This is geology. B with all of us trampled, we're
in the midst of a transformation to wean ourselves away from
hydrocarbon energy sources. The large oil companies are very
well aware of this and indeed see themselves as playing an
integral role in this transformation.
But what would that role be? So Mark Moody Stewart is a
former chairman of Royal Dutch Shell and is a director of Saudi
aramco, which has the largest daily oil production of any oil
producing company. He recognizes that our response
to Global Warming Demands a major change in our energy
strategy, and is a prominent voice for change in the oil
industry. So, mark would be Stewart.
Welcome to geology, B. It's a pleasure to be here.
I've enjoyed your other podcast, but I'm afraid, I'm a bit.
Less solidly geological and most of them.
Well, you started your career as a geologist.
What were you looking at? Well, I wrote the doctoral
thesis in Cambridge on the devonian flew via Taos,
sediments of spitsbergen on joining shall I was lucky enough
to work as a field. Geologist, first of all, in
Spain doing onshore geology to tie in offshore seismic in the
Mediterranean, that was an absolutely great.
It job. I told my old PhD supervisor
that I could see, at least three or four doctoral Theses from the
work, I was doing at that time. The geology of Spain was limited
Bible was a 1936 paper by a German geologist called
Brinkman. And I had a Land Rover, a
galley, a go driver, who was no lover of Franco, and a pretty
blank page. My Swiss colleague, who was a
year or two senior to me said, Mark, you take the tesserae and
I'll do the mises egg and whatever the ballet artists are
they're mine. So then I went to Oman to join
can glenys feel party mapping the Oman mountains.
Another blank page with those magnificently.
Exposed. Trust each to be mapped.
It was really terrific. Well I hope you don't mind me
giving away the timeline here a bit but I think you were doing
this in the mid-1960s at just about the time that plate
tectonics was coming really the accepted Paradigm where you
aware of it when you were doing your work and did it actually
influence the way you looked at things in the field?
Yes. We could see the transition from
the thick shelf limestone's which form the Arabian oil field
reservoirs, which transition to exactly the same Limestone Shale
Limestone sequence, only much thinner and then the thin
limestone's and read read That radiolaria and charts of the
ocean floor. Thousands of meters of thickness
on the Shelf going down to tens of meters on.
The ocean floor, all beautifully over thrust, and then capped by
the ophea lights, with huge hunks of limestone reefs in.
And, on top of the ophiolite, we knew it was the ocean floor with
steinman's famous. Trinity of red radial Aryan
Church, pillow, lavas, and ophiolite.
We also, You about seafloor, spreading from Vine and
Matthews. Fred Vine was only a year or two
ahead of me at Cambridge. And his wife is our son's
godmother for the first two years of our married life.
We shared a house with Dan Mackenzie, who was best man at
our wedding. So, he had the shelf and end,
well, tied down, and could see the transition to the ocean
floor and the frosting. But we hadn't quite got our
minds around what happened at the margin of the plate.
So when the whole theory of plate tectonics on folded and I
expect you were one of the very first to hear about it being.
So friendly with Dan Mackenzie was right there in the
Forefront. Did it surprise you or did it
just make sense? As soon as you heard about it?
No, it kind of made sense as we heard about it.
I remember with my colleague, Michelle birth and we were
working on these thin Oceanic sediments which Kind of
imbricated and we were trying to work out mechanisms of how it
worked. We had a theory that actually it
would be due to some kind of uplift and then gravity sliding.
So when we saw the plates develop we began to understand.
But that was afterwards, frankly.
So, what actually Drew you to the oil industry in the first
place? Well, my doctorate was funded by
shell. They gave me a general.
Generous Grant of 50 pounds a month and my wife, Judy was
working, as a research assistant, she was earning 60
pounds a month. And when I finish that the
choice was basically continue in Academia if that was possible to
work for the national coal board in the UK even then that did not
attract me being a nationalized industry.
And Cole, I could have worked perhaps Southern Africa with
someone, like, anglo-american who I afterwards worked with on
say, alluvial diamonds. But the politics of southern
Africa, in the 60s was not attractive, even then.
And then, there was the oil industry and shall had produced
a number of really good academic papers in the field of
sedimentology. I was interested in, so I was
familiar with their people and it seemed I'm quite a Natural
Choice. We never imagined that there
would be an oil and gas industry.
Well the gas industry was just beginning in the UK but it was
clearly going to be around the world somewhere when was it that
you first started to think seriously about the limits
imposed by greenhouse gas induced warming.
Well, shalin BP, first acknowledged the threat of
climate change in 1997, John Brown and BP got the credit.
