Shorting Oil, Hedging Tesla

[jhm]

Not taking away from your points, but wouldn't the TCO calculation also need to include the "cost" of buying a BEV truck now versus a year or two later when the purchase price might be lower?

At this stage of the game, BEV semi's are a rapidly changing tech. There's an opportunity cost with investing in the early tech. It would be like buying solar panels in 2010 to get an ROI of 15 years, or waiting 6 years to buy panels and get an ROI of just 7 years. That's not what the media is saying, but I'm willing to wager that it is what the fleet managers are factoring.

Sure that's a potential issue. Tesla is pretty good at entering with a good price and sticking with it, so as to keep resale prices stable. Leases are another way for fleet owners to mitigate that risk. Leases were important for the Model S, but no longer needed for Model 3.

If Tesla did a lot of leases for the Semi, they could be in a position to benefit from higher residual values than what clients expect. Let's say the 25c/mile savings is real over the long term. A client leading the truck might be satisfied with just a 10c/mile savings on any a 400k mile lease. If Tesla is doing the financing right, it is in a position to retain the other 15c/kWh savings on the lease, worth $60k. This was essentially the game SolarCity and others were playing with rooftop solar PPAs. Clients were wary of falling prices and unreliable technology along with needing capital. So saving just 3c/kWh off of grid power when outright ownership would have implies substantially higher savings. I'm not suggesting that Tesla should pursue this sort of lease model for semis, but it is an option when clients are skeptical of a new technology.

So what could force Semi prices down and undermine residual values? Aside from some sort of technology failure, the main risk I think is just competition. If other electric semi makers undercut Tesla's price, this could push all prices down. This happened somewhat with rooftop solar, but not with the Model S. Six years later, competitors still don't have a direct competitor for the Model S. This has allowed Tesla the luxury of keeping prices stable. Will we get that lucky with the electric semi? I don't know. China and others are chomping at the bit. If the electric truck market becomes highly competitive, prices could come down fast. But this would also drive diesel semi resale values down very fast too. So the truck operator who holds off going electric out of fear of obsolescence may actually lose more on their diesel fleet by waiting. The situation with rooftop solar was different because it was the utility that faced bigger obsolescence risk than the homeowner should rooftop solar prices fall severely. But with fleet operators, they already have a whole fleet of diesel that is at risk of obsolescence.

 

[jhm]

Batteries and the Balance of Energy

I've been trying to imagine what could slow up the transition to EVs. The most fundamental problem I see is building out battery production fast enough. Tesla has been battery constrained in its history, and other OEMs will as well. But what happens at a macro level when the whole battery supply chain is at a bottleneck? In such periods, the market will tend to allocate the marginal MWh of battery to the products with highest marginal return. This has profound implications for the price of various fuels that batteries compete with.

So envision a world where batteries compete primarily in three segments.

• Power markets dominated by natural gas
• Private autos dominated by gasoline
• Commercial vehicles dominated by diesel

This is a simplified world to be sure but the point is to characterize the relationships batteries may have with natural gas, gasoline and diesel. When batteries are scarce, the marginal MWh will tend to offset the fuel which affords the maximum savings in fuel cost. That is all other factors are priced into battery powered products than their fossil fuel burning alternatives such that the tightness in the battery supply is dominant binding constraint on the economy. In this sort of scenario, the market is simply trying to figure out which fuel is most economical to displace with the marginal MWh of batteries.

So I will attempt to gauge the displacement rates for each fuel dominating the three segments.

In the power markets, batteries facilitate displacement of natural gas (and hence coal and other fuels with which gas competes) in two ways. First, batteries directly compete with gas peakers. The displacement here is 11.214 mmBtu per discharged MWh, the heat rate of a gas turbine. A battery used for peaking will discharge daily, let's suppose, at an average 75% of capacity. Thus, the average annual discharge is 273.75 MWh per MWh of battery capacity. This is an annual displacement of 3070 mmBtu of natural gas. At a reference price of $3/mmBtu, the marginal MWh battery used as a peaker can result in a annual savings of $9209. (This of course is not a net savings netting out the cost of power to charge the battery and other operating costs. I envision this as being supplied by solar or wind which are almost entirely capex.)

