Reliable and cost efficient energy supplies were critica1 for economic growth and to raise living standards, said Mr Heinz Rothermund, Managing Director of Shell UK Exploration and Production, in Glasgow today. And if we accepted that economic growth and social development went hand in hand and were worthwhile goals for world peace, then for the timebeing, there was no alternative to the continued use of fossil fuels.
Giving the 1997 Celebrity lecture for the lnstitute of Petroleum at Strathclyde University, Mr Rothermund said: "Environmenta1 improvement and sustainable development will only come about if they are tackled as issues facing society at a whole. Within the sphere of action appropriate for business there are contributions that all Shell companies must make, such as having good environmental management, resource stewardship and a responsible attitude to employees and to the communities in which they operate; there are contributions we may be able to make, such as the development of renewable energy sources; and there are things we cannot do, areas where only governments have the capacity and responsibility for action, such as social policy.
"But in those areas where it is appropriate for us to make our contribution, we are committed to demonstrating clear actions in support of our words".
Referring to the Brunddland Commission definition of the goal of sustainable development: 'development that meets the needs of the present without compromising the ability of future generations to meet their own needs', Mr Rothermund said the Shell Group had committed itself to contributing to sustainable development "None of us wishes to destroy the rights of future generations," he said. "We don't want to cheat on our grandchildren."
Development meant economic growth to raise living standards. From the mid-19th century to 1960 world economic output grew more than eleven-fold, but the benefits were almost wholly resticted to Western industrialised countries. Explosive population growth could mean 8.5 billion human beings by 2030. Fortunately, growth in developing countries had now accelerated, and there was good ground for optimism about continuing overall economic and social progress. Global output could grow threefold over the next 25 years, and living standards for most of the world's people should continue to rise.
"Commercial enterprises have a proven record," said Mr Rothermund, "and given the opportunity, will continue to play the primary role in society in the generation of wealth. Through innovation and investement, 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 like Shell played a vital role in disseminating technical, commercial and managerial skills, particularly important in the developing world. Only profitable enterprises could contribute to wealth creation. Tax revenues from business were the life blood governments used to fund the schools, hospitals and social progammees which raised living standards and supported human development.
Shell group companies, for example, paid some $50 billion in taxes last year, and Shell dividend payments support many pension funds. Equally only profitable enterprises would contribute to environmental improvement-the environmental record of the former Soviet Union was a grim reminder.
"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," said Mr Rothermund. "Forget any - or focus too much on just one - and the concept begins to crumble".
Shell Expro was committed to contributing to stable economic development by providing safe, affordable supplies of energy, by continuously reducing waste; and by supporting the national social agenda through paying taxes and providing employment. Shell UK's Better Britain Campaign also aimed at assisting local communities to improve their quality of life; the Shell Education Service provided high quality material to schools; thc LIVEWIRE and Shell Technology Enterprise Programmes encouraged entrepeneurship amongst young people and provided work experience to students.
Tbe most satisfying programmes, said Mr Rothermund, integrated business and community needs. Expro had reduced by 80 per cent an estimated 1,600 tonnes of wood waste a year, bringing annual savings of £300,000. The remaining wood waste was being recyled by a new company providing 15 jobs for people with learning disabilities. A new company providing 50 jobs had been created in Lowestoft to process oil-coated dril1 cuttings previously disposed of offshore. Again this project had provided local employment, environmental benefit and real cost-savings each of tbe pillars supporting sustainable development.
Atlantic Margin
Mr Rothermund said: "As you may know there is an ongoing campaign to stop the development of new fields in the deep waters 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, for instance in an area with a doubtfull 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 tbe energy market and overlook the operational limits of a commercial enterprise.
To date, Atlantic Margin companies had ivested some £1.5 billion to arrive at only two commercial finds, Foinaven and Schiehallion. These would help to replace dwindling UK reserves and would generate some 9,000 jobs but together, the fields contained a fraction of one percent of global oil reserves.
There had been unprecedented cooperation by companies in an Atlantic Margin environmental care proggramme, and in establishing the Atlantic Margin Environmental Network and the Atlantic Frontier Environmental Forum, for a constructive and cooperative regulator / interest group / industry interface. The Network focused on environmental research projects and dialogue with interest groups such as fishermen, environmentalists, the Joint Nature Conservancy Council and the RSPB. The Forum was chaired by Professor Alisdair MacIntyre a personality of reputable independence.
