New Diverter Regimes for Dendritic Frac Geometries?

The key challenge for the US shale industry is to continue improving productivity per well, as illustrated repeatedly in our research. Hence, this short note reviews an advance in fracturing fluids, which has been patented by BP. Diverter compositions are optimised across successive pressurization cycles, to create dendritic fracture geometries, which will enhance stimulated rock volumes.


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Decarbonise Downstream?

Refining has the highest carbon footprint in global energy. Next-generation catalysts are the best opportunity for improvement: uniquely, they could cut refineries’ CO2 by 15-30%, while also uplifting margins, which get obliterated by other decarbonisation approaches. Catalyst science is undergoing a digitally driven transformation. Hence this 25-page note outlines a new ESG opportunity around refining catalyst technologies. Industry leaders are also identified.


Pages 2-3 outline the need to decarbonise the refining industry, in order to clean up the world’s future oil production and preserve access to capital.

Pages 4-6 decompose the sources of CO2 emissions across a typical refinery, process-by-process; as a function of heat, utilities and hydrogen.

Page 7-8 outline small opportunities to improve refinery CO2 intensities, via continued process enhancements, changing crude slates and renewable energy.

Page 9 finds green hydrogen can reduce CO2 emissions by c7-15%, but economics are unfavorable, obliterating refining margins.

Pages 10-12 models the costs of post-combustion carbon capture, which could cut CO2 intensities by 25-90%, but also risks cutting margins by $2-4/bbl.

Pages 13-14 present the opportunity for better catalysts, identifying which Energy Majors have the leading refining technologies, based on patent filings.

Pages 15-17 outline the most promising, emerging catalyst technologies from 50 patents we studied. They can reduce refinery CO2 intensities by 5kg/bbl.

Pages 18-21 highlight breakthrough, digital technologies to improve the development of new catalysts, including super-computing and machine learning techniques.

Pages 23-24 screen 35 leading catalyst companies, including Super-Majors, chemicals companies and earlier-stage pure-plays.

Guyana: carbon credentials & capital costs?

Prioritising low carbon barrels will matter increasingly to investors, as they can reduce total oil industry CO2 by 25%. Hence, these barrels should attract lower WACCs, whereas fears over the energy transition are elevating hurdle rates elsewhere and denting valuations. In Guyana’s case, the upshot could add $8-15bn of NAV, with a total CO2 intensity that could be c50% below the industry average.


Pages 2-3 introduce our framework for decarbonisation of the global energy system. Within oil, this requires prioritising lower carbon over higher carbon oil barrels.

Pages 3-6 outline the economic value in Guyana, which is now at the point where it is hard to move the needle with further resource discoveries.

Pages 7-8 show how lower WACCs can be trasnformative to resource value, even more material than increasing oil prices to $100/bbl.

Pages 9-17 outline the top technologies that should minimise Guyana’s CO2 emissions per barrel, including flaring policies, refining quality, midstream proximity, proprietary gas turbine technologies from ExxonMobil’s patents and leading digital technologies around the industry.

Our conclusion is that leading companies must deepen their efforts to minimise CO2 intensities and articulate these initiatives to the market.

Investing for an energy transition

What is the best way for investors to decarbonise the global energy system? We argue this outcome is achievable by 2050. But a new ‘venturing’ model is needed, to incubate better technologies. CO2 budgets can also be stretched furthest by re-allocating to gas, lower-carbon oil and lower-carbon industry. But divestment is a grave mistake. These are the conclusions in our new, 18-page report.


The global energy system could be decarbonised by 2050 (chart above). Yet today’s renewable technologies are only sufficient to meet c15% of the challenge. The largest component, at c50%, requires new energy technologies: both to economize demand and decarbonise supplies, which will most likely remain fossil-dominated to 2100.

Other routes are dangerous. The ‘divestment movement’ seeks to cut off capital for fossil fuels. This does not yield an energy ‘transition’, but a devastating energy ‘shortage’. Scaling up new technologies requires more capital, not less (see pages 2-7 in the PDF).

Is the investment community configured for energy transition? We fear not.

First, the investment process should favour lower-carbon suppliers across every industry, to incentivise efficiency. Within energy, this includes natural gas, low-carbon oil over higher-carbon oil (saving 500MTpa of CO2) and technology-leaders (see pp 8-11).