Second, batteries in the power generation markets facilitate more integration of solar and wind. Thus, the marginal MWh can enable more wind and solar to be brought into the grid than would be economic with out firming up with incremental storage. Let us suppose that on our hypothetical grid incremental wind and solar capacity requires that 20% of power generated must be stored. This enables 20% of the power generated when market prices are lowest to be shift to times when the price is highest. This amount of time shifting is critical for incremental capacity to be profitable. But it is not necessary for incremental capacity to be 100% stored. So for every 1 MWh a battery stores and sells into peaker market, it makes another 4 MWh of renewable power economic to sell into the baseload market. This 4 to 1 ratio is a sort of leverage ratio, extending the displacement impact of a battery beyond what it can directly discharge into the market. So this combine impact of one cycle of a MWh battery is 11.412 mmBtu (gas turbine peaker) plus 4×7.652 mmBtu (combined cycle gas baseload). The total displacement is 41.8 mmBtu per cycle, and at 75% daily cycling 11,449 mmBtu per year, a nominal gross savings of $34,346 per year.

Clearly, when the battery supply is constrained, it makes more sense for the power market to leverage the marginal MWh battery to offset 11.4 billion Btu (BBtu) per year rather than just 3.1 BBtu. The gross savings of $34.3k factors into the value that the power market will place on that marginal battery.

Now let's look at the private auto market. ICEVs are about 22% efficient as EVs. This implies that one discharge cycle on 1MWh capacity (~20 cars) offsets about 15.5 mmBtu of gasoline (0.124 mmBtu/gallon). A key limiting factor for private vehicles is that families will want substantially more range than they need in an average day. In a tight battery supply situation, consumers with higher daily driving will have greater demand for the marginal battery. So suppose the marginal EV buyer wants range four times that of daily driving, e.g. a person driving 60 miles per day seeks out a car with 240 miles range. This implies daily charging at 25% depth or charging 75% once every 3 days. So assuming this charging rate, the annual offset for private autos is 1414 mmBtu. At a nominal reference price of $3/gal, gasoline is $24.19/mmBtu. And the gross savings is $34,219 per year per marginal MWh of battery supply.

Finally, we look at commercial vehicles. The big difference here is simply that commercial uses, think semi trucks, will cycle batteries much more heavily. Let's suppose the segment cycles at three time the rate as private autos, specifically daily at 75% depth. (Think of a semi with 600 miles range that goes 450 miles on an average day.) Here our marginal MWh of battery offsets 4243 mmBtu per year. At a nominal price of $3/gal of diesel (0.137 mmBtu/ gal), or $21.90/mmBtu, the gross fuel savings is $92,915 per year.

In sum, the marginal displacements of 1 MWh battery are as follows:

• NG 41.8 mmBtu/cycle, 11.4 BBtu/yr, $34.4k/yr
• Gasoline 15.5 mmBtu/cycle, 1.4BBtu/yr, $34.2k/yr
• Diesel 15.5 mmBtu/cycle, 4.2 BBtu/yr, $92.9k/yr

In terms of reducing primary fossil energy (and carbon emissions), Powerpacks have highest impact while Tesla cars have the least, but the gross saving in fuel is about the same. However, Tesla Semi would deliver nearly 3 times as much gross savings. Indeed many other factors go into the net saving of these three options. This mostly depends on how much capex is required and financing on that capital. Even so, the gross savings nearly 3 times as much on diesel is a huge difference for other costs differences to overwhelm. My view is that during times of limited battery supply, commercial EVs will grow faster than than private EVs and grid batteries.

Another implication of this analysis is that the price ratio of diesel to natural gas may need to shrink. Under these nominal prices, diesel is about 7.3 times the price of natural gas, but to equalize gross savings a ratio of 2.7 is needed. Nominally, diesel needs to fall to $1.11/gal to be at parity with natural gas at $3/mmBtu. I don't believe it will be able to close this gap, but price pressure will be there.

Curiously, I think that a carbon tax would help to support a higher diesel to natural gas price ratio, but this would only increase aggregate demand for batteries.

Fundamentally, as demand for batteries heats up the markets will decide which fossil revenue streams are most economical to displace. Tesla is playing in each of these segments. This will give Tesla exposure to whatever market is willing to pay the most for batteries, making it relatively indifferent to which market needs the batteries the most.

