Turn the Plastics into Roads?

An opportunity is emerging to absorb mixed plastic waste, displacing bitumen from road asphalts. We find strong economics, with net margins of $200/ton of plastic, deflating the materials costs of roads by c4%. The challenge is scaling the opportunity beyond 20MTpa, as unrecycled waste plastics surpass 320MTpa. Leading companies include Dow (US, public) and MacRebur (UK, private).

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.

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.

Digitization after the crisis: who benefits and how much?

Digitization offers superior economics and CO2 credentials. But now it will structurally accelerate due to higher resiliency: Just 8% of digitized industrial processes will be materially disrupted due to COVID-19, compared to 80% of non-digitized processes. In this 22-page research report, we have constructed a database of digitization case studies around the energy industry: to quantify the benefits, screen the most digital operators and identify longer-term winners from the supply chain.

Remote possibilities: working from home?

The COVID-19 crisis will structurally accelerate remote working. The opportunity can save 30% of commuter journeys by 2030, avoiding 1bn tons of CO2 per year, for a net economic benefit of $5-16k per employee. This makes remote work materially more impactful than electric vehicles.

COVID-19: what have the oil markets missed?

In the short-term, global oil demand could decline by -11.5Mbpd YoY in 2Q20 due to COVID-19. This is over 15x worse than the global financial crisis of 2008-9, too large for any coordinated production cuts to offset. However, in the medium-term, once the worst of the crisis is over, new driving behaviours could actually increase gasoline demand, causing a very sharp oil recovery. Finally, over the longer-term, structural changes will take hold, transforming the way consumers commute, shop and travel, but overall, these net impacts balance each other out.

COVID-19 Impacts on US Gasoline Demand?

US gasoline is the largest component of global oil demand, at c9Mbpd, or c9% of the global market. Hence we have modelled how it could be impacted by COVID-19, looking line by line, across a granular, c100-line breakdown.

A -2Mbpd contraction is possible in 2Q20, if 34% of all US workplaces close temporarily and 50% of non-essential travel is cancelled. This is an extreme scenario, commensurate with a c5pp slowdown in US GDP,  comparable to the “Great Recession” of 2008-09 in economic terms, but with 8x deeper demand destruction for gasoline.

Such steep declines are not inconceivable, from a modelling perspective. They could underpin a c10Mbpd YoY collapse in global oil demand.

How quickly could demand rebound? Very minimal long-term impacts persist from 2022 onwards, with demand destruction of just 60kbpd in 2023-24. We can even construct scenarios where US gasoline demand surprises to the upside, rising +0.5Mbpd, if COVID is brought under control. So when the oil market does turn, it may turn very quickly.

To run your own scenarios, please download the model.

How to structure a decarbonized gas value chain?

Gas value chains are the largest and lowest cost decarbonization opportunity on the planet, commercialising zero carbon energy for an incremental cost below $1/mcfe ($17/ton of CO2). This compares with end gas prices of $4-14/mcf and other CO2 mitigation options up to $800/ton. This 15-page note outlines how to structure a decarbonized gas value chain, securitizing forestry-based carbon commitments in an actively managed carbon fund.

Oil markets: meltdown?

There is now a 75% chance of an oil rout in 2020, with prices falling to $20-40/bbl. Our updated Monte Carlo models, outlined in this 4-page report, reflect the demand destruction due to COVID19 and the breakdown of OPEC’s accord. The range of uncertainties is vast, c5x higher than at YE19. But our base case sees 2.3Mbpd of oversupply this year, denting oil to $30/bbl, and halving the US rig count. A 1Mbpd YoY shale curtailment by April 2021 brings the market back into balance by 2022. But there is also a c2-10% risk of steeper supply disruptions due to new policies and geopolitics.

The future of offshore: fully subsea?

Offshore developments will change dramatically in the 2020s, eliminating new production platforms in favour of fully subsea solutions. The opportunity can increase a typical project’s NPV by 50%, reduce its breakeven by one-third and effectively eliminate upstream CO2 emissions. We have reviewed 1,850 patents to find the best-placed operators and service providers, versus others that will be disrupted. Overall, the theme supports the ascent of low-carbon natural gas, which should treble in the energy mix by 2050.