"It is important to recognise" said Mr Rothermund, "that the specific attack by Greenpeace in particular on oil and gas developments in the Atlantic Margin, accompanied by the ussual exaggerated claims about 'last wilderness' and 'environmental devastation', with emotional references to whales and endangered speeies, also raises a key question: '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?". Undoubtably, there is a dilemma".
Energy critical to growth and peace
"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", said Mr Rothermund. "Poverty is a major source of conflict". Ther had been a huge increase in energy demand since the mid-l9th century, when the world consumed some six million barrels of oil equivalent a day. We now consumed nearly 200 million barrels of oil equivalent a day. Yet major parts of the world's population had still little or no access to electricity or mobility.
Coal still provided nearly a quarter of our energy, oil a third, and gas was increasingly important and now met a fifth of energy needs. The analysis of projected future energy demand was fundamental to understanding the implications of sustainable development.
One of the Shell Group's long-range energy scenarios, Sustained Growth, described a world of continuing abundant energy supplies at competetive prices, and average per capita energy consumption nearly doubling by 2060. The other, Dematerialisation, envisaged a different world in which new technologies, systems and lifestyles would deliver continuing improvements in energy efficiency, with average per capita consumption rising by only some 15 per cent by 2060. In both scenarios, energy efficiency and alternative energy sources played a central role.
"Increasing energy efficiency is a normal part of industrialisation," said Mr Rothermund. ln the United States, for example, energy intensity has fallen by 1 per cent a year over the past century. There are good grounds for believing that we may soon be able to make faster progress through continuing technological advances, market reforms, the switch from manufacturing to service industries, and lifestyle changes."
Renewable energy
Rnewable sources of energy - wind, biomass and solar power - were already established in niche markets and we could expect them to become increasingly competitive. Renewable energy today accounted for less than one per cent of supplies, but this could grow to more than five per cent by 2020 - much faster than oil a century ago - and renewables could possibly provide half the world's energy by 2060.
The Shell group has sustained an interest in renewable energy development for over a decade: "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."
But there were numerous major dilemmas ahead and no ready made solutions. Nuclear power for example would solve the problem of carbon dioxide emissions but it would be difficult to deal safely with nuclear waste and achieve public acceptability - a reminder that all forms of energy face environmental and societal problems. Environmentalists in the USA were campaigning for the dismantling of hydro-electric dams, and wind parks were accused of noise, sight and glare pollution and faced an uncertain future.
Mr Rothermund said: "It's the old chestnut of people wanting renewable energy whilst saying '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 Shell scenario, demand for fossil fuels was likely to grow rapidly for at least the next quarter of a century. Fossil fuels would certainly face ever increasing competition from renewable energy. Mr Rothermund said: "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 combustion, such as natural gas, is a considerable challenge not only for oil and gas 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 and the environment.
Shell Expro actions
Whilst the debate on climate change continued, it was clearly prudent to develop alternative ways of economically generating energy, to learn to use energy more efficiently, and to reduce the environmental impact of fossil fuels. The goal-based UK regulations created a 'win-win' situation in which the greatest environmental benefit could be achieved for a given cost. But industry had to demonstrate that it was continually improving environmental performance and not using self regulation as an excuse to do nothing.
Shell Expro had introduced a system for making a full inventory of emissions discharges and wastes, and identifying priorities for improvement, including oil in produced water, fuel usage, flare emissions and the amount of solid wastes being sent to landfill. Ten-year targets and yearly waste forecasts set comprehensive and challenging objectives.
Building the ability to listen and respond to the views and concerns of society was another essential component, and environmental reporting was an important aspect: "Shell UK produced its second annual report last week, independently verified by Lloyds," sait Mr Rothermund. "Individual operating sites also produce their own reports. External verification of environmental reporting is a recent development and there are incresingly calls for other forms of independent verification - most notably about how we discharge our social responsibilities.
Certification and verification was an opportunity to learn more about the openness and dialogue to which Shell was committed. But much experience remained to be gained, for instance the standards and practices that needed to be taken into account, were still in infancy.
Brent Spar had transformed Shell's outlook, not as an environmental problem, but as a symbol of industry's inabiliy to engage with the outside world in a meaningful fashion. It posed challenges of communication, clarity and credibility. "By communication I mean initiating discussion with a wide spectruum of opinion formers in different societies; listening and talking through what can be expected from international enterprise and what cannot. 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 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."
He added; "We are committed to demonstrating clear actions in support of our words."