Shell and Brunei have a long and rich history together, dating back over 80 years. It’s a history that illustrates the importance of working together and of using innovation and technology to make the most of precious energy resources. The partnership between Shell and Brunei has helped make the Sultanate one of Asia’s most important producers of oil and gas and a reliable supplier of energy supporting the region’s rapidly growing economies. And of course the income from oil and gas means that Brunei has one of the highest GDPs per capita in the world. Like Shell, Brunei has a tradition as an energy pioneer. Brunei LNG began operating one of the world’s first large-scale liquefied natural gas facilities back in 1972. Over the subsequent 40 years, Brunei has safely delivered more than 6,000 LNG cargoes, mainly to Japan and Korea, underpinning the energy security of both countries.

1. THE NATURAL GAS
REVOLUTION: TRANSFORMING
ASIA'S ENERGY LANDSCAPE

2. Speech given by Malcolm Brinded, Executive Director,
Upstream International, at the ASEAN Energy Business Forum,
Brunei, September 21, 2011.
Growing population levels and economic growth are driving
rising energy demand in Asia and across the world. In this
speech, Malcolm Brinded, Executive Director of Upstream
International at Royal Dutch Shell, describes how the current
revolution in global gas supplies, driven by the opening up of
tight gas and shale gas sources and the rapid expansion of
liquefied natural gas (LNG), will help Asia develop a secure and
sustainable energy supply. By displacing coal-fired power,
natural gas is the quickest and cheapest way to cut emissions
of CO2 and harmful local pollutants in the power sector.
Malcolm also describes some of the steps Shell is taking to
ensure that the industry’s operations are conducted safely,
especially in the context of Asia’s growing deepwater oil and
gas industry.

3. The natural gas revolution: transforming Asia’s energy
landscape
Good afternoon. It’s a great pleasure to be back in Brunei.
Shell and Brunei have a long and rich history together,
dating back over 80 years. It’s a history that illustrates the
importance of working together and of using innovation and
technology to make the most of precious energy resources.
The partnership between Shell and Brunei has helped make
the Sultanate one of Asia’s most important producers of oil
and gas and a reliable supplier of energy supporting the
region’s rapidly growing economies.
And of course the income from oil and gas means that
Brunei has one of the highest GDPs per capita in the world.

4. Like Shell, Brunei has a tradition as an energy pioneer. Brunei
LNG began operating one of the world’s first large-scale
liquefied natural gas facilities back in 1972. Over the
subsequent 40 years, Brunei has safely delivered more than
6,000 LNG cargoes, mainly to Japan and Korea, underpinning
the energy security of both countries.
And in the past decade, the Champion West field, 90 km
offshore of Brunei, was the location of major breakthroughs in
our Smart Fields™ technology. It combines sensors and
powerful computer systems with traditional reservoir
controls, which can help to increase the amount of oil
recovered from a field by as much as 10%, so contributing to
the extension of Brunei’s production by many years.

5. In fact, I was working in Brunei at the time we discovered the
Champion West Field, way back in 1975. Because of its
complexity, it lay untapped until Smart Fields™ technology was
ready to bring it on-stream nearly 30 years later.
The kind of deep partnership and pioneering spirit so evident in
Brunei will increasingly be needed to address the region’s and
the world’s growing energy challenges.
And I am aware that considerable government thought has gone
into guiding and preparing an Energy White Paper to ensure
long-term energy security for Brunei, and to establish a resilient
energy industry to support the Wawasan Brunei 2035.

6. Today, I’ll also look ahead to the future. And I’ll focus on two
main themes:
First, I’ll describe the vital contribution of natural gas in meeting
surging long-term demand for energy, while safeguarding the
environment for future generations.
We are currently witnessing some truly astonishing
developments in the global and regional gas markets. Most
important, they give ASEAN countries and the wider Asia region
the opportunity to reduce their dependence on coal-fired power,
with all its environmental disadvantages.
Second, since oil will remain front and centre in the global
energy mix until well into the second half of this century, and
since Asia’s deep-water resources are set to make a growing
contribution – I’ll also explain why safety must remain the
industry’s overwhelming priority in the region.

