Energy transition is maturing as an investment theme. ‘Obvious’ portfolio tilts are beginning to look over-crowded. Non-obvious ones are looking over-looked. This note outlines the ‘top ten’ themes that excite us most in 2020, among commodities, drivers of the energy transition, market perceptions and corporate strategies.
CO2 and methane intensities are tabulated for 300 distinct company positions across 9 distinct basins in this data-file. Using the data, we can aggregate the total CO2 in (kg/boe) and methane leakage rates (as a percent of natural gas production) across the US’s different basins.
Covered basins include the Permian, Bakken, Eagle Ford, Marcellus/Utica, Alaska, GoM, Powder River, San Juan, Anadarko basin and DJ basin (chart above).
It is possible to rank the best companies in each basin, using the granular data, to identify industry leaders and laggards (chart below).
This model disaggregates the CO2 emissions of producing shale oil, across 14 different contributors, aggregating across a dozen different models constructed by Thunder Said Energy: such as materials, drilling, fracturing, supply chain, lifting, processing, methane leaks and flaring.
CO2 intensity can also be flexed by changing different input assumptions, such as methane leakage, flaring activity and well productivity; while we will be happy to share underlying models with you, for further sensitivity analysis.
Our ‘idealized shale’ scenariofollows in a separate tab, showing how it could be achievable to make Permian shale production a ‘carbon neutral’ resource.
This data-file screens the methods available to monitor for methane emissions. Notes and metrics are tabulated for Method 21, Optical Gas Imaging, fixed sensors, ground labs, aircrafts, drones and satellites; including advances at the cutting edge of each method.
Emerging screening methods, such as drones and trucks are also scored, based on results from an excellent recent technical trial. The best drones can detect almost all methane leaks >90% faster than traditional methods.
Companies developing next-generation methane-mitigationtechnologies are screened, including 10 public companies and 33 private companies. This peer group filed 150 patents in 2018-19. 8 companies seem particularly exciting to us.
Operators are also screened, across the dozen largest Energy Majors, to estimate their methane leaks and broader methane intensity across the supply chain.
Of the largest 15 shale E&Ps, the proportion with ESG slides in their quarterly presentations has exploded by 4.5x in the trailing twelve months, from 13% in 3Q18 to 60% in 3Q19.
The progress is tracked in this short data-file, which counts the number of ESG slides published, by company, by quarter; as the industry articulates its carbon credentials in order to help attract capital.
This data-file calculates the CO2 intensity of oilfield supply chains, across ten different resources, as materials are transported to drilling rigs, frac crews, production platforms and well pads.
Different resources can be ranked on this measure of supply chain CO2-intensity: such as the Permian, the Gulf of Mexico, offshore Norway, Guyana, pre-salt Brazil and Middle East onshore production (chart above).
Underlying the calculations are modeling assumptions, for both onshore and offshore operations, each based on c15 input variables. You can change the inputs to run your own scenarios, or test the most effective ways to lower supply-chain CO2.
This data-file tabulates Permian CO2 intensity based on regulatory disclosures from 20 of the leading producers to the EPA in 2018. Hence we can calculate the basin’s upstream emissions, in tons and in kg/boe.
The data are fully disaggregatedby company, across the 20 largest Permian E&Ps, Majors and independents; and across 18 different categories, such as combustion, flaring, venting, pneumatics, storage tanks and methane leaks.
A positiveis that CO2 intensity is -52% correlated with operator production volumes, which suggests CO2 intensity can be reduced over time, as the industry grows and consolidates into the hands of larger companies.
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 c7-10xacross 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.