A new breed of venture funds is most needed, so investors can allocate capital to economically promising technologies. These opportunities are extremely exciting, based on all of our research. For example, we argue leading Energy Majors should offer up co-investments in their venture funds (see pp 12-16).

Drones & droids: deliver us from e-commerce

Small, autonomous, electric delivery vehicles are emerging. They are game-changers: rapidly delivering online purchases to customers, creating vast new economic possibilities, but also driving the energy transition. Their ascent could eliminate 500MTpa of CO2, 3.5Mboed of fossil fuels and c$3trn pa of consumer spending across the OECD. The mechanism is a re-shaping of urban consumption habits, retail and manufacturing. The opportunities are outlined in our new, 20-page report.


The average US consumer buys 2.5 tons of goods per year, served by a vast distribution network of ships, trucks and smaller vehicles, collectively responsible for 1.5 barrels of oil, $1,000 of cost and 600kg of CO2 per person per annum (page 2).

Fuel economy currently deteriorates, with each step closer to the consumer. Container ships achieve c900 ton-miles per gallon of fuel. But delivery vans, the dominant delivery mechanism for internet purchases, are least efficient, achieving just 0.02 effective ton-mpg and costing at least $3.6 per delivery (page 3).

The rise of e-commerce has already increased supply chain CO2 by c30%, and supply chain costs by 2x since the pre-internet era. On today’s technologies, CO2 will rise another 20% and cost will rise another 50% by 2030, adding 0.7Mbpd of oil demand, 120MTpa of CO2 and $500bn of cost across the OECD (pages 4-5)

Drones and droids are 90-99% less energy intensive than delivery vans, and 70-97% less costly. The technology is maturing. Thus small, autonomous, electric vehicles will move immediately, efficiently, straight to their destination (pages 6-8).

Retail and manufacturing will have be transformed by the time drones approach 50% market share in last-mile delivery. Tipping-point economies-of-scale mean that they will take market share away from cars and delivery vans very rapidly (pages 9-10).

The second half of the report focuses in on the opportunities. Retail businesses must consolidate, specialise or diversify to “sharing” models. The latter can save $1trn of consumer spending and 100MTpa of emissions in the US alone (pages 11-20).

Disrupting Agriculture: Energy Opportunities?

Precision-engineered proteins are on the cusp of disrupting the meat industry, according to an exceptional, 75-page report, published recently by RethinkX. The science is rapidly improving, to create foods with vastly superior nutrition, superior taste and superior costs, by the early-2020s.

The energy opportunities are most exciting to us, after reading the report. If RethinkX’s scenarios play out, we estimate: direct CO2 savings of 400MTpa, enough to offset 10% of US oil demand; 2bcfd of upside to US gas demand; and enough land would be freed up to decarbonise all of US oil demand, or increase US biofuels production by 6x to c6Mbpd.

We would be delighted to introduce clients of Thunder Said Energy to the reports’ authors, Catherine Tubb and Tony Seba. Please contact us if this is useful.

Drone Attacks on Energy Assets?

Over 100 attacks on global energy assets made major news headlines in the past decade. The majority were small-scale, targeting pipelines in conflict-regions, because this was the infrastructure most accessible to aggressors. However, a new and devastating wave of drone technologies could place the world’s largest and most vulnerable facilities into the firing line, threatening multiple millions of barrels per day. This short note outlines the latest in drone technologies and why they concern us.


Historical attacks on energy assets

Supply disruptions have been a feature of oil markets over the past ten years. For example, in the chart below, we have counted 100 violent attacks on energy infrastructure from major news stories. However, the majority were small-scale and located in active conflict-zones. Most oil infrastructure has heretofore been safe.

Here are the numbers: 90% of the prior attacks in our sample were low impact, when we assessed their severity. c60% were concentrated on pipeline infrastructure, which is relatively easy to repair. 70% of the upstream attacks were on wells or small processing units. 80% were localised within active war-zones such as Libya, Nigeria, Iraq, Yemen and the Sudans, rather than in stable countries. These attacks were nevertheless numerous. They shuttered 1Mbpd of Nigerian output between 2006 and 2016, 1Mbpd of Libyan output in 2011 and c0.5Mbpd of output in Yemen and Syria.