The brilliant speech at Stanford, but it was actually in
our annual report in Shell which had been published a month
earlier, Where We spelled out the risk.
But we all thought that it would take a long time.
The change due to technology was clearly inevitable.
People sometimes forget that she'll had a major nuclear
fusion project called general atomic in the early 70s.
It was not a successful Venture and cost us a lot of money.
Once in the 90s, I asked the great Saudi oil Minister Arlene.
I me, who in many ways is the father of modern, aramco, what?
He thought of renewable energy and he said, Mark.
Don't worry about it. It's technology and Technology
will do what technology always does.
It will change things, and he was, and is still an
enthusiastic for It's a matter of time when I joined shell, we
knew that the world would never burn.
All the coal available and that the same was probably true of
oil. The big question was when and
what, how do you catch the wave too soon?
And the traditional competition on the market will kill you too
late and you die as an irrelevant and aging Beast.
It's a very major challenge. As for companies and societies,
during that time, we'll just a bit later.
The conventional wisdom was that oil demand would start
flattening in the 2030s, but you thought it would happen much
sooner and why was that? Well, the historical shifts in
energy changes have happened. Over 30 years cycles for
example, in the 20th century Century you and I've lived most
of our lives in, we started with coal and wood and the little bit
of oil to provide kerosene for lamps and save the whales and
someone reminded me oats which provided energy for the horses
and then gradually change. Came fuel oil, replace coal
because of convenience much easier to pump things than
shovel them. Natural gas, replaced fuel oil,
and we in the industry learnt to take hydrogen and convert the
fuel oil into lighter, fuels Transportation fuels and you
could see these changes happening on, as I said, Thirty
Year Cycles roughly, but there were examples and are examples
in our industry of much more rapid growth.
If you remember in the early, There was a process of
incentivizing farmers in the u.s. corn Farmers growing Maize
to convert it into ethanol. It's not a very good idea but
given the incentive it happened that within four or five years.
There was the capacity to convert half the US corn crop
into ethanol and half the US corn.
Crop is a quarter of the global concur.
Op and it had big impacts on Mexico obviously on on food and
so on remarkable change as I said it was very bad idea and
not good for the climate at all. But nonetheless, an example of
Rapid change equally we could see in our own industry, the
growth of shale oil which went from 0 to 6 million barrels, a
day in the space of three or four years astonishing speed.
So we knew that they could be rapid change.
Now, demand growth is the difference between two very big
numbers oecd. Demand growth has been falling
for quite some years, but this is offset by emerging market
growth. So you have oacd declining
Emerging Markets, growing, particularly China and India but
other markets in Africa and Latin America.
But with covid and the economic hit demand dropped, drastically
emerging markets were badly hit and we don't know when they'll
recover. I used to think that Peak demand
would be probably in the mid 20s which was earlier than many
people in the industry. Thought because when you look at
the small difference between these two very large numbers,
you could see, it could quite easily flip.
Now with the change I think maybe in 2019 we may even have
seen the peak gosh, that's amazing, so much earlier than
anticipated. So when demand for oil does
flattened or start falling as indeed, it may already have
done. Do you see all prices continuing
to fall? And if so what effect will that
have on the big oil producing countries?
Well oil is a very unusual commodity and Has been.
So since the 1970s since the 1970s unlike all other
Commodities, if you look at iron or copper nickel and so on the
lowest cost, producers dominate the market and they have say 80
percent of market share in oil. The lowest cost producers the
big Middle East. Producers such as Saudi Arabia
and the Emirates and Kuwait and Iran.
Have held back their production to maintain the price.
The result is that with that constraint on production, the
low cost producers have only about 30 percent of market share
and that allowed those high prices.
And I remember it from the North Sea, the price has saved the
development of the North Sea. We had big cost overruns, so the
North Sea more expensive. Extra technology was able to
come on stream, North Slope of Alaska came on later.
The Gulf of Mexico, deep water, came on and most recently, Shale
repeatedly, OPEC and Friends constraining their their
production and allowing higher cost, producers to grow and
that's fine. As long as the markets growing,
and prices can be kept High, the major Middle East, producers
were Because they could increase their production slightly meet
inflation. Saudi Arabia, as long as they
exported say, 7 million barrels a day of oil, they were happy at
a reasonable price, but when demand flattens there will be
an, is a fight for market share and it's, that's very difficult
for the low cost. Producers who depend on oil
income for their societies. They want to increase.
This production to offset the loss of oil price, but it has to
be balanced if you do it too fast, the old price will crash.
