In addition to the high cost of building this refinery, operational costs may also be high – since it will be processing low quality crude.

The Saudis appear to be able to meet their share of heavy crude needed, as new fields come on line. However Shell is going to rely on Canadian syncrude for its share. To get that much syncrude down to the Gulf Coast, new pipeline links must be made. Shell is also apparently expecting that Canadian oil output will continue to increase, and that other Midwest refinery projects under development will not also seek the Canadian oil it wants.






DJ/WSJ

Double post. This is getting old...

"It" in this case referring to the cost of everything.

I agree with what you said and that profits will be higher, just saying that it will be more costly to operate such a refinery - and it will be subject to more frequent downtime.

In general, it appears that the marginal quality of oil available has dropped faster than the ability of refineries to adjust - leading to a minor surplus of low grade stuff.

Tatneft and Shell Form Partnership to Develop Heavy Oil



rigzone

In a global economic bone crushing thud...I wonder how many other "green" projects get shelved...

I think most all of them AND infrastructure improvement projects as well...including repairing pot holes in streets.

Just trying to be positive here.

Shell and StatoilHydro have scrapped plans to build a green power plant that would capture and store carbon dioxide because the project was found to be uneconomic.

Surprise surprise... Not.

Distributed to all Shell employees this morning:

"From: Jeroen van der Veer, Chief Executive
To: All Shell employees
Date: 22 January 2008
Subject: Shell Energy Scenarios

Dear Colleagues
In this letter, I'd like to share reflections about how we see the energy future, and our preferred route to meeting the world's energy needs. Industry, governments and energy users - that is, all of us - will face the twin challenge of more energy and less CO2.

This letter is based on a text I've written for publication in several newspapers in the coming weeks. You can use it in your communications externally. There will be more information about energy scenarios in the months ahead. By the year 2100, the world's energy system will be radically different from today's. Renewable energy like solar, wind, hydroelectricity and biofuels will make up a large share of the energy mix, and nuclear energy too will have a place.

Mankind will have found ways of dealing with air pollution and greenhouse gas emissions. New technologies will have reduced the amount of energy needed to power buildings and vehicles. Indeed, the distant future looks bright, but getting there will be an adventure. At Shell, we think the world will take one of two possible routes. The first, a scenario we call Scramble, resembles a race through a mountainous desert. Like an off-road rally, it promises excitement and fierce competition. However, the unintended consequence of "more haste" will often be "less speed" and many will crash along the way.

The alternative scenario, called Blueprints, has some false starts and develops like a cautious ride on a road that is still under construction. Whether we arrive safely at our destination depends on the discipline of the drivers and the ingenuity of all those involved in the construction effort. Technical innovation provides for excitement. Regardless of which route we choose, the world's current predicament limits our maneuvering room. We are experiencing a step-change in the growth rate of energy demand due to population growth and economic development, and Shell estimates that after 2015 supplies of easy-to-access oil and gas will no longer keep up with demand.

As a result, society has no choice but to add other sources of energy - renewables , yes, but also more nuclear power and unconventional fossil fuels such as oil sands. Using more energy inevitably means emitting more CO2 at a time when climate change has become a critical global issue. In the Scramble scenario, nations rush to secure energy resources for themselves, fearing that energy security is a zero-sum game, with clear winners and losers. The use of local coal and homegrown biofuels increases fast.

Taking the path of least resistance, policymakers pay little attention to curbing energy consumption - until supplies run short. Likewise, despite much rhetoric, greenhouse gas emissions are not seriously addressed until major shocks trigger political reactions. Since these responses are overdue, they are severe and lead to energy price spikes and volatility. The other route to the future is less painful, even if the start is more disorderly. This Blueprints scenario sees numerous coalitions emerging to take on the challenges of economic development, energy security and environmental pollution through cross-border cooperation.

