Peter Voser - Chief Executive, Royal Dutch Shell HARDtalk

income by 2015. He said both the wealthy and those on welfare had to

share in tackling the deficit. Now it's time for HARDtalk.

The United States is about to become the world's largest producer

of oil and gas. Quite remarkable for a country that only a few years

ago was the world's largest importer of gas. It's a turnaround

made possible by shale and it comes at a time of rapidly increasing

demand from China, India and the Middle East. My guest today, Peter

Voser, is the boss of Royal Dutch Shell one of the biggest energy

companies in the world. With economies so thirsty for power,

producers are being driven to new frontiers - but at what cost?

Peter Voser, welcome to HARDtalk. Thank you for having me. That first

from countries, there is a demand that you are a struggling to

satisfy? Absolutely correct. Demand is rising much faster driven by the

world's population growth. Driven by countries coming out of more

energy poor environments into richer environments. We are

struggling to provide the right supply. That gives a certain

volatility to the pricing. I would say over the years to come, supply

will always slightly behind the demand growth in the world. There

is talk of global energy demand doubling by 2050. A massive

increase. The world will go from 7 billion-9 billion people. People

are going through the most intensive energy face. Energy

efficiency is built into that. We cannot say that today. The demand

could rise faster if we do not get the energy efficiency right. With

the United States, one of the remarkable discoveries and so

prices given what had been expected, is the boom in shale gas. How

important will that be for the future energy needs? I will call it

a revolution. It has transformed the whole Gas situation. You have

seen tremendous gas growth across the world, specifically in the

United States. 100 years of gas available against current

consumption. There is huge growth possible. This would drive

industrialisation, it would drive a conversion from coal to gas. -- it

well. It will bring manufacturing petrochemicals back to the United

States. It can drive the economy on this gas. We will talk about its

comparisons in a moment. You are literally saying, it will mean that

what? A growth in factories, a repatriation of manufacturing back

to the US? Yes, in my opinion in a big style. What we produce in my

industry, it can be used in very heavy Industries, in petrochemicals.

This would generate jobs. The government will embrace this in the

longer term to bring jobs back. They have outsourced and put them

offshore over decades. It will be cheaper to produce a plastic toy in

America than in China? Yes. It will replace imports from the Middle

East. You'll see this growing to the detriment of Europe's

manufacturing base, or other parts of the world. The US have something

in their hands, it is not just gas, they have low tide of oil. It will

help them to drive the re- industrialisation of the Midwest in

the US. If you have a US that is self-sufficient, I can meet its own

energy demands, what does that mean for the way that it treats the

Middle East? In geopolitical terms does it change its politics? Does

it change the way the world works? You have to look at this from two

sides. The growth in demand is 90% outside the OECD it over the next

few years. Producers will be looking to those countries that

will buy in the future. That 90% growth is India and China, two-

thirds of FIFA stop the Middle East is already moving towards a shove.

-- of it. The same from the US. -- Asia. What I am wondering, what

does it mean for their politics? As a result of conflict or politics,

it has alliances there, everyone says it is because of oil, is that

going to change? I think they will still have an interest. They will

want more stability of energy for emerging markets. You do not want

these emerging markets, China and India, being held back by very

volatile and high prices of energy because of geopolitical issues in

the Middle East. There is still an interest from the US. They will

also look at these emerging markets from a political point of view.

