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CONTENTS

 

 

CLIMATE CHANGE - WHAT IS 2
A CAUSE FOR CONCERN 3
WHAT SHELL THINKS ABOUT CLIMATE CHANGE AND WHY 4
WHAT SHAPES OUR THINKING 5
ROLE OF GOVERNMENT 7
WHAT IS SHELL DOING ABOUT CLIMATE 8
REDUCING EMISSIONS OF GREENHOUSE GASES IO



Each of the companies within the Royal Dutch/Shell Group of companies is a separate and distinct entity. in this
report, the expressions Group and Royal Dutch/Shell Group are used to refer to the companies of the Royal
Dutch/Shell Group as a Whole. The words ?She/i?, ?We? and ?us? are used in some places to refer to the Group and in
others to an individual She/l company or companies Where no useful purpose is served by identifying it or one of
them more particularly.

 

 

 

CLIMATE CHANGE -WHAT IS 

Some solar radiation is reflected by the earth and the atmosphere

Solar radiation
passes through

the clear

atmosphere

.

Most radiation is absorbed by the EARTH
earth's surface and warms it

ases present in the

atmosphere, such as water

vapour, carbon dioxide and
methane, keep the earth warmer
than it would otherwise be by acting
as an insulating blanket and trapping
some of the sun?s rays - the natural
?greenhouse effect?.

The burning of fossil fuels such as
coal, oil and natural gas, together
with other human activities such as
deforestation, releases greenhouse
gases, especially carbon dioxide (C02)
into the air. Their concentration in
the atmosphere has been rising since
the industrial revolution. This has led

ATMOSPHERE

Infra-red radiation is emitted
from the earth's surface

 

to an increase in the greenhouse
effect.

There is concern that an enhanced
greenhouse effect will cause the
world to warm up. This could cause
a change in climate and local
weather patterns, possibly with
increased droughts, floods, storms
and sea level rise. The average
temperature of the earth has risen by
about half a degree Celsius over the
last century, possibly due in part to
human greenhouse gas emissions.

Some of the infra?red radiation

is absorbed and re-emitted by the
greenhouse gases.

The effect of this is to warm the
surface and the lower atmosphere

WHAT THE WORLD HAS DECIDED TO DO.

ost of the world?s nations were
sufficiently concerned to sign a
United Nations agreement, the
Framework Convention on Climate
Change in 1992. Industrial
countries agreed to reduce emissions
of greenhouse gases to the' level they
were in 1990, by the year 2000.
Very few countries will meet this
target.

At a conference in Kyoto (December
1997), stronger commitments under
the Convention were agreed. Rich

countries will be legally bound to
reduce their greenhouse gas
emissions by at least 5% on average
relative to 1990 levels by the years
2008 to 2012. This is the first real
step in what will likely be a series of
further international negotiations to
tackle the issue globally.

 

 

 

Combined global land and sea surface temperatures
A CAUSE FOR ONC ERN 1860?1997 (relative to 1961?90 average)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.50
0.40 
trend
3 0.30?
The temperature of the Earth has 0 20_
.
. . 0
been rISIng over the last century. 010? II
8 'tlill'vnll
II
The causes are not clear but TE 
030? I. I II
I I
040? II I
Atmospheric carbon dioxide concentrations and fossil fuel emissions '0-50 -
380 ?0'60 I I I I 
1840 1860 1880 1900 1920 1940 1960 1980 2000
A 360 6 emISSIons of greenhouse gases,
5 - 4 555) especially carbon dioxide, from
340 - 2 human activities have caused their
0 . .
- 53 8: concentrations In the atmosphere Increase.
I I I I I 
1850 1900 1950 2000
ii 300 Year
0 

280 . .
Atmospheric carbon diox1de concentrations and
260 global temperatures over the last 150 thousand years
800 1000 1200 1400 1600 1800 2000 Projection
Year
Present
We don?t know what the 360 <?day
consequences of this will be but the ?300
projected rise in carbon dioxide co $82955 in
. . . 0  2
concentratIons In the aIr far exceed (IE-J1 2 i :250 
. o- 
the levels the Ianet has seen In at - 
?2 9c 400-?
least the last 150,000 yearsThousand years ago

 

 

 

 

WHAT SHELL THINKS ABOUT CLIMATE CHANGE AND WHY

he balance of scientific evidence
Tsuggests a link between human
activities - especially the burning of
fossil fuels - and climate change.
There are still tremendous
uncertainties, which makes it difficult
to estimate the size, nature,
distribution and speed of any future

changes resulting from man's actions.

