ArrowHead Models – Integrated Hydrocarbon

The ArrowHead Global Integrated Hydrocarbon Model (AGIHM) Represents the Way Global Hydrocarbon Markets Work throughout the World

Representing the Integrated Structural and Probabilistic Dimension for Every Hydrocarbon Commodity Region Globally Enables Identifying and Mitigating Greenhouse Gas Emissions

Representing the Integrated Structural and Probabilistic Dimension for Every Hydrocarbon Commodity Region Globally Enables Identifying and Mitigating Greenhouse Gas Emissions

The future of hydrocarbons will not look like the past, and companies and public bodies must understand the future and make the right decisions. Future decisions won’t mirror past decisions; and historical data, experience, and conventional wisdom will be of no help. Yet, companies and governments must make decisions now to shape the future of energy during and after the transition.

Recent litigation against hydrocarbon and electric companies alleges damages related to “knowing but failing to take action” on greenhouse gas releases. Companies must demonstrate the efficacy of the actions they have taken and the mitigation strategies they have followed up and down the hydrocarbon value chain. (Does a company produce CO2, or do its customers produce CO2? ArrowHead can quantify this for the entire value chain). At the same time, shareholders are demanding that management quantify the value of their business under various future eventualities past capital investments did not consider (e.g., IEA’s Sustainable Development and Net Zero 2050 scenarios). International, federal, state, and local agencies are becoming increasingly demanding regarding hydrocarbon emissions, and yet they don’t really know what truly “drives” them. Public agencies have begun to adopt mandates, incentives, regulations, or outright bans, and they need to understand the impact on emissions, economics, and aggregate CO2 output to know the effectiveness, consequences, and pace of their actions. To (1) make correct decisions (2) defend against legal or regulatory actions 3) create and manage maximally effective regulations as a public agency, and/or (4) comply with such regulations, it is necessary to understand and show:

  • Due diligence in understanding the genesis of CO2, CH4, and other pollutant releases from the energy sector as a whole.
  • Quantity of emissions directly attributable to every particular step of the value chain.
  • The owner of each step of the value chain (including both fuel and capacity).
  • Marginal abatement cost curves and the activities that truly mitigate aggregate emission.
  • The efficacy and pace of existing and new technologies on all the value chains (e.g., hydrogen, fuel cells, super capacitance. For example, what might broadscale penetration of electric vehicles and electric storage at utility scale truly mean?)
  • CO2 emissions directly attributable to consumers (not companies) after it leaves the energy system (e.g., residential heating, commercial air conditioning).

Companies and governments need to know how much total CO2 or CH4 or other emissions emanate from every element of every value chain in the world under prospective policy actions up and down the value chains and “add ‘em all up.” Figure 1 shows the simple, direct, and accurate way ArrowHead does it. We have ~50,000 nodes that span the world, so we can do what the figure shows comprehensively throughout the world, quantifying the pollutants that come out by node, by region, across the hydrocarbon and electric sector, and worldwide. Notice how this ensures perfect accounting along each supply chain, taking perfect account of thermal efficiency (losses) all along the way. Such information is exhaustive, accurate, policy-sensitive, and testifiable. Exhaustive quantification, testimony and advocacy is already a bigger factor today than yesterday. Skittish investors who have recently suffered returns lagging the S&P 500 want to know what the energy sector looks like in the face of alternative outcomes of the ongoing Energy Transition. Are CO2 or end-use policies a death knell, or will costs simply be flowed right on through to final customers? A tall order, but ArrowHead fills it – we explicitly model engineering, emissions, and economic activity for every element of the energy value chain throughout the world.

Without a technology that allows for explicit and transparent itemization and accounting for every Btu that flows from wellhead to burner tip, assumptions are obfuscated and emissions accounting inaccurate. Only Arrowhead provides the visual, economic, value-chain model that allows for this level of forensic accounting of the intersection of technology, emissions, economics, and policy. Companies and governments cannot exhaustively and transparently quantify how the energy system affects them nor how they affect the energy system. Other than ArrowHead, no one has represented the inter-linked operation of the oil, natural gas, petrochemical, renewables, and electricity sectors of the energy market to see how they jointly combine to release CO2, CH4, and other pollutants up and down every value chain in the world. Absent that, decision makers have no actionable idea how much CO2 is coming out of the energy system and how they can mitigate or accelerate it? Companies lack an effective defense strategy against lawsuits by various parties interested not only in mitigating negative climate impact but also taking their money for the public till. No one, except ArrowHead, has a world hydrocarbon-electricity-renewables-CO2 model containing every value chain to guide them. We will help you understand and make the right decisions.

Absent such understanding, the public, the government, and companies are bombarded with solar, wind, biomass, battery, electric vehicle, fuel cell, hydrogen, and hybrid advocacy or scenarios with “colorful, adjectival names” and astronomical claims but without scientific or economic justification. They have no idea how various scenarios someone might proffer will help citizens of any particular country or the world as a whole or simply shift the problem to some other location in the world and impose on certain people. With an “externality” as ubiquitous around the world as CO2, government and industry simply must understand the policy environment that is increasingly affecting hydrocarbon markets.