The BP Statistical Review is out. It's time to up our game. The big news is that total primary energy consumption surged 2.2%. This is depressing because most of this was fossil fuel and emissions were driven up. Let's put some numbers out there to see where we stand, and then I want to estimate how much battery production capacity we need to arrest fossil fuel demand growth in 2017 and compared with 5 year averages.

• Coal +25.4 Mtoe 2017, -12.6 Mtoe 5yr avg
• Natural gas +82.7 Mtoe, +59.0 Mtoe 5yr avg
• Oil +64.5 Mtoe (1698 kbpd), +63.4 Mtoe (1535 kbpd) 5yr avg
  • Gasoline +15.8 Mtoe (360 kbpd), +24.8 Mtoe (566 kbpd) 5yr avg
  • Diesel +31.5 Mtoe (645 kbpd), +13.4 Mtoe (274 kbpd) 5yr avg

So both coal and natural gas were up substantially from their 5 year averages. Oddly oil was up 11% over average by volume (kbpd) but only up 1.7% by energy (Mtoe).

So how many batteries would it take to make total fossil energy peak? I'm going to base this on five-year averages. I'm also going to ignore coal since it is already declining. Moreover, if natural gas is pushed into declining this will likely push coal into even faster decline. So let's translate the offset in my prior post into Mtoe per GWh. Specifically, 1 GWh of batteries can offset the following:

• Natural Gas 11.4 TBtu or 0.285 Mtoe per year
• Gasoline 1.4 TBtu or 0.035 Mtoe per year
• Diesel 4.2 TBtu or 0.105 Mtoe per year.

Thus,

• Natural gas 59 Mtoe growth is defeated by 207 GWh batteries in grid storage.
• Gasoline 24.8 Mtoe growth is defeated by 709 GWh of light EVs.
• Diesel 13.4 Mtoe growth is defeated by 128 GWh of heavy EVs.
• Oil, ex gasoline and diesel, 25.2 Mtoe growth is defeated by 240 GWh of heavy EVs.

Altogether this is 1284 GWh of battery production capacity needed to arrest demand growth in oil and natural gas. Backing out the decline of coal by 12.6 Mtoe only reduces our battery requirement by 44 GWh.

The size of the capacity requirements suggest that diesel is likely to peak first, followed by natural gas, total oil and finally gasoline. This of course depends on how quickly uptake of heavy EVs, light EVs, and stationary batteries go. Of the three main fuels gasoline has the highest battery requirement by far. This could be greatly reduced, however, if plugin hybrids do well against ICE.

In sum, about 1.1 to 1.3 TWh of battery production capacity is needed to bring about peak oil demand, and this is about enough to peak all fossil fuels combined.

Current capacity is 131 GWh with 406 GWh planned by 2021. Would that make 1.3 TWh possible by 2024?

 

[ItsNotAboutTheMoney]

Right, I'm not saying that cost parity is not important. It is an important milestone that marks a point of no return for ICE. But the $100/kWh is really overdone in the media. Here are a couple of reasons.

Price parity is different for every kind of vehicle. Specifically for commercial vehicles where 5000 cycle life is well utilized, price parity comes at a much higher cost per kWh than $100. For example, let's suppose the Tesla Semi really does cut 25 cents off of the cost per mile. This implies a savings of $250k over the 1 million mile warranted range. On a TCO basis then the parity price for the long range semi is up to $250k greater than $180k. For Tesla to market this at any $400k, a battery cost around $250/kWh would be quite cheap enough. But this is for TCO price parity. What of sticker price parity? To get there, the $180k Semi would need to be reduced to about $130k. To get there, Tesla would need to make batteries around $70/kWh. But is this really needed? At this price point, the Semi would save about 30c/mile rather than 25c/mile at the $180k price point. Does this really matter? Should truckers hold off buying a Tesla Semi until sticker price parity is obtained? Should Tesla hold back until this is possible?

