Providing coverage of Alaska and northern Canada's oil and gas industry
July 2009

Vol. 14, No. 27 Week of July 05, 2009

‘And’ rather than ‘or’

Lawrence urges balance between fossil and renewable fuels in energy transition

Alan Bailey

Petroleum News

The world needs to achieve a balance between the use of traditional fossil fuels and new renewable energy sources, as the global community transitions into its energy future, David Lawrence, vice president, exploration, for Royal Dutch Shell, told a packed annual meeting of the Resource Development Council in Anchorage, Alaska, June 30.

“It’s not a question of oil and gas versus renewables, or oil and gas versus biofuels. … It’s not a matter of ‘or’ at all. It’s a matter of ‘and,’ and to get all of the above to meet our energy needs,” Lawrence said.

And Alaska’s role in resource and energy development is larger than that of any other U.S. state, and larger than most countries that Shell operates in, he said.

Diversified future

Referring to what he characterized as the three hard energy truths — increasing energy demand, an inability to grow new energy supplies fast enough and the impact of fossil-fuel-generated carbon dioxide on the climate — Lawrence outlined his vision of a diversified energy future.

“Not only will we need to find more sources of energy to satisfy our growing thirst, it is imperative that we acknowledge and mitigate any associated environmental impacts,” Lawrence said.

The world’s “easy oil” has gone, with new oil fields tending to be remote, complex and expensive to develop, Lawrence said. For example, Shell has already spent $3 billion on its current Alaska venture with, so far, no monetary return, he said.

And although the world is transitioning into new energy technologies, it has typically taken 25 years for a new energy source to gain as little as 1 percent of the global energy market, Lawrence said, citing the history of the LNG industry, an industry that started 45 years ago and which has now achieved a 2 percent market penetration.

“The (energy) transformation will need to be well paced to be successful,” Lawrence said. “Policies aimed at too hasty displacement of fossil energy might condemn many of the world’s citizens to … poverty.”

Several decades

Shell thinks that wind, solar and biofuel energy use will all grow much more quickly than traditional energy sources such as oil and gas but that despite this rapid growth it will take several decades for these technologies to make major inroads into the overall energy mix.

“Optimistically, we believe that renewables will provide around 30 percent of the world’s energy by the middle of this century,” Lawrence said, adding that renewables represent about 3 percent of world energy production at present.

And, even envisioning as much as 40 percent of energy coming from renewable sources, that possibility begs the question of where the remaining 60 percent of the energy will come from.

“We hope (from) places like Alaska … because the resource base here is huge,” Lawrence said. “It’s another Gulf of Mexico scale resource … in U.S. waters, yet to be found.”

Alaska ground zero

But those who think it possible to exclude fossil fuels from future energy production are trying to block Alaska oil and gas development, he said.

“Unfortunately Alaska, particularly the offshore, is ground zero … in the misguided effort to put us in an either/or world, where fossil fuels play no role in the bridge to the energy future,” Lawrence said. “No less than five of the largest environmental groups in the world have become rooted in Alaska and some will spare no expense or effort to ensure development of any kind does not take place in the offshore.”

Lawrence cited the United States Court of Appeals for the District of Columbia decision in April to uphold an appeal against the Minerals Management Service outer continental shelf five-year lease sale program, an appeal which he said was launched by at least three international environmental groups and one local indigenous group, and which could result in a loss of $10 billion in lease bonuses to the U.S. treasury as well as helping propel U.S. oil imports above their current level of 60 percent of U.S. oil supplies, and possibly causing an unnecessarily early shutdown of the trans-Alaska oil pipeline.

In fact, had the trans-Alaska oil pipeline construction not been authorized several decades ago, the United States would currently be obtaining an additional 700,000 barrels of oil per day from sources outside Alaska, where environmental and safety standards are the most stringent in the world, Lawrence said.


Although the courts cannot overlook the views of the perhaps thousands of people that the environmental organizations represent, a small group of people often litigates development projects at every stage. And some non-governmental organizations employ a tactic of enlisting local communities to add weight to their arguments, despite disconnects between those international groups and the local communities over issues such as the harvesting of whales, Lawrence said.

In fact, Shell has partnered with several environmental groups, he said.

“These groups pull no punches in letting us know when and where they believe we can do better, and we’re ready to listen. We value their feedback,” Lawrence said.

And Shell values the views of people impacted by oil and gas development.

“We have a genuine respect for honest dialogue and believe groups of individuals deserve to be heard on important issues that could impact their lives for generations,” Lawrence said.

Lawrence particularly mentioned North Slope Borough Mayor Edward Itta’s forthright concerns about the need to protect offshore areas that the North Slope communities and their ancestors have depended on.

“We respect his opinion greatly,” Lawrence said.

Shell has responded to the concerns of North Slope communities with a scaled-down offshore drilling plan that will end up costing the company tens of millions of dollars in lost efficiency, Lawrence said.

“That (cost) wasn’t the point,” Lawrence said. “The point was: We hear you, we listen and if this is important to you it’s important to Shell, and that’s why we made our programs the way we did.”

And Lawrence slammed an environmental group that had been quoted as saying in response to Shell’s scaled-down plan that one offshore drillship is one offshore drillship too many.


Moreover, limiting offshore oil and gas exploration on the grounds of potential impacts on climate change is also illogical because coal-burning power plants in the U.S. Midwest, for example, play a much greater role in climate change than Alaska oil and gas facilities, Lawrence said.

At the same time, Shell’s track record in Sakhalin demonstrates the company’s ability to bring oil on line in an environmentally challenging region, he said. Less than 3 barrels of oil have been spilled in Sakhalin, despite production of more than 100 million barrels in a very hostile environment similar to that in Alaska, while no oil has ever been spilled as a consequence of exploration drilling in offshore Alaska, Lawrence said.

And Shell is confident in its ability to use advanced technologies to clean up an offshore oil spill, in the unlikely event of a spill occurring.

“No other company has deployed the immediate response capability in terms of vessels, equipment and trained personnel that Shell has at the field site,” Lawrence said.

Lawrence urged constructive partnerships in addressing the issues surrounding oil and gas development in the Beaufort and Chukchi Seas.

“How can we balance our energy needs with economic progress and sustainable development, (and with) community concerns about the environment?” Lawrence asked. “And the kind of constructive partnerships that I’m talking about are not those in which one party just simply has a strategy of ‘no that’s impossible’ and turns to the courts. In the world of the three hard truths … this is simply opting out of the challenge. We need people, communities, governments, regulators and organizations not to opt out, not to say ‘that’s impossible,’ but to opt in.”

Rather than talking about the 50 ways that something might not work, people should focus on making it work and doing things the right way, he said.

“We believe that there’s possibly more oil and gas in offshore Arctic Alaska than there is remaining to be found in the Gulf of Mexico,” Lawrence said. “That’s why we’re here. It would be our privilege to help to find and produce it safely, with no harm to the environment and in a way that meets the needs of the communities in which we work.”

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