Energy Change for Climate Control
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  • JODI Oil and BP #7

    Posted on September 5th, 2016 Jo No comments

    I both love and loathe Geography at the same time. I squirm at the irregularities – not the Slartibartfastian squiggly coastlines – but the way that people of differing cultures, languages and political or religious adherences refuse to occupy territory neatly, and deny being categorised properly. Actually, no, that’s just a joke. I love diversity, and migration, and long may culture continue to evolve. I find the differing mental geographies of people intriguing – such as the rift between the climate change science community and those few shrill shills resisting climate change science; for some reason often the very same people ardently opposed to the deployment of renewable energy. How to communicate across psychological boundaries remains an ongoing pursuit that can be quite involving and rewarding sometimes, as the entrenched antis diminish in number, because of defections based on facts and logic. One day, I sense, sense will prevail, and that feels good.

    So I like divergence and richness in culture, and I like the progress in communicating science. What I don’t like is trying to map things where there is so much temporal flux. The constantly rearranging list of Membership of the European Union, for one good and pertinent example; the disputes over territory names, sovereignty and belonginess. When it comes to Energy, things get even more difficult to map, as much data is proprietary (legally bound to a private corporation) or a matter of national security (so secret, not even the actual governments know it); or mythical (data invented on a whim, or guessed at, or out of date). And then you get Views – the different views of different organisations about which category of whatever whichever parties or materials belong to. In my struggle to try to understand petroleum crude oil production figures, I realised that different organiations have different ways of grouping countries, and even have different countries in similar-sounding groups.

    So I decided that as a first step towards eliminating categorisation overlaps or omissions, I should establish my own geography which was flexible enough to accommodate the Views of others, and permit me to compare their data more knowingly. Here are my first versions :-

    1. Country Regional Grouping
    I have given up to three levels of geographical detail, and an alternative grouping for most of the main land masses. Here it is in Excel spreadsheet format (.XLS). And here it is as a Comma-Delimited text file (.CSV).

    2. Country Regional Comparison
    I have compared the definitions of territorial regions between the following organisations and agencies : JODI (Joint Organisations Data Initiative), BP plc (the international company formerly known as British Petroleum), OPEC (the Organization of Petroleum Exporting Countries), EIA (United States of America, Department of Energy, Energy Information Administration), IEA (International Energy Agency of the OECD Organisation for Economic Co-operation and Development) and the United Nations (UN). Here it is as an Excel spreadsheet (.XLS). And here it is as a Comma-Delimited text file (.CSV).

    There are some differences. Surprisingly few, in fact, if you only consider countries with significant oil production. I did find quite a lot of spelling mistakes, however, even in documentation that I assume was partially machine-generated.

    The result is that I can be fairly confident that if I separate out data for China, Mexico, Israel and Turkey and a few other less significant countries when I compare data sources, any large divergence in numbers will have to be down to the different ways that people count oil rather than the way they categorise territories.

  • Brexit or Remain ? Evolving Political Realities

    Posted on June 22nd, 2016 Jo No comments

    I have been looking at some of the finer details of the new BP report – the annual “Statistical Review of World Energy” for 2016. It’s a bit confusing trying to compare it to the 2015 report, to try to see how positions have changed, partly because of the evolving nature of territorial politics of the various countries and their membership of regional blocs. For example, in the 2015 report, the country that calls itself Eire was known as “Republic of Ireland”, but in the 2016 report it is referred to as “Ireland”; and the bloc that BP knew as “Former Soviet Union” is know labelled as “Commonwealth of Independent States”, which has lost Estonia to the European Union, and Georgia, Latvia and Lithuania to the region known as “Europe” – which is not the same as the European Union or OECD Europe. It’s going to take me a few weeks to analyse this report, and compare the data to that available from other sources, such as JODI Oil, which last reported on 20th June 2016.

    In the meantime, the country known as the United Kingdom of Great Britain and Northern Ireland – itself a regional bloc – could well vote to secede from the European Union, an Act which, if carried and enacted by the British Parliament, and overseen by whoever is Prime Minister, would consume all the working hours of all civil servants in all Departments of Government for many years. This would be the administrative spanner-in-the-works to beat all bureaucratic snarl-ups – the unpicking of the UK from the EU – as it would involve extensive and detailed work to rewrite and recode the entire British legislative corpus. There wouldn’t be any time left to actually govern the country, or support action on climate change.

    But this is what the so-called “Eurosceptics” want – to hold up progress on climate change action. They are as much climate change science deniers as they are European Union-haters. In fact, leading science-denying politicians may have coerced the Prime Minister into agreeing to the EU Referendum in the first place. It really does matter how the UK voters act on 23rd June 2016 in the polling booths. If the UK votes to remain in the European Union, then the Energy Union will continue, and environmental legislation – including measures to combat climate change – will go ahead – bringing energy and climate security. If the UK votes to leave the European Union, where it plays a vital role, then ministers and civil servants will be locked into discussions attempting to negotiate the UK’s changed relationship with the EU for months and months to come. The government won’t be free to attend to policies to alleviate the effects of global recession on the country, or deal with managing immigration, creating employment, the need for building homes, or bailing out failing industry if they spend all their time over the next few years re-drafting laws to remove the effects of European Union from them. More importantly, the UK Government will be too busy undoing European Union to attend to responsibilities to keep to the UK’s Carbon Budget, or developing the renewable energy industries.

    Vote Remain. For climate, for security, for society.

  • The Lies That You Choose

    Posted on January 31st, 2016 Jo No comments

    I have had the great fortune to meet another student of the Non-Science of Economics who believes most strongly that Energy is only a sub-sector of the Holy Economy, instead of one of its foundations, and doesn’t understand why issues with the flow of commodities (which include energy resources) into the system is critical to the survival of the global economy, and that the growth in the Services Industries and Knowledge Economy cannot compensate for the depletion of freshwater, fossil fuels and other raw resources.

    This person believes in Technology, as if it can fly by itself, without seeming to understand how Technological Innovation is really advanced by state investment – a democracy of focus. This otherwise intelligent learner has also failed to grasp, apparently, that the only way that the Economy can grow in future is through investment in things with real value, such as Energy, especially where this investment is essential owing to decades of under-investment precipitated by privatisation – such as in Energy – investment in both networks of grids or pipes, and raw resources. And this from somebody who understands that developing countries are being held back by land grab and natural resource privatisation – for example ground water; and that there is no more money to be made from property investment, as the market has boomed and blown.

    How to burst these over-expanded false value bubbles in the mind ? When I try to talk about the depletion of natural resources, and planetary boundaries, people often break eye contact and stare vacantly out of the nearest window, or accept the facts, but don’t see the significance of them. Now this may be because I’m not the best of communicators, or it may be due to the heavy weight of propaganda leading to belief in the Magical Unrealism always taught in Economics and at Business Schools.

    Whatever. This is where I’m stuck in trying to design a way to talk about the necessity of energy transition – the move from digging up minerals to catching the wind, sunlight and recycling gases. If I say, “Look, ladies and laddies, fossil fuels are depleting”, the audience will respond with “where there’s a drill, there’s a way”. As if somehow the free market (not that a free market actually exists), will somehow step up and provide new production and new resources, conjuring them from somewhere.

    What are arguments that connect the dots for people ? How to demonstrate the potential for a real peak in oil, gas, coal and uranium production ? I think I need to start with a basic flow analysis. On the one side of the commodity delivery pipeline, major discoveries have decreased, and the costs of discovery have increased. The hidden underbelly of this is that tapping into reservoirs and seams has a timeline to depletion – the point at which the richness of the seam is degraded significantly, and the initial pressure in the well or reservoir is reduced to unexploitable levels – regardless of the technology deployed. On the other end of the commodities pipeline is the measure of consumption – and most authorities agree that the demand for energy will remain strong. All these factors add up to a time-limited game.

