WPC: Technology key to natural gas's future

Natural gas will overtake coal and begin to challenge oil as the leading global energy source within 20 years, the World Petroleum Congress in Calgary was told Tuesday. Gas demand will increase faster than any other primary energy source, predicted one speaker at a WPC forum on gas supply and development, but industry must focus on achieving technological advances to reduce costs throughout the gas value chain, said another.


CALGARY� Natural gas will overtake coal and begin to challenge oil as the prime global energy source within 20 years, the World Petroleum Congress in Calgary was told Tuesday. Gas demand will increase faster than any other primary energy source, predicted one speaker at a WPC forum on gas supply and development, but industry must focus on achieving technological advances to reduce costs throughout the gas value chain, said another.

Andy Jenkins of TransCanada International (TCI), Calgary, was one of several speakers at the forum who forecast significant world growth in gas use.

Jenkins said world gas consumption is expected to increase 50% in the next 20 years, with Asia and Latin America registering the largest growth. New and more-efficient electrical generation plants will be a major growth factor for gas, and there will also be growth in countries where hydroelectric generation fluctuates by season, he said.

Olivier Appert of the International Energy Agency predicts that gas demand will increase faster than any other primary energy source and that gas's share of world energy use will increase to 30% from 20% by 2020.

Government policies on emissions could have a significant effect on gas demand, he noted. A 10% switch from coal to gas in the US market would increase world demand by 110 bcf/year.

Appert says there appears to be no reserves restraint for natural gas. Gas reserves are now equivalent to oil reserves, but not all gas is equally accessible, he said, and the concept of proven reserves varies from country to country. It might be better to use a concept such as "useful reserves," Appert suggested.

Supply-demand disconnect
World gas reserves total an estimated 5,145 tcf, with 70% in the former Soviet Union and the Middle East, while major consuming areas are Europe and North America, said Jenkins. The need for additional infrastructure to connect remote and stranded gas with markets will underpin strong growth in the world�s pipeline network.

There are more than 532,000 miles of pipe now in place, said Jenkins. Of that, 24% is in Western Europe and more than 60% in North America. He anticipates a global pipeline growth rate of about 7%/year through 2020.

The largest trans-border trade movement of natural gas is between Canada and the US, at 3.1 tcf/year. Movements between Russia and Europe are second, at 2.7 tcf/year.

IEA's Appert agreed that global distribution of gas relative to markets is not ideal. Transportation costs�about 10 times more than for oil, on an equivalent basis�are a major restraint, he said.

There is a need to reduce all costs in order to connect remote and stranded gas to markets. Frontier reserves in locations such as the Arctic and deep water account for more than half of world proven reserves, says Appert.

Improved technology, integration of regional markets, political stability, and an attractive and stable regulatory and financial regime to support investment all will be needed to support required future gas development.

Technology the key
Jenkins and Jean Bercy of Institute Fran�s du P�ole agree that technical innovation is the key to cutting costs and making gas more competitive with other fuels.

Jenkins said new technologies have contributed to more efficient operations and lower costs and will continue to do so. These include automatic welding, high-strength steel, better quality control, online pipeline data, and satellite communications that aid remote control operations. He believes the internet also will play an important role in continuing technology advances in the industry.

Bercy noted that major natural gas projects are capital-intensive, with overall costs at $3-4/MMbtu and do not leave much room for profit.

Taking an LNG production train as an example of how technology can reduce costs, Bercy says a 15% cost reduction is feasible through the use of technical and process improvements of a standard train. Cost savers include more-efficient acid gas purification, condensate recovery, and economies of scale. And large and technically improved LNG carriers reduce transportation costs.

Natural gas will be the prime energy source of the 21st Century, but to industry must first focus on achieving technological advances to reduce costs throughout the gas value chain.

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