Brinded Henry Cambridge 11112010

8/7/2019 Brinded Henry Cambridge 11112010

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Energy, Technology andClimate Change: A New

World

Malcolm Brinded

Executive Director, Upstream InternationalRoyal Dutch Shell plc

Simon Henry

Chief Financial Officer,Royal Dutch Shell plc

Churchill College, CambridgeNovember 11, 2010


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Malcolm Brinded and Sim

2

appointment, he was ExecutiveMalcolm is a Fellow of the Ins

Engineering. He is a member oTrustee of the Emirates FoundatiChairman of the Shell Foundatiindustry. Malcolm, a British natiadult sons.

Churchill College, starting as amember of the Chartered Instituincluding Finance Manager ofProducts Finance Adviser for A2000, General Manager Finan

He was appointed Head of GVice President Finance for Expl

Simon is a British national bo

children.

n Henry: Energy, Technology and Climate Change

Malcolm Brinded is Executive DireInternational.

Malcolm Brinded has been on th

and Executive Director of the Upstrsince July 2009.

He joined Shell in1974 after obtdegree in Engineering from Churcworked for Shell companies in BruOman and the UK. In 1998 he becof Shell UK Exploration and Produfifth of the UKs offshore oil and ga1999 until 2002 he was also ShellUK.

He continues as a member of the

Board, a role he has held since itswas a member of the Boards of thecompanies since 2002. From Marc

Director in charge of Exploration & Productiontitutions of Civil and Mechanical Engineers anthe Nigerian Presidents Honorary Internation

ion and the International Business Leaders Forun. In 2002 he was appointed CBE for services

ional, was born in 1953. He is married to Ca

Simon HenrybecameRoyal Dutch Shell plc o

Simon became Chief1, 2009, and Executive2009. In this role he isof finance and informamanagement in Shell, fstrategy development aresponsibility within theShells business activitieregion.

He joined Shell in198class honours degree i

engineer at the Stanlow refinery in the UK. Ate of Management Accountants in 1989, he h

arketing in Egypt, Controller for the Upstreaia Pacific, Finance Director for the Mekong Cle for the South East Asian Retail business.

roup Investor Relations in 2001 and most receration & Production from 2004 until his curre

rn on July 13, 1961. He is married to Jonquil,

: A New World

tor, Upstream

Shell Board since 2002,

am International business

ining a first-class honoursill College. He hasei, the Netherlands,ame Managing Directortion responsible for as business and fromCountry Chairman in the

Royal Dutch Shell plc

ormation in 2004. Hetwo former parenth 2004 until his current.of the Royal Academy of

al Investor Council and am. He is also theto the UK oil and gas

ola and they have three

hief Financial Officer ofMay1, 2009.

Financial Officer on MayDirector on May 20,responsible for all aspectsion technologyr global business

nd has oversightExecutive Committee fors in the Asia Pacific

2 after obtaining a first-Mathematics fromter qualifying as ald various finance posts,business in Egypt, Oilster and, up to the end of

tly served as Executivet appointment.and they have three


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Malcolm Brinded and Sim

3

Growing population levels andworld. But with greenhouse gasmuch-reduced cost to the envir

Executive Director of UpstreamChief Financial Officer bothand scientific expertise to help tadvances in seismic technologylocations. Second, new techniqwhich is the quickest and cheadevelopment over more than thAnd fourth, the companys imm

Introduction

As Churchill graduates, were eproud of the links between Shellcollege. They could hardly be stmore significant.

As you know, the colleges oribe traced back to the early 19Winston Churchills desire to estpostgraduate institute for enginescientists to rival the MassachusInstitute of Technology.

Shell played a crucial role in r

this aspiration in the form of ChCollege. John Oriel, who had bGeneral Manager of the Shell Rand Marketing Company, wasthe two prime movers in the drivestablish the college, alongsideColville, Churchills Private Secr

In fact, thanks to his efforts, Shpledged 100,000 pounds thequivalent of around 2 million ptoday to help set up the Colle

Oriel became one the collegesfellows.

Over the subsequent half centand Churchill have maintainedrelationship. For example, as ShIndustrial Fellow Commoners, mof industry would stay at Churchconducting research at CambriMoreover, to mark Churchills SiJubilee in 1986, Shell funded aLectureship in Control Engineericollege.


surging economic growth are driving rising eemissions continuing to rise, all countries musnment in the coming decades. In this speech,

International at Royal Dutch Shell, and Simonhurchill graduates discuss four ways Shell ishe world develop a secure and sustainable enthat are allowing the company to open up reses in gas production that are opening up vasest way to cut CO2 emissions from the globalee decades of the technology that converts nainent move into the large-scale production of b

peciallyand theronger or

gins can0s, andablish aers andtts

ealising

rchilleen theefiningone ofe toSir Johntary.ell

oundse. And

founding

ry, Shellstrong

ellembersill whilege.ilver

g at the

And, of course, many Churchill ahave joined Shell over this period were not sure of the exact numberwe think it works out at about onetwo years.

