Fire2Fission: A Fund

Executive Summary:

1. Oil and gas companies should invest directly in a fund which pools capital across the industry to research, develop, and deploy new small modular and micro-nuclear reactors.
2. The benefits and opportunities of such a venture far outweigh the challenges, risks, and obstacles.
3. Fire2Fission is actively working to make this a reality.

You hear it time and time again…

• “It’s going to take a billion dollars.”
• “Unless you have $2B burning a hole in your pocket, you probably can’t develop a new nuclear power plant.”
• “It’s going to take ten years and at least a billion to develop.”

The common thinking in the nuclear industry today is it’s going to take gobs – and I mean lots and lots and lots – of money to develop new nuclear power plants. There are a myriad of reasons why this group-think exists, but it generally seems to be true. We’ll save the reasons why for another post.

Where is all that money going to come from? Why are multiple private companies around the world actively working to invest those kinds of funds to create new technologies? Are they crazy? Or is it actually a good investment?

Enter the interesting world of oil and gas. In the upstream oil and gas sector, innovation is a constant. The financial prize of developing new oil and gas wells combined with a recurring need to continuously drill new wells to replace a declining production (read: revenue) base necessitates some incredible technology advancements. Which begs the question:

What if an oil and gas company invested in the research, development, and deployment of a new nuclear power plant or innovative technology?

I can hear executives around the world balking. But I can also hear them quietly thinking, “Wait a second, what’s the opportunity? How much money could we actually make?”

A billion dollars is a sizable amount for any single public or private company to invest. Or is it?

The shale revolution destroyed $300B over 10 years as companies began to manufacture (rather than explore for) oil and gas. The market was flooded at breakneck speeds with a surplus of supply comparable to the beanie baby boom. Imagine if just $1B or $2B of all that destroyed capital had gone into researching and deploying an advanced nuclear reactor…

Consider the benefits:

1. Return on Investment – First and foremost, there’s a HUGE financial incentive to be able to deploy inexpensive, reliable, low/no emissions heat and electricity globally. The opportunity is almost too large to fathom. We’re talking hundreds of trillions of dollars in every country on Earth. Because of the energy density of nuclear fuels, there’s an intrinsic advantage to using them to generate heat and electricity which dwarves every other energy generation technology.
2. ESG & the push to Net Zero – oil and gas companies are continuously under fire now to track their emissions. Some have installed solar facilities in their fields to power production facilities. Others purchase carbon credits. Others supplement diesel with natural gas in their frac fleets and drilling rigs to lower total emissions. Despite all these efforts, it’s realistically no more than greenwashing in the ESG movement when you consider the quantity of emissions that will eventually be generated by the very product they sell. With some very, very elementary math, it’s not difficult to calculate the what percent of emissions most oil and gas companies are reporting today as “their emissions” aka Scope 1 and Scope 2 emissions as a fraction of the total emissions that will eventually be generated by their products aka Scope 3 emissions. Spoiler alert: Scope 1 and Scope 2 emissions only account for 0.5% to 1% of an oil and gas company’s total emissions. That means 99% of the remaining emissions from the products they sell will eventually end up in the atmosphere. That’s a laughable rounding error, and it’s also the elephant in the room.

So what to do?

If you want everyone to love you long term and provide tremendous benefit to society, then you need a plan that actually makes sense, is founded in reality, and obeys the laws of physics. Reinvesting funds into renewable projects makes very little sense because utility scale wind and solar projects themselves make very little sense for human prosperity. Investing in geothermal projects is admirable and may have some legs by utilizing the horizontal drilling and hydraulic fracturing technologies which have been developed over the past 15 years, but it’s a drop in the bucket compared to the upside elsewhere. Committing to more batteries, hydrogen generation, or other pipe-dream technologies sounds altruistic, but the hurdles to overcome are monumental relative to the opportunity elsewhere – namely, those energy storage techniques don’t have an inherent physical advantage over the existing energy generation technologies. Without a step change in the physics, you’re fighting for market share in an already crowded and noisy space.

Instead, consider investing in a technology play which has a gigantic advantage over every single other energy generation technology. Invest in a technology which has an energy density millions of times greater than hydrocarbons (and billions of times greater than renewables + batteries), produces millions of times less waste, has the best safety record on the planet of any energy generation source (on both a gross and normalized basis i.e. deaths per kWh generated), and is emissions free.

Invest in nuclear energy.

Think about it. It’s literally SPLITTING THE ATOM for energy. The world seems to have forgotten how absolutely freaking awesome this is, and it should be shouted from mountaintops, boardrooms, and dive bars all around the world.

