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Tue 30 Nov 2010 12:00 AM

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View from the top

Peter Voser, Shell CEO, says unlocking the potential of GTL will play a major role in meeting the world’s energy demands.

View from the top

How do you see energy supply and demand evolving over the
coming two decades and how is Shell positioning itself for the future?

PV: Global demand for energy will surge as a result of
population growth and industrialisation, so that by 2050 we could be using
double the amount of energy we do today. Against this backdrop there will be
growing environmental stress and increasing calls from governments around the
world for a more sustainable energy system. To manage the supply side, there
will be a need to mobilise all forms of energy, ranging from
difficult-to-produce oil and gas, to coal, nuclear and renewable. But the
demand side must be managed as well. We need to become more efficient at using
energy. There are also technical solutions that can be pursued to capture and
store the CO2 that would otherwise be emitted into the atmosphere. Shell has
long experience of many different energy sources, including natural gas, which
is the cleanest-burning fossil fuel and biofuels, which can be made to have a
low carbon footprint. This leaves us well-positioned for the future, so we
continue to invest. This year alone Shell has plans to make a net capital
investment of around $29 billion. With an unrivalled tradition of technological
innovation, I see the energy transition as a huge opportunity for Shell.

Why is it relevant
that the next World Petroleum Congress will be held in Doha?

PV: Over the past couple of decades Qatar has emerged as a
very significant player in global energy under the wise leadership of HH Sheikh
Hamad Bin Khalifa Al-Thani, The Emir of the State of Qatar, and the effective
implementation of that vision for the energy sector by HE Abdullah Bin Hamad
Al-Attiyah, Deputy Prime Minister and Minister of Energy and Industry. Already Qatar is the
world’s leading exporter of liquefied natural gas (LNG) and the gas-to-liquids
(GTL) capital of the world. By the time of WPC 2011, Qatar will have extended its global
lead in both LNG and GTL considerably. I am proud of the role Shell is playing
in this as Qatar’s
partner in the Pearl GTL project and the Qatargas 4 LNG project. I think it is
entirely appropriate for Qatar
to host one of the leading global conferences in the energy industry.

Shell has invested
heavily in Qatar’s Pearl project, but does GTL have a future elsewhere?

PV: Pearl GTL in Qatar
is a significant project for Qatar
and for Shell. As the world’s largest GTL project, it also marks a step-change
for GTL. I am satisfied with our progress in the construction of this project,
and I look forward to the completion of major construction by the end of this
year. Pearl GTL will produce 260,000 barrels per day of products, including
140,000 barrels per day of GTL products. Each GTL product has qualities that we
believe will appeal to customers. GTL kerosene is one example, and I was
pleased to see a Qatar Airways Airbus A340 making the first ever commercial
passenger flight using a 50-50 blend of GTL and conventional jet fuel in
October last year.

In Qatar,
we are working with Qatar Petroleum on both GTL and LNG projects and both are
economically attractive for us.
I believe LNG and GTL also both represent attractive options for gas resource
holders to monetize their gas. One thing to bear in mind is that GTL offers
access to the oil product markets for gas resource holders and that can be a
good strategic diversification. Of course, you need to have the right
combination of abundant gas and the capacity – not least in terms of labour –
to build the huge plants that are needed.

We remain interested in new GTL opportunities, but our main
focus now is on delivering Pearl GTL itself. We have over 50,000 workers onsite
in Ras Laffan Industrial
City. Onshore
commissioning is well under way. Offshore we have completed our drilling
campaign – with record times for the North Field. We are proud to be a pioneer
in GTL. We have more than 35 years’ research in producing liquid fuels from
non-oil sources and started up the world’s first commercial GTL plant of its
type in Malaysia

in 1993.

How do you see the
energy mix developing in the future?

PV: Shell’s scenario work shows that by the middle of this
century 30% of the world’s energy could come from wind, solar and other
renewable sources. The build-up will be slow because these sources need a lot
of development before they can become commercial on a large scale. In the
meantime fossil fuels and nuclear will remain the main source of our energy
needs. So we will do our part to continue to develop difficult-to-produce oil
and gas to supply the world with the energy it needs. Gas is becoming an
important transition fuel as it is cleaner and less carbon intensive than coal
or oil while there will be a greater variety of transport fuels, including
biofuels, electricity and hydrogen. Everything from cars to homes will become
more energy efficient than today.

What about the
future role of unconventional energy?

PV: As I mentioned earlier, fossil fuels will provide the
bulk of the world’s rapidly rising energy needs to give renewable and
sustainable energy sources the time to be developed. Unconventional oil and gas
have a role to play in the global energy mix. Shell has made a strategic choice
to work across a broad energy portfolio including unconventional oil and gas
though nearly all of the energy Shell produces globally is conventional oil and
gas.

