BL

What synergies do Oil majors have with Renewables. None

Recommended Posts

^

Well, they're trying to survive. There is a very good chance that Exxon won't exist in 2040. Total and BP seem perfect candidates to move into solar and wind. In fact, Total is involved in a huge offshore windmill farm. These Big Oil companies all have a fiduciary responsibility to their shareholders to make a profit. BP used to have more pensioners in Great Britain than any other company, because of their huge dividend (which was cut in half). It is odd that BP would have Deepwater Horizon and then lecture about global climate change, isn't it? 

And to take the counter-position, we really don't know what the unintended consequences of widespread offshore wind farms and onshore solar farms will do to change the climate. Hint: it may not be all good. 

You're right about longevity, but it's either pack your bag and give up or at least try to make a transition. For example, I bought a thousand shares of Total because of their 8% yield (which they say is safe) and their 25% capex into renewables. They bought a great battery company and run it as a wholly owned subsidiary--this is going to be a big deal in ESS across the whole of Europe and even the U.S. (I can't recall the name of the battery company but all the pros said this one is superior to most.) 

Hindsight is perfect but it would have been a great move for Exxon to have purchased Tesla, and also Albermarle Lithium Mines. 

But that's yesterday's wine and here is their perfect fit without a lot of new retrofitting: As you likely know, when an aging oil well reaches end of life, it immediately brings in massive amounts of salts from the source basin and with the salt comes water. So if you have an old well that's chugging along producing 10 barrels of oil per day (which at $40 is $12,000 per month) but suddenly starts producing more water than oil, the party is over. In certain wells, one of the predominant salts is . . . Lithium Carbonate. As an aging guy interested in both oil and gas and lithium (particularly for electricity storage depots), my idea was to buy up stripper wells in certain areas, sell the oil until the water hit, then ultrafilter/electrophorese lithium and other rare earth elements (which are also concentrated in certain wells). Well, s*** happens, and this time it was Covid. Anyway, how many old wells do the majors own? Hundreds of thousands. What is likely to be the limiting feature toward electric renewables? Lithium--too many companies are trying to go EV and so far lithium is the only game in town. 

Since I own all the majors (for the dividend, obviously not for their sterling performance in value), I sincerely hope that some kid is doing this very thing. Getting lithium out of spoduline in Nevada and China is tough and labor and cost intensive (pit mining). Getting it from brine at the bottom of a well bore in the Uintas Formation should be very doable. 

  • Like 3
  • Haha 1
  • Upvote 4

Share this post


Link to post
Share on other sites

One of the processes that have put the oil majors on alert is the photoelectric production of methane and alcohols pushed hard by Obama in his day, which breaks even on $4 gasoline and lower than that with more modern solar installations. Way back when, I estimated that $3 gasoline was achievable at solar efficiencies of 30-40%. This electrogas is quite cheap to produce but for huge capital costs compared to a drill into the ground. On the order of 10-20 fold.

  • Upvote 2

Share this post


Link to post
Share on other sites

(edited)

 

On 10/4/2020 at 12:35 PM, Gerry Maddoux said:

^

 

 .

Edited by BLA
  • Upvote 1

Share this post


Link to post
Share on other sites

3 hours ago, BLA said:

Total has a nice dividend .  I think around 5%.  As for their battery investment.  They are but one of several European companies in a consortium. 

I'm not pushing Total, understand, but you might want to check them out. Here are some facts:

1) They began making the shift to renewables in 2013. 2) They purchased Saft, a massive battery company with 105,000 employees and a market cap of 210B, and a hundred-year history of making fine batteries for the world. 3) Their dividend is now up to 9%, what with the slide down to $33 and change. They say it is safe. 4) Total also purchased a stake in Ionic Materials, said to be a leader in achieving a solid-state battery. 5) PSA + Total have formed a JV to build two gigafactories.

I'm not exactly sure why the renewables crowd hasn't picked up on the fact that this is a Big Oil with intentions to move into renewables in a very large way. They very much wish to be the lithium ion battery ESS builder and maintainer for the European Union, and it sure looks like they're headed that way. I had to look up a couple of things to respond to you and based on that I'm buying more in the a.m. It makes little sense to me that people are going hog-wild over a company that nobody has ever heard of and builds very little, while this giant oil company, which btw is also a huge LNG provider, just went out and spent and bought some of the great battery companies.

