This conference is about technology. What technology can contribute to meeting the world's pressing energy challenges. Some may think technology less important to our industry today. That what really counts now is commercial drive and acumen. That we can buy all the technology we need.
I disagree. Commercial capabilities are vital - but must rest on solid technological foundations.
Technology is central to our present performance, future prospects and ability to contribute to society. Commercial success depends - more than ever - on the skills, understanding and creativity of those who develop and apply our technology.
Realising the value of technology requires more than just fancy kit. It demands:
· understanding needs and possibilities,
· wide-ranging capabilities,
· making the most of technology, and
· integrating to add value.
Let me use these ideas to structure what I say. Please forgive me if I focus on what Shell is doing. It is what I know. But that is not to suggest other companies don't have such capabilities. Although I believe we do give a higher priority to technology than some.
Understanding needs and possibilities:
I suggest the main challenges facing energy industries are:
· increasing recovery of oil and gas,
· extending gas markets,
· reducing the environmental impact of energy, and
· remaining profitable and competitive.
Increasing recovery of oil and gas - and by this I mean identifying, developing and recovering as much as possible of the resource - is a vital challenge.
This may seem strange in face of the threat of climate change from burning fossil fuels.
But dealing with such a threat must be a long-term process - of learning and adaptation. Energy systems on which lives depend have to evolve. Oil and gas - and also coal - will long remain essential for meeting growing energy needs.
In Shell, we don't see imminent resource constraints. Oil resources should continue to meet demand growth for at least two decades - although this depends on continued technological advance.
Resources of gas are less well known, although I am sure there is much still to find.
Of course, in this industry twenty years is not long. The challenge is immediate.
It is also misleading to think about energy in terms of global resources. Countries want to use their own resources to meet their energy needs and support their economic aspirations. Energy importers want a range of suppliers, for security and competition. The challenge is world-wide.
Gas is increasingly valuable - because of its efficiency, convenience, cleanliness and lower carbon intensity. Consumption could more than double in two decades. Extending the use of gas is the most effective immediate response to the climate threat.
But delivering economic gas - not just enabling long-distance supplies but developing the necessary market infrastructure - is a complex undertaking. Gas requires an integrated chain, robust in all its links.
Extending the use of gas will improve air quality as well as reduce greenhouse emissions. But we can also help to safeguard our environment by:
· improving operating standards,
· helping develop better vehicles and power plants,
· making renewable energy commercial, and
· finding ways of dealing with carbon dioxide.
A vital task is to reduce the environmental impact of coal - which still accounts for a quarter of energy supplies. It is a vital resource for some, including China - where it accounts for more than two-thirds of primary energy.
Energy companies must do all this while remaining competitive and profitable in increasingly open, connected, volatile and shifting markets. That is an unrelenting challenge.
Nowhere are energy challenges more important than in China - because of its size and population, the rapidity of its economic development, the nature of its resource base, its environmental aspirations, and its consequence in the world.
I believe international energy companies can contribute much to realising China's energy goals.
This is not because of overwhelming technological superiority. We have found the quality of technology - and the level of skills - to be very high among our Chinese partners.
We do offer particular technologies of value. But I think it is rather how we apply and integrate technology - capabilities developed through wide and varied experience and honed by relentless competition - that matters.
Shell has been doing business in China for more than a century. We are committed to being a valuable partner in:
· realising the potential of China's oil and gas resources,
· delivering the benefits of clean, efficient and cost-effective gas,
· building strong oil products and petrochemical businesses, and
· finding cleaner and more efficient ways of using China's vast coal reserves.
We have a long-standing interest in the producing offshore Xijiang field in the South China Sea, where we are also exploring with CNOOC. And we are working with CNPC to develop the Changbei gas field in the Ordos Basin for consumers in north-east China.
As a result of our recent strategic alliance with Sinopec we have taken a stake in their IPO and have become a partner in exciting projects, including:
· gas exploration and development in the Tarim and Ordos basins;
· a retail venture in Jiangsu, and
· four coal gasification projects using Shell technology.
We are working with CNOOC and others on the planned Nanhai petrochemical manufacturing complex, for which have just signed a joint-venture agreement. We are discussing a range of further co-operation.
We aspire to do much more.
I believe our experience of the gas business - for example in the West European gas industry and as the leading LNG company - fits us to make a particular contribution to delivering cost-effective gas supplies from indigenous resources and elsewhere.
Phil Watts, Managing Director of The Shell Petroleum Company (The "Shell" Transport and Trading Company, plc) and Group Managing Director of the Royal Dutch/Shell Group of Companies at the SPE International Oil & Gas Conference, Beijing, PR China.
© 2000 Mena Report (www.menareport.com)