Energy, Technology and

Climate Change: A New

World

Malcolm Brinded
Executive Director, Upstream International
Royal Dutch Shell plc

Simon Henry
Chief Financial Officer,
Royal Dutch Shell plc

Churchill College, Cambridge

November 11, 2010
 Malcolm Brinded and Simon Henry: Energy, Technology and Climate Change: A New World

Malcolm Brinded is Executive Director,

Director Upstream
International.
Malcolm Brinded has been on the Shell Board since 2002,
and Executive Director of the Upstream
eam International business
since July 2009.
He joined Shell in1974 after obtaining a first-class honours
degree in Engineering from Churchill College.
College He has
worked for Shell companies in Brunei, the Netherlands,
Oman and the UK. In 1998 he became Managing
Managin Director
of Shell UK Exploration and Production – responsible for a
fifth of the UK’s offshore oil and gas business – and from
1999 until 2002 he was also Shell Country Chairman in the
UK.
He continues as a member of the Royal Dutch Shell plc
Board, a role he has held since its formation in 2004.
2004 He
was a member of the Boards of the two former parent
companies since 2002. From March 2004 until his current
appointment, he was Executive Director in charge of Exploration & Production.
Malcolm is a Fellow of the Institutions of Civil and Mechanical Engineers and of the Royal Academy of
Engineering. He is a member of the Nigerian President’s Honorary International Investor Council and a
Trustee of the Emirates Foundation and the International Business Leaders
Leaders Forum. He is also the
Chairman of the Shell Foundation. In 2002 he was appointed CBE for services to the UK oil and gas
industry. Malcolm, a British national, was born in 1953. He is married to Carola and they have three
adult sons.

Simon Henry became ame Chief Financial Officer of

Royal Dutch Shell plc on May1, 2009.
Simon became Chief Financial Officer on May
1, 2009, and Executive Director on May 20,
2009. In this role he is responsible for all aspects
of finance and information technology
management in Shell, for global business
strategy development and has oversight
responsibility within the Executive Committee for
Shell’s business activities in the Asia Pacific
region.
He joined Shell in1982 after obtaining a first-
class honours degree in Mathematics from
Churchill College, starting as an engineer at the Stanlow refinery in the UK. After qualifying as a
member of the Chartered Institute of Management Accountants
Accountants in 1989, he held various finance posts,
including Finance Manager of Marketing in Egypt, Controller for the Upstream business in Egypt, Oil
Products Finance Adviser for Asia Pacific, Finance Director for the Mekong Cluster and, up to the end of
2000,
00, General Manager Finance for the South East Asian Retail business.
He was appointed Head of Group Investor Relations in 2001 and most recently served as Executive
Vice President Finance for Exploration & Production from 2004 until his current appointment.
appointm
Simon is a British national born on July 13, 1961. He is married to Jonquil, and they have three
children.

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 Malcolm Brinded and Simon Henry: Energy, Technology and Climate Change: A New World

Growing population levels and surging economic growth are driving rising energy demand across the
world. But with greenhouse gas emissions continuing to rise, all countries must find more energy at a
much-reduced cost to the environment in the coming decades. In this speech, Malcolm Brinded,
Executive Director of Upstream International at Royal Dutch Shell,
Shell and Simon Henry, the company’s
Chief Financial Officer – both Churchill graduates – discuss four ways Shellll is using its technological
and scientific expertise to help the world develop a secure and
and sustainable energy supply.
supply First,
advances in seismic technologyy that are allowing the company to open up resources from hard-to-reach
locations. Second, new techniques in gas production that are opening up vast resources of natural gas,
which is the quickest and cheapest way to cut CO2 emissions from the global
bal power sector.
secto Third, Shell’s
development over more than three decades of the technology that converts natural gas into int liquid fuels.
And fourth, the company’s imminent move into the large-scale production of biofuels in Brazil.

Introduction And, of course, many Churchill alumni

As Churchill graduates, we’re especially
proud of the links between Shell and the
college. They could hardly be stronger or
more significant.
As you know, the college’s origins can
be traced back to the early 1950s, and
Winston Churchill’s desire to establish
esta a Shell is using science and technology to
postgraduate institute for engineers and
scientists to rival the Massachusetts
Institute of Technology.
Shell played a crucial role in realising
this aspiration in the form of Churchill
College. John Oriel, who had been the
General Manager of the Shell Refining
and Marketing Company, was one of
the two prime movers in the drive to
establish the college, alongside Sir John
Colville, Churchill’s Private Secretary.
In fact, thanks to his efforts, Shell
pledged 100,000 pounds – the
equivalent of around
round 2 million pounds
today – to help set up the College. And
Oriel became one the college’s founding
fellows.
Over the subsequent half century, Shell
and Churchill have maintained a strong
relationship. For example, as Shell
Industrial Fellow Commoners,, members
of industry would stay at Churchill while
conducting research at Cambridge.
Moreover, to mark Churchill’s Silver
Jubilee in 1986, Shell funded a
Lectureship in Control Engineering at the
college.
have joined Shell over this period –
we’re not sure of the exact number, but
we think it works out at about one every
two years.
(Malcolm Brinded) With that in mind, we
will focus on some of the ways in which
help the world develop a secure and
sustainable global energy system.
In Shell’s day-to-day work we draw
upon all manner of scientific and
technical disciplines, from materials
science to advanced mathematics,
from chemical and civil engineering
to agricultural science – and an array
of specialised fields in between.
And the need for these advanced
skills
ills will only grow more important
as the energy landscape is reshaped
by surging demand and global efforts
to tackle CO2 emissions.
I’ll begin by describing these trends,
before addressing two ways in which
Shell is responding through the
application of new technology.
First, I’ll focus on some recent
advances that we’ve made in seismic
technology that are allowing us to
find oil resources that had earlier
been concealed.
I’ll then discuss the ongoing boom
in unconventional gas production.
Here, technological
ological advances are
driving a massive expansion in the

