The 2020 election results will take the energy industry one of two paths — toward the energy transition or continuing the status quo. In this guest column, an energy investor assesses the situation ahead of election day. Photo via Getty Images

The United States Presidential election is at our doorstep. The fossil fuel industry is under significant pressure and the outcome of the election could impact the speed at which exploration and production is impacted. This pressure is financial in nature, but also is operational, technological and all wrapped in physics. A mere 12 to 18 months ago, environmental, social and governance influences and overlays on E&P began and are only accelerating.

My company, Riverbend Oil and Gas, is beginning to see the industry rebound from a significant downturn in revenues, activity, and confidence in 2020 due to the impacts of COVID-19 and the OPEC price war earlier this year. The industry is battling with headwinds, including, lack of access to debt/equity capital, transaction valuations, commodity prices, shale well spacing, and other issues, all impairing market conditions.

At present, there is little to no lubrication in the system. With most talking about an oil and gas market cycle that is driven by supply and demand fundamentals over previous decades, now there is more discussion of a contrarian view of those confident of a demand recovery for oil and gas.

Since the start of energy private equity, funds were raised by general partners to support the small cap E&P space, in the late '80s, private equity became a significant participant in the oil and gas upstream space. Private equity firms became great in number as institutions desired exposure to a growing segment of the market outside of merely investing in the oil and gas public equities. This role, 30 to 35 years later, remains essential, but is currently stifled with thoughts of a declining fossil fuel world and with energy representing only about 2 percent of the S&P 500.

Hydrocarbon outlook

Looming headwinds in the fossil fuel industry include The Green New Deal, an accelerating consciousness of the carbon footprint, the Paris Climate Accord, ESG importance, and the growth of renewables. Additionally, the advent of electric vehicles presents a significant new entrant that is causing a substantial threat to oil's monopoly on the transportation sector. A collision of possible futures exists. Currently, around 1 billion vehicles today are using around 30 percent of the world's oil supply with an estimate of 4 million electric vehicles on the roads globally. Some forecasters predict around 400 million electric vehicles in 2040, decreasing oil supply demand by an estimated 6 percent.

These forecasts of human mobility are driven by the nature of human ambition and worldwide population growth. Africa, China, and India are expected to grow significantly through 2100. Moreover, all persons worldwide strive for a better life for themselves and their families — energy drives these ambitions.

Meanwhile, the capital markets for public fossil fuel companies has declined by over 90 percent from 2016 to 2019 with a continued dismal outcome year-to-date in 2020. The lack of cash flow and capital markets will likely drive less U.S. and non-nationalized produced oil and gas volumes and fewer sustainable companies. Many confident analysts predict a looming oil supply shortage in 2021 driven by these factors along with a federal lands development ban and the possible slowdown of fracking. However, others predict that peak oil demand is now and the need for fossil fuels has already reached a peak.

Assessing the candidates

The results of the election are anticipated to have significantly differing implications (should campaigning be a real signal) for the oil and gas industry. While a Donald Trump win would largely represent a status quo for the environment, a Joe Biden triumph could drive towards changes. Implications are wide ranging across the equity, credit and commodities market energy value chain.

It is important to evaluate who will have control of the House and Senate to pass said legislation. The House is expected to remain with the Democrats, comfortably winning at least 224 of the 435 seats. Recent polls have pointed toward a competitive Senate election cycle. The Republicans currently have a 53-47 Senate majority, but a Democrat favored majority of 51-49 is currently predicted.

The next question is whether the filibuster would be eliminated to push legislation through without a super majority needed; meaning Democrats could drive approvals with a 50-50 tie and Kamala Harris's vote. Although polls are pointing toward a "blue wave" for the Democrats, certain moderate democrats in oil and gas states such as Colorado, New Mexico and Pennsylvania may be swayed against major regulatory or legislative threats to oil and gas exploration and production. Additionally, elected authorities in anticipated Republican states such as Texas, Oklahoma, North Dakota, Utah, and Ohio who are home to industry trade groups and fossil fuel companies will play a significant role.

The Biden Administration has discussed several energy-related policies. These include support for climate-friendly legislation, a ban on federal lands and water permits that represented 21 percent of U.S. oil output in 2019, and an increased investment of $2 trillion over four years in clean energy technologies. To put this investment into perspective, total global energy investment from 2017 to 2019 averaged $2 trillion, and Biden's plan would add $500 billion per year. Biden would target roughly two thirds of U.S. carbon emissions focusing on transportation (40 percent) and electricity production (31 percent).

Broadly, the goal is a nationwide carbon reduction to achieve net-zero emission no later than 2050 and transition to a carbon pollution-free power sector by 2035. In order to achieve the 2050 net zero emissions goal, the world requires 2020 COVID-19 sized reductions (8 percent) every other year for the next 25 years. Throughout this energy transition, energy prices are likely to increase, and as a result, the pace of the energy transition will likely reflect the balance of societal demand to reduce fossil fuel usage and the costs (economic, convenience, speed, satisfaction) of doing so.

