�۶���Ƶ

While the globe-trotting Matijevic started working in Libya’s oil-and-gas fields when he was just 13 years old and on school break, his recent journey of discovery started five years ago, when he was determined to understand how oil-and-gas producers were really contributing to Climate Change. A McKinsey 2020 industry report indicated the oil-and-gas sector directly or indirectly produced 42% of the globe’s greenhouse gas emissions, but no one knew precisely how.

Matijevic assumed the worst production damage occurred when oil-and-gas companies were “flaring,” a 160-year-old drilling technique of reducing dangerously high pressure in an oil well by burning off excess gas in the atmosphere. But then Matijevic’s company started collecting real-time data on where the industry’s environmental damage was actually occurring.

It was terrifying,” he says. “We had no idea how bad it was. No clue.

The biggest environmental damage was not CO2 but escaped methane

Using a molecule-by-molecule carbon-tracking accounting system his company invented, then constantly checking his tech-driven simulator results in real time through elaborate reservoir, physical plant, and satellite monitoring checks, Matijevic and his team discovered that all the industry’s flaring and drilling accounted for just 36% of the environmental harm being done by his industry. The far biggest environmental damage was not CO2 emissions, but methane gas escaping unnoticed from faulty valves and separators at the above-ground pipes and plants. 

“We learned that fugitive emissions and venting accounted for 64% of the industry’s climate damage,” he says, independently confirming the broad results of the 2020 McKinsey report that inspired his thinking. While Matijevic knew fossil fuels would remain a part of Man’s economic activities on earth for the foreseeable future, from then on, the engineer began thinking about how he could help bridge today’s highly polluting energy industry with the hoped-for Clean Energy of the future. It’s become his life’s calling.

“Because we have a conscience,” he says, “we also have the choice to live by our conscience. This is a privilege, and for this privilege, we all must pay a price of gratitude. Someone pays the price by being a great writer, another by being a great engineer, and others still by being a great grandfather or a kind person. For everyone the price is different. When your life is over – when your choice of conscience is finished – and you look back at life, you want to say, ‘my life was worth it.’”

Make the energy industry Net Zero compliant

And so Matijevic set about imagining an energy industry that operated in an entirely different way than it has in its polluting past. A natural ‘systems thinker,’ Matijevic took the molecular-level data he was gathering, and, using new technologies and services from Siemens, SAP, and Amazon Web Services, he designed a comprehensive method of making fossil-fuel extraction carbon neutral at source, while also eliminating the more serious environmental damage occurring during oil-and-gas’s long journey to the end customer. The neat feature of his fully integrated hi-tech system: it doesn’t just monitor and report harmful emissions, it also has verification and mitigation procedures built into its process.

His Net Zero vision in broad terms: Leaky, antiquated pipes-and-valves are replaced with digitalized versions that efficiently monitor and prevent from escaping the methane that is now carelessly and silently leaking into the atmosphere. Flaring is also eliminated and the excess gas destabilizing an underground well is captured, brought to the surface, and sold in the open market. Meanwhile, CO2 emissions produced during downstream and upstream operations are pumped back into underground reservoirs, both neutralizing today’s harmful atmospheric effects while also jump-starting the underground biological and chemical reactions that ultimately produce ‘green methane’— which can profitably be sold in the future.

Net Zero really means a producer has become 100% efficient

A lifetime of knowledge, starting with his deep expertise in reservoir simulation, came together to create this vision. In 2018, Matijevic partnered with Germany’s Siemens, itself committed to making its sprawling business a sustainability showcase. Matijevic knew he needed Siemen’s 20,000-plus program developers and its industrial might to help him scale up his fully integrated system. That same year the partnership began working with a troubled independent British producer operating oil-and-gas fields in Kazakhstan, a country where Matijevic himself worked for many years and had made a name for himself as an on-the-ground problem solver.

The British firm was buried in debt and desperately needed to become more efficient. Matijevic is keen to point out that reaching Net Zero through his system makes the producer 100% efficient – no oil or gas product is wasted or leaked into the atmosphere – and that should be the goal of every well-managed firm.

It should also be a cornerstone of every government’s Energy Security plan. Matijevic estimates that the oil-and-gas industry currently has a maximum efficiency rate of 70%, the rest of its production needlessly lost during the extraction, transmission, and refining process. The lesson of the Ukraine-Russia war: no country can afford to let 30% of their oil-and-gas supplies leak mindlessly into the atmosphere, which means Net Zero ambitions and Energy Security are now inextricably linked.

PM Lucas’ valve-by-valve and pipe-by-pipe real-time data collection of the Kazakhstan operation revealed where oil-and-gas molecules were escaping, raw simulator data that was then analyzed and physically checked at the plant and reconfirmed through satellite images. His simulator predictor worked just as he hoped, Matijevic says, and in the process, they learned the independent British producer would never have become financially distressed if it had just been able to trap and sell all the methane its operation had been losing for years. The PM Lucas team is now in its final stage of fine-tuning the Kazakhstan plant’s ongoing reporting and mitigation procedures.

Emboldened by his ‘proof of concept’ results, Matijevic is advocating for a complete restructuring and recapitalization of energy companies, so that firms can meet their Net Zero emission goals by 2050, not just talk about them, and in the process become hyper efficient.