My second point is that whatever vehicle price is low enough to generate sufficient demand is good enough to start. The key problem that I have with media fixation about $100/kWh is that it is usually framed as a critical event for demand. That material demand for EVs just is not there until EVs are at sticker price parity. Viewing above parity batteries as a barrier to demand is just plain wrong. Specifically it is the demand for EVs at a premium to ICE that is helping to drive the supply chain efficiencies needed to get to $100/kWh. Without this demand for premium EVs, it would take much, much longer for subparity EVs to arrive. This is the basic mistake that all the OEMs have been making. They will only make as many EVs as the law requires them too, until batteries are subparity. That path is way too slow. Tesla has cultivated enough demand above parity to really advance the technology and gain scale. In so doing, they will hit sub $100, many years ahead of the bulk of OEMs. The Chinese will hit it quickly too. Any OEM waiting for $100 batteries to arrive will be a loser in the EV race.

So the really critical action happens before sticker price parity is reached. The EV makers that get there first and vehicles that excite consumer demand for premium EVs matter most. Right now I think product diversity, not price and not battery price, is the key to demand cultivation. There are too many vehicle segments that just don't have enough EV products to choose from. OEMs sitting on their hands waiting to cheap batteries is the problem.

I agree that price parity is overblown for establishing a market, but my point about cost parity was directly in response to the discussion on peak oil.

2016 to 2017 petroleum demand _growth_ was 1.6Mbbl/day. That's equivalent to about 72.8Mgal/day of finished product. I use about 0.8gal/day commuting in my Prius so about 88M "mes" would need to convert to electric just to offset last year's growth.

If electrification is going to make oil demand peak, it's going to have to be heavy users and mainstream market volume and for that there will have to be a cost advantage. More TCO for commercial users and more price for mainstream private vehicle owners.

 

[jhm]

I agree that price parity is overblown for establishing a market, but my point about cost parity was directly in response to the discussion on peak oil.

2016 to 2017 petroleum demand _growth_ was 1.6Mbbl/day. That's equivalent to about 72.8Mgal/day of finished product. I use about 0.8gal/day commuting in my Prius so about 88M "mes" would need to convert to electric just to offset last year's growth.

If electrification is going to make oil demand peak, it's going to have to be heavy users and mainstream market volume and for that there will have to be a cost advantage. More TCO for commercial users and more price for mainstream private vehicle owners.

Yes. If you look at my previous post, you'll see that I anticipate some 368 GWh being allocated to heavy EVs and 709 GWh to light EVs. This is about 600k heavy EVs and 12M light EVs sold in a year.

 

[jhm]

The BP Statistical Review is out. It's time to up our game. The big news is that total primary energy consumption surged 2.2%. This is depressing because most of this was fossil fuel and emissions were driven up. Let's put some numbers out there to see where we stand, and then I want to estimate how much battery production capacity we need to arrest fossil fuel demand growth in 2017 and compared with 5 year averages.

• Coal +25.4 Mtoe 2017, -12.6 Mtoe 5yr avg
• Natural gas +82.7 Mtoe, +59.0 Mtoe 5yr avg
• Oil +64.5 Mtoe (1698 kbpd), +63.4 Mtoe (1535 kbpd) 5yr avg
  • Gasoline +15.8 Mtoe (360 kbpd), +24.8 Mtoe (566 kbpd) 5yr avg
  • Diesel +31.5 Mtoe (645 kbpd), +13.4 Mtoe (274 kbpd) 5yr avg

So both coal and natural gas were up substantially from their 5 year averages. Oddly oil was up 11% over average by volume (kbpd) but only up 1.7% by energy (Mtoe).

So how many batteries would it take to make total fossil energy peak? I'm going to base this on five-year averages. I'm also going to ignore coal since it is already declining. Moreover, if natural gas is pushed into declining this will likely push coal into even faster decline. So let's translate the offset in my prior post into Mtoe per GWh. Specifically, 1 GWh of batteries can offset the following:

• Natural Gas 11.4 TBtu or 0.285 Mtoe per year
• Gasoline 1.4 TBtu or 0.035 Mtoe per year
• Diesel 4.2 TBtu or 0.105 Mtoe per year.

Thus,

• Natural gas 59 Mtoe growth is defeated by 207 GWh batteries in grid storage.
• Gasoline 24.8 Mtoe growth is defeated by 709 GWh of light EVs.
• Diesel 13.4 Mtoe growth is defeated by 128 GWh of heavy EVs.
• Oil, ex gasoline and diesel, 25.2 Mtoe growth is defeated by 240 GWh of heavy EVs.

