by Heinz Rothermund Managing Director of Shell UK Exploration and Production.

Ladies and Gentlemen, The young boy who said: "How can I know what I think until I hear what I say' may have been closer to the truth than he realised. The adolescent will be true to himself by consulting his beliefs whilst debating how to put them into action. It takes maturity to realise that we must act, examine our actions to work out our beliefs. An early conclusion to my address would be to say that large corporations have many adolescent streaks. In recent years we have all become adept at green talk. But examples of clear actions which match up to those words are less easy to come by.

Moving from words to action is difficult enough when there is agreement about what the words mean. it is far more difficult when there are differing interpretations of the sentiments behind the words.

As the chief executive of the Royal Dutch/Shell Group's exploration and production operations in the United Kingdom it is my responsibility to convert our green words into actions. It is a responsibility I take very seriously and I have given considerable thought to its implications.

What I would like to present to you today is very much a work in progress. It contains some of my ideas, it contains concepts developed in the corporate centre and, most importantly, the thinking of my colleagues in Shell Expro. "Development that meets the needs of the present without compromising the ability of future generations to meet their own needs' is the goal of sustainable development" - as defined by the Brundtland Commission.

Earlier this year the Royal Dutch/Shell Group committed itself to contributing to sustainable development. This commitment was not made lightly and it was not driven by public relations concerns. It was a carefully considered step. Sustainable development is a compelling idea. None of us wishes to destroy the rights of future generations. We don't want to cheat our grandchildren.

Development, as we understand it, means economic growth to raise living standards. From the mid-1 9th century to 1960 world economic output grew more than eleven-fold. But the benefits were almost wholly restricted to those in Western industrialised countries - who en joyed an unprecedented rise in living standards.

At the some time population levels exploded: One billion human beings in 1850; twice that number by 1950; Five times as many today. Growth rates are slowing but there may be 8.5 billion of us by 2030, with population levels stabilising at 10- 12 billion by 2060, as envisaged by the World Bank.

Fortunately, strong economic growth has continued in the second half of this century - and has been much more widely spread. Growth in developing countries has accelerated. Living standards for hundreds of millions have risen -and are continuing to rise.

There is good ground for optimism about continuing overall economic and social progress - driven by economic liberalisation, technological advance and spreading skills. Shell scenario work suggests that global output could grow threefold; in real terms; over the next 25 years. Living standards for most of the world's people should continue to rise.

Commercial enterprises have a proven record and, given the opportunity, will continue to play a primary role in society, namely the generation of wealth. Through on ongoing process of innovation and investment, they are best placed to provide the essential goods and services, creating value for society through employment, the development and transfer of skills and the payment of taxes and dividends.

Transnational companies play a vital role in disseminating technical, commercial and managerial skills. This is particularly important in the developing world - where such skills are in short supply yet essential for progress. Shell companies are major, long-term investors in developing countries. Our operations are largely run by nationals whose skills we have helped to develop.

One important way in which this comes about is as a result of the movement of people between different Shell companies. At any time some 5,000 people of 60 different nationalities are working outside their home country -gaining and passing on experience. Within Expro, for instance, we employ nationals of 35 different countries, ranging from Argentina to Zimbabwe.

Only profitable enterprises will be in a position to contribute to the wealth creation process. Furthermore, the tax revenues which flow from business are the life blood governments use to fund infrastructure and welfare; the schools, hospitals and social programmes which raise living standards and support the human development on which economic progress depends. Shell Group companies, for example, paid some 50-billion dollars in taxes last year. And, let us not forget it, our dividend payments support many a pension fund.

Equally, only profitable enterprises will contribute to environmental improvement. The environmental record of the countries in the former Soviet Union are a grim reminder of this reality.

I have tried to explain that we believe that business should be a partner in sustainable development and that it must be based on the three pillars of economic success, environmental improvement and social responsibility. Forget any - or focus too much on just one - and the concept begins to crumble. In Shell Expro, here in the UK, we are comitted to making a contribution on each of these three main themes:

First, we are contributing to stable economic development by providing safe, affordable supplies of energy

Second, we are continuously improving our eco efficiency by reducing the waste emissions from our activities and products through a comprehensive environmental management and product stewardship programme.

Third, we are supporting the national social agenda through the taxes we pay and by providing direct and indirect employment in an industry of highest technical sophistication which helps to develop the UK skills base.

All commercial enterprises develop or participate in programmes that support the community in which they operate. Shell UK has a number of community programmes: the Shell Better Britain Campaign, aimed at assisting local communities to improve their quality of life, the Shell Education Service, which aims to provide high quality teaching material to schools.

Also there are the Shell LIVEWIRE and Shell Technology Enterprise Programmes which aim at either providing work experience to undergraduate students, through summer placements in small or medium sized businesses and encourage early entrepreneurship amongst young people.

