Shell projects natural gas could become world’s energy backbone

Natural gas could become the backbone of the world’s energy system within two decades, displacing coal as a major electricity source and helping to trim global greenhouse gas emissions, Royal Dutch Shell predicted Thursday.

In another scenario unveiled by Shell, high energy prices could unlock more expensive resources and technologies, driving solar power to become the dominant power source by the 2060s.

But neither projection will allow the world to curtail enough heat-trapping greenhouse gas emissions to limit temperature rise to 2 degrees celsius, which is considered a major tipping point for global climate change, said Jeremy Bentham, the head of Shell’s scenarios team.

Shell released both forecasts as part of its 40-year-old “New Lens Scenarios” program, which began in the 1970s with a prescient prediction of a global oil crisis. Like the energy supply and demand modeling done by other major oil companies, the scenarios are designed to explore how policy and business decisions today will unfold over decades.

The scenarios “highlight the need for business and government to find ways to collaborate, fostering policies that promote the development and use of cleaner energy and improve energy efficiency,” said Shell CEO Peter Voser at the Center for Strategic and International Studies. At Shell, the forecasts force the company “to consider different points of view.”

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Colorfully named “mountains” and “oceans,” the two scenarios hinge on sharply different government involvement in dictating energy and other policy. Government plays a strong role in the more rigid “mountains” forecast, where power is concentrated at the top, partly reinforcing the status quo. In the more fluid “oceans” scenario, market forces — not government policies — are the driving force behind the emergence of expensive technologies and resources.

Natural gas would flourish under Shell’s mountains model, which also predicts a major transformation in the transportation sector, with trucks and cars largely powered by electricity and hydrogen. That change, along with more electric power generated by natural gas, the rise of still-developing technology for capturing carbon dioxide emissions and growth in nuclear to 30 percent of power supply by 2060, would help keep greenhouse gases in check.

Still, modest demand for liquid fuels would temper oil prices, and relatively moderate energy prices would “lead to high-cost resources being left in the ground,” Shell predicts in its mountains model. That seems counter to  Shell’s long-term commitment to harnessing oil under U.S. Arctic waters, an initiative that already has cost billions.

Shell on Wednesday announced it would “pause” its Arctic drilling program this summer, providing time for its rigs to be repaired, an emergency spill response system to be honed and a broad review of the 2012 operations to conclude.

Under the mountains outlook and a “generally lower price trajectory, there are going to be a lot of pressures around developing (expensive) resources,” Bentham said. So the Arctic “is an attractive area to develop, but a trickier area.”

Voser stressed that Shell views its U.S. Arctic quest as “a multi-year exploration program,” with development potential in the second half of the next decade. Given those long timelines, “we will take the time to do this right, in order to be the responsible operator in a multi-year exploration program,” Voser said.

The oceans scenario envisions a rise in the use of fossil fuels globally, with coal continuing to play a big role in generating power worldwide. Increasing oil prices would help sustain drilling in even harsher environments, including the Arctic and deep-water frontiers, under the oceans model.