The Drivers for Change in the Energy Industry

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HutanBio is developing low-carbon biofuel production systems to make a scalable, controlled, high-output Bioenergy Carbon and Utilization (BECCU) system that captures waste CO2and converts it to valuable low-carbon biofuels. So what are the drivers for our technology?

Tropical latitudes where a combination of very high solar radiation, year-round high temperatures and very little variation in day length provide not only the optimum location for continuous industrial microalgal biofuel production, but also co-locates within the largest and most vibrant global economies.

Today the energy industry faces unprecedented challenges. While managing the difficult transition to low-carbon technologies in response to climate change, the Covid-19 pandemic has produced the sharpest economic depression on record. Oil prices have dropped over 2020 from ~$60/barrel to ~$40/barrel as demand has plummeted.

Successfully addressing these twin challenges presents an existential moment for energy companies. Post-Covid-19 energy market analysis combining both the transition to zero carbon and the pandemic predict 6% – 12% drop in global energy demand 2019 – 2030, depending on scenarios, a lowering oil and gas prices below pre-Covid-19 values with peak oil plateauing below 100 mbd before 2030 [1]. Significantly, investor confidence is low yet existing oil field production is declining at between 2% – 6% a year requiring investment in new capacity even if global market remains below the 100 mbd 2019 record. Reliance on shale to make up reserve capacity is doubtful as it requires very high capital investment and >$70 barrel to succeed [2].

New oil and gas investment in 2020 has dropped by a third over 2019. Companies have reported asset values falling by over $50 billion in 2020 [3]. In response, European energy companies BP and Shell are re-basing their dividends and reporting a move to broaden their portfolios and reduce dependence on oil. BP announced it will reduce fossil oil production 40% by 2030 and increase renewable energy spending 10-fold by 2030 as it plans to become a net-zero emissions company by 2050 [4,5]. US energy companies such as Exxon [6] and Chevron [7] face a difficult near term as large deficits from Permian Basin investments appear increasingly out of step [2] with the Biden Administration green energy policies and a rapprochement with the UN Paris Accord [8].

In the meantime, Asia, the world’s largest energy market and economic region, is actively diversifying its energy mix to include more biofuels driven by policies that mandate higher biofuel blends and renewables [3]. Energy investors are looking globally to support new technologies that can deliver reliable sustainable energy compatible with reducing CO2 emissions [3]. It is clear that the energy sector urgently needs new low-emission, scalable, continuous supplies of drop-in components for their fuel portfolios.

References

  1. IEA. (2020). World Energy Outlook 2020. https://www.iea.org/reports/world-energy-outlook-2020
  2. Brower, D. Myles McCormic, M. 2020 The US shale industry’s top priority: win back Wall street. Financial Times October 27 2020 https://www.ft.com/content/fcda3560-7f17-4d90-900f-08abe072899c
  3. IEA 2020 World Energy Investment 2020 . https://webstore.iea.org/download/direct/3003
  4. BP Energy Outlook 2020 https://www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/energy-economics/energy-outlook/bp-energy-outlook-2020.pdf
  5. F, R, Raval, A., Sheppard, D.2020 BP’s Looney stakes future on producing less oil Financial TimesSeptember 13 2020 https://www.ft.com/content/e1d53208-b460-4708-a89c-d8b418cceffb
  6. Exxon 2019 Outlook for Energy: A perspective to 2040 https://corporate.exxonmobil.com/-/media/Global/Files/outlook-for-energy/2019-Outlook-for-Energy_v4.pdf)
  7. Chevron Annual Report 2019 The human energy company https://www.chevron.com/-/media/chevron/annual-report/2019/documents/2019-Annual-Report.pdf
  8. Martin, J., Burns, A. 2020 Biden Wins Presidency, Ending Four Tumultuous Years Under Trump The New York Times November 7 2020 https://www.nytimes.com/2020/11/07/us/politics/biden-election.html

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