More research is clearly needed to
increase understanding of the
scientific, social, and economic
aspects of the problem.

But much is already known about
climate systems. At the very least,
mankind is carrying out a risky
experiment with the planet by raising

the levels of greenhouse gases in the
atmosphere to levels far above any
seen in the last 150,000 years or
more. We don?t know whether this
will be catastrophic, or whether it
might on balance be 
beneficial. But we do know that it is
in effect irreversible. We in Shell
share the concern over the possible
impacts of using fossil fuels. We
believe that prudent precautionary
measures are now necessary. The
emission limits for greenhouse gases
set in Kyoto provide the necessary
signals to encourage such measures.

 

?Despite the many remaining uncertainties about the nature and
the risks of the process [climate change], believe that there is now
suf?cient evidence to support prudent precautionary action. 

Cor Senior She/l Managing Director

 

WHAT SHAPES OUR THINKING

Our thinking on climate change -
especially on the action it

demands - is shaped by our view of
sustainable development and the
long-term energy scene.

We believe that affordable, clean and
reliable energy products are essential
to sustainable development: meeting
the needs of the present without
compromising the ability of future
generations to meet their own needs.

Fossil fuels supply around 85 per cent
of the world's primary energy needs.
They have brought tremendous
benefits to an ever increasing world
population through economic

growth. There are no alternatives
available now in sufficient amounts at
the right price to replace fossil fuels.
However, wind power and some
biomass (plant matter) sources are
already competitive with fossil fuels in
certain cases. We expect solar panels
that generate electricity
(photovoltaics) and other renewable
sources of energy to become
increasingly cost?effective over the
next decades.

We can draw these conclusions
because of our considerable
experience in making educated
guesses on what might possibly
happen in the future. We call this

 

process ?scenario building?. We
have developed two long-term
energy scenarios which cover the
next century and these have helped
us with our thinking on climate
change.

0 One scenario sees energy
consumption continuing to rise at
about one per cent a year less than
the growth in the world?s economy.
For the next 20 years the world
continues the current shift away from

fuels with a high carbon content (eg.

coal), towards lower-carbon fuels,
such as natural gas. After 2025
renewable energy sources start to
make an important contribution

because innovation continues to
lower their costs while dwindling
reserves lead to higher prices for oil
and gas.

0 The other scenario sees more
radical changes in energy
consumption. The world?s increased
needs are met with less energy and
fewer materials. This is because new
materials and different ways of
working allow a more efficient use of
energy. Examples are the growth of
information technologies (less need
to move goods and people) and
dramatically more efficient cars
(lower gasoline consumption).

ATMOSPHERE CONCENTRATION FOR TOTAL RESOURCE 

C02 

1000 -
950 -
900 
850 

Gas
Oil

Oil Shales

 

 

 

Heavy Oil
800 -
750 
700 
650 -
600 
550 
500 
450 

 

 

Bram


EU

 

360? Current

Uncoventional
Oil Gas

Coventional
Oil Gas

Coal

Note: Proven plus undiscovered resources at the 50% probability level

Source: based on 7995 SAR and Masters, 7994

Although these scenarios are very
different in their assumptions, they
agree on three important points:

0 The eventual consumption of most
of the world?s conventional oil and
gas, mainly because these fuels are
highly effective, convenient to use,
and easy to transport.

0 Use of coal will grow, but not to
the same level as some others would
suggest when oil and gas resources
are running down.

0 Carbon dioxide (COZ) emissions
could peak in the period 2020-2030,

at a level below that of many
long-term estimates made by others.
This would lead to stabilisation of
atmospheric COZ levels at just over
twice the pre?industrial level, close to
the ?target? proposed by the
European Union.

