As the world grapples with the urgent challenge of climate change, the energy industry is working to reduce greenhouse gas emissions while continuing to deliver the secure and affordable energy people need today. Is switching to renewables the answer, and do oil and gas have a role to play?

Presented by Julia Streets. Featuring Dr Bassam Fattouh of the Oxford Institute for Energy Studies, Sian Lloyd-Rees of Mainstream Renewable Power and Shell’s Zoe Yujnovich.

The Energy Podcast is a Fresh Air Production for Shell, produced by Annie Day and Sarah Moore, and edited by Molly Lynch and Sophie Curtis.

TRANSCRIPT

Shell The Energy Podcast
Season 4, Episode 4

00:00:00
Julia Streets: Today  on  The  Energy  Podcast.

00:00:07
Bassam Fattouh: If  oil  and  gas  is  to  remain  part  of the  energy  mix,  the  key  issue  then  becomes  how  to  reduce  greenhouse  gas  emissions  from  hydrocarbon  related  activities.

00:00:16
Sian Lloyd-Rees: If  we  want  to  achieve  net- zero  by  2050,  we  all  need  to  adopt  that  2050  mindset  now,  making  the  decisions  today  that  are  consistent  with  the  future  that  we  want.

00:00:26
Zoe Yujnovich: The journey to net-zero must be achieved whilst at the same time providing a stable and reliable supply of energy.

00:00:34
Julia Streets: The  science  is  clear  and  the  world  is  in  a  fight  to  avoid  the  most  serious  effects  of  climate  change.  Energy  and  the  use  of  it  is  one  of  the  biggest  contributors  to  global  greenhouse  gas  emissions.  And  this  means  that  the  oil  and  gas  industry,  which  supplies  much  of  that  energy,  is  under  pressure  like  never  before.  Many  countries  are  working  to  achieve  net- zero  carbon  emissions  by  2050,  while  continuing  to  meet  the  demand  for  secure  and  affordable  energy.
 The  impact  of  the  war  on  Ukraine  on  the  global  energy  market  has  shown  just  how  delicate  the  balance  is  to  maintain.  Some  critics  argue  that  only  a  drastic  scale  back  from  oil  and  gas  will  do,  advocating  for  actions  like  an  immediate  end  to  the  development  of  new  oil  and  gas  fields.  Others  believe  that  the  global  economy  cannot  be  decarbonized  without  the  constructive  participation  of  the  oil  and  gas  industry.
 On  one  thing,  there  is  broad  agreement  that  business  as  usual  is  no  longer  an  option.  How  can  the  world  manage  the  balancing  act  of  meeting  demand  while  investing  in  the  energy  of  the  future?  Does  it  need  to  go  further  and  faster?  Hello,  I'm  Julia  Streets,  and  today  on  the  Energy  Podcast  we  ask;  is  there  a  role  for  oil  and  gas  in  the  journey  to  net- zero?  With  me  to  discuss  this  are  Dr.  Bassam  Fattouh,  Director  of  the  Oxford  Institute  for  Energy  Studies,  Sian  Lloyd- Rees,  the  UK  Managing  Director  for  Mainstream  Renewable  Power  and  Shell's  Integrated  Gas  and  Upstream  Director,  Zoe  Yujnovich.  So,  Bassam,  let  me  start  with  you.  How  does  the  world  get  its  energy  today?

00:02:10
Bassam Fattouh: Based  on  the  latest  statistics  for  2022,  hydrocarbons,  that  means  oil,  gas  and  coal,  accounted  for  the  bulk  of  primary  energy  consumption.  Oil  accounted  for  more  than  30%  of  primary  energy  consumption,  followed  by  coal,  which  still  account  for  more  than  25%,  and  then  the  share  of  natural  gas  is  not  far  away,  standing  at  around  25%.  The  share  of  renewables  in  the  form  of  solar  and  wind  has  been  rising  fast  and  accounted  close  to  10%  of  primary  energy  consumption,  surpassing  nuclear  energy  and  hydroelectricity.  But  Julia,  it's  important  to  focus  not  only  on  the  shares,  but  also  the  growth  rates.  For  instance,  if  you  take  coal,  the  growth  rate  between  2012 and 2022  was  close  to  zero,  whereas  renewables  grew  more  than  12%  per  annum  during  the  same  period.  So the  energy  mix  actually  can  evolve  faster  than  implied  by  historical  standards,  which  is  needed  if  we  are  to  meet  our  climate  targets.

