Carbon-negative plastics: a breakthrough?

This short note describes a potential, albeit early-stage, breakthrough converting waste CO2 into polyethylene, based on a recent TOTAL patent. We estimate the process could sequester 0.8T of net CO2 per ton of polyethylene. This matters as the world consumes c140MTpa of PE, 30% of the global plastics market, whose cracking and polymerisation emits 1.6T of CO2 per ton of polyethylene.

An exciting array of companies is aiming to convert waste CO2 into materials, as part of the energy transition. We have profiled 27 leading examples in our screen, which is linked here, updated in June-2020. In the past year, we added three new companies to the list. Three companies reached full technical readiness and moved into commercialisation. The pace of progress has been strong. The companies are ranked by sector below.

The most advanced end market for CO2 is in the curing process for cement, a 4bn ton per annum industry, which accounts for 4bn tons per annum of global CO2 (8% of the total). We recently profiled Solidia’s CO2-curing process, which may eliminate 60% of the net CO2, at a c5% lower cost, and could scale up to displace 300MTpa of CO2 globally (below).

Plastics are the second largest opportunity, with 460MTpa of plastic products consumed globally. Aramco and Repsol are already commercialising polyols and polyurethanes derived from CO2, but these are only c7% of total plastics demand. The largest plastic product is polyethylene, at 140MTpa, or 30% of the total plastic market (chart below, data here). Chevron and Novomer also have technologies turning CO2 into carboxylates and acrylates, but again, these are smaller markets.

Hence, one of TOTAL’s 2019 patents stood out to us, as we reviewed 3,000 of the largest Energy Majors’ patents from last year. TOTAL has patented a group of boron-doped copper catalysts for electro-reducing CO2 into C2s, such as ethylene, which is the chemical precursor to polyethylene [1].

The process has a Faradaic efficiency of 80%. It yields two-thirds ethylene, one-third ethanol, and <0.1% C1s. This is a major advance. Pre-existing technologies are described, which have exhibited low selectivity (6-43% C1), low stability (a few hours), low activity and much lower efficiencies (27-39%).

Specifically, boron comprises 4-7% of the catalyst’s molar mass. Chemically, it draws in electrons from adjacent Cu atoms, inducing a positive charge, which lowers the activation energy for carbon-carbon bonds to form. “The invention is remarkable in that it describes the first tunable and stable Cu+ based catalyst”, the patent states.

Stability remains to be proven, and has only been shown to reach c40-hours in the trials described in TOTAL’s patent. This remains an obstacle for commercialisation, and we score the technology’s readiness as Level 5.

Nevertheless, it is interesting to ask “what if”. We estimate that each ton of ethylene produced from CO2 could sequester a net 0.8 tons of CO2 if the process is powered by natural gas (and 2.5T of CO2 if the process is powered by renewables).

An additional 1.6T of CO2 emissions would also be saved, because this is the typical emissions intensity of conventional production methods for cracking ethane and polymerising ethylene (chart below, data here).

TOTAL’s library of speciality chemicals patents is formidable, based on our review of patents around the energy industry, and as outlined in our recent research.

Last year, we profiled another TOTAL patent, using chromium-based catalysts to reduce defects and increase the strength of recycled plastic products (chart below, note here).

We remain excited by the pace of progress in next-generation plastic recycling, turning waste plastic back into oil. TOTAL also screens among the leaders in this area, via a new partnership with Recyling Technologies. Our screen of companies in this space was also recently updated and is linked here.

[1] Che, F., De Luna, P., Sargent, E. & Zhou, Y. (2019). Boron-Doped Copper Catalysts For Efficient Conversion Of Co2 To Multi-Carbon Hydrocarbons And Associated Methods. TOTAL Patent WO2019206882A1

Ramp Renewables? Portfolio Perspectives.

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

Pages 2-3 outline our methodology for assessing the optimal risk-adjusted returns of a Major energy company’s portfolio, including the risk, return and correlations of traditional investment options: upstream, downstream and chemicals.

Page 4 quantifies the lower returns that are likely to be achieved on renewable investment options, such as wind, solar and CCS, based on our recent modeling.

Pages 5-6 present an “efficient frontier” of portfolio allocations, balanced between traditional investment options and renewables, with different risk and return profiles.

Pages 6-7 draw conclusions about the optimal portfolios, showing how to maximise returns, minimise risk and maximise risk-adjusted returns (Sharpe ratio).

The work suggests oil companies should primarily remain oil companies, working hard to improve the efficiency and lower the CO2-intensities of their base businesses.

Patent Leaders in Energy

Technology leadership is crucial in energy. It drives costs, returns and future resiliency. Hence, we have reviewed 3,000 recent patent filings, across the 25 largest energy companies, in order to quantify our “Top Ten” patent leaders in energy.

This 34-page note ranks the industry’s “Top 10 technology-leaders”: in upstream, offshore, deep-water, shale, LNG, gas-marketing, downstream, chemicals, digital and renewables.

For each topic, we profile the leading company, its edge and the proximity of the competition.

Companies covered by the analysis include Aramco, BP, Chevron, Conoco, Devon, Eni, EOG, Equinor, ExxonMobil, Occidental, Petrobras, Repsol, Shell, Suncor and TOTAL.

Upstream technology leaders have been discussed in greater depth in our April-2020 update, linked here.

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