Global gas: catch methane if you can?

Scaling up natural gas is among the largest decarbonisation opportunities on the planet. But this requires minimising methane leaks. Exciting new technologies are emerging. This 23-page note ranks producers, positions for new policies and advocates developing more LNG. To seize the opportunity, we also identify 23 early-stage companies and 10 public companies in methane mitigation. Global gas demand should treble by 2050 and will not be derailed by methane leaks.

Pages 2-4 explain why methane matters for climate and for the scale up of natural gas. If 3.5% of methane is leaked, then natural gas is, debatably, no greener than coal.

Pages 5-8 quantify methane emissions and leaks across the global gas industry, including a granular breakdown of the US supply-chain, based on asset-by-asset data.

Page 9-10 outlines the incumbent methods for mitigating methane, plus our screen of 34 companies which have filed 150 recent patents for improved technologies.

Pages 11-13 cover the best new developments in drones and robotics for detecting methane emissions at small scale, including three particularly exciting companies.

Pages 14-15 outline next generation satellite technologies, which will provide a step-change in pinpointing global methane leaks and repairing them more quickly.

Pages 16-20 covers the changes underway in the oilfield supply chain, to prevent fugitive methane emissions, highlighting interesting companies and innovations.

Page 20-21 screens methane emissions across the different Energy Majors, and resultant CO2-intensities for different gas plays.

Pages 22-23 advocate new LNG developments, particularly small-scale LNG, which may provide an effective, market-based framework to mitigate most methane.

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.

CO2-Labelling for an Energy Transition?

We argue CO2-labelling is the most important policy-measure that can be taken to accelerate the energy transition: making products’ CO2-intensities visible, so they can sway purchasing decisions. There is precedent to expect 4-8% savings across global energy use, which will lower the net global costs of decarbonisation by $200-400bn pa. Digital technologies also support wider eco-labelling compared with the past. Leading companies are preparing their businesses.

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Decarbonise Downstream?

Refining has the highest carbon footprint in global energy. Next-generation catalysts are the best opportunity for improvement: uniquely, they could cut refineries’ CO2 by 15-30%, while also uplifting margins, which get obliterated by other decarbonisation approaches. Catalyst science is undergoing a digitally driven transformation. Hence this 25-page note outlines a new ESG opportunity around refining catalyst technologies. Industry leaders are also identified.

Pages 2-3 outline the need to decarbonise the refining industry, in order to clean up the world’s future oil production and preserve access to capital.

Pages 4-6 decompose the sources of CO2 emissions across a typical refinery, process-by-process; as a function of heat, utilities and hydrogen.

Page 7-8 outline small opportunities to improve refinery CO2 intensities, via continued process enhancements, changing crude slates and renewable energy.

Page 9 finds green hydrogen can reduce CO2 emissions by c7-15%, but economics are unfavorable, obliterating refining margins.

Pages 10-12 models the costs of post-combustion carbon capture, which could cut CO2 intensities by 25-90%, but also risks cutting margins by $2-4/bbl.

Pages 13-14 present the opportunity for better catalysts, identifying which Energy Majors have the leading refining technologies, based on patent filings.

Pages 15-17 outline the most promising, emerging catalyst technologies from 50 patents we studied. They can reduce refinery CO2 intensities by 5kg/bbl.

Pages 18-21 highlight breakthrough, digital technologies to improve the development of new catalysts, including super-computing and machine learning techniques.

Pages 23-24 screen 35 leading catalyst companies, including Super-Majors, chemicals companies and earlier-stage pure-plays.