The oil and gas sector has long been one of the Earth's largest and most valuable industries, but it's undergoing major changes to compete in the green energy transition and remain profitable.
At last year's COP28 summit, nations signaled a definitive shift away from fossil fuels, marking a potential "beginning of the end" for the era. While ambitious, the reality is more complex. Oil and gas aren't disappearing anytime soon — in fact, the industry is projected to rake in revenue of US$5.3 trillion in 2024, with daily consumption of 103 million barrels.
Indeed, petroleum remains the lifeblood of transportation systems, powering billions of vehicles, while natural gas heats a significant portion of the world's homes. At the same time, the industry's substantial environmental impact — accounting for 15 percent of energy-related emissions on a worldwide scale — cannot be ignored.
As countries balance continued fossil fuel requirements with the urgent need to decarbonize, companies are exploring a range of strategies to modernize oil and gas operations, from tackling methane emissions and eliminating non-emergency flaring, to electrifying upstream facilities with low-emissions electricity, using carbon capture and storage technologies and expanding low-emissions hydrogen use in refineries. Read on to learn more about these efforts.
Reducing CO2 emissions with renewable gasoline
A company offering solutions that fit under this umbrella is Verde Clean Fuels (NASDAQ:VGAS).
The company is focused on creating commercial plants to convert various feedstocks, including biomass and flared natural gas, into gasoline using its proprietary SynGasToGasoline+ (STG+) process.
The Investing News Network (INN) spoke with Ernie Miller, CEO of Verde, about turning waste into fuel and targeting “stranded assets.” He explained that STG+ has two different pathways to production.
One pathway uses natural gas as the feedstock, converting it to synthesis gas via steam methane reforming, and then converting the synthesis gas to methanol and finally gasoline. The other pathway gasifies renewable feedstocks, like biomass or agricultural waste, to produce the synthesis gas, which then follows the same process to gasoline.
In addition to creating “renewable gasoline,” the second pathway has the benefit of generating excess biogenic CO2 that can be sequestered, resulting in a gasoline product with a “deeply negative carbon intensity score." As Miller explained, this means more carbon is put into the ground during production than is emitted when the gasoline is burned.
He clarified that while the gasoline produced using Verde’s process burns the same as any other gasoline, “What's different is that in the process of producing that renewable gasoline, we've put more carbon in the ground than carbon is released when you burn that gasoline. So it’s carbon negative.”
In 2022, the production, transport and processing of oil and gas generated 5.1 billion metric tons of CO2 equivalent. Scope 1 and Scope 2 emissions from oil and gas activities accounted for just under 15 percent of total energy-related greenhouse gas emissions, according to the International Energy Agency.
Mitigating flaring and stranded assets
In addition to reducing emissions associated with the oil and gas production process, the STG+ method can use the natural gas that companies burn off or “flare” during the oil extraction process.
“We've got an awful lot of opportunities here in North America to bring value to low-value natural gas, while at the same time solving a major flaring issue,” said Miller said during the conversation.
By targeting natural gas that would normally lack economic benefit and be flared off, Verde is also creating another revenue stream for companies like Diamondback Energy (NASDAQ:FANG). Using the STG+ process, Diamondback, which operates in the Permian Basin and is a partner of Verde, can now unlock more value from its assets.
Miller said Diamondback is highly regarded for its operations and leadership in methane abatement and flare mitigation. The company excels in adding value to disadvantaged natural gas, particularly in the Permian Basin, where natural gas trades at the Waha hub. Currently, natural gas at Waha trades at negative US$2.45 per MMBtu, meaning producers incur a loss before gathering, compression and processing costs.
"Gas in the Permian Basin today has no value. If you don't have firm transport to a Gulf Coast market, that's what you're going to get — you're effectively going to have to pay somebody to vent your natural gas," he explained, adding, “So we're able to (provide) that economic benefit to a producer … we're able to really kind of swap commodity exposures for something that is very low value or no value to something that's much higher value."
Oil and gas producers also face the issue of stranded assets — properties that are too small or uneconomical to target. This is especially true in regions like West Africa, where there is no market or infrastructure to transport natural gas.
Companies like BP (LSE:BP,NYSE:BP) and Total (NYSE:TTE) have invested heavily in oil production in these areas, but the natural gas produced often has no destination and is flared, causing environmental and economic problems.
Addressing the stranded gas issue globally could benefit all stakeholders, as organizations like the World Bank are increasingly tying funding to the reduction of flaring.
Extracting lithium from oilfield brine
Like Verde, Volt Lithium (TSXV:VLT,OTCQB:VLTLF) is targeting the energy potential within waste streams.
The battery metals-focused company is specifically targeting oilfield brine, a saltwater that is produced during the exploration and extraction of oil and natural gas. It is non-potable water that primarily contains dissolved sodium, calcium, magnesium and chloride. This produced water can also contain lithium.
As Alex Wylie, CEO, president and director, told INN, Volt’s proprietary direct lithium extraction technology consists of three phases. In the first phase, contaminants like organics are removed from the brine. In the second phase, direct lithium extraction occurs using two technologies developed by Volt. They effectively extract 98 to 99 percent of the lithium from the brine. This water, often associated with oil production, is typically considered a waste stream. For every barrel of oil, 4.5 barrels of water are produced, which can be used to extract lithium instead of being disposed of.
The third phase involves concentrating and crystallizing the lithium to produce a battery-grade product. Volt's technology has proven to be capable of delivering a commercially viable lithium product, and the company plans to move into field operations to produce battery-grade metal. “We've demonstrated over the last year that there is a (battery-grade) product that we can develop. And we're at the phase now where we're looking to move into field operations. We're going to be also producing battery-grade metal from the field operations,” said Wylie.
Using desalination to combat the water crisis
Volt's technology could be especially useful in Texas' Permian and Delaware basins.
Wylie went on to note that in the US, 22 million barrels of oilfield brine are produced daily, potentially yielding 350,000 metric tons of lithium annually, enough to meet a third of US lithium demand by 2030.
Aside from reusing a waste stream to extract value, Volt's process could eventually help create water streams for use in processing and manufacturing. Wylie said that on its own, the Permian Basin in Texas generates 19 million barrels (681 million gallons) of water daily, noting that this water needs to be desalinated.
At the same time, Texas consumes large amounts of water. The manufacturing sector uses 900 million gallons daily, while agriculture needs 1.4 billion gallons and power production requires 300 million gallons.
"When people think about desal, I'm not talking about drinking water, I'm talking about other uses," he said. "There is an opportunity here to reuse the water for other purposes, to help with the water crisis of the Southwest US."
Volt’s lithium extraction process creates "very clean water" by removing contaminants using reagents such as sodium hydroxide and hydrochloric acid. “So when we go to desalination, ultimately we've got a clean product to start with, which falls in line with environmental sustainability and reusing that water to the maximum ability,” said Wylie.
“I know there's work to be done on desalination, so I'm not saying that we're doing that today — we're focused on lithium extraction,” he said. “But in the future, we see an opportunity where you could use that water for other purposes.”
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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