00:03:12
Julia Streets: So  in  support  of  the  UN  Paris  Agreement's  ambition  to  limit  the  global  temperature  increase  to  1. 5  degrees  centigrade,  above  pre- industrial  levels,  many  countries  have  set  net- zero  targets  and  I'm  curious  to  know  what  does  that  mean  for  the  energy  industry?  Sian,  can  I  come  to  you?

00:03:28
Sian Lloyd-Rees: As  Bassam’s  just  talked  about,  the  energy  mix  today  includes  a  number  of  different  energy  sources  and  to  achieve  net- zero,  we  need  to  grow  our  cleaner  energy  mix  going  forward,  but  that's  going  to  take  time  and  it's  going  to  take  a  balance  of  different  things.  From  my  perspective,  as  a  wind  developer,  we  are  focused  on  trying  to  accelerate  the  uptake  and  the  introduction  of  wind  powered  energy  and  solar  energy  on  a  global  basis.  But  there  are  challenges.
 When  we  look  at  the  wind  resource  in  the  world,  a  lot  of  it  lies  in  the  northern- hemisphere,  the  greatest  need  is  in  the  southern- hemisphere.  It  lies  far  from  offshore  in  quite  deep  waters,  and  that  requires  different  technologies,  floating  technologies,  to  be  able  to  access  it.  We  then  have  the  challenge  of  transporting  that  wind  energy,  once  we've  managed  to  deliver  it at  an  affordable  price,  to  different  parts  of  the  world.  So  we  have  technology  challenges,  we  have  geographical  challenges.  We  also  have  the  challenges  around  the  supply  chain  and  the  materials  that  we  need  in  order  to  be  able  to  ramp  up  in  terms  of  renewables.  Yes,  we  need  to  grow  our  renewable  energy  percentage  in  terms  of  the  mix,  but  we  also  need  to  focus  on  the  energy  sources  today  and  we  need  to  decarbonize  those.  Oil  and  gas  today  needs  greater  decarbonization,  but  so  do  many  other  heavy  industries  as  well  around  the  globe.

00:04:39
Julia Streets: And Zoe,  perhaps  I  could  bring  you  in  here.  I'd  love  to  get  your  thoughts  as  well  about  what  all  this  means  for  the  energy  industry.

00:04:44
Zoe Yujnovich: The  journey  to  net- zero  must  be  achieved  whilst  at  the  same  time  providing  a  stable  and  reliable  supply  of  energy.  Whilst  the  global  energy  mix  is  changing,  demand  for  energy  services  will  continue  to  grow  and  it'll  need  to  be  met  by  a  combination  of  different  types  of  energy.  It's  certainly  going  to  be  critical  that  we  don't  dismantle  the  current  energy  system  faster  than  we  can  build  the  clean  energy  system  of  the  future.  We  are  very  focused  on  trying  to  understand  how  to  change  the  demand  patterns  and  indeed  how  we  therefore  supply  alternative  energy  into  those  different  demand  hubs.  
 Oil  and  gas  will  continue  to  play  a  crucial  role  in  the  energy  system  for  decades  to  come,  but  of  course  we  will  see  that  demand  reducing  gradually  over  time.  The  other  thing  I  think  I  would  say  is  of  course  it's  also  very  critical  that  we  actually  lead  by  example  in  how  we  drive  that  energy  efficiency.  And  we  are  very  focused  on  cutting  emissions  from  the  existing  operations.  So  in  short,  it's  absolutely  essential  that  the  energy  mix  will  change,  we  must  reduce  emissions  from  our  own  operations  and  also  find  those  profitable  sustainable  ways  to  transition  to  net- zero.