3
 Malcolm Brinded and Simon Henry: Energy, Technology and Climate Change: A New
World
world’s gas resources. This matters
because natural gas is the quickest
and cheapest way to cut CO2
emissions from the global power
sector.
(Simon Henry) I’ll then pick up the
thread with another major
breakthrough in the global gas
market: the conversion of natural gas
into liquid fuels – soon to begin on a
large-scale
scale at Shell’s massive $18-19
$18
billion Pearl GTL plant in Qatar.
Next, I’ll describe some of the
science and technology underpinning
the expansion of the biofuels industry,
which will be critical to tackling CO2
emissions in the transport sector –
before finishing with a word on the
broader geo-political
political context in
which the energy industry takes its
place.
The global energy challenge
(Malcolm Brinded) Inn the first half of
the century, global demand for
energy could double, according to
the International Energy Agency,
driven by a rising global population
– 9 billion compared to today’s 6.5
billion or so – and especially by
economic growth
owth in the developing
economies.
Figure 1 – Rising energy demand
China’s GDP growth is running at
some 10% per annum, while India
and Brazil are not far behind. And
it’s this kind of growth that helps to
4
explain why China’s gas
consumption could treble by 2020.
“...fossil fuels
To keep pace with rising demand,
will continue to
the world will need to invest heavily
meet the
in all energy sources, from oil and
natural gas, to biofuels, nuclear majority of
power, solar and wind. global demand
Not to do so will leave billions of for decades.”
people in the energy poverty and
deprivation they face today – for
example more than1.4 billion are
without access to electricity (IEA),
while nearly a billion people still use
unsafe sources of drinking water (UN
– 884 million).
At the same time, we must urgently
tackle greenhouse gas emissions.
According to the consensus of climate
scientists, CO2 emissions should
hould be
limited to 450 parts per million to
avoid levels of global warming with
significant negative consequences.
On one estimate (Mauna Loa,
Hawaii) they have now reached
390ppm – so just 60ppm to go – yet
they continue to rise at an annual rate
of 2ppm. The clock is clearly ticking.
Over time, cleaner energy sources
will meet a growing share of
demand, as global efforts to tackle
climate change gather pace. For
example, the Chinese government
has announced a 40–45% 45% voluntary
reduction off carbon intensity per unit
of GDP by 2020 compared to
2005. And in the US, the
government has committed to an “Our industry is
ambitious 17% reduction in CO2 very different to
emissions by 2020 compared to consumer
2005. electronics,
But even so, fossil fuels will where
continue to meet the majority of businesses are
global demand for decades. under pressure
After all, there are significant to develop and
technical and financial constraints to
market new
deploying alternative sources on a
mobiles
mass scale.
phones.. within
Our industry is very different to
consumer electronics, where eighteen
businesses are under pressure to months.”
develop and market new mobile
 Malcolm Brinded and Simon Henry: Energy, Technology and Climate Change: A New
World

phones, for example, within 18 come from resources that haven’t even
months. been found yet.
At Shell, we’ve researched all That is why the oil and gas industry
current energy types. And we found continues to explore all over the world.
that in the 20th century, it took Shell remains one of the world’s biggest
around 30 years for new energy explorers. In the last
ast three years we have
sources
rces and carriers to capture 1% of spent around $3 billion a year on
the market after commercial exploration. And we are conducting
introduction. seismic surveys and drilling wells in the
For example, the first liquefied natural 38 countries shown on this map.
gas plant came on-stream
stream in 1964 in Almost half of the world’s yet-to-be
be-
Algeria, using Shell technology. Since found oil lies offshore, according to a
then the growth of LNG has been comprehensive global assessment done
spectacular. But four decades later, the by the US Geological Survey in 2000.
share of LNG in the global energy mix is For that reason, we’ve been developing
still only 2%. technology to help us explore and
Yet we still think that by the middle operate safely in deeper and deeper per
of this century, up to 30% of the water.
world’s energy could come from
wind, solar and other renewable
sources.
And that would represent a historic
transformation
formation from the 13% they
represent today. In absolute terms
that would represent an increase in
output from renewable sources of
more than 300%.
But it would also mean that, even
then, fossil fuels would still supply
almost two-thirds of global energy.gy.
So the first question is whether that
can be provided.