(Malcolm Brinded)With that in miwill focus on some of the ways inShell is using science and technolohelp the world develop a secure asustainable global energy system.

In Shells day-to-day work we drupon all manner of scientific and

technical disciplines, from materialscience to advanced mathematics,from chemical and civil engineerinto agricultural science and an arof specialised fields in between.

And the need for these advanceskills will only grow more importanas the energy landscape is reshapby surging demand and global effto tackle CO2 emissions.Ill begin by describing these trend

before addressing two ways in whShell is responding through theapplication of new technology.

First, Ill focus on some recentadvances that weve made in seistechnology that are allowing us tofind oil resources that had earlierbeen concealed.

Ill then discuss the ongoing booin unconventional gas production.

Here, technological advances aredriving a massive expansion in the

: A New World

ergy demand across thet find more energy at aalcolm Brinded,

enry, the companysusing its technologicalrgy supply. First,urces from hard-to-reachresources of natural gas,ower sector. Third, Shellstural gas into liquid fuels.iofuels in Brazil.

lumni, butevery

d, wehich

gy tod

w

ay

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,

ich

ic


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Malcolm Brinded and SimWorld

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worlds gas resources. This mattbecause natural gas is the quickand cheapest way to cut CO2emissions from the global powesector.

(Simon Henry)Ill then pick upthread with another majorbreakthrough in the global gasmarket: the conversion of naturainto liquid fuels soon to beginlarge-scale at Shells massive $1billion Pearl GTL plant in Qatar.

Next, Ill describe some of thescience and technology underpithe expansion of the biofuels inwhich will be critical to tacklingemissions in the transport sectorbefore finishing with a word onbroader geo-political context inwhich the energy industry takesplace.

The global energy challenge(Malcolm Brinded)In the first hathe century, global demand forenergy could double, accordin

the International Energy Agencydriven by a rising global popul 9 billion compared to todaysbillion or so and especially beconomic growth in the develoeconomies.

Figure 1 Rising energy demChinas GDP growth is runningsome 10% per annum, while Inand Brazil are not far behind. Aits this kind of growth that helps


rsest

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ing

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explain why Chinas gasconsumption could treble by 2020

To keep pace with rising demanthe world will need to invest heavilin all energy sources, from oil and

natural gas, to biofuels, nuclearpower, solar and wind.

Not to do so will leave billions opeople in the energy poverty anddeprivation they face today forexample more than1.4 billion arewithout access to electricity (IEA),while nearly a billion people still uunsafe sources of drinking water (U 884 million).

At the same time, we must urgenttackle greenhouse gas emissions.According to the consensus of climscientists, CO2 emissions should blimited to 450 parts per million toavoid levels of global warming witsignificant negative consequences.

On one estimate (Mauna Loa,Hawaii)they have now reached390ppm so just 60ppm to go they continue to rise at an annual r

of 2ppm. The clock is clearly tickinOver time, cleaner energy sourcwill meet a growing share ofdemand, as global efforts to tackleclimate change gather pace. Forexample, the Chinese governmenthas announced a 4045% voluntareduction of carbon intensity per uof GDP by 2020 compared to2005. And in the US, thegovernment has committed to an

ambitious 17% reduction in CO2emissions by 2020 compared to2005.

But even so, fossil fuels willcontinue to meet the majority ofglobal demand for decades.After all, there are significanttechnical and financial constraints tdeploying alternative sources on amass scale.

Our industry is very different toconsumer electronics, wherebusinesses are under pressure todevelop and market new mobile

: A New

.d,

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eN

ly

ate

h

yette

g.s

ryit

o

...fossil fuelswill continue to

meet the

majority ofglobal demandfor decades.

Our industry is

very different toconsumer

electronics,where

businesses areunder pressureto develop and

market newmobiles

phones.. within

eighteenmonths.


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5

phones, for example, within 18months.

At Shell, weve researched allcurrent energy types. And we fothat in the 20th century, it took

around 30 years for new energsources and carriers to capturethe market after commercialintroduction.

