USA Data-Files - Thunder Said Energy

The Ascent of Shale

This model contains our live, basin-by-basin shale forecasts. It covers the Permian, Bakken and Eagle Ford, as a function of the rig count, drilling productivity, completion rates, well productivity and type curves. Thus, we derive production and financial expectations.

For 2022, the key challenge is stepping up activity levels, as the rig count must rise +60% YoY to keep early-2020s oil markets sufficiently supplied. Conversely, in 2021, production surpassed our expectations due to an unprecedented rate of DUC drawdowns, while well productivity was also stronger-than-feared.

Our longer-term numbers hinge on the productivity gains described in our thematic research. Shale productivity trebled from 2012-2018. We think it can rise another 45% by 2025, unlocking 15Mbpd of liquid shale production. However productivity could disappoint mildly in 2022 as the industry ramps activity levels back post-COVID.

We have also modeled the Marcellus shale gas play, using the same framework, in a further tab of the data-file. Amazingly, there is potential to underpin a 100-200MTpa US LNG expansion here, with 20-50 additional rigs.

Utility-scale solar power: the economics?

This model indicates the economics of a typical utility-scale solar project, as a function of a dozen economic inputs: capex costs per MW, power prices, solar insolation, panel efficiency, decline rates, curtailment, opex, DD&A, loan metrics and tax rates.

Capex costs are also disaggregated across a dozen categories, derived from technical papers and our own calculations (chart below).

Our base case calculations show utility scale can be extremely economic on a standalone basis, with 10% levered returns achieved at 4-7c/kWh input prices.

However, it is interesting to note how quickly the economics deteriorate: by c3-5c/kWh in areas where solar penetration is already high; and by 5-7c/kWh in less sunny locations. There is also a 3-4% risk to IRRs if projects have been under-written with unrealistic decline rates.

Overview of Downstream Catalyst Companies

This data-file tabulates details of the c35 companies commercialising catalysts for the refining industry. Improved catalysts are aimed at better yields, efficiencies and energy intensities. This is the leading route we can find to lower refining sector CO2 emissions.

In particular, we find five early-stage companies are aiming to commercialise next-generation refining catalysts.

We also quantify which Majors have recently filed the most patents to improve downstream catalysts.

If you would like us to expand the data-file, or provide further details on any specific companies, then please let us know…

Solar Use within the Oil Industry?

This data-file tabulates 20 solar projects being undertaken within the oil industry, in order to clean up production and reduce emissions. More projects are needed, as the total inventory will obviate <1% of oil industry CO2 by 2025.

For each project, we estimate total TWH of power generation per annum, the CO2 emissions avoided, the timeline; and we also summarize the project details.

Leading examples include the use of concentrated solar for steam-EOR in Oman and California, Solar PV in the Permian, and leading efforts from specific companies: such as Occidental, Shell, Eni and other Majors.

Development Concepts: how much CO2?

This data-file quantifies the costs and CO2 emissions associated with different oilfield development concepts’ construction materials.

We have tabulated c25 projects, breaking down the total tonnage of steel and concrete used in their topsides, jackets, hulls, wells, SURF and pipelines. Included are the world’s largest FPSOs, platforms and floating structures; as well as new resources in shale, deepwater-GoM, Guyana, pre-salt Brazil and offshore Norway.

Infill wells, tiebacks and FPSOs make the most efficient use of construction materials per barrel of production. Fixed leg platforms are higher, then gravity based structures, then FLNG, and finally offshore wind (by a factor of 30x).

Drones attack military fuel economy?

This data-file quantifies the fuel economies of typical military vehicle-types, as $1.7 trn per annum of global military activity consumes c0.7Mbpd of total oil demand on our estimates, which are also included in the data-file.

Military drones are transformational. Almost all the incumbent military vehicles in our data-file have fuel economies below 1 mpg. But the Reaper and Predator drones, famous for their deployment in recent conflicts, have achieved 3mpg and 8mpg respectively. But small, next-generation electric drones will achieve well above 1,000 mpg-equivalent.

Swarms of small-scale electric drones could emerge as the most devastating military weapon of the 21st century, according to a book we read last year on the topic, arguing that “A swarm of armed drones is like a flying minefield…they are so numerous that they are impossible to defeat… each one presents a target just 4-inches across… and shooting down a $1,000 drone with a $5,000 missile is not a winning strategy”. Our notes on the book are included in the data-file.

US Shale Gas to Liquids?

We have reviewed 40 of Shell’s GTL patent filings for 2018. They show continued progress, innovating new fuels, lubricants, renewable-heavy gasolines, waxes and detergents. Each patent is summarised and categorized in this data-file.

All of this begs the question whether there is a commercial rationale for a US replica of the Pearl GTL project, to handle the over-abundance of gas emanating from the Permian; and produce these advantaged products. It would also help reduce the risk of US LNG projects glutting the market.

We therefore model the economics in this data-file, using prior project disclosures and our learnings from the patent history. Our base case IRR is 11%, taking in 1.6bcfd of shale gas as feedstock. Resiliency is tested at varying oil and gas prices.

Explaining US gasoline?

This data-file breaks down US gasoline demand, as a function of vehicle miles traveled (urban and rural), GDP growth, gasoline prices and fuel economy across the US vehicle fleet. It contains monthly data on each variable, going back to 2002, so correlations can be explored.

Gasoline demand is modestly slower-than-expected in 2019, rising just +1.0% YoY, which is above the prior 15-year trend for 0.4% pa growth, but below the 1.8% expected basesd on regressions to fuel prices and GDP.

One cause is urban vehicle miles driven, where growth has slowed, defying historical correlations with GDP (strong) and gasoline prices (reasonable). Structural explanations could include the rapid rise of alternative vehicles (e.g., e-scooters), ride-sharing and policy decisions.

Please download the file to view the data or test your own regressions.

U.S. Shale: Winner Takes All?

Shale is a ‘tech’ industry. And the technology is improving at a remarkable pace. But Permian technology is improving faster than anywhere else. These are our conclusions after reviewing 300 technical papers from 2018. We address whether the Permian will therefore dominate future supply growth.

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