Industry transformation does not come cheap – but it will pay off

That’s no small ambition. The International Energy Agency figures that energy industry investments in this transformation will have to rise from the $2 trillion spent annually in recent years, to $5 trillion annually by 2030, before falling slightly to $4.5 trillion annually by 2050. In short, such a radical industry transformation does not come cheap. But neither does maintaining the status quo: due to the Ukraine-Russia war, the EU alone has so far absorbed $1 trillion in higher energy costs, a bill that will only grow in the coming months and years ahead.

Matijevic is convinced the industry’s tech-driven Net Zero transformation will garner a handsome return-on-investment for bold energy companies and their financial backers. How so? According to PM Lucas’ data analysis, the 13 oil-and-gas majors shunned by ESG investors had their market values roughly cut in half from their respective peaks to when COVID hit in February 2020, a cumulative $1.8 trillion loss of shareholder value. Meeting the UN’s sustainability goals is likely, regardless of oil prices, to put their stock back in favor with ESG-mandated asset managers, which would reverse that market loss and increase shareholder value by trillions of dollars.

That’s just for starters. Trapping and selling the 30% of oil-and-gas that is currently escaping into the atmosphere will also produce trillions of dollars in additional revenue. By Matijevic’s calculations, just three-to-four years of investment, including replacing old pipe valves with state-of-the-art equipment, will eliminate 80% of the industry’s harmful emissions. “Let me be blunt,” Matijevic says. “We do not need to look for more oil. We just need to produce it and use it more efficiently.”

His mind constantly restless and imagining new systems, Matijevic is now tapping his deep knowledge of underground reservoirs to solve a major problem hamstringing the transition to Green Energy: the battery or storage problem.

The silver lining of the tragic Ukraine-Russia war is that the EU is massively investing in its Green Energy infrastructure. Last November, for example, the French Senate passed legislation requiring the nation’s large park garages put solar panels on their roofs, with one stroke legislating some 11 gigawatts of homegrown energy, equal to 10 nuclear power plants. Renewable energies supplied 22% of the EU’s energy needs in 2021, and the EU Commission has been talking in the last year about setting a new 40% or 45% renewable energy target for 2030.

How to solve the energy storage problem?

Matijevic makes the point that in the near future we are likely to produce sufficient renewable energy to fuel most of our basic energy needs, but that solar power is produced in abundance in the summer; there currently is no means to store that energy surplus for use in the winter when it is most needed. Industry studies from HyUnder (2014) and Ruhnau & Qvist (2022) estimate, for example, that Germany alone will in the coming decades produce anywhere between 56 Terawatt Hours (TWh) and 75 TWh of surplus renewable energy requiring storage. A 2021 McKinsey study notes that building this storage capacity will be a highly attractive market for investors.

Of course, building industrial-sized storage batteries to take care of this Green Energy bottleneck – triggering huge demand for mined lithium and other minerals that are in limited global supply – is not an environmentally-friendly or affordable answer or even acceptable from a geopolitical risk standpoint.

Matijevic instead envisions a holistic system, minutely monitored and safeguarded by his molecule-tracking tech service, which starts with efficiently converting summer’s surplus solar and wind energy into clean hydrogen and ammonia fuels, all doable after recent Clean Energy breakthroughs. That fuel can then be safely transported and stored in depleted underground oil-and-gas reservoirs, until the stored energy is needed in winter and fed back into the grid.

Matijevic urges us to view underground oil-and-gas reservoirs as earth’s natural batteries, encased solidly in rock and safely storing energy underground for millions of years in liquid or gas form. His proposal is to simply use modern technologies to repurpose earth’s natural storage system for the Green Energy revolution.

The idea is certainly compelling on paper: Austria’s underground reservoir storage capacity alone is some 95.5 TWh, according to E-Control, more than enough to take care of neighboring Germany’s entire surplus, and would not, if so used, create the environmental damage associated with battery production.

We do not have an energy problem in the world,” Matijevic claims. “We have a storage problem.

This article has been updated and revised from an earlier version, to reflect the profound changes underway in the energy industry since the Russia-Ukraine war.

The views expressed are those of the interviewee, not �۶���Ƶ.

The information in this discussion has been prepared by, and reflects the opinions and various investment views of, the speaker. �۶���Ƶ has not independently verified such information and does not guarantee its accuracy or completeness. This information is being provided to you for your information purposes only and does not constitute a recommendation or an endorsement by �۶���Ƶ of the author, the securities or views stated herein. Any specific securities discussed should not be considered a recommendation or solicitation to buy or sell any particular security. You should not assume that any investment in any of the securities was or will be profitable. Any information presented is general in nature and not intended to provide individually tailored investment advice.

No affiliation, association, sponsorship or endorsement is suggested or implied by �۶���Ƶ to any person, entity, company or organization appearing, featured or mentioned in the interview, although �۶���Ƶ may have or have had a relationship with, or may provide or have provided products and/or services to, certain persons, entities, companies and/or organizations mentioned herein.

© �۶���Ƶ 2023. All rights reserved. �۶���Ƶ AG.