Many major projects have been cancel, so there's not much new
production coming on and with natural decline production will
get back into balance. Saudi Arabia, has always kept
one or two million barrels A Day.
Extraordinary numbers in spare capacity.
You ready to turn on and there's been a drastic cut of investment
in new Ventures, by the international oil companies.
So we may get a spike of oil prices, but I think basically
prices not much above say $50 a barrel, a very likely, okay.
So the next transition will take us into all together very
different kinds of energy. Source.
Not just from one carbon based resource to another but two,
things like wind solar geothermal and others.
In fact, several respected forecasts, have suggested that
we will actually need lots of new energy sources Each of which
will not be as dominant as oil and gas have been in the past.
So in this new world, what know, how or infrastructure can the
major oil companies? Contribute to this transition.
Well, the transition is going to need not just lots of small
projects, it's going to need integration and the management
of large projects and their integration give you an example
of Envision energy of creative, Chinese Renewable Energy company
that I'm have an involvement with an advisor.
And Zhong Lai, the boss of that says, if he could get a contract
for 10, gigawatts of wind turbines in Mongolia, he could
radically reduce the cost of building those turbines.
He would design them specifically for that location.
The turbine blades, which are a big problem.
Could be manufactured more or less on-site, obviating
transport, The energy could then be taken from western China to
Eastern China. Through China's network of very
high voltage, ultra high voltage, DC transmission lines,
which reduce the loss and you have a time difference between
western China and the coast in the East so that when the sun
and solar is still working in. Mongolia, the lights are out in
the coastal region. That's sort of major project.
Transmission, generation needs integration and balancing.
It also needs trading energy trading, and if you look
carefully at the accounts of the major oil companies, certainly
BP, and she'll major projects they made from Trading, come
from Trading oil, knowing what the requirements are and
handling. The Gration between different
demands. It's a major skill.
Pipe infrastructure will also be important, which can be
repurposed as we did with natural gas in Europe, natural
gas to household. Gas was provided from coal, gas,
from town gas, mixture of carbon, monoxide and hydrogen
and with natural gas. We had to convert that to
methane major. I've done all across Europe,
very effectively. So I think there are many skills
which can be used, which will be needed.
Question is, will the majors have the wit and capacity to do?
So, at the moment, I buy my electricity renewable
electricity because it's traded from, shall I have an electric
vehicle, which is charged by a shell installed charger, so it
is possible. Whether it will happen or not.
So now the matter you mentioned repurposing infrastructure such
as pipelines and I'm wondering if you're referring there to the
use of hydrogen, I actually know.
You're a great fan of hydrogen in the energy equation.
Why is that? Well, I am a fan of hydrogen and
of course, one of the first uses of hydrogen could be to inject
it into methane carrying pipeline systems at relatively
low. Lilo percentages, which is very
easy. I used to say that if I ever
bought a new car, we hadn't bought a new car for 20 years
because we were happily running old Priuses which have done two
hundred. Eighty thousand miles.
The dick would be a hydrogen fuel cell vehicle like the
Toyota Mirai. I think actually, I was
convinced by Michael Lee brachle Bloomberg, new energy that my
economics were wrong and that they probably It should be done
by fully electric vehicles and we have actually bought new a
fully electric vehicle, a remarkable machine, but I think
hydrogen can work for storage and heavy Transportation ships,
even aircraft because we can't just rely on batteries.
Batteries will be an essential part of storage repurposed
vehicle batteries and so on but batteries.
I'm and enormous resources, mind, resources, and many of
these come from difficult places and we can't run everything on
electricity steel. For example, we can't run.
So hydrogen is very important for the bits that electricity
can't necessarily reach directly.
So, yes, I can see that heavy transport by Road sea and air.
It's hard to imagine an electrically.
Driven airplane, or though, you know, we'll probably have those
in due course to, but you mentioned batteries and the
importance of batteries, becomes greater when you have an
intimate and Supply such as wind and solar.
Obviously those only work when the wind is blowing or the Sun
is up and Shining. So does hydrogen play a role in
those circumstances you think? Absolutely hydrogen is an
alternative storage method. If If you have renewable energy
available at the time, when you have more renewable energy than
you need, you can either store it in batteries or use pumped
storage, which would be the ideal.
But, you know, pumping water uphill to dams and then letting
it run down again, but storing it through the electrolysis of
hydrogen. So-called green hydrogen is an
obvious answer. It's expensive at the moment and
there are projects to radically reduce As has been done in wind
and solar the cost of the electrolyzers, if you have in
any situation where you have a large amount of renewable
energy, there will be times when they will be excess and at the
moment that gets if it can't be stored, it just gets shut off
and shut down its curtailed as they call it.
