Originally circulated on 19 February 2021
Aweh fellow Ruminants & Groupies in day 328 of Re-Modified Lock Down Level 3 now with freely available alcohol and not so freely available vaccines.
This week I would like to turn to the hype, dare I say euphoric hysteria, regarding the looming transition to a carbon neutral world. This is a suitable topic for Ruminant Pink Friday™. Notwithstanding the tremendous growth and innovation in the IT industry the global energy industry remains the single largest industry in the world with tens of trillions of dollars of infrastructure invested over many decades. Energy is and will remain the master resource. This is rooted in thermodynamics and everything a civilization does requires energy. Indeed in science fiction civilizations are classified according to their energy usage on the Kardashev scale with humanity being classified as a type 0 civilization. https://en.wikipedia.org/wiki/Kardashev_scale. A type I civilization is one that can harness most or all of the energy that falls onto its planet from its parent star or about 1016-1017 W or 10-100 peta W or PW. Current human civilization is about four orders of magnitude short of this metric and is thus a type 0 civilization. A type II civilization utilises most or all of the energy from its host star and a type III utilises the inconceivable amount of energy from an entire galaxy. Let us just speculate for a brief moment concerning the dominance hierarchy issues should we ever meet a type II (let alone III) civilization. They would definitely get all the reserved parking spaces on P1 next to the lift taking them straight to the 10th floor and humans would not be allowed in this lift. Indeed humans would only be allowed to park on P7 and they would all sit in open plan offices.
When one considers the growth possibilities of the energy industry from this perspective, let alone being carbon neutral, there is every reason to be euphoric about the growth prospects of the energy industry. The galaxy is the limit.
In order for earth to become carbon neutral it will be necessary to spend $ tens of trillions on renewable energy and infrastructural projects. This will involve literally thousands of megaprojects (> $1 billion). It will also involve technology pioneering megaprojects. Why are pioneering megaprojects so attractive to decision makers at the top of dominance hierarchies? Bent Flyvberg talks about the four sublimes of megaprojects. http://econdefense.blogspot.com/2015/07/four-sublimes-of-megaprojects.html?_sm_au_=iMVvtnkjwFs2w2J20GLqHKHB1jtC6. One of these is the technological sublime which is the rapture engineers and technologists get from building the first, biggest, tallest and most innovative project in the world.
Now onto the more mundane and awfully tedious matter of shareholder value creation. If you consistently create shareholder value you get rising share prices, salary increases, generous bonuses, share allocations, dividends and the like. You rise in the dominance hierarchy and may even make the cover of Fortune magazine. If on the other hand you destroy shareholder value you become over indebted, there are no salary increases, bonuses or dividends and cost cutting and waves of headcount reduction are the order of the day. You may become a zombie company. Your permanently reserved table at Marble with the complimentary bottle of Johnnie Walker Blue slips away and you have to stand in the queue at Steers. Zombie companies have formed the subject of a previous Ruminant Pink Friday™ and are simply defined in terms of economic metrics associated with indebtedness.
The last couple of years has not been kind to the oil and gas energy companies and their rankings in the global company pecking order has slipped a lot and a number of them have become zombie companies. When it comes to new entrants there is a whole herd of start-ups funded by venture capital and those with deep pockets. Most of these will crash and burn but perhaps the next Tesla of the energy industry is amongst this herd. The future for the energy incumbents is also not clear and a number of the zombie companies will also not survive. Even some of the energy incumbents with heathier balance sheets are likely not to survive. A period of disruptive change is looming.
This then leads to the Ruminant Pink Friday™ question of the day:
What role will zombie energy companies play in the coming energy transition within the next decade?
Will some zombie energy companies transform, rise from the ashes and pioneer the energy transition creating huge shareholder value? If so which zombie companies? Dear readers I invite your opinion.
Thank you very much for the many helpful suggestions and input which I’m researching and please keep the submission ideas flowing.
Regards
Bruce
Ruminant Pink Friday 