(Photo credit: iStockphoto.com)
Natural gas as a core energy source that drives economies and development is entering its golden age. Scarcity and consequently security issues that plague other energy sectors have led to the rising prominence of natural gas.
Seemingly in abundance, geographically-widespread and environmentally-friendlier compared with other fossil fuels, natural gas has the potential to be a game changer. This is especially so since gas is the cheaper alternative for the emerging economies of India, China and the Middle East, where energy demands is growing exponentially. But to what extent is gas the silver bullet for the energy mix of the future.
Recent research continues to bolster the attractiveness of gas as an energy staple. Conventional recoverable sources are equivalent to more than 120 years of global consumption with projections of total recoverable resources posited to sustain today's level of consumption for more than 250 years.
Demand is also rosy. The IEA predicts that natural gas as a percentage of the global energy mix is set to increase from 21 percent to 25 percent by 2035. Accordingly, China's gas demand is expected to rise to match that of the entire European Union (EU), with the Middle East demand expected to almost double and India to quadruple.
All regions will need to increase gas production to enhance overall energy security, even though global gas resource can comfortably supply the projected growth in demand for the next few decades.
The strongest centres of growth in natural gas are expected to be the Middle East, Russia, the Caspian Sea, North America and Africa. According to the IEA, gas trade between the main world regions will more than double by 2035, increasing by 620 billion cubic metres (bcm), and will be spilt evenly between pipeline gas and liquefied natural gas (LNG). But there is an absence of a global gas market today, which is why Asian prices are the highest in the world at US$13-$14 per million cubic feet (mcf) compared with US$4 in the US and US$8-$9 in Europe.
The question is, will a global market develop?
Investment in the energy-supply infrastructure will also be critical if more countries are to adopt gas as part of their energy mix. The IEA expects cumulative investment in gas-supply infrastructure to amount to around US$8 trillion. With such an urgent need for LNG capacity, steps are necessary to balance the price of gas relative to other fuels and the IEA sounded a warning over market-distorting subsidies, which it says could encourage inefficient gas consumption.
Investments in inter-regional pipeline infrastructure and ensuring sufficient gas storage will be two initiatives that contribute to stable gas prices by facilitating trade and competition and dampening volatility.
Then there is the issue of emissions. Gas still contributes to climate change. An optimal approach to limit emissions is for governments to ensure that support for renewables is maintained, and to promote a shift to low-carbon energy sources, increased efficiency in energy usage, and new technologies such as carbon capture and storage.
Prospects for a "Golden Age Of Gas"
Successful development of proven gas reserves will depend on a complex set of factors, and in turn affect the uptake of gas globally. Policy choices, technological capability and market conditions will determine how quickly gas is brought to market. In many cases, major gas resources can take several decades from the time they are discovered to reach production.
Lower economic growth and higher extraction costs could also affect the appetite for demand.
One thing is certain, though. As countries reconsider their investments in nuclear power and face increasing global pressure to commit to reducing emissions, natural gas will be the energy source they turn to, to replace coal, and to a certain extent, oil--in their energy mix.
The projection of that usage of natural gas will more than double and account for 25 percent of world energy demand by 2035, is likely to become a reality.
The article is part of an energy book specially commissioned by the Energy Market Authority. The full article can be downloaded here.
BY: Peter Shadbolt, Financial Times Special Projects Contributing Editor