Figure 2 – Perdido project

Seismic technology
I’ve already described how long-term
long
energy demand is rising. That includes
Some of this technology is contained in
demand for oil at least until 2030. But
new, safer-design
design floating platforms like
the natural decline in the production rates
this Perdido installation – which started
of developed fields will make keeping
production in March this year in the
pace with this demand all the more
deep waters of the Gulf of Mexico.
difficult.
This is, in fact, the world’s deepest
In fact, thee combined effect of offshore producing platform, set in
increasing demand and falling
2.2km water depth – that’s 50% deeper
production rates means that the world
than the Macondo well site where BP
will need to produce an additional 40
had the Gulf of Mexico blowout.
million barrels of oil a day by 2020.
Such a major platform – and the oil wells
Forty million barrels a day is about four
that supply it from the seabed – costs
times what Saudi Arabia produces, or
over $5 5 billion to build and install. So
ten times what at the UK and Norway
together produce. Most of it will need to
5
 Malcolm Brinded and Simon Henry: Energy, Technology and Climate Change: A New
World
one thing’s for sure – we need to be
certain we put it in the right place!
That’s why we spend our exploration
dollars – trying to be sure we know
where the oil and gas is.
Seismic surveys
And one of the key exploration
operations we conduct is a seismic
survey. It results in images of
underground rock layers.
In an idealised situation the basics of
marine seismic exploration are easy to
grasp. A ship tows a source of sound
waves that travel down into the layer-
layer
cake rockk formations beneath the
seabed. At each of the interfaces
between layers the waves are reflected
back to the surface, where they are
picked up by pressure sensors strung out
behind the same ship.
If the time between a seismic “shot”
and the detection of its echoes is plotted
for each reflection point, then the layers
can be traced out. And if the speed of
sound through each of the layers is
known, then the image can be converted
into a cross-sectional
sectional image of the earth.
Of course, the real world is not ideal.
Rock strata are often faulted and
deformed. And geophysicists don’t know
the different speeds of sound in each
layer; they have to estimate them.
Still, by the 1980s science,
engineering, mathematics and computers
had managed to produce images of the
earth’s rock layers that were accurate
enough in most situations.
Challenge in the Gulf of Mexico
But one prospect that tested the limits of
marine seismic imaging was located in
the deep rock layers under the Gulf of
Mexico.
There sediments had been deposited
on a thick and extensive bed of rock salt:
the remains of repeatedly evaporated
seas of primordial earth. Rock salt is a
misnomer: over geological timescales it
flows like putty, driven by the uneven
weight of overlying sediment.
6
The salt had a tendency to rise in
columns, forming mushroom-like “Imaging what
canopies – some six kilometres high. The lay below such
underside of such salt overhangs a salt structure
sometimes serves as structural “traps” with seismic
where oil and gas can accumulate. waves shot
Conventional marine seismic surveys from directly
were thrown off track by another
above was a bit
property of underground salt: the speed
like looking
of sound in it can be twice as fast as that
through
of the surrounding sediments. The salt
structures of the Gulf thus refracted and roughly
diffracted seismic waves every which textured glass
way. Imaging what lay below such a blocks.”
salt structure with seismic waves shot
from directly above was a bit like
looking
ing through roughly textured glass
blocks.
Still, we thought that we had sussed
out the geological situation at the Deimos
prospect at a water depth of between
1000 and 1300 00 metres in the Gulf of
Mexico. And in 2004 we drilled an
exploration well that we thought had a
70% chance of striking oil.
The well – which cost in the order of
$100 million – was “dry”: it did not
show signs of oil or gas. Geologists
were at a loss to explain the absence of
the reservoir, and the exploration
programme in this location was
suspended.
“All-azimuth” seismic survey
A few years later, however, the Deimos
area was once again slated for a
seismic survey as part of a
redevelopment project involving a couple
of nearby fields, including the prolific
Mars field. We took advantage age of the
opportunity to make clearer seismic
images. One way to do this would be to
let the seismic waves strike the area
under the Deimos salt structure more from
the side rather than from directly above.
And not just from one side, but from all
sides.
Think of a torch shining obliquely on
a rough surface. Ridges and grooves
perpendicular to the light beam cast
shadows that can perplex the viewer. But
 Malcolm Brinded and Simon Henry: Energy, Technology and Climate Change: A New
World
by illuminating the surface from various
directions, the orientations of the ridges
and grooves can be better determined.
To make such an “all-azimuth”
azimuth” seismic
survey possible, we dispensed with the
towed sensors. Instead, we set the
sensors down on the ocean bottom –
807 of them, to be precise – with the
aid of deep-diving
diving remotely operated
vehicles.
We also so processed the acquired
data with more intensive computations
that improved upon earlier mathematical
approximations for solving the equations
governing seismic waves. These
computations no longer made the
simplifying assumption that the seismic
waves could uld be modelled like light rays
in geometric optics, for example. Nor
did they ignore various wave-interference
interference
phenomena. This type of processing only
became possible with the recent
increases in the number-crunching
crunching power
of computers. Their number of
calculations
lculations per second has increased a
few thousand-fold
fold over the past decade.
Our ocean-bottom all-azimuth
azimuth survey
– only the second one done in deep
water and at a total cost of some $28
million – did indeed reveal a clearer
picture. It showed why the 2004 well
had missed the oil: it was drilled with the
wrong geologic model in mind. Nothing
in the earlier fuzzy seismic images had
suggested that geological faults were
found in the relatively young Miocene
formations underlying the salt. The new
seismic images,es, however, clearly
showed faulting to be an important
feature of the sub-salt
salt formations. They
also showed where the oil was likely to
be found.
On the basis of this updated
imaging, another exploration well drilled
in 2009 confirmed the existence of the
reservoir. We now call it the West
Boreas field. Another discovery – South
Deimos – was also found nearby on the
