Oil: what happens when you defer or curtail production?

The aim of this data-file is to tabulate and track technical papers into the impacts of deferring production at oil and gas fields. The impact depends on the reservoir type, but generally we expect shut-ins and deferrals during the 2020 COVID crisis will lower effective production capacity.

The Winners. Generally, super-giant Middle East carbonate reservoirs and recently completed shale wells may fare well after curtailments and deferals, with production rates coming back higher than before the shut-ins.

The Losers. Restoring production may be more challenging at highly mature, heavy and waxy fields, particularly those with high water cuts or in deep water: where shut in, these fields may never recover to previous levels, while ramping back can take several years in some past cases.

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 July-2020, it contains 167 differentiated views on 87 public companies.

The Top Technologies in Energy

What are the top technologies to transform the global energy industry and the world? This data-file summarises where we have conducted differentiated analysis, across c80 technologies (and counting).

For each technology, we summarise the opportunity in two-lines. Then we score its economic impact, its technical maturity (TRL), and the depth of our work to-date. The output is a ranking of the top technologies, by category; and a “cost curve” for the total costs to decarbonise global energy.

Download this data-file and you will also receive updates for a year, as we add more technologies; and we will also be happy to dig into any technologies you would like to see added to the list.

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.

How would a CO2 price improve industrial efficiency in oil and gas?

This data-file looks through 20 technologies that can reduce the CO2 intensity of the oil and gas sector. It contains our economic assumptions and our workings behind each technology.

A CO2 price of $40/ton could effectively encourage 10% CO2 reductions that are already economic but have not yet taken place, while an $80/ton CO2 price could incentivize total decarbonization of 20%.

The CO2 price required to incentive a CO2 saving project is closely correlated with its capex cost, and our data allows us to derive rules-of-thumb.

Flare gas capture: the economics?

c150bcm of gas was flared globally in 2019, including 15bcm in the United States, which emitted 30MT of CO2-equivalents. This data-file simplifies the economics of capturing flare gas, by gathering the gas, cleaning the gas, and compressing the gas into a regional pipeline.

Generally, double-digit returns are achievable at a large new shale pad, by capturing and commercialising associated gas rather than flaring it. Economics are more challenging at smaller pads, remote pads and for wet or contaminated gas. Economics are highly variable, site-by-site, as can be stress-tested in the model.

Carbon prices would dramatically improve the economics of flare gas capture. A c$40/ton CO2 price would incentivize capturing gas from the majority of remote pads, while it would unlock c40-50% IRRs on flare gas capture from large pads, a very expensive opportunity cost for any operator to ignore. As a rough estimate, a $100/ton CO2 price could eliminate flaring in the US, subject to pipeline availability.

 

Long-Run Oil Demand Model

This Excel model calculates long-run oil demand to 2050, end-use by end-use, year-by-year, region-by-region; across the US, the OECD and the non-OECD. Underlying workings are shown in seven subsequent tabs. The model has been updated in May-2020 to reflect COVID.

The model runs off 25 input variables, such as GDP growth, electric vehicle penetration and oil-to-gas switching. You can flex these input assumptions, in order to run your own scenarios.

Our scenario foresees a plateau at c104Mbpd in the 2020s, followed by a gradual decline to below 90Mbpd in 2050. This reflects 7 major technology themes, assessed in depth, in our recent deep-dive report and COVID considerations, assessed in depth in a further deep-dive report.

Without delivering these technology themes, demand would most likely keep growing to 130Mbpd by 2050, due to global population growth and greater economic development in the emerging world. Our pre-COVID model is also included as a separate file for reference.

The route to net zero: an energy-climate model for 2-degrees

We have modeled the global climate system from 1750-2065, to simplify the climate-science of the energy transition into an easily understandable format.

‘Net zero’ is achievable by 2050, with atmospheric CO2 remaining below 450ppm, the level consistent with 2-degrees C of warming.

Fossil fuel use is 10% higher than today, but the industry has transformed itself, towards the most efficient, lowest-carbon fossil fuels (especially natural  gas), with the remaining CO2 captured or offset. This is the most economical  route to an energy transition, per all of our research.

Please download the model to stress-test your own input assumptions. Notes from Academic papers follow in the ‘Sources’ tab, drawn largely from the IPCC, to explain the ocean, soil and plant fluxes in our model.

Oil markets: the aftermath?

Our oil price outlook is informed by a 45-line supply-demand model, running month-by-month out to 2025. This download contains both the model, and a 4-page summary of our outlook.

Oil prices could rebound sharply to the upside in the aftermath of the COVID crisis, as 7.5Mbpd of supply growth has been lost or deferred. The result is steep undersupply in 2022-25.

After ten years forecasting oil markets, our humble conclusion is that all oil models are wrong. Some are nevertheless useful. To be most useful, our model takes a Monte Carlo approach to the key uncertainties, to quantify the “risk” of positive and negative surprises (illustrative example below).

Please download the model to see, and to flex our input assumptions. Usually included with the download is a PDF summary of our latest oil price thesis, but our latest instalment has been superseded by our deep-dive note into the future of oil demand linked here.

Upstream technology leaders: weathering the downturn?

Leading technologies correlate 50-80% with ROACEs and -88% with costs in the energy industry. Hence, we assessed 6,000 patents from 2018-19, to determine which Energy Majors are best-placed to weather the downturn, benefit from dislocation and thrive in the recovery. We find clear leaders in onshore, offshore, shale, LNG and digital.