Course:EOSC311/2021/Project Title: Royal Dutch Shell: Fossil Fuels to Clean Energy Initiatives with Data

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Introduction and Summary

A fossil fuel powered energy station.

As the world progresses and becomes ever more technologically savvy, we also become more reliant on electricity. Fossil fuels and natural gases, two extremely valuable commodities, are pivotal to every day life in the modern era. However, while they provide us with most of our energy needs, they are also detrimental to both us and our environment. Fossil fuels and natural gases are non-renewable and becoming increasingly scarce as our needs are overtaking their rate of replenishment. Fossil fuels and their byproducts are what drive our society, both figuratively and literally. The byproducts are required in most materials we use such as plastic, cosmetics and carrying bags for our groceries. Most vehicles on the road, apart from fully electric ones, require oil or a refined version of it to be powered. But their most important use is in electricity generation, manufacturing, and industrial process heating. In the developing world, the use of coal is paramount as it's needed for heating and cooking. Coal is the cheapest alternative when the newer cleaner more expensive energy sources cannot meet energy demand. [1]

We all know the fact that our burning of fossil fuels and high energy use is what is causing us to enhance climate change and global warming. This article will look into what lead to our current problem of an overreliance on fossil fuels, what we are doing to find more sustainable means, as well as understanding how to utilize these new sustainable means to harness energy and meet our needs. This article will be separated as follows; First, I will discuss the geological process of the formation of fossil fuels and its extraction. Then I will look at how its use has caused different geological drawbacks to processes such as the greenhouse effect and climate change. Lastly, I will look at how companies, in particular, Royal Dutch Shell, who are leading the industry in energy, are looking for more renewable and sustainable practices in order to maintain their edge over their competitors. I wish to discuss this because it could be linked to how they use big data and data analytics to decide their decisions in changing or moving their practices that could accelerate the transition or hinder it. It could also be due to technology advancements in certain utilizations of renewable energy that it may be more possible for early adoption of new forms of energy. I believe that this will tie in very well with the concepts we have learnt in EOSC 311 and also bolster my knowledge of BTM and applying what I've learnt in different courses to be applied in various fields.

Relationship with BTM

With Business Technology Management (BTM), I always found it to be interesting to be working with technology and seeing how they form connections with how businesses operate and how we can further improve their efficiencies and processes. These processes and the effects of Tesla disrupting the industry as well as other environmental movements sparked my interest. I wished to see how technology evolved and drew inspiration from the environment of going green and moving to more renewable and sustainable forms of energy. Furthermore, in BTM, we take on the role as project managers or as consultants to observe data trends and also to discuss, recommend and implement different technology strategies for companies to improve their strategies, productivity or processes to be more efficient in managing projects and portfolios. BTM is also crucial for helping businesses align their technology systems and processes with their underlying business structure. [2]

Why Fossil Fuels?

Fossil Fuels

Fossil fuels are by large the world's primary energy source, consisting of mostly coal, oil and natural gas. Over the course of the century, fossil fuels have fueled the global economic development. However, as mentioned before, fossil fuels are limited and finite. The fuels can also cause irreparable damage to our environment. The U.S. Energy Information Administration has stated that in 2016, fossil fuel burning was directly responsible for 76 percent of emissions of greenhouse gases. The emissions of these gases contribute to the greenhouse effect which is causing unprecedented negative changes in the Earth’s climate and resulting in enhanced global warming. [3] Currently, the energy mix of fossil fuels still remains approximately the same as it has in the last 10 years. [4] 86% of the global energy demand is fulfilled by fossil fuels. Currently, oil, gas and coal lead with a 36%, 27% and 23% share vs alternative energy resources at 14% in the global energy mix. Renewable energy resources such as solar, wind, geothermal biomass and hydel account for just 8% while nuclear fulfills only 6% of the total energy mix. [5] To understand why fossil fuels are not sustainable or aren't suitable for future use, we first have to understand the process of it's formation and extraction. Then we can look at its effects on a geological scale.

Specimen of lignite coal.

Formation of Fossil Fuels

In general, most fossil fuels are formed in the same way. They are organic matter that is buried and unable to decay. The only difference is the type, where and how this happens.