basis of the new seismic imaging.
Together, they add the equivalent of
more than150 million barrels of oil to the
7
already prolific Mars Basin area. That
would mean over $12 billion of
revenues at current oil prices.
And so we have just announced our
decision to develop these two fields in
the go-ahead
ahead of the Mars B development
project, installing another giant 21,000-
21,000
tonne floating platform designed
igned to
process approximately 100,000 barrels
of oil equivalent per day from as many
as 24 subsea wells in water 1,000000
metres deep. Six of those wells will come
from West Boreas and South Deimos.
The natural gas revolution
I’ll now switch focus to natural gas,
which as you can see, has grown
dramatically in importance as a
global source of energy since the
middle of the twentieth century. And
recent technological advances are
making an even bigger impact than
deep-water seismic.
Natural gas advantages
This is great news for the world
because the quickest and cheapest
way to cut CO2 emissions from the
global power sector is to grow the
presence of natural gas at the
expense of coal. Natural gas is the
cleanest-burning
burning fossil fuel: modern
gas plants emit half the CO2 of
modern coal plants, and 60-70% 70% less
CO2 than old coal plants, of which
there are still hundreds in operation
today in China, North America and
Europe.
Natural gas capacity is also
considerably faster and cheaper to “..the quickest
install than other new build sources of and cheapest
electricity. And gas-fired power way to cut CO2
stations can be switched on and off emissions from
with relative ease, making them ideal the global power
allies of the intermittent power sector is to grow
generated by wind turbines and solar the presence of
panels.
natural gas at
the expense of
Advances in “tight” gas production
coal.”
Only a few years ago, it looked as if
North America’s domestic gas
 Malcolm Brinded and Simon Henry: Energy, Technology and Climate Change: A New
World
production would decline. But in fact its
gas production has increased
dramatically. The reason is that drilling
companies
nies managed to the unlock the
gas resources in rock so “tight” that the
gas seeps through the rock – at best –
about a thousand times slower than it
would through an ordinary reservoir.
They developed a method to crack open
the rock to allow the gas to flow
ow into
wells much more freely.
These rock-cracking
cracking operations, known
as hydraulic fracturing or “fracking”,
involve pumping liquids into a sealed
well section under such high pressure
that the rock around the well splits open.
As the crack widens and lengthens, it is
filled with a granular material known as
proppant, through which gas can readily
flow. The proppant keeps the crack open
after the pressure is released.
Figure 3: Fracking in the field
Fracking – not only of gas wells but
also of oil wells – has actually been
practiced in the field for several
decades. But these operations did
not always result in increased
production. Sometimes the proppant
plugged up the crack, stunting its
growth. Sometimes the cracks curled
around the well before extending into
the formation, creating gas-flow
flow
detours. And the power and pressure
available were sometimes not up to
the job.
“Fracking” improvements
But in the last decade, major leaps have
been made in the size and efficiency of
8
the fracking kit. The pieces of kit can
include multiple 1,500-horsepower
horsepower
pumps that can achieve rock-fracturing
fracturing
pressures as high as 1,000 bar and
proppant-carrying
carrying flow rates as high as
260 litres per second.
cond. (For comparison:
a typical fracking pump is more powerful
than a Formula 1 engine and moves
liquids at 20 times the rate of the race
car’s pit-stop refuelling.)
For tight gas to reach its full potential,
more targeted ways of planning,
executing and monitoring these fracking
operations have also had to be
developed.
In particular, our study of fluid and rock
mechanics under the high-pressure
pressure
conditions of fracking has enabled us to
program computer applications that
predict where the rock is most likely to
yield and how long and wide the crack
will grow. They model the e complex
interplay of fluid pressure and flow with
rock stresses and strains in three
dimensions. We thus have a good idea
of how best to orient a well in the
reservoir and what the optimal
combination of pressure, flow rate and
proppant volume is for fracking
cking it even
before we begin drilling the well.
As we undertake fracking operations,
around 20 micro-seismic
seismic sensors in a
nearby well listen to the popping and
creaking of growing cracks. The sounds
enable us to map out the contours of a
growing crack and d adjust the pump
programme accordingly.
We also have moved from fracking
predominantly vertical wells to fracking
mainly horizontal wells. Only a small
segment of a vertical well – perhaps 15
metres – intersects the gas-bearing
bearing zone.
But with a horizontal well, a thousand “…in the last
metres or more can lie entirely within the decade,
gas-bearing
bearing zone, providing plenty of major leaps
potential locations for fracturing. have been
And if we align the wellbore axis to the made in the
minimum horizontal stress, then the size and
fractures should sprout around the efficiency of
wellbore, yielding the highest fracking kit.”
productivity increase.
 Malcolm Brinded and Simon Henry: Energy, Technology and Climate Change: A New
World
At Groundbirch in western Canada we
have gone from fracking at 300-metre
300
intervals to fracking at 100-metre
metre
intervals. And this year we have reduced
the spacing to 50 metres.
A full-scale tight gas development takes
hundreds of wells, each with multiple
mu
fractures. The key to a profitable
development is to use the learning curves
from these large-scale
scale drilling and
fracking programmes to drive down
costs.
Our operations at Pinedale, in the US
state of Wyoming, are a great example.
In 2002 it took uss an average of 60
days to drill a well there. Today, an
average well takes just over 25 days –
60% quicker. And that’s to a depth of
over 4,500 metres.
The other thing to note from the slide is
that we are learning faster – the later
curves are steepening. ng. At Groundbirch,
which we acquired in 2008 as part of
our purchase of the Canadian company
Duvernay, it took us only three years
rather than eight to achieve nearly the
same improvement as at Pinedale.
Being able to drill and frack wells more
quickly gives us greater flexibility to
adjust operations according to the
prevailing economics, our capital
resources and other extraneous
constraints, such as lease expiry dates.
We also lower temperature-sensitive
sensitive
fibre-optic
optic strands to monitor production.
The fibre-optic