7. The regional and global energy challenge
So, first, the big picture.
The reality is that it’s still too early to assess how this year’s
tragedy in Japan might affect the long-term evolution of the
global energy system, and the role of nuclear power. Suffice to
say, the energy industry must continue to do all it can to help
the country recover from the terrible events of March.
Nevertheless, there are some future trends that we can be sure
about.
Global energy demand could double or even triple in the first
half of the century if the emerging economies follow historic
patterns of economic development.
And Asia’s economies are achieving some remarkable growth
rates amid strong global macro-economic volatility.

8. GDP growth this year is expected to be more than 9% in
China and to approach 8% in India. And among the ASEAN
5, it’s forecast to run at more than 5%. Contrast that with
the European Commission’s latest growth forecast for the
EU in 2011: 1.7%.
But with economic success comes rising levels of energy
consumption. Tens of millions of people are buying their
first cars, televisions and refrigerators. And governments
are taking steps to lift their poorer citizens out of real
energy poverty. It’s a sobering thought that nearly 1.5
billion people around the world still lack access to
electricity.
Asia’s rapidly growing cities will be another important
factor. In part that’s because per capita energy
consumption tends to be higher among urban dwellers,
again because of higher levels of prosperity.

9. According to a new report on urbanisation by Shell’s scenarios
planners, energy consumption in China’s cities is expected to
more than double in the next decade-and-a-half – in Indian cities
it could triple.
For perspective, I should add here that the amount of energy
consumed by cities is also determined by their density: more
sprawling, less compact cities tend towards higher levels of per
capita energy consumption.
To keep pace with all this demand, Asia and the world will need
to invest heavily in all energy sources, from oil and natural gas to
biofuels, nuclear power, solar and wind.
According to the IEA, as much as $33 trillion of cumulative
investment in the global energy supply infrastructure will be
needed between 2010 and 2035. For perspective, that’s around
$25 billion every week.

10. At the same time, countries in Asia and beyond are attempting to
make the journey to a more sustainable energy system. For
example, the Chinese government wants to deliver a 17% reduction
in CO2 emissions per unit of GDP as part of its 12th Five Year Plan.
According to the consensus of climate scientists, the concentration
of CO2 in the atmosphere should be limited to 450 parts per million
to avoid levels of global warming with significant negative
consequences.
On some estimates, they have already passed the 390 ppm
mark, and continue to rise at an annual rate of 2 ppm. The reality is
that the world is set to overshoot the 450 ppm target: the collective
focus must now be on limiting the extent to which it does so, while
giving a more prominent place on the policy agenda to the challenge
of adapting to the consequences of climate change.

11. Nevertheless, at Shell, we think that renewable
sources could supply up to 30% of global energy by
2050 – up from 13% today. That would represent a
shift of truly historic proportions, given the
financial and technical constraints facing new
energy sources. But even so it also means that
fossil fuels will continue to meet around 60% of
demand and nuclear the remainder.
So a sustainable energy system will not just be one
in which renewable energy sources meet a growing
share of demand. Cleaner fossil fuels, such as
natural gas, must also play a more prominent role.

12. Natural gas: critical to Asia
So the dramatic expansion in the world’s natural gas supplies
could not be more well-timed or more welcome.
Natural gas will not just be a reliable and abundant fuel for Asia’s
remarkable economic growth. As the cleanest burning fossil
fuel, it can also make an immediate impact in cushioning the
environmental impact of the region’s rising energy consumption.
That’s already widely appreciated in ASEAN countries, where
gas-fired power met half of new electricity demand between 2000
and 2009.
But there’s an even bigger prize at stake: displacing coal fired
power with natural gas is the fastest and cheapest route to CO2
emissions reductions in the global power sector over the next 20-
plus years.

