metamorworks
My themes:
My themes of efficiency with resources and capital are increasingly important given the sustainability requirements of a transitioning energy system. Scale is becoming a factor in oil and gas as well as the development of a lower carbon economy.
Energy is connected to… everything.
The following video interview with Seeking Alpha’s Michael Hopkins delves into the dynamics at present with views to the future.
A Fluid Energy World: New Combinations, Scale and Efficiency (YouTube Video)
Interview with Jennifer Warren by Seeking Alpha’s Michael Hopkins (Jennifer Warren, Concept Elemental)
The charts below are discussed in the video. A few highlights follow.
Oil markets fundamentals, geopolitics and economics
The futures curve has been a poor predictor of prices. Increased volatility and unexpected events make it less indicative.
Futures Curve (Pioneer)
Crude Views (Pioneer)
The geopolitics of oil and gas are changing as suppliers and consumers shift. It’s a shifting supply chain, partly set off by Russia’s invasion of Ukraine, with policy signals and society’s needs and wants in the mix as well.
The LNG trade reflects aspects of this. Many LNG projects are off the table given geopolitical risk.
LNG Projects and Global Demand (Tellurian)
China’s GDP growth (The Economist)
China’s GDP growth will be challenging to predict. Their re-opening to the world will likely be a counterweight to reduced energy demand elsewhere with recessionary expectations.
The energy transition, as we think of it, is increasingly including large oil and gas firms. Many of their differentiated strategies play to their strengths. They’re upping low-carbon investment moderately.
Oil and gas investment in low carbon (BloombergNEF)
The new green policy covers renewables, carbon capture and storage (CCS), hydrogen, and sustainable fuels.
IRA Subsidies (BloombergNEF)
Sustainable fuels (BloombergNEF)
Scale
Scale will matter more in a higher oil price environment which is forecast. Geopolitics and the transition’s incentives and dynamics are pushing this as well. In oil and gas, this has been apparent over the last several years. Now, a transitioning energy system offers those with existing scale to leverage opportunities. It will also be created in new energy supply chains.
As an aside:
A notable quote by CEO Tim Wirth of Chevron (CVX).
We’re a leader in RNG (renewable natural gas), leveraging strengths across the entire value chain from feedstock to customer. We’ve got a really strong market position in California… I would just say our business is up and running and we’re supplying customers today, not planning out into the future and banking on that.
…We’re excited about the announcement to work with a number of really good partners to try to develop hydrogen opportunities there on the Gulf Coast. One of the things I think you’re going to see in these new energies businesses, as they evolve, is we’re going to have to build entire new value chains. That means we’re going to partner with different people who have expertise in different parts of these value chains and can bring technology, can bring customers, can bring experience to a venture that no one company necessarily would have, but collectively, we can work with people that can build these new value chains.
It’s early days on many of these things. We’re studying all the different opportunities in terms of blue hydrogen, green hydrogen… It will require significant investments. I don’t want to get ahead of ourselves here. This is to really develop well-informed perspectives on the investment opportunities, the business models, and ultimately how we would build a business up there.
(From third quarter earnings call, 2022)
Note: Earlier video referenced:
Intricacies of the Energy Transition (Jennifer Warren, Concept Elemental)
Be the first to comment