    Oh, you can choose to believe that everything will continue as it always seems to have. But the Golden Age of Plenty is drawing to a close, my friend.

  • Cumbria Floods : Climate Defenceless

    Posted on December 7th, 2015 Jo No comments

    I fully expect the British Prime Minister, David Cameron, will be more than modicum concerned about public opinion as the full toll of damage to property, businesses, farmland and the loss of life in Cumbria of the December 2015 floods becomes clear. The flooding in the Somerset Levels in the winter of 2013/2014 led to strong public criticism of the government’s management of and investment in flood defences.

    The flood defences that were improved in Cumbria after the rainstorm disaster of 2009 were in some cases completely ineffective against the 2015 deluge. It appears that the high water mark at some places in Cumbria was higher in the 2015 floods than ever recorded previously, but that cannot be used as David Cameron’s get-out-of-jail-free clause. These higher flood levels should have been anticipated as a possibility.

    However, the real problem is not the height of flooding, but the short recurrence time. Flood defences are designed in a way that admits to a sort of compromise calculus. Measurements from previous floods are used to calculate the likelihood of water levels breaching a particular height within a number of years – for example, a 1-in-20 year flood, or a 1-in-200 year flood. The reinforced flood defences in Cumbria were designed to hold back what was calculated to be something like a 1-in-100 year flood. It could be expected that if within that 100 years, other serious but not overwhelming flooding took place, there would be time for adaptation and restructuring of the defences. However, it has taken less than 10 years for a 1-in-100 year event to recur, and so no adaptation has been possible.

    This should suggest to us two possibilities : either the Environment Agency is going about flood defences the wrong way; or the odds for the 1-in-100 year flood should be reset at 1-in-10-or-so years – in other words, the severity profile of flooding is becoming worse – stronger flooding is more frequent – which implies acceptance of climate change.

    The anti-science wing of the Conservative Party were quick to construct a campaign against the Environment Agency in the South West of England in early 2014 – distracting people from asking the climate change question. But this time, I think people might be persuaded that they need to consider climate change as being a factor.

    Placing the blame for mismanagement of the Somerset Levels at the door of the Environment Agency saved David Cameron’s skin in 2014, but I don’t think he can use that device a second time. People in Cockermouth are apparently in disbelief about the 2015 flooding. They have barely had time to re-establish their homes and lives before Christmas has been cancelled again for another year.

    Will the Prime Minister admit to the nation that climate change is potentially a factor in this 2015 waterborne disaster ?

    I remember watching in in credulity as the BBC showed the restoration of Cockermouth back in 2010 – it was either Songs of Praise or Countryfile – I forget which. The BBC were trying to portray a town getting back to normal. I remember asking myself – but what if climate change makes this happen again ? What then ? Will the BBC still be mollifying its viewers, lulling them back into a false sense of security about the risks of severe climate change ? What if there is no “normal” to get back to any more ? Is this partly why the Meteorological Office has decided to name winter storms ?

    Can future climate-altered floods be escaped – or are the people of Britain to remain defenceless ?

  • Energy Security : National Security #3

    Posted on November 26th, 2015 Jo No comments

    Although the Autumn Statement and the Spending Review are attracting all the media and political attention, I have been more interested by the UK Government’s Security Review – or to give it is full title : the “National Security Strategy and Strategic Defence and Security Review 2015”, or (SDSR), document number Cm 9161.

    Its aim is stated in its sub-heading “A Secure and Prosperous United Kingdom”, but on matters of energy, I would suggest it fails to nail down security at all.

    In my analysis, having dealt with what appears to be a misunderstanding about the nature of hydrocarbon markets, I then started to address the prospect of Liquefied Natural Gas (LNG) imports from the United States.

    My next probe is into the global gas pipeline networks indicated by this mention of the “Southern Gas Corridor” in Section 3.40 : “…measures to protect and diversify sources of [energy] supply will become increasingly important, including the new Southern Corridor pipeline, US liquid natural gas (LNG) exports, further supplies of Australian LNG, and increased supply from Norway and North Africa.”

    First of all, and perhaps of secondmost importance, the “Southern Gas Corridor” is more of a European Union policy suite than an individual pipeline. In fact, it’s not just one pipeline – several pipelines are involved, some actual, some under construction, some cancelled, some renamed, some re-routed, and some whose development is threatened by geopolitical struggle and even warfare.

    It is this matter of warfare that is the most important in considering the future of Natural Gas being supplied to the European Union from the Caspian Sea region : Turkmenistan, Iran, Kazakhstan, Georgia and Azerbijan. Oh, and we should mention Uzbekistan, and its human rights abuses, before moving on. And Iraq and Syria – where Islamic State sits, brooding.

    Natural Gas is probably why we are all friends with Iran again. Our long-lasting dispute with Iran was ostensibly about nuclear power, but actually, it was all about Natural Gas. When Russia were our New Best Friend, Iran had to be isolated. But now Russia is being a tricky trading partner, and being beastly to Ukraine, Iran is who we’ve turned to, to cry on their shoulder, and beg for an alternative source of gas.

    So we’ve back-pedalled on the concept of waging economic or military conflict against Iran, so now we have a more southerly option for our massive East-to-West gas delivery pipeline project – a route that takes in Iran, and avoids passing through Georgia and Azerbaijan – where Russia could interfere.

    The problem with this plan is that the pipeline would need to pass through Syria and/or southern Turkey at some point. Syria is the country where Islamic State is currently being bombed by the United States and some European countries. And Turkey is the country where there has been a revival of what amounts pretty much to civil war with the Kurdish population – who also live in Iraq (and the edges of Syria and Iran).

    Russia is envious of the southerly Southern Gas Corridor plan, and jealous of its own version(s) of the gas-to-Europe project, and influence in Georgia and Azerbaijan. So perhaps we should not be surprised that Russia and Turkey have had several military and political stand-offs in the last few months.

    We in the United Kingdom should also be cautious about getting dragged into military action in Syria – if we’re thinking seriously about future energy security. Further destabilisation of the region through military upheaval would make it difficult to complete the Southern Gas Corridor, and make the European Union increasingly dependent on Russia for energy.

    In the UK, although we claim to use no Russian gas at all, we do get gas through the interconnectors from The Netherlands and Belgium, and they get gas from Russia, so actually, the UK is using Russian gas. The UK gets over half its Natural Gas from Norway, and Norway has been a strong producer of Natural Gas, so why should we be worried ? Well, it appears that Norwegian Natural Gas production may have peaked. Let’s re-visit Section 3.40 one more time : “…measures to protect and diversify sources of [energy] supply will become increasingly important, including the new Southern Corridor pipeline, US liquid natural gas (LNG) exports, further supplies of Australian LNG, and increased supply from Norway and North Africa.”

    The problem is that nobody can fight geology. If Norway has peaked in Natural Gas production, there is little that anyone can do to increase it, and even if production could be raised in Norway through one technique or another (such as carbon dioxide injection into gas wells), it wouldn’t last long, and wouldn’t be very significant. Norway is going to continue to supply gas to its other trading partners besides the UK, so how could the UK commandeer more of the Norwegian supply ? It seems likely that “increased supply from Norway” is just not possible.

    But back to the Southern Gas Corridor. It is in the United Kingdom’s security interests to support fresh gas supplies to the European Union. Because we may not be able to depend on Russia, we need the Southern Gas Corridor. Which is why we should think very, very carefully before getting involved in increased military attacks on Syria.