Renewables and hydrocarbons

In 2019, the U.S. accounted for 15 percent of global CO2 emissions (5,130 MM metric tons of CO2), down 873 MM metric tons since the U.S. peaked in 2007. The large decrease can be attributed to coal-to-gas switching, while wind generation and solar power installations also aided the decline. From 2018 to 2019 alone, coal-to-gas switching decreased U.S. emissions by 140 MM metric tons, driving the largest decrease for the year. While shifting from one end of the carbon-emitting energy spectrum to another, it is imperative to balance costs, plausibility and expectations.

Hydrocarbons can be stored for less than $1 per barrel of oil equivalent, or BOE, while renewables cost $200 per BOE. Total U.S. renewable storage capabilities can provide two hours of national electricity demand which is stored in the utility-scale batteries on the grid and in the about 1 million electric vehicles on U.S. roads. Storage, physics and costs are major drivers for a hydrocarbon partnership as the U.S. transitions to a less carbon-heavy source of fuel. While costs of wind and solar have been driven down by around 70 percent and 89 percent, respectively since 2009, the Betz Limit and Shockley-Queisser Limit do have a governor on further improvements of the current technology and materials. Similarly, subsurface oil and gas reservoirs have similar boundary conditions of physics involving ultimate recovery of resources through natural production, fracking and/or enhanced recovery techniques.

The goal of providing low cost, reliable energy to consumers, enhancing lives and providing better futures can be reached through utilizing hydrocarbon technologies in tandem with renewable sources. A vast amount of investment, research and development is still required in the renewable world, including battery storage, solar/wind efficiency, electric grid expansion and electric vehicle technology/charging stations.

According to the 2020 IEA Energy Outlook, oil and gas represented 55 percent of global energy demand in 2019 and the agency predicts that oil and gas will comprise 46 percent to 54 percent of the energy stack in 2040. This is a relatively flat market share. Coal, on the other hand, cedes market share to renewables and nuclear power, decreasing from 30 percent to 10 percent. While renewables are vital to reaching the U.S. goals of net-zero emissions, hydrocarbons are essential in backstopping U.S. energy needs and ambitions throughout this energy transition. Additionally, on a global scale, cheaply sourced and stored hydrocarbons are essential for emerging economies to advance through existing carbon-emitting infrastructure, eventually leading to renewable alternatives and global carbon reduction.

We remain encouraged for the next decade of growth and performance as we look to identify unique opportunities in the space. In a dynamic oil and gas market, Riverbend has a high degree of confidence to sustain and thrive due to our culture, performance-based team and systems. Riverbend is anchored by vigorous technical subsurface reserve assessments as well as land, accounting and commercial diligence. Additionally, Riverbend, as an energy company, is investing in the alternatives segment, concentrating on materials and services in the wind, solar and battery portions of the value chain. In a world full of human ambition, we see a need for all energy to support undeveloped nations and economies to access the opportunity of the American Dream, pursuing elimination of a "have" and "have not" world.

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Randy Newcomer is president and CEO of Houston-based Riverbend Oil and Gas, a private equity investment group specializing in the energy industry.

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Houston innovator receives $5M to establish new center that explores crystallization process

crystal clear initiative

A new hub at the University of Houston is being established with a crystal-clear mission — and fresh funding.

Thanks to funding from Houston-based organization The Welch Foundation, the University of Houston will be home to the Welch Center for Advanced Bioactive Materials Crystallization. The nonprofit doled out its inaugural $5 million Catalyst for Discovery Program Grant to the new initiative led by Jeffrey Rimer, Abraham E. Dukler Professor of Chemical Engineering, who is known internationally for his work with crystals that help treat malaria and kidney stones.

“Knowledge gaps in the nascent and rapidly developing field of nonclassical crystallization present a wide range of obstacles to design crystalline materials for applications that benefit humankind, spanning from medicine to energy and the environment,” says Rimer in a news release. “Success calls for a paradigm shift in the understanding of crystal nucleation mechanisms and structure selection that will be addressed in this center.”

The Welch Foundation, which was founded in 1954, has granted over $1.1 billion to scientists in Texas. This new grant program targets researchers focused on fundamental chemical solutions. Earlier this year, the organization announced nearly $28 million in grants to Texas institutions.

"Support from the Welch Foundation has led to important advances in the field of chemistry, not only within Texas, but also throughout the United States and the world as a whole,” says Randall Lee, Cullen Distinguished University Chair and professor of chemistry, in the release. “These advances extend beyond scientific discoveries and into the realm of education, where support from the Welch Foundation has played a significant role in building the technological workforce needed to solve ongoing and emerging problems in energy and health care.”

Rimer and Lee are joined by the following researchers on the newly announced center's team:

  • Peter Vekilov, Moores Professor, chemical and biomolecular engineering
  • Alamgir Karim, Dow Chair and Welch Foundation Professor, chemical and biomolecular engineering;
  • Jeremy Palmer, Ernest J. and Barbara M. Henley Associate Professor, chemical and biomolecular engineering
  • Gül Zerze, chemical and biomolecular engineering
  • Francisco Robles Hernandez, professor of engineering technology.

