Adaptation reduces the vulnerability of assets, infrastructure, environmental systems and societies to climate change, and is a response to the risks associated with changes in weather patterns. Governments, communities and businesses will need to prepare for severe changes in the weather. Shell is currently identifying our facilities and locations that are most exposed to the physical impacts of climate change.
We have always taken into account potential risks and threats to the viability and profitability of major projects, to ensure the robustness of our portfolio. Some external parties say that fossil fuel reserves could become stranded, due to government policies to reduce CO2 emissions.
At Shell, we assess the CO2 risks on all our planned ventures using a CO2 project screening value (PSV). A value of CO2 has been applied to all of our projects since 2000. Since 2008, our CO2 PSV has been $40 per tonne. This means that new projects are assessed for the financial impact should a price of $40 for CO2 emissions be implemented. For projects with a high exposure to carbon pricing or legislation, we consider the impact of higher CO2 prices.
The screening value can influence the design and operations of projects to increase their resilience to future CO2 regulation. For example, at our Carmon Creek project in Alberta, Canada, the CO2 screening value led to the inclusion of process equipment to use energy more efficiently, as well as the capture and disposal of CO2.
Collaboration and advocacy
Shell collaborates with a number of organisations and industry associations to move the energy and climate change discussion forward. In 2014, Shell’s Chairman, Jorma Ollila, attended the United Nations Climate Summit in New York to support the World Bank’s statement on carbon pricing, along with other leaders from business and government.
We also work with organisations such as the International Emissions Trading Association to support the inclusion of carbon pricing within a future international agreement on climate change. In 2014, we signed the Trillion Tonne Communiqué which makes the case for a strong carbon price.
This continuing work supports our preparations for the 21st session of the Conference of the Parties to the UNFCCC (COP 21) in Paris in late 2015.
Energy efficiency in our operations
We continue to work on improving the energy efficiency of our existing operations. Reducing heat loss and power use also helps to reduce our own CO2 emissions.
In 2014, we continued to improve our energy intensity (the amount of energy consumed for every unit of output). This is the result of work within our operations to improve the reliability of equipment and undertake energy efficiency projects. Emissions from our Downstream business continue to decline. A 1% improvement in energy efficiency across our manufacturing sites is equal to $5–7 million savings per site, depending on the oil or gas price. In 2014, our 20 global manufacturing sites were able to make energy consumption savings of around $16 million. This was largely due to our CO2 and energy management system, which enables us to identify equipment and processes where we can improve energy efficiency.
We are also making efficiency improvements to our shipping operations. For example, we piloted a scheme for our fleet of 54 liquefied natural gas (LNG) and oil vessels by improving in areas such as reducing fuel consumption and loading and discharging times. In 2013 and 2014, the scheme reduced emissions and generated savings worth more than $150 million. We are now implementing these changes in other parts of our shipping fleet.