13. Coal was responsible for as much as 44% of energy
related CO2 emissions in 2010. And it remains a central
part of the energy mix in many Asian
countries, accounting for around 70% of China’s primary
energy mix, for example.
In the run up to 2020, the incremental increase in CO2
emissions from coal-fired power in China and India alone
is expected to be roughly double the increase from the
entire global transport sector.
Natural gas is the quickest way to tackle these emissions
because modern gas plants emit half the CO2 emissions
of new coal plants, and up to 70% less CO2 than the old
steam turbine coal plants, of which there are still
hundreds in Asia, Europe and the US.

14. And natural gas capacity is faster and less costly to install than any
other new source of electricity. They require only half the capital
cost of coal per MWh; one-fifth the cost of nuclear; 15% of the cost
of onshore wind, and less than one-tenth the capital cost of
offshore wind power.
But when it comes to coal’s heavy environmental cost, CO2
emissions are not the only game in town. We must also address
local pollutants such as nitrogen oxides, sulphur dioxide and
particulates – all emitted by coal-fired power in heavy quantities,
with damaging consequences for air quality, and thus human
health, in many Asian cities.
Natural gas offers immediate and substantial benefits here, too.
Analysis carried out by various organisations, including the US
National Energy Technology laboratory suggests that a combined
cycle gas plant emits negligible particulates. And compared with a
supercritical pulverised coal plant emits:

15. • Around 20 to 40 times less SO2
• Almost 10 times less NOx
• While consuming around half the volume of water per
MWh.
Despite all this, some people worry that gas-fired power
only has a temporary role to play in the era before
renewable energy sources take over – in other words, that it
is just a transition fuel.
But the reality is that natural gas will play a critical role in a
sustainable energy system for many decades beyond 2030.
Why is that?
Unlike many electricity sources, gas-fired power can also be
switched on and off with relative ease. That makes it the
ideal and necessary ally of the intermittent power generated
by wind, solar and other renewable sources.

16. And over the longer term, carbon capture and storage
technology could reduce emissions from gas-fired power
close to zero. Here, we must remember that CCS technology
will be more effective in combination with gas than coal,
because it then needs to deal with only half the CO2
emissions, and requires only 50% of the underground storage
space.
All of which makes gas not a transition fuel, but a destination
fuel, with a permanent role to play at the heart of a low-carbon
economy.
And natural gas’s advantages as a transport fuel are also now
coming into sharp focus, especially against a backdrop of
rapid urbanisation.
For one thing, natural gas can provide a cleaner source of
power for Asia’s growing stock of electric vehicles. That would
also help to ease many Asian countries’ rising oil import
needs.

17. But there’s also growing momentum and excitement about
the potential of LNG in heavy vehicles, such as trucks,
ships, barges and trains. In part, that’s because it can help
to reduce CO2 emissions. It’s also because it’s a smart
way to reduce local emissions of sulphur oxides and
particulates, while meeting sharply rising demand for
transport fuels in Asia.
More policymakers around the world are now waking up to
the many advantages of natural gas, as global supplies
continue their remarkable expansion. Total worldwide
recoverable gas resources are now estimated as being
equal to 250 years of current production.

18. As a result, according to the IEA’s new gas
scenario, between 2008 and 2035 gas demand could
increase by:
• 60% globally;
• nearly 8 times in China;
• 5 times in India;
• while doubling in the Middle East.
Nevertheless, there are still lingering doubts in some
quarters about whether global gas supplies can really
expand fast enough to meet projected demand.
So let’s zero in on the astonishing developments taking
place in the global gas markets, and what they mean for
Asia.

19. Tight gas, shale gas & coal seam gas
And let’s start with the opening up of vast new tight gas, shale gas
and coal seam gas deposits – all abundant gas resources trapped
in very tight rock.
As recently as ten years ago the industry considered them all too
difficult and costly to access. But there has been huge progress in
drilling and fracturing the rock to release this gas, so tapping these
resources profitably, as well as safely.
I’m sure we’re all familiar with how this has prompted a stunning
turnaround in North America’s gas outlook. The continent now has
more than a century of supplies at current consumption rates, just
a few years after it was feared that long-term production decline
had set in.

