Wednesday, June 2, 2021

Blue Hydrogen, Mitsubishi, Denbury, RBN Energy, And All That Jazz -- June 2, 2021

Not-ready-for-prime-time.

This is a long, disjointed post, but for those paying attention, it may pay huge dividends. 

Disclaimer: this is not an investment site.  Do not make any investment, financial, job, career, travel, or relationship decisions based on what you read here or think you may have read here

This is one of those posts that does not flow well from one "idea" to the next. But, trust me, it's a big deal if you can put this altogether. 

First, re-read my not-ready-for-prime-time reply to a reader re: Denbury

That was posted earlier today. 

Then pure serendipity, The Williston Herald had an article on blue hydrogen. A reader sent me the article/link/story; I would have missed it. [Did my blog on Denbury have anything to do with the reader catching the Herald article and sending it my way? One wonders. But I digress.]

The dots connect. Wow! Do they connect! And how!

On January 28, 2021, RBN Energy had a blog about hydrogen, part 2. As usual, I posted the lede, but in this case, I also archived the entire blog. I thought it might be important some time down the road. I had no idea that "down the road" happened so fast. 

Here was the lede that was posted on the blog. 

RBN Energy: making sense of the hydrogen buzz, production edition, part 2. Archived.

Based on the response we received to our first-ever hydrogen blog last fall, it’s fair to say we didn’t waste this space on a fringe subject. To be honest, the level of interest in hydrogen far exceeded our expectations, and suggested that we might have even been a little bit late to the party — but fashionably so, if you ask us. In the weeks since then, we’ve spent a fair amount of time distilling the tremendous amount of news flow and reading material that was either sent our way or popped up in the daily news feeds. 
You could go a lot of different directions with hydrogen and it’s still very easy, in our view, to get lost in the forest of green energy technology. So, as we are wont to do, we have stuck to our simple approach of tackling this fuel just like we do with hydrocarbons, and we are first turning our attention upstream. Today, we continue our series on hydrogen with a look at the top production methods for the fuel.

So, what is "blue hydrogen" about which The Williston Herald is talking? 

From the RBN Energy blog regarding blue hydrogen, the stuff Mitsubishi was talking about in Bismarck this past week:  

The existing hydrogen market is huge. It also emits significant amounts of carbon. That’s because, according to the International Energy Agency (IEA), around 75% of the hydrogen produced in the world is synthesized using natural gas, mostly through a process called steam methane reforming (SMR).

Note that another 20+% of global hydrogen is produced using coal, thanks mostly to China. In the U.S., about 95% of the hydrogen produced comes from natural gas, according to the Department of Energy (DOE).

Similar to the rest of the world, most of the natural gas is turned into hydrogen via SMR, although there are a few partial oxidation (POX) plants that make up a small sliver of the supply side of the market.

We won’t cover POX today, or another technology for producing hydrogen from natural gas called autothermal reforming (ATR), but the processes are not very different than SMR.

To that end, Figure 1 below shows a simplified process flow diagram for a typical SMR unit.

Simplified SMR Flow Diagram

Figure 1. Simplified SMR Flow Diagram. Source: RBN

To create hydrogen via SMR, natural gas is first fed into a processing unit called a reformer. There it reacts with high-temperature steam and a catalyst, usually one that is nickel-based, to form hydrogen and carbon monoxide. The resulting gas mix is then fed to the shift conversion unit, where the carbon monoxide reacts with the steam to produce even more hydrogen, plus carbon dioxide (CO2). The hydrogen and carbon dioxide are then sent to a pressure swing adsorption (PSA) unit, where the CO2 is removed from the hydrogen.

Naturally, our Figure 1 is simplified, and there are a bunch of other pieces of equipment such as heat exchangers and dryers that we left off, but you get the general idea.

