Direct air capture of CO2: the economics?

Direct Air Capture of CO2 will cost around c$200/ton of CO2 abated, all in, and apples-to-apples with other technologies assessed by TSE.  This data-file models out the economics of the process in detail (chart above).

Our model is based upon excellent technical disclosures from Carbon Engineering, which we have aggregated. Our data-file includes a full breakdown of the capital costs and the energy associated with each component of the DAC plant, plus an explanation of the process.

Stress-testing shows total CO2 removal costs will range between $150-300/ton of CO2,  flexing 18 input assumptions, such as WACCs, tax-support, cost-deflation, utilization, power prices, gas prices and water prices. (gas- and water-intensity of the process should be noted). Our key conclusions are written up on the first page of the data-file.

Carbon Funds to Decarbonize Natural Gas

This economic model illustrates a carbon fund to decarbonize natural gas by planting new forests, while also generating passable economics, attracting investment and incentivizing CO2 savings.

The mechanics are that the fund collects carbon credits, which are bundled into the contractual sales price of natural gas (typically costing less than $1/mcf). Part of the carbon credits are used to plant forests. The remainder are kept as financial reserves, to ensure the fund can meet its future offset obligations. Once these obligations have been met, the financial reserves can be disbursed to the fund’s limited partners.

Please download the data-file to stress-test forestry costs, carbon pricing, gas pricing and optimisation opportunities.

Methane emissions from pneumatic devices, by operator, by basin

Methane leaks from 1M pneumatic devices across the US onshore oil and gas industry comprise 60% of all US upstream methane leaks and 23% of all upstream CO2. This data-file aggregates data on 563,000 pneumatic devices, from 300 acreage positions, of 200 onshore producers in 9 US basins.

The data are broken down acreage position by position, from high-bleed pneumatic devices, releasing an average of 4.2T of methane/device/year to pnuematic pumps and intermediate devices, releasing 1.5T, through to low-bleed pneumatic devices releasing 160kg/device/year.

It allows us to rank operators. 12 companies are identified, with a pressing priority to replace c135,000 medium and high bleed devices. 6 companies are identified with best-in-class use of pneumatics (chart below).

A summary of our conclusions is also written out in the second tab of the data-file.  For opportunities to resolve these leaks and replace pneumatic devices, please see our recent note on Mitigating Methane.

Floating production systems versus subsea tiebacks: the costs?

This model estimates the line-by-line costs of an FPSO project, across c45 distinct cost lines, in order to quantify the potential savings of a tieback or a ‘fully subsea’ development.

Our estimates drawing on four technical papers, as illustrated in the backup tabs of the model. For a full discussion, see our recent note ‘The future of offshore: fully subsea‘.

We estimate c$750M of cost savings for a tieback, and c$500M of cost savings for a fully subsea development, as compared against a traditional project with a traditional production facility.  Please download the model to see the different cost drivers, line-by-line.

Fully subsea offshore projects: the economics?

This model presents the economic impacts of developing a typical, 625Mboe offshore  gas condensate field using a fully subsea solution, compared against installing a new production facility.

Both projects are modelled out fully, to illstrate production profiles, per-barrel economics, capex metrics, NPVs, IRRs and sensitivity to oil and gas prices (e.g. breakevens).

The result of a fully offshore project is lower capex, lower opex, faster development and higher uptime, generating a c4% uplift in IRRs, a 50% uplift in NPV6 (below) and a 33% reduction in the project’s gas-breakeven price.

Please download the model to interrogate the numbers and input assumptions.

Oxy-combustion: economics of zero-carbon gas?

Oxy-combustion is a next-generation power technology, burning fossil fuels in an inert atmosphere of CO2 and oxygen. It is easy to sequester CO2 from its exhaust gases, helping heat and power to decarbonise. The mechanics are described here. We model that IRRs can compete with conventional gas-fired power plants.

This is our model of the economics. It is constructed from technical disclosures. For example, Occidental petroleum and McDermott have already invested in one of the technology-leaders, NET Power, which constructed a demonstration plant in LaPorte Texas, starting up in 2018.

A review of recent project progress has also been added to the data-file in early-2020.  Details remain relatively secretive. But we find 9 potential deployments which are being moved towards commerciality. The details we have found are summarized in the data-file.

Ten Themes for Energy in the 2020s

This short presentation describes our ‘Top Ten Themes for Energy in the 2020s’. Each theme is covered in a single slide. For an overview of the ideas in the presentation, please see our recent presentation, linked here.

Fugitive methane: what components are leaking?

This data-file looks through 35 different technical papers and data-sources to tabulate the methane leaks from different components around the oil and gas industry.

The largest leaks per event are from losses of well control, which can emit 10-1M tons per annum. Next are mid- and downstrseam facilities at 1-10kTpa.

The largest leaks by upstream component are compressor seals (1-100Tpa) and millons of pneumatic devices (0.01-10Tpa), which each comprise c20-30% of total upstream leaks.

Potentially overlooked categories include wellheads, storage tanks and workover practices. All are quantified in the data-file. The theme is addressed in detail in our note, mitigating methane.

Scaling Up Renewables and Batteries

This model aims to calculate the average costs and the incentive prices required to scale up renewables in a typical developed world grid, from 25% to 40%, then to 50%, then to 60%.

The economics are modelled as a function of renewable costs, battery costs, curtailment rates, gas prices and carbon prices, which you can flex.

The calculations are based on Monte Carlo simulations using real-world data on wind and solar volatility, which dictates the curtailment rate of renewables and the utilziation rates of batteries that are built as a backstop.

We conclude that renewables will cap out at 45-50% of grids, even with the benefit of batteries. Beyond 50%, curtailment surpass 70%, trebling incentive pricing.  Large-scale batteries also increase incentive prices 5-25x. Natural gas is the best complement for renewables, with both between 25-50% of grid demand.

Molten Carbonate Fuel Cells: capture carbon, generate electricity?

Molten carbonate fuel cells (MCFCs) could be a game-changer for CCS, and fossil fuels. They are electrochemical reactors with the unique capability to capture CO2 from the exhaust pipes of combustion facilities; while at the same time, efficiently generating electricity and heat from natural gas. The first pilot plant is being tested in 1Q20, by ExxonMobil and FuelCell Energy. Economics range from passable to phenomenal. The opportunity is outlined in this 27-page report.