optic readings can confirm the
inflow of gas. As the gas enters the well,
it expands; and as it expands, it cools.
(This phenomenon will be familiar to
some of you as the Joule-Thomson
Thomson effect.)
Cooler zones thus show where gas is
flowing freely into the well. If not enough
gas is flowing into the well, we can frack
again.
The broader implications
So what does all this mean?
In financial terms, we reckon that an
annual investment of about $4 billion
between 2011 and 2015 – mostly for
drilling and fracking wells – will result in
9
Shell having a total of around 85 million
cubic metres per day of production from
our North American tight gas operations
ations “…the race is
in five years’ time. That’s almost three now on to
times what we produced in 2009, 9, and unlock
enough gas to provide power to around unconventional
13.6 million American homes. gas resources
At the current US wholesale gas price in other parts
of about $4 per million BTU (which is of the world
roughly one half of the average including
wholesale UK price), that production
China.”
yields an annual operational cash flow
of more than $3.5 billion.
At a broader level, the IEA thinks that
the world now has enough technically
recoverable gas resources for 250 years
at current production rates.
tes. And the race
is now on to unlock unconventional gas
resources in other parts of the world,
including China.
Thus the global gas market is
expanding rapidly on the back of these
technological advances. That will
accelerate the pace of global CO2
reductions as new gas-fired
fired power
reduces the need for more coal.
Gas-to-liquids Technology
(Simon Henry) I’ll focus on another
important innovation in the global gas
market: the large-scale
scale conversion of
natural gas into liquid fuels, lubricants
and chemical feedstocks. This will carry
gas into new markets, and create
cleaner products.
As I mentioned earlier, our flagship
project in Qatar, Pearl GTL, is nearing
completion. When finished, it will be the
world’s first world-scale GTL plant – that
is, on a scale equivalent to a large oil
refinery. At one point, more than
50,000 workers from 60 nations were
at work on a site the size of 350 football
fields, one of the world’s largest
industrial developments.
 Malcolm Brinded and Simon Henry: Energy, Technology and Climate Change: A New
World
Figure 4: Pearl GTL – nearing completion
Pearl will produce enough GTL gasoil
to fill over 160,000 cars a day and
enough syntheticc base oil each year to
make lubricants for more than 225
million cars.
Last year, we secured approval for the
use of a GTL kerosene blend in
commercial aircraft, only the fourth time
in 100 years of aviation history that a
new fuel has been approved.
Most of the GTL gasoil will be blended
into the global diesel pool. But when
blended with conventional diesel in high
concentrations, it can also help to tackle
the pollution that dogs many of the
world’s cities. It burns with lower sulphur
dioxide, nitrogen
gen oxides and particulate
emissions than conventional oil-based
based
diesel. That’s been proved by trials of
100% GTL gasoil in several urban bus
and taxi fleets.
GTL gasoil has also proved itself in
altogether harsher conditions. It helped
to power the winning ing Audi car in the Le
Mans 24 hour race in France in 2006,
2007 and 2008 as part of a specially
designed diesel fuel. In fact, 2006 was
the first time a diesel powered car had
won what is reputed to be the world’s
toughest car race.
Let me give a brief overview of how
we will create all these products at our
Pearl GTL plant.
Put simply, our GTL process converts
natural gas into synthesis gas, a mixture
of hydrogen and carbon monoxide,
which, with the help of catalysts, is then
converted into liquid hydrocarbon
rocarbon
products.
10
Cleaning up the gas
Pearl is linked to the world’s largest “Pearl will
single gas field, the North Field, which produce
stretches from Qatar’s coast out into the enough GTL
Gulf. The field contains some 25 trillion gasoil to fill
cubic metres of gas, about 15% of over 160,000
worldwide gas resources. The cars a day…”
production process begins withh the
transporting of this gas to the shore,
through pipelines.
In gas-liquid
liquid separation and clean-up
clean
units, we then remove all of the naturally
occurring hydrocarbon liquids, such as
condensates and liquefied petroleum
gas, as well as ethane. We also remove
contaminants like sulphur.
This leaves methane, which is, off
course, the simplest hydrocarbon, made
up of one carbon atom and four
hydrogen atoms (CH4). Next begins the
process of conversion, which takes place
over three stages. Uniquely, Shell’s
technology covers all three stages.
First, the pure natural gas is partially
oxidised with pure oxygen to make the
synthesis gas. This is done at
temperatures of up to 1,300 degrees
Celsius and under high pressure.
The catalysts: converting the syngas to
wax
The second stage is the heart of the GTL
process. We pass the hydrogen and
carbon monoxide mixture through the “...our GTL
Fischer-Tropsch reactors, thereby process converts
converting it into both long chain wax natural gas
molecules (a liquid wax, but which into… a mixture
becomes solid at room temperature) and an of hydrogen and
water. carbon
I should explain that these reactors take
monoxide,
their name from two chemists, Franz
which, with the
Fischer, a German, and his Czech-born
Czech
help of catalysts,
partner, Hans Tropsch, who in the
1920s developed a chemical process to is then converted
produce synthetic liquid fuels from coal. into liquid
They publisheded their first findings in hydrocarbon
1923, showing how they had produced products ”
a synthetic gas from coal, before using
an alkali-iron
iron catalyst to convert it to
hydrocarbons.
 Malcolm Brinded and Simon Henry: Energy, Technology and Climate Change: A New
World
Within our Fischer-Tropsch
Tropsch reactors at
Pearl,, the conversion is triggered by
carefully designed cobalt based
catalysts.
Over three decades, we have
developed catalysts that are able to
support a large-scale
scale and efficient
commercial operation. What that means
is that they are highly active, yet able to
remain stable. And they also have high
levels of what we call “selectivity” – that
is the ability to produce the highest yields
of the molecules representing the desired
products.
To develop these catalysts, we had to
get their precise chemical composition
right – although cobalt is the main
element, they also include a number of
other metals. And we had to ensure that
these metals were correctly dispersed on
the surface of the catalysts.
Critical to all this is the size of the
cobalt particles. At the outset of our GTL
work, in the 1970s and early 80s, the
received wisdom was that the most
active catalysts, and thus the most