For example, the first liquefiedgas plant came on-stream in 19Algeria, using Shell technology.then the growth of LNG has beespectacular. But four decades latshare of LNG in the global enerstill only 2%.

Yet we still think that by the miof this century, up to 30% of theworlds energy could come fromwind, solar and other renewablsources.

And that would represent a hitransformation from the 13% therepresent today. In absolute terthat would represent an increasoutput from renewable sources

more than 300%.But it would also mean that, ethen, fossil fuels would still supplalmost two-thirds of global ener

So the first question is whethercan be provided.

Seismic technologyIve already described how lonenergy demand is rising. That i

demand for oil at least until 20the natural decline in the produof developed fields will make kpace with this demand all the mdifficult.

In fact, the combined effect ofincreasing demand and fallingproduction rates means that thewill need to produce an additiomillion barrels of oil a day by 2

Forty million barrels a day is abtimes what Saudi Arabia produten times what the UK and Nortogether produce. Most of it will


und

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natural4 in

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0. Buttion ratesepingore

worldnal 40020.

ut foures, orayneed to

come from resources that havent ebeen found yet.

That is why the oil and gas induscontinues to explore all over the wShell remains one of the worlds bi

explorers. In the last three years wspent around $3 billion a year onexploration. And we are conductinseismic surveys and drilling wells i38 countries shown on this map.

Almost half of the worlds yet-to-bfound oil lies offshore, according tcomprehensive global assessmentby the US Geological Survey in 2For that reason, weve been develtechnology to help us explore andoperate safely in deeper and deewater.

Figure 2 Perdido project

Some of this technology is containew, safer-design floating platformthis Perdido installation which staproduction in March this year in thdeep waters of the Gulf of MexicoThis is, in fact, the worlds deepestoffshore producing platform, set in2.2km water depth thats 50%than the Macondo well site wherehad the Gulf of Mexico blowout.Such a major platform and the oi

that supply it from the seabed coover $5 billion to build and install.

: A New

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one things for sure we need tcertain we put it in the right plaThats why we spend our explordollars trying to be sure we knwhere the oil and gas is.

Seismic surveysAnd one of the key explorationoperations we conduct is a seissurvey. It results in images ofunderground rock layers.

In an idealised situation the bmarine seismic exploration aregrasp. A ship tows a source ofwaves that travel down into thecake rock formations beneath thseabed. At each of the interfacbetween layers the waves are rback to the surface, where theypicked up by pressure sensors stbehind the same ship.

If the time between a seismicand the detection of its echoes ifor each reflection point, then thcan be traced out. And if the spsound through each of the layer

known, then the image can beinto a cross-sectional image of tOf course, the real world is notRock strata are often faulted andeformed. And geophysicists dthe different speeds of sound inlayer; they have to estimate the

Still, by the 1980s science,engineering, mathematics andhad managed to produce imagearths rock layers that were ac

enough in most situations.

Challenge in the Gulf of MexicBut one prospect that tested themarine seismic imaging was locthe deep rock layers under theMexico.

There sediments had been deon a thick and extensive bed ofthe remains of repeatedly evapseas of primordial earth. Rock smisnomer: over geological timeflows like putty, driven by the unweight of overlying sediment.


bee!ationow

ic

sics ofasy tooundlayer-esflectedarerung out

shots plotted

layerseed ofis

onvertede earth.ideal.

nt knoweach.

omputerss of theurate

limits ofated inulf of

ositedrock salt:ratedlt is acales iteven

The salt had a tendency to rise icolumns, forming mushroom-likecanopies some six kilometres higunderside of such salt overhangssometimes serves as structural trap

where oil and gas can accumulateConventional marine seismic sur

were thrown off track by anotherproperty of underground salt: the sof sound in it can be twice as fastof the surrounding sediments. The sstructures of the Gulf thus refracteddiffracted seismic waves every whiway. Imaging what lay below sucsalt structure with seismic waves shfrom directly above was a bit likelooking through roughly textured glblocks.

Still, we thought that we had susout the geological situation at theprospect at a water depth of betw1000 and 1300 metres in the GulMexico. And in 2004 we drilledexploration well that we thought h70% chance of striking oil.

The well which cost in the orde

$100 million was dry: it did nshow signs of oil or gas. Geologiswere at a loss to explain the absethe reservoir, and the explorationprogramme in this location wassuspended.

All-azimuth seismic surveyA few years later, however, the Dearea was once again slated for aseismic survey as part of a

redevelopment project involving aof nearby fields, including the proliMars field. We took advantage ofopportunity to make clearer seismiimages.One way to do this wouldlet the seismic waves strike the areunder the Deimos salt structure morthe side rather than from directly aAnd not just from one side, but frosides.