20. What’s becoming clearer is the potential for replicating
the gas production boom in the rest of the world. China
and Australia are most likely to trigger the next wave of
the revolution, but South Africa, Indonesia and India also
hold significant shale and coal seam gas deposits.
China’s deposits of these gas resources are potentially
enormous. For example, its technically recoverable shale
gas resources could be 50% bigger than those of the US,
according to a report published earlier this year by the
United States Energy Information Administration.
This could play a major role in helping the Chinese
government to boost the share of natural gas in the
country’s energy mix, reducing its dependence on coal.

21. Shell is proud to be working with CNPC on several projects to tap these
resources. These include the Changbei tight gas field in Shaanxi
Province, which supplies gas to Beijing and other cities in eastern China.
While there’s no doubt abundant gas reserves can be made available
across the globe, society should not underestimate the highly complex
technology and substantial investment required to tap them in a safe and
reliable way.
Global LNG market
The second pillar of the global gas supply revolution has much deeper
roots in Asia and especially here in South-East Asia.
Of course, I’m talking about the global LNG market.
LNG’s flexibility has been thrown into sharp relief by the industry’s
response to the tragedy in Japan, with cargoes diverted at short notice
from a range of locations, including Russia, Australia, Korea and Nigeria,
while others, including Brunei, rescheduled maintenance to maximise
supplies.

22. Brunei, Indonesia and Malaysia are deeply woven into the fabric of the
LNG industry, as major long-term suppliers. And continued exploration
will open up new opportunities in all three countries.
Today, the industry’s remarkable expansion continues apace, linking
new suppliers with new customers, and allowing gas supply to track
demand as it shifts and fluctuates around the world. At Shell, we think
global LNG demand could double this decade, with Asia the biggest
driver.
For example, with gas demand in ASEAN countries rising fast, some
are now poised to become LNG importers for the first time, with new
LNG trade routes supplementing the region’s pipeline infrastructure.
The growth in LNG supplies is equally impressive. In the past two
years alone, global liquefaction capacity has increased by more than
100 bcm (75mt), or around 40%.

23. Qatar, the world’s largest LNG supplier, has provided a
sizeable chunk of that and now accounts for more than one-
quarter of global liquefaction capacity.
In 2011, it has brought another giant LNG train on-
stream, taking its total LNG export capacity to an enormous
102bcm (77 mtpa). On the basis of existing long-term
contractual commitments around 40% of Qatar’s LNG is
reserved for Asian markets. But that share could rise to as
much as half.
The story of the next decade will also be one of massive
innovation, rapid global and regional LNG expansion – and a
few surprises.
For example, even North America is now preparing to
become an LNG exporter – and who would have seen that
coming ten or even five years ago?

24. Earlier this year, the US Department of Energy gave the go-ahead to
LNG exports from the country’s Gulf Coast. Thanks to the United States’
tight gas production boom, as little as 6-7% of its enormous LNG import
capacity (180bcm+) was used last year.
Overall, LNG supplies will grow at an annual rate of nearly 6%
throughout this decade. And of the new global LNG capacity predicted
to come on-stream between 2012 and 2017, more than three-quarters
has been earmarked for Asian markets.
So where will the new LNG come from? Much of it will be produced in
Australia, which is emerging as the next major force in the global LNG
market.
The country has around half a dozen large-scale LNG projects planned
or under construction. These include Arrow Energy, Shell’s joint venture
with CNPC, which plans to convert coal seam gas to LNG, making this
abundant gas source exportable to China and other Asian countries. By
around 2020 Australia’s LNG export capacity could be nearly 120 bcm
(90 mtpa).

25. Floating LNG
Asia will also benefit from the LNG’s industry’s latest major technological
breakthrough, when we start to produce and liquefy natural gas at
sea, opening up large-scale deposits that would otherwise remain stranded
because they are too costly to tap.
In May, Shell announced the final investment decision to build a floating
liquefied natural gas facility to develop our Prelude gas field – 200
kilometres off Australia’s north-west coast. This giant Floating LNG plant will
cool the produced gas into a liquid on the spot.
The largest offshore facility in the world, the Prelude facility will be longer
than four football fields laid end to end. And when fully equipped, and with its
storage tanks full, it will weigh roughly six times as much as the largest
aircraft carrier.
This size gives it stability in the open seas. Indeed the facility has been
designed to withstand a one in ten thousand year storm producing a 3
second gust of 390km/hr wind – quite a bit worse than Hurricane Katrina.

