Long-term LNG supplies: devastating shortages?

Our LNG supply model looks project-by-project, across 125 LNG facilities: including c40 mature plants, c12 under development, c20 in design and c25 under discussion.

Our base case supply estimates come from “risking” the supply associated with each of these projects (chart below). Use of LNG should rise at over 8% per year to drive the energy transition and displace coal, but there are only enough developments underway for a 4-5% CAGR, as COVID has deferred 70MTpa of start-ups.

The outlook depends on the path. The 2030 supply outlook can vary by c300MTpa, when comparing all reasonably possible supply (top chart) against the firm supply-growth that looks all but locked (bottom chart). Qatar and select US projects are the most exciting new supply sources.

The greatest opportunities in LNG are therefore to create new demand and to advance competitive projects when others are cannot. To see which projects we think will progress, please download the data-file.

Rocket fuels: an overview?

This data-file profiles five types of rocket fuels, based on data from 100 rockets that have flown over the past 80-years: kerosene, hydrogen, solid fuels, nitrogen tetroxides and an exciting new-comer, LNG.

Although hydrogen provides the greatest specific impulse, a measure of a rocket’s thrust per fuel mass, we actually find a surprising trend away from liquid hydrogen in rocket designs, due to low volumetric density and high complexity.

Most notably, SpaceX and Blue Origin are tilting towards LNG as their fuel-of-choice in the Raptor and BE-4 rockets. The former has cited some amazing chamber pressures (3,900psi) and thrust:weight ratio targets (200).

LNG liquefaction: the economics?

This model captures the economics for a typical LNG liquefaction project, breaking down IRRs and NPVs as a function of key input-variables.

The InputsOutputs tab allows you to flex key variables such as: LNG sales price, Capex/tpa, Opex/mcf, Utilization, Thermal Efficiency, LNG shipping distance, LNG tanker rates, and liquids cuts. A detailed capex breakdown is also provided (below).

A base LNG case project is likely to earn a c10% real, unlevered IRR at $7.5/mcf. The economics are most sensitive to gas pricing and capex; and somewhat less sensitive to the other variables.

Alternative truck fuels: how economic?

This data-file compares different trucking fuels — diesel, CNG, LNG, LPG and Hydrogen — across 35 variables. Most important are the economics, which are fully modelled, in the 2020s in the US, in the 2020s in Europe and incorporating deflation in the 2040s.

Hydrogen still screens as an expensive alternative. We estimate full cycle freight costs will be c30% higher for hydrogen vehicles than diesels in Europe, and as much as 2x higher in the US. The data-file contains a breakdown of hydrogen truck concepts and their operating parameters.

Natural Gas can be close to competitive. On an energy-equivalent basis, $3/mcf gas is 4x more economical than $3/gal diesel. However, the advantages are offset by higher vehicle costs, operational costs and logistical costs. Mild environmental positives of gas are also offset by mild operational challenges.

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.

Hydrogen opportunities: an overview

This data-file provides an overview of eleven different processes for commercial hydrogen production: including their energy-economics, costs and CO2 emissions; plus a qualitative description of their opportunities, challenges and technical readiness.

Covered technologies include steam methane reforming, fossil fuel gasification, pyrolysis, renewable electrolysis, fuel cell electrolysis, solar photoelectrocatalysis and solar photocatalysis.

A breakdown of today’s c110MTpa global hydrogen market is also provided, looking industry-by-industry, including links to our work on each topic.

Our conclusion is that natural gas remains the most viable fuel source on a weighted basis, considering both cost and carbon emissions, It may also be easier to de-carbonise natural gas directly than via the hydrogen route.

CO2 Separation: an overview?

This data-file summarises six leading CO2-separation technologies. For each one, we outline the process, its technical maturity, costs, CO2-selectivity, energy-intensity and drawbacks. Our notes and workings are also included in subsequent tabs.

A $50/ton carbon price would be needed to incentivise more CCS, using today’s conventional, technically mature methods. The problem remains, that these means suffer from energy penalties of 15-30%.

Amines are the dominant solution for CCS, hence we have added a backup tab, reviewing the specific amine cocktails being commercialized  by specific companies, along with their energy intensity (chart below, bar color indicates technical readiness).

Metal Organic Frameworks could be a material breakthrough, with c60-80% lower costs and energy penalties. These remarkable materials can contain 10,000m2 of surface area in a single gram, with impressive tuning to adsorb specific gases. Our file contains new notes on MOFs, including the technology leaders: 4 listed companies, 5 start-ups and 225 patents from 2018-19.

Molten Carbonate Fuel Cells could also be a material breakthrough. They are unique in generating net energy while also concentrating CO2 for sequestration.

Long-Term LNG Demand: technology-led?

This is a simple model of long-term LNG demand, extrapolating out sensible estimates in the world’s leading LNG-consuming regions. On top of this, we overlay the upside from two nascent technology areas, which could add 200MTpa of potential upside to the market. Backup workings are included.

Greenfield LNG: Does Exxon have an edge?

For large-scale capital projects in a commodity industry, harnessing better technologies tends to unlock better returns.

Hence this 7-page note evaluates ExxonMobil’s technology for constructing greenfield LNG plants, particularly in remote geographies. Its technical leadership stands out from our analysis of 3,000 patents across the industry. This matters as Exxon progresses new LNG investments in Mozambique, PNG and the US.

ExxonMobil has leading LNG technology for extra-large trains using the APX process, modular LNG units that minimise on-site construction costs, pressure-swing absorption to remove gas-contaminants and efficient gas turbines.

Opportunities should arise for investors in Exxon’s LNG projects, and for its partners, resource-owners and other stakeholders, to ensure that value is maximised.

Shale EOR: the economics

This model assesses the economics of a shale-EOR huff’n’puff project. NPVs and IRRs can be stress-tested as a function of oil prices, gas prices, production-profiles, EUR uplifts and capex costs. Our input assumptions are derived from technical papers. We think that economics are increasingly exciting, as the technology is de-risked. As more gas is stranded in key shale basins, base case IRRs rise from c15% well-level IRRs to c20%.

Copyright: Thunder Said Energy, 2022.