Think of a torch shining obliqua rough surface. Ridges and groovperpendicular to the light beam cashadows that can perplex the view

: A New

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Imaging whatlay below sucha salt structure

with seismic

waves shotfrom directly

above was a bitlike looking

throughroughly

textured glassblocks.


7/16


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8

production would decline. But igas production has increaseddramatically. The reason is thatcompanies managed to the unlgas resources in rock so tight

gas seeps through the rock atabout a thousand times slower twould through an ordinary reserThey developed a method to crthe rock to allow the gas to flowells much more freely.

These rock-cracking operationas hydraulic fracturing or frackiinvolve pumping liquids into a swell section under such high prethat the rock around the well splAs the crack widens and lengthfilled with a granular material kproppant, through which gas cflow. The proppant keeps the crafter the pressure is released.

Figure 3: Fracking in the field

Fracking not only of gas wealso of oil wells has actuallypracticed in the field for several

decades. But these operationsnot always result in increasedproduction. Sometimes the propplugged up the crack, stunting itgrowth. Sometimes the cracks caround the well before extendinthe formation, creating gas-flowdetours. And the power and preavailable were sometimes not uthe job.

Fracking improvementsBut in the last decade, major lebeen made in the size and effic


fact its

drillingck thehat the

best han itvoir.ck openinto

, knownng,aledssureits open.ns, it isown asn readilyack open

lls buteen

id

pantsurledg into

ssureto

ps haveiency of

the fracking kit. The pieces of kit cinclude multiple 1,500-horsepowepumps that can achieve rock-fractupressures as high as 1,000 bar aproppant-carrying flow rates as hig

260 litres per second. (For compaa typical fracking pump is more pthan a Formula 1 engine and movliquids at 20 times the rate of the rcars pit-stop refuelling.)

For tight gas to reach its full potemore targeted ways ofplanning,executing and monitoring these fraoperations have also had to bedeveloped.

In particular, our study of fluid anmechanics under the high-pressureconditions of fracking has enabledprogram computer applications thapredict where the rock is most likelyield and how long and wide thewill grow. They model the compleinterplay of fluid pressure and flowrock stresses and strains in threedimensions. We thus have a goodof how best to orient a well in the

reservoir and what the optimalcombination of pressure, flow rateproppant volume is for fracking it ebefore we begin drilling the well.

As we undertake fracking operatiaround 20 micro-seismic sensors innearby well listen to the popping acreaking of growing cracks. The senable us to map out the contoursgrowing crack and adjust the pumprogramme accordingly.

We also have moved from frackipredominantly vertical wells to fracmainly horizontal wells. Only a smsegment of a vertical well perhametres intersects the gas-bearingBut with a horizontal well, a thousmetres or more can lie entirely withgas-bearing zone, providing plentpotential locations for fracturing.And if we align the wellbore axis tminimum horizontal stress, then thfractures should sprout around thewellbore, yielding the highestproductivity increase.

: A New

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9

At Groundbirch in western Cahave gone from fracking at 30intervals to fracking at 100-metrintervals. And this year we havethe spacing to 50 metres.

A full-scale tight gas developmhundreds of wells, each with mfractures. The key to a profitabldevelopment is to use the learnifrom these large-scale drilling afracking programmes to drive dcosts.

Our operations at Pinedale, instate of Wyoming, are a greatIn 2002 it took us an averagedays to drill a well there. Todayaverage well takes just over 2560% quicker. And thats to a deover 4,500 metres.

The other thing to note from ththat we are learning faster thecurves are steepening. At Grouwhich we acquired in 2008 asour purchase of the Canadian cDuvernay, it took us only three yrather than eight to achieve nea

same improvement as at PinedaBeing able to drill and frackquickly gives us greater flexibilitadjust operations according to tprevailing economics, our capitresources and other extraneousconstraints, such as lease expiryWe also lower temperature-sensfibre-optic strands to monitor prThe fibre-optic readings can coinflow of gas. As the gas enters

it expands; and as it expands, i(This phenomenon will be familisome of you as the Joule-ThomsCooler zones thus show whereflowing freely into the well. If nogas is flowing into the well, weagain.

The broader implicationsSo what does all this mean?

In financial terms, we reckon tannual investment of about $4between 2011 and 2015 mdrilling and fracking wells will


nada we-metreereduced

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le.ells moreto

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t enoughcan frack

hat anillionstly forresult in

Shell having a total of around 85cubic metres per day of productionour North American tight gas operin five years time. Thats almost thrtimes what we produced in 2009,

enough gas to provide power to a13.6 million American homes.