Our thinking is also influenced by the
difference in the amounts of C02
emitted when various types of fossil
fuels are burned.

We do not know exactly how much

if we were to burn all the fossil fuel
resources, the resulting levels of
carbon dioxide in the atmosphere
could be shown as in the chart

C02 in the atmosphere would be
dangerous. However, if all known
and probable reserves of fossil fuels 
of which coal is the biggest
component - were burned, it would
lead to C02 concentrations in the
atmosphere about twice the EU
target. On the other hand, burning
only the oil and gas resources would
lead to atmospheric COZ levels well
below this and not much above
today?s levels [see above chart].

If we are to stabilise concentrations

at a reasonable level, say twice the
pre-industrial level, we will have to be
much more efficient in our use of
energy. It is likely that we will
eventually have to choose oil, gas
and renewables, and perhaps even
nuclear, in preference to coal. We
may also find effective ways of
capturing and disposing of C02 from
combustion gases in some cases.

 

ROLE OF GOVERNMENT

overnments have an important
role to play in setting the policy
frameworks that will help deal with
the climate change issue.

Governments should consult with
industry and others on how to
achieve their national commitments
to greenhouse gas reductions
without undermining industry's
competitive position. They should
consider all the policy options open
to them. Policies selected should:

0 Work with the market, not against
it - this is the most efficient way to
allocate resources

0 Remove subsidies and other

market distortions

0 Encourage the development of
?climate friendly? technologies

0 Help reduce emissions in the
cheapest way through tradable
emissions permits and joint initiatives
with other countries

Governments should also be the
main funders of research into the
climate system and its impacts,
because such information benefits
society as a whole.

Shell companies believe their
knowledge of energy markets
enables them to contribute to the
debate on the right sorts of policies

and to discuss practical measures
with governments in countries where
they operate. Much of this is done
through industry groups in which
they participate, especially at national
level. Shell companies also
contributes positively through
international industry bodies such as
the International Petroleum Industry
Environmental Conservation
Association (IPIECA), the International
Chamber of Commerce and the
World Business Council for
Sustainable Development.

 

 

 

 



 

'num .4



i-?v

. .

WHAT IS SHELL DOING ABOUT CLIMATE 

nergy markets are always
changing. Shell companies have
to plan for these changes and meet
their responsibilities to shareholders,
employees, those with whom they do
business and to society at large.

They must play their part in the
necessary precautionary measures to
limit greenhouse gas emissions.

Shell companies expect to do the
following:

0 Continue to produce oil and gas
to fuel the next 20-30 years of
economic growth, particularly in
developing countries. With
populations rising, this is quite a

challenge. This means Shell
companies have to continue to find
more reserves.

0 Provide more natural gas. This
fuel will be in high demand for the
next few decades because it is
abundant, can be converted
efficiently into electricity, can be
relatively cheap to find and transport
and emits far less carbon and other
pollutants than competing fuels. Shell
companies are developing natural gas
resources and bringing them to
market through liquefaction,
conversion to diesel type fuels, and
through pipelines. They are
increasing their investments in these

businesses e.g. liquefied natural gas
projects in Oman and Nigeria, gas
exploration in Peru, and the
partnership with Gazprom in Russia.

0 Develop their businesses in
gas-fired power generation which
produces less than half the amount
of C02 per unit of electricity
generated compared with coal. For
example, Shell International Gas 
has recently taken a 50% stake in
InterGen, a major independent power
producer, and has a number of plans
for new power stations within its
own power business unit. Electricity is
essential for development and
improvements in the quality of life,

 

 

 

especially in developing countries.

0 Develop renewable energy
sources. Shell companies aim to be a
major force in renewables, which are
seen as gaining a major share of the
world energy market beyond 2020.
They will invest $500 million over the
next five years on renewable
resources, especially forestry, solar
power and biomass energy. The
newly formed Shell International
Renewables now represents the
Group?s fifth core business. Its
substantial forestry business absorbs
large amounts of carbon dioxide.

0 Reduce emissions of greenhouse
gases in their own operations as well

as helping their customers to do the
same.