effective, were those with the smallest
possible cobalt particles.
But by working in partnership with
several universities, we discovered that
this is not the case: in fact, it became
clear that if the particles were too small
their level of activity actually declined.
That’s because the most active particles
consist of certain configurations of cobalt
atoms, which themselves can only be
formed
rmed if there are enough atoms. Thus
the main challenge in producing effective
catalysts is ensuring that as many of the
cobalt particles as possible are of the
right size – which is at the nano-scale.
nano
Another focus of our research has been
on ensuring that
hat the catalysts remain
highly active, even after lengthy periods
in use. This matters because, over time,
their level of activity can slow as the
cobalt becomes agglomerated or
“sintered”, which increases the size of
the particles.
We’ve developed several techniques
to counter the deactivation of the
11
catalysts, including conditioning the
synthesis gas and regenerating the “Over three
catalysts in-situ. decades, we
Our catalysts are the result of three have developed
decades of close collaboration between catalysts that
our laboratories, our pilot plant in are able to
Amsterdam and the world’s first support a
commercial GTL plant of its type, at large-scale and
Bintulu in Malaysia, which we opened in
efficient
1993.
commercial
To produce the thousands of tonnes of
operation.”
catalysts we need at Pearl GTL, we will
have spent around four years using
dedicated facilities in full-time
production. Although, as I’ve said, the
catalysts consist of fine, nano-scale
scale
pores, they cover an enormous surface
surf
area. And the catalysts will be fed into
24 Fischer-Tropsch
Tropsch reactors, each of
which weighs about 1,200 tonnes and
contains tens of thousands of tubes for
the catalysts.
Creating the final products
In the third stage of the GTL process, the
long-chain
chain liquid wax is refined into the
final products.
In chemistry terms, what we are doing
is changing the molecular structure of the
syncrude. To do this, we e use cracking to
convert the long carbon chain molecules
into smaller chain molecules. And we
convert them into branch chain molecules
by a process of “isomerisation”.
After processing in the hydro-cracker,
cracker,
the resulting syncrude is fed into a
distillation
ion column or synthetic crude
distiller, where it is separated into various
fractions according to their boiling
points.
Thus we are left with our products,
ready for customers across the world.
Biofuels
I’ll now describe another way in which
we are using technology to satisfy rising
demand for cleaner transport fuels:
biofuels.
Indeed at Shell, we believe that, of all
the low-carbon
carbon transport fuels, biofuels
can make the biggest contribution to
 Malcolm Brinded and Simon Henry: Energy, Technology and Climate Change: A New
World
tackling CO2 emissions in the next two
decades. We expect their share of the
road transport fuel mix to increase from
somewhere approaching 3% today to
around the 9% mark by 2030.
Cosan
Shell is already one of the world’s largest
distributors of transport biofuels. And we
are now moving into production, further
to the recent agreement of a proposed
$12 billion dollar joint venture with
Cosan, Brazil’s largest biofuels producer.
This will allow us to produce ethanol
from Brazilian sugarcane, which can
reduce fuel-related
related emissions by between
70%
0% and 90% compared to standard
petrol.
Yet there are concerns in some quarters
about the sustainability of the biofuels
industry, not least its impact on areas rich
in biodiversity and the conditions of its
workforce. So I’ll describe how Cosan
uses itss technological expertise not just to
boost production, but also to improve the
sustainability of its operations.
I should first mention that the main area
of sugarcane production in south-central
south
Brazil is some 2,000 kilometres from the
fringes of the Amazon
mazon Rainforest. And
sugarcane grown for ethanol in Brazil
uses less than 1.5% of the country’s
arable land. There are strict legal limits
on the expansion of sugarcane crops
into new areas.
Cosan is fast phasing out manual
cane-cutting.
cutting. In fact, more than 60%
of its sugarcane is harvested by
mechanical cutters.
These machines can harvest some
600 tonnes of sugarcane in a day,
depending on the location – around
60 times the amount typically
harvested by a single cane-cutter
cutter
working manually. That reduces
Cosan’s reliance on manual workers,
while creating some new jobs in the
operation and maintenance of this
machinery.
12
Geographical information system ystem
Cosan’s highly advanced geographical
eographical
information system
ystem is also at the heart of
its success. The system processes and
“Cosan is fast
interprets vast quantities of information phasing out
about all aspects of Cosan’s 800,000 manual cane-
hectares of sugar cane – including the cutting”
topography of the fields, data about soil
nutrients and pest infestation
on levels.
If you think of 800,000 hectares as a
circle with a radius of around 30 miles,
it would, if centred here on the College,
stretch as far as Bury St Edmonds and
Bedford to the East and West, and to
Peterborough and Bishop’s Stortford to
the north and south.
outh. That is a lot of
sugarcane!
The geographical information system
draws its data from all manner of
sources, including government soil
records, public weather stations, and,
indeed, satellite imaging of the
company’s crops. The company also
produces
duces detailed climate reports, based
on records that go back 30 years.
Complex algorithms then convert all
this data into digital maps that display
detailed information about all 800,000
hectares. Cosan has been developing
the system since 2003, drawing on
advanced skills in mathematical
modelling, the agricultural sciences,
informatics and statistics.
And it brings the company several
powerful advantages. Cosan can make
extremely accurate predictions about its
likely crop yields. And it is able to
identify and rectify any problems with its
crops quickly.
Moreover, the system also produces
significant environmental benefits.
Because it records data about soil “Cosan’s highly
nutrients and pest infestation levels, it can advanced
calculate the exact amount of fertilisers
geographical
and herbicides needed at each site. As
information
a result, Cosan can limit its use of these
system is at the
chemicals to what is strictly
ly necessary –
something that would otherwise be heart of its
impossible across such vast and varied success”
tracts of land.
 Malcolm Brinded and Simon Henry: Energy, Technology and Climate Change: A New
World
To further limit its use of pesticides,
Cosan uses natural pest control. For
example, to counter the moth caterpillars
