Renewables to struggle to replace fossil fuels

LONDON: Clean renewable energy will struggle to replace fossil fuels as heavy industries will only gradually wean themselves off coal, oil and gas, Royal Dutch Shell Chief Executive Officer Ben van Beurden is set to say on Tuesday.

In a speech he will make to the annual Oil and Money conference in London, van Beurden will again urge governments to place a price on carbon emissions in order to reduce coal consumption in favour of the less polluting natural gas.

"I know that some people would like fossil fuels to be replaced by renewables as we speak. But for technical and economic reasons, this can only happen step by step. And it will not happen across the board," van Beurden is set to say.

Heavy industry, heavy duty transport and chemical manufacturers will continue to require hydrocarbons to operate, he added.

Van Beurden said that an effective carbon pricing system would also boost the economic incentives for cleaner technologies such as carbon capture and storage (CCS).

"In my view, the issue is essentially about finding economic ways to invest in an energy transition. This is why governments should take the opportunity to put a price on carbon," he is to say.

"By taking the costs of tackling climate change and air pollution into account, carbon pricing systems will drive the right behaviour of consumers and producers."

Shell was among six of Europe's largest oil and gas companies to urge governments around the world to introduce a price on carbon emissions at the United Nations Paris climate conference in December, where governments will try to agree on a way to limit global warming.

Setting a price for each tonne of carbon that emitters produce is meant to encourage companies to adopt cleaner technologies and shift away from using fossil fuels, primarily coal.

The Shell chief executive is also set to outline the Anglo-Dutch firm's plans to live through an extended period of low oil prices following their halving since June 2014, which has damaged oil companies revenues.

Shell has reduced its operating costs by $4 billion or around 10 percent in the first half of 2015 as costs return to levels last seen in 2011, he will say.

The company, which is hoping to complete its proposed $70 billion (46.2 billion pounds) bid to buy smaller rival BG Group in early 2016, also expected to cut 2015 capital spending by 20 percent from last year to around $30 billion.- Reuters