the moment the US is investing heavily in protecting the version

golf. Making sure the Straits of Hormuz will not be shut. If you do

not need to do that anymore, you have got money freed up elsewhere,

you can move the US from a volatile part of the world. We have to

understand how you can build a energy system in the US. It will

take them 20-30 years to get there. Very long time frames. That is a

challenge we all have. In our industry and in politics, we have

ticket going on our energy system while at the same time building one

with less carbon dioxide for the future. The ramifications are

beyond your industry. Absolutely. That is quite clear. Let's talk

about shale. You say it is a win- win. Other people say there are all

sorts of problems. Let's begin with the environmental one. The process

by which you get shale gas out of the ground, fracking, it is

blasting water and chemicals into rock as I understand it to get the

gas out. It is hugely polluting, isn't it? A limited amount of

research has been done. Compared to coal, the footprint of shale gas is

at least 20% greater and more than twice as great on the 20-year

horizon. That is the course of the methane. -- because. I think

fracking has been done for the last 60-70 years, it can be done in the

right way. It needs the right technologies. It needs the right

footprint in terms of how much land you actually use. What chemicals

you use. How you build the holes etc. It can be done. It needs

regulations that are the same for all of us. That is what we are

pushing at the moment. To lift up the standards we are using. What is

your assessment of how it compares with other gas or coal? In bulletin

terms. Invalid in terms against coal, 50-70% less CO2. The

chemicals you are using on the fracking site, they are all

biodegradable. You can do this in an environmentally sound way. The

methane can be measured and captured. The methane can be

captured? Yes. The technologies are around. They have to be applied and

forced to do so. That is what we are driving out. Against coal there

is no question. The world has gas in its hands. It can achieve a lot

of climate change goals by switching from coal to gas. We have

to accept that for the wider society, this is still a fossil

fuel. The International Energy Agency have said it is still in its

formative years, there are concerns about its environmental impact. It

could stop the revolution in its tracks. I agree on that. This has

come very fast. Event the industry was surprised with how quickly we

found these resources. The dialogue has been done in a very fast way.

We need to continue that to give the conference to the energy users

and also the government. The way it is doing things at the moment is

not good enough? Let me put it this way, having larger companies like

Royal Dutch Shell, with long-term review on developing these

resources coming into these places, does help to lift the standards.

That is what we should go. We should have a discussion that is

not driven by emotions, but by fax. That is why I'm criticising Europe,

it is done on emotions. There are too many unknowns. I would not say

there are not many unknowns. We have been doing this since the 30s.

We have not spoken about the possibility of it polluting

groundwater. Let's cover that one. Groundwater is very high up. We go

down to 4,000 metres. The issue is how you drove through the

groundwater. If you do your cementing the right way, there is

no ground water pollution. You can a chamois ground water pollution

over the last six years. -- cannot show me. The fact that there were

two earthquakes in Blackpool, in a country that does not have

earthquakes, that is the UK being emotional? There are seismic

activities, that is correct. It is like a bus pass in your house. --

passing. The dialogue between industry and society and government

about what this entails and what are the risk. There is no energy

form that does not have risk. The dialogue needs to happen. One of

the things that has happened as a result of the boom in shale gas, in

the US prices are down to $2 a unit. So much cheaper than elsewhere in

the world. Europe and Asia. Hence, this competitive advantage we are

talking about. It the rails any investment in renewables. Do you

accept that? -- derails. The answer is no. In the long-term the world

will need to deliver and develop all energy forms. Gas and

renewables are complementary. Renewables will not produce all the

time. Does it mean more subsidies for renewables? I do not believe in

business models that live on subsidies. What about environ

mental models? Over time we have to face the fact that energy prices go

up. I am for that, not because we make profit, but you cannot make

sure it against current prices. Current prices are competitive

because they are fossil fuel based. The world has a lot of them. If we

want new energy forms, we have to put it into research and

development. We have to accept that prices go up. That is not an easy

It seems a bizarre argument. We have concerns that we know about as

a result of fossil fuels that will not be sold, no matter what you do.

You are saying there should not be subsidies? That is not what I am

saying. You don't believe in the business model? In the long term, I

don't believe in that. Six times as much subsidy for fossil fuels.

Europe, you pay 60-70 % tax. There are a lot of other things. Let's

put things in the right perspective. Emerging countries are subsidised.

I think they should stop that. It helps to stop demand rising too

much. I think some countries are moving there. On our side, I think

they'd to declare. And -- we need to be clear. If an individual wants

to choose the energy system, they choose a price for the energy

system. Coming back to the subsidy question, to build a business model,

there have been subsidies in some parts of the industry. You cannot

always be on that. We talk about new frontiers. Shell is involved in

a pristine wilderness of a new frontier, the Arctic. You have

spent $4.5 billion in seven years trying to find a way to safely get

oil out of the Arctic. You have not been successful and you have closed

down for the winter again. Is there a point are you believe it cannot

be done safely? We would not say that. We think it can be done

safely. We are in the exploration phase. Naturally, you closed down

during the winter. There is no rush. We are building a complete new oral

response system. -- oil response. We are trying to refurbish rigs. We

are taking time to put this together. In order to develop a

long-term operation model for the Artic, it takes time. Having said

that, for the last few decades, all of the wells have been drilled.

