Rice University Forum: Natural gas is the energy market’s rising star
BY STEPHANY ROMANOW, Editor, Hydrocarbon Processing
HOUSTON: Natural gas is the fastest growing hydrocarbon–based energy resource. This was the consensus of the recent Rice University Baker Institute’s Geopolitics of Natural Gas Forum. Mark Finley, BP’s General Manager, Global Markets and U.S. economics, commented that outlook for the energy industry is being redefined by natural gas.
Natural gas does have sufficient supplies. In North America, the shale gas phenomenon is proving that point. Shale gas has the potential to be 21% of the U.S. natural gas supply. Much of the U.S. natural gas supply will be directed to power generation for the mid-term.
In contrast, China’s demand for natural gas continues to increase. According to BP’s 2014 energy outlook, China will consume the same volume of natural as Europe by 2035. Imports and trade will be vital to satisfying China’s need for natural gas. Imports will be met by pipelines from the Former Soviet Union and LNG imports.
The ‘real’ experiment in economics
Finley remarked that a “real” experiment in economics is happening in North America. In energy markets, a “real” experiment is taking an isolated economy, dropping in a new substantial energy supply and witnessing what develops. In this case, the isolated economy is the U.S. energy market and the new energy source is shale gas. In 2003, nearly 75% of the U.S. drilling rigs were searching for natural gas, which was deemed as in short supply and that LNG imports would be needed by 2008. Today, drilling operations are searching for oil, which hovers close to $100/bbl.
In the U.S., the change in natural gas supplies developed in short notice. The investments to use the new domestic supplies are influenced by available infrastructure.
Demand for electrical power is increasing for all nations, developed and developing. In the U.S., the power industry had sufficient capacity readily installed to handle the new natural gas supplies and reacted quickly. The industrial sector has a longer reaction time to convert to using the more available natural gas. Investments for new petrochemical facilities have been announced; but, grassroots facilities will need several years to move through engineering, permitting, and constructing phases.
Even more time is needed for natural gas to be integrated into the transportation industry. Construction of distribution centers and conversion of the vehicle fleet will take longer time than the industrial sector to take advantage of abundant domestic natural gas.
2035: No dominant energy source
The energy mix is changing over the long term, according to Finley. However, fossil fuels will remain the dominant energy sources in the future and hold 80% of the energy mix by 2035. Oil, Natural gas and coal will evenly split the energy market. At that point, there is no dominant energy form.
Growth in the energy market will continued to be influenced by technology, competition and government energy policy.