The scale of Chinese curtailed production at the moment is
enough to power the entire United Kingdom every single
electricity, requirement of the United Kingdom.
And I think it's very important. There are challenges as to how
it can be transported can be transported as ammonia.
Saudi aramco has just made the first ammonia shipment, that's
not green ammonia, it's blue ammonia.
So the come dioxide has been captured and it's going to Japan
for power generation. So Japan is looking to generate
power from ammonia, which is really hydrated.
So it's extremely important, I think and it's undergoing
something of a Revival when I was in shall in the late 90s,
early 2000s, we set up a hydrogen unit, its had a mixed
history since then, but it's really coming back into its own.
I think hydrogen is undergoing quite a Vogue at the moment,
some of our listeners. Might be geology students
wondering about their employment prospects in a world in which
the major oil companies are no longer prospecting for oil.
What would you say to them? Well, this transition is going
to take quite a while and we are absolutely going to need
geologist at the moment. The major companies are
concentrating on exploring looking for fields which have
Lighter hydrocarbons. So less intense from come point
of view and things which are close to the markets.
And so on, it also will be important because carbon capture
and storage under almost any one scenario is going to have to
play a part in this transition. So we're going to need geologist
to find the reservoirs and caps that we can safely in half.
Aquifers sequestration, large volumes of carbon dioxide and
will need to find those reservoirs close to the areas of
habitation and Industry. Then they'll be dams for storage
demand for copper, which is Need for electrification, other
minerals, such as lithium, Cobalt for Batteries, nickel,
and how we find these elements in places, which Accessible and
stable. And then there's all the tricks
of using artificial intelligence and making the production of oil
and gas more efficient, there are endless ways of geologist
finding employment. But I would also say to anyone
considering a University degree, it's worth doing something,
which you're really excited by. And elegy is exciting.
And if you do it and a good at it, I'm confident that you find
employment. There are lots of historians
doing work and who find gainful employment and who tells me that
historian is any better than the geologist, who's after all the
kind of historian for my last question, I'd like to ask you If
I were to appoint you to lead a world government with infinite
Powers, what would you do about climate change?
Okay, that's a difficult. And intriguing question, I think
the answer is, I would introduce a mixture of economics and
regulation ever since the late 90s, we in many of the major oil
companies, certainly the European oil companies have been
saying We need to put a price on carbon now in order to get a
price on carbon which you need if you're going to make carbon
capture and storage economic, somebody has to be prepared to
pay for the storage, you are avoiding a damaged.
So you need a price on carbon almost any Economist tells you.
That's the way to do it you can do it through cap-and-trade
systems or through taxation to force change.
Ange you need a relatively high price so you can't do everything
by taxation. We've had high gasoline prices
and diesel prices in Europe, due to tax the bulk of the price.
We pay for gasoline and diesel in Europe is due to tax and
that's had an effect. As a result of that, we have
more efficient vehicles and people realize that you better
get something, which is a bit more.
Economics and the gas guzzler. But if the prices go, too high,
you damaged rural economies, and we've seen in Britain, if I go
back to my time, I remember when the Finance Minister Chancellor
Gordon, Brown wanted to put the price up, you had striking
truckers on the street because they said we can't afford to pay
this. You're doing this out of my job,
so apart from pricing. You need efficiency mandates for
vehicles or regulatory Frameworks for power generation
saying band, coal or no power generation, unless you have
capture and storage of the resulting carbon dioxide.
I don't think we drive less comfortably in Europe than you
do in the United States but we do so far more efficiently and
it's been demonstrated including in the United States, the fuel
efficiency mandates, the so-called Cafe standards have
worked well in the u.s., in the past when they've been applied.
But then every now and then, a government comes in and cancel
them all. And all the improvements in
efficiency, go into bigger and heavier vehicles and
acceleration. And that's complete Madness.
So, we need a balance between economic measures.
Taxation pricing, bad things like the emission of carbon
dioxide but at the same time regulation which is accepted by
everyone and hides the cost, of course, people pay for it
because you have to work hard to redesign things to make them
more efficient but it's not much of a cost and it's fairly well
hidden from the consumers. So I think that's the answer and
mixture of economics and It would be fun but nobody is going
to offer me the job. Some awkward is Stewart.
Thank you very much, not at all. Thank you.
It's been a pleasure for more about geology, b, as well as
pictures and diagrams that illustrate.
This podcast, you can go to geology B.com