Green deserts: a final frontier for forest carbon?

Forests can offset 15bn ton of CO2 per year from 3bn global acres. But is there potential to afforest any of the world’s 11bn acres of arid and semi-arid lands, by desalinating and distributing seawater? Our 18-page note answers this question. While the energy economics do not work in the most extreme deserts (e.g., the Sahara), $60-120/ton CO2 prices may be sufficient in semi-arid climates, while the best economics of all use waste water from oil and gas, such as in the Permian basin.


The opportunity and challenges for nature based solutions to climate change are outlined on pages 2-4, explaining the rationale for afforesting deserts.

Precedents for afforesting deserts, including detailed case studies from the Academic literature, are reviewed on pages 5-8.

Water requirements are quantified, based on data from 60 tree species and the forestry industry, on pages 9-10.

The energy economics of desalinating and piping water are presented on pages 11-12.

The challenges of afforestation in the most extreme desert environments are modelled on page 13, showing why it is almost impossible to grow forests in the Sahara. The CO2 costs of supplying sufficient water could exceed the CO2 absorbed by new trees.

Supplementing rainfall in marginal lands is a more compelling economic model (e.g., adding the equivalent of 100mm new rainfall to marginal lands with c300-400mm), as shown on page 14.

The best case we can find is to use Permian waste water. Costs of desalination could be lower than current costs of disposal, while Permian upstream operations on the reforested acreage could be made carbon neutral, per pages 16-17.

A short list of companies exposed to the theme is presented on page 18.

Green Hydrogen Economy: Holy Roman Empire?

This 16-page note models the green hydrogen value chain: harnessing renewable energy, electrolysing water, storing the hydrogen, then generating usable power in a fuel cell. Today’s end costs are very high, at 64c/kWh. Even by 2050, our best case scenario is 14c/kWh, which would elevate average household electricity bills by $440-990/year compared with the superior alternative of decarbonizing natural gas.


Voltaire famously slated the Holy Roman Empire for being neither holy, nor Roman, nor an Empire. The same criticism may apply to the Green Hydrogen Economy. Well over 80% of 2050’s hydrogen market is likely to be blue hydrogen. This is ultimately derived from natural gas energy (increasing gas demand). And it is still not economical, costing 39c/kWh today and 11c/kWh in our best case by 2050.

Our baseline costs to decarbonize natural gas power are presented on page 2.

Renewable energy inputs to green hydrogen production are costed on pages 3-4,

Electrolyser costs, and potential future improvements, are covered on pages 5-7.

Distributing and storing hydrogen is surprisingly challenging. We review 5 key reasons and derive base- and best-case cost estimates on pages 8-11.

Generating electricity from green hydrogen is costed on pages 12-13.

What do you have to believe to be constructive on green hydrogen costs, in the best case scenario in the 2040s and 2050s? We answer this question on page 14.

Relative advantages of blue hydrogen are discussed on pages 15-16, although we still think decarbonized natural gas will be a superior option for the energy transition.

Energy storage: batteries versus supercapacitors?

Supercapacitors may eclipse lithium ion batteries in the hybridization of transport and industry. Their energy density is improving. Potential CO2 savings could surpass 1bn tons per year. IRRs of 10-50% can be achieved, even prior to CO2 prices. This 20-page note presents are our conclusions after reviewing 2,000 Western patents, and identifies leading companies exposed to the theme.


What are super-capacitors? The underlying physics of super-capacitors and their energy economics are spelled out from first principles on pages 2-3.

The three technical advantages of super-capacitors over lithium ion batteries are argued on pages 4-8.

Commercial deployments of super-capacitors, including their energy savings, costs and economics are presented on pages 9-14.

Efforts are underway to improve energy density by tuning ionic electrolytes to better-controlled graphene pore distributions, as outlined on pages 15-17.

Over 20 companies geared to the theme, including “technology leaders”, are profiled based on revieweing 2,000 patents, on pages 18-20.

Downward revisions to our long-term oil demand forecasts, incorporating the impacts of supercapacitors, are presented on page 20.

3D printing an energy transition?

Additive manufacturing (AM) can eliminate 6% of global CO2, across manufacturing, transport, heat and supply chains. This 21-page note quantifies each opportunity and reviews 5,500 patents to identify who benefits, among Capital Goods companies, AM Specialists and the Materials sector.


Additive manufacturing and its advantages are described on pages 2-4, with reference to a database of a dozen examples, quantifying cost savings and lead time reductions.

Potential CO2 savings are discussed in manufacturing, transport, power, heat recovery, supply chaining and across the oilfield on pages 5-14.