The most satisfying programmes are those that achieve a direct integration of business needs and community requirements. Two recent projects, in Aberdeen and Lowestoft, completed through the initiative of Shell Expro staff, are particularly good examples.

Expro produces an estimated 1,600 tonnes of wood waste each year, mostly in the Form of pallets and cases used for packing and storing material. This has now been reduced by 80% resulting in savings of £300,000 a year.

Part of the solution involves reducing waste at source by eliminating excessive packaging. The other part is achieved by a specialist wood recycling company which has been set up with the Aberdeen City council, Aberdeenshire Council, and Enable, the Scottish Society for the Mentally Handicapped.

The new company - Wood RecyclAbility limited which provides 15 jobs for people with learning disabilities- recycles pallets in good condition whilst the remaining wood waste is processed into raw material for the chipboard manufacturing industry.

In a similar vain, a new company providing 50 jobs has been created in Lowestoft to process oil coated drill cuttings previously disposed of in the offshore environment. Again this project has stimulated local employment, brought environmental benefit and provided real cost savings, reinforcing each of the pillars that support the sustainable development concept.

But, let me return to the complex issue of sustainable development from an energy producer's perspective. As you may know there is an ongoing campaign to stop the development of new fields in the deep waters of the West of Shetland. The critics believe that if we stop drilling in UK waters somehow a major impact on world carbon dioxide emissions will be achieved.

They would like to limit hydrocarbon production in an area of the world which has a commendable environmental record and appear to be unconcerned about damage to British industry in a sector where it has leadership in advanced technology. They implicitly accept that UK production lost would be produced elsewhere, possibly in an area with a doubtful environmental record. They imply that it is a simple matter for one company to resolve the energy policy of a nation state. They ignore the economic realities of the energy market and overlook the operational limits of a commercial enterprise.

To date the companies operating in the Atlantic Margin region have invested some 1.5 billion pounds to arrive at only two commercial finds, Foinaven and Schiehallion. Still, in addition to contributing to replacing the dwindling UK reserves of oil and gas, these two projects will generate some 7500 jobs during the construction phase and over 1500 jobs when operational. These finds are not Middle East elephants. Together Foinaven and Schiehallion contain a fraction of one percent of global oil reserves.

There has been unprecedented cooperation between individual companies in developing an environmental care programme for the Atlantic Margin Rather than to map the marine environment around individual drill sites, forger areas have been surveyed - equivalent to an area the size of Wales. As an interesting aside, a seismic survey fleet has been used to survey the presence of cetaceans, producing remarkable results, of high scientific value. This research provides a much firmer basis for environmental care than the heartfelt perceptions of single issue pressure groups.

To provide a mechanism for a constructive and cooperative regulator - interest group - industry interface, the industry has established the Atlantic Margin Environmental Network and the Atlantic Frontier Environmental Forum.

The Network focuses on environmental research projects and dialogue with a variety of interest groups such as fishermen, environmentalists, the Joint Nature Conservancy Council and the Royal Society for the Protection of Birds on a variety of nature-related projects, including whale and dolphin monitoring, sea bird watching and even a project to 'finger print' oil on beaches to detect the point of origin.

The Forum is chaired by Professor Alisdair Maclntyre a personality of reputable independence.

It is important to recognise, however, that the specific attack, by Greenpeace in particular, on oil and gas developments in the Atlantic Margin, accompanied by the usual exaggerated claims about last wilderness and environmental devastator, with emotional references to whales and endangered species, also raises a key question: "In how far is it sensible to explore for and develop new hydrocarbon reserves given that the atmosphere may not be able to cope with the greenhouse gases that will emanate from the utilisation of the hydrocarbon reserves discovered already". Undoubtedly, there is a dilemma and I would now like to spend some time analysing it.

As I mentioned at the beginning of my address, reliable and cost efficient energy supplies are critical for the economic growth required to raise living standards and, undeniably, therefore, for the goal of world peace. Poverty is a major source of conflict.

Let us first take some time to assess how a global perspective may be evolving.

The energy picture has developed dramatically in the last century and a half. There has been a huge increase in the demand for energy since the mid 19th century, when the world consumed perhaps six million barrels of oil equivalent a day, most of which was wood.

Over the next century demand rose by some 2% a year to reach 40 million barrels of oil equivalent a day.

In the second half of this century, however, that growth has accelerated to some 3.5% a year today - and, including traditional sources such as wood, we now consume nearly 200 million barrels of oil equivalent per day. Energy demand in industrialised countries rose rapidly during the post war boom but growth has slowed since the 1970s. However, the energy needs of developing countries have been growing by some 4.5% a year for the past 20 years - more than doubling in that period.