00:05:56
Julia Streets: Just  building  on  that,  there's  some  warnings  from  environmental  groups.  The  continued  investment  in  oil  and  gas  infrastructure  can  risk  the  making  of  the  transition  to  cleaner  energies  even  more  difficult  or  even  too  expensive.  And  I'm  really  curious  to  hear  from  our  guests  today  whether  they  think  that  is  fair.  Sian,  can  I  come  to  you  first?

00:06:16
Sian Lloyd-Rees: Yes,  and  there  is  a  lot  of  discussion  around  the  concern  that  infrastructure  decisions  and  investment  today  shape  the  energy  future  that  we'll  get.  So  from  our  global  wind  developer  perspective,  we  look  carefully  at  government  policies  and  the  subsidies  and  investment  areas  they  prioritize.  And  the  UK  move  faster  than  many  countries  in  focusing  its  fiscal  incentives  into  renewable  development  with  a  contract  for  different  commercial  mechanism,  which  they  initiated,  which  guarantees  a  long- term  contract  certainty  for  wind  developers.  Likewise,  in  the  USA,  we're  seeing  the  Inflation  Reduction  Act  focused  on  attracting  investors  and  infrastructure  developers  into  the  renewable  energy  space, and the  EU  has  got  a  similar  mechanism.
 So  we  certainly  are  seeing  a  subsidy  reallocation  trend  in  favor  of  renewable  energy  sources  and  the  growth  which  all  helps   to  address  the  argument  around  renewables  being  more  expensive  or  not  fit  for  purpose.  But  overall,  if  we  want  to  achieve  net- zero  by  2050,  we  all  need  to  adopt  that  2050  mindset  now,  making  the  decisions  today  that  are  consistent  with  the  future  that  we  want.  And  this  is  what  we  look  for  when  we  engage  with  governments  in  different  parts  of  the  world  in  terms  of  where  their  future  investment  is  going.

00:07:23
Julia Streets: Bassam,  can  I  bring  you  in here, because  I'm  curious  what  would  be  the  impact  of  stopping  new  investments  in  oil  and  gas  altogether?

00:07:30
Bassam Fattouh: Well,  at  this  stage  of  the  transition  where  we  haven't  seen  a  fundamental  shift  in  demand  and  in  fact  demand  for  oil  and  gas  continues  to  rise,  the  impact  of  stopping  investment  will  be  higher  and  more  volatile  prices  for  the  simple  fact  that  by  not  investing,  not  only  there  will  be  no  new  oil  and  gas  supplies,  but  also  existing  supplies  will  start  declining.  And  high  oil  and  gas  prices  have  multiple  effects.  It  raises  the  issue  of  affordability  and  governments  will  have  to  put  in  place  packages  to  protect  consumers,  which  will  affect  their  fiscal  balances.  Also,  energy  transition  policies  may  lose  support  from  the  general  public  if  this  results  in  high  energy  costs.  That  is  why  it's  key  to  have  an  orderly  and  just  transition.  But there  are  also  other  unintended  consequences.  For  instance,  higher  gas  prices  can  result  in  substitution  from  gas  into  oil  and  coal  which  have  higher  emissions.
 In  fact,  the  Russia- Ukraine  war  revealed  these  types  of  substitutions.  In  Europe  as  a  result  of  high  gas  prices,  we  saw  a  substitution  from  gas  into  diesel,  fuel,  oil  and  coal  in  power.  In  some  developing  countries,  which  were  priced  out  of  the  gas  market,  particularly  the  LNG  market,  we  saw  increased  reliance  on  coal.  Some  developing  countries'  access  to  finance  is  extremely  limited  and  they  face  high  cost  of  borrowing  and  don't  have  in  place  the  appropriate  regulatory  framework  to  attract  investment  in  renewables.  Also  has  been  chronic  underinvestment  in  distribution  and  transmission  networks,  which  actually  could  limit  the  rapid  deployment  of  renewables.

00:09:09
Julia Streets: There's  one  other  element  to the  finance investment  discussion,  which  we  must  bring  forward,  because  the  profits  of  oil  and  gas  companies  regularly  hit  the  headlines.  And  following  from  the  energy crisis  brought  about  by  the  invasion  of  Ukraine,  energy  costs  for  households  have  soared  across  the  world.  Meanwhile,  companies  like  Shell  have  reported  record  gains.  So  I  suppose  my  question  is  shouldn't  oil  and  gas  companies  use  more  of  their  profits  to  fund  the  transition?  And  of  course  Zoe,  I  have  to  come  to  you  with  that  question.

