Growing Global Energy
Demand: A Defining
Moment for Louisiana
Marvin Odum
Director, Upstream Americas
The Louisiana Mid-Continent Oil & Gas Association Annual Meeting
New Orleans, Louisiana
25th January 2012
Marvin Odum: Growing Global Demand – A Defining Moment for Louisiana
Marvin E. Odum is President of Shell Oil Company and Director Upstream of Royal Dutch Shell’s
subsidiary companies in the Americas.
Odum holds positions of board leadership and participation in the Business Roundtable and the
American Petroleum Institute. In addition, he is a member of the Dean’s Council of the John F. Kennedy
School of Government at Harvard University and the Advisory Board of the Cockrell School of
Engineering at The University of Texas at Austin. He also serves on the University Cancer Foundation
Board of Visitors for MD Anderson Cancer Center and is involved with several other Houston-area
charities.
Odum earned a bachelor’s degree in mechanical engineering from The University of Texas at Austin
and a master’s degree in business administration from the University of Houston. He began his Shell
career as an engineer in 1982, and has since served in a number of management positions of
increasing responsibility in both technical and commercial aspects of energy.
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Marvin Odum: Growing Global Demand – A Defining Moment for Louisiana
Introduction
Thanks and good morning. It‟s a
pleasure, as always to be back in
Louisiana.
It‟s where I started my career, right out of
college in 1982, living Uptown on State
Street, and I always enjoy coming back
here.
I consider it an honor to have a chance
to speak to you today and I look forward
to questions you might have for me.
You may not know this, but other
institutions were founded, like you, in
1923, but most of them have fallen by
the wayside. The USSR and its
experimental calendar of five-day weeks,
for example. Also the original Yankee
Stadium and the New York Moderation
League, created in 1923 to repeal
prohibition.
The Louisiana Mid-Continent Oil and
Gas Association has outlasted them all,
and rightly so. Because you are
important to an industry that is vital to
Louisiana, to the country, and for that
matter, the world.
Shell, Louisiana and the industry
Certainly you are important to Shell.
Shell has more roots in Louisiana than
just about any place else in the U.S.,
with the possible exception of Houston.
In 1954 our New Orleans office was in
the building right next door to where we
are this morning, connected to this hotel.
We hosted receptions in the International
Room. The Petroleum Club on the third
floor was the place to see and be seen
in those early offshore days.
We were thrilled to be right in the thick
of things, and we still are.
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Today, every part of our business
operates in this state:
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We‟re a major producer in the Gulf
of Mexico
We produce natural gas in the
northern part of the state
Our pipelines run through the state
We have refineries, chemical plants,
terminals and Shell gas stations all
over
We distribute marine fuels and
lubricants out of the Port of New
Orleans
We even process asphalt in St.
Rose.
We also have valuable links with
Louisiana State University (LSU) and its
engineering schools. LSU is a talent
pipeline for us – the entire state is really.
Through our relationships with the
University and with organizations like this
one, we‟ve undertaken innovative
projects from coastal revitalization to
advocacy of fresh ideas on policy.
So Louisiana is, and always has been, a
great place for Shell to do business.
And every year our sponsorship of Jazz
Fest is Shell‟s „thank you‟ to New
Orleans and Louisiana – a signal of our
belief in the future of this great city.
Louisiana knows a thing or two about
our industry. It appreciates its great
wealth in mineral and natural resources.
And that‟s wealth in terms of dollars,
jobs, individual income and stability.
You understand, like we do, that to meet
tomorrow‟s energy demand, we‟re going
to need to do more of what we‟re doing
today, not less.
More exploration, more production,
more investment in new technologies that
make it safer and more efficient.
Marvin Odum: Growing Global Demand – A Defining Moment for Louisiana
Louisiana’s role in meeting the needs
of 9 billion people
State in the South” for economic
development.
You‟ve all heard the numbers. The
world‟s energy demand is expected to
double by 2050. By then, the
population is projected to exceed 9
billion – three times what it was just 50
years ago.
A lot of this growth is driven by the oil
and gas industry including, I‟m proud to
say, Shell.
Our scenario planners tell us that by that
time, we could be facing a gap
between energy supply and demand
equal to the size of the industry‟s entire
output in 2000. I always have to stop
and think about what this really means!
Louisiana is home to our Deepwater
business. In the Gulf, our Perdido
platform, which started production in
March 2010, and the Mars B project,
where we aim to start production by
2015, are just two pillars of that
business.
We describe this gap, this challenge of
meeting future demand, as a zone of
uncertainty.
About a week ago, I was talking to a
group of people that included members
of the National Academies, a few
Nobel Prize winners, and many scientists
and otherwise experts in their fields.
