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Mar 6 • 4 tweets • 2 min read
1/ CERAWeek2023 takeaways thread. Lots of early talk about pragmatism and needing to move to an orderly, from a chaotic, "transition" that will take many, many decades. The pragmatism is definitely welcomed...but doesn't change the reality that...

@CERAWeek #CERAWeek
2/ ...we are still very early in the energy CAPEX cycle. We are under-invested in capacity and deliverability in traditional energy. It is still way, way early in the ramp period for the multitude of new technologies being pursued and that would be needed to transition.
3/ Investors, understandably, and without question (1) do NOT want traditional energy CAPEX, (2) are intrigued with future technologies. Lots of reasons for this we all know. This nets, in my view, to a high likelihood of the messy energy transition continuing.
4/ Only on Panel 2 of Day 1, but welcomed global perspectives from Petronas, Linde, and BKR execs. "Energy transition only through an Anglo-Saxon lens will not work. We need to be pragmatic about what makes sense for the rest of the world" (paraphrase). 100%.

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More from @ArjunNMurti

arjun⚡️murti Profile picture
Jan 28
1 of 6/ Will Oil Go The Way of Coal?

Oil bulls can only hope so, as coal demand reached an all-time high in 2022 and shows no signs of entering terminal decline. On equities, IMO, there is no comparison between US coal and US oil & gas in terms of relevance and needed CAPEX.
2/ Coal demand reached an all-time high in 2022 driven by China and non-OECD demand. You can love or hate or not care…to me, it simply shows how hard it it is to kill massive, low cost, reliable, and secure energy resources. Image
3/ In the case of coal, there are numerous power gen alternatives: nuclear, renewables, nat gas, fuel oil, diesel, and biomass. Yet, despite viable options, Coal demand has not definitively entered terminal decline, let alone peaked.
Read 7 tweets
arjun⚡️murti Profile picture
Jan 14
1/ @SuperSpiked looks at the bubble stock cycle, EV hockey stick adoption forecasts, and what I expect will be a growing recognition that oil demand is not going to structurally decline any time soon. Oil demand resilience—>+ terminal value for traditional energy.
2/ The IEA’s “Net Zero by 2050” report mainstreamed the idea oil demand could peak soon. But that requires (1) efficiency gains to accelerate and (2) EV growth to hockey stick up. Neither is likely, in my view. IEA NZE report marked the start of the energy crisis era.
3/ There is zero evidence of a structural change in efficiency, which would be the key driver of demand erosion this decade. US mpg misses forecasts by 90%-95%. Global stats tell a similar story.
Read 8 tweets
arjun⚡️murti Profile picture
Nov 12, 2022
1 of 7/ Metaverse Meets Universe @SuperSpiked. As happens every 20-30 years or so, the world is structurally short deliverable oil, refined products, and natural gas/LNG. We are in need of a major CAPEX cycle that exactly no one wants. arjunmurti.substack.com/p/metaverse-me…
2/ A CAPEX cycle is unlikely so long as investors believe the traditional energy business is going away either this decade or next…neither of which I think is true. A “zero” terminal value is way too low, especially for 1Q/2Q ROCE companies.
3/ I have 2030 oil demand at 107 mn b/d and a downside estimate of 100 mn b/d if we don’t get supply growth. I expect the top 2 ROCE quartile companies to generate 15%-30% ROCE this decade. Both figures support “terminal value” credit for traditional energy.
Read 8 tweets
arjun⚡️murti Profile picture
Apr 23, 2022
1 of 8/ This week’s post focuses on sentiment toward the traditional energy sector. Key takeaway: It's early days in the new energy crisis era.

arjunmurti.substack.com/p/sentiment-wa…
2/ At a time when above- and below-ground inventories + spare capacity are exhausted and the normal world is in the process of ex-communicating Russia, we are in need of a major CAPEX cycle. This requires much more of a sentiment + mind-set shift than we have seen thus far.
3/ 3 Rs of recovery: (1) ROCE rebounded to 10% in 2021 and should be above 20% in 2022…the sector ROCE super cycle is off to a great start.
Read 9 tweets
arjun⚡️murti Profile picture
Apr 2, 2022
1 of 5/ Energy macro commentary - A week of progress

Good to see a growing recognition from some left-of-center, climate types that higher US oil & gas production is a good thing…. a pretty notable departure from the overwhelming pre-Ukraine rhetoric.
2/ The increasing recognition of the importance of US oil & gas coupled with improving mid-cycle ROCE/FCF bodes well for long-term sector valuations. Energy availability, affordability, reliability, and security are all enhanced with a healthy US oil & gas industry.
3/ Climate & Environment. We don’t need enviro regs to be gutted. We do need streamlining and obstruction elimination. In exchange for infrastructure freedom, hold O&G accountable to strict methane/water/clean-up rules. NZO S 1+2+methane can be a growth pre-req.
Read 5 tweets
arjun⚡️murti Profile picture
Mar 19, 2022
1 of 10/ What does pariah state status imply for future Russia oil exports?

Shocking insight: pariah states tend to be unreliable oil suppliers because...wait for it...they are pariah states for a reason.
arjunmurti.substack.com/p/what-does-pa…
2/ Has Russia reached that point of no return where it faces long-term sanctions and exclusion from the group of "normal" functioning countries? It increasingly seems that way. The risk I am focused on is long-term structural oil supply declines, not short-term impacts.
3/ The track record for pariah/failed states is poor. Iran, Venz, and Libya are all well below prior production highs seen some 40+, 20+, and 10+ years prior. Iraq is the former pariah state "winner" by taking only 10 years post GW2 to reach new highs last seen in the 1970s.
Read 11 tweets

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