I agree with your overall premise: renewables and Big Oil don't go together. I could be very wrong but I think Total may be different and in a class all its own. While I couldn't recall the name at first, I remember looking into Saft pretty extensively. They're the real deal. 

 

  • Like 2
  • Upvote 1

Share this post


Link to post
Share on other sites

(edited)

11 hours ago, BLA said:

SAT question

(a) cow is to elephant as (b) Oil is to solar.

(a) both animals  - (b) both energy  .  .  .  but that's about it.  Dairy farming is down but don't expect them to start raising elephants.

The Oil majors investing in Renewables is probably a PR move only.  Just like the Exxon commercials showing development of turning algae into fuel. Better run out and invest in algae farms.

The thought of EXXON , Chevron , Total , BP , etc being successful building solar panels or build/buy solar farms or wind farms seems ridiculous to me.  Hydrogen economy .  .  maybe ? But what edge do they really have against present industrial gas companies ? 

Not many know that in the early 1980s Exxon invested $ Billions in the office electronics to compete with Wang and IBM .  Is that their area of expertise ? How did that work out ?

Oil will be around for a while as there are many uses other than gasoline , but it will plateau and decline.  

The big question is simply how fast that will decline.  

1. How fast will EVs grow ? (faster than many think)

2. How fast will Governments (local, region, country) legislate green enforcement ? (faster than many think) 

3. How fast will the oil industry consolidate ( it's about to begin) 

I look at oil company investments as I would a long term bond.  (1) What's the duration ?  (2) What's the yield ?

I always thought it would be easier and better to make housing out of plastics than lumber and all the other separate materials we use now. It could have steel structure as a framework or aluminum or whatever. I see mass production of components and easy assembly. Lots of oil could be used up in housing. 

How much oil is used in feedstock for wind turbines? 

Edited by ronwagn
addition
  • Like 1

Share this post


Link to post
Share on other sites

Seems rather simple. 86% depreciation over 5 years and a 26% investment tax credit. They're exchanging their taxes for a low yield investment. 

  • Like 1

Share this post


Link to post
Share on other sites

(edited)

9 hours ago, 0R0 said:

One of the processes that have put the oil majors on alert is the photoelectric production of methane and alcohols pushed hard by Obama in his day, which breaks even on $4 gasoline and lower than that with more modern solar installations. Way back when, I estimated that $3 gasoline was achievable at solar efficiencies of 30-40%. This electrogas is quite cheap to produce but for huge capital costs compared to a drill into the ground. On the order of 10-20 fold.

The efficiency of the synthesis equipment probably matters more. I'd weigh the profit potential of power sale vs the profit potential of fuel production. If the panel is 26% efficient, then that's multiplied by the synthesis efficiency to get your resultant efficiency. Obviously it's always going to be lower than the panel efficiency, which means a loss in profit. 

With nuclear power and a thermal based system, the fuel synthesis could use 60-70% of available heat, whereas the brayton cycle makes use of 35%. For this reason, the fuel synthesis profit potential for thermal systems is higher than that of wind or solar. I think the primary advantage for its application with wind/solar would be as a way to use up excess power. That way they wouldn't sell at dirt cheap and/or negative rates. 

[EDIT] Oh, an important correction (I never get it right the first time). For the loss in profit via resultant efficiency, it's obviously dependent on the end derivative commodity price. If we have $10 gasoline then obviously it doesn't matter if the efficiency is lower than the panel's electric output. However, it matters since we're trying to find how much gasoline we can make per actual MWh generated by the panel. 

Edited by KeyboardWarrior
  • Like 1
  • Upvote 2

Share this post


Link to post
Share on other sites

(edited)

On 10/4/2020 at 8:14 PM, Gerry Maddoux said:

.

.

Edited by BLA

Share this post


Link to post
Share on other sites

12 hours ago, BLA said:

SAT question

(a) cow is to elephant as (b) Oil is to solar.