Altogether this is 1284 GWh of battery production capacity needed to arrest demand growth in oil and natural gas. Backing out the decline of coal by 12.6 Mtoe only reduces our battery requirement by 44 GWh.

The size of the capacity requirements suggest that diesel is likely to peak first, followed by natural gas, total oil and finally gasoline. This of course depends on how quickly uptake of heavy EVs, light EVs, and stationary batteries go. Of the three main fuels gasoline has the highest battery requirement by far. This could be greatly reduced, however, if plugin hybrids do well against ICE.

In sum, about 1.1 to 1.3 TWh of battery production capacity is needed to bring about peak oil demand, and this is about enough to peak all fossil fuels combined.

Current capacity is 131 GWh with 406 GWh planned by 2021. Would that make 1.3 TWh possible by 2024?

Another detail here is that all these batteries need to be paired (at least conceptually) with power source. I will describe this in terms of solar power with about 21% capacity factor, or 5 hours of power per day.

For heavy EVs, daily 75% charging 1 GWh of capacity needs to be paired with 0.15 GW of solar.

Light EVs, daily 25% charging, 1GWh is paired with 0.05 GW of solar.

To displace natural gas, I am assume that 20% of the power generated is stored, thus 1 GWh of batteries are paired with 1 GW of solar.

So diesel growth is defeated with 128 GWh batteries plus 19.2 GW solar

Natgas 207 GWh plus 207 GW solar.

Gasoline 709 GWh plus 35.45 GW solar.

Other diesel 240 GWh plus 36 GW solar.

So altogether this is 298 GW solar paired with 1284 GWh displacing some 122.4 Mtoe (equiv 4.9 quadrillion BTU or 2.29 MBoe/d).

Just for reference to displace 1 MBoe/d, we'd need just 660 GWh battery cap plus 130 GW solar in a year. Of course, you can substitute solar for wind or other power source. Last year 99GW of solar was installed, and they appear to be 29% this year. So clearly there is not difficulty getting to the solar requirement. Rather battery capacity (and vehicles to put them in) is the challenge. 2017 seed capacity at 131 GWh, and about 406 GWh are planned for 2021. This is about a 33%/y, or tripling every 4 years. So we reach 660 GWh level in 2023. So this is about the time we get to the 1MBoe/d level of displacement of fossils. At this level, I believe all responsible energy analysis will need to be explicitly measuring and modeling the impact of batteries. When the whole oil and gas industry is about 146 MBoe/d, you don't just brush off 1 MBoe/d.

 

[jhm]

Petrochemicals: The Future For Big Oil | OilPrice.com

The latest news is a deal between Aramco and a California startup that will allow the Saudi company to use the startup’s oxidative coupling of methane technology in its petrochemicals operations. This technology may sound impressive but it is in fact an alternative to the traditional way of converting gas into ethylene, the main raw material for plastics. This alternative, according to the California company, Siluria, can increase the portion of crude oil converted into chemical feedstocks to 40-80 percent per barrel from the current 15-25 percent, while the rest is made into fuel.

Now we know there is a way for most of a barrel to turned into non-fuel products. The value of this technology would look to increase as demand for fuels decline. Hmm.

 

[SebastianR]

I use about 0.8gal/day commuting in my Prius so about 88M "mes" would need to convert to electric just to offset last year's growth.

I find this actually a bit encouraging: 88 Million is not such an enormous number if you think that most of the growth in oil consumption is driven by an expanding middle class in less developed countries. And then the commute in a Prius is pretty much as good as it gets before you start considering electric transportation. So if you flip the perspective and consider yourself being an oil producer: you would have banked on some 3 billion folks entering the middle class until 2030 and buying a car + consuming oil. And all you get is the equivalent of 88 million Prius drivers a year... Doesn't sound too great, does it?

Petrochemicals: The Future For Big Oil | OilPrice.com

Now we know there is a way for most of a barrel to turned into non-fuel products. The value of this technology would look to increase as demand for fuels decline. Hmm.