Leading companies exposed to the theme are profiled, based on our screen of 5,500 patents on pages 15-17, ranging from venture stage firms, to listed pure-play specialists, to mega-cap diversified capital goods companies. Oil and Gas companies’ exploration of theme are outlined on page 18.

Implications for the materials sector are most interesting, lowering demand for metals, and ramping demand for thermoplastics. We describe the main products in detail, and the leading companies making them, based on our patent screen, on pages 19-21.

Efficient frontiers: improvements from a CO2 price within oil and gas?

A CO2 price of $40-80/ton could double the pace of industrial efficiency gains in the oil and gas sector, eliminating 15-20% of its CO2 emissions, as outlined in this 14-page note. Cost-curves would steepen in E&P and refining. Technology leaders benefit. Spending would also accelerate, particularly for heat exchangers, compressors, digitization and electrification projects.


The importance of industrial efficiency gains, particularly within the oil and gas sector, as part of the energy transition, is summarized on pages 2-3.

The mechanism for unlocking efficiency gains with a CO2 price, including the costs of improvement projects, is summariized on pages 4-5.

The opportunity capture waste heat is greatly enhanced with a CO2 price, and leading companies are identified based on reviewing 1,500 Western patents on pages 6-9.

The opportunity to eliminate flaring fully from the US with a CO2 price below $100/ton, including implications for oil producers, is presented on pages 10-11.

Further efficiency gains, such as preventing methane leakages, adopting more digital solutions, and electrifying frac fleets are presented on pages 12-14.

Net zero Oil Majors: four cardinal virtues?

Attaining ‘Net Zero’ can uplift an Energy Major’s valuation by c50%. Specifically, this means emitting no net CO2, either from the company’s operations (Scope 1&2 emissions) or from the use of its products (Scope 3). This 19-page report shows how a Major can best achieve ‘net zero’ by exhibiting four cardinal virtues. Decarbonization is not a threat but an opportunity.


Prudence entails shifting portfolios appropriately. Full decarbonization of the world is possible at a CO2 cost below $75/ton. Thus, technologies costing $100-1,000/ton should be avoided as they could prove to be value destructive. The largest, cost effective opportunity for Majors is trebling gas output, displacing 2.5x more CO2-intensive coal, which can save 20% of the world’s emissions (pages 2-5).

Temperance entails lowering CO2 intensity. Scope 1&2 CO2 varies 5-7x between different resources plays and by 2-3x within resource plays. Majors must strive to be among the lowest carbon competitors in every sub-sector where they operate. This CO2-efficiency correlates with cost-efficiency. It is increasingly rewarded by financial markets with c2pp lower WACCs and higher multiples (pages 6-12).  

Courage entails maintaining investment where it is justified by a technical edge. Across a commodity industry, superior returns and CO2 intensities hinge on having superior technologies. Thus, to make the world as efficient and low carbon as possible, companies with industry-leading capabilities should invest. Their growth takes share from less efficient peers, helping the transition (pages 13-16).

Justice entails offsetting all CO2. Nature-based solutions to climate change, such as reforestation and soil restoration, can generate carbon offsets, costing $10-50/ton, near the bottom of the global CO2 cost curve. These offsets can be sold alongside fuels to yield ‘decarbonized fuels’, uplifting retail margins c15-25% (pages 17-19).

Note: the ‘four cardinal virtues’ have been borrowed from Plato’s Republic. The modelling and analysis in the note is our own. Please let us know if you have any questions, comments or would like to discuss.

Can carbon-neutral fuels re-shape the oil industry?

Fuel retailers have a game-changing opportunity seeding new forests, ourlined in our 26-page note. They could offset c15bn tons of CO2 per annum, enough to accommodate 85Mbpd of oil and 400TCF of annual gas use in a fully decarbonized energy system. The cost is competitive, well below c$50/ton. It is natural to sell carbon credits alongside fuels and earn a margin on both. Hence, we calculate 15-25% uplifts in the value of fuel retail stations, allaying fears over CO2, and benefitting as road fuel demand surges after COVID.


The advatages of forestry projects are articulated on pages 2-7, explaining why fuel-retailers may be best placed to commercialise genuine carbon credits.

Current costs of carbon credits are assessed on pages 8-10, adjusting for the drawback that some of these carbon credits are not “real” CO2-offsets.

The economics of future forest projects to capture CO2 are laid out on 11-14, including opportunities to deflate costs using new business models and digital technologies. We find c10% unlevered IRRs well below $50/ton CO2 costs.