that prey on its sugarcane, Cosan
Cosa
breeds small wasps, the caterpillars’
natural enemy. It then releases the wasps
among its crops, which kill the
caterpillars by laying eggs in their
larvae.
All told, some 40 million wasps are
released every month – but only
when the company judges thatt they
are really necessary. And because
the wasps have a lifecycle of just 4-64
days, they are unable to spread far
beyond the sugarcane fields. In fact,
the geographical information system
also guides decisions about when
and where these wasps are used.
Co-generation
Cosan’s sugarcane is also helping to
tackle CO2 emissions beyond the
transport sector. For many years, Cosan
has used co-generation
generation plants to produce
electricity from the residue of its crushed
sugar cane. This provides the company
with a cheap and low-carboncarbon source of
power. In turn, this has boosted the
company’s profitability, while
significantly reducing the CO2 emitted in
the course of its biofuels production.
The company is now also supplying
this electricity to Brazil’s national grid,
thanks to high pressure boilers at its co-
co
generation plants.
Figure 5: Costa Pinto Mill
13
For example, at the Costa Pinto mill
two high-pressure boilers together
generate 66MW of electricity. One-third
One
of this is used to power Cosan’s
operations, and the remaining two--thirds
are sold to the Brazilian national grid.
In late September the company
opened a new sugar and ethanol mill in
the city of Caarapo, with
ith an annual co-
co
generation capacity of 76MW. To put
this in perspective, Cosan estimates that
this would be enough to supply a city of
half a million people.
Thus Cosan is also helping Brazil to
develop a secure and sustainable power
sector.
Geopolitics: supply security
By way of conclusion, I’ll finish with a
word on the broader geo-political
context in which the industry takes its
place – a key feature of the industry ever
since Winston Curchill decided to
convert the Royal Navy from coal to oil
just over 100 years ago.
I studied Maths. My daughter is now
studying Politics and International
Relations – perhaps
erhaps rather more relevant
to my role today.
A good example is the expansion of
the global gas market on the back of the
technological advances
ances described by
Malcolm. This has many energy security
implications.
For one thing, the opening up of so
much unconventional gas in North
America means that the continent will be
self-sufficient
sufficient for decades to come. This is
just a few years after it feared
eared that its
production would decline.
The growth of unconventional gas is
acting in concert with the expansion of
the market for liquefied natural gas – gas “..Cosan is also
that has been supercooled so that it can helping Brazil
be transported by tanker in liquid form. to develop a
LNG is growing ng fast on the back of new
secure and
supplies and new customers – in fact at
sustainable
three times the rate of the overall gas
power sector.”
market.
That strengthens supply security
because LNG allows supplies to follow
 Malcolm Brinded and Simon Henry: Energy, Technology and Climate Change: A New
World
demand as it shifts and fluctuates around
the world. After all, you can’t easily
change the supply source for a pipeline
but you certainly can for an LNG import
terminal.
This is important for the UK and other
EU countries facing declining production
from their domestic gas sources. The
world’s growing LNG network will allow
them to buy their gas from a diverse
range of sources.
By 2020, LNG is likely to account for
nearlyly 30% of Europe’s gas needs. The
number of regas facilities in Europe is
growing extremely fast. In practice this
means competition between indigenous
supplies, Russia, Africa and the Middle
East. The competition to build new
facilities and pipelines, while
ile developing
the market for such an important fuel, are
challenges in which Shell can and does
play a significant role.
National oil companies
When thinking about the geopolitical
context, the rise of the national oil
companies is now key – these
companies are owned or controlled by
governments.
In recent decades, the national oil
companies have risen to prominence, as
major resource holding countries
untries have –
understandably – sought to obtain full
value for their natural resources.
This has transformed the energy
industry. Our ability to win important
business opportunities now hinges on our
ability to develop productive
relationships with these resource holders.
At Shell, we have the utmost respect for
the NOCs – their skills, their investment
in researchh and development and their
stewardship of their national energy
resources in best interests of their
countries.
But we believe that we have much to
offer them, especially our scientific,
technical and management expertise.
expertise.
For example, Malcolm’s story on
unconventional gas production.
14
This is happening in China, where the
government has thrown its weight behind
natural gas. It aims to more than double “…the opening
the gas share of the primary energy mix up of so much
to around the 8-10%
10% mark by 2020. unconventional
China is seeking to import gas from the gas in North
Caspian region, from Russia, via LNG America means
and also to develop its own production. that the
New pipelines are being built. This will continent will
create a more flexible and integrated be self sufficient
gas market. Ultimately demand will be for decades to
driven by security and cost of supply. come.”
And Shell is helping the country’s
national oil companies to tap a
significant unconventional gas resource
base.
We already operate the Changbei
tight gas field in Shaanxi Province under
a production sharing agreement with the
China National Petroleum Corporation.
Corporatio It
supplies gas to Beijing and other cities in
eastern China.With CNPC we are also
appraising and developing
unconventional gas resources elsewhere
in the country.
And our partnership is now extending
beyond China’s shores. Together, we
have purchased Arrow Energy, an
Australian gas company, in a $3.2
billion deal. The joint venture plans to
convert coal bed methane – an
abundant unconventional gas source – to
LNG for export to China.
So it’s a great example of how strong
relationships between Shell and national
oil companies can drive advances in gas
production.
Conclusion
That is an appropriate place to finish.
“By 2020, LNG
This evening, we’ve shown how Shell’s
scientific and technical experts are is likely to
already doing much to drive progress account for
towards a secure and sustainable global nearly 30% of
energy system. Europe’s gas
I hope we’ve also shown that Shell’s needs”
need for highly capable chemists,
 Malcolm Brinded and Simon Henry: Energy, Technology and Climate Change: A New
World

