The Golden Age Of Natural Gas Is Here

by: Felipe Bazon
A recent report published by the IEA (International Energy Agency) entitled "Are we entering a golden age of gas? " sparked a series of discussions across the globe about the future of gas. Many energy market experts came forward to express their opinions and thoughts about the report which led me to right this article.

The IEA report says that the discovery of new reservoirs in South america, Middle East and Central Asia, the supply from unconventional resources such as shale gas and the unpredicted increase in demand are the major factors that will make natural gas enter a golden age.

According to the IEA global consumption will rise by more than 50% over the next 25 years accounting for a quarter of the world’s energy supply by 2035. On the back of low CO2 emissions when it is burned the report also suggests it could be a quick fix for global warming.

That is when opinions start to differ. Despite having the lowest CO2 emissions between all fossil fuels, natural gas still emits CO2 when it is burned and a strong reliance on gas could see temperatures rise by 3. 5ºC in the next 50 years causing disastrous consequences. This problem could be easily solved by the installation of carbon capture and storage equipment on these power plants which in turn would elevate energy prices making gas not such a viable option after all.

But it is too early to conclude that as more studies are needed in this area to evaluate the operational costs of carbon capture and storage equipment.

IEA's biggest bet to create this so called natural gas golden age is surely on shale gas. Regardless to what many people think shale gas is not a newly discovered type of gas, it was first discovered and extracted in 1821 but the production was overshadowed by larger natural gas reserves and less expensive extraction.

Now that global reserves are declining shale gas is becoming a viable option especially in america where production tripled over the past five years. It is estimated that natural gas will be responsible for 40% of all the energy produced in the us thanks to an abundant supply of shale gas.

Another point in favour of gas is the announcement made by Germany that will phase out all of its nuclear power plants by 2022. The Germans plan to combine renewable energy resources and natural gas to compensate for nuclear. The plans are to build six new natural gas power plants that will generate a total of 5 GW. This will surely increase global demand.

All seems very optimistic according the IEA's report but there are other points that need to be looked at before we can say gas has entered its golden age.

For instance according to the Financial Times Commodities Experts Javier Blas:

“The natural gas market is entering a golden age on the back of increasing global demand. So proclaims the International Energy Agency, the western countries’ watchdog. But the natural gas pricing system remains, for now, largely in the dark ages. ”

I think what Javier is trying to say is that global wholesale gas prices need to be independent from oil prices and adopt gas-to-gas pricing similar to the ones used in the uk for instance.

Ben Fryes from Bloomberg says:

“A golden age for gas hinges on the industry’s ability to address this issue, Gas producers must use the latest technology to find solutions to the problems for gas to reach its potential as a fuel. New technology may boost future prices, ”

As you can see it is a bit too soon to say that we are entering a natural gas golden age but we are sure in for some huge changes in a near future.
source: www.articlecity.com