(a) both animals  - (b) both energy  .  .  .  but that's about it.  Dairy farming is down but don't expect them to start raising elephants.

The Oil majors investing in Renewables is probably a PR move only.  Just like the Exxon commercials showing development of turning algae into fuel. Better run out and invest in algae farms.

The thought of EXXON , Chevron , Total , BP , etc being successful building solar panels or build/buy solar farms or wind farms seems ridiculous to me.  Hydrogen economy .  .  maybe ? But what edge do they really have against present industrial gas companies ? 

Not many know that in the early 1980s Exxon invested $ Billions in the office electronics to compete with Wang and IBM .  Is that their area of expertise ? How did that work out ?

Oil will be around for a while as there are many uses other than gasoline , but it will plateau and decline.  

The big question is simply how fast that will decline.  

1. How fast will EVs grow ? (faster than many think)

2. How fast will Governments (local, region, country) legislate green enforcement ? (faster than many think) 

3. How fast will the oil industry consolidate ( it's about to begin) . Like any Declining industry huge consolidation of EVERYTHING from majors to fracking.  OP had a good article about majors selling over $100 billion of asset sales.  (at least) . It will be interesting to see what the OPEC Oil States do ?  Privatize ? These governments are supported by their oil industry.   I believe you

I look at oil company investments as I would a long term bond.  (1) What's the duration ?  (2) What's the yield ? (3) Will they "default" on their dividend.

I gave a presentation last week on exactly this topic. I was pointing out that the only thing the majors could bring to the table with renewables was a big fat checkbook. They have zero what we call barriers to entry working in their favor. Conversely, if Tesla wanted to get into the oil business they'd probably get their butts handed to them, because there's just so much that they don't know. We'll see how this all plays out, but i like Gerry's idea best, at least that plays to some of their strengths. 

Share this post


Link to post
Share on other sites

(edited)

On 10/5/2020 at 12:07 AM, Ward Smith said:

I stren

.

Edited by BLA
  • Upvote 1

Share this post


Link to post
Share on other sites

26 minutes ago, Ward Smith said:

I gave a presentation last week on exactly this topic. I was pointing out that the only thing the majors could bring to the table with renewables was a big fat checkbook. They have zero what we call barriers to entry working in their favor. Conversely, if Tesla wanted to get into the oil business they'd probably get their butts handed to them, because there's just so much that they don't know. We'll see how this all plays out, but i like Gerry's idea best, at least that plays to some of their strengths. 

Hell, I'm in the process of building a 440 kW solar farm. There is no barrier of entry save for competing utilities. I'm finding out that without the tax credit or depreciation I wouldn't make shit. Revenues barely cover interest. 

  • Haha 1
  • Upvote 1

Share this post


Link to post
Share on other sites

One possible synergy is with offshore wind. Oil companies know how to build offshore platforms and connect them to land.

  • Like 1
  • Great Response! 1
  • Upvote 3

Share this post


Link to post
Share on other sites

5 minutes ago, Dan Clemmensen said:

One possible synergy is with offshore wind. Oil companies know how to build offshore platforms and connect them to land.

Increasingly oil companies are clueless about building offshore platforms. They are only good at buying them. I recommend you look at Aker in Norway as an example. 

  • Upvote 1

Share this post


Link to post
Share on other sites

1 hour ago, KeyboardWarrior said:

The efficiency of the synthesis equipment probably matters more. I'd weigh the profit potential of power sale vs the profit potential of fuel production. If the panel is 26% efficient, then that's multiplied by the synthesis efficiency to get your resultant efficiency. Obviously it's always going to be lower than the panel efficiency, which means a loss in profit. 

With nuclear power and a thermal based system, the fuel synthesis could use 60-70% of available heat, whereas the brayton cycle makes use of 35%. For this reason, the fuel synthesis profit potential for thermal systems is higher than that of wind or solar. I think the primary advantage for its application with wind/solar would be as a way to use up excess power. That way they wouldn't sell at dirt cheap and/or negative rates. 

