There are investment opportunities within the energy sector that will benefit from the energy transition — and they are not just in the renewables sector.
Tyson Birchall, managing director of Longbow Capital, a Calgary based private equity manager, points out that even if the world is able to achieve the objectives of the Paris agreement, the oil and gas industry will still require investment of approximately $425 billion per year to meet demand as supply declines faster than demand does (he cites IEA reports).
Longbow manages approximately $500 million and is investing in opportunities inside and outside of the oil and gas sector that will benefit from the disruption created by the energy transition — which can include energy infrastructure, services, products and technology — what Birchall called, “Energy with a capital E.”
Birchall presented, virtually, at the Silicon Valley Band of Angels’ investment group dedicated to energy.
“There’s going to need to be a tremendous amount of investment in oil and gas” even if the energy transition moves oil and gas down to 25% of our global energy needs, said the investor.
He said that the size and scale of the challenge — and the motivation accelerating the energy transition has created an enormous number of opportunities. He added that there were also “a lot of snake oil salespeople riding the coat tails” of the trend.
Cleaner oil and gas?
Birchall singled out a few firms from his firm’s portfolio.
Certarus looks to displace diesel or propane consumption with its lower-carbon distributed compressed natural gas technology. Certarus compresses, transports and integrates CNG for the energy, mining, forestry, utility and industrial sectors — enabling an “electric frack” powered 100% by natural gas turbines or a 20-MW peak-shaving project in Long Island, New York. Certarus revenue grew from $16 million in 2014 to $175 million in 2019, in what Birchall described as a very profitable business.
“Fracking is a hydrocarbon-intense spectacle of horsepower and engineering,” with $75 million or more of mobile equipment that is required to be set up and then moved to the next well for every frack. Fracking didn’t require penny-pinching when oil was expensive and capital for the industry was cheap, but it does today. And saving money is not the only driver.
“The oil and gas industry is responding to shareholder pressure,” said Birchall, adding that it reducing emissions and the environmental impact of resource development has become a primary driver for companies as they seek acceptance by investors. He observed that there were more oil and gas ESG compliance-related conferences than general oil and gas conferences as it has become a dominant theme.
Another portfolio firm, North West Refining is 50% partner in the building of the Sturgeon Refinery, a greenfield refinery “designed to capture CO2 process emissions from the outset,” according to the company. 70% of emissions are captured and transported via pipeline for an enhanced oil recovery application.
In order to achieve Paris agreement goals, the O&G industry has to reduce its emissions intensity by 45%. If you’ll believe it, it’s cleaner oil and gas.
“Oil and gas has a problem — people hate it”
The investor also spoke about the ways in which the oil and gas industry is responding to environmental pressure from investors and other stakeholders.
The oil and gas industry has been “demonized” and has some real headwinds it must to face, said Birchall, adding,”Oil and gas has a problem — people hate it”
“But what do business owners do?” Quoting famed investor Paul Tudor Jones, Birchall said they “adapt, evolve, compete or die. The oil and gas industry is going to keep going. It’s not simply going to roll over and it will invest in technology to be able to compete in a low-carbon world.”
This was a trend that was evident pre-Covid. Birchall noted that, “Covid hasn’t changed anything — it’s accelerated everything.”
This content is protected by copyright and may not be reused. If you want to cooperate with us and would like to reuse some of our content, please contact: email@example.com.
People hate the oil and gas industry with good reason: Lies. Funding obfuscation. Funding opposition to renewable energies. Making a mess of ecosystems by polluting. Warping governmental policy through regulatory capture to create abominations like the Natural Gas Act of 1938 and its amendments. Creating a thing like FERC. Influencing states and local governments to oppose zero Carbon energy at every turn when they can.
There should be no sympathy, and no cooperation with them. And I personally don’t care how many thousands lose jobs as a result. It’s “the American way”. Disney jettisoned 28,000 just last week.
These employees, these managers should have seen this coming. And they want socialist support because they chose a wrong bet?
The point of the article is that the oil and gas industry will need capital, and it will acquire that capital one way or another. It might even be profitable.
It won’t need a government handout or bailout, it will simply extract the funds from the end user in the form of higher prices. It’ll work the same as your utility bill, you pay it or you don’t get any.
It’s not just ‘the American Way’, it’s how every economy ever operated.
It is clearly evident about climate crisis. Rush Limbaugh continues saying hoax while the west burns more and more. Fires may come to to the east like Gatlinburg had if change is not done. Best way is to stop making ICE vehicles completely. Tesla has proven we can do EV and Superchargeing without advertising. Traditional car companies could do the same without advertising which would save them millions. There is plenty of electricity which most EVs charge at midnight
The fate of America’s oil and gas industry is in question and will have dire consequences for the broader economy if not addressed correctly. Even after this is over, it will take time for the supply and demand sides of the market to synchronize. Keeping assets corrosion-free during this crisis is essential to ensuring they can be reinstated and operational as quickly and cost-effectively as possible.
Here’s an excellent counter argument to the calls to ban fracking. And it doesn’t even mention coal.
Good article. I think the calls to ban fracking are foolish. Better regulated might be nice.
By submitting this form you agree to pv magazine using your data for the purposes of publishing your comment.
Your personal data will only be disclosed or otherwise transmitted to third parties for the purposes of spam filtering or if this is necessary for technical maintenance of the website. Any other transfer to third parties will not take place unless this is justified on the basis of applicable data protection regulations or if pv magazine is legally obliged to do so.
You may revoke this consent at any time with effect for the future, in which case your personal data will be deleted immediately. Otherwise, your data will be deleted if pv magazine has processed your request or the purpose of data storage is fulfilled.
Further information on data privacy can be found in our Data Protection Policy.