Natural gas will account for nearly half of Royal Dutch Shell plc's total output within three years, CEO Peter Voser told a Washington, DC, audience earlier this month.

Speaking at the Woodrow Wilson Center, Voser said Shell's embrace of natural gas "is not merely a shift in our portfolio. Increasing natural gas production and transportation by liquefying it and shipping the LNG [liquefied natural gas] to global markets means that more natural gas will be available to displace coal as the fuel for power plants."

Shell in 4Q2008 was the 12th leading U.S. gas producer, according to the Natural Gas Supply Association. The European-based producer explores for gas in the Gulf of Mexico, Alaska, Alabama, Colorado, South Texas and Wyoming. The U.S. exploration and production (E&P) arm is headquartered in Houston, and Shell also employs nearly 2,000 in its U.S. E&P technology division and in Shell Technology Ventures.

"In the United States, new technology has opened up abundant gas resources contained in dense rock formations, increasing supplies dramatically...So you can see why I'm sometimes tempted to say: Nothing beats natural gas," said Voser. "I think we are underestimating the contribution gas can make in helping the United States address global warming."

Renewable energy, "while important and necessary, is not the silver bullet that's going to solve all our problems, at least not for a long time yet. Historically it has taken at least 25 years for any new energy type to conquer 1% of the global market. That's been true for liquefied natural gas in the past. Biofuels are reaching that mark about now. Wind could do so sometime in the next decade, 25 years after the first big wind farms were built here in the United States and in Denmark."

However, Shell "cannot innovate in all directions," Voser said. "We have to focus on our own skills and capabilities. We are not a government. We are a business. The key is to be in the right segment of the right market at the right time. Are we? Well, judge for yourself. The global energy market is growing. Within that market, oil and gas are both indispensable and our core business. And within that segment, Shell is increasingly focusing on natural gas, the cleanest-burning fossil fuel..."

Energy producers "sit at the nexus of one the world's most difficult and exciting challenges: building a new energy system capable of meeting the energy needs of future generations at much reduced environmental cost," Voser said. "Complex challenges rarely have simple solutions. Shell's response has been multifaceted," but "when you're in the right place today, there's still the question: Will you be there tomorrow? This is the trillion-dollar question confronting all oil and gas companies."

Global climate change also has to be addressed, he said. Shell is advocating that the United States adopt a cap-and-trade (CAT) emissions system, which Voser said is more effective than a carbon tax in setting a market price.

"A lot, not everything, will depend on how far the United States is prepared to push the agenda forward...There is the perception that the oil and gas industry is 100% opposed to congressional efforts to enact climate legislation. While other companies can address their own positions, this is not the position of Shell."

As a member of the U.S. Climate Action Partnership, Shell is lobbying legislators to enact a CAT program, Voser said. "We recognize the value of such action in spurring investment and positioning the United States as a leader in the coming international climate negotiation."

Shell will remain an integrated oil and gas producer, the CEO said. However, "winning companies will be the ones that stay ahead of the rising aspirations of energy customers, through innovation, pushing the limits of what is possible."

The company also has no plans to abandon its position as the world's No. 1 motor fuel supplier, Voser told the audience. Qatar Airways on Monday completed the world's first commercial passenger flight powered by kerosene made from natural gas. The flight, from London's Gatwick Airport to Doha, Qatar, was operated with an Airbus A340-600 aircraft using a mixture of synthetic gas-to-liquids, kerosene and conventional oil-based kerosene fuel developed by Shell.

On the highways, "car drivers want easy access to affordable transport fuel that takes them a long distance. That's nothing new," said the CEO. "What has changed is the growing desire for driving that is fun, useful and environmentally acceptable. This trend of cleaner driving is likely to continue, including in the United States, with fuel efficiency standards getting ever tighter...

"Over a billion new vehicles are expected to come on to the world's roads between now and 2050, more than doubling today's total. So there will be room and need for many different fuel types, including conventional fuels, biofuels and electricity...We've learned from experience -- sometimes the hard way -- that it takes time to develop and build a market for new types of energy. That's why a more efficient use of energy is crucial. Governments, companies and all of us as consumers will have to show leadership in that regard."

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