Energy Transition Capital Options: All of the Btu—and CCUS

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It’s all Btu—oil, gas, wind, solar, renewable gas, hydrogen, biofuels and more.

And veteran producers of the primary Btu, oil and gas, as well as longtime Btu financiers are joining to build operations in additional forms of fuel. Likely these two groups alone will solve the problem— including some by reducing the release of new CO₂, such as at dairy farms, and some by simply stripping CO₂ from the atmosphere via air capture.

The latter will result in burial of most of the carbon; other applications will be in EOR and new products. Over at SpaceX, founder Elon Musk is looking to air-captured CO₂ for stripping out the O₂ to fuel Starship rockets to Mars.

His other point: sending the technology to Mars to strip O₂ from the planet’s 95% CO₂ atmosphere, making oxygen for inhabitants and to fuel return trips to Earth.

SpaceX’s Starbase on the Texas Coast near Mexico’s border is just east along Boca Chica Boulevard of the Rio Grande LNG export facility that NextDecade Corp. has been hoping to build. The Brownsville plant’s developers have added CO₂ capture to their plans, offsetting a prospective anchor shipper’s concern that the natural gas is sourced from the oily Permian Basin and Eagle Ford.

Longtime oil and gas private equity financier Quantum Energy Partners has been investing in alternative energy since 2010. CEO Wil VanLoh, who founded the firm in 1998, explained on page 32 that, ultimately, it is carbon capture, utilization and storage (CCUS) that is the greatest contributor to reaching climate goals.

“I really think that the industry that’s been vilified the most—oil and gas—is going to be the industry that saves the world from its carbon problems,” VanLoh said. “That’s going to be through CCUS.”

Meanwhile, oil and gas are an essential part of the future. He told Wall Street, “You shouldn’t be divesting of them; you should be investing in them.”

His point is that, while wind, solar and other sources of energy join the Btu grid, crude oil and natgas demand will increase, as energy-poor countries join the first-world economy with access to these fuels and as the world’s population continues to grow.

Quoting Warren Buffett at Hart Energy’s inaugural Energy Transition Capital Conference in October 2021, VanLoh said, “I think we’re going to have a lot of hydrocarbons for a long time. And we’ll be very glad we’ve got them.”

Watch Quantum Energy Partners CEO Wil VanLoh speak at Hart Energy’s inaugural Energy Transition Capital Conference.

In addition to a bounty of private equity ready to invest, discussed in these pages are public-equity sources of funding alternative energy operations and sustainability-linked bonds (SLBs) and loans (SLLs) that energy firms are accessing at lower interest.

There’s a lot of money looking to fund the energy transition, according to Kassia Yanosek, a partner at McKinsey & Co. If more than 70% of current oil and gas demand is replaced by renewables, investment of some $225 trillion is needed—$7 trillion per year between now and 2050.

The uptake of these new opportunities within the veteran oil and gas industry is great, said Sanjay Bhatia, co-founder of the Evolve Collective energy consultancy and a longtime oilfield services professional.

When Evolve formed two years ago, “there was just kind of crickets coming from the traditional players,” he explained in the article on page 16. Now there is a chorus. “Almost every player we talk to, from oilfield services to the E&P side, has a group or a venue [where] we can start to introduce these [transition] startups.”

Over at EnCap Investments LP, which has funded oil and gas startups for 30 years, it has added a dedicated energy transition fund.

“It is a growing space,” said Kellie Metcalf, managing partner leading the fund, in the story on page 18. “A bit counter to what [others] say, there are definitely investment opportunities that can make money.”