speech to the world gas conference in Tokyo, Shell chairman of the committee of managing directors, Sir Philip Watts, has outlined Shell's vision of a gas-powered future and the importance of an expanding Asian market to those plans.
|Former Shell chief Philip Watts|
For a long time Shell has been consuming gas producers in a bid to become the pre-eminent world gas supplier. As Watts points out, gas is becoming the fuel of the future as unstable political climates, environmental benefits and price are forcing traditional coal and oil consumers to look for alternative sources of energy.
"Few disagree about the great potential for natural gas in the 21st century. It has many competitive advantages: abundance, costs, cleanliness, lower carbon intensity, flexibility. Expanding the use of gas is the best medium-term response to the threat of climate change. It has the potential to become the most important fuel for the next generation."
Several leading Asian consumers such as Japan and China are providing the foundation for Watts' theory, backed by the fact that eastern energy demands are expected to outgrow those of the west in the next few decades.
"In Japan gas currently only supplies about 12 per cent of its energy needs but there are an increasing range of sources which could increase that share, not the least Sakhalin from 2007. Sales have already more than doubled since 1990. China is determined to reduce its reliance on burning coal for economic as well as environmental reasons. Gas consumption there could increase seven times over the next 20 years.
"The United States, Canada and Western Europe presently consume around half the world's energy while Asia-Pacific takes a quarter. Those positions are likely to be reversed over the next 50 years as overall energy demand grows two or three times.
"The composition of energy supplies is also changing. World gas demand seems set to continue growing strongly. The world could be consuming more gas than oil by 2025. That would mean very large incremental growth providing two-to-three times more gas over the next thirty years than we have since 1970," said Watts.
Many eastern countries are already sourcing alternative supplies of fuel after several decades of violent unrest in the traditional supply basins of the Middle East. So far Russia has benefited most from this new strategy and with the development of the Sakhalin-2 project gaining momentum, many more contracts could soon head north of the Urals.
"We must be prepared for growing geopolitical turbulence and economic volatility in an increasingly interdependent and changeful world which represent a particular challenge for an industry with our timescales, investment requirements and dependence on international cooperation. The world economic outlook remains fragile with few signs of improvement."
In a final point of political manoeuvring Watts was keen to point out that Shell has not abandoned the search for renewables in its chase to sew up the world gas market. It is currently involved in 40% of world supplies, but emphasised that gas is a more than suitable intermediate alternative until technology can support world demands.
"Renewables will not offer a quick fix. They have great long-term potential although that depends on overcoming significant technological, economic and environmental challenges. And we can do much now to push them forward, as we are doing in Shell. But it will be many years before they can play a significant role in meeting expanding energy needs.
"By contrast, increasing gas use is the best immediate way of improving air quality and limiting carbon dioxide emissions. Asia-Pacific gas demand is growing very fast and there is a high dependency on imports so customers are concerned about security and diversity of supply, as well as price."
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