According to data published by the Argonne National Laboratory, the SMR process is about 70%-80% efficient. Using the low end of that range and an assumed $3 per million British thermal units (MMBtu) natural gas price, we estimate the natural gas costs of SMR equate to about $0.50 per kilogram (kg), a number supported by a recent IEA study.

The IEA also assumes another $0.17/kg in other variable costs for SMR, along with $0.34/kg to cover capital costs. That math brings SMR hydrogen production costs to just about $1/kg, assuming you do nothing to contain the produced carbon dioxide.

The IEA estimates that installing a carbon capture, utilization, and storage (CCUS) technology brings total costs up to $1.50/kg of hydrogen.

Even with the added cost of containing the CO2, SMR is cheap when compared to just about any other method of production. Also, while some SMR units feature CCUS, most do not. Remember from Part 1 of this series that hydrogen produced from natural gas via SMR is called “gray” hydrogen. If you combine CCUS with the SMR, your turn the hydrogen from gray to “blue”.

It's okay to ignore this next paragraph:

How much do SMR units produce each year? That’s a good question, and answering it isn’t as easy as you might like. To our knowledge, there is no requirement to report hydrogen production in the U.S., so there’s nothing in the way of historical data from the Energy Information Administration (EIA) like there is for most of the hydrocarbon world. The most recent information we could find from the DOE estimated U.S. hydrogen production at about 10 million metric tons per year (Mtpa). On a daily basis, that’s roughly 11 billion cubic feet per day (Bcf/d) of hydrogen containing approximately 3 million MMBtu. That translates to about 3 Bcf/d of natural gas equivalent energy. Further, if we assume almost all of that produced hydrogen was generated with natural gas-based SMR — the DOE estimates appear to exclude by-product hydrogen relinquished by refinery and chemical plant processing units — the amount of natural gas used to produce it would come out to roughly 4.3 Bcf/d. Note that math (4.3 Bcf/d of natural gas used to make the hydrogen energy equivalent of 3 Bcf/d) uses the low-end of our previously stated 70%-80% efficiency range.

But don't ignore this paragraph:

All of which is to say that gas demand from the hydrogen industry is already a huge component of the existing energy balance within the U.S., a fact not lost on most natural gas analysts. Note also that the DOE estimates about 25% of that hydrogen is consumed in the ammonia industry, with most of the rest in the refining and petrochemical sector.

For what it’s worth, we could find no production data for the “green” methods of producing hydrogen, which we discuss next.

So, blue hydrogen: Remember from Part 1 of this series that hydrogen produced from natural gas via SMR is called “gray” hydrogen. If you combine CCUS with the SMR, your turn the hydrogen from gray to “blue”.

Quick! Who combines CCUS with CO2 EOR? Full circle. We're back to Denbury.   

Some folks suggest Denbury is about the only operator of note involved with CO2 EOR and CCUS.

I think I've said enough.

Disclaimer: this is not an investment site.  Do not make any investment, financial, job, career, travel, or relationship decisions based on what you read here or think you may have read here

Blogging Is Delayed Until Tomorrow Morning -- June 2, 2021

If you came for the Bakken, go back, come back tomorrow. 

 1937 hrs tonight I hit a wall. 

Locked in my house. COVID outside. A glass of whiskey in my hand. And listening to Amy Winehouse. What else can I add? -- from comments to video below.

Headphones on seriously loud; drown out any outside noise. Can I get back to black?

For the record: no whiskey in my hand.  

287 million views.

It would be interesting to formally debate who was is / was most autobiographical in her songwriting? Amy Winehouse or Lana Del Rey? Would Hunter S Thompson weigh in if he could? 

The blogging begins again tomorrow. I just can't do it tonight. It's going to be a night of femme fatales and loud music.







 
If we get the all clear sign this summer could we have blow-out concerts like this?

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Atlanta -- We Have A Problem

I may not be the only who has hit a wall. Look at the low number of Covid-19 vaccinations given in the US in the last 24 hours per CDC data: barely half a million --last column -- number of vaccinations given in past 24 hours, when we should be seeing one to four million vaccinations per 24-hour period.

