Folks,

This recent opinion piece from the CEO of Shell deserves wider circulation, so I’m re-posting it here (boldface mine). Although van der Veer has been much more forthcoming about the reality of energy supplies than the rest of his Big Oil peers (when are the rest of the big oil majors going to own up to their own exaggerated reserve estimates, like Shell did?), this is remarkably straight-shootin’ stuff.

When the CEO of one of the world’s largest oil companies says that supply is going to have to struggle to keep up with demand, you can take it to the bank.

Three Hard Truths About the World’s Energy Crisis

Source: East African Standard (Nairobi)

OPINION

7 August 2007

Posted to the web 6 August 2007

By Jeroen Van Der Veer

Nairobi

When it comes to the future of energy, the world needs a reality check.

Contrary to public perception, renewable energy is not
the silver bullet that will solve all our problems. Indeed, in the decades
ahead, three hard truths will generate turbulence in the global energy system.

We all know that global demand for energy is growing, but
the reality of how fast has not really sunk in. The first hard truth is that
demand is accelerating. Energy use in 2050 may be twice as high as it is today
or higher still. The main causes are population growth, from six to more than
nine billion, and higher levels of prosperity.

China and India are entering the energy-intensive phase
of their development. This is the point when people buy their first television
set or car, board a plane for the first time and start to consume much more
transport fuel and electricity.

And most people in China and India have never boarded a
plane! The pace of change is startling. Last year, China enlarged its
electricity capacity by roughly the equivalent of Great Britain’s entire stock
of power stations.

The second hard truth is that the growth rate of supplies
of ‘easy oil’, conventional oil and natural gas that are relatively easy to
extract, will struggle to keep up with demand.

Just when energy demand is surging, many of the world’s
conventional oilfields are going into decline. The problem is not the
availability of resources as such. Overall, the International Energy Agency
believes that there could be roughly 20 trillion barrels oil equivalent of oil
and natural gas in place.

This includes conventional and unconventional resources,
such as oil shale and sands. In theory, this is enough to keep us going for
about 400 years at the current rate of consumption.

Carbon emissions unacceptable

In practice, though, less than half can be recovered with
existing technology. The world now produces 135 million barrels oil equivalent a
day of oil and natural gas. We could still raise that number with new
technologies, but only gradually and certainly not indefinitely.

The third hard truth is that increased use of coal will
cause higher carbon dioxide emissions possibly to levels we deem unacceptable.
The IEA believes that coal use could grow by around 60 per cent in the next 20
years.

The main reason that countries turn to coal is energy
security. China and India will continue to exploit their domestic coal reserves
to be less dependent on oil and gas imports. So will the US, which now generates
more than half its electricity with coal.

But burning coal for electricity generates twice as much
carbon dioxide as burning natural gas. Gasifying coal, instead of burning it,
reduces emissions, but still this is not enough to solve the problem.

In our battle against greenhouse gas emissions, taking
the carbon dioxide out of fossil fuels, especially coal, is crucial. It will be
a huge challenge: To keep greenhouse gases in the atmosphere well below 550
parts a million, the upper most bound of where science tells us we should be.

Shell works with models that assume carbon capture and
storage is installed at 90 per cent of all the coal and gas-fired power plants
in the rich countries by the year 2050, and at 50 per cent in non-OECD
countries.

Time is short: It will take a decade to test the
technology in pilot projects before we can move to larger-scale projects. So
what about renewables such as wind and solar energy?

The share of renewables in the global energy mix could go
up from its low base of about one per cent to about 30 per cent by the middle of
the century. The number of wind turbines, for instance, may grow from about
30,000 today to one million and their capacity will be significantly larger than
the ones we have built.

This assumes that the hunt for technological
breakthroughs to make renewables cheaper will be successful. But even then,
fossil energy will still make up most of the remaining 70 per cent.

However, this is out of sync with what opinion polls show
that most Americans and Europeans believe that renewable energy will have
replaced most fossil energy by 2050. As the hard truths make clear, this simply
is not going to happen.

That is why energy efficiency is important. More than
half the energy we generate every day is wasted. In an average car, about 20 per
cent of every unit of petrol goes into moving a car forward, the rest is lost as
heat.

For an aircraft during take-off, the figure is eight per
cent. Only 35 per cent of burnt coal in a power plant becomes electricity, the
rest is lost as heat. What is the point of producing more energy if we continue
to waste most of it?

Instead, we should aim to become twice as efficient in
our use of energy by the middle of the century. That is entirely feasible,
provided that the will is there.

The world’s energy system is entering a turbulent phase,
and the only question is: How turbulent? A unified world could respond more
effectively than a fragmented one.

The writer is the Royal Dutch Shell Plc CEO