  • Energy Security, National Security #2

    Posted on November 24th, 2015 Jo No comments

    The UK Government’s Security Review (SDSR), published 23rd November 2015, regrettably shows traces of propaganda not supported by current data.

    For example, the report states in Section 3.40 that : “…measures to protect and diversify sources of [energy] supply will become increasingly important, including the new Southern Corridor pipeline, US liquid natural gas (LNG) exports, further supplies of Australian LNG, and increased supply from Norway and North Africa.”

    I have already addressed my recommendation that the writers of this report should be more careful to distinguish between Liquefied Natural Gas (LNG) which is a methane-rich product that can substitute for Natural Gas; and Natural Gas Liquids (NGLs) which is a methane-poor product that cannot substitute for Natural Gas.

    However, assuming that the writers of the report are talking about cryogenically stored and transported Natural Gas-sourced energy gases, there is a problem in assuming that the United States will be exporting any large amounts of LNG to Europe any time soon. In fact, there are several problems.

    Just because the business and political press have been touting the exciting prospect of US LNG exports, doesn’t mean that the data backs up this meme.

    First of all, although American Natural Gas production (gross withdrawals from oil and gas wells) continues to grow at a rate that appears unaffected by low Natural Gas prices, the production of shale gas appears to have plateau’d, which might well be related to Natural Gas prices.

    Secondly, although exports of Natural Gas as a whole and exports of Natural Gas by pipeline remain healthy, LNG exports have fallen since the heady days of 2010-2011.

    Next, although the oil and gas industry proposed lots of LNG export terminals, only a handful are being constructed, and there are already predictions that they will run under-capacity, or won’t get completed.

    And further, as regards potential future LNG customers, although China is rejecting LNG imports for a variety of reasons, mostly to do with falling economic growth rates, none of that LNG currently comes from the United States. And China is planning to develop its own onshore Natural Gas and will take LNG from the Australia/Indonesia region.

    The bulk of US LNG exports go to Taiwan and Japan, and Japan is unlikely to restart many nuclear power plants, so Japan will continue to need this gas.

    On top of all this, the United States is a very minor LNG exporter, so major change should be considered unlikely in the near term.

    And it any LNG is heading for Europe, it will probably end up in France, perhaps because they need a better backup plan for their turbulent nuclear power plants.

    All of which adds up to a puzzled look on my face. How can the British Government reasonably expect the commencement of significant quantities of American LNG exports to arrive in the UK ? The only reason they believe this is because there has been American propaganda, promulgated through media of all kinds, for the last five or so years, to convince the world that the USA can achieve greater energy independence through the “explosion” in shale gas production.

    It’s a story told by many successive US Governments – that the US can achieve greater energy independence, but the reality is very, very different.

    The UK Government should not believe any narrative of this nature, in my view, nor include it in national security analyses.

    …to be continued…

  • Energy Security, National Security #1

    Posted on November 24th, 2015 Jo No comments


    Our assiduous government in the United Kingdom has conducted a national security review, as they should, but it appears the collective intelligence on energy of the Prime Minister’s office, the Cabinet Office and the Foreign Commonwealth Office is on a scale of poor to dangerously out of date.

    No, LNG doesn’t stand for “liquid natural gas”. LNG stands for Liquefied Natural Gas. I think this report has confused LNG with NGLs.

    Natural Gas Liquids, or NGLs, are condensable constituents of gas-prone hydrocarbon wells. In other words, the well in question produces a lot of gas, but at the temperatures and pressures in the well underground, hydrocarbons that would normally be liquid on the surface are in the gas phase, underground. But when they are pumped/drilled out, they are condensed to liquids. So, what are these chemicals ? Well, here are the approximate Boiling Points of various typical fossil hydrocarbons, approximate because some of these molecules have different shapes and arrangements which influences their physical properties :-

    Boiling Points of Short-Chain Hydrocarbons
    Methane : approximately -161.5 degrees Celsius
    Ethane : approximately -89.0 degrees Celsius
    Propane : approximattely -42.0 degrees Celsius
    Butane : approximately -1.0 degrees Celsius
    Pentane : approximately 36.1 degrees Celsius
    Heptane : approximately 98.42 degrees Celsius

    You would expect NGLs, liquids condensed out of Natural Gas, to be mostly butane and heavier molecules, but depending on the techniques used – which are often cryogenic – some propane and ethane can turn up in NGLs, especially if they are kept cold. The remaining methane together with small amounts of ethane and propane and a trace of higher hydrocarbons is considered “dry” Natural Gas.

    By contrast, LNG is produced by a process that chills Natural Gas without separating the methane, until it is liquid, and takes up a much smaller volume, making it practical for transportation. OK, you can see why mistakes are possible. Both processes operate at sub-zero temperatures and result in liquid hydrocarbons. But it is really important to keep these concepts separate – especially as methane-free liquid forms of short-chain hydrocarbons are often used for non-energy purposes.

    Amongst other criticisms I have of this report, it is important to note that the UK’s production of crude oil and Natural Gas is not “gradually” declining. It is declining at quite a pace, and so imports are “certain” to grow, not merely “likely”. I note that Natural Gas production decline is not mentioned, only oil.

    …to be continued…


  • Nobel Chutzpah Prize 2015

    Posted on July 14th, 2015 Jo 2 comments

    The problem with climate change “deniers” and low carbon energy “sceptics” is that they cannot read.

    Here’s Jo Nova, claiming that the United Nations and the World Bank are demanding $89 trillion “to fix climate”.

    She writes, “The ambit claims know no bounds. Who else would ask for $89,000,000,000,000? If the evil “more developed” nations pay for their carbon sins, the bill for those 1.3 billion people works out at $70,000 per person by 2030 (babies included).”

    A simple little diagram from the actual report and a little text, shows she is entirely wrong :-

    From Section 2.1 “Infrastructure investment and global growth” :-

    “The global economy will require substantial investments in infrastructure as the population and the middle class grow. An estimated US$89 trillion of infrastructure investment will be required through 2030, based on data from the International Energy Agency (IEA), the Organisation for Economic Co-operation and Development (OECD), and analysis for the Commission (see Figure 1). This is chiefly investment in energy and cities. This estimate for the required investment is before accounting for actions to combat climate change.”

    That’s before accounting for actions to combat climate change, Ms Nova. Before. I know it’s probably clanging against your internal cognitive fences, but the fact is, the world needs to spend a heap of capital in the next 20 to 30 years reviving, replacing and renewing energy systems infrastructure. That spending has to happen regardless of whether it’s low carbon spending.

    And let’s read the note on Figure 1 more carefully :-

    “INCLUDING OPERATING EXPENDITURES WOULD MAKE A LOW-CARBON TRANSITION EVEN MORE FAVOURABLE LEADING TO A FURTHER REDUCTION OF US$5 TRILLION, FOR OVERALL POTENTIAL SAVINGS OF US$1 TRILLION”

    So, Jo Nova, the world will actually be better off if it decides to make all new energy expenditure low carbon.

    Jo Nova, when will you be updating your web post ?

  • Shell and BP : from “Delay and Deny” to “Delay and Distract”

    Posted on June 3rd, 2015 Jo No comments

    Shell, BP and some of their confederates in the European oil and gas industry have inched, or perhaps “centimetred”, forward in their narrative on climate change. Previously, the major oil and gas companies were regularly outed as deniers of climate change science; either because of their own public statements, or because of secretive support of organisations active in denying climate change science. It does seem, finally, that Shell in particular has decided to drop this counter-productive “playing of both sides”. Not that there are any “sides” to climate change science. The science on climate change is unequivocal : changes are taking place across the world, and recent global warming is unprecedented, and has almost definitely been attributed to the burning of fossil fuels and land use change.