0 Fund programmes that help
improve our understanding of
climate change and its impacts, such
as the science and policy work at the
Massachusetts Institute of Technology
in the USA.

 

 

 

REDUCING EMISSIONS OF GREENHOUSE GASES

he daily operations of Shell

Tcompanies produce greenhouse
gases when they burn off (flare) or
release (vent) unwanted gases in the
production of oil and gas; and when
they transport, store and distribute
their products. Shell companies also
burn fossil fuels when they refine oil
and manufacture chemicals, and this
releases greenhouse gases.

Refineries have invested heavily to
improve energy efficiency over
many years. This has not necessarily
reduced their overall fuel use in
recent years, because increased
demand for cleaner road transport
fuels, such as low-sulphur diesel, has

increased the amount of energy
needed to refine a given amount of
product.

Flaring. About 85% of overall
flaring takes place in Nigeria. The
Shell company in Nigeria is
committed to stop all continuous
flaring by 2008, or sooner. Shell
companies have reduced flaring by
over 20% in aggregate between
1992 and 1996. Norske Shell, for
example, has already eliminated
continuous flaring.

Venting. This releases mainly
methane, which is a much more

powerful greenhouse gas than C02.

It is better in the short term to burn
this gas rather than release it to the
atmosphere. Consequently, the plans
are to convert vents to flares and
subsequently to stop the flaring.
Venting has been reduced by 26 
since 1992.

CFCs and halons. These are
powerful greenhouse gases. Shell
companies use relatively small
amounts (mainly for fire fighting) and
have reduced emissions by 85% since
1992. They aim to eliminate the use
of the most damaging of these
gases.

 

Shell companies contribute to
reducing their customer's
greenhouse gas emissions mainly
by providing them with lower carbon
fuels, especially natural gas and
renewable energy sources. Many
Shell companies have promoted
automotive LPG, a fuel with a lower
carbon content than gasoline.

Modern petrochemical products
produced by Shell chemical
operations allow the substitution of
energy intensive materials such as
steel with less energy intensive
plastics. This has made a major
contribution to reducing the weight
of cars, and therefore improving their

 

fuel efficiency. A number of Shell
products are used as insulators to
reduce heat loss from buildings and
refrigerators.

Further improvements, albeit small in
C02 emissions, come from the
additives used in fuels and
lubricants that improve or maintain
engine efficiency.

More information on these activities
may be found in the various Health
Safety and Environment reports of
the Royal Dutch/Shell Group, its main
businesses and its operating
companies, obtainable from the Shell

an
aw
wo-

luau?



web site at: 
or from SLBPA-PXX, Shell Centre,
York Road, London SE1 7NA, UK.

The Group?s contribution to targets
for greenhouse gas reductions may
be small in global terms. Greenhouse
gas emissions come from so many of
society?s activities that no single
source is ever a large part of the

 

total. Nonetheless, we must all play

our part' accordmg to our capab'm'es . .given the risks and uncertainties, it is clearly prudent to develop 

and circumstances. 
alternative ways of generating energy, learn to use energy more
ef?ciently and reduce the environmental impact of producing and

burning fossil fuels. 

Sir john jennings, former She/l Managing Director

ll

PICTURE INDEX

Cover and page 1
Page 4
Page 5
Page 7

Page 8

Page 9

Page 11

Satellite photograph of a tornado from The Telegraph Photo Library.

Seraya Chemicals Plant in Singapore photographed by Ric Gemmell.

Night Skies, Punket, Thailand.

Sunset over the North Sea.

Forestry in South Africa - Weeding a plantation of young eucalyptus trees.

Solar panels - Shell Companies are committed to contributing to sustainable development. As part of that commitment, the Group

allocates a percentage of its annual budget to development of alternatives to fossil fuels. It invests millions each year to test the
potential of such technologies as biomass and photovoltics.

LNG carrier - North West Sea - Eagle

Aerial view of the Shell/Esso Kittiwake production platform taken from directly above. The platform is located in a water depth of
278ft. ninety miles off Peterhead.

Camisea project - Cashiriari 2

View of the illuminated forecourt at a Shell RVI service Station in Singapore.

 

 

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