00:09:38
Zoe Yujnovich: As  we  mentioned  earlier,  today's  energy  system  is  still  overwhelmingly  comprised  of  fossil  energy  and  whilst  recognizing  the  need  to  continue  to  decarbonize  that  energy,  many  of  the  oil  and  gas  reserves  have  a  natural  decline.  So  we  have  to  continue  to  invest  to  essentially  ensure  that  we  can  have  that  stable  production  over  time.
  Over  the  last  15  years,  as  well  as  maintaining  our  core  business  of  oil  and  gas,  we  have  been  investing  in  a  wide  range  of  low  carbon  energies,  from  hydrogen  production  to  de- risking  carbon  capture  and  storage,  biofuel  production,  electric  vehicle  charging,  as  well  as  wind  and  solar  generation.  We  have  invested  in  2022,  about  8. 2  billion  in  low  carbon  energy  and  non- energy  products.  This  is  about  a  third  of  our  total  capital  expenditures,  and  of  that  about  4. 3  billion  went  into  low  carbon  energy  solutions.

00:10:38
Julia Streets: Bassam,  I'm  keen  to  get  your  voice  on  this  discussion  about  the  use  of  profits  as  well.  Your  thoughts?

00:10:43
Bassam Fattouh: Well,  in  this  current  environment,  international  energy  companies  are  generating  very  healthy  cash  flows.  Part  of  these  cash  flows  will  be  directed  towards  investment  in  oil  and  gas  project,  because  the  demand  for  oil  and  gas  is still  rising.  But  there  are  also  expectations  that  companies  must  allocate  much  larger  part  of  their  cash  flows  and  capex  budget  to  clean  technologies.  And  I  think  the  amount  of  capital  allocated  to  renewables  has  become  a  key  metric  for  many  investors  and  NGOs.  The  challenge  really  is  how  to  allocate  cash  flows  to  these  projects  at  an  accelerated  rate,  while  achieve  attractive  returns  to  their  shareholders  as  some  of  these  technologies,  such  as  green  hydrogen  and  CCS is yet  to  scale  up.  If  the  alternative  opportunities  in  the  clean  technology  space  are  limited  and  evaluations  are  inflated  and  large  investments  in  hydrocarbons  are  not  particularly  rewarded  by  investors,  because  of  fears  that  investment  in  new  project  increase  the  risk  of  stranded  assets,  then  companies  will  use  these  high  cash  flows  to  reduce  debt,  return  money  to  shareholders  through  buybacks  and  dividends.
 Actually  a  trend  that  we  have  seen  in  this  cycle,  this  has  the  attraction  of  making  the  energy  firms  more  resilient  in  terms  of  lowering  their  leverage  ratios  and  making  these  companies  more  attractive  for  investors  and  shareholders.  But  of  course  for  many  investors  and  perhaps  observers,  this is  a  signal  that  companies  are  not  doing  enough  to  decarbonize  their  activities  and  they  are  not  transforming  their  activities  and  operations  fast  enough.  But  from  company's  perspective,  this  is  seen  as  ensuring  that  capital  is  not  destroyed  in  projects  that  don't  meet  their  profitability  criteria  and  where  scale  has  not  yet  been  achieved.

00:12:28
Julia Streets: So, how is the oil  and  gas  industry  driving  down  emissions  from  its  existing  operations?

00:12:34
Bassam Fattouh: If  oil  and  gas  is  to  remain  part  of the  energy  mix,  the  key  issue  then  becomes  how  to  reduce  greenhouse  gas  emissions  from  hydrocarbon  related  activities. And  this  requires  heavy  investment  in  areas  such  as  electrification  of  platforms,  reducing  venting  and  gas  flaring,  CCS  and  the  development  of  low  carbon  fuels  in  the  aviation  and  transport  sector.  This  also  requires  developing  and  harmonizing  standards  for  measuring,  monitoring,  reporting  and  verifying  emissions.  And  although  there  has  been  progress  made  in  this  area,  I  think  the  landscape  remains  very  fragmented,  which  make  it  difficult  to  measure  performance  over  time  and  compare  between  companies  and  countries.  So  that's  why  the  efforts  really  should  be  concentrated  on  how  to  reduce the  emissions  of  hydrocarbon  related  activities  while  demand  is  still  there.