At the current US wholesale gasof about $4 per million BTU (whicroughly one half of the averagewholesale UK price), that productiyields an annual operational cashof more than $3.5 billion.

At a broader level, the IEA thinksthe world now has enough technicrecoverable gas resources for 250at current production rates. And this now on to unlock unconventionaresources in other parts of the worlincluding China.

Thus the global gas market isexpanding rapidly on the back of ttechnological advances. That willaccelerate the pace of global CO reductions as new gas-fired powerreduces the need for more coal.

Gas-to-liquids Technology(Simon Henry) Ill focus on anotherimportant innovation in the globalmarket: the large-scale conversionnatural gas into liquid fuels, lubricaand chemical feedstocks. This willgas into new markets, and createcleaner products.

As I mentioned earlier, our flagshproject in Qatar, Pearl GTL, is nea

completion. When finished, it willworlds first world-scale GTL plant is, on a scale equivalent to a largerefinery.At one point, more than50,000 workers from 60 nationsat work on a site the size of 350 ffields, one of the worlds largestindustrial developments.

: A New

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of the worldincluding

China.


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Figure 4: Pearl GTL nearing c

Pearl will produce enough GTto fill over 160,000 cars a dayenough synthetic base oil eachmake lubricants for more than 2million cars.

Last year, we secured approvuse of a GTL kerosene blend incommercial aircraft, only the foin 100 years of aviation historynew fuel has been approved.

Most of the GTL gasoil will beinto the global diesel pool. Butblended with conventional diesconcentrations, it can also helpthe pollution that dogs many of

worlds cities. It burns with lowedioxide, nitrogen oxides and pemissions than conventional oil-diesel. Thats been proved by tri100% GTL gasoil in several urband taxi fleets.

GTL gasoil has also proved itsaltogether harsher conditions. Itto power the winning Audi car iMans 24 hour race in France in2007 and 2008 as part of a s

designed diesel fuel. In fact, 20the first time a diesel powered cwon what is reputed to be thetoughest car race.

Let me give a brief overview owe will create all these productsPearl GTL plant.

Put simply, our GTL process cnatural gas into synthesis gas, aof hydrogen and carbon monoxwhich, with the help of catalystsconverted into liquid hydrocarbproducts.


mpletion

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Cleaning up the gasPearl is linked to the worlds largessingle gas field, the North Field, wstretches from Qatars coast out intGulf. The field contains some 25 tr

cubic metres of gas, about 15% ofworldwide gas resources. Theproduction process begins with thetransporting of this gas to the shorethrough pipelines.

In gas-liquid separation and cleaunits, we then remove all of the natoccurring hydrocarbon liquids, succondensates and liquefied petroleugas, as well as ethane. We also rcontaminants like sulphur.

This leaves methane, which is, ofcourse, the simplest hydrocarbon,up of one carbon atom and fourhydrogen atoms (CH4). Next begiprocess of conversion, which takesover three stages. Uniquely, Shellstechnology covers all three stages.

First, the pure natural gas is partioxidised with pure oxygen to maksynthesis gas. This is done at

temperatures of up to 1,300 degrCelsius and under high pressure.

The catalysts: converting the syngwaxThe second stage is the heart of thprocess. We pass the hydrogen acarbon monoxide mixture through tFischer-Tropsch reactors, therebyconverting it into both long chainmolecules (a liquid wax, but which

becomes solid at room temperaturwater.

I should explain that these reactotheir name from two chemists, FranFischer, a German, and his Czechpartner, Hans Tropsch, who in the1920s developed a chemical proproduce synthetic liquid fuels from

They published their first findings1923, showing how they had proa synthetic gas from coal, before uan alkali-iron catalyst to convert it thydrocarbons.

: A New

thich

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Pearl willproduce

enough GTLgasoil to fill

over 160,000cars a day

...our GTLprocess converts

natural gasinto a mixture

of hydrogen andcarbon

monoxide,which, with the

help of catalysts,is then converted

into liquidhydrocarbon

products


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11

Within our Fischer-Tropsch reaPearl, the conversion is triggerecarefully designed cobalt basedcatalysts.

Over three decades, we have

developed catalysts that are ablsupport a large-scale and efficiecommercial operation. What this that they are highly active, yeremain stable. And they also halevels of what we call selectivitis the ability to produce the highof the molecules representing thproducts.