Coal

The formation of coal is found to be occurring mostly on land in mires. Mires are where the groundwater is near (wetland) or slightly above (bogs, swamps) the soil, in areas with humid tropical to temperate climates that allow vegetation to produce more organic matter than is decomposed.[6] This vigorous growth of vegetation leads to an abundance of organic matter that continues to build within the stagnant groundwater, not being able to oxidize and decay. [7] This situation of dead organic matter being submerged in oxygen-poor water has to be maintained for centuries to millennia for enough material to accumulate and form a thick layer. The thick layer of deposit is then covered with more sediment or matter, typically from rivers changing their course or rising sea levels. As time goes by, more sediments are deposited and added, causing the organic matter to become compressed and start heating. Low-grade lignite coal forms at depths between a few 100 m and 1,500 m and temperatures up to about 50°C. At between 1,000 m to 5,000 m depth and temperatures up to 150°C m, bituminous coal forms. At depths beyond 5,000 m and temperatures over 150°C, anthracite coal forms.[7] The maturity of the coal is directly proportional to the energy content, meaning that the older the coal is, the more energy content it has. This means that anthracite possesses the highest energy content of all the coal types, followed by bituminous and lastly, lignite.[8]

Oil and Natural Gas (Petroleum)

Crude Oil

The formation of petroleum, much like it's terrestrial cousin, requires a significant amount of time to form. Approximately 70% of oil deposits that exist are estimated to have been formed in the Mesozoic age (252 to 66 million years ago), 20% in the Cenozoic age (65 million years ago)[9], and 10% forming in the Paleozoic age (541 to 252 million years ago). [10] This is believed to be linked to the fact that Mesozoic age was marked by a tropical climate, and thus possessed large amounts of plankton in the ocean. The plankton lands on the ocean floor and mixes with inorganic material that enters the ocean by rivers into an organic-rich mud. It is this mixture of mud on the ocean floor that forms the base of oil over many years. Similar to coal, the mud cannot be allowed to decay and is further buried by more sediment and organic matter and lithifies; becoming sedimentary rock and creating organic shale.[9] The shale's temperature then increases as it becomes further imbedded deeper into the Earth's interior. The increased pressure and temperature of the shale transforms it into kerogen. Shale that contains kerogen is known as oil shale. If temperatures of the kerogen are more than 90°C but lower than 160°C, the kerogen is transformed into oil and natural gas. At temperatures higher than this, only natural gas or graphite is formed. [9]

Extraction of Fossil Fuels

There are 3 techniques of coal production. 1st) is open-cut or open-pit mining, for when the coal bed occurs superficially and it is fairly thick. 2nd) - coal mining using galleries - is the use of slightly sloping wells through which coal is delivered to the surface. The galleries are used when the coal bed is shallow and of small thickness, and when construction of an open pit is not of economic benefit. Finally, the third technique of coal production mining, is drilling and recovering coal from large depths either on land or at sea. A mine is a vertical or inclined shaft drilled from the surface through the mass of terrestrial rocks to the coal-bearing bed. Coal is also mined from deposits extending far out at sea. Underwater coal mining is carried out in Canada, Chile, Japan, and Great Britain. The oldest technique of coal mining is galleries, while the most economically advantageous one is open pits. However, the major technique of coal production is mining, which accounts for 60% of total production.[11] Extraction of oil and gas are carried out from drilling rock formations and forming wells. Wells are typically drilled vertically, though they can also be drilled horizontally. [11]

Impact of Fossil Fuels on the Environment

Earth's greenhouse effect (US EPA, 2012).png

Before we move on to the impact of fossil fuels on the environment, the greenhouse effect has to be understood. The greenhouse effect is "the natural warming of the earth that results when gases in the atmosphere trap heat from the sun that would otherwise escape into space." [12] As sunlight reaches the surface of the earth, some of its rays, approximately 30%, are bounced by into space by the albedo of our glaciers and ice caps due to ice-albedo feedback. The other 70% are trapped by the natural greenhouse gases (carbon dioxide, methane, nitrous oxide, and water vapor.) These greenhouse gases trap heat in the atmosphere and warm the planet.