The more dangerous and worrying attacks have been full-scale assaults on large industrial assets. The worst example, many will remember, was Al Qaeda’s January-2013 attack on Algeria’s 9bcm pa In Amenas gas facility. 39 hostages were killed, as well as 29 terrorists. In addition, it took until June-2016 to bring production back to full capacity. The impacts of such incidents are hard-felt and long-lasting. Another legacy is that security measures have been escalated in high-risk regions.

On 14th September 2019, another industry-changing attack took place, on Saudi Arabia’s Abqaiq and Khurais oilfields. 5.7Mbpd of oil production was curtailed, constituting the largest supply-disruption on record. Repairing the damage will cost hundreds of millions of dollars. The latest suggestion is that the damage was inflicted by 20 drones, plus additional cruise missiles, which may have been guided to their targets by the drones. Unfortunately, this attack raises the spectre of further incidents, owing to the rise of drone swarm technology.

Ten Characteristics of Drone Swarms

Drone swarms could emerge as the most devastating weapon of 21st century warfare, outflanking large, high-speed, high-cost military vehicles of the past (Hambling, 2015; chart below, data here). They pose much greater risk to high-value infrastructure than prior weaponry that was available to aggressors. To understand why, it is necessary to review ten properties of drone swarms.

(1) Easy to access. Most military equipment is not openly available for purchase on the internet or in consumer electronic stores. However, hundreds of models of drones are now available in the consumer sector. They can be modified and retro-fitted to inflict violence or damage. Similarly, in the military sphere, one expects large super-powers such as the US, Russia and China to develop leading military technologies, but advanced drones are also being developed in smaller countries such as Israel, Iran, Turkey, Korea. The technology is not always closely contained. In particular, Iran has been found to donate its Ababil drones and Quds missiles to allies such as the Houthis; and Islamic State was able to use drones to drop grenades in Northern Iraq in 2016-17.

(2) Easy to fund. These drones have price points in the thousands of dollars, rather than the millions, which makes them accessible to small groups of aggressors rather than just to nation-states. Out of 15 high-spec consumer drones that we reviewed recently, the median cost was $10,000 (chart below, data here). Half-a-dozen priced below $2,500. This not only makes them accessible, compared to cruise missiles costing $150k to $1.5M; but also expendable, compared to fighter jets costing $30-150M.

(3) Easy to launch. There is no need for runways, special hangers or refuelling facilities. Drones can launch from any terrain and travel tens or hundreds of miles. The fact that drones can be launched and travel to their targets brings a much wider array of assets into the firing line. This will include facilities deep within protected territory, such as Abqaiq and Khurais; or offshore assets, which have repeatedly been considered as targets by Nigerian militants, but have been protected by their offshore locations.

(4) Increasingly large swarms. In 2015, the largest drone swarms being flown numbered 30-50. However, China’s CETC flew drone swarms numbering 100-200 in 2018 (chart below). Israel is developing technologies where a single operator could fly an entire swarm of drones, in a single, controllable formation. This matters because the larger the swarm, the harder it is to neutralize. Using a swarm of 20 drones may be one reason why the latest attack on Saudi infrastructure succeeded, while dozens of prior attacks from 2017-18 were thwarted.

(5) Increasingly autonomous swarms. The most effective counter-measure against military drones in the past has been to “jam” the controllers used for steering them. This tactic was used, for example, against Islamic State, in Northern Iraq. But now, some of the leading commercial drones use neural network algorithms to auto-navigate. Thus they cannot be “jammed”. For example, the Skydio R1 uses a NVIDIA Jetson processor with 192 processing cores, which is less power hungry than prior chips. Qualcomm is also making ‘simultaneous location and mapping’ hardware the size of a credit card, allowing drones to navigate by sight alone.

(6) Potency. A large drone may carry a warhead or missile; smaller drones can carry grenades, IEDs or firearms and small drones may illuminate targets (e.g., with lasers) in order to direct larger incoming missiles. Any of these could do very significant damage to facilities that contain live hydrocarbons.