This is by far the worst report I've seen since tracking this data.  

All rows "hidden" except reports for Wednesdays going back to March 3, 2021. I could have gone back to January, 2021, but it would have been just more of the same.

CDC data here



Total Doses Administered

Number of People Receiving At Least One Dose

Fully Vaccinated

Delta: Difference in daily doses from previous day

Wednesday

June 2, 2021

296,912,892

168,734,435

136,155,250

508,652

Wednesday

May 26, 2021

289,212,304

165,074,907

131,850,089

1,423,432

Wednesday 

May 19, 2021

277,290,173

159,174,963

125,453,423

1,754,966

Wednesday

May 12, 2021

264,680,844

153,986,312

117,647,439

1,548,283

Wednesday

May 5, 2021

249,566,820

148,562,891

107,346,533

1,797,771

Wednesday

April 28, 2021

234,639,414

142,692,987

98,044,421

2,231,745

Wednesday 

April 21, 2021

215,951,909

134,445,595

87,592,646

2,563,671

Wednesday 

April 14, 2021

194,791,836

123,917,385

76,681,252

2,509,055

Wednesday 

April 7, 2021

171,476,655

109,995,734

64,422,618

2,884,580

Wednesday 

March 31, 2021

150,273,292

97,593,290

54,607,041

2,670,947

WTI Trending Toward $70 -- Active Rigs At 20 -- June 2, 2021

Disclaimer: this is not an investment site.  Do not make any investment, financial, job, career, travel, or relationship decisions based on what you read here or think you may have read here

AMC: doubled today, after an already incredible run. This tells me one thing: this market is different. Once something starts to move, all bets are off. I don't know what the free cash flow for AMC will be this year as we "return" to normal, but if WTI/Brent trend toward $75 / $80, we're going to see some "pops" in oil companies that will shock everyone ... except those paying attention.

Exhibit A:

  • CVX: up 1.34%; up $1.43; closed at $108;
  • COP: at 1.24%; up 72 cents; closed at $59;
  • OKE: up 0.9%; up 48 cents; closed at $54.25:
  • APA: up 2%; up 46 cents; closed at $23.52;
  • DVN: up 2%; up 60 cents; closed at $30.80
  • MNRL: up 0.26%; up 5 cents; closed at $18.94

Exciting: personally, two companies excite me --

Others that deserve comment:

  • Nvidia: up 3%; up $20; closed at $671;
  • AMD: up 1.44%; up $1.16; closed at $82;
  • XLNX: up 1%; up $1.21; closed at $129;

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Back to the Bakken

Brent: $71.20.

Active rigs:

$68.83
6/2/202106/02/202006/02/201906/02/201806/02/2017
Active Rigs2011646050

No new permits.

MRO reports a nice well:

  • 37251, 4,438, MRO, McGowan 11-2H, Killdeer, t12/20; cum 163K 4/21; this well is tracked here as well as some interesting observations regarding this well.
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare
BAKKEN4-20213027713277262752827990260060
BAKKEN3-202131283242833336196242252211393
BAKKEN2-20212826976270924119126111193654831
BAKKEN1-20213130427303395140929472216685655
BAKKEN12-202029496104919110120342426334285583
BAKKEN11-2020200454000

Denbury -- 4Q20 Corporate Presentation

Disclaimer: this is not an investment site.  Do not make any investment, financial, job, career, travel, or relationship decisions based on what you read here or think you may have read here. 

A reader who appears to take investing a whole more seriously than I do, and who has been investing as long as I have -- four or five decades -- has been following Denbury for quite some time. I think that reader owned Denbury at one time, but says he no longer holds any shares in Denbury. 

Recently that reader suggested I take a look at the most recent Denbury presentation because of the huge amount of information that was presented. A pdf will download.