    So Shell and BP have finally realised that they need to shed the mantle of subtle or not-so-subtle denial, although they cling to the shreds of dispute when they utter doubts about the actual numbers or impacts of global warming (for example : http://www.joabbess.com/2015/06/01/shells-public-relations-offensive/). However, we have to grant them a little leeway on that, because although petrogeologists need to understand the science of global warming in order to know where to prospect for oil and gas, their corporate superiors in the organisation may not be scientists at all, and have no understanding of the global carbon cycle and why it’s so disruptive to dig up all that oil and gas hydrocarbon and burn it into the sky. So we should cut the CEOs of Shell and BP a little slack on where they plump for in the spectrum of climate change narrative – from “utter outright doom” to “trifling perturbation”. The central point is that they have stopped denying climate change. In fact, they’re being open that climate change is happening. It’s a miracle ! They have seen the light !

    But not that much light, though. Shell and BP’s former position of “scepticism” of the gravity and actuality of global warming and climate change was deployed to great effect in delaying any major change in their business strategies. Obviously, it would have been unseemly to attempt to transmogrify into renewable energy businesses, which is why anybody in the executive branches who showed signs of becoming pro-green has been shunted. There are a number of fairly decent scalps on the fortress pikes, much to their shame. Shell and BP have a continuing duty to their shareholders – to make a profit from selling dirt – and this has shelved any intention to transition to lower carbon energy producers. Granted, both Shell and BP have attempted to reform their internal businesses by applying an actual or virtual price on carbon dioxide emissions, and in some aspects have cleaned up and tidied up their mining and chemical processing. The worsening chemistry of the cheaper fossil fuel resources they have started to use has had implications on their own internal emissions control, but you have to give them credit for trying to do better than they used to do. However, despite their internal adjustments, their external-facing position of denial of the seriousness of climate change has supported them in delaying major change.

    With these recent public admissions of accepting climate change as a fact (although CEOs without appropriate science degrees irritatingly disagree with some of the numbers on global warming), it seems possible that Shell and BP have moved from an outright “delay and deny” position, which is to be applauded.

    However, they might have moved from “delay and deny” to “delay and distract”. Since the commencement of the global climate talks, from about the 1980s, Shell and BP have said the equivalent of “if the world is serious about acting on global warming (if global warming exists, and global warming is caused by fossil fuels), then the world should agree policy for a framework, and then we will work within that framework.” This is in effect nothing more than the United Nations Framework Convention on Climate Change (UNFCCC) has put forward, so nobody has noticed that Shell and BP are avoiding taking any action themselves here, by making action somebody else’s responsibility.

    Shell and BP have known that it would take some considerable time to get unanimity between governments on the reality and severity of climate change. Shell and BP knew that it would take even longer to set up a market in carbon, or a system of carbon dioxide emissions taxation. Shell and BP knew right from the outset that if they kept pushing the ball back to the United Nations, nothing would transpire. The proof of the success of this strategy was the Copenhagen conference in 2009. The next proof of the durability of this delaying tactic will be the outcomes of the Paris 2015 conference. The most that can come out of Paris is another set of slightly improved targets from governments, but no mechanism for translating these into real change.

    Shell and BP and the other oil and gas companies have pushed the argument towards a price on carbon, and a market in carbon, and expensive Carbon Capture and Storage technologies. Not that a price on carbon is likely to be anywhere near high enough to pay for Carbon Capture and Storage. But anyway, the point is that these are all distractions. What really needs to happen is that Shell and BP and the rest need to change their products from high carbon to low carbon. They’ve delayed long enough. Now is the time for the United Nations to demand that the fossil fuel companies change their products.

    This demand is not just about protecting the survival of the human race, or indeed, the whole biome. Everybody is basically on the same page on this : the Earth should remain liveable-inable. This demand for change is about the survival of Shell and BP as energy companies. They have already started to talk about moving their businesses away from oil to gas. There are high profile companies developing gas-powered cars, trains, ships and possibly even planes. But this will only be a first step. Natural Gas needs to be a bridge to a fully zero carbon world. The oil and gas companies need to transition from oil to gas, and then they need to transition to low carbon gas.

    Renewable Gas is not merely “vapourware” – the techniques and technologies for making low carbon gas are available, and have been for decades, or in some cases, centuries. Shell and BP know they can manufacture gas instead of digging it up. They know they can do the chemistry because they already have to do much of the same chemistry in processing fossil hydrocarbons now to meet environmental and performance criteria. BP has known since the 1970s or before that it can recycle carbon in energy systems. Shell is currently producing hydrogen from biomass, and they could do more. A price on carbon is not going to make this transition to low carbon gas. While Shell and BP are delaying the low carbon transition by placing focus on the price of carbon, they could lose a lot of shareholders who shy away from the “carbon bubble” risk of hydrocarbon investment. Shell and BP need to decide for themselves that they want to survive as energy companies, and go public with their plans to transition to low carbon gas, instead of continuing to distract attention away from themselves.

  • Why Shell is Wrong

    Posted on June 2nd, 2015 Jo No comments

    So, some people do not understand why I am opposed to the proposal for a price on carbon put forward by Royal Dutch Shell and their oil and gas company confederates.

    Those who have been following developments in climate change policy and the energy sector know that the oil and gas companies have been proposing a price on carbon for decades; and yet little has been achieved in cutting carbon dioxide emissions, even though carbon markets and taxes have been instituted in several regions.

    Supporters of pricing carbon dioxide emissions urge the “give it time” approach, believing that continuing down the road of tweaking the price of energy in the global economy will cause a significant change in the types of resources being extracted.

    My view is that economic policy and the strengthening of carbon markets and cross-border carbon taxes cannot provide a framework for timely and major shifts in the carbon intensity of energy resources, and here’s a brief analysis of why.

    1.   A price on carbon shifts the locus of action on to the energy consumer and investor

    A price on carbon could be expected to alter the profitability of certain fossil fuel mining, drilling and processing operations. For example, the carbon dioxide emissions of a “tank of gas” from a well-to-wheel or mine-to-wheel perspective, could be made to show up in the price on the fuel station forecourt pump. Leaving aside the question of how the carbon tax or unit price would be applied and redistributed for the moment, a price on carbon dioxide emissions could result in fuel A being more expensive than fuel B at the point of sale. Fuel A could expect to fall in popularity, and its sales could falter, and this could filter its effect back up the chain of production, and have implications on the capital expenditure on the production of Fuel A, and the confidence of the investors in investing in Fuel A, and so the oil and gas company would pull out of Fuel A.

    However, the business decisions of the oil and gas company are assumed to be dependent on the consumer and the investor. By bowing to the might god of unit price, Shell and its confederates are essentially arguing that they will act only when the energy consumers and energy investors act. There are problems with this declaration of “we only do what we are told by the market” position. What if the unit price of Fuel A is only marginally affected by the price on carbon ? What if Fuel A is regarded as a superior product because of its premium price or other marketing factors ? This situation actually exists – the sales of petroleum oil-based gasoline and diesel are very healthy, despite the fact that running a car on Natural Gas, biogas or electricity could be far cheaper. Apart from the fact that so many motor cars in the global fleet have liquid fuel-oriented engines, what else is keeping people purchasing oil-based fuels when they are frequently more costly than the alternative options ?

    And what about investment ? Fuel A might become more costly to produce with a price on carbon, but it will also be more expensive when it is sold, and this could create an extra margin of profit for the producers of Fuel A, and they could then return higher dividends to their shareholders. Why should investors stop holding stocks in Fuel A when their rates of return are higher ?