This will be interesting: we do have an environmental crisis with our unsustainable use of plastics. I see more and more folks getting serious around banning single-use plastics. I'm not sure (and for the sake of this planet I hope) we don't see a huge growth in plastics. So nope, I don't think this will be a profitable way out...

 

[RobStark]

AAA Report: Americans Spend 7% Of Income On Gasoline

 

[jhm]

AAA Report: Americans Spend 7% Of Income On Gasoline

The reporting here is unreliable. The numbers don't make sense. $69 per month on gasoline is 7% of income if your income is just $1000 per month.

 

[RobStark]

The reporting here is unreliable. The numbers don't make sense. $69 per month on gasoline is 7% of income if your income is just $1000 per month.

They said Americans are spending $69 MORE each month.

If you make $1k per month you likely don't have a car. Unless someone else pays your rent/mortgage.

 

[jhm]

They said Americans are spending $69 MORE each month.

If you make $1k per month you likely don't have a car. Unless someone else pays your rent/mortgage.

Ah, that makes more sense.$69 is 1.5% of $4600 per month or $55k per year. That sounds about right for median family income.

 

[jhm]

Crude oil-to-chemicals technology could be game changer for chemicals industry

Net negative carbon emissions making plastics, very interesting.

 

[neroden]

Fascinating. It's not actually carbon-negative, but it produces less CO2 than the conventional naptha-cracking process by using less energy. It uses methane which is in serious oversupply, and increasing, as the gas-to-oil ratio goes up in wells. I suspect it'll be a hit. This generates the standard petrochemical precursors from methane. Those precursors can usually only be made by cracking longer chain molecules... and ending up with a lot of methane as a side effect. So it's a no-brainer to install this if it works at scale; it converts low-value methane into high-value petrochemical precursors while using low energy inputs.

 

[jhm]

Saudi Aramco in expansion mode, signs $44bn deal in India | Plastics News

This illustrates the kind of integrated refinery-petrochem complex that Aramco is going for. 1.2 mbpd crude is about 60 mmtpa capacity. Petrochem capacity is 18 mmtpa, 30% of refinery capacity. Of course, the petrochem plant could take in natural gas and other precursors beyond what the refinery provides, but I think that depends on prices. As the price ratio of crude to natgas shrinks, importing LNG and other petrochem feedstock into India will be less attractive. So as a fallback, this complex could source all petrochem feedstock from its refining operations, whence 30% of crude would ultimately go to petrochem.

 

[jhm]

Fascinating. It's not actually carbon-negative, but it produces less CO2 than the conventional naptha-cracking process by using less energy. It uses methane which is in serious oversupply, and increasing, as the gas-to-oil ratio goes up in wells. I suspect it'll be a hit. This generates the standard petrochemical precursors from methane. Those precursors can usually only be made by cracking longer chain molecules... and ending up with a lot of methane as a side effect. So it's a no-brainer to install this if it works at scale; it converts low-value methane into high-value petrochemical precursors while using low energy inputs.

Yeah, this is more of a net-net carbon negative, simply lower than the next best alternative. Current emissions is about net 1.4t CO2 per tonne of plastics, but this brings that down to net 0.4t CO2, makining net-net -1.0 t CO2. But I think there is opportunity to drive this down much lower. Consider this process:

This process must take in 02, it can recycle CO2, and can take in H2. So what if we add an electrolyzer into this process. The electrolyzer takes in surplus power from the grid (excess wind and solar), splits water and feeds O2 and H2 back into this process. Basically the electrolyzer kicks in whenever the electricity is below parity prices with natural gas and O2.

This gives the whole refinery-petrochem-electrolyzer complex an ability to recycle more CO2 from operations and taking in energy at below fuel costs. It also could go a long ways toward seasonal balancing of the grid. The complex can soak up excess power in spring and fall potentially generating negative CO2 emissions at the plant while reversing this in the winter and summer as electricity demands peak. Also natural gas can be stored up during spring and fall, to be used in petrochem or power generation in winter and summer. This leverages the enormous storage capacity of natural gas to balance seasonal demand. But over the course of a year perhaps petrochem could be truly net negative on carbon emissions. Yes, it could actually take in surplus CO2 captured in winter and summer and from other CCS sources around the world.