To develop these catalysts, wget their precise chemical compright although cobalt is the melement, they also include a nuother metals. And we had to enthese metals were correctly dispthe surface of the catalysts.

Critical to all this is the size ofcobalt particles. At the outset ofwork, in the 1970s and early 8received wisdom was that theactive catalysts, and thus the m

effective, were those with the spossible cobalt particles.But by working in partnership

several universities, we discoverthis is not the case: in fact, it beclear that if the particles were totheir level of activity actually deThats because the most activeconsist of certain configurationsatoms, which themselves can oformed if there are enough ato

the main challenge in producincatalysts is ensuring that as mancobalt particles as possible areright size which is at the nano

Another focus of our researchon ensuring that the catalysts rehighly active, even after lengthyin use. This matters because, ovtheir level of activity can slow acobalt becomes agglomeratedsintered, which increases thethe particles.

Weve developed several tecto counter the deactivation of th


ctors atby

e tontt means

t able tove high thatest yieldsdesired

had toositioninber of

sure thatersed on

theour GTL0s, theostst

allest

withed thatcameo smalllined.articlesof cobaltly bes. Thus

effectivey of theof the-scale.has beenainperiodser time,therize of

niques

catalysts, including conditioning thsynthesis gas and regenerating thecatalysts in-situ.

Our catalysts are the result of thrdecades of close collaboration bet

our laboratories, our pilot plant inAmsterdam and the worlds firstcommercial GTL plant of its type, aBintulu in Malaysia, which we ope1993.

To produce the thousands of toncatalysts we need at Pearl GTL, whave spent around four years usingdedicated facilities in full-timeproduction. Although, as Ive said,catalysts consist of fine, nano-scalepores, they cover an enormous surfarea. And the catalysts will be fed24 Fischer-Tropsch reactors, eachwhich weighs about 1,200 tonnescontains tens of thousands of tubesthe catalysts.

Creating the final productsIn the third stage of the GTL proceslong-chain liquid wax is refined int

final products.In chemistry terms, what we areis changing the molecular structuresyncrude. To do this, we use crackconvert the long carbon chain molinto smaller chain molecules. Andconvert them into branch chain molby a process of isomerisation.

After processing in the hydro-crathe resulting syncrude is fed into adistillation column or synthetic crud

distiller, where it is separated intofractions according to their boilingpoints.

Thus we are left with our productready for customers across the worBiofuelsIll now describe another way in wwe are using technology to satisfydemand for cleaner transport fuels:biofuels.

Indeed at Shell, we believe that,the low-carbon transport fuels, biofcan make the biggest contribution

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Over threedecades, we

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are able tosupport a

large-scale andefficient

commercialoperation.


12/16


12

tackling CO2 emissions in the ndecades. We expect their sharroad transport fuel mix to increasomewhere approaching 3% toaround the 9% mark by 2030.

CosanShell is already one of the worldistributors of transport biofuels.are now moving into productionto the recent agreement of a pr$12 billion dollar joint ventureCosan, Brazils largest biofuels

This will allow us to producefrom Brazilian sugarcane, whicreduce fuel-related emissions by70% and 90% compared to stapetrol.

Yet there are concerns in somabout the sustainability of the biindustry, not least its impact onin biodiversity and the conditionworkforce. So Ill describe howuses its technological expertiseboost production, but also to imsustainability of its operations.

I should first mention that theof sugarcane production in soutBrazil is some 2,000 kilometresfringes of the Amazon Rainforessugarcane grown for ethanol inuses less than 1.5% of the countarable land. There are strict legon the expansion of sugarcaneinto new areas.

Cosan is fast phasing out macane-cutting. In fact, more than

of its sugarcane is harvested bymechanical cutters.

These machines can harvest s600 tonnes of sugarcane in a ddepending on the location ar60 times the amount typicallyharvested by a single cane-cutteworking manually. That reducesCosans reliance on manual wowhile creating some new jobs ioperation and maintenance of tmachinery.


xt twoof the

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ain area-centralfrom the. AndBrazilrysl limits

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r

rkers,theis

Geographical information systemCosans highly advanced geograinformation system is also at the heits success. The system processes ainterprets vast quantities of informat

about all aspects of Cosans 800,hectares of sugar cane includingtopography of the fields, data abonutrients and pest infestation levels.

If you think of 800,000 hectarescircle with a radius of around 30it would, if centred here on the Colstretch as far as Bury St EdmondsBedford to the East and West, andPeterborough and Bishops Stortforthe north and south. That is a lot ofsugarcane!

