03/08/2009 - 16:05

Shell boss warns of global supply crunch

03/08/2009 - 16:05

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Shell Australia chairman Russell Caplan has warned the world faces an energy supply crunch by 2015 if solutions are not found soon to the conflicting issues of rapid demand growth, dwindling supplies and the need to lower greenhouse emissions.

Shell boss warns of global supply crunch

Shell Australia chairman Russell Caplan has warned the world faces an energy supply crunch by 2015 if solutions are not found soon to the conflicting issues of rapid demand growth, dwindling supplies and the need to lower greenhouse emissions.

Speaking at a CEDA luncheon in Perth, Mr Caplan warned that despite the temporary impact of the global slowdown, energy demand would continue to grow more rapidly than the world's current ability to increase conventional supply.

With the world's population predicted to rise by 50 per cent to 9 billion by the middle of the century, it was therefore imperative that all potential sources of energy - including conventional fossil fuels such as oil, coal, and gas as well as uranium and renewable energy - are utilised to their maximum potential.

"Each of those sources will need to grow to meet all that extra demand - we will need it all," Mr Caplan said.

But meeting surging demand at the same time as meeting the vital requirement of lowering greenhouse emissions would require "truly massive investment" in the order of trillions of dollars, he said.

And that in turn required an integrated response to supply, demand and environmental concerns, including an enlightened approach from government toward encouraging the huge investment required.

Failure to do so could put the world's energy supplies on the critical list within six years, he said.

"To invest on this scale requires access to capital and sufficiently stable market conditions that allow reasonable assumptions about returns over the very long lives of these expensive energy-creating assets," Mr Caplan said. "And there's a danger that if we don't make enough large investments soon, the world will face an energy supply crunch around the middle of the next decade."

Mr Caplan said a massive expansion of Australia's LNG industry, utilising WA's vast natural gas reserves and coal gasification in Queensland could make Australia the key player in providing energy security in the entire Asia Pacific region.

"There are some who argue that by exporting our energy resources, Australia diminishes its own energy security. This is a short-sighted position in my view," he said. "In supplying LNG to our neighbours, we can lead in enhancing Asia's energy security and stability, and that's good for Australia as well."

But Mr Caplan said Australia needed to retain its reputation for stable political and fiscal regimes to maximise investment in LNG capacity and carbon-capture and storage technology.

In a veiled swipe at proposed changes to taxes on condensate production at the North West Shelf, Mr Caplan warned it was risky to alter fiscal regimes for major projects after the investment has already been made.

"Changes to fiscal arrangements after the upfront investment in an LNG project has taken place can fundamentally alter the economic viability of assets. They can also alter the perceptions of risk associated with future investments - which potentially means the loss of new investment opportunities to Australia," he said.

"If investors don't have long-term confidence in the stability of the tax regime, potential investments in major projects will be severely compromised."

Similarly, security of tenure was also vital to encourage the significant investment in exploration needed to identify potential development opportunities, and retention leases should not be revoked if the holder was making "genuine efforts" to determine the viability of the contained oil or gas resources.

 

 

 

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