    If neither consumers nor investors are going to change their practice because Fuel A becomes more costly than Fuel B because of a price on carbon, then the oil and gas company are not going to transition out of Fuel A resources.

    For Shell to urge a price on carbon therefore, is a delegation of responsibility for change to other actors. This is irresponsible. Shell needs to lead on emissions reduction, not insist that other people change.

    2.   A price on carbon will not change overall prices or purchasing decsions

    In economic theory, choices about products, goods and services are based on key factors such as trust in the supplier, confidence in the product, availability and sustainability of the service, and, of course, the price. Price is a major determinant in most markets, and artificially altering the price of a vital commodity will certainly alter purchasing decisions – unless, that is, the price of the commodity in question increases across the board. If all the players in the field start offering a more expensive product, for example, because of supply chain issues felt across the market, then consumers will not change their choices.

    Now consider the global markets in energy. Upwards of 80% of all energy consumed in the global economy is fossil fuel-based. Putting a price on carbon will raise the prices of energy pretty much universally. There will not be enough cleaner, greener product to purchase, so most purchasing decisions will remain the same. Price differentiation in the energy market will not be established by asserting a price on carbon.

    A key part of Shell’s argument is that price differentiation will occur because of a price on carbon, and that this will drive behaviour change, and yet there is nothing to suggest it could do that effectively.

    3.   A price on carbon will not enable Carbon Capture and Storage

    Athough a key part of Shell’s argument about a price on carbon is the rationale that it would stimulate the growth in Carbon Capture and Storage (CCS), it seems unlikely that the world will ever agree to a price on carbon that would be sufficient to stimulate significant levels of CCS. A price on carbon will be deemed to be high enough when it creates a difference in the marginal extra production cost of a unit of one energy resource compared to another. A carbon price can only be argued for on the basis of this optimisation process – after all – a carbon price will be expected to be cost-efficient, and not punitive to markets. In other words, carbon prices will be tolerated if they tickle the final cost of energy, but not if they mangle with it. However, CCS could imply the use of 20% to 45% extra energy consumption at a facility or plant. In other words, CCS would create a parasitic load on energy resources that is not slim enough to be supported by a cost-optimal carbon price.

    Some argue that the technology for CCS is improving, and that the parasitic load of CCS at installations could be reduced to around 10% to 15% extra energy consumption. However, it is hard to imagine a price on carbon that would pay even for this. And additionally, CCS will continue to require higher levels of energy consumption which is highly inefficient in the use of resources.

    Shell’s argument that CCS is vital, and that a price on carbon can support CCS, is invalidated by this simple analysis.

    4.   Shell needs to be fully engaged in energy transition

    Calling for a price on carbon diverts attention from the fact that Shell itself needs to transition out of fossil fuels in order for the world to decarbonise its energy.

    Shell rightly says that they should stick to their “core capabilities” – in other words geology and chemistry, instead of wind power and solar power. However, they need to demonstrate that they are willing to act within their central business activities.

    Prior to the explosion in the exploitation of deep geological hydrocarbon resources for liquid and gas fuels, there was an energy economy that used coal and chemistry to manufacture gas and liquid fuels. Manufactured gas could still replace Natural Gas, if there are climate, economic or technological limits to how much Natural Gas can be resourced or safely deployed. Of course, to meet climate policy goals, coal chemistry would need to be replaced by biomass chemistry, and significant development of Renewable Hydrogen technologies.

    Within its own production facilities, Shell has the answers to meet this challenge. Instead of telling the rest of the world to change its economy and its behaviour, Shell should take up the baton of transition, and perfect its production of low carbon manufactured gas.

  • Shell’s Public Relations Offensive #2

    Posted on June 1st, 2015 Jo No comments

    And so it has begun – Shell’s public relations offensive ahead of the 2015 Paris climate talks. The substance of their “advocacy” – and for a heavyweight corporation, it’s less lobbying than badgering – is that the rest of the world should adapt. Policymakers should set a price on carbon, according to Shell. A price on carbon might make some dirty, polluting energy projects unprofitable, and there’s some value in that. A price on carbon might also stimulate a certain amount of Carbon Capture and Storage, or CCS, the capturing and permanent underground sequestration of carbon dioxide at large mines, industrial plant and power stations. But how much CCS could be incentivised by pricing carbon is still unclear. Egging on the rest of the world to price carbon would give Shell the room to carry on digging up carbon and burning it and then capturing it and burying it – because energy prices would inevitably rise to cover this cost. Shell continues with the line that they started in the 1990s – that they should continue to dig up carbon and burn it, or sell it to other people to burn, and that the rest of the world should continue to pay for the carbon to be captured and buried – but Shell has not answered a basic problem. As any physicist could tell you, CCS is incredibly energy-inefficient, which makes it cost-inefficient. A price on carbon wouldn’t solve that. It would be far more energy-efficient, and therefore cost-efficient, to either not dig up the carbon in the first place, or, failing that, recycle carbon dioxide into new energy. Shell have the chemical prowess to recycle carbon dioxide into Renewable Gas, but they are still not planning to do it. They are continuing to offer us the worst of all possible worlds. They are absolutely right to stick to their “core capabilities” – other corporations can ramp up renewable electricity such as wind and solar farms – but Shell does chemistry, so it is appropriate for them to manufacture Renewable Gas. They are already using most of the basic process steps in their production of synthetic crude in Canada, and their processing of coal and biomass in The Netherlands. They need to join the dots and aim for Renewable Gas. This will be far less expensive, and much more efficient, than Carbon Capture and Storage. The world does not need to shoulder the expense and effort of setting a price on carbon. Shell and its fellow fossil fuel companies need to transition out to Renewable Gas.

  • Zero Careers In Plainspeaking

    Posted on March 5th, 2015 Jo 1 comment

    There are many ways to make a living, but there appear to be zero careers in plainspeaking.

    I mean, who could I justify working with, or for ? And would any of them be prepared to accept me speaking my mind ?

    Much of what I’ve been saying over the last ten years has been along the lines of “that will never work”, but people generally don’t get consulted or hired for picking holes in an organisation’s pet projects or business models.

    Could I imagine myself taking on a role in the British Government ? Short answer : no.

    The slightly longer answer : The British Government Department of Energy and Climate Change (DECC) ? No, they’re still hooked on the failed technology of nuclear power, the stupendously expensive and out-of-reach Carbon Capture and Storage (CCS), and the mythical beast of shale gas. OK, so they have a regular “coffee club” about Green Hydrogen (whatever that turns out to be according to their collective ruminations), and they’ve commissioned reports on synthetic methane, but I just couldn’t imagine they’re ever going to work up a serious plan on Renewable Gas. The British Government Department for Transport ? No, they still haven’t adopted a clear vision of the transition of the transport sector to low carbon energy. They’re still chipping away at things instead of coming up with a strategy.

    Could I imagine myself taking on a role with a British oil and gas multinational ? Short and very terse and emphatic answer : no.

    The extended answer : The oil and gas companies have had generous support and understanding from the world’s governments, and are respected and acclaimed. Yet they are in denial about “unburnable carbon” assets, and have dismissed the need for Energy Change that is the outcome of Peak Oil (whether on the supply or the demand side). Sneakily, they have also played both sides on Climate Change. Several major oil and gas companies have funded or in other ways supported Climate Change science denial. Additionally, the policy recommendations coming from the oil and gas companies are what I call a “delayer’s game”. For example, BP continues to recommend the adoption of a strong price on carbon, yet they know this would be politically unpalatable and take decades (if ever) to bring into effect. Shell continues to argue for extensive public subsidy support for Carbon Capture and Storage (CCS), knowing this would involve such huge sums of money, so it’s never going to happen, at least not for several decades. How on Earth could I work on any project with these corporations unless they adopt, from the centre, a genuine plan for transition out of fossil fuels ? I’m willing to accept that transition necessitates the continued use of Natural Gas and some petroleum for some decades, but BP and Royal Dutch Shell do need to have an actual plan for a transition to Renewable Gas and renewable power, otherwise I would be compromising everything I know by working with them.