That‟s because we don‟t yet have clear
answers to some tough questions.
I know what you are thinking. I should
have been listening, not talking!
Will we have enough energy? Will it
be sustainable? Will the average
person be able to afford it? What
geopolitical factors will influence the
security of our supply? And what
happens if we can‟t reliably access the
energy we need?
Many of the people there were from
areas outside of energy – medicine,
government policy and others.
Each question poses real challenges, but
also, big opportunities – especially here
in Louisiana.
In one of the worst overall economic
climates in a generation, Louisiana ranks
third – behind only Texas and Florida –
in job growth.
I saw Governor Jindal on Fox News a
few weeks ago talking about the
45,000 jobs and the $10 billion in
private capital investments in Louisiana
every year for the last three years in a
row.
Southern Business & Development
magazine names Louisiana the “Best
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I described Perdido to them this way:
“The upstream infrastructure of our
business is the biggest, least visible and
probably most misunderstood part of
what we do.
“For example, one of our newest
upstream production platforms in the Gulf
of Mexico is one we call Perdido,
roughly 400 miles into the Gulf of
Mexico from where we sit today.
“When you think of Perdido, think of a
huge cork, a multi-billion dollar cork,
made of steel, nearly as tall as the Eiffel
Tower, weighing as much as 10,000
large family cars, floating on the surface
in 8,000 feet of water.
“Think of that cork holding a large crew
of professionals, operating miles of
piping, thousands of valves, hundreds of
electronic safety sensors.
Marvin Odum: Growing Global Demand – A Defining Moment for Louisiana
“Think of that cork tethered to the sea
floor and a network of wellheads and
equipment linked to more than 100 miles
of oil and gas pipelines, along-side
species of marine life that no human had
ever seen before our remotely operated
underwater vehicles snapped their
photos.
“Perdido has the capacity to pump
roughly 100 kboe/d. To put that in
perspective, it‟s enough to meet the
energy needs of about 2.2 million
American households every day.
“But there are 130 million homes in
America. And more than 250 million
cars on our roads. And more than six
million businesses, large and small.
“So imagine the number of Perdido‟s
required to keep our economy running
and to maintain our lifestyles, secure our
future and create jobs.”
I hope that it gave them some insight into
the capabilities of this industry.
And Mars B, when it comes online, will
be no less spectacular.
Coming ashore, I know many of you are
familiar with our Haynesville gas
development. Here‟s a quick update:
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We‟ve drilled more than 350
vertical and horizontal wells to date
Since 2008 we‟ve lowered drilling
costs by ~50 percent
Completion costs have been lowered
~45 percent and cycle times have
been cut by 60 percent.
And for the state, we see even more
opportunity in the technology that turns
natural gas into liquid products – like
fuels and lubricants – helping not only
with the economic challenges of gas
development, but also with a critical
liquid fuel need and security of supply for
the U.S.
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Ensuring continued growth in natural gas
will take the hard work of thousands of
skilled workers and technical experts,
and a community of supporting
contractors and suppliers.
You have that kind of community.
Commitment and a coherent approach
Of course, growing global energy
demand also means there‟s going to be
more competition for energy resources.
And if the last several years have shown
us anything, it‟s that people are looking
for ways to make their dollars go farther.
This is why we see safety, efficiency and
sustainability as key to our business. Not
only do these things represent the right
things to do, they enable our growth.
We don‟t see them as constraints, we
see them as part of the value of our
brand.
Last summer, for example, we released
our onshore gas principles to establish
how we will operate in the booming
natural gas market.
These principles confirm that we will:
 Design, construct and operate our
wells and facilities in a safe and
responsible way
 That we will continue to protect
groundwater and reduce water in
our operations
 That we will protect air quality and
control fugitive emissions
 And that we will engage with
communities on the social and
economic impacts of our operations,
helping them take advantage of the
huge economic benefits these
developments can deliver.
Nobody said we had to do this. We
said that we could, and more importantly
that we should. And we know it is
Marvin Odum: Growing Global Demand – A Defining Moment for Louisiana
important to be very transparent about
how we do things. It‟s our best defense
from critics.
But of course, meeting the energy
challenge and safely capturing the value
to businesses and communities that our
industry can provide depends on more
than the commitments of companies like
mine and many of yours.
It depends as well on a coherent
approach from government. In the wake
of the BP Macondo tragedy, we lost that
coherent approach with a moratorium
followed by permitting delays and
regulatory uncertainty.
Many of us have been dealing with this.
We‟ve lost lots of ground and Gulf
Coast employment has suffered. But I
think I can fairly say now that it is
improving.
