Cutting Edge Insights- Thunder Said Energy

April 23, 2019January 27, 2023

Is gas a competitive truck-fuel?

We have assessed whether gas is a competitive trucking fuel, comparing LNG and CNG head-to-head against diesel, across 35 different metrics (from the environmental to the economic). Total costs per km are still 10-30% higher for natural gas, even based on $3/mcf Henry Hub, which is 5x cheaper than US diesel. The data-file can be downloaded here.

The challenges are logistical. Based on real-world data, we think maintenance costs will be 20-100% higher for gas trucks (below). Gas-fired spark plugs need replacing every 60,000 miles. Re-fuelling LNG trucks requires extra safety equipment.

Specially designed service stations also elevate fuel-retail costs by $6-10/mcf. Particularly for LNG, a service station effectively ends up being a €1M regasification plant (or around $250/tpa, costs below).

We remain constructive on the ascent of gas (below), but road vehicles may not be the best option.

To flex our input assumptions, please download our data-model, comparing LNG, CNG and other trucking fuels across 35 different metrics .

April 17, 2019December 5, 2022

Machine Learning on Permian Seismic?

Pioneer Natural Resources is improving the accuracy of its Midland basin depth-models by up to 40%, using a machine-learning algorithm to re-calibrate its seismic from well logs. Faster drilling and better production rates should follow.

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Pioneer Natural Resources has patented a new methodology in 2018, to calibrate its seismic images in the Permian, with reference to its well-logs. Ordinarily this task would be challenging and time-intensive. But the new algorithm employs machine-learning. This places it at the cutting edge of Permian data-science, where just 2% of technical papers have used ML in the past year (chart below).

Specifically, a multi-layer neural network model iteratively improves the estimates of key seismic parameters from the log data (e.g., impedance, sonic velocity, Young’s modulus, Poisson’s ratio) (chart below). This algorithm improves the vertical accuracy of seismic interpretations by up to 40%.

The neural network creates different inversion volume estimates (208) from the well logs (202) and their attributes (204)

Improved well-placement and geo-steering. The patent cites how “reflectors that were previously unmappable on conventional seismic data can be mapped so horizontal wells can be more accurately placed”. This will be used to target wells into larger-capacity reservoirs and to inform well completion parameters.

Improved drilling-times. The company also cited a need to avoid drilling through carbonate debris flows in the Midland basin. They are excessively hard, damage drill-bits and lead to costly ‘trips’. Instead, it is intended to use the better-calibrated seismic to steer well-paths through brittle organic facies. Thus, we expect the innovation to lower costs and improve well-economics

Pioneer screens as one of the top quartile operators, across all the technologies we have diligenced so far (chart below). Although, please note, we are still “early” in our project to categorize who has the best technologies in oil and gas.

If you would like to read our latest deep-dive note on shale-technology it is linked here. The full database, covering all 300 technical papers is available here.

Patent Source: Meek, R., (2018). High Resolution Seismic Data Derived from Pre-Stack Inversion and Machine Learning. Pioneer Natural Resources USA, patent WO2018201114

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April 16, 2019January 27, 2023

Who else wants more shale?

The Majors’ deepening interest in shale was illustrated by Chevron’s $50bn acquisition of Anadarko. Consolidating in the Permian fits our ‘Winner Takes All‘ thesis.

But who else wants more shale in their portfolio? This is not to speculate on M&A, but simply looking at the companies’ research activity last year…

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Hence the chart below summarises 300 technical papers into shale, published across a representative sample of companies in 2018.

Shell has been the most active shale researcher by a wide margin — half in the Permian, half internationally.

The companies who are not on this list may also be more interested in corporate M&A. This is a technology industry. And if you don’t have your own technology, you will need to buy it…

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If you would like to read our latest deep-dive note on shale-technology it is linked here. The full database, covering all 300 technical papers is available here.

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