Shell Oil and Gas Company Perspective on Energy Futures
- Posted on July 8, 2014
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There was a time when the Royal Dutch Shell corporation demonstrated strong interest in nuclear energy.
In 1973, it was approached by Gulf Oil Company, the owner of Gulf General Atomics, as a capital partner for an aggressive expansion program.
GA had spent the better part of two decades developing an innovative high temperature gas-cooled reactor technology. It had constructed a small prototype at Peach Bottom in Pennsylvania and followed that successful experiment up with a larger, 300 MWe demonstration plant at Fort St. Vrain in Colorado. That plant generated a lot of excitement and customer interest in the technology because it seemed to solve several problems that had been seen as hampering the development of light water cooled nuclear reactors.
Most importantly, the high temperature gas cooled reactor offered higher steam temperatures and pressures, which enabled the Ft. St. Vrain nuclear power plant to achieve a heat rate (thermal efficiency) that was competitive with the best available coal fired technology. As an additional benefit, the inert gas cooling eliminated the internal corrosion and minor activation issues that can lead to “hot spots” in the reactor coolant piping systems, tanks and valves in light water reactors.
On the strength of the technical advances embodied in the HTGR technology, General Atomic’s had earned an impressive order book for ten nuclear plants that would be a scaled up, 1000 MWe version of the Ft. St. Vrain design. Gulf did not have sufficient capital resources by itself to finance the necessary industrial expansion to fulfill those orders, hence its approach to Shell.
Royal Dutch Shell purchased 50% of Gulf General Atomics, which then reverted its corporate name to simply General Atomics or GA.
Then something quite surprising — to most observers — happened. For the next year or so, GA salesmen worked feverishly to convince the customers who had ordered HTGRs to cancel those orders. The official story offered by the company was that after investing hundreds of millions of dollars into the purchase of 50% of the company, Royal Dutch Shell people performed a detailed technical evaluation of the reactor plant design and decided that it could not be constructed and sold profitably at the agreed upon prices. They saw an immense future effort that would yield nothing but losses for the company.
According to the company, if they cancelled the orders, they were liable for tens of millions in contract-related damages, but if the customers cancelled the orders, both parties could simply walk away and avoid the trouble of trying to fulfill the contracts by building plants.
In 1981, Gulf bought out Shell’s interest in General Atomics. That was 33 years ago. There is little evidence of any Shell investments in nuclear energy development since that time. There are those who accept the notion that Shell decision makers have a “once burned, twice shy,” justifiable reason for staying away, but I suspect that Shell accomplished exactly what it wanted to accomplish with its several hundred million dollar investment. After all, Shell often reports quarterly, after-tax profits from sales of oil and natural gas that exceed $5,000 million dollars.
Those profits are driven by gas and oil prices that are substantially higher than they would be in a market that included robust competition from a growing nuclear energy industry.
As a skeptic when it comes to the actions and motives of petroleum companies, I’ve often marveled at the timing of Shell’s brief flirtation with nuclear energy investing. It purchased its share of GA at the time that world oil prices were increasing by 400% from $3 per barrel to $12 per barrel and when logical market observers thought that nuclear energy was a terrific way to reduce petroleum dependence. It bought into a company with strong sales prospects in 1973 and left a company in 1981 that no longer had any interest in selling nuclear power plants.
The impetus for telling this story today was my discovery of a Shell promotional video that describes its view of the world’s energy challenge and its proposed solution. The video mentions “nuclear power” one time, but focuses on the growth in unreliables like wind. Not surprisingly, the video concludes by saying that Shell is putting all of its bets on natural gas, because it produces “up to” 70% fewer CO2 emissions compared to coal, which is quite a stretch goal considering that the basic chemical reaction of burning methane (CH4) produces 66% of the CO2 of the basic chemical reaction of burning C (carbon, the primary ingredient of coal.)
Here is that video.
PS – After writing the above post, I realized that my “discovery” of the video was almost exactly three years after it was posted, July 6, 2011. As I think back on what led me to the video — a message from YouTube that said “We think you’d like…” — I chuckled. Something tells me that the bots that made that recommendation don’t look at the “year” field when checking dates and viewing habits to make their recommendations. Oh well…
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