We want to start a fund which accomplishes

1. Assemble a team of experts to manage the fund (in progress as of March 2022)
2. Fundraise a large amount of capital to be deployed over five to ten years to help finance the research, development, and deployment of an innovative nuclear reactor globally.
3. Select a small modular reactor or micro-nuclear reactor technology that promises to be a step-change in the industry, supports the needs of oil and gas, but is not currently adequately funded. Many of these exist, and many more are sure to develop.
4. Enter into a mutually beneficial equity agreement and partnership with the technology vendor.
5. Imagine, plan, design, build, sell, learn, innovate, repeat. We believe reps are important to success, and we’ll use proven design and development processes to guarantee our goals are met.

Note – there is no end date to the deployment. After we have a technology in process, we will innovate continuously and won’t stop working until humans around the world have clean, reliable, and affordable energy.

Enter the Q&A for all the rebuttals.

“But isn’t it radically expensive?”

Yes, nuclear power is currently super expensive. But the industry has been crippled by two paralyzing problems:

1. There’s been very little innovation in the past 50 years driven predominantly by politics, public perception, and frankly the lack of a need to innovate. The plants that were built in the ’60’s and ’70’s in America are absolutely incredible, and it’s frankly a miracle and testament to the inherent advantages of nuclear power that they were able to compete for so long in the absence of continued innovation.
2. The regulatory burden on nuclear is radically unfair and should 100% be revised. Irrational standards are belied on the industry (many from their own doing) which don’t exist to such a disproportionate extent in any other industry.

Consider how expensive it was to drill a horizontal well and perform major hydraulic fracturing in 2002. How much would it have cost to drill a 12,500′ TVD, 22,500′ TMD well in the Wolfcamp A in that year?

Billions.

Why? Because the technology literally didn’t exist. It required and entire industry hundreds of billions of dollars, tens of thousands of extremely expensive tests, and 20 years of trial and error to transform the total cost and realized benefit of drilling and completing horizontal wells. Thousands fo new technological components were innovated on, optimized, and deployed for every company in the United States (and Canada) to utilize and their leisure. It was phenomenal time to be in energy.

How much does it cost to drill those wells in 2022? Between $9MM and $12.5MM, pending on the operations team, technology selection, and

That’s a monumental step-change in costs, capability, and an industry’s ability to execute on feasible projects quickly. It’s almost unfathomable to conceptualize the transition.

We should be doing the exact same innovations in nuclear. If we can innovate continuously, then the cost to deploy new reactors and technologies will come down. Every single oil and gas executive has seen the phenomenal competitive advantage innovation plays in their business. The nuclear industry in America hasn’t had a step-change as big as the shale revolution ever.

But it’s coming.

With the development and deployment of small modular and microreactors, there will be a step-change in the energy space. They stand a chance to become less expensive than any other energy generation technology in existence.

And the best part is, because there hasn’t been much innovation in the space, literally all of it is low hanging fruit. The opportunity is there. The industry just has to seize it.

“Why would we displace our current assets (i.e. oil and gas development) with a competing technology which stands a chance to ultimately displace us?”

Great question. Glad you asked.

In reality, helping to fund the development and deployment of small modular and microreactors holds infinitely more opportunity for oil and gas than than it does risk. Two primary benefits:

1. Involved in the development conversation with first access to deployment of the technology.
2. The ESG movement should be an opportunity, not a predicament.

Let’s expound on each of these.

First, this technology is going to be developed with or without input, help, or resistance from the fossil industry. If you’re involved in the conversation, then you’ll have access to it when it’s market ready and be able to deploy it faster for your own operations and profits. Consider just a few of the opportunities to deploying microreactors in your field operations:

1. Purchase one reactor and power your frac fleet and drilling rigs for 20 years without having to refuel – ever.
2. Deploy a reactor for your micro-grid to have reliable and dependable electricity for the life of your field. Never spend another dime on diesel generators. Eliminate all of the time, effort, and expense your entire team would have had to spend working with utilities.
3. Use the excess electricity and power generated from the reactors to generate additional profit streams, namely by generating clean, desalinated water, hydrogen for a new gas economy, or even synthetic fuels.

Sounds like science fiction, doesn’t it? But it’s not. That’s what makes it so compelling.

Second, like it or not, oil and gas is directly in the crosshairs of the public. The ESG movement is real, rhetoric around the disaster of climate change has gained momentum faster than a bucket of bowling balls rolling down a pyramid, and there will continue to be increased scrutiny from the financial, political, and social communities around the world to put an end to global emissions. It’s not going away.

Nor should it. Outdoor air pollution kills over three million people annually. We should do something about that, shouldn’t we?

I can’t say this loudly enough: THIS IS AN OPPORTUNITY. There’s a real, compelling, and virtuous story to be told through investing in energy dense fuels, and there is currently a rising movement founded in grass roots efforts and young people who want to see the best physics and technologies deployed to better the lives of all humans. What better way to get on board with the movement than presenting an innovative, proactive, and rational plan to the public?