After looking a the presentation, my not-ready-for-prime-time reply:

1. Denbury is mentioned often as the best (almost only) player in this niche (CO2 EOR) + CCUS.

2. A couple of years ago, it appeared to be too early -- this niche had not caught on.

3. P/E is N/A (negative earnings); no dividend. But chart looks very, very good for a long term investor.

4. Market cap at $3.5 billion is exactly the right price as a takeover target.

5. Every E&P company out there (XOM, COP, CVX) feeling the pressure of carbon offsets, ESG, "green energy" must be looking at DEN as a possible takeover.

6. When you first told me about DEN several years ago I was not interested. I thought DEN was "before its time." But now I'm thinking, any day we could hear an announcement that a company like XOM, CVX, COP (market cap $260 billion, $200 billion, $80 billion, respectively) will acquire DEN (market cap, $3.5 billion).

7. One could argue that DEN is in the mature area of the Bakken (eastern Montana) and that the rest of the Bakken is nowhere near ready for CO2 EOR but strategically it might make sense for XOM (with XTO in the Bakken) or COP (with BR in the Bakken).

8. So, for Sophia with a really long time horizon, DEN might be a good place to start accumulating shares.

I'll ask Sophia when I pick her up from TutorTime later this afternoon her thoughts on this. She'll probably defer to Corky. 

Disclaimer: this is not an investment site.  Do not make any investment, financial, job, career, travel, or relationship decisions based on what you read here or think you may have read here.

Amazon Books "On Demand" -- June 2, 2021

I think I mentioned this on the blog: after reading the illustrated edition of Joshua Slocum's Sailing Alone Around The World, I ordered an annotated version through Amazon.

This is the screen-shot of the order:

  • the order was placed May 28,2021;
  • the book was delivered May 30, 2021 (two days later)

So what? you say.

This is the "so what." 

These are screenshots of the book cover and the publication date:



In other words, this book was printed / published "on demand." 

The publishing company is not named.

The editor is not named. The individual who provided the introduction or the annotation is not provided. 

The copyright for this book has long expired. Anyone can print this book. I believe books can be copyrighted for 50 years and then extended by the author (estate, heirs) by an additional fifty years, but that's it. Interestingly, Mark Twain figured out a way to get around this and copyrights to his books lasted longer than the conventional copyright (and for all I know are still copyrighted; I don't know). 

The price I paid for this book: $0.00 (sells for $10.00). I "covered" the cost with points accrued on the credit card.

The book is returnable. 

The book absolutely does not meet my standards and is pretty much falsely advertised. But I won't return it; it's easy to carry (small soft cover) and one that I can easily mark up. 

Generally (?) Amazon alerts the buyer to these "printed on demand" books. I do not recommend buying them unless one really needs it for some reason and there are no alternatives. 

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Donuts

Yesterday I mentioned Krispy Kreme

According to a reader, this is a big deal. Who knew? I certainly did not. 

I did not know that the fact I like Krispy-Kreme-like donuts set me apart from those who like cake donuts. 

Apparently this can be almost as serious as Trump supporters vs Obama supporters

I definitely fall into the Krispy-Kreme-like donuts.

So, I was curious. What was I eating when I had coffee at Dunkin' [Donuts] when we "lived" in Boston some years ago. 

Well, it turns out Dunkin' has three options: Krispy-Kreme-like donuts; cake donuts; and, French cruller. 

I had forgotten all about French cruller but of the three, the cruller is definitely my favorite. Hand it to the French, they always seem to come out on top when it comes to food. You like your steak rare? The French? Steak tartare. 

And, oh, by the way, French toast (whether it's French or not, who knows) is so much simpler to make than pancakes or waffles and so much better.

No Wells Coming Off Confidential List -- June 2, 2021

Brent: $70.86

Active rigs:

$68.24
6/2/202106/02/202006/02/201906/02/201806/02/2017
Active Rigs2011646050

No wells coming off the confidential list.

