CERAWeek Recap, Pipeline Bottlenecks, Defense Tech Rising, M&A Announcements
“Davos is billionaires lecturing millionaires on how to eradicate poverty. Whereas CERAWeek is engineering types trying to figure out what comes next and how to build it." - Andy Karsner
If you’re unfamiliar with CERAWeek, it’s S&P Global’s annual energy conference held in Houston and is widely regarded as one of the most important energy gatherings of the year.
Riffing on Andy Karsner’s quote above, if Davos is the world’s elites pontificating about an idealized and incredibly out-of-touch view of the world, CERAWeek is the sober brother talking about real issues and more importantly, real solutions (and not telling everyone to eat bugs and stop having babies).
For your reading pleasure, here’s a very brief recap of what was discussed at this year’s meeting:
AI and Energy Efficiency: A major focus was on how artificial intelligence is transforming the energy sector. AI is being used to enhance operational efficiencies, making fossil fuel extraction safer and more climate-friendly. However, scaling AI solutions to field operations remains a challenge.
Shift in Energy Policy: The U.S. Secretary of Energy emphasized a pivot towards increased oil production and infrastructure, moving away from a sole focus on energy transition. This approach was described as "realistic," balancing energy needs with environmental concerns.
Global Energy Demand: Experts highlighted the growing energy demand, particularly in developing nations. Oil demand is expected to rise significantly, driven by increased consumption in the Global South.
Balanced Energy Strategies: Industry leaders stressed the importance of a balanced approach to energy transition. While renewable energy sources like wind and solar are growing, they currently account for a small fraction of global energy supplies.
Investment in Technology: Discussions also revolved around leveraging advanced rigs, equipment, and AI-driven practices to improve productivity without large capital investments.
Energy Demand & Pipelines
A common theme for this young RE/shore publication, but for good reason. Energy demand has become the topic of the day for many macro and geopolitical reasons (Russia / Ukraine, OPEC+, Trump, shifting geopolitical alliances, technology-driven demand boom, etc.).
And you can’t talk about energy demand without talking about energy infrastructure.
Out of CERAWeek, one of the more nuanced discussions was around gas pipeline permitting.
“Clearly the goal has to be permitting reform passed by Congress," Tim Ryan, co-chair of pro-gas group Natural Allies for a Clean Energy Future. "The new administration will likely test the limits of what is possible with executive orders, but then it gets caught up in court, people are suing and you're not sure, you're still kind of stuck," said Ryan, a former Democratic representative for Ohio.”
"I think we'll have enough moderate Democrat senators that really want to see the best for our country," Armstrong said at a press briefing. "I think they'll support permitting ... not just for pipelines, but for everything [including] power transmission." A reform bill would require 60 votes in the Senate, where Republicans currently hold a 53-47 majority.
"If they don't figure it out, then the Democrats in the Senate won't be able to release the billions of dollars from the IRA that are stuck because you can't get transmission lines," Ryan said. "So I think there's an incentive for them to do it. And clearly, there's an incentive for the Republicans."
This is all very timely as U.S. natural gas production is continuing to set record highs, but pipeline capacity has not kept pace, creating a bottleneck for both domestic transport and international LNG exports.
“Pipeline capacity has not caught up with production after a series of project cancellations over the last eight years, according to Toby Rice, CEO of EQT the No. 2 U.S. gas producer.”
This has contributed to a 35% rise in electricity costs for U.S. consumers in the last four years, he said.”
"We have the gas, we just don't have the pipelines to get it to places, so now you see a situation where it doesn't matter how much we produce," Rice said in an interview on the sidelines of the conference.”
But there is hope… Trump, NY Governor to Discuss Reviving Constitution Gas Pipeline.
Defense Tech Meets Industrial Manufacturing
Palantir’s Karp Inks New Manufacturing Deals With Defense Startups
One of the most fascinating to watch companies over the past few years, both from a product and stock price perspective (as well as a refreshingly open CEO, Alex Karp), Palantir, is seemingly integrating itself into the permanent future of the U.S. industrial manufacturing base.
“Palantir Technologies Inc. Chief Executive Officer Alex Karp said the company wants to make American manufacturing more efficient — announcing a flurry of new partnerships and stressing the importance of a strong industrial base to bolster the economy and national security.
In particular, Palantir has put a focus on up-and-coming defense tech firms, announcing plans to work with them to boost manufacturing for aircraft, submarines and other hardware.”
Examples:
Archer Aviation Inc., a vertical-takeoff-and-landing aircraft company, will lean on Palantir to scale up its manufacturing efforts, and will use its AI for features like route planning and air traffic control.
Autonomous marine vessel startup Saildrone Inc., will use Palantir’s software for fleet management and processes like buying parts.
Defense startups Saronic Technologies, which builds autonomous watercraft, as well as Epirus Inc., which makes weapons that can shoot drones out of the sky, will also incorporate Palantir’s technology.
GE Aerospace to Invest Nearly $1B in U.S. Manufacturing in 2025
This is nearly double last year’s commitments and comes against the backdrop of a slowly deglobalizing world and an uncertain but likely highly tariffed future for the U.S. and its allies.
How it will be spent:
$500 million to expand capacity to strengthen quality and delivery (spread across Ohio, Michigan, NC, Massachusetts, and Kentucky)
$100+ million to scale innovative materials and parts (spread across Alabama, NC, Ohio, and Mississippi)
$100+ million for external supplier base
Full press release here.
Other Headlines:
Data Centers: Chevron to develop and power data centers in the US
SMRs: Bill to fast-track small nuclear reactors for data centers advances in Senate
US Grid Investments: Iberdrola to invest over $20 B in US grid infrastructure by 2030
BESS: Cypress Creek Renewables secures US$133 million for 200MW Texas BESS
Podcast: BCGs Dry Powder - Infrastructure’s New Playbook (covers the transformation of PE and infrastructure funds and where we are today from an asset class perspective, IRRs, and investing further out on the risk curve)
M&A
Flexible Packaging: The Oakdale Company Acquires Century-Tech, Inc., A Packaging Machinery Manufacturer Gearing Up For Strategic Expansion
Fuel Tank Fire Suppression: Aerial Announces Acquisition of Hazard Protection Systems
Battery Monitoring Solutions: Industrial Growth Partners Acquires SENS
Capital Raise for Industrial Servcies: Carr’s Hill Partners Raises $210 Million For Oversubscribed Debut Fund