To put simply, fossil fuels release large amounts of carbon dioxide into the atmosphere when they are burnt. The extra carbon dioxide and presence of other greenhouse gases result in the Earth capturing and retaining more heat than is necessary, producing a positive climate forcing or warming effect.[13] 50% of the gases that are estimated for the enhanced greenhouse effect is attributed to the burning of fossil fuels. Some of the gases are; methane escaping from natural gas reservoirs, or vented from coal mines, or produced by anaerobic fermentation in landfills and by cows, nitrous oxide which is produced during fossil fuel combustion, and chlorofluorocarbons, which are used to manufacture aerosols and sprays. [12] Currently, energy production accounts for 75% of global greenhouse gas emissions.[14] Over 20 years from 1990 to 2019, the total warming effect from greenhouse gases produced by human activities is estimated to have increased by 45%.[13] Furthermore, according to BP's report on world energy in 2016, only 115 years of coal production and approximately 50 years of oil and natural gas remain. [14]

Role of Companies in Energy

File:Seven Sisters (oil companies).jpg
The 7 Oil Leaders

Since we know about fossil fuels and the impact they have on our lives and our environment, it's also up to companies who supply us our energy sources to find other alternatives in order to stay relevant. In Business Technology, we would analyze the data trends and formulate different algorithms to determine the best course of action for a company. Companies such as Royal Dutch Shell and BP who are leaders in the fossil fuel and energy industry, would most likely rely on data and other trends to maximize their growth of other renewable sources as well as scaling them for a larger access to different markets. The companies would also have to deal with government initiatives and programs that could steer them into looking into renewable energy earlier than they would like to; which is where having a data analysis and modelling of future data could be useful to properly allocate resources and maximize the utilization of the company's resources.

Oil companies such as Royal Dutch Shell have been under increasing pressure and put under the spotlight for making too many promises to reduce their extractions and supplies of fossil fuels. However, with more industries moving towards renewable energies and looking for alternatives, Shell is also under pressure to research and develop new ways to provide energy or concede their industry leading position to competitors. Competition in the industry has led to shareholders wanting the company to help meet global climate goals and clean the image of the industry at Shell, all while cutting emissions by 45% at the end of 2030. [15] So how are they planning to do it?

Most oil companies are taking one of 3 approaches: invest in clean technologies, move into clean-energy businesses and climate policy lobbying. Hence, we will be taking a deeper look into what strategies the Dutch oil giant has taken in order to secure their position as a leading energy provider in the future. The energy industry leaves room for funding in research and development according to Pricewaterhouse Cooper. The oil companies spend the least of their revenues on research and development and is potentially what is holding innovation in renewable and clean energy industries from advancing the energy transition from fossil fuels to cleaner energy. International Energy Agency data shows that government spending on energy R&D is also required to step up as there has not been much increase in spending in this key area. Other areas the oil companies could invest in is in clean-energy businesses, such as renewable electricity generation and distribution and electric-vehicle charging. [15]

Royal Dutch Shell Wind Farms

Case Study: Royal Dutch Shell's Progress To Net-Zero Emissions

The Royal Dutch Shell Group was created in February 1907 through the amalgamation of two rival companies – Royal Dutch Petroleum Company and the “Shell” Transport and Trading Company Ltd of the United Kingdom. They are one of the largest publicly traded petroleum corporation globally. They engage in crude oil and natural gas exploration, production, refining, and marketing in more than 90 countries. [16]

Shell's long-term ambition is to reduce the net carbon footprint of the energy products they sell by 65% by 2050, instead of 50%. Their medium-term ambition is to reduce the net carbon footprint of the energy products 30% by 2035, in step with society, instead of 20%. [17]The short term goal timeline has been accelerated to be completed by 2030, with the company having to reduce its net carbon emissions by 45%, in comparison to emission levels in 2019. [18] Ben van Beurden, Shell's chief executive, mentioned in a statement that the ruling was hastening the implementation of their new strategy instead of a complete change of its plans after a Dutch court ruling. In 2021, Shell also listed plans this year to limit the carbon intensity of the fossil fuels it produces and sells by 6%, 20%, and 45% by 2023, 2030 and 2035 respectively, as compared to 2016 levels. The targets were part of its ambition to become a net zero emissions business by 2050.

Shell's Clean Initiatives

Shell's main initiatives of the 3 aforementioned tactics is to focus on clean technologies and move towards cleaner energy businesses.