    Could I imagine myself taking on a role with a large engineering firm, such as Siemens, GE, or Alstom, taking part in a project on manufactured low carbon gas ? I suppose so. I mean, I’ve done an IT project with Siemens before. However, they would need to demonstrate that they are driving for a Renewable Gas transition before I could join a gas project with them. They might not want to be so bold and up-front about it, because they could risk the wrath of the oil and gas companies, whose business model would be destroyed by engineered gas and fuel solutions.

    Could I imagine myself building fuel cells, or designing methanation catalysts, or improving hydrogen production, biocoke/biocoal manufacture or carbon dioxide capture from the oceans… with a university project ? Yes, but the research would need to be funded by companies (because all applied academic research is funded by companies) with a clear picture on Energy Change and their own published strategy on transition out of fossil fuels.

    Could I imagine myself working on rolling out gas cars, buses and trucks ? Yes. The transition of the transport sector is the most difficult problem in Energy Change. However, apart from projects that are jumping straight to new vehicles running entirely on Hydrogen or Natural Gas, the good options for transition involve converting existing diesel engine vehicles to running mostly on Natural Gas, such as “dual fuel”, still needing roughly 20% of liquid diesel fuel for ignition purposes. So I would need to be involved with a project that aims to supply biodiesel, and have a plan to transition from Natural Gas to Renewable Gas.

    Could I imagine myself working with a team that has extensive computing capabilities to model carbon dioxide recycling in power generation plant ? Yes.

    Could I imagine myself modelling the use of hydrogen in petroleum refinery, and making technological recommendations for the oil and gas industry to manufacture Renewable Hydrogen ? Possibly. But I would need to be clear that I’m doing it to enable Energy Change, and not to prop up the fossil fuel paradigm – a game that is actually already bust and needs helping towards transition.

    Could I imagine myself continuing to research the growth in Renewable Gas – both Renewable Hydrogen and Renewable Methane – in various countries and sectors ? Possibly. It’s my kind of fun, talking to engineers.

    But whatever future work I consider myself doing, repeatedly I come up against this problem – whoever asked me to work with them would need to be aware that I do not tolerate non-solutions. I will continue to say what doesn’t work, and what cannot work.

    If people want to pay me to tell them that what they’re doing isn’t working, and won’t work, then fine, I’ll take the role.

    I’d much rather stay positive, though, and forge a role where I can promote the things that do work, can work and will work.

    The project that I’m suitable for doesn’t exist yet, I feel. I’m probably going to continue in one way or another in research, and after that, since I cannot see a role that I could fit easily or ethically, I can see I’m going to have to write my own job description.

  • Renewable Energy : Google Blind

    Posted on November 23rd, 2014 Jo 2 comments

    In an interesting article by two Google engineers, Ross Koningstein and David Fork, "What It Would Really Take to Reverse Climate Change : Today’s renewable energy technologies won’t save us. So what will?", the authors concluded from their modelling scenarios that :-

    "While a large emissions cut sure sounded good, this scenario still showed substantial use of natural gas in the electricity sector. That’s because today’s renewable energy sources are limited by suitable geography and their own intermittent power production."

    Erm. Yes. Renewable electricity is variable and sometimes not available, because, well, the wind doesn’t always blow and the sun doesn’t always shine, you know. This has been known for quite some time, actually. It’s not exactly news. Natural Gas is an excellent complement to renewable electricity, and that’s why major industrialised country grid networks rely on the pairing of gas and power, and will do so for some time to come. Thus far, no stunner.

    What is astonishing is that these brain-the-size-of-a-planet guys do not appear to have asked the awkwardly obvious question of : "so, can we decarbonise the gas supply, then ?" Because the answer is "yes, very largely, yes."

    And if you have Renewable Gas backing up Renewable Power, all of a sudden, shazam !, kabam ! and kapoom !, you have An Answer. You can use excess wind power and excess solar power to make gas, and you can store the gas to use when there’s a still, cold period on a wintry night. And at other times of low renewable power, too. And besides using spare green power to make green gas, you can make Renewable Gas in other ways, too.

    The Google engineers write :-

    "Now, [Research and Development] dollars must go to inventors who are tackling the daunting energy challenge so they can boldly try out their crazy ideas. We can’t yet imagine which of these technologies will ultimately work and usher in a new era of prosperity – but the people of this prosperous future won’t be able to imagine how we lived without them."

    Actually, Renewable Gas is completely non-crazy. It’s already being done all over the world in a variety of locations – with a variety of raw resources. We just need to replace the fossil fuel resources with biomass – that’s all.

    And there’s more – practically all the technology is over a century old – it just needs refining.

    I wonder why the Google boys seem to have been so unaware of this. Maybe they didn’t study the thermodynamics of gas-to-gas reactions at kindergarten, or something.

    Thanks to the deliberate misinterpretation of the Google "brothers" article, The Register, James Delingpole’s Breitbart News and Joanne Nova are not exactly helping move the Technological Debate forward, but that’s par for the course. They rubbished climate change science. Now they’ve been shown to be wrong, they’ve moved on, it seems, to rubbishing renewable energy systems. And they’re wrong there, too.

    Onwards, my green engineering friends, and upwards.

  • Shell Shirks Carbon Responsibility

    Posted on November 19th, 2014 Jo No comments

    I was in a meeting today held at the Centre for European Reform in which Shell’s Chief Financial Officer, Simon Henry, made two arguments to absolve the oil and gas industry of responsibility for climate change. He painted coal as the real enemy, and reiterated the longest hand-washing argument in politics – that Shell believes that a Cap and Trade system is the best way to suppress carbon dioxide emissions. In other words, it’s not up to Shell to do anything about carbon. He argued that for transportation and trade the world is going to continue to need highly energy-dense liquid fuels for some time, essentially arguing for the continuation of his company’s current product slate. He did mention proudly in comments after the meeting that Shell are the world’s largest bioethanol producers, in Brazil, but didn’t open up the book on the transition of his whole company to providing the world with low carbon fuels. He said that Shell wants to be a part of the global climate change treaty process, but he gave no indication of what Shell could bring to the table to the negotiations, apart from pushing for carbon trading. Mark Campanale of the Carbon Tracker Initiative was sufficiently convinced by the “we’re not coal” argument to attempt to seek common cause with Simon Henry after the main meeting. It would be useful to have allies in the oil and gas companies on climate change, but it always seems to be that the rest of the world has to adopt Shell’s and BP’s view on everything from policy to energy resources before they’ll play ball.

    During the meeting, Mark Campanale pointed out in questions that Deutsche Bank and Goldman Sachs are going to bring Indian coal to trade on the London Stock Exchange and that billions of dollars of coal stocks are to be traded in London, and that this undermines all climate change action. He said he wanted to understand Shell’s position, as the same shareholders that hold coal (shares), hold Shell. I think he was trying to get Simon Henry to call for a separation in investment focus – to show that investment in oil and gas is not the same as investing in Big Bad Coal. But Simon Henry did not bite. According to the Carbon Tracker Initiative’s report of 2013, Unburnable Carbon, coal listed on the London Stock Exchange is equivalent to 49 gigatonnes of Carbon Dioxide (gtCO2), but oil and gas combined trade shares for stocks equivalent to 64 gtCO2, so there’s currently more emissions represented by oil and gas on the LSX than there is for coal. In the future, the emissions held in the coal traded in London have the potential to amount to 165 gtCO2, and oil and gas combined at 125 gtCO2. Despite the fact that the United Kingdom is only responsible for about 1.6% of direct country carbon dioxide emissions (excluding emissions embedded in traded goods and services), the London Stock Exchange is set to be perhaps the world’s third largest exchange for emissions-causing fuels.

