Thursday, July 21, 2005

Understanding Natural Gas
I just ran across an excellent article on natural gas that I think is worth sharing with my readers. Gas played a crucial role in the resolution of the 1970s energy crises, and is widely expected to play an equally important role in reducing emissions from the electricity sector. However, as the article explains clearly, the ability of domestic gas resources to fulfill that role is in serious question, as a result of persistent underinvestment in infrastructure and governmental policies towards gas drilling in undeveloped areas. Despite the relationship between increased use of renewable energy and natural gas conservation that I pointed out recently, renewables cannot be expected to substitute for natural gas and coal and nuclear (depending on one's politics.)

While covering a lot of important ground, the article misses a few key points that are worth mentioning, to complete the picture:
  • Whatever one's views about "peak oil", global gas supplies are nowhere near a geological peak. In fact, gas has really been exploited heavily in only a few selected areas, such as the US and Northwest Europe. The key problems in increasing global natural gas supplies are unrelated to geology, but are rather a function of investment, logistics, markets and regulation.
  • An important reason for the current plateau in domestic gas supply is the inexorable decline in oil production here. This is a natural consequence of the depletion of US oil reserves, and it reduces "associated gas"--gas produced in conjunction with oil--in lock-step.
  • Remaining gas reserves in the US are huge, not only in the off-limits areas described in the article, but also in Alaska. The "gas cap"--associated gas--of the North Slope field is enormous, and gas production equal to about 10% of total US supply has been reinjected into the reservoir, at least partly for lack of a market. Together with other Alaskan and remote Canadian gas it could fill much of the anticipated supply gap, if sufficient pipeline capacity were built. This is what is at stake in the Congressional debate about a trans-Alaska gas pipeline.
  • LNG cannot restore the US to an era of cheap gas, even if an unlimited number of import terminals were approved and built. Imports will play an increasingly important role in meeting demand, but current landed LNG prices, while below today's high levels, are still at least double the historic US natural gas price. The full economic consequences of permanently expensive gas have yet to manifest fully, in terms of the offshoring of gas-dependent petrochemical and other industries from the US to regions with cheaper supply.

For various reasons, natural gas has always been treated as less glamorous than oil and now operates in the shadow of cleaner, sexier alternate energy technologies. However, it provides just under a quarter of the total energy we use, on a par with coal but with less than half the greenhouse gas emissions. It would be a disaster for this contribution to slip, but that is precisely where we are headed without a major reappraisal of our national priorities. The gas provisions of the current Energy Bill are a small but positive step in that direction.

No comments: