Investing for an Energy Transition

What is the best way for investors to drive decarbonisation? We argue 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.

Distribution Costs: Ships, Trucks, Trains and Delivery Vans?

This data-file breaks down the financial and carbon costs associated with a typical US consumer’s purchasing habits. It covers container-ships, trucks, rail freight, cars and last-mile delivery vans; based on the ton-miles associated with each vehicle and its fuel economy.

We estimate the distribution chain for the typical US consumer costs 1.5bbls of fuel, 600kg of CO2 and $1,000 per annum.

The costs will increase 20-40% in the next decade, as the share of online retail doubles to c20%. New technologies are needed in last-mile delivery, such as drones.

Please download the model to for a full breakdown of the data, and its sensitivity to oil prices, consumption patterns, international trade and exciting new delivery technologies.

Gas industry CO2 per barrel?

We have constructed a simple model to estimate the CO2 emissions of commercialising a gas resource, as a function of eight input variables: such as production techniques, methane leakage, sour gas processing, LNG liquefaction, LNG tanker distances and pipeline distances.

Energy return on energy invested is c20x across piped gas resources and c10x across LNG resources, compared with c7-10x for oil. This supports the rationale for oil-to-gas switching, as commercialising gas will likely emit 0-80% lower CO2 per boe; plus 15-20% lower combustion emissions.

Different resources are compared using our methodology. The lowest CO2 profile is seen for well-managed piped gas (e.g., Norway to Europe). Actual data on US LNG facilities and methane intensities have been added.

Download the model and you can quickly compute approximate CO2 emissions for other resources.

At the cutting edge of EOR?

This data-file summarises 120 patents into Enhanced Oil Recovery, filed by the leading Oil Majors in 2018. Based on the data, we identify the “top five companies” and what they are doing at the cutting edge of EOR.

We find clear leaders for water-flooding both carbonate and sandstone reservoirs. At mature fields, we think these operators may be able to derive >10pp higher recovery factors; and by extension, lower decline rates, higher cash flows and higher margins.

As more of the world’s oilfields age, having an “edge” in EOR technology will make particular Oil Majors more desirable operators and partners, to avoid the higher costs and CO2 intensities of developing new fields to replace them.

 

CO2 Separation: an overview?

This data-file summarises six leading CO2-separation technologies. For each one, we outline the process, its technical maturity, costs, CO2-selectivity, energy-intensity and drawbacks. Our notes and workings are also included in subsequent tabs.

A $50/ton carbon price would be needed to incentivise more CCS, using today’s conventional, technically mature methods. The problem remains, that these means suffer from energy penalties of 15-30%.

Amines are the dominant solution for CCS, hence we have added a backup tab, reviewing the specific amine cocktails being commercialized  by specific companies, along with their energy intensity (chart below, bar color indicates technical readiness).

Metal Organic Frameworks could be a material breakthrough, with c60-80% lower costs and energy penalties. These remarkable materials can contain 10,000m2 of surface area in a single gram, with impressive tuning to adsorb specific gases. Our file contains new notes on MOFs, including the technology leaders: 4 listed companies, 5 start-ups and 225 patents from 2018-19.

Molten Carbonate Fuel Cells could also be a material breakthrough. They are unique in generating net energy while also concentrating CO2 for sequestration.

2050 oil markets: opportunities in peak demand?

Seven technology themes can save 45Mbpd of long-term oil demand. They make the difference between 2050 oil consumption surpassing 130Mbpd and our own forecasts: for a plateau in the 2020s, then a gradual descent to 87Mbpd in 2050. This is still an enormous market, equivalent to 1,000 bbls of oil consumed per second. Opportunities abound in the transition: to deliver our seven themes, improve mobility, switch oil to gas, reconfigure refineries and ensure that the world’s remaining oil needs are supplied as cleanly and efficiently as possible.

Make CO2 into valuable products?

This data-file is a screen of 27 companies, which are turning CO2 into valuable products, such as next-generation plastics, foams, concretes, specialty chemicals and agricultural products.

For each company, we have assessed the commercial potential, technical readiness, partners, size, geography and other key parameters. 13 companies have very strong commercial potential. 10 concepts are technically ready (up from 8 as assessed in mid-2019),  6 are near-commercial (up from 5 in mid-2019), while 13 are earlier-stage.

A detailed breakdown is also provided for the opportunity to use CO2 enhancing the yields of commercial greenhouses (chart below).

The featured companies include c21 start-ups. But leading listed companies include BP (as a venture partner), Chevron Phillips, Covestro, Repsol, Shell, TOTAL (as a venture partner) and Saudi Aramco.

Oil industry CO2 per barrel?

We have constructed a simple model to estimate the CO2 emissions of commercialising an oil resource, as a function of a dozen input variables: such as flaring, methane leakage, gravity, sulphur content, production processes and transportation to market.

We estimate energy return on energy invested is c7-10x across the entire oil industry, including upstream, midstream and downstream.

Different resources are compared using our methodology. Relative advantages are seen for large, well-managed offshore oilfields and shale. Relative disadvantages are seen for heavy crudes (e.g., Oil Sands, Mexican Heavy) and producers with low regard for flaring and methane emissions (e.g., Iran, Iraq). However, gas production is lower CO2.

Download the model and you can quickly compute approximate CO2 emissions for other resources. We have also published separate data disaggregating refining CO2, gas industry CO2, drilling CO2 and development concept CO2.

Major technologies to decarbonise power?

Leading Oil Majors will play a crucial role in decarbonising the energy system. Their initiatives should therefore be encouraged by policy-makers and ESG investors, particularly where new energy technologies are being developed, which will unlock further economic opportunities to accelerate the transition.

In order to help identify the leading companies, this-data file summarises c90 patents for de-carbonising power-generation. It is drawn from our database of over 3,000 distinct patents filed by the largest energy companies in 2018. These technologies will secure the role of fossil fuels, particularly natural gas, in a decarbonising energy system.

Next-generation nuclear: the cutting edge?

This data-file screens c20 companies at the cutting edge of nuclear technology, to assess whether fission or fusion breakthroughs can realistically be factored into long-run forecasts of energy markets or the energy transition.

Our conclusion is “not yet”. Despite many signs of exciting progress, the average technical readiness in our sample is TRL 4 (testing components). Nine companies are working to lab-scale prototypes. Energy gains and system stability remain key challenges.

The best case scenario could see fusion reactors commercialised in the 2030s, but technical challenge remain. The pace of progress is however accelerating slowly (chart below).

This database summarises each company, including its technology, location, employee count, notable backers, technical readiness, earliest potential commercial date and recent milestones. Our notes also cover SMRs (below), expected costs or technical details that have been disclosed.

Copyright: Thunder Said Energy, 2022.