RBN Energy: opportunities for CO2 sequestration through enhanced oil recovery, part 2

No doubt about it. The global effort to reduce emissions of carbon dioxide — the most prevalent of the greenhouse gases — is really heating up. Yes folks, CO2 is in the spotlight, and everyone from environmental activists and legislators to investors and lenders want to slash how much of it is released into the atmosphere. There are two ways to do that. First, produce less of it. That’s what the development of no- or low-carbon sources of power and the electrification of the transportation sector are intended to accomplish. The second way is to capture more of the CO2 that’s being emitted and make it go away, and the most cost-effective means to that end is sequestration — permanently storing CO2 deep underground, either in rock formations or in oil and gas reservoirs through a process called enhanced oil recovery, or EOR. Sure, there’s an irony in using and sequestering CO2 to produce more hydrocarbons, but the volumes of CO2 that could be squirreled away for eternity through EOR are enormous, and the crude produced might credibly be labeled “carbon-negative oil.” In today’s blog, we continue our look at the rapidly evolving CO2 market and the huge opportunities that may await those who pursue them.

Quitting Cold Turkey -- June 2, 2021

Taken out of context, the following may not make sense to you. If it does not, see full essay here.

  • Reader, try this one. There are certain things you did out of rote but had insidiously been tapering off. Yet suddenly, you inexplicably just quit cold turkey. The NBA became boring, then the NFL. And now MLB is too. Then they all disappeared from your life. Yet you never really noticed, much less missed them, until there was not a trace of them left. You become vaguely aware that you have not been to a movie theater since 2015, and haven’t watched a Grammy, Emmy, Tony, or Oscar ceremony in …when exactly? Now you feel zero need to do so, and are neither angry nor sad, but feel mostly nothing. These referents are about as important to you as a billboard on the freeway. You wonder, for a nanosecond only, how this happened or how little you must have been invested in any of these things in the first place. Were these always mere naked emperors in lavish robes, and suddenly you regained your child clarity, yelling out “They all are buck naked!”
  • You were already but vaguely thinking of quitting an increasingly same old/same old club or burdensome association. You were getting tired of dutifully showing up at a particular event. You found yourself watching a television show and enjoying it less, listening to a music group that became monotonous, watching movies of a particular star, and gradually you suddenly and inexplicably taper off. Then suddenly, there is some sort of mental implosion. You abruptly tune them all out, politely so, but all the more firmly for your years of poorly invested patience. You are not mad, but simply “done with it.” The reaction is only momentarily remorse—a minute or two of regret for “chronicles of wasted time.” Then comes welcome relief if not euphoria that the virtue-signaling lectures are over, the self-pitying sermons gone, and the victimization schtick zilch! I noticed the other day I have not watched a major network newscast in ten years, maybe 15 years for 60 Minutes. PBS? Haven’t seen its Newshour in over a decade too. Is Face the Nation or Meet the Press still on? No doubt they remain highly rated. I used to watch both religiously—around the turn of the millennium.

My life became immeasurably better when I stopped watching almost everything except TCM some years ago. I now have Hulu but I still watch no network news, etc. A little sports, not much. My wife knows not to bring up anything with regard to current events unless it's something "I need to know." My life has become so much better.

Notes From All Over -- Pre-Market Edition -- June 2, 2021

Disclaimer: this is not an investment site.  Do not make any investment, financial, job, career, travel, or relationship decisions based on what you read here or think you may have read here. 

Things are moving too fast. 

ATT - Discovery: this is going to be a lot bigger than people think.

  • Exhibit A: AMC
  • Exhibit B: Amazon buys MGM

Morning brief: demand outstripping supply. A good problem to have.  

Power of the presidency: a lot of folks think Joe Biden's policies will destroy America. What amazes me is how quickly a president can change the conversation. And many CEOs -- the successful ones -- are working to figure out how to make these policies work.