00:13:24
Julia Streets: Zoe,  keen  to  hear  your  thoughts.

00:13:26
Zoe Yujnovich: There  are  many  things  that  we're  doing  recognizing  that  it's  critical  that  we  take  action  now  on  those  things  that  we  control,  while  also  of  course  influencing  the  way  demand  will  evolve  for  our  customers.  When  we  look  at  carbon  emissions,  we've  been  able  to  reduce  ours  from  our  own  operations  by  30%  at  the  end  of  2022,  compared  with  2016,  which  is  our  reference  year,  and  this  takes  us  more  than  halfway  toward  our  target,  a  50%  reduction  by  2030.  For  several  years  we've  also  been  transforming  our  remaining  integrated  refineries  into  low  carbon  energy  and  chemical  parks.  But  we  also  recognize  that  when  we  make  new  investments,  we  must  hold  a  really  high  bar  to  ensure  that  they're  not  just  economically  resilient,  but  they're  carbon  resilient  as  well.  So  for  example,  we  just  recently  brought  online  Timi  in  Malaysia,  our  first  wellhead  platform  in  the  country  that's  powered  by  a  solar  and  wind  hybrid  power  system.
 We're  also  growing  our  liquified  natural  gas  business  that  will  play  a  critical  role  in  a  balanced  energy  transition  in  the  way  it  also  compliments  renewables  production.  Liquified  natural  gas  can  be  easily  transported  to  places  where  it's  needed  most  and  that  picks  up  on  Sian's  point  that  not  all  countries  will  be  endowed  with  natural  resources,  whether  they  be  hydrocarbons,  wind  or  solar.  And  so  it  allows  you  to  actually  move  that  energy  to  where  it's  best  needed.  And  of  course,  on  average,  natural  gas  emits  about  50%  less  carbon  emissions  than  coal  when  used  to  produce  electricity,  making  it  the  natural  lower  carbon  substitute  in  the  near  term.
 And  we  also  are  trying  to  look  at  ways  in  which  we  can  re- scope  the  way  we  do  our  engineering.  In  our  US  Gulf  of  Mexico,  we  have  Vito,  a  completely  redesigned  platform.  We  see  by  actually  bringing  new  technology  and  integrating  the  way  our  scope  is  reviewed,  that  we've  been  able  to  reduce  by  70%  the  lifecycle  cost  from  the  original  host  concept,  a  true  demonstration  of  how  we  can  really  challenge  ourselves  to  improve  carbon  and  fiscal  returns  and  how  they  can  really  work  together  in  a  complimentary  way.

00:15:36
Julia Streets: So  on  the  subject,  let's  go  offshore  to  hear  what's  happening  on  Shell's  newest  deep  water  platform,  Vito.  Vito  is in  the  Gulf  of  Mexico  and  has  been  especially  designed  to  deliver  greater  energy  efficiency.  Operations  Maintenance  Coordinator  Rodney  Townsend  is  there  to  show  us  around.

00:15:53
Rodney Townsend: My  name  is  Rodney  Townsend  and  I'm  currently  standing  on  Shell's  offshore  platform  Vito,  Shell's  13th  deepwater  development.  I'm  around  150  miles  southwest  of  New  Orleans  in  the  blue  waters of the Gulf  of  Mexico.  Vito  is  an  amazing  facility,  four  bright  yellow  cylindrical  columns  hold  up  the  top  sides,  which  are  home  to  vessels,  separators,  pumps,  generators,  and  compressors,  all  the  processing  equipment  and  support  systems  that  we  use  in  oil  production.
 Vito  is  like  a  remote  island  made  of  steel  and  floating  in  the  water.  I'm  one  of  60  people  in  the  Vito  family  currently  offshore,  where  we  work  and  live  for  14  days  at  a  time.  The  platform  I'm  standing  on  today  is  different  than  the  original  plans  for  the  facility.  In  2015,  Shell  began  redesigning  the  Vito  Project  to  take  advantage  of  the  latest  technology  and  make  it  more  cost- efficient  while,  reducing  its  CO2  footprint.  It's  about  a  third  smaller  than  the  previous  platforms  we've  built,  consumes  less  electricity  and  features  energy  efficient  gas  turbines,  compression  systems  and  more.  These  measures,  along  with  others,  resulted  in  a  reduction  of  approximately  80% in  CO2  emissions  over  the  lifetime  of  the  facility.  Vito's  simplified  and  replicable  design  is  a  blueprint  for  future  deepwater  projects.