The geographical information sysdraws its data from all manner ofsources, including government soilrecords, public weather stations, aindeed, satellite imaging of thecompanys crops. The company alproduces detailed climate reports,on records that go back 30 years.

Complex algorithms then convert

this data into digital maps that disdetailed information about all 800hectares.Cosan has been develothe system since 2003, drawing oadvanced skills in mathematicalmodelling, the agricultural sciencesinformatics and statistics.

And it brings the company severpowerful advantages. Cosan canextremely accurate predictions abolikely crop yields. And it is able to

identify and rectify any problemscrops quickly.

Moreover, the system also produsignificant environmental benefits.Because it records data about soilnutrients and pest infestation levels,calculate the exact amount of fertiliand herbicides needed at each sita result, Cosan can limit its use of tchemicals to what is strictly necesssomething that would otherwise beimpossible across such vast and vatracts of land.

: A New

hicalart ofndion

00theut soil

as ailes,

llege,ndtoto

tem

nd,

obased

all

lay,000ingn

,

lake

ut its

ith its

ces

it cansers. Ashesery

ried

Cosan is fastphasing out

manual cane-cutting

Cosans highlyadvanced

geographicalinformation

system is at theheart of its

success


13/16


13

To further limit its use of pesticiCosan uses natural pest control.example, to counter the moth cthat prey on its sugarcane, Cosbreeds small wasps, the caterpil

natural enemy. It then releases tamong its crops, which kill thecaterpillars by laying eggs in thlarvae.

All told, some 40 million wasreleased every month but onlywhen the company judges that tare really necessary. And becathe wasps have a lifecycle of judays, they are unable to spreadbeyond the sugarcane fields. Inthe geographical information syalso guides decisions about whand where these wasps are use

Co-generationCosans sugarcane is also helpitackle CO2 emissions beyond thtransport sector. For many yearhas used co-generation plants telectricity from the residue of its

sugar cane. This provides the cwith a cheap and low-carbon spower. In turn, this has boostedcompanys profitability, whilesignificantly reducing the CO2 ethe course of its biofuels produc

The company is now also supthis electricity to Brazils nationathanks to high pressure boilers ageneration plants.

Figure 5: Costa Pinto Mill


des,Forterpillarsn

llars

e wasps

ir

s are

heyset 4-6farfact,temn

d.

ng toe, Cosanproduce

crushed

mpanyurce ofthe

mitted inion.plyingl grid,t its co-

For example, at the Costa Pintotwo high-pressure boilers togethergenerate 66MW of electricity. Onof this is used to power Cosansoperations, and the remaining two-

are sold to the Brazilian national g In late September the companyopened a new sugar and ethanolthe city of Caarapo, with an annugeneration capacity of 76MW. Tthis in perspective, Cosan estimatethis would be enough to supply ahalf a million people.

Thus Cosan is also helping Brazildevelop a secure and sustainablesector.

Geopolitics: supply securityBy way of conclusion, Ill finish witword on the broader geo-politicalcontext in which the industry takes iplace a key feature of the industrsince Winston Curchill decided toconvert the Royal Navy from coal tjust over 100 years ago.

I studied Maths. My daughter is

studying Politics and InternationalRelations perhaps rather more relto my role today.

A good example is the expansiothe global gas market on the backtechnological advances describedMalcolm. This has many energy seimplications.

For one thing, the opening up ofmuch unconventional gas in NorthAmerica means that the continent

self-sufficient for decades to come.just a few years after it feared thatproduction would decline.

The growth of unconventional gaacting in concert with the expansiothe market for liquefied natural gasthat has been supercooled so that ibe transported by tanker in liquid fLNG is growing fast on the back osupplies and new customers in fathree times the rate of the overall gmarket.

That strengthens supply securitybecause LNG allows supplies to fo

: A New

ill

e-third

-thirds

rid.

ill inl co-putthat

ity of

l toower

a

itsy ever

o oil

ow

evant

ofof thebycurity

so

ill be

This isits

s isn of gas

it canrm.

f newct ats

llow

..Cosan is alsohelping Brazil

to develop asecure andsustainable

power sector.


14/16


14

demand as it shifts and fluctuatethe world. After all, you cant echange the supply source for abut you certainly can for an LNterminal.

This is important for the UK anEU countries facing declining prfrom their domestic gas sources.worlds growing LNG networkthem to buy their gas from a divrange of sources.

By 2020, LNG is likely to acnearly 30% of Europes gas neenumber of regas facilities in Eurgrowing extremely fast. In practimeans competition between indsupplies, Russia, Africa and theEast. The competition to build nfacilities and pipelines, while dthe market for such an importantchallenges in which Shell can aplay a significant role.

