Chevron (CVX) Inks Agreement With Mitsui for Geothermal Project
Chevron Corporation CVX's Japan-based unit and Mitsui Oil Exploration Co. Ltd. ("MOECO"), a subsidiary of Mitsui & Co. Ltd., announced their partnership to pilot advanced geothermal technology in Japan. The companies will conduct tests using advanced closed-loop (ACL) technology, marking an important step toward exploring the commercial feasibility of geothermal energy development.
Significance of the Collaboration
Signed in September 2022, the agreement between Chevron New Energies Japan and MOECO aims at delving into the technical and commercial viability of advanced geothermal energy and other new energy technologies. This collaboration also reflects the companies’ commitment to driving innovation in the renewable energy sector.
ACL Technology and Its Advantages
Unlike conventional geothermal methods that require extracting hot water or steam from underground reservoirs, ACL technology focuses on sub-surface heat exchange through conduction. It involves circulating a working fluid from the surface through a loop of underground wells, using sub-surface geothermal heat.
This approach holds significant promise as a novel technology that can generate geothermal energy globally while providing a lower-carbon and reliable baseload energy solution.
The key advantage of ACL technology lies in its ability to unlock geothermal energy in multiple locations. By eliminating the need for direct extraction of hot water or steam, it presents a more sustainable and eco-friendly solution for geothermal power generation.
The Pilot Test in Hokkaido, Japan
The pilot test using ACL technology is set to take place in the scenic Niseko region of Hokkaido, Japan. Its primary objectives include de-risking the technology, scaling up its application and paving the way for commercial geothermal power generation.
The project also presents the potential to use geothermal heat as a renewable resource, expanding its applications beyond electricity generation. The knowledge gained from this test will be instrumental in identifying commercial opportunities in Japan and elsewhere.
Leveraging Longstanding Relationship
Chevron New Energies Japan and MOECO share a longstanding relationship (of more than 40 years) in energy development across the Asia Pacific region. Their partnership capitalizes on this expertise, leveraging Chevron's use of advanced technology and MOECO's local presence to drive geothermal development while reducing potential impact on the environment and local communities.
Both companies recognize the importance of customer-centric geothermal development, aligning with their broader goal of providing affordable, reliable and clean energy.
What Lies Ahead?
The Chevron-MOECO partnership is an exciting development in the field of geothermal energy. With ACL technology's potential to unlock vast geothermal resources, we can anticipate a cleaner, more sustainable future for energy production.
The pilot test is expected to pave the way for wider adoption of the innovative geothermal solution and contribute to a greener planet.
Zacks Rank and Key Picks
Currently, CVX carries a Zacks Rank #3 (Hold).
Some better-ranked stocks for investors interested in the energy sector are Evolution Petroleum EPM, sporting a Zacks Rank #1 (Strong Buy), and Archrock AROC and NGL Energy Partners NGL, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Evolution Petroleum: EPM is worth approximately $280.79 million. EPM currently pays a dividend of 48 cents per share, or 5.69% on an annual basis.
The company currently has a forward P/E ratio of 7.64. In comparison, its industry has an average forward P/E of 19.90, which means EPM is trading at a discount to the group.
Archrock: AROC is valued at around $1.58 billion. It delivered an average earnings surprise of 8.34% for the last four quarters and its current dividend yield is 5.96%.
Archrock is a provider of natural gas contract compression services and aftermarket services of compression equipment.
NGL Energy Partners: NGL is valued at around $498.68 million. In the past year, its shares have risen 133.3%.
The company currently has a forward P/E ratio of 4.34. In comparison, its industry has an average forward P/E of 13.80, which means EPM is trading at a discount to the group.
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