What model should fuel-retailers use, to collect CO2 credits at the point of fuel-sale? We lay out three options on pages 15-18. Two uplift NPVs 15-25%. One could double or treble valuations, but requires more risk, and trust.

The ultimate scalability of forest projects is assessed on pages 19-25, calculating the total acreage, total CO2 absorption and total fossil fuels that can thus be preserved in the mix. Next-generation bioscience technologies provide upside.

A summary of different companies forest/retail initiatives so far is outlined on page 26.

On the road: long-run oil demand after COVID-19?

Another devastating impact of COVID-19 may still lie ahead: a 1-2Mbpd upwards jolt in global oil demand. This could trigger disastrous under-supply in the oil markets, stifle the economic recovery and distract from energy transition. This 17-page note upgrades our 2022-30 oil demand forecasts by 1-2Mbpd above our pre-COVID forecasts. The increase is from road fuels, reflecting lower mass transit, lower load factors and resultant traffic congestion.


Upgrades to our granular 2020-2050 oil demand models, including headline numbers, are outlined on pages 2-3.

Travel demand that will never come back is described on pages 4-5, including remote work, a shift to online retail and lower business travel. Our forecasts for higher oil demand are not based on a Panglossian recovery of travel habits to pre-COVID levels.

The shift from mass transit to passenger cars is detailed on pages 6-9, covering ground-transportation (buses and train), mid-range air travel, and reverse urbanization enabled by remote working.

Load factors are lightly reduced, requiring more cars to service each passenger-mile of travel, as outlined on page 10.

Higher road traffic dents fuel economy, which we have quantified using real-world data from the City of New York, also drawing on data from prior oil downturns, on pages 11-14.

Implications for oil markets, companies and the energy transition are discussed on pages 15-17.

Decarbonize Heat?

Natural gas currently fuels two-thirds of residential and commercial heating, which in turn comprises c10% of global CO2. In this 20-page report, we have assessed ten technologies to decarbonize heat, including heat pumps, renewables, biogas and hydrogen. The lowest cost and most practical solution is to double down on natural gas, alongside nature-based carbon offsets. Global gas demand for heating should continue rising by 3bcfd per year.


Heating’s contribution to global energy demand, gas demand and global emissions is broken out on page 2.

Natural gas currently supplies two-thirds of heating. Different boiler types, their costs and their efficiencies are reviewed on page 3.

Natural gas can be decarbonized with nature-based solutions. The mechanisms and the costs are explained on page 4.

Other incumbents are contrasted on page 5, including oil furnaces and electric heaters, showing how their costs vary with oil, gas and power prices.

Heat pumps can be cost-competitive, if powered from the grid, and our screen of leading heat pump companies is presented on page 6.

Running heat pumps purely off of renewables is not economical. The numbers and the challenges are outlined on pages 7-9.

Solar rooftop heaters can also be cost-competitive in certain contexts, but not in our base case and not at scale (page 10).

Biogas costs are very high, but landfill taxes can act as a kingmaker for these projects, ramping them to c10-20% of developed world gas grids (page 12).

Hydrogen is least economic of the options we considered. Costs and challenges for blue, semi-green and fully green hydrogen are outlined on pages 13-14.

Capturing more waste heat from industrial processes, finally, holds some potential, and we screen numbers on pages 15-16.

Conclusions and impacts for the global gas market are articulated on pages 17-19.

Which gas resources are best-placed is summarized on page-20.

Biofuels: better to bury than burn?

The global bioethanol industry could be disrupted by a carbon price. Between $15-50/ton, it becomes more economical to bury the biofuel crop, rather than convert it into biofuels. This would remove 8x more CO2 per acre, at a lower total cost. More conventional oil could be decarbonized with offsets. Ethanol mills and blenders would be displaced. The numbers and implications are outlined in this 12-page report.


Nature-based solutions to climate change need to double annual CO2 uptake from plants in our models of decarbonization, using forests and fast-growing grasses (pages 2-3).

We profile the bioethanol industry, which is already using fast-growing grasses to offset 2Mbpd of liquid fuels. But our models suggest the economics, efficiency and CO2 intensities are weak (pages 4-6).

A first alternative is to reforest the land used to grow biofuels, which would carbon-offset 1.5x more oil-equivalents than producing biofuels (pages 7-8).

A more novel alternative is to bury the biomass, such as sugarcane or other fast-growing grasses, which could sequester 8x more CO2, with superior economics at $15-50/ton CO2 prices (pages 9-11).

Company implications are summarized, suggesting how the ethanol industry might be displaced, and quantifying the CO2 intensity of incumbents (page 12).