    Here’s a rough transcript of what Simon Henry said. There are no guarantees that this is verbatim, as my handwriting is worse than a GP’s.

    [Simon Henry] I’m going to break the habit of a lifetime and use notes. Building a long-term sustainable energy system – certain forces shaping that. 7 billion people will become 9 billion people – [many] moving from off-grid to on-grid. That will be driven by economic growth. Urbanisation [could offer the possibility of] reducing demand for energy. Most economic growth will be in developing economies. New ways fo consuming energy. Our scenarios – in none do we see energy not growing materially – even with efficiencies. The current ~200 billion barrels of oil equivalent per day today of energy demand will rise to ~400 boe/d by 2050 – 50% higher than today. This will be demand-driven – nothing to do with supply…

    [At least one positive-sounding grunt from the meeting – so there are some Peak Oil deniers in the room, then.]

    [Simon Henry] …What is paramount for governments – if a threat, then it gets to the top of the agenda. I don’t think anybody seriously disputes climate change…

    [A few raised eyebrows and quizzical looks around the table, including mine]

    [Simon Henry] …in the absence of ways we change the use of energy […] Any approach to climate change has got to embrace science, policy and technology. All three levers must be pulled. Need a long-term stable policy that enables technology development. We think this is best in a market mechanism. […] Energy must be affordable at the point of use. What we call Triple A – available, acceptable and affordable. No silver bullet. Develop in a responsible way. Too much of it is soundbite – that simplifies what’s not a simple problem. It’s not gas versus coal. [Although, that appeared to be one of his chief arguments – that it is gas versus coal – and this is why we should play nice with Shell.]

    1. Economy : About $1.5 to $2 trillion of new money must be invested in the energy industry each year, and this must be sustained until 2035 and beyond. A [few percent] of the world economy. It’s going to take time to make [massive changes]. […] “Better Growth : Better Climate” a report on “The New Climate Economy” by the Global Commission on the Economy and Climate, the Calderon Report. [The world invested] $700 billion last year on oil and gas [or rather, $1 trillion] and $220 – $230 billion on wind power and solar power. The Calderon Report showed that 70% of energy is urban. $6 trillion is being spent on urban infrastructure [each year]. $90 trillion is available. [Urban settings are] more compact, more connected, there’s public transport, [can build in efficiencies] as well as reducing final energy need. Land Use is the other important area – huge impact on carbon emissions. Urbanisation enables efficiency in distributed generation [Combined Heat and Power (CHP)], [local grids]. Eye-popping costs, but the money will be spent anyway. If it’s done right it will [significantly] reduce [carbon emissions and energy demand]…

    2. Technology Development : Governments are very bad at picking winners. Better to get the right incentives in and let the market players decide [optimisation]. They can intervene, for example by [supporting] Research and Development. But don’t specify the means to an end…The best solution is a strong predictable carbon price, at $40 a tonne or more or it won’t make any difference. We prefer Cap and Trade. Taxes don’t actually decrease carbon [emissions] but fundamentally add cost to the consumer. As oil prices rose [in 2008 – 2009] North Americans went to smaller cars…Drivers [set] their behaviour from [fuel] prices…

    [An important point to note here : one of the reasons why Americans used less motor oil during the “Derivatives Bubble” recession between 2006 and 2010 was because the economy was shot, so people lost their employment, and/or their homes and there was mass migration, so of course there was less commuter driving, less salesman driving, less business driving. This wasn’t just a response to higher oil prices, because the peak in driving miles happened before the main spike in oil prices. In addition, not much of the American fleet of cars overturned in this period, so Americans didn’t go to smaller cars as an adaptation response to high oil prices. They probably turned to smaller cars when buying new cars because they were cheaper. I think Simon Henry is rather mistaken on this. ]

    [Simon Henry] …As regards the Carbon Bubble : 65% of the Unburnable fossil fuels to meet the 2 degrees [Celsius] target is coal. People would stuggle to name the top five coal companies [although they find it easy to name the top five oil and gas companies]. Bearing in mind that you have to [continue to] transport stuff [you are going to need oil for some time to come.] Dealing with coal is the best way of moving forward. Coal is used for electricity – but there are better ways to make electricity – petcoke [petroleum coke – a residue from processing heavy and unconventional crude oil] for example…

    [The climate change impact of burning (or gasifying) petroleum coke for power generation is possibly worse than burning (or gasifying) hard coal (anthracite), especially if the pet coke is sourced from tar sands, as emissions are made in the production of the pet coke before it even gets combusted.]

    [Simon Henry] …It will take us 30 years to get away entirely from coal. Even if we used all the oil and gas, the 2 degrees [Celsius] target is still possible…

    3. Policy : We tested this with the Dutch Government recently – need to create an honest dialogue for a long-term perspective. Demand for energy needs to change. It’s not about supply…

    [Again, some “hear hears” from the room from the Peak Oil and Peak Natural Gas deniers]

    [Simon Henry] …it’s about demand. Our personal wish for [private] transport. [Not good to be] pushing the cost onto the big bad energy companies and their shareholders. It’s taxes or prices. [Politicians] must start to think of their children and not the next election…

    …On targets and subsidies : India, Indonesia, Brazil […] to move on fossil fuel subsidies – can’t break the Laws of Economics forever. If our American friends drove the same cars we do, they’d reduce their oil consumption equivalent to all of the shale [Shale Gas ? Or Shale Oil ?]… Targets are an emotive issue when trying to get agreement from 190 countries. Only a few players that really matter : USA, China, EU, India – close to 70% of current emissions and maybe more in future. The EPA [Environmental Protection Agency in the United States of America] [announcement] on power emissions. China responded in 24 hours. The EU target on 27% renewables is not [country-specific, uniform across-the-board]. Last week APEC US deal with China on emissions. They switched everything off [and banned traffic] and people saw blue sky. Coal with CCS [Carbon Capture and Storage] we see as a good idea. We would hope for a multi-party commitment [from the United Nations climate talks], but [shows doubt]… To close : a couple of words on Shell – have to do that. We have only 2% [of the energy market], but we [hope we] can punch above our weight [in policy discussions]. We’re now beginning to establish gas as a transport fuel. Brazil – low carbon [bio]fuels. Three large CCS projects in Canada, EU… We need to look at our own energy use – pretty trivial, but [also] look at helping our customers look at theirs. Working with the DRC [China]. Only by including companies such as ourselves in [climate and energy policy] debate can we get the [global deal] we aspire to…

    […]

    [Question from the table, Ed Wells (?), HSBC] : Green Bonds : how can they provide some of the finance [for climate change mitigation and adaptation] ? The first Renminbi denominated Green Bond from [?]. China has committed to non-fossil fuels. The G20 has just agreed the structure on infrastructure – important – not just for jobs and growth – parallel needs on climate change. [Us at HSBC…] Are people as excited about Green Bonds as we are ?

    [Stephen Tindale] Yes.

    [Question from the table, Anthony Cary, Commonwealth Scholarship Commission] …The key seems to be pricing carbon into the economy. You said you preferred Cap and Trade. I used to but despite reform the EU Emissions Trading Scheme (EU ETS) – [failures and] gaming the system. Tax seems to be a much more solid basis.

