In the transition to sustainable energy, oil and gas will, for the time being anyway, remain indispensable. But if we want to keep meeting growing demand, and responsibly, innovation simply must be accelerated. To drive the necessary innovation and technology, TNO, Shell and Siemens have set up the Oil & Gas Reinvented Community. To learn more TNO Time talked to Shell’s Chief Technology Officer Yuri Sebregts and TNO’s Director Gas Technology René Peters.
Fossil fuels are finite, CO2 emissions are changing our climate and wind and solar power look like viable alternatives. Have oil, coal and gas almost had their day?
Yuri Sebregts: “Certainly not. We’re right in the middle of an energy transition in which wind and solar energy, in particular, are on the rise. At the same time the demand for energy is high and increasing quickly, as a result of the rising level of welfare of very many people. All this calls for both reliable and affordable energy. And with natural gas, in particular, it’s possible to limit emissions.”
And that energy also has to be sustainable?
Yuri Sebregts: “The current energy system will lead to even more CO2 emissions. Air quality is also suffering, such as in China where a lot of energy is still produced by burning coal. But we can hardly inhibit the quality of life of so many people, so we’ll need to aim for more energy and less CO2.”
With the biggest solar farm in the Netherlands, The Dutch Island Ameland wants to be completely self-sufficient in renewable energy by 2020. Is that the right way to go?
Yuri Sebregts: “Ameland is indeed an impressive project. But many sectors, such as heavy transport, shipping, aviation and industry, still rely on traditional sources of energy. Ameland won’t solve that. Solar and wind power can’t provide enough energy for heavy industrial applications, such as the production of steel and cement. Cars might be battery powered at the moment, but I cannot see aircraft flying on batteries anytime soon. They will still need kerosene, with perhaps biofuels in the medium term.”
René Peters: “No, there’s more to energy transition than switching off a coal-fired power station and building a wind farm. Oil and gas will play a key role for a long time to come.”
"Solar and wind power can’t provide enough energy for heavy industrial applications"
What does Shell see as tomorrow’s most promising alternative and renewable energy sources? And when will they start impacting the traditional business of Shell, which is already more a gas company than oil?
Yuri Sebregts: “We are an energy company. True, the recent acquisition of BG accelerates the shift from an oil to a gas company, but we deploy our innovation resources on many different alternatives. These include using Liquefied Natural Gas (LNG) as a cleaner alternative fuel for heavy road transport and shipping, for example, and hydrogen for cars. In Germany, to promote the use of electric vehicles Shell is participating in a joint venture with six parties to set up an extensive network of hydrogen filling stations. And in Qatar we are producing gas-to-liquids (GTL), as an alternative to conventional diesel in existing diesel engines in ships, trucks and buses. We’re also investing in new technologies for producing biofuels from crop residues.”
But LNG still produces CO2 emissions.
Yuri Sebregts: “That’s true, but only half as much as coal. And gas should be seen as a transitional solution. In many applications for which a good and affordable alternative is not available, such as heavy transport, for example, gas is a viable transition fuel. Incidentally, Shell also invests heavily in CO2 capture and storage.”
René Peters: “Gas is a better fuel than oil, but we still need oil. There are no aircraft that can fly on gas. For the foreseeable future, oil will also be indispensable in the petrochemical industry, although here too, there is a discernable shift to gas and bio-based chemistry.”
"In many applications for which a good and affordable alternative is not available gas is a viable transition fuel. Incidentally"
Thanks to having better insulation, more and more households in the Netherlands are using less and less gas. And when it comes to electricity, they’re even feeding back into the net, thanks to the use of solar panels and wind turbines. Will we actually need central, large-scale power generation in future?
Yuri Sebregts: “But most households are still connected up; they depend on coal- or gas-fired power stations if the sun doesn’t shine. A zero meter reading means no connection at all to the grid. Security of supply is essential and that calls for substantial investments, which complicates the issue. And it’s not one global transition that’s taking place; there are many different transition processes in different countries and regions. This can be due to climatic reasons, for example how much wind and sun there is and the configuration of the applicable energy system: in other words, demand and the available resources. And the departure point for a wealthy country like Germany is very different to that of a country like India, where energy consumption is expected to rise sharply.”
Could the whole energy supply infrastructure one day suddenly be turned upside down by a disruptive technology, perhaps developed by Tesla, Google or Apple, which are now investing billions in sector-independent initiatives like cars?
