SHELL OIL’S OFFER: GIVE US DRILLING, WE’LL GIVE YOU NEW ENERGY

Is Shell Oil President John Hofmeister offering a deal? In a recent speech, he proposed a 12-point “coherent, comprehensive” energy policy. It included specific provisions for New Energy development. It also included specific provisions for new drilling in restricted areas and for new liquefied natural gas (LNG) facilities.

Was he suggesting a deal? “You give us what we (in the oil and gas industry) want and we’ll give you (New Energy producers) what you want.”

The oil and gas industry has always paid lip service to the possibility of New Energy while humbly apologizing for not being able to figure out how to make it economically as feasible as oil and gas. Most likely this new speech was just more of the same old platitudes - but it affirmed that the Old Energy cognoscenti finally see a New Energy rival on their horizon.

At the very least, Hofmeister demonstrated that oil and gas industry insiders understand much of what is needed on the New Energy side of the table: Developing next generation cellulosic and nonfood biofuels, building wind energy transmission, backing the research to bring solar energy costs down, funding a new transportation infrastructure, implementing efficiencies and imposing a national cap-and-trade system.

Hofmeister is also perfectly clear about what he wants in return: Drilling in ANWR and the restricted offshore and Rocky Mountain regions, development of oil shale and oil sands, expansion of coal with clean coal technology, increased LNG ports and new nuclear.

Between the lines, the speech offered plenty of the old limited thinking: "We must beware of superficial promises of easy solutions…" “Easy solutions” has always been oil and gas industry code for New Energy.

In a speech earlier the same month, Hofmeister made his central concern clear: "During the course of today, the U.S. will consume 10,000 gallons of oil a second…That equivalent is 21 million barrels of oil a day…a swimming pool full of oil every second of every minute of every hour throughout the day…In addition, we will consume some 60 billion cubic feet of gas. Sixty billion cubic feet of gas, if stacked on top of each other, would be 25 roundtrips to the moon…when we deal with energy security in this country, that's a very big deal…It's the basis of our lifestyle."

There is no reason to chastise an oil man for putting oil first. Perhaps the best indication it is not yet time to take Hofmeister's deal seriously is his offer to build a hygrogen infrastructure. A "hydrogen economy" has long been the bait in the Big Oil/Detroit bait-and-switch game to keep themselves in power.

Nevertheless, the time to take the deal Hofmeister is offering might be drawing near. With cap-and-trade in place, it might not be economically feasible to go on drilling and devastating the landscape for fuels that generate costly greenhouse gas emissions. With equal access to the kind of subsidies the fossil fuels industries get, New Energy is a better bet. Big Oil abandoned developing shale in the Rocky Mountains in the 1980s not out of any environmental conscientiousness but because it made no business sense to do so. The day is coming when it simply will not make economic sense to drill in ANWR and the only offshore development will be in wind and wave energies.

Hofmeister will have meetings with the presidential nominees from both parties to explain his plan. Just the fact that he knows he can’t ask any of them for what he wants without offering something substantive to New Energy at the same time is a big, big deal.

Just 2 years ago, the IEA's assessment of world energy demand put New Energy at the bottom of the heap but...(click to enlarge)

Shell Oil outlines 12-point energy plan
Paula Dittrick, February 28, 2008 (Oil & Gas Journal)
and
Shell President: America’s Energy Security a ‘Mess’
Kerry Laird, February 21, 2008

WHO
John D. Hofmeister, President, Shell Oil Co.

...Last year the IEA moved New Energy to the top of the chart. It's more than a way of drawing a graph. They're taking notice. (click to enlarge)

WHAT
As an outgrowth of Shell’s 50-city, 18-month "National Dialogue on Energy Security," Hofmeister called on government to create energy policy with specific short term, medium-term, and long-term goals.

WHEN
Speech delivered February 27.
Hofmeister said the U.S. has not had a "coherent, comprehensive" energy policy since World War II.

ExxonMobil's 2007 Energy Outlook took notice, too, and put New Energy on top. (click to enlarge)

WHERE
- Business and Climate Change conference cosponsored by the British Consulate-General of Houston
- Shell is seeking clearance to build LNG terminals in Long Island Sound off New York and Connecticut and is building them in Mexico and India.

WHY
- Hofmeister said the U.S. should treat energy security as seriously and concretely as homeland security and economic security.
- Hofmeister’s 12 points were developed after a 50 city, 18 month tour by Shell executives.
The 12 points:
(1) Access to restricted U.S. oil and gas fields.
(2) Access to unconventional oil and gas (Ex: Colorado, Wyoming, Utah oil shale).
(3) Increased emphasis (read: government funding) on clean coal technology (ex: coal gasification or integrated gas combined cycle technology (carbon capture and sequestration, CCS).
(4) LNG facilities.
(5) Next generation (cellulosic) biofuels (instead of agrofuels).
(6) Building wind energy distribution (transmission).
(7) Solar research to make solar energy commercially viable.
(8) Building a hydrogen fleet and infrastructure.
(9) Boosting product and urban planning energy-efficiency.
(10) Instituting a national cap-and-trade system from the necessary federal framework for measuring and controlling greenhouse gases to the trading market.
(11) Energy education from school programs to consumer information.
(12) Considering new nuclear, geothermal, hydropower and undiscovered possiblities.

Why are they taking notice? Because there's really only one way to meet rising energy demand over the next half century. (click to enlarge)

QUOTES
- Hofmeister, on LNG: "We face enormous difficulty in siting LNG regasification terminals, especially on the East and West Coasts…It will take ongoing education and forward-looking policymakers to make this clean energy source accessible."
- Hofmeister, on a national cap-and-trade system: "…a national climate change policy makes much better sense than dozens of regional policies or 50 state policies."
- Hofmeister, on energy security: "My goodness, what a mess we're in when it comes to national energy security…The last time America had an energy strategy…was World War II…The strategy was simple: Produce all the energy the nation can produce and ration it to consumers in order to support the war effort…It's time now for the nation…to approach energy security in a bipartisan nationally led model, such as we do with homeland security and economic security."