[EDIT] Oh, an important correction (I never get it right the first time). For the loss in profit via resultant efficiency, it's obviously dependent on the end derivative commodity price. If we have $10 gasoline then obviously it doesn't matter if the efficiency is lower than the panel's electric output. However, it matters since we're trying to find how much gasoline we can make per actual MWh generated by the panel. 

The process does not produce electricity. It uses the electric voltage across a gap to reduce carbon and hydrogen from CO2 and water to produce gas directly. The work came from Berkeley via Pacific Northwest Natl. Lab/Battelle. Electric current per se is not produced.

  • Upvote 1

Share this post


Link to post
Share on other sites

2 minutes ago, 0R0 said:

The process does not produce electricity. It uses the electric voltage across a gap to reduce carbon and hydrogen from CO2 and water to produce gas directly. The work came from Berkeley via Pacific Northwest Natl. Lab/Battelle. Electric current per se is not produced.

Ohhh so the sunlight goes directly to synthesis rather than from electric power to synthesis. Do these collect more energy than a photovoltaic system? 

Share this post


Link to post
Share on other sites

15 minutes ago, KeyboardWarrior said:

Hell, I'm in the process of building a 440 kW solar farm. There is no barrier of entry save for competing utilities. I'm finding out that without the tax credit or depreciation I wouldn't make shit. Revenues barely cover interest. 

In many states the utilities are forced to buy your power generated.  

What are the subsidies worth ,? 

Share this post


Link to post
Share on other sites

(edited)

23 minutes ago, Ward Smith said:

Increasingly oil companies are clueless about building offshore platforms. They are only good at buying them. I recommend you look at Aker in Norway as an example. 

The oil companies use the offshore platforms and connectivity to shore.  They don't construct , maintain them or install them.  That's all done by the service companies. 

Edited by BLA
  • Like 1

Share this post


Link to post
Share on other sites

2 hours ago, KeyboardWarrior said:

Ohhh so the sunlight goes directly to synthesis rather than from electric power to synthesis. Do these collect more energy than a photovoltaic system? 

No, their efficiency is advancing with the rest of solar panel tech. The materials need to be very specific to obtain the right conditions for the reactions, so they may lag in efficiency gains. It is a synthetic photosynthesis. So the economics are different. The main point is that the US does not need to drop any of its NG and oil consuming plant in order to go renewable. Which is why the "stranded asset" argument makes no sense to me. It also caps how high NG and oil prices can go over a prolonged period.

The technology is not getting as much attention as photovoltaic because of the drop in battery costs made Teslas & c.o more affordable and range is improving. And small  EV maintenance is cheaper till the battery goes. .

  • Great Response! 1

Share this post


Link to post
Share on other sites

10 hours ago, Ward Smith said:

Increasingly oil companies are clueless about building offshore platforms. They are only good at buying them. I recommend you look at Aker in Norway as an example. 

OK, if they don't build platforms, what else do they not do? For the platforms, to be good at buying them, they need to be good at all of the top-level financial, regulatory, etc. stuff, and at evaluating and picking the right vendors. Those capabilities might transfer from offshore oil to offshore wind.

What are the core competencies of an oil major?

  • Great Response! 1
  • Upvote 1

Share this post


Link to post
Share on other sites

^

Agree. These are large energy companies. For the last several decades, energy has been oil and gas. Petrochemical plants were a brand new business for Exxon and others, and yet they control that space. Windmills and solar panels are made by companies that can be bought. 

Again, back to Total because it was a recent add for me: they recently bought the largest electric charging company in London and plan on adding 150,000 charging terminals in Europe. That's small potatoes but they also are getting into solar and offshore wind and batteries out the wazoo. Why? Because if they don't they're going to be dinosaured out--and their CEO actually likes flying on the Gulfstream. Can they do batteries as well as the next guy? Yes, probably, since they bought a company that has been around for almost a hundred years doing nothing but building batteries. They're also moving more and more into LNG because they realize that's the bridge fuel, as well as the new preferred feedstock for petrochemical and pharmaceutical. Will they succeed in this transition? Very likely, because they're not trying to learn new businesses and build them from scratch but rather buying established businesses that are already pretty good.

