05/06/2011
Shell Vice President for Global Business Environment, Jeremy Bentham indicated that the world energy outlook is entering an "era of volatile transitions' which will bring about massive uncertainty.
Over 600 CEDA attendees learnt that the underlying energy demand would be three times its current usage by 2050, with immediate supply development only reaching half the expectation required to meet the shortfall.
Speaking at events in Perth, Melbourne and Brisbane, Mr Bentham introduced Shell's latest work, Signals and Signposts that puts new global developments into context within the energy scenarios Shell developed in 2008. This new work updates existing scenarios by taking into account the impact of the global financial crisis on the future energy outlook.
Mr Bentham outlined the key role energy scenarios play in helping businesses, governments and the civil society gain a deeper understanding of global developments and the world's energy supply and demand. The 2008 Shell scenarios Scramble and Blueprints were invaluable for informing crucial choices as countries grappled with difficult energy and environmental issues.
However, in what was described as an 'era of volatile transitions', Mr Bentham highlighted some of the new drivers and factors to be considered when shaping emerging thinking in energy outlooks.
Mr Bentham said the stresses in energy and other related systems are substantial and building and these will force transition in one form or another.
The global recession may have interrupted a commodity boom, but as emerging economies enter their most energy-intensive phase of economic development, raising millions out of poverty, pressure is placed on supply and the environment.
Mr Bentham highlighted that underlying energy demand could potentially increase to three times current usage by 2050. He cautioned that current ordinary rates of supply development would only go half way toward bridging that gap - leaving a zone of uncertainty.
Providing some perspective on the increasing energy demand, he said world urbanisation had just passed 50 per cent and was expected to reach 75 per cent by 2050, which was the equivalent of one new metropolitan Melbourne being built in the world every month for the next 30 years.
This zone, he described as 'a zone of extraordinary opportunity or extraordinary misery', saying the choices made would determine which it was to be.
On bridging the energy gap, Mr Bentham said it would only be met by a combination of extra-ordinary production acceleration and extraordinary demand moderation.
Mr Bentham said that on the demand side, this could be met by smart policies and technology innovations.
Mr Bentham highlighted the important contributions that existing fuel sources such as oil, gas and coal could contribute on the supply side. Important developments in the gas sector were also described as a significant opportunity, in Australia and globally, for supplying affordable and lower emissions energy.
However, Mr Bentham said when it came to meeting future energy demand there is no simple answer.
Moving to the environment, Mr Bentham said stresses are still building, highlighting the issue of water availability as an emerging critical issue. If current water consumption trends continue, he said the world could face a 40 per cent shortfall between global freshwater demand and supply by 2030.
Energy producers are one of the largest consumers of freshwater and the link between energy production and water will intensify as portfolio choices move towards more water intensive production methods.
On climate change Mr Bentham presented some dire predictions regarding future atmospheric concentrations of carbon dioxide. In 2008 Shell's Blueprints scenario, based on plausible boundaries for evolvement in the energy system, predicted that atmospheric concentrations of carbon dioxide would rise to 540 parts per million (ppm) - beyond the level identified as limiting the worst ecological and human consequences of climate change.
The key message was that even under Shell's best case energy scenario, we would still exceed atmospheric carbon dioxide concentrations deemed safe by most people in the scientific community. Mr Bentham said that while some things have moved in the right direction the current pace of change is not fast enough.
Despite post Copenhagen summit disillusionment, Mr Bentham said the divergence in public and expert opinion is not sustainable and the climate change issue has to be resolved.
Mr Bentham stressed that the choices society and Shell makes as a business over the next five years will shape investment over the next decade, which largely shape the global energy picture out to 2050.
The question Mr Bentham posed was how we develop collaborations between the public, private and civil society sectors that really work within this period of volatility.
Mr Bentham believes progress can be made, but it is only by taking a realistic view of the situation that position action can be taken.
CEDA's World Energy Outlook event gave attendees access to expert analysis of the factors shaping the global energy outlook and how future energy supply and demand challenges can be met within a financial, political and environmental context.