Royal Dutch Shell announced in September 2020 plans to lay off 9,000 employees or over 10 per cent of its workforce, as part of a major overhaul to shift their oil and gas operations towards the low-carbon energy sector. Shell also has plans that the reorganization of its 72,000 remaining employees, will lead to an estimated US$2 billion to US$2.5 billion of annual savings by 2022. [19] This will enable them to implement their latest investment plan includes pouring between $2 billion and $3 billion annually into renewable energy and hydrogen. [20] Shell's further plans are to increase its spending on renewables and low carbon technologies to up to 25% of its overall budget by 2025. [21] The company is also plans to involve carbon offsets (reduction in greenhouse gases emissions made by compensating for emissions made elsewhere) heavily, as they expect to spend an annual $100 million on planting trees as "nature-based solutions". [21]

Royal Dutch Shell Electric Recharge Station

All of these are part of an overlying plan to increase the number of service stations and retail operations to focus on the sales of renewable electricity directly consumers; to their households and future electric vehicles and the aim of being "a leading provider of clean Power-as-a-Service,”.[22] The investment into the retail and renewable energy business is to build upon its existing pillar of providing gasoline and diesel as they own 46,000 stations and expect to increase that to 55,000. In conjunction with this, Shell wants to grow its electric vehicle charging network from 60,000 currently, to around 500,000 by 2025. The increased number of electric vehicle chargers together with an expanded network of gas stations allows Shell to continue to expand to different markets as they bundle its products together. Shell also expects to move towards selling more biofuels and hydrogen at the traditional gas stations increasing their supply of biofuels and hydrogen in the industry from 3% currently, to 10%. [22]Shell’s move towards cleaner energy business involves them selling low-carbon electricity directly to households, businesses and commercial enterprises. In an announcement in 2021, Shell said that it expects to serve electricity to more than 15 million retail and business customers worldwide. Furthermore, by 2030, Shell intends to double its sales of electricity to 560 terawatt hours a year, which is not solely achievable through generating its own renewable sources power generation alone, but by also purchasing additional electricity on the wholesale electricity markets. In the long term, the company intends for its capital spending to shift away from traditional and gas and instead towards low-carbon fuels and its expanding network of renewable energy stations. [22]

Big Data in Shell's Operations

While Shell has stated that they are planning to move to more greener energies, they intend to spend $8-9 billion on chemicals, products and integrated gas, and $8 billion on "upstream" or current assets they wish to repurpose or add more value. Hence, they are planning to utilize big data to develop ways to reduce oil drilling costs which bears the brunt of the industry’s expense and still provides most of the energy supply society needs. [23] Accenture and Microsoft's survey recently found that 90% of respondents said that increasing their mobile and data analytical capabilities would augment the value of their businesses. Shell is also one of these companies, as it becomes increasingly more expensive in the search for new deposits for traditional oil and gas as the process demands a huge amount of materials, manpower and logistics costing north of over $100 million. [23] Big Data also helps Shell spend less time offline as their machinery are fitted with sensors to collect performance data and compare that data with the data in the servers, so parts at risk of failing can be replaced in an efficient manner. This reduces overheads and minimizes machine downtime.[23] For all these processes, Shell partnered with Hewlett and Packard and developed fiber optic cables in different sensors for their machines to collect data of oil deposits and trends, with that data being transferred to servers maintained by Amazon Web Services. Besides machinery, data analytics is used for streamlining the supply chain of oil and gas, by making the transport, refinement and distribution provided directly by Shell. Shell is vertically integrated, and therefore involved in every aspect of the process from drilling the oil, to refining and packaging and selling it to the consumer as fuel or energy. To minimize transportation costs, fuel is only produced towards the end use point. Data models and complex algorithms help Shell to account the cost of producing the fuel, determine future demand and allocate prices and efficiently devote resources. [23]

Future Direction and Conclusion

We have seen the effect of big data and data trends to understand what drives more oil companies to make informed decisions. Much like in this course, as a project manager, I cannot solely rely on past and outdated data to accurately assess the feasibility of a new source of renewable energy. Since project managers have several experts working with them and they lack the expertise to determine the most optimal way a desired mineral is being extracted or its quality, geologists fill that gap of expertise. The geologists help to give critical information that can enable project managers or consultants to better cater new technological strategies or methods that could help companies, with current existing infrastructure and architecture. With the use of big data analytics, we have seen how it allows for a more thorough examination and close monitoring of different aspects of the oil industry. Data models can be built and analyzed to determine how minor modifications in different methods of extraction, places of deposits or renewable energies can impact the industry. In essence, the more data an organization possesses over the several components essential to its business, the more concise and informed analysis it can generate, and thus, make more informed decisions.[24] This is important as with the current geological processes, Shell can come up with different algorithms and scenarios that can be more accurate and concise in providing estimations for growth in new energy segments or even feasibility of unexplored energy sources.

