It would be unwise to under-estimate the complexity of creating a new LNG province, with a 50MTpa prize on the table in Mozambique. After the first two trains are in motion, the longer-term opportunity is potentially “another Qatar”. But only if Mozambique can compete for capital with US greenfields and brownfield expansions.
Hence we have reviewed 200 of Chevron’s patents from 2018. The company’s ability to develop a new, deep-water LNG province is notable. Ten examples are tabulated below.
It was interesting how many of the patents were filed in Australia and may have derived from learnings at Gorgon and Wheatstone.
For a primer on different LNG process technologies, please see our data-file (here).
EOG has patented a system to deploy pressure and temperature sensors in its frac plugs, which are then retrieved at the surface, providing low cost data on each frac stage. The data can be used to improve subsequent frac stages. We model the economic uplifts at +$1M NPV and +5% IRR per well (at $50 oil).
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 .
Pioneer Natural Resources is improvingthe 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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