(7) Precision. Autonomous drones can attack very specific targets. This level of precision was seen in the recent Saudi attacks, where individual missiles hit each spheroid tank at Abqaiq, in almost the same identical location (US satellite images below). Another example in the civilian sector is being used at beaches in Australia, where ‘SharkSpotter’ deep learning software is used to identify sharks with 90% accuracy, compared with 30% for human operators. Training a drone to identify sharks versus dolphins is computationally similar to identifying vulnerable versus non-vulnerable processing units at energy infrastructure.

(8) Hard to predict. Because swarms of drones are created with standard electronics equipment, much of it available in the civilian sector, “manufacture [of drone swarms] would be relatively hard to spot—compared to the production of traditional military hardware such as manned aircraft, ships or ballistic missiles—as it would resemble any other consumer electronics assembly” (Hambling, 2018).

(9) Hard to stop. The challenge of stopping a large swarm of drones is that there may simply be too many units to neutralize, especially when they are moving quickly. Laser cannons may stop a few units. A battery of missiles may stop many more. However “shooting down a $1,000 drone with a $5,000 missile is not a winning strategy” (Hambling, 2015). Assuming similar budgets, the drone attackers may outnumber the missile defenders. Acknowledging this challenge, the US has budgeted $1.5bn over the next year, to investigate potential solutions. But outside the military, and back in the realm of energy assets, we doubt that any of today’s onshore or offshore processing facilities have the capacity to stop drone attacks.

(10). Hard to retaliate. Drone attacks are very different from prior cases where armed insurgents attacked oil infrastructure, risking their own lives in the melee. Drones are by their nature remotely operated. Furthermore, reading through the history of recent drone attacks (e.g., in Yemen and Syria), it has often been impossible even to identify the culprit. In some cases, their identity still remains disputed. Failure to pinpoint the perpetrator makes it difficult to strike back. In turn, this removes the usual deterrent to attacking an enemy.

Implications for Oil Markets and Companies

Our latest oil market forecasts point to 1-2Mbpd of over-supply each year in the 2020s, assuming steady demand growth of 1.3Mbpd per annum. However, these base case forecasts do not incorporate any impact of supply disruptions from further attacks, which could sway the balance, and cause significant price spikes.

For energy companies, we think it will be crucial to mitigate against the risk of drone strikes, to the best extent possible. This may include diversification, counter-measures, and a growing preference to operate in lower-risk countries. We would be very happy to introduce clients of Thunder Said Energy to our contacts in the military drone space, who may be able to provide further observations.

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2050 oil markets: opportunities in peak demand?

Many commentators fear long-run oil demand is on the cusp of a steep contraction, leaving oil and gas assets stranded. We are more concerned about the opposite problem. Projecting out the current trends, global oil demand is on course to keep rising to over 130Mbpd by 2050, undermining attempts to decarbonise the world’s energy system.

Our new, 20-page note reviews seven technology themes that can save 45Mbpd of long-term oil demand. We therefore find oil demand would plateau at 103Mbpd in the 2020s, before declining gradually to 87Mbpd in 2050. This is still an enormous market, equivalent to 1,000 bbls of oil being consumed every second.

Opportunities abound in the transition, in order to deliver our seven themes, improve mobility, substitute oil for gas, reconfigure refineries for changing product mixes, and to ensure that the world’s remaining oil needs are supplied as cleanly and efficiently as possible. Leading companies will seize these opportunities, driving the transition and earning strong returns in the process.

Do refineries become bio-refineries?

What will happen to oil refineries during the energy transition? On our numbers, liquid oil products will be needed past 2100, long after demand plateaus in the 2020s. Cleaner, more efficient technologies are therefore required in the downstream sector. This note considers whether refineries could increasingly be converted to bio-refineries.

Our evidence comes from the patent literature, as we have reviewed 3,000 patents from the leading 25 Energy Majors. 8% are focused on new energies (chart below, full details in our deep-dive note). Eni screens as the leader for converting refineries to bio-refineries, hence this note summarises its relevant patents on the topic.

Historical Context. Use of vegetable oils in diesel engines goes back to Rudolf Diesel, who, in 1900, ran an engine on peanut oil. Palm oil and peanut oil were both used as military diesel in Africa in WWII. However, vegetable fuels were abandoned due to high costs and inconsistent quality, compared with petroleum fuels.