National oil companiesWhen thinking about the geopocontext, the rise of the national

companies is now key thesecompanies are owned or contrgovernments.

In recent decades, the nationcompanies have risen to prominmajor resource holding countrieunderstandably sought to obtvalue for their natural resources.

This has transformed the enerindustry. Our ability to win impbusiness opportunities now hing

ability to develop productiverelationships with these resource

At Shell, we have the utmost rthe NOCs their skills, their invin research and development astewardship of their national enresources in best interests of theicountries.

But we believe that we haveoffer them, especially our scientitechnical and management expFor example, Malcolms story ounconventional gas production.


s aroundasilypipeline

import

d otheroductionTheill allow

erse

ount fords. Thepe isce thisigenousMiddlewvelopingfuel, are

nd does

liticalil

lled by

l oilence, ashave

in full

yrtantes on our

holders.spect forstmentd theirrgyr

uch tofic,rtise....

This is happening in China, whegovernment has thrown its weightnatural gas. It aims to more than dthe gas share of the primary energto around the 8-10% mark by 202

China is seeking to import gas froCaspian region, from Russia, via Land also to develop its own produ

New pipelines are being built. Tcreate a more flexible and integratgas market. Ultimately demand widriven by security and cost of suppAnd Shell is helping the countrysnational oil companies to tap asignificant unconventional gas resobase.

We already operate the Changtight gas field in Shaanxi Provincea production sharing agreement wiChina National Petroleum Corporsupplies gas to Beijing and other ceastern China.With CNPC we areappraising and developingunconventional gas resources elsein the country.

And our partnership is now exten

beyond Chinas shores. Together,have purchased Arrow Energy, anAustralian gas company, in a $3.billion deal. The joint venture plansconvert coal bed methane anabundant unconventional gas sourLNG for export to China.

So its a great example of how srelationships between Shell and naoil companies can drive advancesproduction.

ConclusionThat is an appropriate place to fiThis evening, weve shown how

scientific and technical experts arealready doing much to drive progrtowards a secure and sustainableenergy system.

I hope weve also shown that Shneed for highly capable chemists,

: A New

re theehindublemix

0.

theG

ction.his willd

ll bely.

urce

eiunderith thetion. Itities inalso

here

ding

e

to

e to

rongtionalin gas

nish.Shells

sslobal

lls

the openingup of so much

unconventional

gas in NorthAmerica meansthat the

continent willbe self sufficient

for decades tocome.

By 2020, LNGis likely to

account fornearly 30% ofEuropes gas

needs


15/16


15

geologists, engineers, andmathematicians is only growing

Indeed, without the rigorous gin the hard sciences provided bCambridge and the worlds oth

universities, it will be impossiblethe global energy challenge.

we very much look forranks in the future, further


stronger.rounding

r top

to meet

So we very much look forward twelcoming more Churchill graduatour ranks in the future, furtherstrengthening the relationship betwShell and our great college.

Thank you.

ard to welcoming more Churchill graduates ttrengthening the relationship between Shell an

great college.

: A New

s to

en

ourd our


16/16


16

Recent s

Th

Natural

The natural gas re

The global energy

Meeting the

Challenges and d

Technolo

The global c

Natural gas: cha

Natural gas:

Br

This publication is one of a range30, 2596 HR The Hague, The N

available in English or as translExternal Affairs

Information about the Royal Dut

publi

Shell International Limited (SI), 2010 Per

reproduced, stored in a retrieval system, or t

provided that the source is acknowledged.

The companies in which Royal Dutch Shel

publication the expressions Shell, Group

are made to Group companies in general.

companies in general or those who work


eeches by Executive Directors

Singapore Energy SummitMalcolm Brinded

gas: key to green energy futurePeter Voser

volution is changing the energy landscapePeter Voser

hallenge: the importance of human capitalHugh Mitchell

nergy challenge through innovationPeter Voser

velopments in the NOC-IOC relationshipMalcolm Brinded

gy and Sustainable DevelopmentSimon Henry

ontext: the importance of innovationJorma Ollila (Chairman)

nging the Middle East energy landscapeMalcolm Brinded

a vital part of Europes energy futureMalcolm Brinded

aking the cycle of volatilitySimon Henry

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cations, can be accessed at:

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and Shell Group are sometimes used for convenience where r

Likewise, the words we, us and our are also used to refer t

for them. These expressions are also used where there is no pur

identifying specific companies

: A New

dtlaanr titlesthe

ious

n is

,

. In this

ferences

Group

ose in

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