By our estimates, before Macondo,
drilling plan approval averaged about
50 days. After Macondo, it went to
more than 200 days, to everyone‟s
consternation.
But we may have turned a corner. We
started seeing real improvement in
December, with the average permit wait
down to a little over 100 days.
This is a heartening trend that we want
to encourage and keep it moving in the
right direction, dropping back to where it
should be.
We do think we will get there, and we
are working hard to make up for what
we have lost.
Shell has always had confidence. We
picked up an additional rig during the
period when no rigs were working and
since have added another which means
six floating rigs for us in the Gulf.
I know many of you are familiar with the
Back to Work Coalition.
Shell is a member, and through this
coalition, we are working with regulators
to further streamline the plan evaluation
process. That will give operators the
assurances we need to make business
decisions.
It will mean approved plans mature into
drilling permits in a more predictable
way.
We are grateful for Secretary Angelle‟s
leadership on this, attending hearings,
holding meetings, and generally working
tirelessly with BOEM and BSEE1 over the
past year, seeking an end to what many
of us have considered the “permitorium”
that followed the drilling moratorium.
We understand that the Secretary has
taken a prominent role in the Outer
Continental Shelf (OCS) Governors
Coalition, which now includes seven
coastal state governors.
This new coalition of governors
understands that OCS development will
provide significant jobs and economic
growth.
Let me say how much I appreciate the
challenges that have confronted BOEM
and BSEE since their inception.
Their people have worked hard, under
tremendous pressure, and made real
progress.
But I can see the agencies will need
more resources, both in numbers and
expertise, to handle the volume of
applications they receive, and
importantly, so that they can deliver
permits able to withstand the now
inevitable legal challenges.
1
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Bureau of Ocean Energy Management; Bureau of
Safety and Environmental Enforcement
Marvin Odum: Growing Global Demand – A Defining Moment for Louisiana
Bottom line: the federal government
should fund BOEM and BSEE properly
and support efficient, predictable
permitting to develop state and national
resources.
Conclusion
Let me close by underscoring the fact that
our industry is about the economy. Yes,
it is about healthy revenue…jobs…strong
local communities…and a brighter future
for our kids.
But it is also much more than that.
For this country and for the world, our
business is about supporting a growing
global population, lifting whole societies
out of poverty, fueling the infrastructure –
factories, transportation, agriculture,
businesses – that the future will depend
on.
At Shell, we see energy at the heart of
enormous global challenges; for
example, the integrated nature of water,
food and energy.
Now, we could let the need for those
three resources just compete with each
other, or we could work with
governments, partners from other industry
sectors and customers to innovate smarter
ways to optimize the supply and use of
water, food and energy.
We are proud of our leadership and
growth in oil and gas, finding it,
developing it safely and delivering it to
market.
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And we are also proud of our role in
paving the way for innovative energy
solutions of the future.
 Biofuels, for example
 Techniques for capturing and
sequestering carbon
 Energy efficiency solutions for our
customers
 And, perhaps someday, even
hydrogen fuel on a commercial
scale.
In the 1950‟s when the offshore industry
first took off in Louisiana, our challenges
were much different. But our industry‟s
importance to New Orleans and
Louisiana continues. There may no
longer be a Petroleum Club on the third
floor of a historic New Orleans hotel,
and there may not be the frontier-town
atmosphere driving the growth in our
industry like there was back then, but I‟m
glad to know that there are still
organizations like LMOGA. And there
are still individuals like those of you
gathered here today.
Together, you are doing what needs to
be done to enable this vital industry, to
help us create value for our communities,
and to open doors to energy solutions for
tomorrow.
This conference is about working to do
even more of that. And I‟m glad to be
part of it.
Thank you very much.
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RECENT SPEECHES BY SHELL’S SENIOR LEADERSHIP

Shell and corporate tax, Simon Henry

Meeting the needs of 9 billion people, Marvin Odum

9 billion reasons to address the world’s energy challenge now, Peter Voser
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Changing direction towards a new energy future, Jorma Ollila
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Canada: a proving ground for responsible oil & gas development, Marvin Odum
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New upstream risks and opportunities: the natural gas revolution, Malcolm Brinded
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An effective regulatory environment starts with collaboration, Marvin Odum
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An era of volatility and opportunity: the outlook for CFOs in the energy industry, Simon Henry
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The energy challenge and the need for new talent, Hugh Mitchell
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Shell won’t exit refining, Peter Voser
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Shell chief warns of era of energy volatility, Peter Voser
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The natural gas revolution: transforming Asia’s energy landscape, Malcolm Brinded
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Meeting our future energy needs, Peter Voser
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