geologists, engineers, and So we very much look forward to o

mathematicians is only growing stronger.
Indeed, without the rigorous grounding
in the hard sciences provided by
Cambridge and the world’s other top
universities, it will be impossible to meet
the global energy challenge.
welcoming more Churchill graduates to
our ranks in the future, further
strengthening the relationship between
Shell and our great college.
Thank you.

“…we
…we very much look forward to welcoming more Churchill graduates to our
ranks in the future, further strengthening the relationship between Shell and our
great college.”

15
 Malcolm Brinded and Simon Henry: Energy, Technology and Climate Change: A New
World

Recent speeches by Executive Directors

The Singapore Energy Summit

Malcolm Brinded

Natural gas: key to green energy future

Peter Voser

The natural gas revolution is changing the energy landscape

Peter Voser

The global energy challenge: the importance of human capital

Hugh Mitchell

Meeting the energy challenge through innovation

Peter Voser

Challenges and developments in the NOC-IOC

NOC relationship
Malcolm Brinded

Technology and Sustainable Development

Simon Henry

The global context: the importance of innovation

Jorma Ollila (Chairman)

Natural gas: changing the Middle East energy landscape

Malcolm Brinded

Natural gas: a vital part of Europe’s energy future

Malcolm Brinded

Breaking the cycle of volatility

Simon Henry

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publication the expressions “Shell”, “Group” and “Shell Group” are sometimes used for convenience where references
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16