Chief executive of energy giant Royal Dutch Shell Peter Voser believes that a third of energy demand by 2050 will be supplied by alternative energies.
“That means an enormous growth rate for alternative energies,” he said, speaking to reporters this week at the group’s annual strategy meeting.
In the short to medium term, Shell will drive its gas and biofuels business as two key energy drivers.
“In the long term, Shell will be an energy company which will play in alternative energy space, and also in the oil and gas space,” said Mr Voser.
The energy firm will officially open its highly anticipated multibillion-dollar petrochemical complex in Singapores’s Pulau Bukom on May 4 – a project almost five years in the making.
Mr Voser said the timing of the opening of the complex – estimated to have cost US$3 billion (S$4.2 billion) – was ideal, given the recent recovery of global markets. Singapore Prime Minister Lee Hsien Loong will be the guest of honour, he said.
Mr Voser also shrugged off concerns of a supply overhang with new petrochemical complexes also firing up in Thailand, China and the Middle East. He said he was confident the market would be able to absorb the plant’s output of various widely used chemicals as demand for such products is picking up.
One key competitive advantage of the new Shell Eastern Petrochemicals Complex (SEPC) is its proximity to Shell’s Bukom refinery, which is highly integrated into the new complex, said Mr Voser. This will give SEPC the flexibility to use different feedstock as demand changes.
The new complex will be Shell’s largest integrated refinery and petrochemical hub globally, employing up to 200 permanent highly skilled workers. Its annual production capacities include 800,000 tonnes of ethylene and 750,000 tonnes of monoethylene glycol, among others. These are used in a wide range of everyday products.
Looking ahead, Mr Voser said that Shell “will look forward and see if we can do more”. If further opportunities arise, the company would be “happy to invest in Singapore”.
Mr Voser also said that Asia is a key region in terms of Shell’s overall investment strategy. The firm is working with PetroChina and Qatar Petroleum International to jointly develop a refinery and petrochemical manufacturing complex in China.
On China in particular, the group’s chief financial officer Simon Henry said that one key strategy is maximising exposure to the Chinese markets while helping Chinese companies go international and developing business together.
One example is Shell and PetroChina’s A$3.3 billion (S$4.2 billion) bid for Australian firm Arrow Energy, he said. This will help the firms “develop a gas business together… and in time, deliver more gas back into China,” he said.
But even as it expands in the East, Shell is axing another 1,000 jobs worldwide to make itself leaner.
Mr Voser said when he took over the reins last July, the “organisation of the company was working against us. Shell had become too complicated, and slower than I’d like”.
He said the cuts would involve down- stream and corporate positions. Countries like Singapore and Malaysia where there are good prospects for growth are unlikely to be affected much by the cuts.
The latest round of cuts brings to 7,000 the number of job losses that will occur between last year and 2012. The move will save the company some US$3 billion in costs in total, estimated Mr Voser.
Shell’s company culture “is being changed as we speak”, he added. He has set the tone with a few objectives for employees: competitiveness, performance, accountability, speed and transparency.
“And then you walk the talk. You give accountability to people to drive it.”
Refining capacity has been reduced 18 per cent since 2002 and Shell is in talks over divestments in New Zealand and Europe which could see a further 15 per cent drop in refining capacity.
Although oil companies have been cushioned by production cuts by oil producing nations during the recent recession, Shell has been disadvantaged recently due to higher exposure to refining and natural gas, where margins are hard-wired to the economy, he said.
Many of Shell’s projects – in Qatar, North America and the Asia-Pacific region – that devoured cash are also finally going into production, said Mr Voser.
As a result, the company’s cash flow is expected to rise 50 per cent by 2012, assuming the oil price is US$60 a barrel, and 80 per cent if it rises to US$80 a barrel.
Mr Voser said the firm expects oil prices to average in the US$50 to US$90 a barrel range for this year, with short-term peaks and troughs.
“We have come a long way, but there is much more to do at Shell, and I am very energised around that.”
Soundbites:
On the biggest challenge:
One of the most fascinating challenges in the world is that we have to double our energy supply, at a cost to the environment which is much lower.
We have to develop more resources, and we also have the technology innovation challenge, it’s a great challenge to have.
On the recent climate change talks in Copenhagen:
Shell, in all its projects, have included a price for Co2 in our calculations because we saw this coming. We are still of the opinion that in the longer term, Co2 needs a price – and we built that into our development cost.
Over time, this will happen. Maybe in a fragmented way, but the long-term direction is very clear.
We are not waiting to get some regulation. We’re moving and implementing more gas production, we are already in biofuels, carbon sequestration and wind energy.
On carbon tax versus cap-and-trade system:
I prefer market-driven solutions, because tax is not an incentive to reduce Co2. Market-driven systems can actually lower costs over time, that’s why you have tremendous incentive to invest as you pay less for your Co2. With the tax collected, what will it be spent on? Do I have a guarantee that this will be the same across economies or do Governments use the tax money for a different thing?
One country will go one way or another, and it will lead to protectionism and this will disturb the global trade flow.