Today’s vegetable oil fuel-blending components primarily contain Fatty Acid Methyl Esters (FAME). However, they cannot be blended beyond c7% without causing problems in auto engines. For example, FAME has a low energy content (38kJ/kg vs diesel at 45kJ/kg), a -5 – 15C cloud point, causes pollution in tanks, polymerises to form rubbers, causes fouling, dirties filters and contaminates lubricants.

Regulation is nevertheless stoking demand for more dio-diesel, going beyond the 7% threshold. Europe Directive 2009/28/C mandates 10% renewable material in diesel by 2020, up from 5% in 2014.

Eni is therefore converting refineries to bio-refineries, to upgrade renewable materials into “green diesel”. A 0.36MTpa facility started up at Porto Marghera, Venice in 2014. A larger, 0.7MTpa facility started at Gela in 2019. Both convert vegetable oils into diesel.

Patents indicate how they work. The starting point is a conventional oil refinery, with two sequential hydro-desulfurization units. For the conversion into a bio-refinery. these units are re-vamped into a hydrodeoxygenation reactor (HDO) and a subsequent hydro-isomerization reactor (ISO), shown in the schematic below.

  • HDO occurs in the presence of hydrogen, a sulfided hydrogenation catalyst from Group VIII or VIB metals, at 25-70 bar and 240-450C.
  • ISO occurs at 250-450C, 25-70bar and a Metal (Pt, Pd, Ni) Acid catalyst on an alumino-silica zeolite framework.
  • Upstream modifications. Pre-treatment processes, surge drums and heat-exchangers are installed upstream of each reactor.
  • Downstream modifications. The output products from the reactors will contain 1-5% H2S, which is removed in an acid gas treatment unit, and then a Claus unit for sulphur recovery; both reached via new connection lines.

The main advantage of this process is cost, which is said to be 80% lower than constructing a new facility. For example, the Porto Marghera project was budgeted at €200M. In its patents, Eni states: “This method is of particular interest within the current economic context which envisages a reduction in the demand for oil products and refinery margins”.

Further advantages are that the produced diesel has excellent properties, including a high octane index, optimum cold properties, high calorific value and a further by-product stream of commercial LPGs. Moreover, the efficiency of the converted facility is seen to be similar to one constructed anew.

The disadvantage is that blending of free fatty acids is limited to c20%. This is why the bio-refineries so far intake 80% palm oil (which contain <0.1% free fatty acids). Eni states: “The reactor used for effecting the HDO step, deriving, through the method of the present invention, from a pre-existing hydrodesulfurization unit, may not have a metallurgy suitable for guaranteeing its use in the presence of high concentrations of free fatty acids in the feedstock consisting of a mixture of vegetable oils. The reactors of the HDO/ISO units specifically constructed for this purpose, are in fact made of stainless steel (316 SS, 317 SS), to allow them to treat contents of free fatty acids of up to 20% by weight of the feedstock”. Processing a broader range of vegetable oils and other waste oils would require a more costly refinery re-vamp.

Further challenges are that the production of hydrogen and other industrial above will be energy intensive. Moreover, Eni’s 1MTpa of green diesel production capacity is only equivalent to c20kbpd of fuel. It will be challenging to source sufficient feedstocks to scale bio-refineries up to meet larger portions of the world’s overall fuel needs.

Our conclusion is therefore that bio-refineries have potential when re-purposing existing downstream facilities, preserving value in the very long-term future of the industry. However, further technological improvements are required before these facilities can scale up or deliver material, and truly decarbonised hydrocarbons. Out of Eni’s other refining patents, we are most positive on Eni Slurry Technology, which is a leading technology for IMO2020 (chart below). For details of other technology leaders in energy, please see our note, Patent Leaders.

Source: Rispoli, G., F. & Prati, C. (2018). Method for Re-Vamping a Conventional Mineral Oils Refinery to a Bio-Refinery. US Patent US2018079967.

The Ascent of LNG?

Gas demand could treble by 2050, gaining traction not just as the world’s cleanest fossil fuel, but also the most economical. The ascent would be driven by technology. Hence this note outlines 200MTpa of potential upside to consensus LNG demand, via de-carbonised power and shipping fuels. LNG demand could thus compound at 8% pa to 800MTpa by 2030, justifying greater investment in unsanctioned LNG projects.


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