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Shell’s flawed Scenarios predictions

Screen Shot 2013-03-01 at 22.08.52Shell has been forecasting dramatic increases in its own production (which have never materialised) for years. If they cannot accurately forecast how their own assets will perform, how can they expect to forecast the whole world’s activities. Vince Cable was actively involved in scenario planning development while at Shell. Need I say more?

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Screen Shot 2013-10-25 at 10.27.00By John Donovan

In the last several days there have been several articles published telling the world about the latest predictions from the famed Shell Scenarios soothsayers forecasting peak oil and the end of the oil era.

Shell says the end of the oil era is 2070: Mother Nature Network (blog)-by Jim Motavalli-Oct 18, 2013
Like the UN with its high, medium and low predictions, Shell is saying ” if … By 2070, the passenger road market could be nearly oil-free and …

Shell predicts petroleum-powered cars will be ‘nearly’ gone by 2070 …: Autoblog (blog)-by Sebastian Blanco-Oct 18, 2013
“By 2070, the passenger road market could be nearly oil-free.” That’s the key line (for us, anyway) in a report out from Shell titled New Lens …

Shell Claims Global Liquid Fuel Demand will Peak in 2035: OilPrice.com-21 October 2013
Shell, one of the largest energy companies in the world, has come out and … that by 2070, the passenger road market could be nearly oil-free

In trying to determine whether a crystal ball gazer is anything more than a charlatan it is relevant to examine the track record of their past predictions.

In January 2008 newspapers published articles based on predictions made by the Shell Scenarios team.

The startling headline in an article published in The Times proclaimed: Demand for oil and gas will outstrip supply within seven years, says Shell chief . The Shell chief  was Jeroen van der Veer, the then Chief Executive Officer of Royal Dutch Shell Plc. The Times article acknowledged that the forecast was contained in a Shell internal email from him leaked to this website, royaldutchshellplc.com. A Daily Express article was published the following day based on the same Shell prediction, with an even more alarming headline: We’ll begin to run out of oil within 7 years

Here we are nearly 7 years later and in that short time the outlook on oil and gas reserves has improved considerably and fears for an early advent of peak oil have proven groundless, with Shell moving their predicted peak oil date to 2035, 20 years later than their earlier crystal ball forecast.

Bearing in mind that Shell Scenarios got it so woefully wrong predicting just a few years ahead, what credibility can be attached when the same team make predictions trying to look decades into the future?

And of course they failed to predict the Shell oil reserves scandal. Guess the crystal ball was a bit cloudy at the time.

Comment by a Shell related source:

Shell has been forecasting dramatic increases in its own production (which have never materialised) for years. If they cannot accurately forecast how their own assets will perform, how can they expect to forecast the whole world’s activities. Shell has formally dropped these aspirational targets only recently, even though there had probably been large numbers of analysts who used these numbers as inputs for their own models…

Vince Cable was actively involved in scenario planning development while at Shell. Need I say more?

CRACKED CRYSTAL BALLS

“Drill for oil? You mean drill into the ground to try and find oil? You’re crazy,”
— Drillers whom Edwin L. Drake tried to enlist for his project to drill for oil in 1859.

“I think there is a world market for maybe five computers.”
— Thomas Watson, chairman of IBM, 1943

“But what is it good for?”
— Engineer at the Advanced Computing Systems Division of IBM, commenting on the microchip,1968.

“640K [of computer memory] ought to be enough for anybody.”
— Bill Gates, 1981

“I’m just glad it’ll be Clarke Gable who’s falling on his face and not Gary Cooper,”
— Gary Cooper on his decision not to take the leading role in “Gone With The Wind.”

“We don’t like their sound, and guitar music is on the way out,”
— Decca Recording Co. rejecting the Beatles, 1962.

“Heavier-than-air flying machines are impossible,”
— Lord Kelvin, president, Royal Society, 1895.

“There is no reason anyone would want a computer in their home.”
— Ken Olson, president, chairman and founder of Digital Equipment Corp., 1977

Screen Shot 2013-03-26 at 23.26.03COMMENTS RECEIVED FROM “AN OLD EP HAND”

“And Voser was made to believe a few years ago that shale oil was the next bonanza. Unfortunately it turned out to be a lot of snake oil.”

Perhaps I have been brainwashed a bit too much in my Shell years but we need to be careful in using these scenarios as forecasts. They are not forecasts and certainly not single line forecasts. Whereas the yearly forecasts of Shell are indeed forecasts within a certain band and on which policy and investment decisions are made, these forecasts have been extremely poor since the great transformation, since it was mostly based on wishes rather than fundamentals. And bad news was effectively stopped to the princes at the top.

Remember this man with the beard predicting that Shell would go to 6.5 million bopd? And Voser was made to believe a few years ago that shale oil was the next bonanza. Unfortunately it turned out to be a lot of snakeoil.

What about the great many promises of Shell to end gas flaring in Nigeria by a certain date. In 1979 a law was past (decree 99) which told the oil companies to stop flaring. This is 34 years ago. They have made some small progress but there still is serious flaring going on.

I agree that the last 20 years or so, a small group of extremely clever people (mostly great abstract thinkers not connected to the real world anymore) have concocted these scenarios. It kept them busy and off the street so to speak. In the days of Arie de Geus (who started them) it made a bit more sense. Shell was prepared in the early 70s for the rise of Opec and the explosion of oil price, they saw it coming. But on the whole I see little wrong with these scenarios. They always try to paint a pessimistic and optimistic world picture and then fit in the possible role of Shell. Great technological upheavals just happen and are not predicted. Perhaps these scenarios should be made every 5 years or so.

It is obvious to me that one day the oil production will decrease. This is fundamental logic. But when this will happen remains a very flexible date. I believe Shell has always said that we need all forms of energy and some time in the future it will be all sustainable (otherwise mankind will be finished). But to get there we also need nuclear power just to tide us over. Good man, Cameron has taken very good action by commissioning 2 nuclear plants.

In 1997 there was talk of possible futures (you know when multiskilled Watts was not yet a priest but an astronaut who had seen the future). It was quite conceivable that the head office in 2007 would be more or less virtual and based in Moscow led by a 40 yr old Chinese woman. I have seen the movie with my own eyes. At the time I cringed already with so much bullshit. But the head honchos pretended to like it.. We do not hear from the priest anymore. By now I would expect he would be aiming to take over the church of England. You will never kill the fire of ambition in this character!

Shell Nigeria was going to double its production to 2 million bopd by 2010 or so.
Shell Brasil would be the next Shell Expro.

Etc
Etc

There are many examples. Just follow the sayings of Brinded since the mid 90s when he was director of Shell Expro.

It was a standard to promise more than could be delivered. Just like the Soviet Union in their good old days.

Hence the enormous cost overruns in Sakhalin, Pearl and the ill fated Corrib project, that is also many years behind schedule.

What happened to the promise of the new office in Aberdeen to run all technical matters in EP Europe? Yet another disappointment!

royaldutchshellplc.com and its sister websites royaldutchshellgroup.com, shellenergy.website, shellnazihistory.com, royaldutchshell.website, johndonovan.website, shellnews.net and shell2004.com are all owned by John Donovan. There is also a Wikipedia article.

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