Over the last hundred years, energy demand per capita has more than trebled, from an average 3 to 13 boe/year, yet ma jor parts of the world's population have still little or no access to the comfort provided by electricity nor the wider range of choices and opportunities linked to mobility. In the mean time, today, in the developed world we each consume some 40 barrels of oil equivalent a year.

Let us now review the change in composition of energy supplies. By 1920 coal provided two-thirds of the world's energy. It remained the ma jor fuel until the 1 960s and still provides nearly a quarter of our energy. Oil provides a third - although its share has fallen since the 1970s. Gas - which has significant environmental and efficiency advantages given its low carbon dioxide emission level per unit of energy - is increasingly important and now meets a fifth of energy needs.

The projection of future energy demand is a fundamental question to address in any attempt to try and understand the implications of sustainable development. Shell Group planners have developed two long-term energy scenarios to explore what is going on.

One long-range scenario, Sustained Growth, describes a world in which there are continuing abundant energy supplies at competitive prices. Average per capita energy consumption would nearly double by 2060 - to approximately Japanese levels today.

The second scenario, Dematerialisation, envisages a rather different world in which new technologies, systems and lifestyles would deliver continuing improvements in energy efficiency. Average per capita consumption rises by only some 15% by 2060 - say to Italian levels in 1970. This would require achieving a sustained 2% annual reduction in energy intensity - where energy intensity is defined as the amount of energy required per unit of economic growth.

In both scenarios, energy efficiency and the development of alternative sources of energy play a central role. Increasing energy efficiency is a normal part of industrialisation. In the United States, for example, energy intensity has fallen by 1% a year over the past century. There are good grounds for believing that we may soon be able to make faster progress - as the result of continuing technological advances, market reforms, the switch from manufacturing to service industries, and lifestyle changes. Some examples would be:

• government backed projects in the US and Germany to develop cars with more than twice the fuel efficiency of today's average,
• significant increases in power generating efficiency as a result of the introduction of combined cycle gas turbines,
• and, the potential for information technology workplace computerisation and the Internet- to save energy by changing lifestyles is gradually being appreciated.

Renewable sources of energy - wind, biomass and solar power - are already established in niche markets. Looking ahead, we can expect them to become increasingly competitive as they follow the normal learning curve of technological development. Costs will fall further as output increases and suppliers respond to competitive pressures and opportunities. For example, the cost of electricity from wind turbines fell by 10% per annum in real terms over 1980- 1995 and the technology is now competitive when deployed in certain windy areas!

Renewable energy sources today account for less than 1% of energy supplies. This could grow to more than 5% by 2020 - which is a much faster expansion than oil achieved a century ago, and the amounts of energy involved would be very much greater. It is possible that renewables could provide half the world s energy by 2060.

The Shell Group has sustained an interest in renewable energy development for at over a decade. Our efforts and enterprises have not always proved successful. Shell has recently reorganised its solar power enterprises into a new company - Shell Solar Energy bv. Investments in photovoltaics will increase rapidly and we are optimistic that this field will prove to be a commercial winner in the coming decades.

Whilst I have no doubt that the energy industry will be transformed by technological developments, equally there are numerous major dilemmas ahead. There are no ready made solutions.

Among the various energy sources, nuclear power would solve the problem of carbon dioxide emissions. But it will be difficult to develop safe ways of dealing with nuclear waste and to achieve public acceptability. In a way the fate of nuclear is a reminder that all forms of energy face environmental and societal problems. Environmentalists in the United States are campaigning vigorously, and with some success, for the dismantling of hydroelectric dams, and wind parks are accused of noise, sight and glare pollution, and face an uncertain future. Its the old chestnut of people wanting renewable energy whilst saying "please don't put the wind turbine in my back yard"!

In the time frame considered, and if we accept that economic growth and social development go hand in hand and are worthwhile goals in our strive For world peace, there is no alternative to the continued use of fossil fuels. In either of the scenarios I referred to, demand for fossil fuel is likely to grow rapidly for at least the next quarter of a century. By 2020, consumption of gas could have nearly doubled, that of oil risen by two-thirds and that of coal by a half. Oil supplies may peak within the first half of the century. However, gas and coal resources are more abundant and supplies could continue to grow for considerably longer. China and India have major coal reserves and are bound to use these.

Suggestions that emissions from fossil fuels could continue growing at current rates throughout next century- such as the International Panel on Climate Change's business as usual scenario are probably unrealistic. They take insufficient account of the inevitable evolution of energy markets. Still, Shell scenarios suggest that emissions would peak by the middle of next century and return to today's levels by the end of it. Of course, this is by no means certain - but it is more plausible than continued growth at today's trends.

