Shell: the future of LNG plants?

Shell is revolutionizing LNG project design, based on reviewing 40 of the company’s gas-focused patents from 2019. The innovations can lower LNG facilities’ capex by 70% and opex by 50%; conferring a $4bn NPV and 4% IRR advantage over industry standard greenfields. Smaller-scale LNG, modular LNG and highly digitized facilities are particularly abetted. This note reviews Shell’s operational improvements, revolutionary greenfield concepts, and their economic consequences.

EOG’s Digitization: Pumped-Up?

EOG patented a new digital technology in 2019: a load assembly which can be built into its rod pumps: to raise efficiency, lower costs and lower energy consumption (i.e., CO2). This short note reviews the patent, illustrating how EOG is working to further digitize its processes, maximise productivity and minimise CO2 intensity.

Ten Themes for Energy in 2020

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.

Will renewable growth slow down from 2020?

The growth of renewables has been revolutionary, with wind and solar costs emerging towards the bottom of the global cost curve, scaling up at a pace of 270TWH pa. However, we find unsettling evidence that the market could slow by c15% from 2020, plateauing in heartland markets such as California, Germany and the UK. The rationale, and all the underlying data, are included in this PDF research report and associated Excel file.

Global gas: catch methane if you can?

Scaling up natural gas is the largest decarbonisation opportunity on the planet. But this requires minimising methane leaks. Exciting new technologies are emerging. This note ranks producers, positions for new policies and advocates developing more LNG. To seize the opportunity, we also identify early-stage companies in methane measurement and mature public companies in the oilfield supply chain. Global gas demand should treble by 2050 and will not be derailed by methane leaks.

Shale growth: what if the Permian went CO2-neutral?

Shale growth is slowing due to fears over the energy transition, as Permian upstream CO2 emissions reached a new high this year. We have disaggregated the CO2 across 14 causes. It could be eliminated by improved technologies and operations: making Permian production carbon neutral, uplifting NPVs by c$4-7/boe, re-attracting a vast wave of capital and growth.

Ramping Renewables: Portfolio Perspectives?

It is often said that Oil Majors should transition to renewables and become Energy Majors. But what is the best balance based on modern portfolio theory? Our 7-page paper answers this question by constructing a mean-variance optimisation model. We find a c0-20% weighting to renewables can maximise risk-adjusted returns. 5-13% is ideal. But beyond a c35% allocation, both returns and risk-adjusted returns decline rapidly to utility-type levels.

Decarbonise Downstream?

Refining has the highest carbon footprint in global energy. To improve, we find better catalysts are needed. Uniquely, they could cut CO2 by 15-30%, while also uplifting margins. Catalyst science is under-going a digitally driven transformation. This 25-page note identifies the leaders.

Oil markets: restoring the balance?

OPEC will most likely need to cut production again to stabilise 2020 oil markets, as shown by our newly updated oil market models.

But over-supply still looms in 2023-25. Three resolutions could remove the overhang, within the oil market’s balance of probabilities.

Our updated oil market outlook is explored in this short, 4-page note.

Guyana: carbon credentials & capital costs?

Commercialising Guyana’s new oil resources could entail 30-35kg of CO2 per bbl, which is c50% below the oil industry average. Prioritising such low carbon barrels will matter increasingly to investors, as they can reduce total oil industry CO2 by 25%. Hence, they should attract a lower WACC. In Guyana’s case, the upshot could add $8-15bn of NAV.