00:17:24
Julia Streets: So,  could  the  world  switch  to  a  hundred  percent  renewable  energy  tomorrow?  And  if  not,  I'm  curious,  why  not? Sian,  what  do  you  think?

00:17:33
Sian Lloyd-Rees: The  statistics  on  what  percentage  of  the  overall  energy  mix  renewables  makes  up  varies,  but  let's  say  it's  currently  contributes  up  to  25%  of  global  energy  demand,  and  that's  taken  us  40  years  to get to  that  point.  But  we  are  now  seeing  a  rapid  increase  in  seabed  leases  for  offshore  wind  being  allocated  and  more  solar  and  hydrogen  developments  as  well.  We're  also  seeing  government  subsidies  and  investment  prioritizing  renewable  energy  uptake.  So  good  progress,  but  as  I've  mentioned  previously,  there  remain  challenges.  And  different  parts  of  the  world  are  addressing  routes  to  market  for  the  energy  in  different  ways.
 In  the  UK,  we're  seeing  some  shorter  term  challenges  for  sure  with  inflation.  The  cost  of  development  has  increased.  There's  global  supply  chain  challenges,  and  today  we are  actually  seeing  wind  developers  put  their  field  development  plans  on  hold,  based  on  them  being  unaffordable  at  this  point.  And  then  you  marry  that  with  the  fact  that  the  average  time  to  take  a  wind  development  to  market  is  10  years.  Now  solar  is  much  quicker,  but  wind and  solar  both  will  need  to  be  included  in  the  energy  mix.  And  similarly,  hydrogen  will  play  a  key  role,  but  the  demand  for  hydrogen  and  the  routes  to  market  for  hydrogen  derivatives  are  yet  to  be  fully  understood.  The  industry  and  governments  are  working  together  on  how  they  can  also  accelerate  the  policies,  the  fiscal  measures  that  they  put  in  place  that  attract  the  inward  investment  that  we  see  going  forward.  So  I  think  we  can  pick  a  pace  and  scale,  but  I'm  not  sure  we  can  do  it  overnight.

00:18:57
Julia Streets: Zoe  can  I  bring  you  in?  I'd  love  to  hear  your  thoughts.

00:18:59
Zoe Yujnovich: Yeah,  I  think  about  this  in  terms  of  perhaps  three  time  horizons.  In  the  first  instance,  it  is  about  looking  for  ways  to  increase  electrification,  and  so  we've  globally  rolled  out  a  significant  footprint  of  EV  charging.  We're  second  to  Tesla.  And  we  also  look  at  things  like  biofuel  production,  which  can  be  drop- in  fuels,  which  can  use  existing  infrastructure  and  help  to  reduce  the  carbon  intensity.  So  that  is  where  you  see  things  like  sustainable  aviation  fuel,  which  is  also  helping  to  reduce  the  footprint  of  aviation.
 We  then  look  at  areas  like  carbon  capture  and  storage.  We  have  projects  that  are  actively  sequestering  carbon  in  Canada,  and  in  Australia.  And  we  continue  to  look  at  additional  opportunities  to  grow  and  scale  that,  recognizing  it's  such  a  critical  part  of  decarbonizing  the  existing  energy  system.  When  you  couple  something  like  carbon  capture  and  storage  with  liquified  natural  gas  for  example,  you  get  blue  hydrogen.  And  that  perhaps  brings  us  to  the  third  horizon,  which  is  in  hydrogen,  which  today  isn't  seen  as  competitive,  but  there  is  an  enormous  amount  of  work  that  clearly  we're  doing  around  how  we  could  de- risk  that.
 And  perhaps  the  best  example  to  bring  that  to  light  would  be  Holland  Hydrogen  1,  where  indeed  it'll  be  Europe's  largest  renewable  hydrogen  plant  once  it's  operational.  It's  currently  in  execution,  it's  a  200  megawatt  electrolyzer,  it's  expected  to  produce  about  80,000  kilograms  of  renewable  hydrogen  per  day.  So  I  think  the  time  horizons  will  vary,  much  of  which  will  be  influenced  by  things  like  demand,  but  I  think  it's  critical  nonetheless  that  we  do  de- risk  all  of  these  time  horizons  together.