When a plan is founded in physics and reality, it will eventually become the winning strategy. It may take more time, convincing, and initial effort than other gimmicks (read: wind and solar), but it will be successful. The oil and gas industry has an opportunity to claim victory by investing directly in the cleanest, safest, and most beneficial energy generation technology to ever be invented. The investment can be celebrated in the market as the most innovative, intelligent, and positive move an oil and gas company can make towards the net-zero movement.

Be proactive in controlling your destiny. E&P companies replace inventory continuously, or they die. They utilize the best technology available combined with the smartest and most effective practices, or they die. They invest strategically and partner with the best people and organizations in the world… or they die.

“Okay. How much money do you we need to invest?”

A billion dollars. See the intro to this essay.

“A billion dollars? You’re crazy. We don’t have that much to shell out. No one has that much for a pet research project. How do you expect to get this done?”

Technology development in the upstream oil and gas space is nothing new. New types of pipe, compressors, downhole plugs, surface slam valves, digital instrumentation, electricity generation, stranded gas capture, downhole measurement techniques, and a plethora of other technologies have been developed over the last hundred years.

What do many of them have in common?

They didn’t have just one customer. They grew out of an innovation and need to serve the entire industry. And in their development process, they worked closely with their current and future customers to create a product which would ultimately be valuable for the entire industry.

Consider Disruptive Downhole as an example. In 2017, they approached me with an idea for an innovative and simplified downhole plug technology that could effectively replace the entire existing downhole plug industry (for those ignorant, downhole plugs are used to isolate pressure between frac stages in well completions). Their design reduced the number of components and material required, increased certainty of where a plug was placed, maintained a similar price point as existing plugs, and improved the pressure isolation between frac stages. It was radically innovative.

I connected them to their financing in 2017. Aspen Energy Partners, a subsidiary of NGP, provided them the startup capital to transform an idea into a viable and best in class solution.

They started slow, getting in the door with one operator, then two, then five. They had trial runs, learnings, and improved their product over time. No one operator bought or started their company. No one operator was the true champion of their technology. A consortium of operators came together to contribute their assets (e.g. a frac stage here, a full lateral there, etc.) to test the new technology. The risk? They lose a small fraction of their asset base. The benefit? They have access to one of the newest and best plug technologies in the industry, which allows them to make better wells at a lower cost.

Disruptive is now ramping up operations five years later and deploying plugs across the country.

This story is not unique. If you’ve been involved in the industry for any amount of time – particularly on the operations or engineering side – then you’re continuously berated with new products. New chemicals, new pumps, new software, new proppants, new logistics tools, new people. It’s all new, and because it’s innovated on to meet the customers’ needs, it’s radically better than anything that existed before it.

By participating in a consortium of companies investing in a nuclear development project, you’re mirroring this development cycle. Spread the risk across a myriad of companies, and have access to all of the benefits when it’s eventually deployed.

“What if we wanted to be the sole investor? Why would we pool our money with others?”

That’s great! We’ll entertain that idea.

We also believe there’s some risk in not having enough diversity in our investor group. We want a broad group who’s capable of leveraging their assets, experience, and people to connect us with the smartest and best people in the world.

This is not an easy problem, and we’re extremely ambitious to try to solve it, but we can’t do it alone. We’ll need your help.

“What are we going to do with the waste?”

Spent nuclear fuel is a minuscule problem compared to outdoor air pollution and a minuscule problem when compared to energy poverty across the world. We have a plethora of technical solutions to deal with nuclear waste, and we believe there are a number of highly attractive business opportunities in that space as well.

We’ll link to another article when ready, but for now, we recommend:

1. Leave it where it is for now. It’s not that big of a deal.
2. If you want to bury it, bury it. It’s absolutely not as dangerous as the world thinks it is.
3. Participate in the DOE’s Consent Based Siting process. This is America’s latest effort at having a plan for the waste, and while it’s going to take 20 to 37 years to execute on (their words, not mine), it’s still the best current plan we have.
4. Continue innovating to create new and better solutions for it.
   1. Smash it up and pump it into the subsurface. We do this everyday with frac sand. We could easily do it with nuclear waste.
   2. Dump it in the ocean. Dilution is the solution to pollution. There’s literally so little nuclear waste that disposing of it at the edge of a submerging fault is a very, very reasonable solution to have it disappear from the biosphere forever.
   3. Reprocess it in a fast reactor. Several of these are currently in the pipeline to be deployed in the US and Canada.

“But aren’t there safety risks?”

There are safety risks in everything we do, but nuclear energy is arguably one of the safest and best technologies on the planet. I implore anyone concerned about the safety to explore the work performed by Geraldine Thomas at the Chernobyl Tissue Bank. Robert Bryce has an incredible podcast with her which dives into the issues more.

“You might be crazy, or you might be brilliant, but you’ve piqued my interest. What are the next steps?”

Reach out to us. We’d love to talk to you.

-Mark, March 2022