26. The Prelude Floating LNG facility will have LNG capacity
of 4.8bcm (3.6mtpa): that’s equivalent to more than 10%
of South Korea’s total natural gas consumption last year.
We think that there are stranded gas deposits totalling
some 6.8-8.2 tcm (240-290 trillion cubic feet) around the
world. That’s equivalent to more than double total
worldwide natural gas demand in 2008.
So having designed the first FLNG facility, we hope to
develop and build many more around the
world, including in Asian waters.
So these are all ways in which the global gas supply
revolution will accelerate in the years ahead - and they’re
all reasons why Asian countries can back natural gas
with growing confidence.

27. Industry safety in Asia
Despite the considerable promise of natural gas, oil will clearly remain
central to the regional and global energy mix for many decades.
Indeed, at Shell we think that global demand for crude oil could rise
by nearly one-fifth by 2030, driven by rising car ownership in
emerging economies.
Satisfying this demand will be no easy task, since readily accessible
energy resources are dwindling. So the industry must continue to
safely access oil trapped in hard-to-reach locations, including in
Asia’s many discovered and prospective deepwater fields.
Shell, for example, is delighted to be the operator of the Gumusut field
in offshore, just around 120 km from here, where we have a 33% share
in the development. And Brunei Shell Petroleum is proud to have
drilled Geronggong, Brunei’s first commercial deepwater discovery.
Both of these fields lie in over 1,200 metres of water.

28. Deep-water developments are increasingly common and the
need to execute them safely remains vital.
The Deepwater Horizon in the Gulf of Mexico last year was a
tragic reminder that constant vigilance is needed to ensure safe
operations.
At Shell, this incident prompted a thorough review of safety
procedures and standards -- particularly in the most
challenging deep water conditions. The assessment included a
review of our operating practices, training requirements and the
frequency of critical equipment tests.
We found that our standards were already industry-leading, but
we also made some adjustments, such as reinforcing the safety
component of our mandatory training classes for well
engineers.

29. Beyond our own practices, we are also working with
industry associations to promote high standards at all
companies, with the aim of reducing the likelihood of an
accident.
While preventing accidents is always the first priority,
one clear lesson from the Gulf of Mexico spill is that the
industry must increase capability to intervene in the
event things go wrong. Several companies, including
Shell, have already built additional containment
equipment designed to cap wells in deep water and
capture leaking oil.
Shell is also part of a consortium that is building a $1
billion rapid response system designed for use in the
Gulf of Mexico.
In addition to these efforts, we’re working closely with
industry partners and regulators worldwide to enhance
coordination and ensure that capping and containment
equipment is quickly available, wherever it is needed.

30. With eight other oil and gas companies, we are detailing the
technical requirements for equipment for use globally outside the
Gulf of Mexico that is capable of being flown to the site of a leaking
well on short notice. A team of about 40 people led by Shell is
looking at the industry’s capability to cap wells, as well as at
hardware to apply dispersants underwater to break up oil before it
reaches the surface.
Current plans call for completing this first phase of work by the end
of 2011.
Conclusion
Let me sum up.
Coal remains by far the biggest threat to all our ambitions for a
more sustainable global energy system. And with the surge in
worldwide gas supplies, Asia has a wonderful opportunity to tackle
its heavy environmental burden.

31. The region is in the frontline of the next wave of the global
supply revolution, as major new gas resources are opened
up and the LNG market continues its breakneck
expansion. This will allow Asia to move with confidence
towards a more secure, sustainable and economic energy
future, especially in the power sector.
But as the industry ramps up production of oil and gas to
satisfy sharply rising demand across the region, we must
maintain a relentless focus on safety and achieving the
very highest operational and environmental standards.
Thank you.