Yuri Sebregts: “Disruption is good; but you cannot plan for it. At Shell we have freed up an independent team to conceive new, out-of-the-box ideas. Called ‘GameChanger’, it has its own freely accessible website. New technological innovations are on their way, which we hope will be both relevant and affordable. But they’ll need to be quickly scalable if they are to be commercially viable. Shell must follow economic principles because we have to meet the expectations of our shareholders. We also have to make future energy products accessible to our customers. We are shareholders in wind farms in the US and the Netherlands, as well as a biofuel company in Brazil. But wind and solar energy account for just one per cent of energy worldwide.”
How can that share be quickly ramped up? Should the pace of innovation be accelerated, under pressure of the Paris climate agreements?
Yuri Sebregts: Those agreements are a good starting point for governments and societies to concur on effective policies and cultural changes that can lead to low-CO2 choices for both industry and consumers. I think there should be more incentives. We are strongly in favour of CO2 pricing. Without it there will still be insufficient incentive for consumers to buy energy with lower CO2 emissions and to be more economical with energy. This is why producers have so little incentive. We need economic incentives.”
"Without CO2 pricing there will still be insufficient incentive for consumers to buy energy with lower CO2 emissions and to be more economical with energy"
Shell does a lot of research and development with third parties, like TNO and Siemens in the Oil & Gas Reinvented Community. Does this mean that Shell doesn’t have enough knowhow in-house?
Yuri Sebregts: “Challenges in energy transition are so big and complex that no company or institution can solve all the problems by itself. You have to do it with others.”
Shell is a global player with research centres in different parts of the world. As a Dutch knowledge institute, how important a role does TNO play in all this?
Yuri Sebregts: “We have three major technology hubs: Houston in the US, Bangalore in India and Amsterdam and Rijswijk in the Netherlands. TNO is an important research institute in the Netherlands, although we also collaborate with TU Delft, TU Eindhoven, as well as the universities of Utrecht and Groningen and others. TNO has lots of in-house capability, expertise and capacity, which is continuously refreshed and stimulated by other innovation users, namely other companies.”
What does the Oil & Gas Reinvented Community add to global research activities?
Yuri Sebregts: “That’s to be found in several areas. We want to drive innovation as broadly and as openly as possible, throughout the whole supply chain, from oil and gas extraction to reducing environmental impact and developing new energy technologies. This is how we hope to accelerate the transition.”
René Peters: “You can see it as a very broad and open collaboration between industry, research institutes, the government and other stakeholders to develop a European innovation network for the oil and gas industry. We’re facilitating the necessary integration.”
"The Oil & Gas Reinvented Community is a very broad and open collaboration between industry to develop a European innovation network for the oil and gas industry"
Are robotics a key focus area of the Oil & Gas Reinvented Community?
Yuri Sebregts: “Certainly. Robotics and other forms of automation are essential in oil and gas extraction. They make it safer, for example, in increasingly difficult-to-reach fields or deep-sea applications. You need standards to enable the necessary growth, to manage the risks and to explain them to regulatory bodies and governments. Breakthroughs can only be achieved with this kind of collaboration.”
René Peters: “There are still plenty of oil and gas reserves, but they are increasingly inaccessible. And at the same time you also have to keep environmental damage to a minimum. We’re making the point, in no uncertain terms, that the oil and gas industry is not the problem but part of the solution.”
So the solution definitely isn’t just to be found in renewable energy sources?
Yuri Sebregts: “For a long time to come there will be a hybrid role for both renewable and traditional energy sources. Some people try to polarise the dialogue between solar cells and hydrocarbons, but to make an affordable and reliable energy system possible they are complementary. For the time being anyway.”
Another focus area for the Oil & Gas Reinvented Community is offshore energy, where wind on the one side, and oil and gas on the other, literally come together.
Yuri Sebregts: “In the North Sea there is a great deal of infrastructure for extracting oil and gas. As you can imagine that existing infrastructure lends itself to the development of offshore wind farms. And depleted gas fields could be used for the temporary storage of wind energy.”
René Peters: “It means not having to dismantle all those rigs, and it’ll still be viable to extract what’s left of the gas from the seabed. Furthermore, if rigs use wind-generated as opposed to gas-generated electricity, they won’t produce harmful emissions. And there’s another huge advantage: by converting part of the drilling platforms to transformer stations wind farms can be positioned further offshore. In this way oil and gas are investing in tomorrow’s wind power, making it considerably cheaper. This will benefit us all because electricity transmission operator TenneT, which operates the wind farms, is 100 per cent financed with public money. Thanks to synergies between offshore and geothermal energy we are developing new technology and have a better operational license. More integration and balance in the total energy system, that, in a nutshell, is what the Oil & Gas Reinvented Community is all about.”
"Depleted gas fields could be used for the temporary storage of wind energy"