Embrace alternative fuels or face higher coal use, Shell says

Canberra Times
Saturday 2/8/2008 Page: 21

Shell has warned environmentalists and ethical investors that failure to exploit tar sands and other unconventional oil products would worsen climate change because it would lead to the world burning even more carbon-heavy coal. Shell's chief executive, Jeroen van der Veer, said the world needed every kind of energy source it could find at a time of soaring demand. He said groups that had threatened to organise a ban on alternative fossil fuels should be careful because without unconventionals "the balancing fuel will be coal."

Shell revealed its tar sands operation posted 74 per cent profit growth to $351 million ($A374 million) in the second quarter, providing a relatively modest but important boost to total group profits of $A8.4 billion. A group of retail cooperative societies in Britain, known as the Co-Op, and wildlife group WWF are calling a meeting of ethical investment funds in September to try to put pressure on governments not to buy any oil supplies coming from tar sands. While environmentalists have claimed that tar sands extraction uses at least three times more energy than traditional oil, Mr Van der Veer said the "well-to-wheels" carbon footprint was only 15 per cent higher than conventional oil.

But Greenpeace questioned the carbon figures and expressed further concern at Shell's growing use of tar sands. A climate change campaigner at Greenpeace, Charlie Kronick, said,"Oil companies are increasingly dependent on these unconventionals as they get squeezed out of countries such as Nigeria and Russia. We fear tar sands are just the entrance ramp to oil shale, gas-to-liquids and other non-conventionals, which will just press the red button for climate change disaster."

Shell was upbeat about another controversial area, expressing optimism that it would be able to sign agreements "before too long" with Iraq despite non-governmental organisations claiming that British and US companies were exploiting the Western military presence there. Much would depend on the security situation, Mr Van der Veer said. Discussions are continuing over oil and gas operations in a country still riven by fighting five years after the overthrow of Saddam Hussein.

Shell said it could make no predictions about the future of oil prices, which have only just fallen back from recent highs of nearly $US150 a barrel. Shell said it planned for both high price and low-price scenarios but always with volatility in mind. Mr Van der Veer indicated that further analysis had led him to reconsider whether financial speculators were as much to blame for that volatility as he had suggested in the past.

Shell said it was pleased with its overall performance, which helped to produce a return on capital 26 per cent higher quarter-on-quarter, but its shares fell nearly 2 per cent to £18.08 ($A38.23) as investors worried about falling oil prices. A doubling of the price of oil to $US120 a barrel in the second quarter boosted profits, but Shell saw overall oil and gas production fall by 1.6 per cent to 3.1 million barrels in the second quarter versus a year earlier.