    [Simon Henry] [The problem with the ETS] too many credits and too many exemptions. Get rid of the exemptions. Bank reserve of credits to push the price up. Degress the number of credits [traded]. Tax : if people can afford it, they pay the tax, doesn’t stop emissions. In the US, no consumption tax, they are very sensitive to the oil price going up and down – 2 to 3 million barrels a day [swing] on 16 million barrels a day. All the political impact on the US from shale could be done in the same way on efficiency [fuel standards and smaller cars]. Green Bonds are not something on top of – investment should be financed by Green Bonds, but investment is already being done today – better to get policy right and then all investment directed.

    […]

    [Question from the table, Kirsten Gogan, Energy for Humanity] The role of nuclear power. By 2050, China will have 500 gigawatts (GW) of nuclear power. Electricity is key. Particularly coal. Germany is building new coal as removing nuclear…

    [My internal response] It’s at this point that my ability to swallow myths was lost. I felt like shouting, politely, across the table : ACTUALLY KIRSTEN, YOU, AND A LOT OF OTHER PEOPLE IN THE ROOM ARE JUST PLAIN WRONG ON GERMANY AND COAL.

    “Germany coal power generation at 10-year low in August”, 9th September 2014

    And the only new coal-fired plants being built are those that were planned up to five years ago. No new coal-fired capacity is now being agreed.

    [Kirsten Gogan]…German minister saying in public that you can’t phase out nuclear and coal at the same time. Nuclear is not included in that conversation. Need to work on policy to scale up nuclear to replace coal. Would it be useful to have a clear sectoral target on decarbonising – 100% on electricity ?

    [Stephen Tindale] Electricity is the least difficult of the energy sectors to decarbonise. Therefore the focus should be on electricity. If a target would help (I’m not a fan) nuclear certainly needs to be a part of the discussions. Angela Merkel post-Fukushima has been crazy, in my opinion. If want to boost renewable energy, nuclear power will take subsidies away from that. But targets for renewable energy is the wrong objective.. If the target is keeping the climate stable then it’s worth subsidising nuclear. Subsidising is the wrong word – “risk reduction”.

    [Simon Henry] If carbon was properly priced, nuclear would become economic by definition…

    [My internal response] NO IT WOULDN’T. A LOT OF NUCLEAR CONSTRUCTION AND DECOMMISSIONING AND SPENT FUEL PROCESSING REQUIRES CARBON-BASED ENERGY.

    [Simon Henry] …Basically, all German coal is exempted (from the EU ETS). If you have a proper market-based system then the right things will happen. The EU – hypocrisy at country level. Only [a couple of percent] of global emissions. The EU would matter if it was less hypocritical. China are more rational – long-term thinking. We worked with the DRC. Six differing carbon Cap and Trade schemes in operation to find the one that works best. They are effectively supporting renewable energy – add 15 GW each of wind and solar last year. They don’t listen to NIMBYs [they also build in the desert]. NIMBYism [reserved for] coal – because coal was built close to cities. [Relationship to Russia] – gas replacing coal. Not an accident. Five year plan. They believe in all solutions. Preferably Made in China so we can export to the rest of the world. [Their plans are for a range of aims] not just climate.

    […]
    […]

    [Simon Henry] [in answer to a question about the City of London] We don’t rely on them to support our activities [my job security depends on a good relationship with them]]. We have to be successful first and develop [technological opportunities] [versus being weakened by taxes]. They can support change in technology. Financing coal may well be new money. Why should the City fund new coal investments ?

    [Question from the table, asking about the “coal is 70% of the problem” message from Simon Henry] When you talk to the City investors, do you take the same message to the City ?

    [Simon Henry] How much of 2.7 trillion tonnes of “Unburnable Carbon” is coal, oil and gas ? Two thirds of carbon reserves is coal. [For economic growth and] transport you need high density liquid fuels. Could make from coal [but the emissions impact would be high]. We need civil society to have a more serious [understanding] of the challenges.

    After the discussion, I asked Simon Henry to clarify his words about the City of London.

    [Simon Henry] We don’t use the City as a source of capital. 90% is equity finance. We don’t go to the market to raise equity. For every dollar of profit, we invest 75 cents, and pay out 25 cents as dividend to our shareholders. Reduces [problems] if we can show we can reinvest. [ $12 billion a year is dividend. ]

    I asked if E&P [Exploration and Production] is working – if there are good returns on investment securing new reserves of fossil fuels – I know that the company aims for a 10 or 11 year Reserves to Production ratio (R/P) to ensure shareholder confidence.

    Simon Henry mentioned the price of oil. I asked if the oil price was the only determinant on the return on investment in new E&P ?

    [Simon Henry] If the oil price is $90 a barrel, that’s good. At $100 a barrel or $120 a barrel [there’s a much larger profit]. Our aim is to ensure we can survive at $70 a barrel. [On exploration] we still have a lot of things in play – not known if they are working yet… Going into the Arctic [At which point I said I hope we are not going into the Arctic]… [We are getting returns] Upstream is fine [supply of gas and oil]. Deepwater is fine. Big LNG [Liquefied Natural Gas] is fine. Shale is a challenge. Heavy Oil returns could be better – profitable, but… [On new E&P] Iraq, X-stan, [work in progress]. Downstream [refinery] has challenges on return. Future focus – gas and deepwater. [On profitability of investment – ] “Gas is fine. Deepwater is fine.”

    [My summary] So, in summary, I think all of this means that Shell believes that Cap and Trade is the way to control carbon, and that the Cap and Trade cost would be borne by their customers (in the form of higher bills for energy because of the costs of buying carbon credits), so their business will not be affected. Although a Cap and Trade market could possibly cap their own market and growth as the sales envelope for carbon would be fixed, since Shell are moving into lower carbon fuels – principally Natural Gas, their own business still has room for growth. They therefore support Cap and Trade because they believe it will not affect them. WHAT THEY DON’T APPEAR TO WANT PEOPLE TO ASK IS IF A CAP AND TRADE SYSTEM WILL ACTUALLY BE EFFECTIVE IN CURBING CARBON DIOXIDE EMISSIONS. They want to be at the negotiating table. They believe that they’re not the problem – coal is. They believe that the world will continue to need high energy-dense oil for transport for some time to come. It doesn’t matter if the oil market gets constrained by natural limits to expansion because they have gas to expand with. They don’t see a problem with E&P so they believe they can keep up their R/P and stay profitable and share prices can continue to rise. As long as the oil price stays above $70 a barrel, they’re OK.

    However, there was a hint in what Simon Henry talked about that all is not completely well in Petro-land.

    a. Downstream profit warning

    Almost in passing, Simon Henry admitted that downstream is potentially a challenge for maintaining returns on investment and profits. Downstream is petrorefinery and sales of the products. He didn’t say which end of the downstream was the issue, but oil consumption has recovered from the recent Big Dip recession, so that can’t be his problem – it must be in petrorefinery. There are a number of new regulations about fuel standards that are going to be more expensive to meet in terms of petroleum refinery – and the chemistry profiles of crude oils are changing over time – so that could also impact refinery costs.

    b. Carbon disposal problem

    The changing profile of crude oils being used for petrorefinery is bound to cause an excess of carbon to appear in material flows – and Simon Henry’s brief mention of petcoke is more significant than it may first appear. In future there may be way too much carbon to dispose of (petcoke is mostly carbon rejected by thermal processes to make fuels), and if Shell’s plan is to burn petcoke to make power as a solution to dispose of this carbon, then the carbon dioxide emissions profile of refineries is going to rise significantly… where’s the carbon responsiblity in that ?