Shell chief warns that crude oil prices will remain ‘volatile’ in 2015 – and attacks ‘naive’ green groups

 

Shell Chief Executive Ben van Beurden
Shell Chief Executive Ben van Beurden

By DARA BUTTERFIELD

The head of global oil giant Shell last night warned that crude oil prices will to remain volatile throughout 2015.

But in a wide-ranging and much food-for-thought speech, Ben van Beurden also described calls by environmental groups calling to phase out fossil fuels as “naïve” and called for the  oil industry to make its voice heard on sustainable energy.

Speaking at the International Petroleum Week conference dinner in London, Van Beurden said: “The market will remain volatile in 2015, if only because for now, OPEC shows no sign of wanting to resume its role as swing supplier.

“Yet, for a sustainable energy future, we need a more balanced debate. The fossil fuels out, renewables in’ mantra is – too often – what it boils down to. Yet in my view, that’s simply naïve. Provoking a sudden death of fossil fuels isn’t a plausible plan.

“In the past we thought it was better to keep a low profile on the issue. I understand that tactic, but in the end it’s not a good tactic.

“The debate about the future of energy is not always very balanced, partly because we keep such a low profile and there’s so little dialogue within our sector.

“We have to make sure that our voice is heard by members of government, by civil society and the general public. Our sector needs to enter into the public debate alongside other credible parties — ranging from academics to non-governmental organisations and policy makers. Together, we can offer some realism and practicality to the debate.

“Making our voice heard — this should be our goal in the run-up to Paris <UN Global Climate Change Summit in December 2015>. The world will benefit.”

When asked last night by Scottish Energy News about what will happen in 2015 to N. Sea crude oil prices, van Beurden said:

 “I can’t predict the future, but oil demand is clearly linked to economic growth. Compared to last year, the International Monetary Fund expects the global economy to grow. So, global oil demand is expected to grow as well.

“But seeing today’s prices, supply will probably not keep pace with this growth. It may even decline, as prices are close to cash costs, according to consultants like Wood Mackenzie. As a result, energy companies could shut down some of their existing production.

“If the brighter economic outlook becomes reality, the market could tighten, and this would support higher prices. But two questions remain. Firstly: How far and how long will prices fall? Secondly: How quickly can prices recover?

“A rapid recovery could occur if projects are postponed or even cancelled. This would lead to less new supply – not so much now, but in two or three years. Combined with economic growth, the market could tighten quickly in this scenario.

“But what if the largest supply growth engine, US shale oil, proves to be resilient in the face of falling prices and the markets remain well-supplied? In that case, with moderate economic growth, prices could stay low for longer.

 “Either way: The market will remain volatile in 2015, if only because for now, OPEC shows no sign of wanting to resume its role as swing supplier. But for the longer term, I see no change to fundamental drivers of oil markets such as rising demand and the need for new supplies.

“The outcome of the political process is uncertain, but the trends behind it are unmistakeable. Even more than the oil price, these trends will shape the future of the industry over the coming decades.

Yes, climate change is real. And yes, renewables are an indispensable part of the future energy mix. But no, provoking a sudden death of fossil fuels isn’t a plausible plan.

“Today, three billion people still lack access to the modern energy many of us take for granted. This isn’t just about having a dustbuster or a television set. Energy access often makes the difference between poverty and prosperity.

“At the same time, demand is growing. There will be more people on this planet, more people living in cities and more people rising from poverty. They will all need energy if they are to thrive.

“The issue is how to balance one moral obligation, energy access for all, against the other: fighting climate change. We still need fossil fuels for a lower carbon, higher energy future.”

Meanwhile, John Hutchinson, Managing Partner at Epi-V – a London-based private equity firm which invests in growth oil-stock companies – said: “The future of North Sea oil is at risk. We need a reduction in taxes and a simplification in the North Sea tax regime. Lord Browne is only the latest in a growing number of senior figures to speak out and the calls for action are becoming so loud the Government can’t ignore them.

 “The Government has to address the toxic combination of ageing fields, rising production costs and reduced oil price environment that is having such a damaging impact on the North Sea oil and gas industry. And it can do that quickly and simply through reducing tax.”

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