References

  1. ↑ Wei Guo, Kelvii (January 2013). "Current Issues of Fossil Fuels and Their Future Prospects". ENERGY SCIENCE, ENGINEERING AND TECHNOLOGY: 86–101 – via Researchgate.
  2. ↑ "What is Business Technology Management?". Cyberportal. 2021.
  3. ↑ "Fossil Fuels". Environmental and Energy Study Institute.
  4. ↑ "Global fossil fuel use similar to decade ago in energy mix, report says". The Straits Times. June 15 2021. Check date values in: |date= (help)
  5. ↑ "Review of Fossil Fuels and Future Energy Technologies". Futures. 69: 31–49. 31 March 2015 – via Elsevier Science Direct.
  6. ↑ Hatch, Joseph R.; Affolter, Ronald H. (2002). Resource Assessment of the Springfield, Herrin, Danville, and Baker Coals in the Illinois Basin. USGS. pp. C1. ISBN 0607987030.
  7. ↑ 7.0 7.1 Earle, Steven (2015). "Physical Geology". BCcampus Open Education. Retrieved https://opentextbc.ca/geology/chapter/20-3-fossil-fuels/. Check date values in: |access-date= (help)
  8. ↑ Hanania, Jordan; Heffernan, Braden; Jenden, James; Le, Chau; Stenhouse, Kailyn; Toor, Jasdeep; Donev, Jason. "Coal". Energy Education.
  9. ↑ 9.0 9.1 9.2 Cey, Edwin (2019). "Oil formation". Energy Education.
  10. ↑ Pendarvis, Pat (2010). "Petroleum is a FOSSIL FUEL". Southeastern Louisiana University.
  11. ↑ 11.0 11.1 Govorushko, Sergey (2013). "Environmental Problems of Extraction, Transportation, and Use of Fossil Fuels". ENERGY SCIENCE, ENGINEERING AND TECHNOLOGY: 1–85 – via Researchgate.
  12. ↑ 12.0 12.1 Denchak, Melissa (July 16 2019). "Greenhouse Effect 101". NRDC. Check date values in: |date= (help)
  13. ↑ 13.0 13.1 Environmental Protection Agency, United States (2016). "Climate Change Indicators: Greenhouse Gases". https://www.epa.gov/. External link in |website= (help)
  14. ↑ 14.0 14.1 Ritchie, Hannah; Roser, Max (2017). "Fossil Fuels". OurWorldInData.org.
  15. ↑ 15.0 15.1 Rathi, Akshat (June 15, 2021). "What Oil Companies Can Do to Cut the Demand for Oil". Bloomberg.
  16. ↑ Gaur, Aakanksha (Apr 11, 2021). "Royal Dutch Shell PLC". Britannica.
  17. ↑ Royal Dutch Shell. "Our Climate Target". Shell Global.
  18. ↑ Raval, Anjli (June 9th 2021). "Shell to speed up energy transition plan after Dutch court ruling". Financial Times. Check date values in: |date= (help)
  19. ↑ Reuters (September 30 2020). "Shell plans to cut up to 9,000 jobs in transition plan". Business Times. Check date values in: |date= (help)
  20. ↑ Ziady, Hanna (June 10 2021). "Shell CEO: We will cut emissions faster but the world needs to use less oil". CNN. Check date values in: |date= (help)
  21. ↑ 21.0 21.1 Busso, Ron (June 9th 2021). "Shell to step up energy transition after landmark court ruling". Reuters. Check date values in: |date= (help)
  22. ↑ 22.0 22.1 22.2 Carpenter, Scott (March 29th 2021). "Shell Wants To Own The Gas Stations Of The Future". Forbes. Check date values in: |date= (help)
  23. ↑ 23.0 23.1 23.2 23.3 Marr, Bernard (May 26 2015). "Big Data In Big Oil: How Shell Uses Analytics To Drive Business Success". Forbes. Check date values in: |date= (help)
  24. ↑ LUCERO, TOMÁS H. (May 19 2020). "Three innovative ways Shell is using big data". Business Chief. Check date values in: |date= (help)
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