00:20:34
Julia Streets: Bassam,  can  I  bring  you  in  here?  Because  I'd  love  to  get  your  thoughts  about the  role  of  policymakers  when  it  comes  to  this  journey  to  net- zero.

00:20:43
Bassam Fattouh: Well,  the  energy  system  has  always  been  transitioning  and  as  people  discovered  more  efficient  sources  of  energy,  they  switched  from  the  less  efficient,  the  higher  cost  energy  to  the  more  efficient,  lower  cost  energy.  I  think  this  transition  is  different in a  key  aspect  that  many  of  the  fuels  we  are  using  are  efficient.  The  infrastructure  around  them  has  been  built  over  many  years  and  many  of  the  assets  are  still  economical  and  operational.  But  of  course  there's  the  issue  of  externality  associated  with  emissions  that  need  to  be  taken  into  account.  And  that's  where  governments  play  a  very,  very  important  role,  because  this  needs  to  be  priced  either  through  carbon  taxes  or  emission  trading  systems.
 But  not  only  that,  we  need  to  achieve  a  decarbonized  system  fairly  quickly.  This  would  need,  for  instance,  early  retirement  of  assets.  If  you  leave  it  to  the  private  sector  and  without  governments  putting  in  place  incentive  through  subsidies  or  taxes,  this  will  not  take  place,  at  least  not  at  the  speed  needed.  Also,  some  of  the  technologies  that  we  need  to  rely  on,  to  reach  our  net- zero  targets,  need  to  be  scaled  up,  so  we  could  achieve  the  cost  reductions.  Again,  I  think  governments  need  to  play  a  key  role  here.  Of  course,  this  does  not  mean  that  the  private  sector  shifts  all  the  risk  to  governments.  That's  not  what  I'm  saying  at  all.  But  there  must  be  some  reasonable  allocation  of  risk  to  enable  investment  in  new  technologies  and  fuels  to  achieve  scale,  cost  reduction,  but  also  bankability  of  projects.

00:22:14
Julia Streets: And Sian, your thoughts on this?

00:22:16
Sian Lloyd-Rees: Well, let me  just  add,  I  think  strong  policy  certainly  encourages  the  investment  that's  needed.  And  again,  we  can  look  at  the  UK  as  this  is  a  good  example.  Very  early  policy  on  wind  encouraged  that  inward  investment.  It's  why  the  UK  currently  has  a  hundred  gigawatts  of  wind  under  development.  Sweden  moved  quickly,  they  also  have  the  same  amount. And then  of  course  we  saw  different  policies  in  different  parts  of  the  world.  In  South  Korea,  there  was  a  very  strong  policy  in  terms  of  local  content  provision  as  part  of  the  seabed  leases  and  the  encouragement  of  technology  to  be  developed.  So  South  Korea  will  never  be  the  largest  wind  development  region  in  the  world,  but  certainly  they've  moved  very  quickly  to  establish  a  very  strong  supply  chain  that  can  flourish  as  it  serves  global  markets.  So  we  do  see  policy  as  being  a  good  signal  for  where  the  government's  priorities  are  and  how  fast  they  want  to  move  and  how it differs in different parts of the world.

00:23:06
Julia Streets: And  Zoe,  what  are  your  thoughts  on  this  question?

