Despite popular belief, a number of people might be surprised to learn Shell is not an oil company.
"We're not," insisted Tahir Faruqui, president of Shell North America LNG and general manager of Origination -- North and Central America at Shell LNG Marketing and Trading. "Shell is a conglomerate that works across the value chain. We are actually an energy company.
"Two, maybe even three years ago, we became more gas than oil in terms of our global operations. Fifty percent of our operations represented gas business, and 49 percent was oil, which is quite telling. It's a sign of the times that the market is moving and changing and always evolving."
Faruqui added that Shell operates "from the beginning to the end" on the energy valued spectrum. "We operate from the exploration side of things all the way to getting commodities delivered to the end users," he said, addressing maritime and transportation professionals at the Greater Houston Port Bureau's monthly Commerce Club Luncheon Series event held recently in Houston.
"As we think about the evolution of the business, our company has evolved as well," Faruqui said, explaining Shell currently has a group called Integrating Gas and New Energies that operates across the spectrum from development to extraction and exploration -- all the way down to delivering the gas molecules.
"I call it 'new energies,' and I said Shell is an energy company because energy is also evolving," Faruqui said.
Expanding on that energy segment, Faruqui explained LNG is a commodity that has been around for 50 years, but has "taken off " to become a significant component of most of the major energy consumers of the world.
"But there are new components coming all the time as well," Faruqui said. "We have solar. Hydro's been around, and even battery is coming in. So we're playing in that space, in that entire value chain, and we're excited about the possibilities that this segment brings.
"I'm excited about that because I represent the gas side of the business," Faruqui continued, adding that his role at Shell is to help grow demand and consumption in that sector and "facilitate the development of the infrastructure needed to bring those molecules to the market."
The shale boom pivot
Faruqui said, globally speaking, Shell's footprint touches every continent.
"Again, LNG is a global commodity," he said. "And while it's always been a global commodity and gas has been more of a local commodity, LNG is making it global, and Shell has a privileged position to be able to play in that space and across that value chain in pretty much every major market."
Faruqui recalled that as recently as the early 2000s, the U.S. was running out of gas.
"Lo and behold, people all over the world were investing in what we call 'regasification capacity' in North America -- Shell being one of them," he explained. "We built one of these massive, multibillion-dollar facilities to receive gas, which was brilliant at the time. We all looked like geniuses.
"Then the shale boom came, and we said, 'What do we do with these multibillion-dollar facilities that are sitting empty?' We said, 'Now we have too much gas; we don't want to consume all of it, but there are other parts of the world that need it.'"
As a result, Shell began converting some of those facilities into liquefaction sites.
"In North America, we've got re-gas capacity as well as liquefaction capacity," Faruqui said. "As of last year, Shell was the first to lift gas out of the United States and take it abroad to markets. So there's a lot of pioneering in this space with -- I am hoping -- more pioneering to come."
LNG's maritime opportunity
Globally, Shell operates more than 55 ships and is adding more, Faruqui said.
"We now have under our control, both through direct ownership and through shortterm and long-term charters, one of the largest fleets of LNG vessels in the world," Faruqui said. "And we're moving them around globally, diverting them at times, bringing them from one location and taking them to another -- depending on where prices are, what the contacts allow -- and moving them to the most urgent-need market."
Faruqui speculated Shell's fleet will grow to more than 70 vessels within a couple of years, saying he believes LNG as a marine fuel is "the next frontier" for the maritime sector.
"We have seen some of that already evolving -- and Shell has been part of that evolution -- where LNG as a marine fuel is more efficient in some cases and definitely more environmentally friendly as it gets consumed in most cases," he said.
Marine, as a sector, is a huge contributor to the pollutants of the market and the environment, Faruqui noted.
"Compared to the emissions that come from conventional fuels, LNG is a better alternative," he said. "When I think about LNG as a fuel, as an energy-efficient alternative and also an environmentally friendly commodity, I can start to see that, as I look at the new frontier of marine fuel, it cannot be ignored."
Confronting infrastructure, regulatory challenges
Faruqui pointed out the supply of LNG is available and abundant, as are many different resources.
"Just look at the United States: We can produce almost any kind of gas in the world right now," he said. "The cost of using LNG as a fuel is a competitive alternative. You do have to invest in the conversion to use your vessel to handle LNG, but once that investment is made, it becomes a very competitive alternative."
But despite its abundance and environmental advantage, LNG is not without its challenges. "It needs infrastructure," Faruqui admitted. "You need billions of dollars for it to get going. Shell believes this frontier is real and will happen, and we are investing in it.
"The engine technology is there, and the evolution is there. Projects and technology personnel are helping to develop what I would call the 'research frontier' with tools and technology that allow us to further develop these types of resources that can be consumed and get adapted to the market."
Last but not least, Faruqui referred to the challenges of the regulatory framework.
"When people see an LNG tanker, they think 'floating bomb,' right? There is the conventional wisdom, and there are the myths that are existing in the market," Faruqui said. "So there are things that we need to do to make this a mainstream fuel and a mainstream opportunity. We at Shell are trying to do whatever we can to dispel those myths that exist."
In the fall of 2016, a major change was announced, Faruqui said, that would imminently help dispel myths and make or "galvanize" this mainstream acceptance of LNG as an environmentally friendly fuel.
"The Global Maritime Regulatory Agency (GMRA) is monitoring and has been governing what these pollutants represent and how many are allowed," he said.
The current limit on the sulfur cap is 1 percent.
"The GMRA said by 2020, that cap is going to get reduced to 0.5 percent," Faruqui said. "So with that change, the maritime sector has to take action. They will have to do something. They may have to put in scrubbers to handle the emissions from the vessels or, as the new builds come, choose to go with the fuel that is actually more efficient and less polluting.
"We believe LNG can get us there -- again, assuming that that infrastructure investment happens. In facilitating that, I hope we can get there."
For fun and profit
Faruqui shared with audience members they would immediately notice positive differences when boarding a vessel fueled by LNG, whether commercially or for entertainment.
"These are fantastic vessels. It is a great vessel to get on; if you get the opportunity, go visit them," he enthusiastically urged.
"You'll find other features of LNG that are not obvious," he added. "It is quieter, it is fast, it is efficient, and it is also cleaner. You can walk on the vessel and see that there is no black soot anywhere. I don't need to sell that anymore!"
Shell customers and end users are noticing the positive changes in vessels that consume LNG as well.
"We are signing deals that are helping make that happen, to make that a reality," Faruqui said, specifically noting Shell had recently signed a deal with Carnival Cruise Line.
"Carnival has committed to converting to LNG for their cruise vessels, which is fantastic," he said, adding that Shell is also signing other deals "on the tanker side."
While it is evident this conversion to LNG and adoption of the concept is already happening, it is incumbent on the industry to support that adoption further, Faruqui said.
"We need others to join us, to help in supporting that conversion either through the infrastructure investments or just through delivery alternatives," he said. "Bunker vessels will be required, barges will be required. We are investing in that, and others are looking at it as well.
"I am hoping we can get the entire industry galvanized behind it to get that conversion moving. I cannot tell you what is going to happen 20 or 25 years from now, but I believe LNG is a molecule that will be part of the energy mix globally -- and most likely bigger than the consumption today."
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