What is certain, however, is that fossil fuels will face ever increasing competition from renewable energy. I believe that over time surpluses will arise and we may - ultimately- leave oil and the gas in the ground - as we are leaving most of the coal in the ground. To manage a smooth transition from fuels producing high carbon dioxide emissions, such as coal, still subsidised in countries like Germany, to fuels that emit less carbon dioxide in the combustion process, such as natural gas, is a considerable challenge not only for oil and gas exploration and production companies, but for society at large. It would be interesting to hear how Greenpeace envisage such an integrated process, that takes into account all aspects of sustainable development- economic growth, social dimensions, environmental considerations - should be managed.

It is also true that energy consumption in developing countries could surpass that in economically developed countries within 20 years. There will be competition for dwindling oil supply.

In recent years, we have begun to appreciate the longer term and globally reaching impacts of energy production, and its use, on the environment. Whilst scientists, and politicians, continue to debate whether any effect from global climate change will be good, bad or indifferent, whether it will be lasting, or whether the earth's natural processes will restore stability, it is clearly prudent to:

develop alternative ways of economically generating energy, learn to use energy more efficiently, and reduce the environmental impact of producing and burning fossil fuels.

What meaningful contribution can an individual company, even one as large as Shell Expro - make to resolving such complex environmental issues? The first answer is that we can seek to obtain the highest possible operational environmental performance. we must endeavour to use all our facilities to their design characteristics and tighten all operational procedures - in order to cut emission, spills and other impacts of our operations.

The goal based regulations in the UK create a win-win situation in which the greatest environmental benefit can be achieved for a given Cost

In order to realise the benefits of such a system it is incumbent on industry to demonstrate that it is indeed continually improving its environmental performance and not using self regulation as an excuse to do nothing.

The questions facing a company in such a regime can be distilled to: How much effort should I use to address environmental problem areas And, on which discharges or emissions should I expend that effort' in other words - how should priorities be set.

To tackle this Shell Expro has introduced a system and like all these systems it has a wonderful acronym - ETSAR (Environmental Target Setting and Ranking) we make a full inventory of emissions, discharges and wastes. From this inventory, eight waste types are identified as priorities for improvement, on the basis of their actual and perceived environmental impact.

For Expro priorities included reducing oil in produced water, fuel usage, flare emissions and the amount of solid wastes being sent to landfill sites.

Long term - ten year - targets have been set which represent comprehensive and challenging objectives. To determine them, we considered current and future legislation, environmental impact, public perception, available techniques, conservation of resources and bench-marking against similar operations elsewhere.

Each year a forecast of waste production from our activities is prepared. Where it fails to meet the rates of improvement set by the long term targets, defines the prioritises where improvement resources should be directed to best effect.

One of the advantages of this priority setting process is that it is adaptable. New priority areas can be introduced as old ones recede from the radar-screen.

Building the ability to listen and respond to the views and concerns of society is another essential component of environmental management within Expro. Environmental reporting is an important aspect of this. It increases the transparency of our performance and forms a solid basis on which to build a constructive dialogue with external parties. As some of you will know the Royal Dutch/Shell Group produced its first external HSE report earlier this month.

Shell UK, Shell Expro's direct parent, produced its second annual report last week - a report which was independently verified by Lloyds. individual operating sites within the UK also produce their own reports. External verification of environmental reporting is a recent development and there are, increasingly, calls for other forms of independent verification - most notably about how we discharge our social responsibilities.

Shell Transport and Trading's annual general meeting in London last week was confronted by some of these calls.

In 1994 Expro adopted a formal environmental management standard. This standard covers all aspects of Shell Expro's business and, whilst it is not certified by an external authority, gap analysis by an external verifier, is in line with the ISO 14001 standard.

In addition to the company's Environmental Management System, Shell Expro has committed to prepare For EMAS registration at its Fife NGL plant in 1997. This is seen as a pilot for Expro and, if beneficial, registration could take place in our other business areas.

Certification and verification is an exercise in openness, transparency and dialogue to which we are committed. But much work remains to be done and experience to be gained - including on understanding of the standards and practices that need to be taken into account, an area still in its infancy. Brent Spar has transformed our outlook. Spar is is not as so many believe an environmental problem, rather it will go down in history as a symbol of the industry's inability to engage with the outside world.

The key words in our approach to the generic challenges Spar poses are communication, clarity and credibility. First communication. By that I mean initiating discussion a wide spectrum of opinion formers in different societies; listening and talking through what can be expected from international enterprise and what cannot. Second, the aim is greater clarity, inside and outside the organisation about what we must do, what we may do and what we cannot do. The third - and crucial - element is credibility. if we are going to reach a shared understanding, we have to make sure our performance is seen to match what we promise.

Ultimately any organisation is only a reflection of its people, of their commitments and their beliefs. In no area is this more true than environmental management.