00:23:09
Zoe Yujnovich: When  we  look  at  different  policies,  as  we  mentioned  a  bit  earlier,  we  have  seen  quite  a  change  in  things  like  how  the  Inflation  Reduction  Act  has  really  stimulated  opportunities  that  might  have  previously  been  on  the  fence,  but  are  now  more  interesting  because  of  the  tax  credits  that  are  being  provided.  And  then  perhaps  just  to  bring  it  to  life  in  terms  of  how  we  think  collaboration  can  work,  if  we  take  an  example  for  LNG  Canada,  which  is  an  asset  that  we  are  partners  in,  it's  on  the  west  coast  of  Canada.  It's  on  track  for  being  commissioned  by  the  middle  of  the  decade.  And  having  worked  with  customers,  predominantly  across  Asia,  who  still  rely  on  a  significant  aspect  of  gas  in  their  energy  ecosystem,  we  are  able  to  produce,  with  new  technology,  a  plant  that  actually  has  60%  lower  emissions  than  the  average  facility  that's  currently  performing  today.  And  so  an  example  of  how  collaboration  with  customers,  with  the  governments,  both  federal  and  provincial  level,  enable  us  to  develop  an  ecosystem  that  provides  the  right  incentives  and  really  drives  change  at  a  faster  pace.

00:24:15
Julia Streets: But  I  wonder  if  we  could  just  look  ahead  a  little.  I'm  curious  to  hear  your  thoughts  and  Sian,  I'm  coming  to  you  first  of  all,  what  do  you  think  the  energy  mix  will  look  like  by  2050?

00:24:26
Sian Lloyd-Rees: So  my  preference  would  be  that  the  energy  mix  in  2050  resembles  where  we  start  from  today,  which  is  to  have an  ambition  of  around  80%  renewable  energy  in  the  mix  by  2050  and  certainly  the  remainder  much  cleaner.  And  I  do  believe  we'll  take  a  mix  of  cleaner  energy  from  the  use  of  carbon  capture,  use  of  hydrogen,  et  cetera,  but  also  in  terms  of  the  uptick  in  renewable  energy,  predominantly  in  wind  and  solar  as  the  primary  sources.

00:24:53
Julia Streets: And  Zoe,  can  I  ask  the  same  question  of  you?  What do you think the  energy  mix  will  look  like  by  2050?

00:24:59
Zoe Yujnovich: I  hope  it's  radically  different  to  the  one  that  we  see  today.  I  do  hope  that  where  hydrocarbons  are  part  of  the  energy  mix,  they're  largely  decarbonized,  both  because  of  the  emissions  in  the  creation  of  the  hydrocarbons,  but  also  in  the  way  that  we  can  couple  that  with  things  like  carbon  capture  and  storage  for  customers.  I  hope  that  technology  will  play  a  really  significant  role  in  ensuring  that  that's  affordable  and  scalable.  And  I  also  hope  that  we  do  so  in  a  way  that's  quite  thoughtful  in  the  way  that  the  transition  is  navigated,  so  we  don't  see  these  volatile  moments  that  we've  experienced  that  are  incredibly  painful  for  the  world  to  endure  as  we've  seen  over  the  past  12  to  18  months.

00:25:40
Julia Streets: Well,  it's  been  a  fantastic  discussion.  Thank  you  for  all  your  thoughts,  because  in  a  really  short  period  of  time,  we've  talked  about  supply  and  demand,  supply  and  value  chains,  security,  affordability,  technology,  and  innovation.  We've  thought  about  policy  and  also  ultimately  the  need  for  collaboration  in  the  ecosystem.  This  is  all  about  action  to  achieve  the  ambition.  So  my  thanks  to  Dr.  Bassam  Fattouh,  Sian  Lloyd- Rees  and  Zoe  Yujnovich.  You've  been  listening  to  The  Energy  Podcast  brought  to  you  by  Shell.  Listen  and  follow  for  free  wherever  you  get  your  podcast,  so  you  don't  miss  a  single  episode.  The  Energy  Podcast  is  a  Fresh  Air  Production,  and  I  must  remind  you  that  the  views  you've  heard  today  from  individuals  not  affiliated  with  Shell  are  their  own  and  not  Shell  PLC  or  its  affiliates.  I'm  Julia  Streets.  Thank  you  for  listening  and  until  next  time,  goodbye.