Policy stability vital to unlock LNG investment for energy shift

Natural gas and LNG will continue to be essential commodities in a world striving for energy security alongside a sustainable future.

But those resources must be approached with rational strategies that embrace the power of AI and sufficient investment along the energy journey.

These were subjects touched on by Wael Sawan, CEO of Shell, during day one interview ‘Leading through the realities of energy sector transformation: AI, investment, and the future of gas & LNG’.

“We are at an incredibly exciting moment in history, you have multiple mega trends,” Sawan told the Energy Impact Theatre.

“AI, climate, the geopolitical realities that we are seeing, fragmentation in some of the world order that we have traditionally seen…energy sits at the interface of all of these different trends.

“And we have an opportunity not to say, ‘is it energy transition? is it energy addition?’, but actually to continue to supply energy the world needs at increasingly lower carbon; that is what gets me out of bed every single day, that is what we are excited about.”

Sawan said that what was not in doubt was the role of gas going into the future, but he stressed the importance of stable policy to multi-billion dollar investment decisions.

“If there is one common theme every single time I meet a head of state, it’s exactly that, because the world is competing for investments.

“It’s also important to recognise they pay out, typically, in over a decade. You need to be able to look through multiple administrations in all the countries in which we invest, and you need the institutions to be strong enough to be able to give you confidence to make those investments.

“So the regulatory environment, the fiscal strength of the country, the appetite to be able to welcome foreign capital…absolutely critical.”

And that was particularly revenant to Europe, said the Shell boss.

“Number one (is) the consistency of the regulatory environment. Make sure that we do not have regulations that incentivise in one area and then disincentivise in another area,” Sawan explained.

“Secondly, the narrative around energy security…everyone is rightly saying we need to be able to go to lower carbon and lower carbon intensity products. But it is a journey of decades, and right now the world is going through energy addition. We see maximum consumption of everything from coal to bio to wood to oil, gas and so on.

Sawan continued: “It’s not what is good or what’s bad - create the right incentives, allow the market to function, put very clear guardrails around carbon intensity and how you want to incentivise or penalise. If we do all of that and do it at pace, I think there’s an opportunity to be able to rebuild some of the strength Europe has.”

Sawan also detailed how Shell is leveraging AI, which he revealed is at play “in almost every context”.

“From an energy demand perspective, it plays because of the huge demand that AI has for energy. From productivity of our own workforce, from reimagining the workflows of a company like Shell, how we use digital twins…it plays into that and into our technology.”

Sawan said the board was fascinated by all of these dimensions, but the “challenge is to make sure that we can wrap our head around it”.

He continued: “And what’s sometimes not talked about as aggressively is AI is not just a technology; you have to match AI with the culture of a company, the workflows of a company. This is a people journey before it is a technology journey, and we need to adapt to that at the base.”

More generally, Sawan added: “We collectively have a responsibility to keep a balanced narrative that’s focused on what needs to be done.

“Let’s not forget the privilege that energy affords people around the world, something we take for granted. Just what’s happening in the next 25 years…if the third of the world that hopefully get access to the middle class are there, that means a 25% increase in primary energy demand that is our collective responsibility to deliver.”