The Top Public Companies for an Energy Transition

This data-file compiles all of our insights into publicly listed companies and their edge in the energy transition: commercialising economic technologies that advance the world towards ‘net zero’ CO2 by 2050.

Each insight is a differentiated conclusion, derived from a specific piece of research, data-analysis or modelling on the TSE web portal; summarized alongside links to our work. Next, the data-file ranks each insight according to its economic implications, technical readiness, its ability to accelerate the energy transition and the edge it confers on the company in question.

Each company can then be assessed by adding up the number of differentiated insights that feature in our work, and the average ‘score’ of each insight. The file is intended as a summary of our differentiated views on each company.

The screen is updated monthly. At the latest update, in May-2022, it contains 260 differentiated views on 140 public companies.

Sulphur recovery units: Claus process economics?

This data-file captures the economics of producing sulphur from H2S via the Claus process, which is an important industrial process cleaning up sour gases from the oil and gas industry, but also in the production of sulphuric acid for phosphate fertilizer and metals/materials production.

Cash costs are likely to be in a range of $40-60/ton. While we think a marginal price of $100/ton should incentivize new Claus units with a 10% IRR. This is assuming H2S inputs are effectively free, as sourced from hydroprocessing or gas sweetening.

Producing sulphur is not energy or CO2 intensive, at 0.1 tons CO2/ton of sulphur. The majority of this is inherited from oxygen enrichment, which improves yields, but in turn requires cryogenic air separation.

If the world’s sulphur and H2SO4 mostly come from 1,000 refineries and oil processing facilities, this might raise a question in the energy transition about coping with future sulphur shortages?

Oil storage terminals: the economics?

This data-file captures the economics of constructing an oil storage terminal (aka a “tank farm”).

The storage spread for a 10% IRR depends mostly on utilization. A typical facility that empties to c15-20% than refills to 80-85%, once per month, need only add a spread of $1.5/bbl to earn a 10% IRR.

Cost data are taken from 20 prior projects, a granular bottom-up estimate and published disclosures from industry-leader Vopak. And they are around 97% lower, on a per-kWh basis, than the best renewables-battery storage options.

Economics may get more challenging during the energy transition, as it becomes harder to finance new storage terminals off assumptions for lower future utilization or outright phase-outs.

Global oil demand: rumors of my death?

‘Rumors of my death have been greatly exaggerated’. Mark Twain’s quote also applies to global oil consumption. This note aggregates demand data for 8 oil products and 120 countries over the COVID pandemic. We see 3.5Mbpd of pent-up demand ‘upside’, acting as a floor on medium-term oil prices.

Global oil demand: breakdown by product by country?

This data-file breaks down global oil demand, country-by-country, product-by-product, month-by-month, across 2017-2021. The goal is to summarize the effects of the COVID-19 pandemic.

Overall, global oil demand fell by -22Mbpd at trough in April-2020, with an average of -9Mbpd YoY in 2020. In 2021, global oil demand was still -2.5Mbpd below 2019 levels, with an exit rate of being -1Mbpd below in 4Q21.

Of the 9Mbpd of demand destruction in 2020, 3Mbpd was jet fuel (-40% YoY), 3Mbpd was gasoline (-13%) and 2.5Mbpd was distillate (-9%). Jet fuel remains most subdued and was still 2Mbpd below 2019 levels in 4Q21.

By region, OECD demand declined faster than non-OECD demand, at -12% and -6% respectively, in 2020. Many non-OECD product categories have already made new highs.

The data are split out across 120 countries, 15 global regions and 8 product categories (LPG, gasoline, jet fuel, distillate, naphtha, fuel oil, other, total).

Oil demand: how much can you save in a crisis?

Countries are encouraged to hold 90-days of emergency oil imports in inventory and have plans to reduce their oil use by 7-10% in emergency times. This has long been IEA guidance.

Hence this data-file tabulates proposals from the IEA to quantify how these reductions (5-10Mbpd globally) could be achieved.

It is important to be realistic. Implementing all of these measures on a global basis would be extremely painful and could still only cut 10Mbpd of global oil demand at most. But a selective combination of measures would not be unsensible, and could realistically take the edge of the most extreme possible price spikes.

The largest measures are odd-even rationing (up to 6Mbpd), ride-sharing (up to 2Mbpd), free public transport (up to 2Mbpd) and slower driving mandates (up to 1.5Mbpd).

Russia: a breakdown of export revenues?

This data-file breaks down Russia’s export revenues, import country by import country, looking across oil, gas, coal, steel, aluminium, copper, gold, aluminium, ammonia, agricultural products, other metals, materials and manufactured goods.

2019’s total exports were $425bn, comprising $225bn of oil, $55bn of gas, $50bn of metals, $20bn of coal, $30bn basic materials and $25bn of ag products. 55% of the total goes to Europe.

The numbers are sensitive, and can vary from $300bn pa to $800bn pa, depending on pricing and volumes (chart below), which can also be stress-tested fully in the data-file.

Global Energy Markets: 1750 to 2100

This model breaks down 2050 and 2100’s global energy market, based on a dozen core input assumptions.

You can ‘flex’ these assumptions, to see how it will affect future oil, coal and gas demand, as well as global carbon emissions.

Annual data are provided back to 1750 to contextualize the energy transition relative to prior transitions in history (chart below).

We are positive on renewables, but fossil fuels retain a central role, particularly natural gas, which could ‘treble’ in our base case.

A fully decarbonized energy market is possible by 2050, achieved via game-changing technologies that feature in our research.

US CCS: market sizing?

This data-file aims to bound the potential market-size for CCS in the US, which is most likely around 500MTpa.

Our bottom up calculations look industry-by-industry, and conclude that c20% of industrial and power-sector emissions could be captured, across coal-power, gas-power, ethanol, steel, cement, chemicals and smaller manufacturing.

To put this in perspective, we also quantified how many million tons of oil and gas have been extracted out of subsurface reservoirs in the US over the past 40-years, across different resource types.

Oil markets: more balanced than ever before?

Oil markets look more balanced than at any time in the past 5-years, suggesting prices will most likely move sideways. 2022 is seen -0.3Mbpd under-supplied. There is also an equal one-third chance of a surprise to both the upside and the downside, per our Monte Carlo analysis. Maintaining balance to 2025 is also possible, as long as prices can support +1.6Mbpd pa of shale growth. But generally we expect greater under-supply ahead in other commodities linked to the energy transition.

The full modelling behind this 4-page note is available here.

Copyright: Thunder Said Energy, 2022.