For Big Oil, there are two possible routes: 1) stick with business as usual and expect to wither and die within 10-15 years, or, 2) transition quickly into renewables by buying competent businesses and letting them do their thing on the Warren Buffet plan. Most U.S. Big Oil companies have stuck their heads in the sand and they're likely not going to survive. I'm comparing them to me. I love oil and gas and pipelines and catepillars and offshore and just about anything having to do with sedimentary rocks on top of basement schist, oil-stained conodants, well-bore geologic ages and the like. However, as I began sweating and figuring that the dogs of doom were coming for me, I began studying up on lithium-ion storage facilities. I began reading that stuff by Jay McKinsey, the Australian gent, M. Poor, Dan Clemmensen and others. I didn't much care for it, but I read it. And then, lo and behold, I got sort of enthusiastic about lithium-ion batteries as large energy storage depots, and solar and wind. i'm working on hydrogen cells and nuclear fusion. I'm pretty interested in living to see the ITER. 

I'm not a green energy whiz and I don't want to become one. But I don't want to stop learning either. Big Oil doesn't want to go broke. Neither do I. Exxon had a chance to buy Tesla and leave management in place. Now the market cap for Tesla exceeds Exxon. Do you think that has escaped Exxon's notice? It hasn't escaped mine, so I sincerely doubt they missed it. But there are going to be a lot of viable lithium-ion battery companies out there, lots of solar and wind. It's not survival of the fittest, but of the more agile. When I refuse to bend with the wind of progress I hope to go gently into that good night. 

  • Great Response! 2
  • Upvote 1

Share this post


Link to post
Share on other sites

(edited)

14 hours ago, BLA said:

In many states the utilities are forced to buy your power generated.  

What are the subsidies worth ,? 

Oh yea, they're forced to buy it. At two cents per kWh. I met with representatives on Thursday. My last hope is to see if a nearby business will rent the farm, since I'm not allowed to register as a utility. Our provider has a legal right to serve our area. In other words, they have a legalized monopoly. 

[EDIT] As for the second question. 26% tax credit that can be claimed once construction is completed, then 86% depreciation over 5 years. The subsidies are critical for this project to succeed. If I can't work out any deals with nearby businesses though, I'll have to think of another way to get started. I have a few ideas, but this project was really attractive since I can focus on school while it generates income passively. Plus, it's easy to get large loans for solar here. 

Edited by KeyboardWarrior
  • Like 1
  • Upvote 1

Share this post


Link to post
Share on other sites

12 hours ago, 0R0 said:

No, their efficiency is advancing with the rest of solar panel tech. The materials need to be very specific to obtain the right conditions for the reactions, so they may lag in efficiency gains. It is a synthetic photosynthesis. So the economics are different. The main point is that the US does not need to drop any of its NG and oil consuming plant in order to go renewable. Which is why the "stranded asset" argument makes no sense to me. It also caps how high NG and oil prices can go over a prolonged period.

The technology is not getting as much attention as photovoltaic because of the drop in battery costs made Teslas & c.o more affordable and range is improving. And small  EV maintenance is cheaper till the battery goes. .

Agricultural or transportation equipment could maintain power density with this option too. Batteries shouldn't be considered for tractors, trucks, or airplanes. 

Share this post


Link to post
Share on other sites

(edited)

4 hours ago, Dan Clemmensen said:

OK, if they don't build platforms, what else do they not do? For the platforms, to be good at buying them, they need to be good at all of the top-level financial, regulatory, etc. stuff, and at evaluating and picking the right vendors. Those capabilities might transfer from offshore oil to offshore wind.

What are the core competencies of an oil major?

 

Geology , Drilling, Petro Refining , Petrochemicals and Politics

.

Edited by BLA
  • Upvote 1

Share this post


Link to post
Share on other sites

19 minutes ago, BLA said:

 

Geology , Drilling, Petro Refining , Petrochemicals and Politics

.

For these core competencies, the most obvious synergy is for geothermal, not wind or solar.

I notice that you did not list retail fuel distributions and sales. I thought that was an important part of what they do?

  • Great Response! 1
  • Upvote 1

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
You are posting as a guest. If you have an account, please sign in.
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.