Another obvious advantage of locating an electrolyzer within such a complex is that all the needed access to gas distribution infrastructure is right there already. All that is need is the electrolyzer itself plus interconnection with the grid or renewable power resources. Here is where it gets really interesting for Saudi Arabia. They want to be developing this sort of petrochem capacity within their boarders. They also want to build out a huge renewable portfolio. They have contemplated building enormous transmission lines to Europe to export this surplus power. But what if they use electrolyzers to harness this surplus instead. Rather face the enormous cost of powerlines to Europe, they could export petrochems to the whole world. This would harness both their hydrocarbon resources and renewable resources and produce valuable commodities that are much easier to export long distances. Moreover, if their petrochem operations are truly net negative emissions over the course of a year, such a business may be compatible with a zero carbon economy.

 

[jhm]

More background on Siluria, these articles are from 2014 when the outlook for crude prices where still much higher than they are now.

(Better read) Siluria Promises Half-Price Gasoline from Natural Gas
(Shorter read) Cheaper Gasoline: Siluria Technologies

As the chart illustrates, the price ratio of crude to natgas is a key driver of what makes this competitive. If the ratio is really high, then getting cheap gasoline from natgas is attractive (2014 outlook). But if the ratio is really low and the price of gasoline is low too, then making more petrochems from crude becomes attractive (post-peak demand view). Essentially this technology allows crude and natural gas to compete head to head for higher value products.

Notice also in the longer read that Siluria has been making progress on finding optimal catalysts by lowering the cost of testing millions of candidates. This is very much like how pharmaceuticals try to find new medicines by massive combinatorial testing of potential active agents. I don't know what targets Siluria is working on these days, but I sure hope they are going after power to gas targets. Electrolyzers stand to gain efficiency with better catalysts, and there may even be shorter pathways from CO2 + H20 to ethylene (or other high value chemicals) via electrolysis. The search for catalysts is enormously important.

 

[ggr]

More background on Siluria, these articles are from 2014 when the outlook for crude prices where still much higher than they are now.

(Better read) Siluria Promises Half-Price Gasoline from Natural Gas
(Shorter read) Cheaper Gasoline: Siluria Technologies

As the chart illustrates, the price ratio of crude to natgas is a key driver of what makes this competitive. If the ratio is really high, then getting cheap gasoline from natgas is attractive (2014 outlook). But if the ratio is really low and the price of gasoline is low too, then making more petrochems from crude becomes attractive (post-peak demand view). Essentially this technology allows crude and natural gas to compete head to head for higher value products.

Notice also in the longer read that Siluria has been making progress on finding optimal catalysts by lowering the cost of testing millions of candidates. This is very much like how pharmaceuticals try to find new medicines by massive combinatorial testing of potential active agents. I don't know what targets Siluria is working on these days, but I sure hope they are going after power to gas targets. Electrolyzers stand to gain efficiency with better catalysts, and there may even be shorter pathways from CO2 + H20 to ethylene (or other high value chemicals) via electrolysis. The search for catalysts is enormously important.

I apologize for coming late to the game, but ethylene is still a gas, it isn't remotely like crude, so I'm missing the point of this. Unless maybe ethylene is good enough to start polymerization?

 

[jhm]

I apologize for coming late to the game, but ethylene is still a gas, it isn't remotely like crude, so I'm missing the point of this. Unless maybe ethylene is good enough to start polymerization?

The interest here is in petrochem feedstock, mostly plastic, not fuel uses.

 

[ggr]

The interest here is in petrochem feedstock, mostly plastic, not fuel uses.

Exactly what I was trying to ask: can ethylene be used to make plastic, or not? I didn't think so but am quite happy to be corrected. Your posting that I quoted, in the diagram at the bottom, was all about turning methane into ethylene (or as we English speakers would call it, Ethane ).

 

[mspohr]

Exactly what I was trying to ask: can ethylene be used to make plastic, or not? I didn't think so but am quite happy to be corrected. Your posting that I quoted, in the diagram at the bottom, was all about turning methane into ethylene (or as we English speakers would call it, Ethane ).

Yes, ethane/ethylene gas is the primary feedstock for most plastics... not really used as a fuel.