This is not new. And we are putting everything into making sure that we

apply the highest global standards. That is the problem with it. You

have this pristine wilderness, as we are talking about. The risks are

inordinately high. There are particular concerns and the Artic

because there is a short window of summer months where you can operate.

The audit committee that looked at this came to the conclusion that

there should be a ban on anything until a suitable regime is in place.

The chair of the committee said that companies should come clean

and make -- admit it will be difficult to deal then I'll spell

in the Arctic. The infrastructure is not in place. There will be your

round operations. When I see you only thrill in the summer, that is

just for exploration. In the developed and scenario, you build.

We are operating already in the Arctic. We have a big gas field an

oil field in the Arctic. It is -- in order to develop this type of

system, you need to have the experience. That is what we have

been gaining for a 30-40 years. We are applying it in Alaska. Why is

it that a rival of years, Total, the chief executive has said that

pulling out of oil, or oil and grain land would be a disaster. A

league would do too much damage to the company. I think you will have

to as Christophe. I asked him about that. I think he will give you a

different story. I think that is not the issue. I think it can be

done in the Safeway. Other companies like Chevron, they are

working together. This is important. The industry works together for all

responsibility during the seasons. You need to do that. One of the

concerns, it was raised by the committee, if you have this Bill, a

blood just before the winter, it could be spewing out for six months.

-- If you have a spill, a blow-out. We have never had that. Technically

that. That is what I am going to say. You cannot compare the Gulf of

Mexico to Alaska. The Gulf of Mexico is high-pressure with light

oil that comes out. You're in deep water. You are in shallow water and

it is not high pressure. One needs to take a view on each area that

you are in Alaska. You cannot just compare it to this accident which

happened in the Gulf of Mexico. The logical basis is completely

different. You need to be very careful that you do not jump from

one to the other. They may not be compatible. This is a question for

your company. You need people to when

when they go wrong. When you look at the situation in Nigeria, Shell

has had a huge investment with the Government they're over a long time.

It also has a troubled history with the clean-up. With the UN, at the

request of the Medellin government, they carried out of the board. --

Nigerian. 10 out of 15 sides that were meant to have been made safe,

and I know she'll have accepted this, but there are still ongoing

and shoes concerns about the fact that you have not sorted the mess

out. The method was made by leaks. If you look at Nigeria, there are a

lot of opportunities. There is a lot of oil and gas which needs to

be developed. In that area, we have clearly said that we accept the

report. The leadership of the Government is important. You need

access to these sides in a Safeway. Unfortunately, access is very

difficult for security reasons. We have ongoing theft and stealing of

crude which damages the environment even mor even mor very

difficult for Oz to go in there and clean the sub. Should you be there

in the first place? One man says that crude oil has infiltrated the

water and the food. If you cannot clean it up, should you be a?

are not a company which walks away. We are a company that wants to do

things right. We're clearly in a situation where we cannot do it

alone, Winnie's stakeholders and you need the Government to help us

to get access. -- we need. We are providing a lot of committees with

drinking water which we truck in every day. We are prepared to do

these things. I cannot take the risk and allow people in if it is

not safe enough. I have said this many times to the government of

Nigeria, they need to take a leadership role. This can actually

be done in the right way. We need happening day in and day out. This

is because of theft and stealing. version that this is down to

sabotage. They say they have taken images and time lines and that

leaks from corrosive pipes, rather than sabotage. We have done this.

We have invited people to come down. We build the pipeline for $1.1

billion last year. We had to take it out again. I think we should all

face reality. You cannot just take one case and make a total case out

of it. How much have you had to put aside to cover the cost? Of the

clean-up, which clean-up? The clean-up in the delta in Nigeria.

last year. A similar number this year. We do this as part of the

normal process. Will this cost billions going for it? It is too