The new forest: can carbon-neutral fuels re-shape the oil industry?

Integrated oils have a game-changing opportunity in seeding new forests. They could potentially offset c15bn tons of CO2 per annum, enough to permit the continuation of 85Mbpd of oil and 400TCF annual gas consumption within a fully decarbonized energy system. The cost is competitive, at c$50/ton. It is natural to sell carbon credits alongside retailing fossil fuels. We calculate 15-25% uplifts in the value of a typical fuel retail business, while allaying fears over the energy transition. Our 21-page note outlines the opportunity.


The advatages of forestry projects are articulated on pages 2-5, explaining why fuel-retailers may be best placed to commercialise genuine carbon credits.

Current costs of carbon credits are assessed on pages 6-8, adjusting for the drawback that some of these carbon credits are not “real” CO2-offsets.

The economics of future forest projects to capture CO2 are laid out on 9-10. We find c10% unlevered IRRs at $50/ton CO2 costs.

What model should fuel-retailers use, to collect CO2 credits at the point of fuel-sale? We lay out three options on pages 11-14. Two uplift NPVs 15-25%. One could double or treble valuations, but requires more risk, and trust.

The ultimate scalability of forest projects is assessed on pages 15-19, calculating the total acreage, total CO2 absorption and total fossil fuels that can thus be preserved in the mix. Next-generation bioscience technologies provide upside.

A summary of different companies forest/retail initiatives so far is outlined on page 21.

Drones & droids: deliver us from e-commerce

Small, autonomous, electric delivery vehicles are emerging. They are game-changers: rapidly delivering online purchases to customers, creating vast new economic possibilities, but also driving the energy transition. Their ascent could eliminate 500MTpa of CO2, 3.5Mboed of fossil fuels and c$3trn pa of consumer spending across the OECD. The mechanism is a re-shaping of urban consumption habits, retail and manufacturing. The opportunities are outlined in our new, 20-page report.


The average US consumer buys 2.5 tons of goods per year, served by a vast distribution network of ships, trucks and smaller vehicles, collectively responsible for 1.5 barrels of oil, $1,000 of cost and 600kg of CO2 per person per annum (page 2).

Fuel economy currently deteriorates, with each step closer to the consumer. Container ships achieve c900 ton-miles per gallon of fuel. But delivery vans, the dominant delivery mechanism for internet purchases, are least efficient, achieving just 0.02 effective ton-mpg and costing at least $3.6 per delivery (page 3).

The rise of e-commerce has already increased supply chain CO2 by c30%, and supply chain costs by 2x since the pre-internet era. On today’s technologies, CO2 will rise another 20% and cost will rise another 50% by 2030, adding 0.7Mbpd of oil demand, 120MTpa of CO2 and $500bn of cost across the OECD (pages 4-5)

Drones and droids are 90-99% less energy intensive than delivery vans, and 70-97% less costly. The technology is maturing. Thus small, autonomous, electric vehicles will move immediately, efficiently, straight to their destination (pages 6-8).

Retail and manufacturing will have be transformed by the time drones approach 50% market share in last-mile delivery. Tipping-point economies-of-scale mean that they will take market share away from cars and delivery vans very rapidly (pages 9-10).

The second half of the report focuses in on the opportunities. Retail businesses must consolidate, specialise or diversify to “sharing” models. The latter can save $1trn of consumer spending and 100MTpa of emissions in the US alone (pages 11-20).

Is gas a competitive truck-fuel?

We have assessed whether gas is a competitive trucking fuel, comparing LNG and CNG head-to-head against diesel, across 35 different metrics (from the environmental to the economic). Total costs per km are still 10-30% higher for natural gas, even based on $3/mcf Henry Hub, which is 5x cheaper than US diesel. The data-file can be downloaded here.

The challenges are logistical. Based on real-world data, we think maintenance costs will be 20-100% higher for gas trucks (below). Gas-fired spark plugs need replacing every 60,000 miles. Re-fuelling LNG trucks requires extra safety equipment.

Specially designed service stations also elevate fuel-retail costs by $6-10/mcf. Particularly for LNG, a service station effectively ends up being a €1M regasification plant (or around $250/tpa, costs below).

We remain constructive on the ascent of gas (below), but road vehicles may not be the best option.

To flex our input assumptions, please download our data-model, comparing LNG, CNG and other trucking fuels across 35 different metrics .