Arctic refuge drilling rights: suspended by Biden. Another non-story. SeekingAlpha's link here.

Making America great: the southwest -- Arizona, New Mexico, Texas, Oklahoma (and Nevada) account for 30% of US job growth in manufacturing -- again, this is manufacturing we're talking about, not services -- over three years, adding more than 100,000 jobs. A long, long above-the-fold story in The Wall Street Journal

Apple, Inc.: Tim's Cook's compensation was comparatively modest among highest-paid CEOs os 2020. Tim Cook earned $15 million vs the median $13 million across the S&P 500. Cook's pay rank is 171st highest out of the S&P 500 CEOs, even though Apple makes up six percent of the entire index. He retires soon; it will be interesting to see his successor.

Breather: Apple -- before rush to a new all-time high. IBD below has an article on best energy stocks right now. It seems to me someone is chasing energy right now. Soon it may be time to sell some energy and buy Apple -- it's been trading sideways for quite some time now.  

Disclaimer: this is not an investment site.  Do not make any investment, financial, job, career, travel, or relationship decisions based on what you read here or think you may have read here.

********************************
Energy -- Fossil Fuel

Top oil stocks: Inveestor's Business Daily. It seems to me those folks recommending energy stocks now missed the boat. They should have been doing this four years ago. 

Deal: press release. Southwestern Energy to acquire Indigo Natural Resources. 

Another deal: Pembina Pipeline to buy Inter Pipeline in a deal valuing the latter at C$8.3 billion. 

EPD: set to soar. SeekingAlpha

Disclaimer: this is not an investment site.  Do not make any investment, financial, job, career, travel, or relationship decisions based on what you read here or think you may have read here.

Dividends: ENB makes the cut again

Paradoxes: on May 28, 2021, I listed a number of paradoxes (?). Today, I add two more:

  • every day I read stories about how oil-rich nations and fossil fuel companies are going green (exhibit A: Norway the country, and Equinor, Norways' state oil company) and now Equinor announces it will partner with Exxon to invest $8 billion in developing oilfield off Brazil. So, which is it? Is Equinor going green or simply geographically moving elsewhere.
  • speaking of which, I thought fossil fuel was dead in Brazil, due to environmental concerns about leaks and spills ruining their pristine beaches and their tourist industry; so where does Brazil stand: no more drilling; back to drilling?
  • Greta: "I have a headache."

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Word of the Day

Chyron: link here

Not to be confused with the Greek Chiron.

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Video of the Day

Sent to me by a reader:

Big Pharma (And Little Pharma?) Deserve A Lot Of Thanks -- June 2, 2021

California: One month ahead of the target date set by the Biden administration, California has now at least partially vaccinated 70% of its adult residents against COVID-19. Clearing that hurdle is a vital development as the state prepares to fully reopen later this month. The US as a whole is about 55%. Good for California. I'm impressed. 

Re-posting from yesterday:

Is the pandemic over? Not in countries "under-vaccinated." For countries reaching "herd immunity," it looks like the pandemic is over. The UK reported zero deaths from Covid-19. I assume that was in a 24-hour period. In the US, we should easily reach Biden's goal two weeks early.

Moderna becomes the second vaccine maker asking for full FDA approval. Pfizer/BioNTech applied for full approval on May 7, about a month ago.  

If this can be confirmed, this is quite remarkable, maybe one of the best vaccines out there: 

Moderna has been found to be more than 90% effective at protecting against Covid and more than 95% effective against severe disease up to six months after the second dose.

If you want to see how incredibly awesome the vaccines are, look at the data. This is an incredibly fun site and you can spend hours sorting and graphing the data; entirely interactive. Check out the US, the UK, and Israel. 

By the way, this would not have happened without Trump's policies for which he took a lot of heat, and interestingly, Biden did not change. 

If you need more proof, look at UK vehicular traffic last week -- 101% of pre-Covid. Not 101% during Covid but 101% pre-Covid