What are the
implications for Shell, and deep-water exploration and production in general,
of the Gulf of Mexico oil spill?

PV: All of us at Shell are deeply saddened by the loss of
life and the environmental consequences due to the Deepwater Horizon incident.
We’re confident that the incident will be thoroughly investigated and findings
will be communicated across the industry to prevent such events from occurring
in the future. We have joined forces with other oil companies is helping deal
with incident and we are participating in an industry task force looking at
recommendations on improvements or precautions that will help prevent such an
incident from occurring again in the future. The Gulf of
Mexico has not experienced an incident of this magnitude in many
decades of offshore drilling and production, and our thoughts continue to be
with those affected by this tragic. Safety is, has been, and forever will be,
our number one priority. It is our core value. Shell has never had a
significant offshore well incident or platform spill in the deep water Gulf of Mexico related to its exploration and production
business.

Although the cause of the incident may not be known for
months, we have taken a number of proactive steps to reinforce safety and
prevent a similar incident from happening in our offshore operations. One
immediate step was to review of all safety emergency systems, including blowout
preventers and related equipment.

What are the main
areas that you have identified in which Shell can cut costs?

PV: We have made a good start in Shell. We managed to cut
costs by more than $2 billion last year and have targeted a further $1 billion
this year. So cost reduction remains an urgent priority for us. There is a
possibility that inflation could soon return to the industry and that is a good
reason for us to maintain our focus on internal and third-party costs. The
focus of the restructuring last year was to make Shell a simpler place to work
with clearer accountabilities. This translated into fewer people taking
strategic decisions and more people implementing. We now have a flatter
organisation with fewer leaders and tougher performance management - more
delivery, less discussion and a sharper focus on results. We continue to
concentrate on introducing simpler processes in contracting and procurement
savings.

But our strategy doesn’t just revolve around cost reduction;
we also focus on growth - operational growth and financial growth. We had
three significant new production start-ups in 2009: the LNG plant at Sakhalin
in Russia, the deep -
water Parque das Conchas project in Brazil,
and a new chemicals production plant in Singapore. In March this year the
Perdido development in the Gulf of Mexico
started up. Looking into 2010-11, we plan to bring 13 key projects on stream in
upstream and downstream. And we work on generating new options for further
growth over 2014-20. The key projects under construction will enable us to
access 11 billion barrels of resources. And the new options for future growth
would yield an additional 8 billion barrels if we proceed with them.

What’s the global
refining outlook today?

PV: We are constantly reviewing our refining portfolio to
ensure that our facilities are competitive in the markets where we operate. We
are divesting ourselves of some plants and investing in others. At present our
most visible growth investments are in regions outside Europe – projects like
the Shell Eastern Petrochemicals Complex in Singapore
and the expansion of Port Arthur refinery in the
US.
But this doesn’t mean that we will not continue to invest in European refining
where this makes sense. In mature markets this may not be about growing
volumes: here the focus is on value growth, and there are plenty of
opportunities to add value through investments in existing assets.

What’s the outlook
for the LNG market?

PV: Despite the difficult LNG short-term market we have
today, world-wide LNG demand is likely to grow – and grow much faster than
overall gas demand. In fact, it could double this decade. This growth will be
driven not only by China, but also by Europe’s growing import dependency, and
by a host of countries in Asia that will begin importing LNG, including
Indonesia, Malaysia, Thailand, Singapore and Pakistan, and here in the Middle
East, Kuwait, Dubai and Bahrain.

Substantially increasing the share of gas in the power
generation mix is by far the cheapest and quickest way for many countries to
deliver a material cut in C02 emissions – and for many, it’s the only realistic
way to meet their 2020 pledge.

Thankfully, gas is abundantly available. The IEA says there’s
enough technically recoverable gas to supply the world for 250 years at current
production levels. We see more LNG supplies, more LNG ships, and more
pipelines, which means more gas for more customers in
more markets. There is a very fast ramp-up in production of unconventional gas
in North America. This changes the US gas supply
picture dramatically and frees up LNG supplies for other countries. Expanding
the world’s gas resources, and bringing these to market, is not easy or cheap.
In addition to tapping conventional and unconventional onshore resources, we
will also have to develop new unconventional or stranded resources.

Shell is a pioneer in the LNG industry as well as technical
leader. Today we are technical adviser to projects that produce nearly 40% of
global LNG supplies. We are driving rapid progress on floating LNG plants.

This will allow us to bring to market resources once
considered too remote or expensive to tap. We are also building on our
experience in the sub-Arctic to develop cost competitive and environmentally
acceptable solutions for full Arctic conditions. In addition we are also seeking to leverage our unconventional gas experience
to develop coalbed-methane based LNG projects. Of course, gas suppliers need
security of demand to justify investments in
new supplies. That’s why it’s important for governments to give clear
signals about their commitment to gas and CO2 pricing.

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