Much innovation occurs at the local level, as major cities develop links with industry to reduce local emissions. National governments introduce efficiency standards, taxes and other policy instruments to improve the environmental performance of buildings, vehicles and transport fuels. As calls for harmonization increase, policies converge across the globe. Cap-and-trade mechanisms that put a cost on industrial CO 2 emissions gain international acceptance. Rising CO2 prices accelerate innovation, spawning breakthroughs. A growing number of cars are powered by electricity and hydrogen, while industrial facilities are fitted with technology to capture CO 2 and store it underground.

Against the backdrop of these two equally plausible scenarios, we will only know in a few years whether December's Bali declaration on climate change was just rhetoric or the beginning of a global effort to counter it. Much will depend on how attitudes evolve in Beijing, Brussels, New Delhi and Washington. Shell traditionally uses its scenarios to prepare for the future without expressing a preference for one over another. But, faced with the need to manage climate risk for our investors and our grandchildren, we believe the Blueprints outcomes provide the best balance between economy, energy and environment.

For a second opinion, we appealed to climate change calculations made at the Massachusetts Institute of Technology. These calculations indicate that a Blueprints world with CO2 capture and storage results in the least amount of climate change, provided emissions of other major manmade greenhouse gases are similarly reduced. The sobering reality is that the Blueprints scenario will only come to pass if policymakers agree a global approach to emissions trading and actively promote energy efficiency and new technology in four sectors: heat and power generation, industry, mobility and buildings. It will be hard work and there is little time.

For instance, Blueprints assumes CO2 is captured at 90% of all coal- and gas-fired power plants in developed countries in 2050, plus at least 50% of those in non-OECD countries. Today, there are none. Since CO2 capture and storage adds cost and brings no revenues , government support is needed to make it happen quickly on a scale large enough to affect global emissions. At the very least, companies should earn carbon credits for the CO2 they capture and store. Blueprints will not be easy. But it offers the world the best chance of reaching a sustainable energy future unscathed, so we should explore this route with the same ingenuity and persistence that put humans on the moon and created the digital age.

The world faces a long voyage before it reaches a low-carbon energy system. Companies can suggest possible routes to get there, but governments are in the driving seat. And governments will determine whether we should prepare for a bitter competition or a true team effort. That is the article, and how I see our challenges and opportunities. I look forward to hearing how you see the situation (please be concise).
Regards
Jeroen van der Veer, Chief Executive "

I think this paragraph is key. It will prove practically impossible for policymakers to 'agree on a global approach', as long as wealth inequality across nations and across the world is what it is and is not addressed. I suggest naming Jeroen's scenarios differently. Instead of 'Scramble' and 'Blueprints' I suggest 'Oppression' and 'Solidarity'. By doing this I think we can have a more relevant and perhaps ultimately a more fruitfull discussion about how things will play out and what needs to be done if we find we have a preference for one or the other.

BTW, welcome Gulfstar. Are you a Shell employee?

That's the most pessimistic thing I've seen from Big Oil.

"scramble" and "blueprints"? Nice soft analogies for "war" and "depression".

The reality under the truth: "we are either going to fight for what's left or we are going to work together through the cold to find answers. let's all pull together now, shall we?"

I'll take my cue from history, if you don't mind. Batten down the hatches!

Shell has an interest in renewables. Shell China is building the first hydrogen filling station in Shanghai.
Jeroen van der Veer has said that natural gas is the future. The Pearl GTL project in Quatar is a case in point. It will produce 260k bpd of Syndiesel for the European market and van der Veer has hinted that is just the begining of the GTL market.
Remember he is a firm believer in more upstream more profit downstream.
BTW Gulfstar are you familair with the Meditteranean deepwater concessions?

See the link below fo other big oil comments on oil, big oil knows all about the problems we face. Most just disagree on the scale of the problem.
Big Oil Comments on Oil Production

Complete misrepresentation. He is clearly suggesting a co-ordinated transition to a low carbon low fossil fuel energy and transport system will be easier and more effective if there is international co-ordination. Then again who is he to question us at peakoil.com he only runs one of the world biggest companies.