Is gas entering a ‘golden age’?

16th May 2014

By: Jeremy Wakeford

  

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Natural gas has been widely touted as a bridging fuel between dirtier fossil fuels – coal and oil – and renewable-energy sources. In a 2011 report, the International Energy Agency (IEA) declared that gas was poised to enter a ‘golden age’. But is gas as good as it is cracked up to be?

Natural gas (mainly methane) has several qualities that make it a popular fuel. Once wells are drilled, most conventional gasfields can deliver a consistent flow of gas for years. Gas is relatively easy to transport and store. It has a high energy density by mass (although not by volume), and, historically, has delivered a relatively large energy return-on-investment ratio. Gas is also very flexible – it can be used for industrial process heat, residential heating, power generation (providing a convenient backup for intermittent renewable-energy sources), and as a feedstock for the manufacture of a myriad of petrochemical products, including synthetic fertilisers.

Nonetheless, natural gas has a number of downsides. First, as a fossil fuel, its combustion does generate carbon dioxide (CO2) emissions – although about half as much for each unit of energy, compared with coal. Second, methane is at least 20 times more potent than CO2 as a greenhouse gas (GHG), and some recent studies have shown that including ‘fugitive emissions’ – gas escaping from well casings and pipelines – means that the total GHG emissions can be as bad as from coal. Third, access to gas is uneven and can be a source of geopolitical tensions – witness Ukraine at present.

The vast majority of global proved conventional gas reserves are concentrated in just a handful of countries. According to BP’s 2013 Statistical Review of World Energy, Iran leads the rankings, boasting 18% of the world total. The other heavyweights are Russia (17.6%) and Qatar (13.4%), while the US comes in fifth, with a 4.5% share. The top ten countries account for almost 80% of reserves.

Gas production follows a somewhat different cross-country profile. In 2012, the US was the top producer, with 25-billion cubic feet (bcf) – 21% of the world’s total – followed closely by Russia, with 18%. The top ten producers accounted for two-thirds of global output. The largest gas exporters are Russia, Qatar, Norway and Canada.

Consumption of gas is on an upward trend across the world, with developing countries having overtaken demand by the rich country club, the Organisation for Economic Cooperation and Development, in 2010. Gas now accounts for about 21% of world primary energy supply, placing it in third position behind oil (32%) and coal (29%). The largest share of global gas is consumed by industry (37%), followed by the residential sector (30%) and nonenergy uses (12%). The biggest gas consumers are mostly producers, with some notable exceptions like Japan, Germany and Italy.

The bulk of traded gas is transported by pipeline and sold in regional markets. Europe has the most extensive pipeline network, drawing supplies from Russia and other former Soviet countries, as well as Middle East and North African suppliers. The European Union imports about half of its gas requirements, and about half of these imports are sourced from Russia.

In recent years, there has been a surge of trade in liquefied natural gas (LNG) – gas that is liquefied under high pressure, pumped aboard special tanker ships and regasified in the consuming country. Japan and South Korea are among the biggest customers. Industry players differ over the prospects for LNG, with some foreseeing excess supply after 2020, while others expect a tightening market.

The biggest news for gas over the last decade has, of course, been unconventional sources, principally shale gas. According to an assessment by the US Energy Information Administration in 2013, global shale gas resources – that is, the quantity of gas geologists estimate could be recovered with current technology without consideration of costs and prices – amount to about a third of total world gas resources. The top ten countries hold 80% of estimated resources.

When it comes to actual production of shale gas, the US is king. Shale now accounts for about a third of US gas output. But other countries are finding it much more challenging to produce shale gas for a variety of reasons, including a lack of infrastructure and technical expertise, difficult geology and public opposition due to pollution and health concerns. Some analysts who have crunched the numbers say the US shale boom will be short-lived, and others warn about the effects on scarce water supplies.

The industry has worked hard to spin gas as a ‘clean’ fuel – even trying to use global warming to convince people that gas is good by comparing it with coal, while ignoring fugitive emissions. With increasing reliance on unconventional supplies, gas may no longer be the lesser of fossil fuel evils. The depletion of conventional reserves suggests gas is starting to lose its allure, rather than entering a golden age.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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