The University of Houston also received another grant from the Welch Foundation. Megan Robertson, UH professor of chemical engineering, received $4 million$4 million for her work with developing chemical processes to transform plastic waste into useful materials.

“For the University of Houston to be recognized with two highly-competitive Welch Foundation Catalyst Grants underscores the exceptional talent and dedication of our researchers and their commitment to making meaningful contributions to society through discovery,” Diane Chase, UH senior vice president for academic affairs and provost, says in the release.

University opens its newest, largest campus research facility in Houston

research @ rice

As the academic year officially kicks off, professors have started moving in and Rice University has opened its largest core campus research facility, The Ralph S. O’Connor Building for Engineering and Science.

The 250,000-square-foot building is the new home for four key research areas at Rice: advanced materials, quantum science and computing, urban research and innovation, and the energy transition. The university aims for the space to foster collaboration and innovation between the disciplines.

"To me it really speaks to where Rice wants to go as we grow our research endeavors on campus," Michael Wong, Chair of the Department of Chemical and Biomolecular Engineering, whose lab is located in the new facility, said in a video from Rice. "It has to be a mix of engineering and science to do great things. We don’t want to do good things, we want to do great things. And this building will allow us to do that."

At $152 million, the state-of-the-art facility features five floors of labs, classrooms and seminar rooms. Common spaces and a cafe encourage communication between departments, and the top level is home to a reception suite and outdoor terrace with views of the Houston skyline.

It replaces 1940s-era Abercrombie Engineering Laboratory on campus, which was demolished in 2021 to make way for the new facilities. The iconic sculpture "Energy" by Rice alumnus William McVey that was part of the original building was preserved with plans to incorporate it into the new space.

The new building will be dedicated to its namesake Ralph O'Connor on Sept. 14 in Rice's engineering quad at 3 p.m. O'Connor, a Johns Hopkins University grad, became a fan Rice when he moved to Houston to work in the energy industry in the 1950s.

The former president and CEO of the Highland Oil Company and founder of Ralph S. O’Connor & Associates left the university $57 million from his estate after he died in 2018. The gift was the largest donation from an estate in Rice's history and brought his donations to the university, including those to many buildings on campus and endowments and scholarships, to a total of $85 million.

“How fitting that this building will be named after Ralph O’Connor,” Rice President Reginald DesRoches said in a statement last summer. “He was a man who always looked to the future, and the future is what this new engineering and science building is all about. Discoveries made within those walls could transform the world. Anybody who knew Ralph O’Connor knows he would have loved that.”

The dedication event will be open to the public. It will feature remarks from DesRoches, as well as Rice Provost Amy Dittmar, Dean of the Wiess School of Natural Sciences Thomas Killian, Chair of the Rice Board of Trustees Robert Ladd and Dean of the George R. Brown School of Engineering Luay Nakhleh. A reception and tours of the new building will follow.

New certificate course trains a ready workforce as biotech companies in Pearland take off

Top of the Class

Biotech companies in Pearland are thriving, with big names such as Lonza, Millar Inc. Inc., and Abbott all experiencing tremendous growth in recent years.

The only challenge to this success is the increased demand for a faster workforce pipeline. Fortunately, the Pearland Economic Development Corporation (PEDC) has a solution.

PEDC has partnered with Alvin Community College (ACC) and Lonza to create a two-level Biotechnology Certificate Course designed to address the need for a better-equipped entry-level workforce.

This initiative offers two options to quickly train individuals for employment in the biotech field: Level 1, a six-week commitment for Biotech: Material Handler; and Level 2, a twelve-week commitment for Biotech: Lab Technician. Each level consists of 64 contact hours, with lectures delivered online and labs and assessments conducted on-site.

Alvin Community College is offering this course, which commenced on August 21, under its Continued Education and Workforce Development (CEWD) department. This department provides programs that incorporate current and new technical courses, training partnerships with businesses and industries, and other opportunities for individuals to acquire and upgrade skills or pursue personal enrichment.

Before this initiative, the region's two- or four-year programs were only graduating a dozen or so individuals. Early discussions focused on how to expedite workforce development through a local community college's certificate program. Alvin Community College was prepared to respond to the local workforce's needs.

PEDC played a pivotal role in establishing an advisory committee comprised of industry partners responsible for vetting the Biotechnology Certificate Course curriculum. Industry partners included the University of Houston Clear Lake (UHCL) at Pearland, Lonza, Millar Inc., Merit Medical, and the nonprofit organization BioHouston.

These partners are invaluable as plans continue to expand these certification programs.

Given the ever-increasing demand for a biotechnology workforce in the Pearland area, the future wish list includes expanding the certification program to other education partners.

For more information about the Biotechnology Certificate Program at Alvin Community College, visit this link.